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What changed in SEMrush Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SEMrush Holdings, Inc.'s 2023 and 2024 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 2024 report.

+388 added−436 removedSource: 10-K (2025-03-03) vs 10-K (2023-12-31)

Top changes in SEMrush Holdings, Inc.'s 2024 10-K

388 paragraphs added · 436 removed · 290 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+31 added−22 removed20 unchanged
Biggest changeWith 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.
Biggest changeOur Guru subscription includes the same features as under Pro plus additional capabilities, such as our content marketing and content creation tools, historical data, extended limits, and Google Data Studio integration. 11 Business. Our Business subscription includes the same features as under Guru, but builds on Guru with further enhancements, such as API access, extended usage limits, and share-of-voice metrics.
We also integrate with third-party solutions to create comprehensive end-to-end workflows across the entire marketing funnel. These workflows include analyzing trends, identifying potential opportunities to optimize visibility, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their marketing campaigns.
We also integrate with third-party solutions to create comprehensive end-to-end workflows across the entire marketing funnel. These workflows include 7 analyzing trends, identifying potential opportunities to optimize visibility, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their marketing campaigns.
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.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, X, 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.
Fully integrated solutions are more likely to drive long-term traffic improvement than siloed approaches, offering more comprehensive functionality and insights, and combining strategies across owned, earned, and paid media. Our fully integrated SaaS platform leverages our proprietary technology, differentiated data, and actionable insights to improve online visibility.
Fully integrated solutions are more likely to drive long-term traffic improvement than siloed approaches, offering more comprehensive functionality and insights, and combining strategies across owned, earned, and paid media. Our fully integrated online visibility management SaaS platform leverages our proprietary technology, differentiated data, and actionable insights to improve online visibility.
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.
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 13 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.
Our online visibility management platform depends on innovating new tools and features to continually improve our offerings. We work closely with our customers and partners to understand their needs and incorporate their feedback as we innovate our platform. We invest substantial resources in research and development to continue to drive our technology innovation.
Our online visibility management SaaS platform depends on innovating new tools and features to continually improve our offerings. We work closely with our customers and partners to understand their needs and incorporate their feedback as we innovate our platform. We invest substantial resources in research and development to continue to drive our technology innovation.
Our SaaS platform creates significant network effects as we grow the number of our customers and our customers provide us with more data. By combining our customer data with our own market data, we are able to improve our algorithms and, in turn, increase the accuracy of our metrics and analytics.
Our platform creates significant network effects as we grow the number of our customers and our customers provide us with more data. By combining our customer data with our own market data, we are able to improve our algorithms and, in turn, increase the accuracy of our metrics and analytics.
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.
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 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
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. 16
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.
Within our platform, 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.
Channels for Disclosure of Information Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, (the “SEC”).
Channels for Disclosure of Information Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our website (www.semrush.com) as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, (the “SEC”).
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.
Our data assets include more than 808 million domains, 26 billion keywords, click stream panel data from billions of events per week, over 43 trillion backlinks, over 10 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.
Most companies do not have the technology or resources to effectively ingest, aggregate, process, and analyze the vast amount of fragmented data from these diverse sources at scale to derive actionable insights.
Most companies do not have the technology or resources to effectively ingest, aggregate, process, and analyze the vast amount of fragmented data from these diverse sources at scale to derive and act upon actionable insights.
To 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.
To increase brand awareness and generate customer demand, we also maintain partnerships with various entities, including: agencies, influencers, strategic partners, and referral 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 a referral affiliate’s promotion.
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 developed our technology platform over the last 16 years, leveraging machine learning to aggregate, cleanse, and analyze an immense amount of proprietary and third-party unstructured data.
Our comprehensive product suite delivers differentiated insights through a singular platform that enables companies to efficiently manage online visibility, reduce traffic acquisition costs, promote consumer engagement, minimize the cost associated with managing multiple third-party vendors, and acquire new customers. Our Growth Strategies The key elements of our growth strategy include: • Acquire new customers.
Our comprehensive product suite delivers differentiated insights through a multi-faceted platform that enables companies to efficiently manage online visibility, reduce traffic acquisition costs, promote consumer engagement, minimize the cost associated with managing multiple third-party vendors, and acquire new customers. 9 Our Growth Strategies The key elements of our growth strategy include: • Acquire new customers.
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.
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 $3,522 as of December 31, 2024 from $3,125 as of December 31, 2023. • Pursue opportunistic Mergers & Acquisitions.
We have developed easy-to-use dashboards, report builders, project sharing, and task management capabilities that streamline the analytics process for our customers through an intuitive and modern customer experience, while enabling intra-company teams to work together seamlessly to manage a company’s online visibility. • Strong value proposition.
Our platform prioritizes the customer experience and promotes collaboration across functional teams. We have developed easy-to-use dashboards, report builders, project sharing, and task management capabilities that streamline the analytics process for our customers through an intuitive and modern customer experience, while enabling intra-company teams to work together seamlessly to manage a company’s online visibility. • Strong value proposition.
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 continue to invest in research and development to enhance our platform and release new products and features, including our Enterprise SEO solution, while bolstering one of the largest independent data sets for online visibility.
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.
Our management team expects to continue to allocate resources to identify, evaluate, and execute strategic acquisitions. For example, we acquired Backlinko.com (“Backlinko”) in January 2022, Intellikom Inc. dba Kompyte (“Kompyte”) in March 2022, Rank, LLC (“Traffic Think Tank”) in February 2023, a majority stake in Datos Inc. (“Datos”) in December 2023, a majority stake in Brand 24 S.A.
Our Platform Our SaaS platform has been purpose-built to help companies manage their online visibility and ensure they identify and reach the right audience in the right context and through the right channels.
Our Platform, Solutions and Product Offerings Our online visibility management SaaS platform has been purpose-built to help companies manage their online visibility and ensure they identify and reach the right audience in the right context and through the right channels.
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 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 106% and 107% as of December 31, 2024 and 2023, respectively, and our compounded average annual revenue growth rate of 35% between the years ended December 31, 2018 and December 31, 2024.
Companies often attempt to address individual aspects of online visibility, such as search engine optimization (“SEO”), search engine marketing (“SEM”), content marketing, social media management (“SMM”), digital public relations (“PR”), and competitive intelligence, among others.
Companies often attempt to address individual aspects of online visibility, such as search engine optimization (“SEO”), search engine marketing (“SEM”), content marketing, social media management (“SMM”), brand marketing, and competitive intelligence, among others.
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.
Our comprehensive online visibility management SaaS platform 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 and backlinks that are driving this traffic, and the effectiveness of a company’s content marketing strategy. • Robust, proprietary technology platform and datasets.
We have eleven additional registered trademarks in the United States, including for the “Prowly” and “Sellzone” marks, Semrush and Prowly logos, and three registrations of other trademarks in the EU and other countries, including for the “Prowly and “Sellzone marks and the Semrush and Prowly logos, with additional trademark registration applications pending in other countries.
We have additional registered trademarks in the United States, including for the “Prowly” marks, Semrush, Ryte and Prowly logos, and registrations of other trademarks in the EU and other countries, including for the “Prowly”, “Ryte” and “Sellzone” marks and the Prowly, Ryte and Semrush logos, with additional trademark registration applications pending in other countries.
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.
Our unique set of data assets have been developed over the 10 last 16 years and includes more than 808 million domains, 26 billion keywords, click stream panel data from billions of events per week, 43 trillion backlinks, 10 billion URLs crawled per day on average, and a range of data aggregated from social media networks.
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.
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 Account (https://x.com/semrush) – Semrush Facebook Page (https://www.facebook.com/Semrush) – Semrush LinkedIn Page (https://www.linkedin.com/company/semrush) – Semrush Instagram Account (https://www.instagram.com/semrush) – Semrush Threads Account (https://www.threads.net/@semrush) – Semrush YouTube Account (https://www.youtube.com/@semrush) – Semrush TikTok Account (https://www.tiktok.com/@semrush) – Semrush Bluesky Account (https://bsky.app/profile/semrushofficial.bsky.social) 15 The information disclosed by the foregoing channels could be deemed to be material information.
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, 2024 and 2023, our differentiated platform empowered more than 1,049,000 and 1,041,000 active free customers, respectively, and approximately 117,000 and 108,000 paying customers, respectively, in over 150 countries. As interactions between companies and their customers continue to shift online, managing a company’s online visibility has become critical.
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 plan to focus research and development investments to increase the functionality of our online visibility management SaaS platform in order to adapt to the latest changes in the digital marketing landscape, leverage AI, and ensure our platform maintains leading technology innovations. Research and development expenses accounted for $80.1 million for the year ended December 31, 2024.
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.
Government Regulations We operate globally and are subject to numerous U.S. federal and 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.
With over 5.4 billion internet users in the second quarter of 2022, according to Internet World Stats, and consumers worldwide spending an average of over six and a half hours per day online, according to GlobalWebIndex, digital channels are essential for customer engagement.
With over 5.5 billion internet users in 2024, according to research platforms, and consumers worldwide spending an average of over six and a half hours per day online, according to GlobalWebIndex, digital channels are essential for customer engagement.
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, 2024, we had 563 full-time employees and 57 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.
(“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.
