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What changed in SEMrush Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SEMrush Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+332 added−450 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in SEMrush Holdings, Inc.'s 2023 10-K

332 paragraphs added · 450 removed · 277 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

49 edited+8 added−9 removed42 unchanged
Biggest changeOur Semrush Affiliate program further increases our brand awareness and helps generate customer demand by offering a commission on each new registration, trial, and subscription activated through an affiliate’s promotion. The BeRush program, which ran throughout 2022 and was closed January 31, 2023, paid affiliates on new registrations, trials, subscriptions activated, and renewals for subscriptions originally brought to Semrush.
Biggest changeTo increase brand awareness and generate customer demand, we maintain partnerships with various entities, including: agencies, influencers, strategic partners, and affiliates. The Semrush Affiliate program contributes to the enhancement of our brand awareness and the generation of customer demand by offering a commission for each new registration, trial, and subscription activated through an affiliate’s promotion.
Our platform maintains a range of seamless third-party integrations for data, workflow, and reporting capabilities, enabling our customers to manage every critical step in optimizing their online visibility. Notable integrations include Google Analytics, YouTube, Facebook, Twitter, Yext, and Microsoft Outlook. • Intuitive, easy-to-use platform. Our SaaS platform prioritizes the customer experience and promotes collaboration across functional teams.
Our platform maintains a range of seamless third-party integrations for data, workflow, and reporting capabilities, enabling our customers to manage every critical step in optimizing their online visibility. Notable integrations include Google Analytics, YouTube, Facebook, X (Twitter), Yext, and Microsoft Outlook. • Intuitive, easy-to-use platform. Our SaaS platform prioritizes the customer experience and promotes collaboration across functional teams.
We also use the following social media channels as a means of disclosing information about the company, our platform, our planned financial and other announcements, and other matters and for complying with our disclosure obligations under Regulation FD: – Semrush Twitter Account (https://twitter.com/semrush) – Semrush Facebook Page (https://www.facebook.com/Semrush/) – Semrush LinkedIn Page (https://www.linkedin.com/company/semrush) The information disclosed by the foregoing channels could be deemed to be material information.
We also use the following social media channels as a means of disclosing information about the company, our platform, our planned financial and other announcements, and other matters and for complying with our disclosure obligations under Regulation FD: – Semrush X (Twitter) Account (https://twitter.com/semrush) – Semrush Facebook Page (https://www.facebook.com/Semrush/) – Semrush LinkedIn Page (https://www.linkedin.com/company/semrush) The information disclosed by the foregoing channels could be deemed to be material information.
Additionally, we offer add-ons that are not included in our subscription plans and are sold on a one-time or monthly basis depending on the add-on. Our add-ons include: local listing management tools, .Trends, our competitive intelligence tool, and Semrush Marketplace, which can enhance customers’ 11 existing subscriptions.
Additionally, we offer add-ons that are not included in our subscription plans and are sold on a one-time or monthly basis depending on the add-on. Our add-ons include: local listing management tools, .Trends, our competitive intelligence tool, and Semrush Marketplace, which can enhance customers’ existing subscriptions.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, Twitter, Instagram, Pinterest, and LinkedIn. We integrate with a wide range of third-party solutions to seamlessly create comprehensive end-to-end workflows across the key components of a company’s online strategy.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, X (Twitter), Instagram, Pinterest, and LinkedIn. We integrate with a wide range of third-party solutions to seamlessly create comprehensive end-to-end workflows across the key components of a company’s online strategy.
Product and Development Our product and development team has delivered high-quality products and new capabilities to increase the functionality of our platform and maximize the value we deliver to our customers. Our product development organization plays a critical role in maintaining the effectiveness and differentiation of our 12 technology in an evolving landscape and maximizing retention of our existing customers.
Product and Development Our product and development team has delivered high-quality products and new capabilities to increase the functionality of our platform and maximize the value we deliver to our customers. Our product development organization plays a critical role in maintaining the effectiveness and differentiation of our technology in an evolving landscape and maximizing retention of our existing customers.
We include both monthly recurring paid subscriptions, which renew automatically unless cancelled, as well as annual recurring paid subscriptions so long as we do not have any indication that a customer has canceled or intends to cancel its subscription and we continue to generate revenue from them.
We include both monthly recurring paid subscriptions, which renew automatically unless canceled, as well as annual recurring paid subscriptions so long as we do not have any indication that a customer has canceled or intends to cancel its subscription and we continue to generate revenue from them.
Item 1. Business Overview We are a leading online visibility management software-as-a-service platform. We enable companies globally to identify and reach the right audience for their content, in the right context, and through the right channels.
Item 1. Business Overview We are a leading online visibility management software-as-a-service (“SaaS”) platform. We enable companies globally to identify and reach the right audience for their content, in the right context, and through the right channels.
In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights or similar agreements with our employees, consultants, and contractors. Our employees, consultants, and contractors are also subject to invention assignment agreements.
In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights or similar agreements with our employees, consultants, and contractors. Our employees, consultants, and contractors are also generally subject to invention assignment agreements.
We offer our solutions on a multi-price point, recurring subscription basis, which provides incremental levels of access to our over 50 products, tools, and add-ons across online visibility management. Some customers start using our products, tools, and add-ons on a free basis before purchasing a subscription to receive premium functionality and additional user licenses.
We offer our solutions on a multi-price point, recurring subscription basis, which provides incremental levels of access to our products, tools, and add-ons across online visibility management. Some customers start using our products, tools, and add-ons on a free basis before purchasing a subscription to receive premium functionality and additional user licenses.
We further 13 control the use of our proprietary technology and intellectual property through provisions in both general and product-specific terms of use.
We further control the use of our proprietary technology and intellectual property through provisions in both general and product-specific terms of use.
Our culture is driven by a collaborative and innovative leadership style, which has allowed us to expand from a single product in 2008 to our comprehensive online visibility management SaaS platform comprised of over 50 products, tools, and add-ons today.
Our culture is driven by a collaborative and innovative leadership style, which has allowed us to expand from a single product in 2008 to our comprehensive online visibility management SaaS platform comprised of products, tools, and add-ons today.
We utilize our products to manage our online visibility and reach our prospective customers. Additionally, we use several other online marketing initiatives, including online advertising, webinars, blogs, podcasts, ebooks, customer success studies, and the Semrush Academy to build our brand and engage with our customer community.
We utilize our products and content assets to manage our online visibility and reach our prospective customers. Additionally, we use several other online marketing initiatives, including online advertising, webinars, blogs, podcasts, ebooks, customer success studies, and the Semrush Academy to build our brand and engage with our customer community.
With Pro, customers have the ability to run their SEO, PPC , and SMM projects with over 50 advanced tools and features. Guru. Guru provides the same features as Pro, with the addition of Content Marketing Platform, historical data , extended limits , and Google Data Studio Integration . Business.
With Pro, customers have the ability to run their SEO, PPC , and SMM projects with advanced tools and features. Guru. Guru provides the same features as Pro, with the addition of Content Marketing Platform, historical data , extended limits , and Google Data Studio Integration . Business.
Our success is driven by our experienced leadership team and culture of continuous innovation. We have been led by our co-founder and CEO, Oleg Shchegolev, since our inception 14 years ago.
Our success is driven by our experienced leadership team and culture of continuous innovation. We have been led by our co-founder and CEO, Oleg Shchegolev, since our inception 15 years ago.
We developed our technology platform over the last 14 years, leveraging machine learning to aggregate, cleanse, and analyze an immense amount of proprietary and third-party unstructured data.
We developed our technology platform over the last 15 years, leveraging machine learning to aggregate, cleanse, and analyze an immense amount of proprietary and third-party unstructured data.
We expect to continue to grow our revenue from our existing customers as they seek to add premium features and additional user licenses, as reflected by our dollar-based net revenue retention rate of 118% as of December 31, 2022. • Continue to innovate and develop new products and features.
We expect to continue to grow our revenue from our existing customers as they seek to add premium features and additional user licenses, as reflected by our dollar-based net revenue retention rate of 107% as of December 31, 2023. • Continue to innovate and develop new products and features.
Our compelling value proposition, effective go-to-market strategy, and recurring revenue model drives efficient unit economics. These attributes have enabled us to cost-effectively acquire over 95,000 paying customers as of December 31, 2022 and over 82,000 paying customers as of December 31, 2021, spanning a broad range of industries and geographies.
Our compelling value proposition, effective go-to-market strategy, and recurring revenue model drives efficient unit economics. These attributes have enabled us to cost-effectively acquire nearly 108,000 paying customers as of December 31, 2023 and over 95,000 paying customers as of December 31, 2022, spanning a broad range of industries and geographies.
The information on our website and that we disclose through social media channels is not incorporated by reference in this Annual Report on Form 10-K or in any other filings we make with the SEC.
The information on our website and that we disclose through social media channels is not incorporated by reference in this Annual Report on Form 10-K or in any other filings we make with the SEC. Corporate Information We were founded in 2008.
Our multi-price point structure also drives meaningful upsell opportunities through higher usage limits, greater product functionality, additional user licenses, and product add-ons, as reflected by our dollar-based net revenue retention rate of 118% and 126% as of December 31, 2022 and 2021, respectively, and our compounded average annual revenue growth rate of 46% between the years ended December 31, 2017 and December 31, 2022.
Our multi-price point structure also drives meaningful upsell opportunities through higher usage limits, greater product functionality, additional user licenses, and product add-ons, as reflected by our dollar-based net revenue retention rate of 107% and 118% as of December 31, 2023 and 2022, respectively, and our compounded average annual revenue growth rate of 41% between the years ended December 31, 2017 and December 31, 2023.
Our sales organization is comprised of account managers, sales executives, and our customer success team. • Account managers focus on engaging new paid customers to help them better understand our software and lead them towards products, tools, and add-ons that align with their unique use cases. • Sales executives are responsible for managing customer engagement and increasing monetization of existing paying customers. • Our customer success team is responsible for product training, assisting with usage of our solutions, and ongoing client support.
Our sales organization is comprised of account managers, sales executives, our customer success team, and supporting roles. • Account managers focus on engaging new paid customers to help them better understand our software and lead them towards products, tools, and add-ons that align with their unique use cases. • Sales executives are responsible for managing customer engagement and increasing monetization of existing paying customers. • Our customer success team is responsible for product training, assisting with usage of our solutions, and ongoing client support. • Supporting roles include management, operations, solutions engineering, product specialists, and enablement.
Our unique set of data assets have been developed over the last 14 years as our network of customers has grown and includes over 770 million domains, 23 billion keywords, click stream panel data from billions of events per week, over 43 trillion backlinks, over 25 billion URLs crawled per day on average, and a range of data aggregated from social media networks.
Our unique set of data assets have been developed over the last 15 years as our network of customers has grown and includes more than 808 million domains, 25 billion keywords, click stream panel data from billions of events per week, 43 trillion backlinks, 25 billion URLs crawled per day on average, and a range of data aggregated from social media networks.
The release of new products, tools, add-ons, and features has enabled 9 us to drive higher monetization over time as we have increased our ARR per paying customer to $2,868 as of December 31, 2022 from $2,631 as of December 31, 2021. • Pursue opportunistic Mergers & Acquisitions.
The release of new products, tools, add-ons, and features has enabled us to drive higher monetization over time as we have increased our ARR per paying customer to $3,125 as of December 31, 2023 from $2,868 as of December 31, 2022. • Pursue opportunistic Mergers & Acquisitions.
We also maintain an App Center where third-party developers can create tools for paid Semrush users. Our App Center contained 37 apps as of December 31, 2022. Sales & Marketing Our customer acquisition model is focused on promoting our brand, increasing market awareness of our platform and products, and driving customer demand, and a strong sales pipeline.
We also maintain an App Center where third-party developers can create tools for Semrush paid users. Sales & Marketing Our customer acquisition model is focused on promoting our brand, increasing market awareness of our platform and products, and driving customer demand, and a strong sales pipeline.
We plan to focus research and development investments to increase the functionality of our online visibility platform in order to adapt to the latest changes in the digital marketing landscape and ensure our platform maintains leading technology innovations. Research and development expenses accounted for $41.2 million for the year ended December 31, 2022.
We plan to focus research and development investments to increase the functionality of our online 12 visibility platform in order to adapt to the latest changes in the digital marketing landscape and ensure our platform maintains leading technology innovations. Research and development expenses accounted for $57.4 million for the year ended December 31, 2023.
We have introduced several new add-on offerings, which have enabled us to grow our ARR per paying customer from $2,631 as of December 31, 2021 to $2,868 as of December 31, 2022.
We have introduced several new add-on offerings, which have enabled us to grow our ARR per paying customer from $2,868 as of December 31, 2022 to $3,125 as of December 31, 2023.
Additionally, we monitor the conversion of free customers to paying customers. • Expand the use of our platform by our existing paying customer base. Our substantial base of over 95,000 paying customers as of December 31, 2022 presents a significant opportunity to increase monetization.
Additionally, we monitor the conversion of free customers to paying customers. • Expand the use of our platform by our existing paying customer base. Our substantial base of nearly 108,000 paying customers as of December 31, 2023 presents a significant opportunity to increase monetization.
Our capital efficient model has enabled us to grow to $275.1 million in ARR as of December 31, 2022 from $215.7 million in ARR as of December 31, 2021. For the years ended December 31, 2022, 2021, and 2020, our revenue was $254.3 million, $188.0 million, and $124.9 million, respectively, representing growth of 35% and 51%, respectively.