See Note 9 “Acquisitions, Intangible Assets, and Goodwill” 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 2024.
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.
Our platform maintains a range of seamless third-party integrations for data, workflow, reporting and AI capabilities, enabling our customers to manage every critical step in optimizing their online visibility. Notable integrations include Google Analytics, Google Ads, Microsoft Ads, Meta Ads, TikTok ads, Amazon ads, Salesforce, HubSpot, YouTube, Facebook, Instagram, X, LinkedIn, Pinterest, Yext, and Microsoft Outlook. • Intuitive, easy-to-use platform.
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.
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 106% as of December 31, 2024. • Focus on expanding the adoption of our Enterprise SEO solution.
We further control the use of our proprietary technology and intellectual property through provisions in both general and product-specific terms of use.
Our employees, consultants, and contractors are also generally subject to invention assignment agreements. 14 We further control the use of our proprietary technology and intellectual property through provisions in both general and product-specific terms of use.
Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, and trade secrets, as well as contractual provisions and restrictions on access to our proprietary technology.
No single customer accounted for more than 10% of our revenue in the year ended December 31, 2024. Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, and trade secrets, as well as contractual provisions and restrictions on access to our proprietary technology.
We hold registered trademarks in the EU and UK for “Kompyte”. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. We are the registered holder of a variety of domestic and international domain names that include “www.semrush.com”, “www.prowly.com”, “www.backlinko.com”, “www.kompyte.com”, and similar variations of them.
We hold registered trademarks in the EU and UK for “Kompyte” and “Ryte”. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.
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.
In addition, as of December 31, 2024, we had a total of 183 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.
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.
This calculation excludes revenue from new customers and any non-recurring revenue. Our culture is driven by a collaborative and innovative leadership style and team, which has fostered our ability to expand from a single product in 2008 to our comprehensive online visibility management SaaS platform comprising the products, tools, and add-ons we offer today.
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.
Human Capital As of December 31, 2024, we had 1,561 full-time employees, consisting of 452 in Spain, 326 in the United States, 153 in Germany, 142 in the Netherlands, 129 in Serbia, 122 in Cyprus, 119 in the Czech Republic, and 118 employees located in other countries and employees working remotely.
We expect to continue to target new customers who have not yet adopted online visibility management solutions and those who are currently using our free offering. Our sales model for new customers is highly efficient due to our low-friction, self-service onboarding capabilities that allow us to acquire new customers with relatively low sales investment.
We expect to continue to target new customers who have not yet adopted online visibility management solutions and those who are currently using our free offering.
Meanwhile, individual solutions targeted at addressing one or a subset of business problems, or point solutions, rely on limited, channel-specific data, providing only partial, incomplete perspectives. Our technology collects, aggregates, and enriches a broad set of fragmented data across networks and channels, which we leverage to derive valuable and actionable insights that we provide our customers.
Our technology collects, aggregates, and enriches a broad set of fragmented data across networks and channels, which we leverage to derive valuable and actionable insights that we provide our customers.
Our proprietary SaaS platform enables us to aggregate and enrich trillions of data points collected from more than 808 million unique domains.
The evolving online landscape and information overload from online content have made it increasingly difficult for companies to understand and manage their online visibility. Our proprietary online visibility management SaaS platform (our “platform”) enables us to aggregate and enrich trillions of data points collected from more than 808 million unique domains.
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.
We have developed our technology platform, and various products, tools, and features, over the last 16 years. Since our founding in 2008, our platform has evolved through technology innovation as we have added these new products, tools, and features.
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 substantial base of approximately 117,000 paying customers as of December 31, 2024 presents a significant opportunity to increase monetization.
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.
For the years ended December 31, 2024, 2023, and 2022, our revenue was $376.8 million, $307.7 million, and $254.3 million, respectively, representing growth of 22% and 21%, respectively. For the years ended December 31, 2024, 2023, and 2022, our net income (loss) was $7.4 million, $1.0 million, and $(33.8) million, respectively.
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 are the registered holder of a variety of domestic and international domain names that include “www.semrush.com”, “www.prowly.com”, “www.backlinko.com”, “www.kompyte.com”, “www.ryte.com”, www.explodingtopics.com”, “www.thirddoormedia.com” and similar variations of them. 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.
We also operate two locations in Google Cloud, one in Virginia and one in South Carolina. Our Customers We serve a range of customers from small and midsize businesses (“SMBs”) to enterprises and marketing agencies, across a wide variety of verticals, including consumer internet, digital media, education, financial services, healthcare, retail, software, and telecommunications, among others.
Our Customers We serve a range of customers from SMBs to enterprise-size businesses and marketing agencies, across a wide variety of verticals, including consumer internet, digital media, education, financial services, healthcare, retail, software, and telecommunications, among others. As of December 31, 2024, we had approximately 117,000 paying customers and 1,049,000 active free customers on our platform across 153 countries.
In a highly fragmented market with a myriad of network- and channel-specific solutions, our differentiated and integrated platform provides comprehensive insights into a company’s online visibility. 7 Some large technology platforms including Google and Facebook offer their own solutions but are incentivized to prioritize their own paid channels, lack independence, and do not operate across rival networks.
As a result, we empower companies to improve their online visibility across key channels through a holistic strategy. In a highly fragmented market with a myriad of network- and channel-specific solutions, our differentiated and integrated platform provides comprehensive insights into a company’s online visibility.
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.
Our subscription-based model enables customers to select a plan aligned with their needs and to license various solutions on a monthly or annual basis.
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.
We have grown our ARR per paying customer to $3,522 as of December 31, 2024, up from $3,125 as of December 31, 2023, driven by strong upsell activity .
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 ARR as the total subscription revenue as of a given date that we expect to contractually receive over the subsequent 12 months from customers on an annualized basis, assuming no increases, reductions or cancellations.
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.
We offer time-limited free trials, which allow prospective customers to experience the functionality of certain plans (for example, our Pro or Guru plans) and decide whether to transition to a paid subscription. At the end of the trial, customers either become paying subscribers or move to our free plan. Free.
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.
Our compelling value proposition, effective go-to-market strategy, and recurring revenue model drives efficient unit economics.
Our software products cover key aspects of online visibility, including SEO, SEM, content, advertising, competitive research, SMM, and digital PR.
The Benefits of Our Platform The key benefits of our platform include: • All-in-one platform to provide comprehensive online visibility. Our software products cover key aspects of online visibility, including search engine optimization, paid advertising, local marketing, content marketing, competitive research, social media management, and brand marketing.
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.
Enterprise. Our Enterprise SEO subscription includes the same features as under the Business subscription, plus AI-driven analysis, customizable dashboards, comprehensive reporting capabilities, and extended limits. Within our Enterprise SEO solution, we currently have four paid subscription tiers — Bronze, Silver, Gold, and Platinum — which differ in terms of usage limits, features, and support levels.
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Online visibility represents how effectively companies connect with consumers across a variety of digital channels, including search, social and digital media, digital public relations, and review websites. The evolving online landscape and information overload from online content have made it increasingly difficult for companies to understand and manage their online visibility.
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Our platform utilizes data and intelligence at the core surrounded by AI-powered interconnected hubs focused on search engine optimization, paid advertising, social media management, local marketing, brand marketing, and content marketing.
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As a result, we empower companies to improve their online visibility across key channels through a holistic strategy.
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Each of these marketing channel hubs is uniquely designed to ensure our customers can analyze, enhance and measure website navigation and performance, content relevance and authority, and overall prospective customer interests and engagement, and most importantly show how each channel is connected to the others to provide a much needed means for our customers to optimize returns on their investments.
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We utilize a highly efficient, low-touch sales approach focused on driving customers to our platform through a self-service model, allowing our sales team to focus on retention and account expansion.
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Some large technology platforms including Google and Facebook offer their own solutions but are incentivized to prioritize their own paid channels, lack independence, and do not operate across rival networks. Meanwhile, individual solutions targeted at addressing one or a subset of business problems, or point solutions, rely on limited, channel-specific data, providing only partial, incomplete perspectives.
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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.
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We calculate our dollar-based net revenue retention rate as of the end of a period by using (a) the revenue from our customers during the twelve month period ending one year prior to such period as the denominator and (b) the revenue from those same customers during the twelve months ending as of the end of such period as the numerator.
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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.
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Since our inception 16 years ago, we have been led by our co-founder and Chief Executive Officer (“CEO”), Oleg Shchegolev. On February 26, 2025, we announced that William (Bill) R. Wagner has been named the new CEO, effective March 10, 2025, and Oleg Shchegolev will assume the role of Chief Technology Officer (“CTO”).
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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.
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We believe this transition will further bolster our leadership team and culture of continuous improvement as it 8 will allow Mr. Shchegolev to focus on artificial intelligence (“AI”) and other product innovation matters in his new role as CTO, while also ensuring strong leadership in the CEO position from Mr.
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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.
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Wagner who is a SaaS industry veteran with over 30 years in the technology sector and who has served as a member of our Board of Directors since September 2022. Our capital efficient model has enabled us to grow to $411.6 million in ARR as of December 31, 2024 from $337.1 million in ARR as of December 31, 2023.