Our capital efficient model has enabled us to grow to $337.1 million in ARR as of December 31, 2023 from $275.1 million in ARR as of December 31, 2022. For the years ended December 31, 2023, 2022, and 2021, our revenue was $307.7 million, $254.3 million, and $188.0 million, respectively, representing growth of 21% and 35%, respectively.
Our comprehensive solution is built with differentiated insights into traffic sources for specific sites, analysis of drivers of traffic to a company’s and its competitors’ websites, the keywords that are driving this traffic, and the effectiveness of a company’s content marketing strategy. • End-to-end workflows with third-party integrations.
Our comprehensive solution is built with differentiated insights into traffic sources for specific sites, analysis of drivers of traffic to a company’s and its competitors’ websites, the keywords that are driving this traffic, and the effectiveness of a company’s content marketing strategy. • Robust, proprietary technology platform.
As of December 31, 2022, we had 444 employees and 79 contractors in our product and development organization. We have primary development hubs in Prague, Czech Republic, Limassol, Cyprus, Warsaw, Poland, Barcelona, Spain, Amsterdam, the Netherlands, and Berlin, Germany. We operate two data centers in Ashburn, Virginia and one in Atlanta, Georgia.
As of December 31, 2023, we had 489 full-time employees and 51 contractors in our product and development organization. We have primary development hubs in Prague, Czech Republic; Limassol, Cyprus; Warsaw, Poland; Barcelona, Spain; Amsterdam, the Netherlands; and Berlin, Germany. We operate two data centers in Ashburn, Virginia.
As of December 31, 2022 and 2021, our differentiated platform empowered over 803,000 and 537,000 active free customers, respectively, and over 95,000 and 82,000 paying customers, respectively, in over 157 and 145 countries, respectively. As interactions between companies and their customers continue to shift online, managing a company’s online visibility has become critical.
As of December 31, 2023 and 2022, our differentiated platform empowered more than 1,041,000 and 803,000 active free customers, respectively, and nearly 108,000 and over 95,000 paying customers, respectively, in over 155 and 157 countries, respectively. As interactions between companies and their customers continue to shift online, managing a company’s online visibility has become critical.
As of December 31, 2022, we had over 95,000 paying customers and over 803,000 active free customers on our platform across over 157 countries. No single customer accounted for more than 1% of our revenue in the year ended December 31, 2022.
As of December 31, 2023, we had nearly 108,000 paying customers and 1,041,000 active free customers on our platform across 155 countries. No single customer accounted for more than 10% of our revenue in the year ended December 31, 2023.
The Semrush Academy is a free online learning program that has enrolled over 700,000 students and issued over 260,000 certifications with 52 courses across 5 languages as of December 31, 2022.
The Semrush Academy is a free online learning program that has enrolled over 864,000 students and issued over 357,000 certifications with 36 courses across 7 languages as of December 31, 2023.
Our sales team is largely focused on driving increased subscriptions of existing paying customers by encouraging our customers to fully recognize the potential benefit from the comprehensive platform we offer.
Customers often begin using our products either on a free basis or immediately become paying customers. Our sales team is largely focused on driving increased subscriptions of existing paying customers by encouraging our customers to fully recognize the potential benefit from the comprehensive platform we offer.
We offer time-limited free trials, which allow prospective customers to test the functionality of our Pro or Guru plans. At the end of the trial period, prospective customers either become paying customers or are switched to free customers. Free. Our free offering grants access to our platform and limits the number of results, keywords to track, and projects.
At the end of the trial period, prospective customers either become paying customers or are switched to free customers. Free. Our free offering grants access to our platform and limits the number of results, keywords to track, and projects.
Our data assets include over 770 million domains, 23 billion keywords, click stream panel data from billions of events per week, over 43 trillion backlinks, over 25 billion URLs crawled per day on average, and a range of data aggregated from social media networks, all of which scale continuously as customers use our platform. • All-in-one SaaS solution to provide comprehensive online visibility.
Our data assets include more than 808 million domains, 25 billion keywords, click stream panel data from billions of events per week, over 43 trillion backlinks, over 25 billion URLs crawled per day on average, and a range of data aggregated from social media networks, all of which scale continuously as customers use our platform. • End-to-end workflows with third-party integrations.
We strive to increase monetization from paying customers as they seek to add additional features within our higher priced subscription plans, purchase additional user licenses, purchase add-ons, and renew existing subscriptions.
We strive to increase monetization from paying customers as they seek to add additional features within our higher priced subscription plans, purchase additional user licenses, purchase add-ons, and renew existing subscriptions. Our sales organization is segmented based on size of the companies they are working with and regions they are covering.
Human Capital As of December 31, 2022, we had 1,316 full-time employees, consisting of 242 in the United States, 299 in Spain, 151 in Cyprus, 139 in the Czech Republic, 120 in Netherlands, and 365 employees located in other countries and employees working remotely.
Human Capital As of December 31, 2023, we had 1,390 full-time employees, consisting of 379 in Spain, 309 in the United States, 143 in the Netherlands, 131 in the Czech Republic, 126 in Cyprus, and 302 employees located in other countries and employees working remotely.
Our proprietary software-as-a-service (“SaaS”) platform enables us to aggregate and enrich trillions of data points collected from over 770 million unique domains.
Our proprietary SaaS platform enables us to aggregate and enrich trillions of data points collected from more than 808 million unique domains.
In addition, as of December 31, 2022, we had a total of 214 contractors located in various countries. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good and we have not experienced any work stoppages.
In addition, as of December 31, 2023, we had a total of 164 contractors located in various countries. None of our employees are represented by labor unions or covered by collective bargaining agreements.
For the years ended December 31, 2022, 2021, and 2020, our net loss was $33.8 million, $3.3 million, and $7.0 million, respectively. 8 The Benefits of Our Solution The key benefits of our solution include: • Robust, proprietary technology platform.
For the years ended December 31, 2023, 2022, and 2021, our net income (loss) was $1.0 million, $(33.8) million, and $(3.3) million, respectively. The Benefits of Our Solution 8 The key benefits of our solution include: • All-in-one SaaS solution to provide comprehensive online visibility.
(“G2”), our platform is listed as a leader in the “all segments” category, comprised of reviewers from each of the small-business, mid-market and enterprise segments (as G2 defines such categories), across 19 product categories, including SEO, competitive intelligence, marketing analytics, content analytics, and social media analytics, which reinforces the strategic advantages of providing a comprehensive solution.
(“G2”), our platform is listed in the Best Global Software Companies and listed as a leader across 17 software categories including SEO, competitive intelligence, marketing analytics, content analytics, and social media analytics, which reinforces the strategic advantages of providing a comprehensive solution.
Our management team expects to continue to allocate resources to identify, evaluate, and execute strategic acquisitions. For example, we acquired Prowly.com Sp. z o. o. (“Prowly”) in August 2020, Backlinko LLC (“Backlinko”) in January 2022, and Intellikom Inc dba Kompyte (“Kompyte”) in March 2022, to expand our technological capabilities and solutions offerings.
Our management team expects to continue to allocate resources to identify, evaluate, and execute strategic acquisitions. For example, we acquired Backlinko LLC (“Backlinko”) in January 2022, Intellikom Inc. dba Kompyte (“Kompyte”) in March 2022, Rank, LLC (“Traffic Think Tank”) in February 2023, and a majority stake in Datos Inc.
The Semrush Academy increases our brand awareness within the marketing community and helps us crowdsource best practices and innovations that we use to improve our existing offerings, advance new products, grow our brand, and engage with the marketing community.
The Semrush Academy increases our brand awareness within the marketing community and helps us crowdsource best practices and innovations that we use to improve our existing offerings, advance new products, grow our brand, and engage with the marketing community. 11 After attracting a prospective customer to our site, we utilize a highly efficient, low-touch sales approach focused on driving customers to our platform through a self-service model.
We continue to invest in research and development to enhance our platform and release new products and features while bolstering one of the largest independent data sets for online visibility. We maintain close relationships with our customer base who provide us with frequent and real-time feedback, which we leverage to rapidly update and optimize our platform.
We continue to invest in research and development to enhance our platform and release new products and features, including our Enterprise product offering, while bolstering one of the largest independent data sets for online visibility.
We have developed our technology platform over the last 14 years. Since our founding in 2008, our platform has evolved through technology innovation as we have added new products, tools, and features.
We have developed our technology platform over the last 15 years. Since our founding in 2008, our platform has evolved through technology innovation as we have added new products, tools, and features. We offer digital online visibility products, tools, and add-ons across SEO, SEM, content marketing, market research, advertising research, local marketing, reporting, social media management, and digital PR.
Our subscription-based model enables customers to select a plan based 10 on their needs and license our platform on a per month basis. We currently have three paid subscription tiers for our core product, Pro, Guru, and Business, as well as several add-ons for an incremental cost.
Our Business Model We offer our paid products and tools to customers via monthly or annual subscription plans, as well as one-time and ongoing add-ons. Our subscription-based model enables customers to select a plan 10 based on their needs and license our platform on a per month basis.
Business provides all of the same features as Guru, plus API access, extended limits and share of voice metric. (1) The chart reflects current pricing as of December 31, 2022, for monthly plans. Annual subscriptions may be entitled to discounted rates. We have a demonstrated track record of upgrading customers to higher price point plans.
Business provides all of the same features as Guru, plus API access, extended limits and share of voice metric. Enterprise. The Enterprise SEO product requires a Business subscription and includes AI driven analysis, customizable dashboards, deep reporting capabilities, and extended limits. We have a demonstrated track record of upgrading customers to higher price point plans.
Prowly significantly accelerated our product expansion in the digital PR software space and added four new product categories, as defined by G2, to our product portfolio. See Note 6 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on the Company’s mergers and acquisitions (“M&A”) activity during 2022.
(“Datos”) in December 2023 to expand our technological capabilities and solutions offerings. See Note 9 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our merger and acquisition (“M&A”) activity during 2023.
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We currently offer over 50 digital online visibility products, tools, and add-ons across SEO, SEM, content marketing, market research, advertising research, local marketing, reporting, social media management, and digital PR. Our Business Model We offer our paid products and tools to customers via monthly or annual subscription plans, as well as one-time and ongoing add-ons.
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We maintain close relationships with our customer base who provide us with frequent and real-time feedback, which we leverage to rapidly update and optimize our 9 platform.
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After attracting a prospective customer to our site, we utilize a highly efficient, low-touch sales approach focused on driving customers to our platform through a self-service model. Customers often begin using our products either on a free basis or immediately become paying customers.
Added
We currently have four paid subscription tiers for our core product, Pro, Guru, Business, and an Enterprise product offering, as well as several add-ons for an incremental cost. We offer time-limited free trials, which allow prospective customers to test the functionality of our Pro or Guru plans.
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We maintain partnerships with agencies and affiliates to further increase brand awareness and generate customer demand. Our agency partners have the ability to use tools to onboard clients onto our platform and are paid a commission.
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Our Enterprise focused sales teams focus primarily on companies with more than 500 employees while mid market and SMB teams work with smaller companies.
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These relationships collectively accounted for less than 10% of our total revenue for the year ended December 31, 2022. As of December 31, 2022, we had 467 full-time employees and 67 contractors in our sales and marketing organization.
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Our program is hosted on an external provider, Impact, while our former internal program, BeRush, was closed on January 31, 2023. As of December 31, 2023, we had 491 full-time employees and 73 contractors in our sales and marketing organization.
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Corporate Information From an operational perspective, our subsidiaries perform the following activities: • Semrush Inc., a Delaware corporation incorporated in 2012, is our primary operating entity and serves as our corporate financial and administrative headquarters and also engages in sales and support of our products, tools, and add-ons; • Semrush Securities Corp., a Massachusetts corporation incorporated in 2022, is a wholly-owned subsidiary of Semrush Inc., and is an entity formed for the purpose of buying, selling and dealing in securities; 14 • Semrush RU Limited was a Russian limited company formed in 2013.
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We consider our relationship with our employees to be good and we have not experienced any work stoppages. 13 Government Regulations We operate globally and are subject to numerous U.S. federal, state, and foreign laws and regulations covering a wide variety of subject matters that are constantly evolving and developing, including laws regarding intellectual property; artificial intelligence; data collection, privacy and security; human resources; consumer protection and marketing; anti-bribery and anti-corruption laws; and tax regulations.
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Semrush RU Limited engaged primarily in software development, maintenance, and engineering activities until the sale of this subsidiary was completed on August 3, 2022. As of August 10, 2022, we no longer have any operating subsidiaries in Russia; • Semrush SM Limited, was a Russian limited company formed in 2017.
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Our compliance with applicable laws and regulations may be onerous and could, individually or in the aggregate, increase our cost of doing business, impact our competitive position relative to our peers, and/or otherwise have an adverse impact on our business, reputation, financial condition, and operating results.
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Semrush SM Limited engaged primarily in sales and marketing related activities within Russia, Europe, and the Asia Pacific region for our products, tools, and add-ons until the sale of this subsidiary was completed on August 3, 2022.
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For additional information about governmental regulations applicable to our business, refer to “Risk Factors” in Item 1A.