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Free accounts help generate demand for our paid offerings as active free customers experience the capabilities and functionality of our platform and are prompted to upgrade to a paid membership when they reach free customer usage limits. Pro. Pro provides access to our platform and ongoing software updates.
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Our sales model for new customers is highly efficient due to our low-friction, self-service onboarding capabilities that allow us to acquire new customers with relatively low sales investment. • Expand the use of our platform by our existing paying customer base.
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Customers upgrade to higher price point plans to increase usage limits and add features, including content marketing tools and historical data tracking. Within our subscription tiers, customers have the ability to purchase increased usage limits by adding the ability to create additional projects, keywords to track, and user licenses without moving to a higher price point plan.
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For both the acquisition of new customers and the expansion of the use of our platform by our existing paying customer base, we expect to continue to heavily market, cross-sell and up-sell our Enterprise SEO solution for which general availability was launched in June 2024.
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Our dynamic pricing model enables our customers to tailor a plan that is suitable for their strategic needs and affords us the ability to expand within our customer base as customers seek additional functionality from our platform.
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Our Enterprise SEO solution, which is built on top of our SEO platform but with additional features and functionalities, is typically sold at a higher subscription price point (as compared to our other product subscriptions), and subscriptions are typically at least an annual term.
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Paying customers who discontinue their subscriptions have the option to return as paying customers at a future time, continue to use our products and tools that are available to free customers, or discontinue using our products and tools entirely.
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It is targeted at larger enterprise customers who often have a need for higher quantities of license entitlements, which in turn drives an increase in average ARR per customer. • Continue to innovate and develop new products and features.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEuropean Data Protection Law also imposes strict rules on the transfer of personal data out of the EU/UK to third countries deemed to lack adequate privacy protections (including the United States), unless an appropriate safeguard specified by the European Data Protection Law is implemented, such as the Standard Contractual Clauses (“SCCs”) approved by the European Commission, or a derogation applies.
Biggest changeThese obligations include the requirement to obtain consent from individuals in specific situations, provide additional disclosures to individuals regarding data processing activities, implement safeguards to protect the security and confidentiality of personal data, limit personal data retention periods, conduct mandatory data breach notifications in certain circumstances, and put in place specific measures (including contractual requirements) when engaging third-party service providers. 34 European Data Protection Law also imposes strict rules on the transfer of personal data out of the EEA/UK to third countries deemed to lack adequate privacy protections, including the United States in certain circumstances, unless a derogation applies, or an appropriate transfer safeguard specified by the European Data Protection Law is implemented, such as the Standard Contractual Clauses (“SCCs”) approved by the European Commission and the “International Data Transfer Agreement or Addendum (“IDTA”) approved by the UK Information Commissioner’s Office.
Interruptions in these systems, whether due to system failures, computer viruses, software errors, physical or electronic break-ins, malicious hacks or attacks on our systems (such as denial of service attacks), or force majeure events, could affect the security and availability of our products and prevent or inhibit the ability of customers to access our platform.
Interruptions in these systems, whether due to system failures, computer viruses, software errors, physical or electronic break-ins, malicious hacks or attacks on our systems (such as denial of service attacks), or force majeure events, could affect the security and availability of our platform and products and prevent or inhibit the ability of customers to access our platform and products.
In addition, we do not own any issued, nor do we have any pending patents, which limits our ability to deter patent infringement claims by competitors and other third parties who hold patents.
In addition, we do not own any issued patents, nor do we have any pending patents, which limits our ability to deter patent infringement claims by competitors and other third parties who hold patents.
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.
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; 44 • 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; • 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.
Further, health epidemics, natural disasters, terrorist attacks, power loss, telecommunications failures or similar catastrophic events could cause our third-party data center hosting facilities, leased servers, and cloud computing platform providers, which are critical to our infrastructure, to shut down their operations, 21 experience technical or security incidents that delay or disrupt performance or delivery of services to us, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
Further, health epidemics, natural disasters, terrorist attacks, power loss, telecommunications failures or similar catastrophic events could cause our third-party data center hosting facilities, leased servers, and cloud computing platform providers, which are critical to our infrastructure, to shut down their operations, experience technical or security incidents that delay or disrupt performance or delivery of services to us, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
Such 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.
Such 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; 28 • 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; • 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.
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.
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.
In addition, there can be no assurance that we will not be required to enter into new negotiated agreements with data providers in the future to maintain or enhance the level of functionality of our platform, or that the terms and conditions of such agreements, including pricing and levels of service, will not be less favorable, which could adversely affect our results of operations.
In addition, there can be no assurance that we will not be required to enter into new negotiated agreements with data providers in the future to maintain or enhance the level of functionality of our platform and products, or that the terms and conditions of such agreements, including pricing and levels of service, will not be less favorable, which could adversely affect our results of operations.
Furthermore, the owners and operators of our data center facilities do not guarantee that access to our platform will be uninterrupted or error-free. We do not control the operation of these third-party providers’ facilities, which could be subject to break-ins, cybersecurity incidents (including system-encrypting ransomware), sabotage, intentional acts of vandalism and other misconduct.
Furthermore, the owners and operators of our cloud and data center facilities do not guarantee that access to our platform will be uninterrupted or error-free. We do not control the operation of these third-party providers’ facilities, which could be subject to break-ins, cybersecurity incidents (including system-encrypting ransomware), sabotage, intentional acts of vandalism and other misconduct.
Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational resources, and harm our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of operations, and financial condition.
Any claim against us, regardless of its merit, could be costly, divert management’s attention and operational resources, and harm our reputation. As litigation is inherently unpredictable, we cannot assure you that any potential claims or disputes will not have a material adverse effect on our business, results of 30 operations, and financial condition.
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.
Additionally, 45 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.
Likewise, we expect to see continued and rapid growth of chatbot platforms that leverage the use of artificial intelligence and could result in lower demand for traditional search engine technologies. If consumers widely adopt new social media networks and artificial intelligence platforms, we will need to develop integrations and functionality related to these new networks and platforms.
Likewise, we expect to see continued and rapid growth of chatbot platforms that leverage the use of artificial intelligence and could result in lower demand for traditional search engine technologies. If consumers 23 widely adopt new social media networks and artificial intelligence platforms, we will need to develop integrations and functionality related to these new networks and platforms.
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.
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.
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.
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.
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.
Failure to 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.
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.
If our efforts to expand our relationships with 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 free trials, and convert them into paying customers, our operating results would be negatively affected.
If any of our data center suppliers experience disruptions or failures, it would take time for the applicable backup data center to become fully functioning, and we would likely experience delays in delivering the affected products and segments of our platform, which may involve incurring significant additional expenses.
If any of our cloud or data center suppliers experience disruptions or failures, it would take time for the applicable backup data center to become fully functioning, and we would likely experience delays in delivering the affected products and segments of our platform, which may involve incurring significant additional expenses.
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.
In addition, the software, internal applications, and systems underlying our platform and products 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.
If we or any of our third-party vendors were to experience an interruption, delay, or outage in service and availability, we may be unable to process new and renewals of subscriptions and our ability to process such subscription and credit card payments would be delayed while we activate an alternative billing platform.
If we or any of our third-party vendors were to experience an interruption, delay, or outage in service and availability, we may be unable to process new and renewals of subscriptions and our ability to 27 process such subscription and credit card payments would be delayed while we activate an alternative billing platform.
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.
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.
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.
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.
We have incurred and will continue to incur costs to integrate the businesses of the companies we acquire or invest in into our business and to integrate their products into our platform, such as software integration expenses and costs related to the renegotiation of redundant vendor agreements, and we expect to incur similar costs to integrate future acquisitions.
We have incurred and will continue to incur costs to integrate the businesses of the companies we acquire or invest in into our business and to integrate their products into our platform, such as software and security related integration expenses and costs related to the renegotiation of redundant vendor agreements, and we expect to incur similar costs to integrate future acquisitions.
Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our vendors, customers and users to resist providing the data necessary to allow us to offer our platform and products to our customers and users effectively, or could prompt individuals to opt out of our collection of their personal data.
The uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our vendors, customers and users to resist providing the data necessary to allow us to offer our platform and products to our customers and users effectively, or could prompt individuals to opt out of our collection of their personal data.
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.
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.
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.
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.
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.
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; 42 • 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; • 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.
We cannot guarantee that these unpaid or paid marketing efforts will continue to attract the same volume and quality of traffic to our websites or will continue to result in the same level of registrations for premium subscriptions as they have in the past.
We cannot guarantee that these unpaid or paid marketing efforts will continue to attract the same volume and quality of traffic to our websites or will continue to result in the same level of registrations for free or premium subscriptions as they have in the past.
Trial subscriptions automatically become premium subscriptions if the customer does not opt out of the trial subscription after the trial period is over, and such trial subscriptions can be upgraded to obtain additional features, functionality, and varying levels of access and report generating capabilities.
Trial subscriptions automatically become premium subscriptions if the customer does not opt out of the trial subscription after the trial period is over, and such trial subscriptions can be upgraded to obtain additional features, functionality, entitlements, and varying levels of access and report generating capabilities.
Federal, state, and foreign laws regulate internet tracking software, the sending of commercial emails and text messages, and other activities, which could impact the use of our platform and products, and potentially subject us to regulatory enforcement or private litigation.