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As of August 10, 2022, we no longer have any operating subsidiaries in Russia; • Prowly Sp. z o.o., a Polish limited liability company formed in 2013, which was acquired by us in August 2020, engages in the development of the Prowly.com software product (“Prowly Software”) and in the worldwide sales and marketing of the Prowly Software; • Semrush CY Ltd., a Cyprus limited company formed in 2013, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush CZ s.r.o., a Czech Republic limited liability company formed in 2015, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush B.V., a Netherlands development company formed in 2022, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush Development S.L., a Spanish development company formed in 2021, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush GmbH, a German development company formed in 2022, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush AM Limited, an Armenian development company formed in 2022, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; • Semrush RS d.o.o.
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We completed our initial public offering in 2021 and our Class A common stock is currently listed on the New York Stock Exchange under the symbol “SEMR”. Our principal executive offices are located at 800 Boylston Street, Suite 2475, Boston, MA 02199, and our telephone number is (800) 851-9959. 14
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Beograd, a Serbian development company formed in 2022, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons; and • Semrush Canada Inc., a Canadian development company formed in 2022, engages in the development of infrastructure, support and marketing for our products, tools, and add-ons. 15

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

125 edited+32 added−146 removed247 unchanged
Biggest changeSuch risks include but are not limited to the following: • geopolitical and economic instability in and impacting the localities where we have foreign operations; • rising inflation impacting the stability of our workforce and foreign operations; • military conflicts impacting the localities where we have foreign operations; • limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets; • compliance with local laws and regulations, and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs; • the complexity of managing international trade sanctions and export restrictions from the jurisdictions in which we have foreign operations; • fluctuations in foreign currency exchange rates which may make our premium subscriptions more expensive for international paying customers and which may increase our expenses for employee compensation and other operating expenses that are paid in currencies other than U.S. dollars; • restrictions imposed by the United States government against other countries, or foreign governments’ restrictions imposed on the United States, impacting our ability to do business with certain companies or in certain countries and the complexity of complying with those restrictions; • power outages, natural disasters, and other local events that could affect the availability of the internet and the consequences of disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers; • difficulties in staffing international operations; • changes in immigration policies which may impact our ability to hire personnel; • differing employment practices, laws, and labor relations; 28 • regional health issues and the impact of public health epidemics and pandemics on employees and the global economy, such as the COVID-19 pandemic; and • travel, work-from-home, or other restrictions or work stoppages, like those imposed by governments around the world as a result of the COVID-19 pandemic.
Biggest changeSuch risks include but are not limited to the following: • geopolitical and economic instability in and impacting the localities where we have foreign operations; • rising inflation impacting the stability of our workforce and foreign operations; • military conflicts impacting the localities where we have foreign operations; • limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets; • compliance with local laws and regulations, and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs; • the complexity of managing international trade sanctions and export restrictions imposed by the United States government and other jurisdictions in which we have foreign operations; 25 • fluctuations in foreign currency exchange rates which may make our premium subscriptions more expensive for international paying customers and which may increase our expenses for employee compensation and other operating expenses that are paid in currencies other than U.S. dollars; • difficulties in staffing international operations; • changes in immigration policies which may impact our ability to hire personnel; • differing employment practices, laws, and labor relations; and • regional health issues and the impact of public health epidemics and pandemics on employees and the global economy.
Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore will be able to control all matters submitted to our stockholders for approval until the earlier of (a) March 24, 2028 (b) such time as the outstanding shares of Class B common stock represent less than ten percent of the aggregate number of shares of our outstanding common stock and (c) the date the holders of two-thirds of our Class B common stock elect to convert the Class B common stock to Class A common stock.
Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and 41 therefore will be able to control all matters submitted to our stockholders for approval until the earlier of (a) March 24, 2028 (b) such time as the outstanding shares of Class B common stock represent less than ten percent of the aggregate number of shares of our outstanding common stock and (c) the date the holders of two-thirds of our Class B common stock elect to convert the Class B common stock to Class A common stock.
If our security measures fail to protect credit card information adequately, we could be liable to both our customers and their users for their losses, as well as the vendors under our agreements with them such that we could be subject to fines and higher transaction fees, we could face regulatory action, and our customers and 25 vendors could end their relationships with us, any of which could harm our business, results of operations or financial condition.
If our security measures fail to protect credit card information adequately, we could be liable to both our customers and their users for their losses, as well as the vendors under our agreements with them such that we could be subject to fines and higher transaction fees, we could face regulatory action, and our customers and vendors could end their relationships with us, any of which could harm our business, results of operations or financial condition.
If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things: • develop new features, integrations, capabilities, and enhancements; • continue to expand our product and development, and sales and marketing teams; • hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition opportunities.
If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things: • develop new features, integrations, capabilities, and enhancements; • continue to expand our product and development, and sales and marketing teams; • hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or 28 • pursue acquisition opportunities.
We have also received inquiries from, and engaged in correspondence with, European data protection authorities regarding our practices regarding cookies used on our websites, and the outcome of these inquiries is still uncertain. Additionally, new and expanding “Do Not Track” regulations have recently been enacted or proposed that protect users’ right to choose whether or not to be tracked online.
We have also received inquiries from, and engaged in correspondence with, European data protection authorities regarding our practices regarding cookies used on our websites, and the outcome of these inquiries is still uncertain. Additionally, new and expanding “Do Not Track” regulations have been enacted or proposed that protect users’ right to choose whether or not to be tracked online.
If our current open source providers were to begin to charge for these licenses or increase their license fees significantly, we would have to choose between paying such license fees or incurring the expense to replace the open source software with other software or with our 46 own software, which would increase our research and development costs, and have a negative impact on our results of operations and financial condition.
If our current open source providers were to begin to charge for these licenses or increase their license fees significantly, we would have to choose between paying such license fees or incurring the expense to replace the open source software with other software or with our own software, which would increase our research and development costs, and have a negative impact on our results of operations and financial condition.
If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional 44 taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations and we may be required to revise our intercompany agreements.
If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations and we may be required to revise our intercompany agreements.
Our second amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law claim for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of or based on a fiduciary duty owed by any of our current or former directors, officers, or employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our second amended and restated bylaws (including the interpretation, validity or enforceability thereof) or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, (the “Delaware Forum Provision”).
Our third amended and restated bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any state law claim for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of or based on a fiduciary duty owed by any of our current or former directors, officers, or employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our third amended and restated bylaws (including the interpretation, validity or enforceability thereof) or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein, (the “Delaware Forum Provision”).
Any of these developments and changes could create opportunities for a competitor to create products or a platform comparable or superior to ours, or that takes material market share from us in one or more product categories, and create challenges and risks for us if we are unable to successfully modify and enhance our products to adapt accordingly.
Any of these developments and changes could also create opportunities for a competitor to create products or a platform comparable or superior to ours, or that takes material market share from us in one or more product categories, and create challenges and risks for us if we are unable to successfully modify and enhance our products to adapt accordingly.
Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.
Our disclosure controls 35 and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.
These regulations seek, among other things, to allow end users to have greater control over the use of private information collected online, to forbid the collection or use of online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limits upon the disclosure of information to third-party websites.
These regulations seek, among other 30 things, to allow end users to have greater control over the use of private information collected online, to forbid the collection or use of online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limits upon the disclosure of information to third-party websites.
If we are not able to complete our initial assessment of our internal controls and otherwise implement the requirements of Section 404 of SOX in a timely 42 manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting.
If we are not able to complete our initial assessment of our internal controls and otherwise implement the requirements of Section 404 of SOX in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. 43 Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial results. We are subject to income taxes in the United States and various jurisdictions outside of the United States.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial results. We are subject to income taxes in the United States and various jurisdictions outside of the United States.
In addition, the software, internal applications, and systems underlying our products and platform are complex and may not be error-free. We may encounter technical problems when we attempt to perform routine maintenance or enhance our software, internal applications, and systems. In addition, our platform may be negatively impacted by technical issues experienced by our third-party service providers.
In addition, the software, internal applications, and systems underlying our products and 23 platform are complex and may not be error-free. We may encounter technical problems when we attempt to perform routine maintenance or enhance our software, internal applications, and systems. In addition, our platform may be negatively impacted by technical issues experienced by our third-party service providers.
There are uncertainties regarding the proper interpretation of and compliance with open source licenses, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to use such open source software, and consequently to provide or distribute our platform and products.
There are uncertainties regarding the proper interpretation of and 39 compliance with open source licenses, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to use such open source software, and consequently to provide or distribute our platform and products.
If we raise additional funds through further 32 issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could experience significant dilution, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our Class A common stock.
If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could experience significant dilution, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our Class A common stock.
For violations of the TCPA, the law provides for a private right of action 40 under which a plaintiff may recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using an “artificial or pre-recorded voice” or an automatic telephone dialing system.
For violations of the TCPA, the law provides for a private right of action under which a plaintiff may recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using an “artificial or pre-recorded voice” or an automatic telephone dialing system.
For example, if a given search engine stopped using backlinks in its ranking algorithm, our customers’ perception of our backlink analytics tool, which enables customers to analyze and monitor the backlink profile of their own and other websites, may be adversely impacted.
For example, if a given search engine stopped using backlinks in its ranking algorithm, our customers’ perception of our backlink analytics tool, which enables customers to analyze and monitor the backlink profile of their own and other 19 websites, may be adversely impacted.
Further, we may be subject to additional risks associated with data security breaches or other incidents, in particular because certain data privacy laws, including European Data Protection Law and the CCPA, grant individuals a private right of action arising from certain data security incidents.
Further, we may be subject to additional risks associated with data security breaches or other incidents, in particular because certain data privacy laws, including European Data Protection Law 33 and the CCPA, grant individuals a private right of action arising from certain data security incidents.
Technical problems or disruptions that affect either our customers’ (and their users’) ability to access our platform and products, or the software, internal applications, database, and network 26 systems underlying our platform and products, could damage our reputation and brands, lead to reduced demand for our platform and products, lower revenues, and increased costs.
Technical problems or disruptions that affect either our customers’ (and their users’) ability to access our platform and products, or the software, internal applications, database, and network systems underlying our platform and products, could damage our reputation and brands, lead to reduced demand for our platform and products, lower revenues, and increased costs.
We may have difficulty effectively integrating the personnel, businesses, and technologies of these acquisitions into our company and platform, and achieving the strategic goals of those acquisitions. 30 We may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all.
We may have difficulty effectively integrating the personnel, businesses, and technologies of these acquisitions into our company and platform, and achieving the strategic goals of those acquisitions. We may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all.
If we experience high turnover of our product and development personnel, a lack of management ability to guide our research and development, or a lack of other research and development resources, we may miss or fail to execute on new product development and strategic opportunities and consequently lose potential and actual market share.
If we experience high turnover of our product and development personnel, a lack of management ability to guide our research and development, or a lack of other research and development resources, we may miss or fail to execute on new product development and strategic opportunities and consequently lose potential and actual market 18 share.
The attractiveness of our platform depends, in part, on our ability to integrate via APIs with third-party applications that our customers desire to use with our products, such as Google, Facebook, Instagram, Twitter, YouTube, LinkedIn, Pinterest, Majestic, and others.
The attractiveness of our platform depends, in part, on our ability to integrate via APIs with third-party applications that our customers desire to use with our products, such as Google, Facebook, Instagram, X (Twitter), YouTube, LinkedIn, Pinterest, Majestic, and others.
As we acquire and invest in companies or technologies, we may not realize expected business or financial benefits and the acquisitions or investments could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our business, results of operations, and financial condition.
As we acquire and invest in companies or technologies, we may not realize expected business or financial benefits and the acquisitions or investments could prove difficult to integrate, disrupt our 26 business, dilute stockholder value and adversely affect our business, results of operations, and financial condition.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • variance in our results of operations from the expectations of market analysts; • announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans; • changes in the prices of our products; • our involvement in litigation; • our sale of Class A common stock or other securities in the future; • market conditions in our industry; • changes in key personnel; 48 • the trading volume of our Class A common stock; • changes in the estimation of the future size and growth rate of our markets; and • general economic and market conditions.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • variance in our results of operations from the expectations of market analysts; • announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions or expansion plans; • changes in the prices of our products; • our involvement in litigation; • our sale of Class A common stock or other securities in the future; • market conditions in our industry; 40 • changes in key personnel; • the trading volume of our Class A common stock; • changes in the estimation of the future size and growth rate of our markets; and • general economic and market conditions.
Our amended and restated certificate of incorporation and second amended and restated bylaws, include provisions that: • provide that the authorized but unissued shares of our common stock and our preferred stock are available for future issuance without stockholder approval; • provide that our Board is classified into three classes of directors with staggered three-year terms; • permit the Board to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and second amended and restated bylaws; • authorize the issuance of “blank check” preferred stock that our Board could use to implement a stockholder rights plan; • provide that only the Chairperson of our Board, our Chief Executive Officer, or a majority of our Board will be authorized to call a special meeting of stockholders; • provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board is expressly authorized to make, alter or repeal our bylaws; and 51 • advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Our amended and restated certificate of incorporation and third amended and restated bylaws, include provisions that: • provide that the authorized but unissued shares of our common stock and our preferred stock are available for future issuance without stockholder approval; • provide that our Board is classified into three classes of directors with staggered three-year terms; • permit the Board to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and third amended and restated bylaws; • authorize the issuance of “blank check” preferred stock that our Board could use to implement a stockholder rights plan; • provide that only the Chairperson of our Board, our Chief Executive Officer, or a majority of our Board will be authorized to call a special meeting of stockholders; 42 • provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board is expressly authorized to make, alter or repeal our bylaws; and • advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Similarly, we expect continuous changes in computer hardware, network operating systems, programming tools, programming languages, operating systems, the use of the internet, and the variety of network, hardware, browser, mobile, and browser-side platforms, and related technologies with which our platform and products must integrate.