Federal, state, and foreign laws regulate internet tracking software, the sending of commercial emails and text messages, sales activities, and other activities, which could impact the use of our platform and products, and potentially subject us to regulatory enforcement or private litigation.
We take reasonable steps to protect the security, confidentiality, integrity, and availability of the information we and our third-party service providers hold, but there is no guarantee that despite our efforts, inadvertent disclosure (such as may arise from software bugs or other technical malfunctions, employee error or malfeasance, improper use of third-party artificial intelligence services, or other factors) or unauthorized access, acquisition, misuse, disclosure or loss of personal or other confidential information will not occur or that third parties will not gain unauthorized access to this information or disrupt or disable our systems or infrastructure.
We take reasonable steps designed to protect the security, confidentiality, integrity, and availability of the information we and our third-party service providers hold, but there is no guarantee that despite our efforts, inadvertent disclosure (such as may arise from software bugs or other technical malfunctions, employee or vendor error or malfeasance, improper use of third-party artificial intelligence services, or other factors) or unauthorized access, acquisition, misuse, disclosure or loss of personal or other confidential information will not occur or that third parties will not gain unauthorized access to this information or disrupt or disable our systems or infrastructure.
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.
We obtain social media data through APIs that connect to social media platform operators, including Facebook, X, Instagram, Pinterest, and LinkedIn. We also collect data from our customers in connection with their use of our platform and other products.
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.
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 we are unable to respond to these changes in a cost-effective manner, our products and aspects of our platform may become less marketable and less competitive or obsolete, and our operating results may be negatively affected.
If we are unable to respond to these changes in a cost-effective and timely manner, our products and aspects of our platform may become less marketable and less competitive or obsolete, and our operating results may be negatively affected.
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.
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.
Our business, brands, reputation, and ability to attract and retain customers depend upon the satisfactory performance, reliability, and availability of our platform, which in turn depend upon the availability of the internet and our third-party service providers.
Our business, brands, reputation, and ability to attract and retain customers depend upon the satisfactory performance, reliability, and availability of our platform and products, which in turn depend upon the availability of the internet and our third-party service providers.
Our platform, products, and add-ons must (i) operate without the presence of material software defects, whether actual or perceived, (ii) maintain deep and rich data sources, (iii) adapt to the changing needs of our current and prospective customers including by developing new technology, (iv) adapt to changing functionality and provide interoperability with third-party APIs, (v) maintain and develop integrations with complementary third-party services that provide value to our customers, (vi) be easy to use and visually pleasing, (vii) deliver rapid return on investment to our customers across multiple functions within their organizations, and (viii) be delivered with a superior customer support experience.
Our platform, products, and add-ons must (i) operate without the presence of material software defects, whether actual or perceived, (ii) maintain deep, rich and continuously improving data sources, (iii) adapt to the changing needs of our current and prospective customers including by developing new technology, (iv) adapt to changing functionality and provide interoperability with third-party APIs, (v) maintain and develop integrations with complementary third-party services that provide value to our customers, (vi) be easy to use and visually pleasing, (vii) deliver rapid and quantifiable return on investment to our customers across multiple functions within their organizations, and (viii) be delivered with a superior customer support experience.
We may also be subject to additional liability risks for failing to disclose data breaches or other security incidents under state data breach notification laws or under the private right of action granted to individuals under certain data privacy laws for actions arising from certain data security incidents, such as the California Consumer Privacy Act (“CCPA”) (which is further discussed below in this “Risk Factors” section).
We may also be subject to additional liability risks for failing to disclose data breaches or other cybersecurity incidents under state data breach notification laws or under the private right of action granted to individuals under certain data privacy laws for actions arising from certain data breaches or cybersecurity incidents, such as the California Consumer Privacy Act (“CCPA”) (which is further discussed below in this “Risk Factors” section).
Our online visibility platform is designed to help our customers connect with consumers across a variety of digital channels, search engines, social networking sites, and other third-party services. These services may adapt and change their strategies and policies over time. Search engines typically provide two types of search results, organic (i.e., non-paid) and purchased listings.
Our online visibility management SaaS platform is designed to help our customers connect with consumers across a variety of digital channels, search engines, social networking sites, and other third-party services. These third-party services may adapt and change their strategies and policies over time. Search engines typically provide two types of search results, organic (i.e., non-paid) and purchased listings.
The number of new customers we attract, whether as free or paying customers, is a key factor in growing our customer and premium subscription base which drive our revenues and collections. We utilize various unpaid content marketing strategies, including blogs, webinars, thought leadership, and social media engagement, as well as paid advertising, to attract visitors to our websites.
The number of new customers we attract, whether as free or paying customers, is a key factor in growing our customer and premium subscription base, which customer base drives our revenues and collections. We utilize various unpaid content marketing strategies, including blogs, webinars, thought leadership, and social media engagement, as well as paid advertising, to attract visitors to our websites.
Such claims could potentially adversely affect our ability to provide our services and the current level of functionality of our platform in such circumstances, which could adversely affect our results of operations.
Such claims could potentially adversely affect our ability to provide our services and the 35 current level of functionality of our platform in such circumstances, which could adversely affect our results of operations.
The use of new and evolving technologies, such as artificial intelligence, in our offerings may result in spending material resources and presents risks and challenges that can impact our business including by posing security and other risks to our confidential information, proprietary information and personal information, and as a result we may be exposed to reputational harm and liability.
The use of artificial intelligence and other new and evolving technologies in our offerings may result in spending material resources and presents risks and challenges that can impact our 26 business including by posing security and other risks to our confidential information, proprietary information and personal information, and as a result we may be exposed to reputational harm and liability.
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.
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 and data breaches, diverting resources from the growth and expansion of our business.
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.
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, 2024.
We have developed our platform, products, and add-ons to rely in part on access to data from third-party sources.
We developed our platform, products, and add-ons to rely in part on access to data from third-party sources.
We may not be successful in delivering on some or all of the foregoing or in doing so while maintaining competitive pricing, which could result in customer dissatisfaction leading to termination or downgrades of premium subscriptions, fewer new free customers, fewer subscription upgrades or lower dollar-based net revenue retention rates, prospective customers’ selection of our competitors’ products over our own, and other adverse effects on our business.
We may not be successful in delivering on some or all of the foregoing or in doing so while maintaining competitive pricing, which could result in customer dissatisfaction leading to termination, non-renewals or downgrades of premium subscriptions, fewer new customers, fewer subscription upgrades or lower dollar-based net revenue retention rates, prospective customers’ selection of our competitors’ products over our own, and other adverse effects on our business.
These claims, lawsuits, and proceedings could include labor and employment, wage and hour, income tax, commercial, data privacy, antitrust, alleged securities law violations or other investor claims, and other matters. The number and significance of these potential claims and disputes may increase as our business expands.
These claims, lawsuits, and proceedings could include labor and employment, wage and hour, income tax, commercial, data privacy, intellectual property, antitrust, alleged securities law violations or other investor claims, and other matters. The number and significance of these potential claims and disputes may increase as our business expands.
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.
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 29, 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.
Many of our current and future competitors benefit from competitive advantages over us, such as greater name recognition, longer operating histories, more targeted products for specific use cases, larger sales and more established relationships or integrations with third-party data providers, search engines, online retail platforms, and social media networking sites, and more established relationships with customers in the market.
Some of our current and future competitors may benefit from competitive advantages over us, such as greater name recognition, longer operating histories, more targeted products for specific use cases, larger sales and more established relationships or integrations with third-party data providers, search engines, online retail platforms, and social media networking sites, and more established relationships with customers in the market.
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.
Similarly, we expect continuous changes in computer hardware and software, 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.
We have previously identified, and may continue to identify, customer accounts for our platform and products that may originate from, or are intended to benefit, persons in countries that are subject to U.S. embargoes, including transactions or events in or relating to Cuba, Iran, North Korea, Syria, the Crimea region of Ukraine and the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine.
We have previously identified, and may in the future identify, customer accounts for our platform and products that may originate from, or are intended to benefit, persons in countries that are subject to U.S. embargoes, including transactions or events in or relating to Cuba, Iran, North Korea, Syria, the Crimea 37 region of Ukraine and the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine.
If we fail to maintain and improve our methods and technologies, or fail to anticipate new methods or technologies for data collection and analysis, hardware, software, and software-related technologies, competing products and services could surpass ours in depth, breadth, or accuracy of our data, the insights that we offer or in other respects, which could result in a loss of customers and harm our business and financial results.
If we fail to maintain and improve our methods and technologies, or fail to anticipate new methods or technologies for data collection and analysis, hardware, software, and software-related technologies, competing products and services could surpass ours in depth, breadth, or accuracy of our data, the insights that we offer or in other respects, which could result in a loss of customers, impact our ability to acquire new customers, and harm our business and financial results.
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.
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 data breaches or other cybersecurity incidents resulting from this type of event.
In addition, with consent from our customers, we collect and store certain personally identifiable information (“personal data”), credit card information, and other data needed to create, support, and administer the customer account, conduct our business, and comply with legal obligations, including rules imposed by the Payment Card Industry networks.