Similarly, we expect continuous changes in computer hardware, network operating systems, programming tools, programming languages, operating systems, the use of the internet, and the variety of network, hardware, browser, 20 mobile, and browser-side platforms, and related technologies with which our platform and products must integrate.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or 43 invalid.
Further, our customers with annual subscription terms may have the right to terminate their subscriptions before the end of the subscription term due to our uncured material breach of agreement, including with respect to our data security obligations.
Further, our customers with annual subscription terms may have the right to terminate their subscriptions before the 22 end of the subscription term due to our uncured material breach of agreement, including with respect to our data security obligations.
See Note 7 “Exit Costs” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our wind down of our Russian operations.
See Note 10 “Exit Costs” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail on our wind down of our Russian operations.
To remain competitive and to acquire new customers, we must deliver features and functionality that enhance the utility and perceived value of our platform, products, and add-ons to our prospective and existing customers.
To remain competitive and to acquire and retain new customers, we must deliver features and functionality that enhance the utility and perceived value of our platform, products, and add-ons to our prospective and existing customers.
We use 34 cookies to store users’ settings between sessions and to enable visitors to our website to use certain features, such as gaining access to secure areas of the website.
We use cookies to store users’ settings between sessions and to enable visitors to our website to use certain features, such as gaining access to secure areas of the website.
In addition, our second amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
In addition, our third amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Additionally, search engines, social networking sites, and other third-party services typically have terms of service, guidelines, and other policies to which its users are contractually obligated to adhere. For example, Google’s Gmail offering has a spam and abuse policy that prohibits sending spam, distributing viruses, or otherwise abusing the service.
Additionally, search engines, social networking sites, third-party artificial intelligence services and other third-party services typically have terms of service, guidelines, and other policies to which its users are contractually obligated to adhere. For example, Google’s Gmail offering has a spam and abuse policy that prohibits sending spam, distributing viruses, or otherwise abusing the service.
Additionally, the forum selection clauses in our second amended and restated bylaws may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders.
Additionally, the forum selection clauses in our third amended and restated bylaws may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders.
Our second amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
Our third amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
We may also be bound by contractual restrictions that prevent us from participating 37 in data processing activities that would otherwise be permissible under applicable laws, including European Data Protection Law. Such strategic choices may impact our ability to exploit data and may have an adverse impact on our business.
We may also be bound by contractual restrictions that prevent us from participating 32 in data processing activities that would otherwise be permissible under applicable laws, including European Data Protection Law. Such strategic choices may impact our ability to exploit data and may have an adverse impact on our business.
Our second amended and restated bylaws designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our third amended and restated bylaws designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
In addition, our cybersecurity insurance coverage may be inadequate to cover all costs and expenses associated with a security breach that may occur in the future. We may need to devote significant resources to defend against, respond to and recover from cybersecurity incidents, diverting resources from the growth and expansion of our business.
In addition, our cybersecurity insurance coverage may be inadequate to cover all costs and expenses associated with a security incident that may occur in the future. We may need to devote significant resources to defend against, respond to and recover from cybersecurity incidents, diverting resources from the growth and expansion of our business.
The CCPA, for example, broadly defines personal information and provides an expansive meaning to activity considered to be a sale of personal information, and gives California residents expanded privacy rights and protections, including the right to opt out of the sale of personal information.
The CCPA, for example, broadly defines personal information and provides an expansive meaning to activity considered to be a sale of personal information, and gives California residents expanded privacy rights and protections, including the right to opt out of the sale or sharing of personal information.
The Delaware Forum Provision and the Federal Forum Provision in our second amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware.
The Delaware Forum Provision and the Federal Forum Provision in our third amended and restated bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware.
We rely on leased and third-party owned hardware, software and infrastructure, including third-party data center hosting facilities and third-party distribution channels to support our operations. We primarily use three data centers in the United States, two located in Virginia and one in Georgia, as well as two Google Cloud locations in Virginia and South Carolina.
We rely on leased and third-party owned hardware, software and infrastructure, including third-party data center hosting facilities and third-party distribution channels to support our operations. We primarily use two data centers in the United States, located in Virginia, as well as two Google Cloud locations in Virginia and South Carolina.
The UK Information Commissioner’s Office has published its own form of standard contractual clauses, referred to as the “International Data Transfer Agreement” for the purposes of data transfers out of the UK.
The UK Information Commissioner’s Office has published its own form of standard contractual clauses, referred to as the “International Data Transfer Agreement” or “IDTA” for the purposes of data transfers out of the UK.
Provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current Board, and limit the market price of our Class A common stock.
General Risk Factors Provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current Board, and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and second amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management.
Provisions in our amended and restated certificate of incorporation and third amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, Twitter, Instagram, Pinterest, and LinkedIn. We also collect data from our customers in connection with their use of our platform.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, X (Twitter), Instagram, Pinterest, and LinkedIn. We also collect data from our customers in connection with their use of our platform and other products.
The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered to prospective employees by competitor employers, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation.
The labor costs associated with our business are subject to several external factors, including unemployment levels and the quality and the size of the labor market, prevailing wage rates, minimum wage laws, wages and other forms of remuneration and benefits offered to prospective employees by competitor employers, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation From time to time, the labor market becomes increasingly competitive.
Our effective tax rate could be impacted by changes in the earnings and losses in countries with differing statutory tax rates, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, changes in accounting principles and tax laws in jurisdictions where we operate.
Our effective tax rate could be impacted by changes in the earnings and losses in countries with differing statutory tax rates, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, changes in accounting principles, and changes in tax laws in jurisdictions where we operate, such as Section 174 of the Code.
If our efforts to expand our relationships with 16 our existing paying and free customers are not successful, our revenue growth rate may decline and our business and operating results will be adversely affected. If we fail to attract new potential customers, register them for trials, and convert them into paying customers, our operating results would be harmed.
If our efforts to expand our relationships with 15 our existing paying and free customers are not successful, our revenue growth rate may decline and our business and operating results will be adversely affected. If we fail to attract new potential customers, register them for trials, and convert them into paying customers, our operating results would be negatively affected.
This concentrated control may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Our dual class structure and concentrated control may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Compliance with evolving privacy and security laws, requirements, and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our collection, disclosure, and use of personally identifiable information kept in our databases or those of our vendors.
Compliance with evolving privacy and security laws, requirements, and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our collection, disclosure, and use of personal data kept in our databases or those of our vendors.
Our business and operating results will be adversely affected if our paying customers do not renew their premium subscriptions. Our business and operating results will be harmed if our paying customers do not upgrade their premium subscriptions or if they fail to purchase additional products.
Our business and operating results will be adversely affected if our paying customers do not renew their premium subscriptions. Our business and operating results may be negatively affected if our paying customers do not upgrade their premium subscriptions or if they fail to purchase additional products.
Such litigation could be costly, time consuming, and distracting to management and could result in the impairment or loss of our rights. Furthermore, our efforts to enforce our rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of such rights.
Litigation has been and may be necessary in the future to enforce such rights. Such litigation could be costly, time consuming, and distracting to management and could result in the impairment or loss of our rights. Furthermore, our efforts to enforce our rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of such rights.
With consent from our customers, we obtain personal, confidential, and other customer data from our customers’ websites, social media accounts, and Google Analytics’ accounts to operate certain functionality on our platform. We rely on credit card purchases as the primary means of collecting our premium subscription fees.
With consent from our customers, we obtain personal, confidential, and other customer data from our customers’ websites, social media accounts, and Google Analytics’ accounts to operate certain functionality on our platform or within products that we offer. We rely on credit card purchases as the primary means of collecting our premium subscription fees.
Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise.
Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise, including nation-state actors.
Approximately 53% and 54% of our revenue for the years ended December 31, 2022 and 2021, respectively, was generated from sales to paying customers located outside the United States including indirect sales through our resellers outside of the United States.
Approximately 52% and 53% of our revenue for the years ended December 31, 2023 and 2022, respectively, was generated from sales to paying customers located outside the United States including indirect sales through our resellers outside of the United States.
Our ability to achieve and sustain profitability is based on numerous factors, many of which are beyond our control. Our products depend on publicly available and paid third-party data sources, and, if we lose access to data provided by such data sources or the terms and conditions on which we obtain such access become less favorable, our business could suffer.
Our ability to achieve and sustain profitability in future periods is based on numerous factors, many of which are beyond our control. 17 Our products depend in part on publicly available, internally developed, and paid third-party data sources, and, if we lose access to data provided by such data sources or the terms and conditions on which we obtain such access become less favorable, our business could suffer.
Most Material Risks to Us We derive, and expect to continue to derive, substantially all of our revenue and cash flows from our paying customers with premium subscriptions, and our business and operating results will be harmed if our paying customers do not renew their premium subscriptions.
Most Material Risks to Us We derive, and expect to continue to derive, substantially all of our revenue and cash flows from our paying customers with premium subscriptions, and our business and operating results may be negatively affected if our paying customers do not renew their premium subscriptions.
In addition, the UK has announced plans to reform the country’s data protection legal framework in its Data Reform Bill, which will introduce significant changes from the EU GDPR.
In addition, the UK has announced plans to reform the country’s data protection legal framework in its Data Protection & Digital Information (No. 2) Bill, which will introduce significant changes from the EU GDPR.
On August 3, 2022, we completed the sale of our two Russian subsidiaries, Semrush RU Ltd. and Semrush SM Ltd., in connection with the winding down of our operations in Russia. Our exit from Russia was substantially completed by December 31, 2022.
On August 3, 2022, we completed the sale of our two Russian subsidiaries, Semrush RU Ltd. and Semrush SM Ltd., in connection with the winding down of our operations in Russia. Our exit from Russia was substantially completed by June 30, 2023.
If we fail to anticipate and adapt to new and increasingly prevalent social media platforms, other competing products and services that do so more effectively could surpass us and lead to decreased demand for our platform and products. The use of social media throughout the world is pervasive and growing.
If we fail to anticipate and adapt to new and increasingly prevalent social media platforms, and the growing use of artificial intelligence platforms, other competing products and services that do so more effectively could surpass us and lead to decreased demand for our platform and products.
In respect of these measures, we rely on positions and interpretations of the law (including European Data Protection Law) that have yet to be fully tested before the relevant courts and regulators.
We have implemented measures designed to comply with the requirements of European Data Protection Law. In respect of these measures, we rely on positions and interpretations of the law (including European Data Protection Law) that have yet to be fully tested before the relevant courts and regulators.
While we are not currently aware of any impact that supply chain attacks, including the SolarWinds attack, may have had on our business, these events are complex, difficult to defend against, and of unknown scope, therefore we could face a level of ongoing residual risk of security breaches resulting from this type of events.
While we are not currently aware of any impact that supply chain attacks may have had on our business, these events are complex, difficult to defend against, and of unknown scope, therefore we could face a level of ongoing residual risk of security breaches or other incidents resulting from this type of event.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who as of March 3, 2023 held in the aggregate 89% of the voting power of our capital stock, which will limit or preclude your ability to influence corporate matters.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who as of December 31, 2023 held in the aggregate 88% of the voting power of our capital stock, which will limit your ability to influence corporate matters.
For example, Russia and China are among a number of countries that have recently blocked certain online services, including Amazon Web Services, making it difficult for such services to access those markets.
For example, China is among a number of countries that have blocked certain online services, including Amazon Web Services, making it difficult for such services to access those markets.
Since shares of our Class A common stock were sold in our initial public offering on March 24, 2021 at a price of $14.00 per share, our stock price has ranged from $7.16 to $32.48 through December 31, 2022.
We have a limited trading history. Since shares of our Class A common stock were sold in our initial public offering on March 24, 2021 at a price of $14.00 per share, our stock price has ranged from $7.16 to $32.48 through December 31, 2023.
OFAC has decided not to pursue any enforcement action against us and the matter has been closed. During the second quarter of 2022, we began a large-scale relocation effort of our Russia-based workforce to other jurisdictions.
OFAC has decided not to pursue any enforcement action against us and the matter has been closed. During the second quarter of 2022, we began relocating our Russia-based workforce to other jurisdictions.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of March 3, 2023, our directors, executive officers, and their affiliates, held in the aggregate 89% of the voting power of our capital stock.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of December 31, 2023, our directors, executive officers, and their affiliates, held in the aggregate 88% of the voting power of our capital stock.
Additionally, many of our competitors may expend a considerably greater amount of funds on their research and development efforts, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs.
Additionally, many of our competitors may expend a considerably greater amount of funds on their research and development efforts, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. Demand for our platform is also price sensitive.
This development effort may require significant research and development and sales and marketing resources, as well as licensing fees, all of which could adversely affect our business and operating results.
These development efforts may require significant compliance, research and development and sales and marketing resources, as well as licensing fees, all of which could adversely affect our business and operating results.
An active public market for our Class A common stock may not be sustained and could be highly volatile, and you may not be able to resell your shares at or above your original purchase price, if at all. You may lose all or part of your investment. We have a limited trading history.
Risks Related to Ownership of Our Class A Common Stock An active public market for our Class A common stock may not be sustained and could be highly volatile, and you may not be able to resell your shares at or above your original purchase price, if at all. You may lose all or part of your investment.
Further, changes in customer preferences or regulatory requirements may require changes in the technology used to gather and process the data necessary to deliver our customers the insights that they expect.
Further, changes in customer preferences, including greater adoption of artificial intelligence, or regulatory requirements may require changes in the technology used to gather and process the data necessary to deliver our customers the insights that they expect.
Our internal controls over financial reporting currently do not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“SOX”), and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of SOX could impair our ability to produce timely and accurate financial statements or comply with applicable regulations and have a material adverse effect on our business.
Failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of Sarbanes-Oxley Act of 2002, as amended (“SOX”) could impair our ability to produce timely and accurate financial statements or comply with applicable regulations and have a material adverse effect on our business.
To date, our relationships with most data providers (including social media platforms) are governed by such data providers’ respective standard terms and conditions, which govern the availability and access to, and permitted uses of such data (including via APIs), and which are subject to change by such providers from time to time, with little or no notice and with little or no right of redress.
To date, our relationships with most data providers (including social media platforms) are governed by such data providers’ respective standard terms and conditions, which govern the availability and access to, and permitted uses of such data (including via APIs), and which are subject to change.
If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result.
While we recently remediated a previously disclosed material weakness, if, in the future, we are unable to successfully remediate future material weaknesses in our internal control over financial reporting the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors 36 may lose confidence in our financial reporting, and our stock price may decline as a result.
Although we have not experienced any material labor shortage to date, we have observed an overall tightening and increasingly competitive labor market and have recently experienced and expect to continue to experience some labor cost pressures.
Although we have not experienced any material labor shortage to date, we have observed an overall tightening and increasingly competitive labor market and have recently experienced and expect to continue to experience some labor cost pressures. Furthermore, we have recently experienced costs and operational complexities with relocating personnel.
(“Wayfair”) that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to the Wayfair case, or otherwise, national, states or local governments may enforce laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions.
Additionally, online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s nation or state, and nations, states, or local governments may enforce laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions.
As a result, these laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions. It is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our interpretations and existing data management practices or the features of our products.
It is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our interpretations and existing data management practices or the features of our products.
Current laws may not provide for adequate protection of our platform or data, especially in foreign jurisdictions which may have laws that provide insufficient protections to companies.
Current laws may not provide for adequate protection of our platform or data, especially in foreign jurisdictions which may have laws that provide insufficient protections to companies. Moreover, our exposure to unauthorized copying of certain aspects of our platform, or our data may increase.
Our actual or alleged failure to comply with applicable privacy or data security laws, regulations, and policies, or to protect personal data, could result in enforcement actions and significant penalties against us, which could result in negative publicity or costs, subject us to claims or other remedies, and have a material adverse effect on our business, financial condition, and results of operations. 38 Many aspects of data protection and privacy laws are relatively new and their scope has not been tested in the courts.
Our actual or alleged failure to comply with applicable privacy or data security laws, regulations, and policies, or to protect personal data, could result in enforcement actions and significant penalties against us, which could result in negative publicity or costs, subject us to claims or other remedies, and have a material adverse effect on our business, financial condition, and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that these facilities are generally suitable to meet our current needs. We operate two data centers in Ashburn, Virginia and one in Atlanta, Georgia. We also operate two locations in Google Cloud, one in Virginia and one in South Carolina. Our data center leases expire between fiscal years 2024 and 2025.
Biggest changeWe also operate two locations in Google Cloud, one in Virginia and one in South Carolina. Our data center leases expire between fiscal years 2025 and 2026. We have excess capacity built into our primary data center leases to accommodate infrastructure growth within the lease periods should we need to add more space or power to our existing footprint.
Item 2. Properties 52 Our headquarters are located at 800 Boylston Street, Suite 2475, Boston, Massachusetts, USA 02199, where we lease 16,467 square feet of office space. The lease expires in 2027. We use this facility for administration, sales and marketing, technology and development and professional services.
Item 2. Properties Our headquarters are located at 800 Boylston Street, Suite 2475, Boston, Massachusetts, USA 02199, where we lease 16,467 square feet of office space. The lease expires in 2027. We use this facility for administration, sales and marketing, technology and development and professional services.
Additionally, we lease 39,877 square feet of office space in Prague, Czech Republic, 19,763 square feet of office space in Barcelona, Spain, 13,605 square feet of office space in Limassol, Cyprus, 10,450 square feet of office space in Trevose, Pennsylvania, 4,097 square feet of office space in Philadelphia, Pennsylvania, and 4,365 square feet of office space in Dallas, Texas.
Additionally, we lease 39,877 square feet of office space in Prague, Czech Republic, 19,763 square feet of office space in Barcelona, Spain, 16,921 square feet of office space in Amsterdam, Netherlands, 10,450 square feet of office space in Trevose, Pennsylvania, 8,890 square feet of office space in Limassol, Cyprus, 5,396 square feet of office space in Austin, Texas, 4,097 square feet of office space in Philadelphia, Pennsylvania, and 4,365 square feet of office space in Dallas, Texas.
The leases expire at various dates between 2023 and 2027, respectively. We rent serviced office spaces with 25 or more desks in Amsterdam, Netherlands; Belgrade, Serbia; Berlin, Germany; and Yerevan, Armenia. The service office contracts have expirations during 2023, with the exception of Yerevan, which expires in 2024.
The leases expire at various dates between 2024 and 2028, respectively. We rent serviced office spaces with 25 or more desks in Belgrade, Serbia; Berlin, Germany; and Yerevan, Armenia. The service office contracts have expirations during 2024. We believe that these facilities are generally suitable to meet our current needs. We operate two data centers in Ashburn, Virginia.
We have excess capacity built into our primary data center leases to accommodate infrastructure growth within the lease periods should we need to add more space or power to our existing footprint. See Note 3 “Leases” to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our data centers. 53
See Note 4 “Leases” to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on our data centers. 45
Removed
We had previously leased a facility containing 122,031 square feet of office space in Saint Petersburg, Russia, which was terminated as of August 2022.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures None. 54 Part II
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures None. 46 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Class B common stock is neither listed nor traded. Stockholders As of March 10, 2023, we had 15 holders of record of our Class A common stock and 5 holders of record of our Class B common stock.
Biggest changeOur Class B common stock is neither listed nor traded. Stockholders As of February 29, 2024, we had 5 holders of record of our Class A common stock and 6 holders of record of our Class B common stock.
Issuer Purchases of Equity Securities None. 55 Item 6. [Reserved] Not applicable. 56
Issuer Purchases of Equity Securities None. 47 Item 6. Reserved Not applicable. 48

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Year Ended December 31, 2022 2021 (in thousands) Revenue $ 254,316 $ 188,001 Cost of revenue (1) 48,553 41,934 Gross profit 205,763 146,067 Operating expenses Sales and marketing (1) 126,889 81,122 Research and development (1) 41,204 24,322 General and administrative (1) 62,779 43,116 Exit costs 11,264 — Total operating expenses 242,136 148,560 Loss from operations (36,373) (2,493) Other income (expense), net 3,456 (522) Loss before income taxes (32,917) (3,015) Provision for income taxes 931 270 Net loss $ (33,848) $ (3,285) (1) Includes stock-based compensation expense as follows: For the Year Ended December 31, 2022 2021 (in thousands) Cost of revenue $ 74 $ 37 Sales and marketing 2,235 405 Research and development 1,123 348 General and administrative 3,961 1,952 Total stock-based compensation $ 7,393 $ 2,742 65 The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated (amounts may not sum due to rounding): For the Year Ended December 31, 2022 2021 (in thousands) Revenue 100 % 100 % Cost of revenue 19 % 22 % Gross profit 81 % 78 % Operating expenses Sales and marketing 50 % 43 % Research and development 16 % 13 % General and administrative 25 % 23 % Exit costs 4 % — % Total operating expenses 95 % 79 % Loss from operations (14) % (1) % Other income (expense), net 1 % — % Loss before income taxes (13) % (2) % Provision for income taxes — % — % Net loss (13) % (2) % Comparison of the Years Ended December 31, 2022 and 2021 Revenue O ur revenue during the years end ed December 31, 2022 and 2021 was as follows: For the Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Revenue $ 254,316 188,001 $ 66,315 35 % Revenue increased by $66.3 million year over year.
Biggest changeFor the Year Ended December 31, 2023 2022 (in thousands) Revenue $ 307,675 $ 254,316 Cost of revenue (1) 52,327 48,553 Gross profit 255,348 205,763 Operating expenses Sales and marketing (1) 126,871 126,889 Research and development (1) 57,442 41,204 General and administrative (1) 77,410 62,779 Exit Costs 1,292 11,264 Total operating expenses 263,015 242,136 Loss from operations (7,667) (36,373) Other income, net 12,313 3,456 Income (loss) before income taxes 4,646 (32,917) Provision for income taxes 3,696 931 Net income (loss) 950 (33,848) Net income (loss) attributable to noncontrolling interest in consolidated subsidiary — — Net income (loss) attributable to Semrush Holdings, Inc. $ 950 $ (33,848) (1) Includes stock-based compensation expense as follows: For the Year Ended December 31, 2023 2022 (in thousands) Cost of revenue $ 130 $ 74 Sales and marketing 3,077 2,235 Research and development 2,213 1,123 General and administrative 9,917 3,961 Total stock-based compensation $ 15,337 $ 7,393 58 The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated (amounts may not sum due to rounding): For the Year Ended December 31, 2023 2022 Revenue 100 % 100 % Cost of revenue 17 % 19 % Gross profit 83 % 81 % Operating expenses Sales and marketing 41 % 50 % Research and development 19 % 16 % General and administrative 25 % 25 % Exit Costs — % 4 % Total operating expenses 85 % 95 % Loss from operations (2) % (14) % Other income, net 4 % 1 % Income (loss) before income taxes 2 % (13) % Provision for income taxes 2 % — % Net income (loss) — % (13) % Net income (loss) attributable to noncontrolling interest in consolidated subsidiary — % — % Net income (loss) attributable to Semrush Holdings, Inc. — % (13) % Comparison of the Years Ended December 31, 2023 and 2022 Revenue O ur revenue during the years end ed December 31, 2023 and 2022 was as follows: For the Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Revenue $ 307,675 254,316 $ 53,359 21 % For the year ended December 31, 2023, revenue increased by $53.4 million.
We expect to continue to incur expenses as a result of operating as a public company, including costs to comply with rules and regulations applicable to companies listed on a U.S. securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, increases in insurance premiums, investor relations, and professional services.
We expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with rules and regulations applicable to companies listed on a U.S. securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, increases in insurance premiums, investor relations, and professional services.
Sustaining Product and Technology Innovation We have a strong track record of developing new products that have high adoption rates among our paying customers. Our product development organization plays a critical role in continuing to enhance the effectiveness and differentiation of our technology in an evolving landscape and maximizing retention of our existing customers.
Sustaining Product and Technology Innovation We have a strong track record of developing new products that have high adoption rates among our paying customers. Our product development organization plays a critical role in continuing to enhance the 52 effectiveness and differentiation of our technology in an evolving landscape and maximizing retention of our existing customers.
Our sales team is largely focused on driving account expansion by encouraging our customers to fully recognize the potential benefit from our comprehensive platform. As a result, we have become increasingly efficient at acquiring customers who increase their spend with us over time.
Our sales team is largely focused on driving account expansion by encouraging our customers to fully recognize the potential benefit from our comprehensive platform. As a result, we have become 51 increasingly efficient at acquiring customers who increase their spend with us over time.
We recommend that you review the reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP financial measure, and the reconciliation of free cash flow margin to net cash used in operating activities (as a percentage of revenue), the most directly comparable GAAP financial measure, provided below, and that you not rely on free cash flow, free cash flow margin or any single financial measure to evaluate our business.
We recommend that you review the reconciliation of free cash flow to net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, and the reconciliation of free cash flow margin to net cash provided by (used in) operating activities (as a percentage of revenue), the most directly comparable GAAP financial measure, provided below, and that you not rely on free cash flow, free cash flow margin or any single financial measure to evaluate our business.
In addition to these expenses, we incur third-party service provider costs, such as data center and networking expenses, allocated overhead costs, depreciation and amortization expense associated with our property and equipment, and amortization of capitalized software development costs and intangible assets acquired through business combinations and asset acquisitions.
In addition to these expenses, we incur third-party service provider costs, such as data center and networking expenses, data acquisition costs, allocated overhead costs, depreciation and amortization expense associated with our property and equipment, and amortization of capitalized software development costs and intangible assets acquired through business combinations and asset acquisitions.
Some of the information contained in this discussion and analysis, including information with respect to our planned investments in our research and development, sales and marketing, and general and administrative functions, contains forward-looking statements based upon current plans, beliefs, and expectations that involve risks and uncertainties.
Some of the information contained in this discussion and analysis, including information with respect to our planned investments in our research and development, sales and marketing, and general and administrative functions, contains forward-looking statements based upon current plans, beliefs, and expectations that involve risks, uncertainties, and assumptions.