In addition, with consent from our customers, we collect and store certain personally identifiable information (“personal data”), credit card information, and other data needed to create, support, and administer the customer account, to collect premium subscription fees, conduct our business, and comply with legal obligations, including rules imposed by the Payment Card Industry networks.
We may also be contractually required to notify certain customers in the event of a security incident pursuant to the applicable customer agreement. These mandatory disclosures regarding a security breach may lead to negative publicity and may cause our customers to lose confidence in the effectiveness of our data security measures.
We may also be contractually 25 required to notify certain customers in the event of a cybersecurity incident or data breach pursuant to the applicable customer agreement. These mandatory disclosures regarding a cybersecurity incident or data breach may lead to negative publicity and may cause our customers to lose confidence in the effectiveness of our data security measures.
Among other requirements, the TCPA requires us to obtain prior express written consent for certain telemarketing calls. Many states have similar consumer protection laws regulating telemarketing. These laws limit our ability to communicate with consumers and reduce the effectiveness of our marketing programs.
Among other requirements, the TCPA requires us to obtain prior express written consent for certain telemarketing calls. Many states have similar consumer protection laws regulating telemarketing. These laws limit our ability to communicate with potential customers and reduce the effectiveness of our marketing programs.
Any intentional or inadvertent security breaches or other unauthorized access to or disclosure of personal data could expose us to enforcement actions, regulatory or governmental audits, investigations, litigation, fines, penalties, adverse publicity, downtime of our systems, and other possible liabilities.
Any intentional or inadvertent cybersecurity incidents, data breaches or other unauthorized access to or disclosure of personal data could expose us to enforcement actions, regulatory or governmental audits, investigations, litigation, fines, penalties, adverse publicity, downtime of our systems, and other possible liabilities.
Our customers’ decisions as to whether to upgrade their subscriptions or not is driven by a number of factors, including customer satisfaction with the security, performance, and reliability of our platform and products, the perceived quality of our customer service, general economic conditions, the price and functionality of our platform and products relative to those of our competitors, and customer reaction to the price for additional products.
Our customers’ 17 decisions as to whether to upgrade their subscriptions or not is driven by a number of factors, including customer satisfaction with the additional features and functionality, performance, security and reliability of our platform and products, the perceived quality of our customer service, general economic conditions, the price and functionality of our platform and products relative to those of our competitors, and customer reaction to the price for the upgraded subscription.
Our customers’ actions using either the link building tool or Prowly could be flagged under Google’s spam and abuse policy or in the future such actions may be prohibited by subsequent changes to Google’s policies.
Our customers’ actions using either the link building tool or email distribution tool could be flagged under Google’s spam and abuse policy or in the future such actions may be prohibited by subsequent changes to Google’s policies.
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.
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, 2024 held in the 43 aggregate 79% of the voting power of our capital stock, which will limit your ability to influence corporate matters.
Our failure to maintain adequate research and development resources, to use our research and development resources efficiently, or to address the demands of our prospective and actual customers could materially adversely affect our business.
Our failure to maintain adequate research and development resources, to use our research and development resources efficiently and effectively, or to address the demands and anticipate future demands of our prospective and actual customers could materially adversely affect our business.
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.
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, 2024, our directors, executive officers, and their affiliates, held in the aggregate 79% of the voting power of our capital stock.
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.
If 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 may lose confidence in our financial reporting, and our stock price may decline as a result.
Our strategy is to sell premium subscriptions of our platform to paying customers of all sizes, from sole proprietors, to SMBs, to large enterprise customers.
Our strategy is to sell premium subscriptions of our platform, including our Enterprise SEO solution, to paying customers of all sizes, from sole proprietors, to SMBs, to large enterprise customers.
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.
Our business and operating results may be negatively affected if our paying customers do not upgrade and/or retain their premium subscriptions or if they fail to purchase additional products.
As of December 31, 2023, 25 countries in Europe, the Middle East, Africa, and Asia-Pacific have enacted various aspects of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting (“BEPS”) 2.0 Pillar Two global minimum tax (GMT). In 24 of those countries, the GMT is effective beginning in 2024.
As of December 31, 2024, 54 countries in Europe, Eurasia, the Middle East, Africa, Asia-Pacific, and the Americas have enacted various aspects of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting (“BEPS”) 2.0 Pillar Two global minimum tax (GMT). In 35 of those countries, the GMT is effective beginning in 2024.
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”).
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 (the “Delaware Forum Provision”).
The requirements of European Data Protection Law pertaining to the licensing of data or obtaining such data from third parties are not entirely clear in all cases.
The requirements of laws and regulations (including European Data Protection Law) pertaining to the licensing of data or obtaining such data from third parties are not entirely clear in all cases.
Our email distribution tool relies on a DMARC integration which enables our customers to send emails using our platform as if they were sending emails directly from their email provider, and our Prowly product involves emails initiated by customers over Prowly servers.
Our email distribution tool enables our customers to send emails to their desired recipients, such as journalists and bloggers. Our email distribution tool relies on a DMARC integration which enables our customers to send emails using our platform as if they were sending emails directly from their email provider, and our product involves emails initiated by customers over our servers.
If we develop or use AI systems that are governed by the AI Act, it may necessitate ensuring higher standards of data quality, transparency, and human oversight, as well as adhering to specific and potentially burdensome and costly ethical, accountability, and administrative requirements.
If we develop or use AI systems that are governed by the EU AI Act, or other applicable AI related laws and regulations, it may necessitate ensuring higher standards of data quality, transparency, and human oversight, as well as adhering to specific and potentially burdensome and costly ethical, accountability, administrative and contractual requirements.
For example, a paying customer subscribing to our core product through a “Business” subscription may downgrade to the “Guru” subscription if they do not deem the additional features and functionality worth the incremental costs.
For example, a paying customer subscribing to our SEO solution through a “Business” subscription may downgrade to the “Guru” subscription if they do not deem the additional features and functionality of “Business” worth the incremental costs.
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.
Investors seeking cash dividends should not purchase 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.
To the extent there are disruptions in our billing systems or third-party subscription and payment processing systems, we could experience revenue loss, accounting issues, and harm to our reputation and customer relationships, which would adversely affect our business and results of operations. 24 We are subject to a number of risks related to credit and debit card payments, including: • we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our products or experience an increase in our operating expenses; • if our billing systems fail to work properly and the failure has an adverse effect on our customer satisfaction, causes credit and debit card issuers to disallow our continued use of their payment products, or, does not permit us to automatically charge our paying customers’ credit and debit cards on a timely basis or at all, we could lose or experience a delay in collection of customer payments; • if we are unable to maintain our chargeback rate at acceptable levels, we may face civil liability, diminished public perception of our security measures and our credit card fees for chargeback transactions or our fees for other credit and debit card transactions or issuers may increase, or issuers may terminate their relationship with us; and • we could be significantly impaired in our ability to operate our business if we lose our ability to process payments on any major credit or debit card.
We are subject to a number of risks related to credit and debit card payments, including: • we pay interchange and other fees, which may increase over time and could require us to either increase the prices we charge for our products or experience an increase in our operating expenses; • if our billing systems fail to work properly and the failure has an adverse effect on our customer satisfaction, causes credit and debit card issuers to disallow our continued use of their payment products, or, does not permit us to automatically charge our paying customers’ credit and debit cards on a timely basis or at all, we could lose or experience a delay in collection of customer payments; • if we are unable to maintain our chargeback rate at acceptable levels, we may face civil liability, diminished public perception of our security measures and our credit card fees for chargeback transactions or our fees for other credit and debit card transactions or issuers may increase, or issuers may terminate their relationship with us; and • we could be significantly impaired in our ability to operate our business if we lose our ability to process payments on any major credit or debit card.
This legislation imposes significant obligations on providers and deployers of high risk artificial intelligence systems, and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles in their development and use of these systems.
The EU AI Act imposes significant obligations on providers and deployers of high risk artificial intelligence systems, and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles in their development and use of these systems.
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements, and harm our operating results.
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements, cause us to have to clawback incentive-based compensation from our executives, and harm our operating results.
Any security breach, whether actual or perceived, may harm our reputation, and we could lose customers or fail to acquire new customers.
Any cybersecurity incident or data breach, whether actual or perceived, may harm our reputation, and we could lose customers or fail to acquire new customers.
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.
We have implemented measures designed to comply with the requirements of applicable data protection, privacy and cybersecurity laws and regulations. In respect of these measures, we rely on positions and interpretations of the law that have yet to be fully tested before the relevant courts and regulators.
We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses, modify our platform or products, or refund premium subscription fees, which could further exhaust our resources. Such disputes could also disrupt our platform or products, adversely affecting our customer satisfaction and ability to attract customers.
We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses, modify our platform or products, or refund premium subscription fees, which could further exhaust our resources.
We have materially grown our number of paying customers through the provision of free subscriptions and through trials of a premium version of our online visibility and marketing insight products.
We have materially grown our number of paying customers through the provision of free subscriptions and through trials of a premium version of our platform and products.
In addition, new social media networks and artificial intelligence platforms may not provide us with sufficient access to data from their networks and platforms, preventing us from building effective integrations with our platform and products.
In addition, new social media networks and artificial intelligence platforms may not provide us with sufficient access to data from their networks and platforms, preventing us from building effective integrations with our platform and products, or preventing us from building products and offerings that provide our customers with useful insights from such new social media networks and artificial intelligence platforms.