These subscriptions are generally stand-ready obligations as the customer has access to the service throughout the term of the subscription, and our performance obligations are satisfied with the customer over time. We consider the SaaS subscription and related support services to have the same pattern of transfer to the customer.
These subscriptions are generally stand-ready obligations as the customer has access to the service throughout the term of the subscription, and our 64 performance obligations are satisfied with the customer over time. We consider the SaaS subscription and related support services to have the same pattern of transfer to the customer.
Deferred contract costs that will be recorded as expense during the succeeding 12-month period are recorded as current deferred contract costs, and the remaining portion is recorded as deferred contract costs, net of current portion. Amortization of deferred contract costs is included in sales and marketing expense in the accompanying consolidated statement of operations and comprehensive loss.
Deferred contract costs that will be recorded as expense during the succeeding 12-month period are recorded as current deferred contract costs, and the remaining portion is recorded as deferred contract costs, net of current portion. Amortization of deferred contract costs is included in sales and marketing expense in the accompanying consolidated statement of operations and comprehensive income (loss).
Following the closing of the IPO, our Class A common stock is publicly traded, and therefore we currently base the value of our Class A common stock on its market price. Expected dividend yield —The annual rate of dividends is expressed as a dividend yield which is a constant percentage of the stock price.
Following the closing of the IPO, our Class A 65 common stock is publicly traded, and therefore we currently base the value of our Class A common stock on its market price. Expected dividend yield —The annual rate of dividends is expressed as a dividend yield which is a constant percentage of the stock price.
We believe there is a significant opportunity to expand within our existing customer base as customers often initially purchase our entry-level subscription, which offers lower usage limits and limited user licenses, as well as fewer features.
We believe there is significant opportunity to expand within our existing customer base as customers often initially purchase our entry-level subscription, which offers lower usage limits and limited user licenses, as well as fewer features.
We have elected the fair value option in respect to the accounting for our convertible note investments, allowing for increases and decreases in the fair value of such investments to be recorded to other income (expense), net for each reporting period.
We have elected the fair value option in respect to the accounting for our convertible note investments, allowing for increases and decreases in the fair value of such investments to be recorded to other income (expense), 56 net for each reporting period.
Subscription revenue is recognized ratably over the contract term beginning on the date on which we provide the customer access to our platform. Our customers do not have the right to take possession of our software.
Subscription revenue is recognized ratably over the contract term beginning on the date on which we provide the customer access to our platform. Our customers do not have the right to 54 take possession of our software.
Sales and Marketing Sales and marketing expenses primarily consist of personnel and related costs directly associated with our sales and marketing department, including salaries, benefits, incentive compensation, and stock-based compensation, online advertising expenses, and marketing and promotional expenses, as well as allocated overhead costs.
Operating Expenses Sales and Marketing Sales and marketing expenses primarily consist of personnel and related costs directly associated with our sales and marketing department, including salaries, benefits, incentive compensation, and stock-based compensation, online advertising expenses, and marketing and promotional expenses, as well as allocated overhead costs.
We offer subscriptions to our platform primarily on a monthly or annual basis, and we sell our 72 products and services primarily through a self-service model and also directly through our sales force.
We offer subscriptions to our platform primarily on a monthly or annual basis, and we sell our products and services primarily through a self-service model and also directly through our sales force.
In addition to our leases, we also have multi-year commitments with certain data providers expiring at various dates through 2026. For more information regarding our commitments with data providers, see Note 13 to the consolidated financial statements of this Annual Report on Form 10-K.
In addition to our leases, we also have multi-year commitments with certain data providers expiring at various dates through 2026. For more information regarding our commitments with data providers, see Note 16 to the consolidated financial statements of this Annual Report on Form 10-K.
We include both monthly recurring paid subscriptions, which renew automatically unless cancelled, as well as annual recurring paid subscriptions so long as we do not have any indication that a customer has cancelled or intends to cancel its subscription and we continue to generate revenue from them.
We include both monthly recurring paid subscriptions, which renew automatically unless canceled, as well as annual recurring paid subscriptions so long as we do not have any indication that a customer has canceled or intends to cancel its subscription and we continue to generate revenue from them.
Contractual Obligations and Commitments Our principal commitments consist of obligations under leases for office space and leases for data center facilities. For more information regarding our lease obligations, see Note 3 to the consolidated financial statements of this Annual Report on Form 10-K.
Contractual Obligations and Commitments Our principal commitments consist of obligations under leases for office space and leases for data center facilities. For more information regarding our lease obligations, see Note 4 to the consolidated financial statements of this Annual Report on Form 10-K.
Personnel costs include the amortization of capitalized commission costs, which increased year over year, partially due to the amortization of commissions paid in prior periods, as well as expense associated with the amortization of commissions paid and capitalized during 2022, which increased due to the overall growth in sales.
Personnel costs include the amortization of capitalized commission costs, which increased year over year, partially due to the amortization of commissions paid in prior periods, as well as expense associated with the amortization of commissions paid and capitalized during 2023, which increased due to the overall growth in sales.
While we believe that free cash flow and free cash flow margin are useful in evaluating our business, free cash flow and free cash flow margin are each a non-GAAP financial measure that have limitations as an analytical tool, and free cash flow and free cash flow margin should not be considered as an alternative to, or substitute for, net cash used in operating activities in accordance with GAAP.
While we believe that free cash flow and free cash flow margin are useful in evaluating our business, free cash flow and free cash flow margin are each a non-GAAP financial measure that have limitations as an analytical tool, and free cash flow and free cash flow margin should 53 not be considered as an alternative to, or substitute for, net cash provided by (used in) operating activities in accordance with GAAP.
For LIBOR borrowings, the applicable rate margin is 2.75% (or 3.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended). For base rate borrowings, the applicable margin is 0.00% (or 2.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended).
For Applicable Benchmark Rate borrowings, the applicable rate margin is 2.75% (or 3.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended). For base rate borrowings, the applicable margin is 0.00% (or 2.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended).
These expenses are comprised of personnel and related costs, including salaries, benefits, incentive compensation, and stock-based compensation expense related to the management of our data centers, our customer support team, and data acquisition costs.
These expenses are comprised of personnel and related costs, including salaries, benefits, incentive compensation, and stock-based compensation expense related to the management of our data centers, our customer support team, and our customer success team.
This cash is held in cash deposits and money market funds. We believe our existing cash and cash equivalents, along with our available financial resources from our credit facility, will be sufficient to meet our operating and capital needs for at least the next 12 months.
This cash is held in deposits and money market funds. We believe our existing cash, cash equivalents, and short-term investments, along with our available financial resources from our credit facility, will be sufficient to meet our operating and capital needs for at least the next 12 months.
If we are unable to successfully address these challenges, our business, operating results, and prospects could be adversely affected. Key Factors Affecting Our Performance There are a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth.
If we are unable to successfully address these challenges, our business, operating results, and prospects could be adversely affected. Key Factors Affecting Our Performance We regularly review a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on March 18, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 15, 2023.
Since our founding in 2008, we have achieved a number of significant milestones, including: • 2010: Surpassed 1,000 customers; • 2012: Started expansion into SEO software, launched Position Tracking, and opened our first U.S. office near Philadelphia, Pennsylvania; • 2014: Continued expansion of SEO capabilities with Site Audit tool; 57 • 2015: Surpassed 10,000 customers and launched Social Media tools; • 2016: Launched Content Marketing and Digital PR tools; • 2017: Completed our first round of financing led by entities affiliated with Siguler Guff & Company and introduced collaboration features, including the ability to add users and share projects and received U.S. and UK search awards for the “Best SEO Software Suite”; • 2018: Completed another round of financing led by Greycroft and e.ventures, relocated headquarters to Boston, Massachusetts, and opened an office in Dallas, Texas, surpassed $70 million in ARR, and launched our first add-on offering, Local Listings; • 2019: Surpassed 50,000 customers and $100 million in ARR, and launched our second add-on offering, our competitive intelligence tool; • 2020: Acquired Prowly, received multiple awards, including “Best SEO Software Suite” and “Best Search Software Tool” according to the European Search Awards, and our headcount grew to more than 900 employees globally; • 2021 : Completed our IPO and the Follow-On Offering and surpassed $200 million in ARR; and • 2022 : Acquired Backlinko and Kompyte, continued expansion of our App Center to 37 apps including 17 third-party apps, increased the number of customers that pay more than $10,000 annually by more than 50% year over year.
Since our founding in 2008, we have achieved a number of significant milestones, including: • 2010: Surpassed 1,000 customers; • 2012: Started expansion into SEO software, launched Position Tracking, and opened our first U.S. office near Philadelphia, Pennsylvania; • 2014: Continued expansion of SEO capabilities with Site Audit tool; 49 • 2015: Surpassed 10,000 customers and launched Social Media tools; • 2016: Launched Content Marketing and Digital PR tools; • 2017: Completed our first round of financing led by entities affiliated with Siguler Guff & Company and introduced collaboration features, including the ability to add users and share projects and received U.S. and UK search awards for the “Best SEO Software Suite”; • 2018: Completed another round of financing led by Greycroft and e.ventures, relocated headquarters to Boston, Massachusetts, and opened an office in Dallas, Texas, surpassed $70 million in ARR, and launched our first add-on offering, Local Listings; • 2019: Surpassed 50,000 customers and $100 million in ARR, and launched our second add-on offering, our competitive intelligence tool; • 2020: Received multiple awards, including “Best SEO Software Suite” and “Best Search Software Tool” according to the European Search Awards, our headcount grew to more than 900 employees globally, and acquired Prowly; • 2021 : Completed our IPO and the Follow-On Offering and surpassed $200 million in ARR; and • 2022 : Continued expansion of our App Center to 37 apps including 17 third-party apps, increased the number of customers that pay more than $10,000 annually by more than 50% year over year, and acquired Backlinko and Kompyte. • 2023 : Surpassed $300 million in ARR, 100,000 paying customers, 1,000,000 active free customers, and acquired Traffic Think Tank and a controlling interest in Datos.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $0.3 million and consisted of cash inflows related to the exercises of stock options of approximately $1.0 million as well as shares issued in connection with the Employee Stock Purchase Plan of $0.8 million and cash outflows relating to payments on capital leases of $2.1 million.
Net cash used in financing activities for the year ended December 31, 2022 was $0.3 million and consisted of cash inflows related to the exercises of stock options of $1.0 million as well as shares issued 63 in connection with the Employee Stock Purchase Plan of $0.8 million and cash outflows relating to payments on finance leases of $2.1 million.
We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the estimated fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. 73 We determined the assumptions for the Black-Scholes option-pricing model as discussed below.
We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the estimated fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.
We generate substantially all of our revenue from monthly and annual subscriptions to our online visibility management platform under a SaaS model. Subscription revenue is recognized ratably over the contract term beginning on the date the product is made available to customers. We have one reportable segment.
We generate substantially all of our revenue from monthly and annual subscriptions to our online visibility management platform under a SaaS model. Subscription revenue is recognized ratably over the contract term beginning on the date the product is made available to customers.
We define ARR as of a given date as the monthly recurring revenue that we expect to contractually receive from all paid subscription agreements that are actively generating revenue as of that date multiplied by 12.
We define Annual Recurring Revenue (“ARR”) as of a given date as the monthly recurring revenue that we expect to contractually receive from all paid subscription agreements that are actively generating revenue as of that date multiplied by 12.
Our subscription-based model enables customers to select a plan based on their needs and license our platform on a per user per month basis. As of December 31, 2022 and 2021, we served over 95,000 and 82,000 paying customers, respectively, in various industries. Our revenue is not concentrated with any single customer or industry.
Our subscription-based model enables customers to select a plan based on their needs and license our platform on a per user per month basis. As of December 31, 2023 and 2022, we served nearly 108,000 and over 95,000 paying customers, respectively, in various industries. Our revenue is not concentrated with any single customer or industry.
Borrowings under our credit facility bear interest at our option at (i) LIBOR, subject to a 0.50% floor, plus a margin, or (ii) the alternate base rate, subject to a 3.25% floor (or 1.50% prior to positive consolidated adjusted earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) for the twelve months most recently ended), plus a margin.
Borrowings under the credit facility bear interest at our option at (i) the Applicable Benchmark Rate, subject to a 0.50% floor, plus a credit spread adjustment margin, or (ii) the alternate base rate, subject to a 3.25% floor (or 1.50% prior to positive consolidated adjusted earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) for the twelve months most recently ended), plus a margin.
This section of this Annual Report on Form 10-K discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Annual Report on Form 10-K discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
The weighted-average assumptions utilized to determine the fair value of options granted are presented in the following table: Year Ended December 31, 2022 2021 Expected volatility 53.3 % 52.1 % Weighted-average risk-free interest rate 2.72 % 1.07 % Expected dividend yield — — Expected life – in years 6 6 JOBS Act Accounting Election We are an “emerging growth company” as defined in the JOBS Act.
The weighted-average assumptions utilized to determine the fair value of options granted are presented in the following table: Year Ended December 31, 2023 2022 Expected volatility 63.1 % 53.3 % Weighted-average risk-free interest rate 3.75 % 2.72 % Expected dividend yield — — Expected life – in years 6 6 JOBS Act Accounting Election We are an “emerging growth company” as defined in the JOBS Act.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this Annual Report on Form 10-K.
Accordingly, the expected volatility is based primarily on the historical volatilities of similar entities’ common stock over the most recent period commensurate with the estimated expected term of the awards. The weighted-average fair values of options granted during the years ended December 31, 2022 and 2021 were $6.36 and $8.45 per share, respectively.
Accordingly, the expected volatility is based primarily on the historical volatilities of similar entities’ common stock over the most recent period commensurate with the estimated expected term of the awards. The weighted-average fair values of options granted during the years ended December 31, 2023 and 2022 were $5.58 and $6.36 per share, respectively.
We monitor free cash flow and free cash flow margin as two measures of our overall business performance, which enables us to analyze our future performance without the effects of non-cash items and allows us to better understand the cash needs of our business.
We define free cash flow margin as free cash flow divided by GAAP revenue. We monitor free cash flow and free cash flow margin as two measures of our overall business performance, which enables us to analyze our future performance without the effects of non-cash items and allows us to better understand the cash needs of our business.
The majority of this increase was driven by an increase in the number of paying customers to more than 95,000 as of December 31, 2022 from more than 82,000 as o f December 31, 2021. The increase in revenue for the year ended December 31, 2022 was also driven by growth in user licenses per customer, add-ons, and attach rates.
The majority of this increase was driven by an increase in the number of paying customers to nearly 108,000 as of December 31, 2023 from over 95,000 as o f December 31, 2022. The increase in revenue for the year ended December 31, 2023 was also driven by growth in user licenses per customer, add-ons, and attach rates.
For the years ended December 31, 2022 and 2021 no single customer accounted for more than 1% of our revenue. Cost of Revenue Cost of revenue primarily consists of expenses related to hosting our platform, acquiring data, and providing support to our customers.
For the years ended December 31, 2023 and 2022 no single customer accounted for more than 10% of our revenue. Cost of Revenue Cost of revenue primarily consists of expenses related to hosting our platform, acquiring data, merchant account fees, and providing support to our customers.
As of December 31, 2022 and 2021, we had more than 95,000 paying customers and 82,000 paying customers, respectively, accounting for $275.1 million and $215.7 million in ARR, respectively. Retaining and Expanding Sales to Our Existing Customers We serve a diverse customer base across a variety of sizes and industries that is focused on maximizing their online visibility.
As of December 31, 2023 and 2022, we had nearly 108,000 paying customers and over 95,000 paying customers, respectively, accounting for $337.1 million and $275.1 million in ARR, respectively. Retaining and Expanding Sales to Our Existing Customers We serve a diverse customer base across a variety of sizes and industries that is focused on maximizing their online visibility.
As indicated in the chart, our customer cohorts typically experience their lowest dollar-based net revenue retention rate during their second full year after becoming a customer, after which the dollar-based net revenue retention rate typically improves and we are able to drive increased spending across the remaining customers within the cohort. 59 Our dollar-based net revenue retention rate enables us to evaluate our ability to retain and expand subscription revenue generated from our existing customers.
As indicated in the chart, our customer cohorts typically experience their lowest dollar-based net revenue retention rate during their second full year after becoming a customer, after which the dollar-based net revenue retention rate typically improves and we are able to drive increased spending across the remaining customers within the cohort.
As of December 31, 2022, we had cash and cash equivalents of $79.8 million, short-term investments of $157.8 million and accounts receivable of $3.6 million. Our principal uses of cash in recent periods have been to fund operations , invest in capital expenditures and short-term investments, and strategically acquire new businesses.
As of December 31, 2023, we had cash and cash equivalents of $58.8 million, short-term investments of $179.7 million and accounts receivable of $7.9 million. Our principal uses of cash in recent periods have been to fund operations , invest in capital expenditures and short-term investments, and strategically acquire new businesses.
We expect ARR per paying customer to continue to increase as customers adopt our premium offerings, and we continue to introduce new products and functionality. Our ARR per paying customer as of December 31, 2022 and 2021 was $2,868 and $2,631, respectively.
We expect ARR per paying customer to continue to increase as customers adopt our premium offerings, and we continue to introduce new products and functionality. Our ARR per paying customer as of December 31, 2023 and 2022 was $3,125 and $2,868, respectively, in absolute unrounded amounts.
Personnel costs increased by $6.2 million, which was primarily driven by a 41% increase in headcount as compared to the year ended December 31, 2021 as we continued to expand our accounting and reporting, legal and compliance, and internal support teams.
This increase to personnel costs was primarily driven by a 9% increase in headcount as compared to the year ended December 31, 2022 as we continued to expand our accounting and reporting, legal and compliance, and internal support teams.
Year Ended December 31, 2022 2021 (in thousands) Net cash (used in) provided by operating activities $ (9,624) $ 23,761 Net cash used in investing activities (179,832) (4,633) Net cash (used in) provided by financing activities (345) 215,324 Effect of exchange rate changes on cash and cash equivalents (275) (230) Net (decrease) increase in cash, cash equivalents and restricted cash $ (190,076) $ 234,222 Year Ended December 31, 2022 2021 (in thousands) Net cash (used in) provided by operating activities $ (9,624) $ 23,761 Purchases of property and equipment (4,234) (2,380) Capitalization of internal-use software costs (1,706) (1,403) Free cash flow $ (15,564) $ 19,978 61 Year Ended December 31, 2022 2021 Net cash (used in) provided by operating activities (as a percentage of revenue) (3.8) % 12.6 % Purchases of property and equipment (as a percentage of revenue) (1.7) % (1.3) % Capitalization of internal-use software costs (as a percentage of revenue) (0.7) % (0.7) % Free cash flow margin (6.1) % 10.6 % Components of our Results of Operations Revenue We generate nearly all of our revenue from subscriptions to our online visibility management platform under a SaaS model.
Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ 7,986 $ (9,624) Net cash used in investing activities (29,068) (179,832) Net cash used in financing activities (19) (345) Effect of exchange rate changes on cash and cash equivalents 184 (275) Decrease in cash and cash equivalents $ (20,917) $ (190,076) Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ 7,986 $ (9,624) Purchases of property and equipment (2,486) (4,234) Capitalization of internal-use software costs (5,165) (1,706) Free cash flow $ 335 $ (15,564) Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities (as a percentage of revenue) 2.6 % (3.8) % Purchases of property and equipment (as a percentage of revenue) (0.8) % (1.7) % Capitalization of internal-use software costs (as a percentage of revenue) (1.7) % (0.7) % Free cash flow margin 0.1 % (6.1) % Components of our Results of Operations Revenue We generate nearly all of our revenue from subscriptions to our online visibility management platform under a SaaS model.
New sales personnel require training and may take several months or more to achieve productivity; as such, the costs we incur in connection with the hiring of new sales personnel in a given period are not typically offset by increased revenue in that period and may not result in new revenue if these sales personnel fail to become productive.
New sales personnel require training and may take several months or more to achieve productivity; as such, the costs we incur in connection with the hiring of new sales personnel in a given period are not typically offset by increased revenue in that period and may not result in new revenue if these sales personnel fail to become productive. 55 Research and Development Research and development expenses primarily consist of personnel and related costs, including salaries, benefits, incentive compensation, stock-based compensation, and allocated overhead costs.
Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates.
We account for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates.
We generated revenue of $254.3 million and $188.0 million for the years ended December 31, 2022 and 2021, respectively, representing growth of 35% year over year. Our revenue grew at a compound annual growth rate of 46% between the years ended December 31, 2017 and December 31, 2022.
We generated revenue of $307.7 million and $254.3 million for the years ended December 31, 2023 and 2022, 50 respectively, representing growth of 21% year over year. Our revenue grew at a compound annual growth rate of 41% between the years ended December 31, 2017 and December 31, 2023.
Net cash provided by operating activities during the year ended December 31, 2021 was $23.8 million, which resulted from a net loss of $3.3 million adjusted for non-cash charges of $13.0 million and a net cash inflow of $14.0 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended December 31, 2023 was $8.0 million, which resulted from net income of $1.0 million adjusted for non-cash charges of $28.3 million and a net cash outflow of $21.3 million from changes in operating assets and liabilities.
To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services.
It may fluctuate from period to period depending on the timing of significant expenditures. To the extent that our customer base grows, we intend to continue to invest additional resources in expanding the delivery capability of our products and other services.
We expect our cost of revenue to increase in absolute dollars due to expenditures related to the purchase of hardware, data, expansion, and support of our data center operations and customer support teams.
We expect our cost of revenue to increase in absolute dollars due to expenditures related to the purchase of hardware, data, expansion, and support of our data center operations and customer support/success teams. We have seen improvement in our cost of revenue as a percentage of revenue, and expect it to remain near current levels.
We intend to continue investing in product development to improve our data assets, expand our products, and enhance our technological capabilities. 60 Non-GAAP Financial Measures In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe that free cash flow and free cash flow margin, each a non-GAAP financial measure, are useful in evaluating the performance of our business.
Non-GAAP Financial Measures In addition to our financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe that non-GAAP income (loss) from operations, non-GAAP income (loss) from operations margin, free cash flow and free cash flow margin, each a non-GAAP financial measure, are useful in evaluating the performance of our business.
Each of these inputs is subjective and generally requires significant judgment to determine. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions and estimates are as follows: Fair value —Prior to the IPO, we estimated the fair value of our common stock.
We determined the assumptions for the Black-Scholes option-pricing model as discussed below. Each of these inputs is subjective and generally requires significant judgment to determine. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Our net loss for the years ended December 31, 2022 and 2021 was $33.8 million and $3.3 million, respectively.
Our net income for the year ended December 31, 2023 was $1.0 million and our net loss for the year ended December 31, 2022 was $33.8 million, respectively.
While these areas 58 present significant opportunities for us, they also pose challenges and risks that we must successfully address in order to sustain the growth of our business and improve our operating results.
While these areas present significant opportunities for us, they also pose challenges and risks that we must successfully address in order to sustain the growth of our business and improve our operating results. Our marketing is focused on building our brand reputation, increasing market awareness of our platform and products, and driving customer demand and a strong sales pipeline.
Our primary uses of cash from operating activities are for online advertising, personnel costs across the sales and marketing and product and development departments, and hosting costs.
The credit facility matured on January 12, 2024. 62 Operating Activities Our largest source of operating cash is cash collections from our customers for subscription services. Our primary uses of cash from operating activities are for online advertising, personnel costs across the sales and marketing and product and development departments, and hosting costs.
The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue in any particular quarterly or annual period. 62 Operating Expenses Research and Development Research and development expenses primarily consist of personnel and related costs, including salaries, benefits, incentive compensation, stock-based compensation, and allocated overhead costs.
The timing of these additional expenses could affect our cost of revenue, both in terms of absolute dollars and as a percentage of revenue in any particular quarterly or annual period.
Our Credit Facility Pursuant to the Credit Agreement among us and Semrush, Inc., each as a borrower, the lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as the administrative agent, as amended from time to time, we have a senior secured credit facility that consists of a $45.0 million revolving credit facility and a letter of credit sub-facility with an aggregate limit equal to the lesser of $5.0 million and the aggregate unused amount of the revolving commitments then in effect.
Our Credit Facility On January 12, 2021, we executed a credit agreement with JPMorgan Chase Bank, N.A., in the form of a revolving credit facility that consists of a $45.0 million revolving credit facility and a letter of credit sub-facility with an aggregate limit equal to the lesser of $5.0 million and the aggregate unused amount of the revolving commitments then in effect.
The credit facility has a maturity of three years and will mature on January 12, 2024. 70 As of December 31, 2022, we had $45.0 million available under the revolving credit facility, with $5.0 million of such revolving commitments available under the letter of credit sub-facility.
As of December 31, 2023, we had $45.0 million available under the revolving credit facility, with $5.0 million of such revolving commitments available under the letter of credit sub-facility.
General and Administrative General and administrative expenses primarily consist of personnel and related expenses, including salaries, benefits, incentive compensation, and stock-based compensation, associated with our finance, legal, human resources, and other administrative employees. Our general and administrative expenses also include professional fees for external legal, accounting, and other consulting services, insurance, depreciation and amortization expense, as well as allocated overhead.
General and Administrative General and administrative expenses primarily consist of personnel and related expenses, including salaries, benefits, incentive compensation, and stock-based compensation, associated with our finance, legal, human resources, IT, and other administrative employees.
Other income (expense), net also includes amounts for interest income and expense, other miscellaneous income and expense, and gains and losses unrelated to our core operations.
We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change. Other income (expense), net also includes amounts for interest income and expense, other miscellaneous income and expense, and gains and losses unrelated to our core operations.
For the years ended December 31, 2021 and 2020, the functional currency of our international operations was the U.S. dollar except for Prowly, which is the Polish Zloty. Any differences resulting from the re-measurement of assets and liabilities denominated in a currency other than the functional currency are recorded within other income (expense), net.
For the year ended December 31, 2023, the functional currencies of our international locations were the local currencies for these regions. Any differences resulting from the re-measurement of assets and liabilities denominated in a currency other than the functional currency are recorded within other income (expense), net.
Marketing and advertising expense increased by $23.6 million as we continue to focus on acquiring new paying customers. Personnel costs increased by $20.1 million, primarily as a result of a 38% increase in headcount as we continue to expand our sales teams to grow our customer base as well as the costs associated with operating in higher cost locations.