We may not be able to verify with complete certainty the source of such data, how it was collected, and that such data was collected and is being shared with us in compliance with all applicable data protection and privacy laws.
With regards to data that we license or otherwise receive from third parties, we may not be able to verify with complete certainty the source of such data, how it was collected, and that such data was collected and is being shared with us in compliance with all applicable data protection and privacy laws.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CIO and SVP of Information Security are members of our cyber resilience steering committee. This committee consists of leaders across the Company in the areas of information security, governance, and oversight. The committee meets periodically and as needed to, as relevant, discuss oversight of the Company’s cybersecurity program, program enhancements, and emerging cybersecurity risks or threats.
Biggest changeThis committee consists of leaders across the Company in the areas of information security, governance, and oversight. The committee meets periodically and as needed to, as relevant, discuss oversight of the Company’s cybersecurity program, program enhancements, and emerging cybersecurity risks or threats. Our Board of Directors holds ultimate responsibility for risk oversight, including cybersecurity.
Our 44 SVP of Information Security also has over twenty-five (25) years of experience in the IT and information security industries, and previously served as the chief information security officer at a public technology company. The CIO reports to senior management on the Company’s cybersecurity governance program.
Our SVP of Security also has over twenty-five (25) years of experience in the IT and information security industries, and previously served as the chief information security officer at a public technology company. The CIO reports to senior management on the Company’s cybersecurity governance program. Our CIO and SVP of Security are members of our cyber resilience steering committee.
Risk Factors. Governance Related to Cybersecurity Risks Our cybersecurity program is directed by our Chief Information Officer (“CIO”), along with the Senior Vice President ("SVP") of Information Security.
Risk Factors. 46 Governance Related to Cybersecurity Risks Our cybersecurity program is directed by our Chief Information Officer (“CIO”), along with the Senior Vice President ("SVP") of Security, who oversees our Cyber Resilience Department.
Our Board of Directors holds ultimate responsibility for risk oversight, including cybersecurity. The CIO provides an annual cybersecurity update to the Board. Our Audit Committee, pursuant to its charter, has been tasked by our Board with oversight of cybersecurity risk management. The CIO and SVP of Information Technology report to the Audit Committee on cybersecurity matters on a periodic basis.
The CIO provides an annual cybersecurity update to the Board of Directors. Our Audit Committee, pursuant to its charter, has been tasked by our Board of Directors with oversight of cybersecurity risk management. The CIO and SVP of Security report to the Audit Committee on cybersecurity matters on a periodic basis.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSee 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
Biggest changeWe 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 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. 47
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.
The leases expire at various dates between May 31, 2025 and December 31, 2028, respectively. We rent serviced office spaces with 25 or more desks in Belgrade, Serbia and Berlin, Germany. The service office contracts have expirations during 2026 and 2027, respectively. We believe that these facilities are generally suitable to meet our current needs.
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.
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, 8,890 square feet of office space in Limassol, Cyprus, 7,287 square feet of office space in Munich, Germany, and 4,365 square feet of office space in Dallas, Texas.
Removed
We 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.
Added
We lease space in data centers in the US and Poland. We also rely on third-party owned and managed virtual cloud environments, including locations in the US and in western Europe. Our data center leases expire between fiscal years 2026 and 2027.

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. 46 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 Not applicable. 48 Part II
Item 3. Legal Proceedings From time to time we may become in involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
Item 3. Legal Proceedings From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.

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 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.
Biggest changeOur Class B common stock is neither listed nor traded. Stockholders As of February 21, 2025, we had 5 holders of record of our Class A common stock and 5 holders of record of our Class B common stock.
Removed
In addition, our credit facility places restrictions on our ability to pay cash dividends.
Removed
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

68 edited+15 added−57 removed36 unchanged
Biggest changeSince 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.
Biggest changeSince our founding in 2008, we have achieved a number of significant milestones, including: • 2010: Surpassed 1,000 customers. • 2015: Surpassed 10,000 customers. • 2016: Launched Semrush Brand and Content Marketing tools. • 2017: Completed our first round of financing 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; surpassed $70 million in ARR; and launched Semrush Local and Semrush Intelligence. • 2019: Surpassed 50,000 customers and $100 million in ARR. • 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. • 2021 : Completed our IPO and the Follow-On Offering and surpassed $200 million in ARR. • 2022 : Launched our first AI product powered by ChatGPT 1.0. • 2023 : Surpassed $300 million in ARR, 100,000 paying customers, and 1,000,000 active free customers. • 2024 : Surpassed $400 million in ARR and launched the general availability of the Enterprise SEO solution. 51 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.
The utility of each of free cash flow and free cash flow margin as a measure of our liquidity is further limited as each measure does not represent the total increase or decrease in our cash balance for any given period.
The utility of free cash flow and free cash flow margin as a measure of our liquidity is further limited as each measure does not represent the total increase or decrease in our cash balance for any given period.
In addition, other companies, including companies in our industry, may calculate free cash flow and free cash flow margin differently or not at all, which reduces the usefulness of free cash flow and free cash flow margin as tool for comparison. A summary of our cash flows from operating, investing, and financing activities is provided below.
In addition, other companies, including companies in our industry, may calculate free cash flow and free cash flow margin differently or not at all, which reduces the usefulness of free cash flow and free cash flow margin as a tool for comparison. A summary of our cash flows from operating, investing, and financing activities is provided below.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $29.1 million, which resulted from $257.5 million used to purchase short-term investments, $5.2 million in capitalization of internal-use software costs, $5.1 million used in cash paid for acquisition of assets and businesses, and $2.5 million used in purchases of property and equipment.
Net cash used in investing activities for the year ended December 31, 2023 was $29.1 million, which resulted from $257.5 million used to purchase short-term investments, $5.2 million in capitalization of internal-use software costs, $5.1 million used in cash paid for acquisition of assets and businesses, and $2.5 million used in purchases of property and equipment.
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.
We expect to continue to incur additional expenses as a result of operating as a public company, including costs to 57 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 52 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 effectiveness and differentiation of our technology in an evolving landscape and maximizing retention of our existing customers.
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.
In addition to these expenses, we incur third-party service provider costs, 56 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.
As such, they are accounted for as a single performance obligation. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. We primarily invoice and collect payments from our customers for in advance on a monthly or annual basis.
As such, they are accounted for as a single performance obligation. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. We primarily invoice and collect payments from our customers on a monthly or annual basis.
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.
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 “Leases” to the consolidated financial statements of this Annual Report on Form 10-K.
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.
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.
Our subscription arrangements provide customers the right to access our hosted software applications and customers do not have the right to take possession of our software during the hosting arrangement. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).
Our subscription arrangements provide customers the right to access our hosted software 64 applications and customers do not have the right to take possession of our software during the hosting arrangement. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).
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 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 and functionality.
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.
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.
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).
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 statements of operations and comprehensive income (loss).
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.
Non-cash charges primarily consisted of $15.3 million of stock-based compensation expense, $10.4 million for amortization of deferred contract 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 $6.1 million for accretion of premiums and discounts on investments.
We expect to fund these obligations with cash flows from operations and cash on our balance sheet. Recent Accounting Pronouncements Refer to sections titled “Recent Accounting Pronouncements” in Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information.
We expect to fund these obligations with cash flows from operations and cash on our balance sheet. Recent Accounting Pronouncements Refer to sections titled “Recent Accounting Pronouncements” in Note 2 “Summary of Significant Accounting Policies” to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information.
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.
We recommend that you review the reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, and the reconciliation of free cash flow margin to net cash provided by operating activities (as a percentage of 55 revenue), the most directly comparable GAAP financial measure, and that you not rely on free cash flow, free cash flow margin or any single financial measure to evaluate our business.
This section of this Annual Report on Form 10-K discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Annual Report on Form 10-K discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
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.
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 non-GAAP financial measures 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 provided by operating activities in accordance with GAAP.
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.
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 15 “Commitments and Contingencies” to the consolidated financial statements of this Annual Report on Form 10-K.
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.
Our tax expense for the years ended December 31, 2024 and 2023 primarily relates to increased profits in our foreign subsidiaries, the non-deductibility of certain equity awards 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. 58 Results of Operations for the Years Ended December 31, 2024 and 2023 The following tables set forth information comparing our results of operations in dollars and as a percentage of total revenue for the periods presented.
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.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 have been omitted from this Annual Report but 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, 2023, which was filed with the SEC on March 7, 2024.
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.
Our sales team is largely focused on driving account expansion by encouraging our customers to fully recognize the potential benefit from our comprehensive platform and the additional features and functionalities available in our Enterprise SEO solution. As a result, we have become increasingly efficient at acquiring customers who increase their spend with us over time.
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.
Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents of $48.9 million, short-term investments of $186.7 million and accounts receivable of $9.0 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 and assets.
The change in operating assets and liabilities was primarily the result of a $9.5 million increase in deferred contract costs, a $3.3 million increase in accounts receivable, a $4.1 million decrease in operating lease liabilities, and a $2.4 million increase in prepaid expenses and other current assets.
The change in operating assets and liabilities was primarily the result of a $12.9 million increase in deferred contract costs, a $4.8 million increase in prepaid expenses and other current assets, and a $4.4 million decrease in operating lease liabilities.
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.
Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 46,996 $ 7,986 Net cash used in investing activities (58,222) (29,068) Net cash provided by (used in) financing activities 1,870 (19) Effect of exchange rate changes on cash and cash equivalents (432) 184 Decrease in cash and cash equivalents $ (9,788) $ (20,917) Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 46,996 $ 7,986 Purchases of property and equipment (3,802) (2,486) Capitalization of internal-use software costs (7,862) (5,165) Free cash flow $ 35,332 $ 335 Year Ended December 31, 2024 2023 Net cash provided by operating activities (as a percentage of revenue) 12.5 % 2.6 % Purchases of property and equipment (as a percentage of revenue) (1.0) % (0.8) % Capitalization of internal-use software costs (as a percentage of revenue) (2.1) % (1.7) % Free cash flow margin 9.4 % 0.1 % Components of our Results of Operations Revenue We generate nearly all of our revenue from subscriptions to our online visibility management SaaS platform under a SaaS model.
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.
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, product and development, and general and administrative departments, and hosting costs.
These cash outflows were partially offset by $241.6 million in proceed from sales and maturities of short-term investments.
These cash outflows were partially offset by $147.5 million in proceeds from sales and maturities of short-term investments.
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.
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.
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.
We intend to continue investing in product development to improve our data assets, expand our products and enhance our technological capabilities. 53 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 from operations, non-GAAP income 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.
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.
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.
These outflows were partially offset by a $9.1 million increase in deferred revenue due to the addition of new customers and expansion of the business and a $6.8 million increase in accounts payable.
These outflows were partially offset by an $8.5 million increase in deferred revenue due to the addition of new customers and expansion of the business and a $1.4 million increase in accrued expenses.
On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates. We believe that of our significant accounting policies, which are described in Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.
We believe that of our significant accounting policies, which are described in Note 2 “Summary to Significant Accounting Policies” to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.
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.
We do not expect to incur exit costs associated with our relocation efforts in future periods. Other Income, Net Included in other income, net are foreign currency transaction gains and losses. The functional currencies of our international locations are the local currencies for these regions.
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.
Net cash used in financing activities for the year ended December 31, 2023 consisted of $2.5 million in cash outflows relating to payments on finance leases. These outflows were partially offset by $2.2 million in proceeds related to the exercises of stock options and $0.3 million in proceeds related to shares issued in connection with the Employee Stock Purchase Plan.
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.
We have elected the fair value option in respect to the accounting for our convertible debt security and investment receivable investments, allowing for increases and decreases in the fair value of such investments to be recorded to other income, net for each reporting period. Interest expense is related to interest associated with outstanding finance leases.
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 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. 52 We calculate our dollar-based net revenue retention rate as of the end of a period by using (a) the revenue from our customers during the twelve month period ending one year prior to such period as the denominator and (b) the revenue from those same customers during the twelve months ending as of the end of such period as the numerator.
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.
This increase was primarily driven by a $3.9 million increase to integration and data costs, primarily as a result of increasing costs incurred related to new products and customer growth, a $3.5 million increase to depreciation and amortization expense primarily related to increased intangible asset balances as of December 31, 2024, a $1.7 million increase to personnel costs, a $1.6 million increase to merchant fees commensurate with revenue growth, and an overall increase in allocable overhead costs.
We define ARR per paying customer as of a given date as ARR from our paying customers as of that date divided by the number of paying customers as of that date. We define the number of paying customers as the number of unique business and individual customers as of a given date.
We define the number of paying customers as the number of unique business and individual customers as of a given date.
Provision for Income Taxes Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Provision for income taxes $ 3,696 $ 931 $ 2,765 297 % Percentage of total revenue 1.2 % 0.4 % For the year ended December 31, 2023, the provision for income taxes increased by $2.8 million.
Provision for Income Taxes Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Provision for income taxes $ 13,027 $ 3,696 $ 9,331 252 % Percentage of total revenue 3.5 % 1.2 % For the year ended December 31, 2024, the provision for income taxes increased by $9.3 million.
Research and development expenses also include depreciation expense and other expenses associated with product development. Other than internal-use software costs that qualify for capitalization, research and development costs are expensed as incurred.
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. Research and development expenses also include depreciation expense and other expenses associated with product development. Other than internal-use software costs that qualify for capitalization, research and development costs are expensed as incurred.
Other Income, Net Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Other income, net $ 12,313 $ 3,456 $ 8,857 256 % Percentage of total revenue 4 % 1 % For the year ended December 31, 2023, other income, net increased by $8.9 million.
Other Income, Net Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Other income, net $ 12,094 $ 12,313 $ (219) (2) % Percentage of total revenue 3 % 4 % For the year ended December 31, 2024, other income, net decreased by $0.2 million.
This calculation excludes revenue from new customers and any non-recurring revenue. We have successfully increased ARR per paying customer over time and believe this metric is an indicator of our ability to grow the long-term value of our platform.
We have successfully increased ARR per paying customer over time and believe this metric is an indicator of our ability to grow the long-term value of our platform and products. 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.
Non-cash charges primarily consisted of $9.0 million for amortization of deferred contract acquisition costs related to capitalized commissions, $7.4 million of stock-based compensation expense, $6.7 million of depreciation and amortization expense, and $4.5 million of non-cash lease expense.
Non-cash charges primarily consisted of $28.0 million of stock-based compensation expense, $12.5 million for amortization of deferred contract costs related to capitalized commissions, $10.1 million of depreciation and amortization expense, and $4.6 million of non-cash lease expense; partially offset by $3.3 million for accretion of premiums and discounts on investments.
For 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.
For the Year Ended December 31, 2024 2023 (in thousands) Revenue $ 376,815 $ 307,675 Cost of revenue (1) 65,477 52,327 Gross profit 311,338 255,348 Operating expenses Sales and marketing (1) 144,340 126,871 Research and development (1) 80,080 57,442 General and administrative (1) 78,610 77,410 Exit Costs — 1,292 Total operating expenses 303,030 263,015 Income (loss) from operations 8,308 (7,667) Other income, net 12,094 12,313 Income before income taxes 20,402 4,646 Provision for income taxes 13,027 3,696 Net income 7,375 950 Net loss attributable to noncontrolling interest in consolidated subsidiaries (861) — Net income attributable to Semrush Holdings, Inc. $ 8,236 $ 950 (1) Includes stock-based compensation expense as follows: For the Year Ended December 31, 2024 2023 (in thousands) Cost of revenue $ 239 $ 130 Sales and marketing 4,742 3,077 Research and development 5,906 2,213 General and administrative 17,112 9,917 Total stock-based compensation $ 27,999 $ 15,337 59 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, 2024 2023 Revenue 100 % 100 % Cost of revenue 17 % 17 % Gross profit 83 % 83 % Operating expenses Sales and marketing 38 % 41 % Research and development 21 % 19 % General and administrative 21 % 25 % Exit Costs — % — % Total operating expenses 80 % 85 % Income (loss) from operations 3 % (2) % Other income, net 3 % 4 % Income before income taxes 6 % 2 % Provision for income taxes 3 % 1 % Net income 3 % 1 % Net loss attributable to noncontrolling interest in consolidated subsidiaries — % — % Net income attributable to Semrush Holdings, Inc. 3 % 1 % Comparison of the Years Ended December 31, 2024 and 2023 Revenue O ur revenue during the years end ed December 31, 2024 and 2023 was as follows: For the Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Revenue $ 376,815 307,675 $ 69,140 22 % For the year ended December 31, 2024, revenue increased by $69.1 million.
Net cash used in operating activities during the year ended December 31, 2022 was $9.6 million, which resulted from a net loss of $33.8 million adjusted for non-cash charges of $28.8 million and a net cash outflow of $4.5 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended December 31, 2024 was $47.0 million, which resulted from net income of $7.4 million adjusted for non-cash charges of $51.1 million and a net cash outflow of $11.5 million from changes in operating assets and liabilities.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our audited consolidated financial condition and results of operations. Revenue Recognition Revenue Recognition Policy We generate revenue primarily from subscriptions to our online visibility management platform, which is comprised of subscription fees from customers accessing our SaaS services and related customer support.
Revenue Recognition Revenue Recognition Policy We generate revenue primarily from subscriptions to our online visibility management SaaS platform, which is comprised of subscription fees from customers accessing our SaaS services and related customer support.
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.
This cash is held in deposits and money market funds. 62 We believe our existing cash, cash equivalents, and short-term investments, will be sufficient to meet our operating and capital needs for at least the next 12 months. Our future capital requirements will depend on many factors, including those set forth under Item 1A. Risk Factors.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2023 2022 Amount % (dollars in thousands) Sales and marketing $ 126,871 $ 126,889 $ (18) — % Percentage of total revenue 41 % 50 % For the year ended December 31, 2023, sales and marketing expense remained relatively flat.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Sales and marketing $ 144,340 $ 126,871 $ 17,469 14 % Percentage of total revenue 38 % 41 % For the year ended December 31, 2024, sales and marketing expense increased by $17.5 million.
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.
Other income, net also includes amounts for interest income and expense, other miscellaneous income and expense, and gains and losses unrelated to our core operations.