This decrease was offset by an increase to personnel costs of $19.3 million primarily as a result of a 17% increase in headcount as we continue to expand our sales teams to grow our customer base as well as the costs associated with operating in higher cost locations.
Non-cash charges primarily consisted of $6.5 million for amortization of deferred contract acquisition costs related to capitalized commissions, $3.5 million of depreciation and amortization expense and $2.7 million of stock-based compensation expense.
Non-cash charges primarily consisted of $15.3 million of stock-based compensation expense, $10.4 million for amortization of deferred contract acquisition costs related to capitalized commissions, $6.8 million of depreciation and amortization expense, and $3.9 million of non-cash lease expense; partially offset by a cash outflow of $6.1 million for amortization (accretion) of premiums and discounts on investments.
The changes in operating assets and liabilities was primarily the result of a $13.8 million increase in deferred revenue due to the addition of new customers and expansion of the business, an $11.6 million increase in accrued expenses, and a $1.5 million increase in accounts payable.
These outflows were partially offset by an $8.8 million increase in deferred revenue due to the addition of new customers and expansion of the business and a $1.6 million increase in accrued expenses.
Our marketing is focused on building our brand reputation, increasing market awareness of our platform and products, and driving customer demand and a strong sales pipeline. We believe that these efforts will result in an increase in our paying customer base, revenues, and improved operating margins in the long term.
We believe that these efforts will result in an increase in our paying customer base, revenues, and improved operating margins in the long term.
It was also driven by a $1.8 million increase in stock-based compensation compared to the year ended December 31, 2021 applicable to these teams.
Personnel costs increased by $16.6 million, which includes a $6.0 million increase in stock-based compensation compared to the year ended December 31, 2022 applicable to these teams.
Our tax expense for the years ended December 31, 2022 and 2021 primarily relates to income earned in certain foreign jurisdictions. 64 Results of Operations for the Years Ended December 31, 2022 and 2021 The following tables set forth information comparing our results of operations in dollars and as a percentage of total revenue for the periods presented.
Our tax expense for the years ended December 31, 2023 and 2022 primarily relates to increased profits in our foreign subsidiaries and the requirement to capitalize certain research and development costs which results in a current U.S. tax provision but no deferred tax benefit as a result of the valuation allowance maintained against our net deferred tax assets. 57 Results of Operations for the Years Ended December 31, 2023 and 2022 The following tables set forth information comparing our results of operations in dollars and as a percentage of total revenue for the periods presented.
We are also required to pay a 0.25% per annum fee on undrawn amounts under our revolving credit facility, payable quarterly in arrears. Operating Activities Our largest source of operating cash is cash collections from our customers for subscription services.
We are also required to pay a 0.25% per annum fee on undrawn amounts under our revolving credit facility, payable quarterly in arrears. As of December 31, 2023, we had not drawn on this revolving credit facility or the letter of credit.
Our dollar-based net revenue retention rate as of December 31, 2022 and 2021 was approximately 118% and 126%, respectively.
Our dollar-based net revenue retention rate enables us to evaluate our ability to retain and expand subscription revenue generated from our existing customers. Our dollar-based net revenue retention rate as of December 31, 2023 and 2022 was approximately 107% and 118%, respectively.
Exit costs in connection with the winding down of our operations in Russia include employee severance and fringe benefit costs, the loss on the sales of our Russian subsidiaries, and other 63 associated relocation costs. We do not expect the remaining exit costs associated with the winding down of our operations in Russia to be material in future periods.
All costs associated with our relocation efforts are included in the consolidated statements of operations in our operating expenses under the line item, Exit Costs . Exit costs in connection with our relocation efforts include employee severance and fringe benefit costs, the loss on the sales of our Russian subsidiaries, and other associated relocation costs.
The increase of $175.2 million between the year ended December 31, 2022 and 2021 was primarily due to $157.9 million used to purchase short-term 71 investments, a $13.6 million increase in cash paid for acquisitions, net of cash acquired, and a $1.5 million increase in the purchase of convertible debt securities.
Net cash used in investing activities for the year ended December 31, 2022 was $179.8 million, which resulted from $157.9 million used to purchase short-term investments, $14.0 used in cash paid for acquisition of assets and businesses, $4.2 million used in purchases of property and equipment, and $2.0 million used to purchase convertible debt securities.
Liquidity and Capital Resources Our principal sources of liquidity have been the net proceeds of our IPO and the Follow-On Offering, which totaled $213.8 million, after deducting underwriting discounts and offering expenses paid or payable by us, and the net proceeds we received through private sales of equity securities, as well as sales of premium subscriptions to our platform.
The increase in the provision for income taxes for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to increased profits in our foreign subsidiaries and the requirement to capitalize certain research and development costs which results in a current U.S. tax provision but no deferred tax benefit as a result of the valuation allowance maintained against our net deferred tax assets. 61 Liquidity and Capital Resources Our principal sources of liquidity have been the net proceeds of our initial public offering in March 2021 and our follow-on offering in November 2021, which totaled $213.8 million, after deducting underwriting discounts and offering expenses paid or payable by us, and the net proceeds we received through private sales of equity securities, as well as sales of premium subscriptions to our platform.
Integration and data costs increased primarily as a result of increasing costs incurred related to new products and customer growth . Merchant fees increased commensurate with revenue growth. Personnel costs increased primarily as a result of a 32% increase in headcount as we continue to grow our customer support team to support our customer growth.
This increase was primarily driven by a $1.8 million increase to integration and data costs, primarily as a result of increasing costs incurred related to new products and customer growth, a $1.1 million increase to merchant fees commensurate with revenue growth, and a $0.8 million increase to depreciation and amortization expense primarily related to increased capitalized software balances as of December 31, 2023.
Other Income (Expense), Net Included in other income (expense), net are foreign currency transaction gains and losses.
We do not expect to incur exit costs associated with our relocation efforts in future periods. Other Income (Expense), Net Included in other income (expense), net are foreign currency transaction gains and losses.
Our multi-price point pricing for our core product ranges between $100 and $400 per month or $1,000 to $4,000 per year for customers who purchased our core product prior to January 4, 2021 and do not let their subscriptions lapse, and between $119.95 and $449.95 per month or $1,199 to $4,499 per year for new customers since January 4, 2021, with each price point providing an incremental level of access to our products and usage limits.
Our subscription model enables our paying customers to choose among tiered plans for a majority of our products to meet their specific needs. Our multi-price point pricing for our core product ranges between $130 and $500 per month or $1,300 to $5,000 per year, with each price point providing an incremental level of access to our products and usage limits.
Income Tax Provision We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business. We account for income taxes in accordance with the asset and liability method.
Interest expense is related to our revolving credit facility, which matured on January 12, 2024, as well as interest associated with outstanding finance leases. Income Tax Provision We operate in several tax jurisdictions and are subject to taxes in each country or jurisdiction in which we conduct business.
Research and Development Year Ended December 31, Change 2022 2021 Amount % (dollars in thousands) Research and development $ 41,204 $ 24,322 $ 16,882 69 % Percentage of total revenue 16 % 13 % For the year ended December 31, 2022, research and development costs increased by $16.9 million, primarily as a result of a 40% increase in headcount and higher personnel costs due to the competitive labor market, as compared to the year ended December 31, 2021, as we continued to expand our product development teams as well as the costs associated with operating in higher costs locations.
Research and Development Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Research and development $ 57,442 $ 41,204 $ 16,238 39 % Percentage of total revenue 19 % 16 % For the year ended December 31, 2023, research and development costs increased by $16.2 million, primarily as a result of a 12% increase in headcount as compared to the year ended December 31, 2022, as well as increased compensation costs associated with the relocation of many research and development employees to higher cost countries. 60 General and administrative Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) General and administrative $ 77,410 $ 62,779 $ 14,631 23 % Percentage of total revenue 25 % 25 % For the year ended December 31, 2023, general and administrative expense increased by $14.6 million.
Free cash flow and free cash flow margin We define free cash flow, a non-GAAP financial measure, as net cash provided by operating activities less purchases of property and equipment and capitalized software development costs. We define free cash flow margin as free cash flow divided by total revenue.
Year Ended December 31, 2023 2022 (in thousands) Loss from operations $ (7,667) $ (36,373) Stock-based compensation expense 15,337 7,393 Non-GAAP income (loss) from operations $ 7,670 $ (28,980) Year Ended December 31, 2023 2022 Loss from operations (as a percentage of revenue) (2.0) % (14.0) % Stock-based compensation expense (as a percentage of revenue) 5.0 % 3.0 % Non-GAAP income (loss) from operations (as a percentage of revenue) 3.0 % (11.0) % Free cash flow and free cash flow margin We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities less purchases of property and equipment and capitalized software development costs.
We expect to increase the size of our general and administrative functions to support the growth of our business.
Our general and administrative expenses also include professional fees for external legal, accounting, and other consulting services, insurance, depreciation and amortization expense, as well as allocated overhead. We expect to increase the size of our general and administrative functions to support the growth of our business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, we have some foreign currency risk related to a small amount of sales denominated in euros, and expenses denominated in euros, rubles, korunas, and zloty. Sales denominated in euros reflect the prevailing U.S. dollar exchange rate on the date of invoice for such sales.
Biggest changeForeign Currency Exchange Risk We are not currently subject to significant foreign currency exchange risk with respect to revenue as our U.S. and international sales are predominantly denominated in U.S. dollars. However, we have some foreign currency risk related to a small amount of sales denominated in euros, and expenses denominated in euros, korunas, and zloty.
Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, interest rates, and inflation. We do not hold or issue financial instruments for trading purposes. Interest Rate Risk We are exposed to market risk related to changes in interest rates. Our investments primarily consist of short-term investments and money market funds.
Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, interest rates, and inflation. We do not hold or issue financial instruments for trading purposes. 66 Interest Rate Risk We are exposed to market risk related to changes in interest rates. Our investments primarily consist of short-term investments and money market funds.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 74 Quantitative and Qualitative Disclosures of Market Risk We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Quantitative and Qualitative Disclosures of Market Risk We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
However, as our international operations expand, our foreign currency exchange risk may increase. If our foreign currency 75 exchange risk increases in the future, we may evaluate the costs and benefits of initiating a foreign currency hedge program in connection with non-U.S. dollar denominated transactions. 76
However, as our international operations expand, our foreign currency exchange risk may increase. If our foreign currency exchange risk increases in the future, we may evaluate the costs and benefits of initiating a foreign currency hedge program in connection with non-U.S. dollar denominated transactions. 67
For example, an immediate 10% decrease or increase in the relative value of the U.S. dollar to the euro would result in a $3.5 million gain or loss on our consolidated statements of operations and cash flows. We have not engaged in the hedging of foreign currency transactions to date.
For example, an immediate 10% decrease or increase in the relative value of the U.S. dollar to the euro would result in a $9.0 million gain or loss on our consolidated statements of operations and cash flows. We have not engaged in the hedging of foreign currency transactions to date.
As of December 31, 2022 and 2021, we had cash, cash equivalents, and investments of $237.5 million and $269.7 million, respectively. The carrying amount of our cash and cash equivalents reasonably approximates fair value, due to the short maturities of these investments.
As of December 31, 2023 and 2022, we had cash, cash equivalents, and investments of $238.6 million and $237.5 million, respectively. The carrying amount of our cash and cash equivalents reasonably approximates fair value, due to the short maturities of these investments.
Increases in the relative value of the U.S. dollar to the euro may negatively affect revenue and other operating results as expressed in U.S. dollars. We incur significant expenses outside the United States denominated in these foreign currencies, primarily the euro.
Sales denominated in euros reflect the prevailing U.S. dollar exchange rate on the date of invoice for such sales. Increases in the relative value of the U.S. dollar to the euro may negatively affect revenue and other operating results as expressed in U.S. dollars. We incur significant expenses outside the United States denominated in these foreign currencies, primarily the euro.
As of December 31, 2022, we had $45.0 million available under the revolving credit facility, with $5.0 million of such revolving commitments available under the letter of credit sub-facility.
As of December 31, 2023, we had $45.0 million available under the revolving credit facility, with $5.0 million of such revolving commitments available under the letter of credit sub-facility. Our revolving credit facility matured on January 12, 2024.
In connection with the relocation of employees out of Russia into other locations in Europe, we are exposed to some increased foreign currency exchange risk related to additional expenses denominated in euros. If the average exchange rates of any of these foreign currencies strengthen against the dollar, the dollar value of our expenses outside the United States will increase.
If the average exchange rates of any of these foreign currencies strengthen against the dollar, the dollar value of our expenses outside the United States will increase.
Removed
Borrowings under our credit facility bear interest at our option at (i) LIBOR, subject to a 0.50% floor, plus a margin, or (ii) the base rate, subject to a 3.25% floor (or 1.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended), plus a margin.
Removed
For LIBOR borrowings, the applicable rate margin is 2.75% (or 3.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended). For base rate borrowings, the applicable margin is 0.00% (or 2.50% prior to positive consolidated adjusted EBITDA as of the twelve months most recently ended).
Removed
We are also required to pay a 0.25% per annum fee on undrawn amounts under our revolving credit facility, payable quarterly in arrears. Foreign Currency Exchange Risk We are not currently subject to significant foreign currency exchange risk with respect to revenue as our U.S. and international sales are predominantly denominated in U.S. dollars.

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