Marketing and advertising expense decreased by $19.6 million, primarily as a result of decreased expenses for paid video and paid search marketing.
These increases were partially offset by a $3.5 million decrease to marketing and advertising expense as a result of decreased expenses for paid video and paid search marketing.
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.
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.
These factors include: Acquiring New Paying Customers We expect increasing demand for third-party online visibility software to accelerate adoption of our platform. Our recurring subscription model provides significant visibility into our future results and we believe ARR is the best indicator of the scale of our platform, while mitigating fluctuations due to seasonality and contract term.
Our recurring subscription model provides significant visibility into our future results and we believe Annual Recurring Revenue (“ARR”) is the best indicator of the scale of our platform and products, while mitigating fluctuations due to seasonality and contract term.
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.
Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $58.2 million, which resulted from $151.2 million used to purchase short-term investments, $25.9 million used in cash paid for acquisition of assets and businesses, net of cash acquired, $7.9 million in capitalization of internal-use software costs, $7.8 million used in funding of investment loan receivables, $5.4 million used for the purchasing of noncontrolling interest shares, and $3.8 million used in purchases of property and equipment.
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.
The increase in the provision for income taxes for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to increased profits in our foreign subsidiaries, the non-deductibility of certain equity awards 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.
We have only issued stock options with service-based vesting conditions and record the expense for these awards using the straight-line method.
We have only issued stock options with service-based vesting conditions and record the expense for these awards using the straight-line method. See Note 14 “Stock-Based Compensation” to the consolidated financial statements of this Annual Report on Form 10-K for additional information on fair value measurement of stock-based awards.
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.
Research and Development Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Research and development $ 80,080 $ 57,442 $ 22,638 39 % Percentage of total revenue 21 % 19 % For the year ended December 31, 2024, research and development costs increased by $22.6 million, primarily due to a $12.8 million increase to personnel costs, which includes a $3.7 million increase to stock based compensation expense, primarily as a result of a 11% increase in headcount as compared to the year ended December 31, 2023.
Our subscriptions are generally non-cancellable during the contractual subscription term, however our subscription contracts contain a right to a refund if requested within seven days of purchase. We offer our paid products to customers via monthly or annual subscription plans, as well as one-time and ongoing add-ons.
Our subscriptions are generally non-cancellable during the contractual subscription term, however some of our subscription contracts contain a right to a refund if requested within seven days of purchase. Cost of Revenue Cost of revenue primarily consists of expenses related to hosting our platform and products, acquiring data, merchant account fees, and providing support to our customers.
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.
By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. 54 Year Ended December 31, 2024 2023 (in thousands) Income (loss) from operations $ 8,308 $ (7,667) Stock-based compensation expense 27,999 15,337 Amortization of acquired intangibles $ 4,346 $ 2,307 Restructuring and other costs $ 2,230 $ 1,292 Acquisition-related costs $ 2,917 $ 372 Non-GAAP income from operations $ 45,800 $ 11,641 Year Ended December 31, 2024 2023 Income (loss) from operations (as a percentage of revenue) 2.2 % (2.5) % Stock-based compensation expense (as a percentage of revenue) 7.4 % 5.0 % Amortization of acquired intangibles (as a percentage of revenue) 1.2 % 0.8 % Restructuring and other costs (as a percentage of revenue) 0.6 % 0.4 % Acquisition-related costs (as a percentage of revenue) 0.8 % 0.1 % Non-GAAP income from operations margin 12.2 % 3.8 % 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.
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.
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, net. We expect our foreign currency exchange gains and losses to continue to fluctuate in the future as foreign currency exchange rates change.
The change in other income, net for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in interest income and an increase in the fair value of convertible notes during the year.
The change in other income, net for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a decrease in fair value adjustments compared to the prior year. This decrease was partially offset by increases to foreign currency gains.
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.
Our ARR per paying customer as of December 31, 2024 and 2023 was $3,522 and $3,125, respectively, in absolute unrounded amounts. We define ARR per paying customer as of a given date as ARR from our paying customers as of that date divided by the number of paying customers as of that date.
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.
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.
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.
This increase was also driven by an increase in the number of paying customers to approximately 117,000 as of December 31, 2024 from nearly 108,000 as o f December 31, 2023. 60 Cost of Revenue, Gross Profit and Gross Margin For the Year Ended December 31, Change 2024 2023 Amount % (dollars in thousands) Cost of revenue $ 65,477 $ 52,327 $ 13,150 25 % Gross profit $ 311,338 $ 255,348 $ 55,990 22 % Gross margin 83 % 83 % For the year ended December 31, 2024, cost of revenue increased by $13.2 million.
Financing Activities Net cash used in financing activities for the year ended December 31, 2023 consisted of $2.5 million in cash outflows relating to payments on finance leases.
These cash outflows were partially offset by $241.6 million in proceeds from sales and maturities of short-term investments. 63 Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 was $1.9 million and consisted of $4.1 million in proceeds related to the exercises of stock options; partially offset by $1.6 million in repayment of acquired debt and $0.6 million of cash outflows relating to payments on finance leases.
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.
We define ARR as the total subscription revenue as of a given date that we expect to contractually receive over the subsequent 12 months from customers on an annualized basis, assuming no increases, reductions or cancellations.
Non-GAAP income (loss) from operations and non-GAAP income (loss) from operations margin We define non-GAAP income (loss) from operations as GAAP income (loss) from operations, excluding stock-based compensation expense.
Non-GAAP income from operations and non-GAAP income from operations margin We define non-GAAP income from operations as GAAP income from operations, excluding stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs and other one-time expenses outside the ordinary course of business. We define non-GAAP operating margin as non-GAAP income from operations divided by GAAP revenue.
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.
In 2024, macro-economic pressure in the lower end of our market was a contributing factor to a slight decrease of our dollar-based net revenue retention rate from 107% to 106% as of December 31, 2023 and 2024, respectively. This calculation excludes revenue from new customers and any non-recurring revenue.
Removed
Online visibility represents how effectively companies connect with consumers across a variety of digital channels, including search, social and digital media, digital public relations, and review websites. Our proprietary SaaS platform enables us to aggregate and enrich trillions of data points collected from hundreds of millions of unique domains, social media platforms, online ads, and web traffic.
Added
These factors include: Acquiring New Paying Customers We expect increasing demand for third-party online visibility software to accelerate adoption of our platform and products.
Removed
This allows our customers to understand trends, derive unique and actionable insights to improve their websites and social media pages, and distribute highly relevant content to their targeted customers across channels to drive high quality traffic.
Added
This ARR definition has been updated to simplify the explanation of our calculation around the treatment of monthly and longer-term contracts, and to be more consistent with other SaaS businesses, which we believe improves the ability for investors to compare our metric against other businesses.
Removed
On March 29, 2021, we completed our IPO in which we issued and sold 10,000,000 shares of our Class A common stock at a public offering price of $14.00 per share for aggregate gross proceeds of $140.0 million. We received approximately $126.6 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.
Added
ARR for prior periods have not been adjusted to reflect this change as there is no variance between the two definitions for the periods presented. As of December 31, 2024 and 2023, we had approximately 117,000 paying customers and 108,000 paying customers, respectively, accounting for $411.6 million and $337.1 million in ARR, respectively.
Removed
On April 20, 2021, the underwriters of our IPO partially exercised their option to purchase additional shares of Class A common stock. In connection with the closing of the partial exercise on April 23, 2021, the underwriters purchased 719,266 shares of our Class A common stock for net proceeds to us of $9.2 million.
Added
We believe investors may want to consider our results with and without the effects of these items in order to compare our financial performance with that of other companies that exclude such items and to compare our results to prior periods. Stock-based compensation. Stock-based compensation is a non-cash expense accounted for in accordance with FASB ASC Topic 718.
Removed
In connection with the closing of the IPO, all of the outstanding shares of our preferred stock and common stock automatically converted into 124,902,093 shares of Class B common stock.
Added
We believe that the exclusion of stock-based compensation expense allows for financial results that are more indicative of our operational performance and provide for a useful comparison of our operating results to prior periods and to our peer companies because stock-based compensation expense varies from period to period and company to company due to such things as differing valuation methodologies, timing of awards and changes in stock price.
Removed
On November 23, 2021, we closed our follow-on offering (the “Follow-On Offering”) in which we sold 4,000,000 shares of our Class A common stock at a price to the public of $20.50 per share. We received $77.9 million in net proceeds after deducting underwriting discounts, commissions and offering expenses.
Added
Excluding amortization of acquired intangible assets from non-GAAP expense and income measures allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property.

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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 changeAs 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.
Biggest changeAs of December 31, 2024 and 2023, we had cash, cash equivalents, and short-term investments of $235.6 million and $238.6 million, respectively. The carrying amount of our cash and cash equivalents reasonably approximates fair value, due to the short maturities of these investments.
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.
For example, an immediate 10% decrease or increase in the relative value of the U.S. dollar to the euro would result in a $10.0 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.
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.
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.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 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.
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. 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.
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. However, we have some foreign currency risk related to a small amount of sales denominated in euros, and expenses denominated in euros, Czech korunas, and Polish zloty.
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
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. 66
Removed
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.

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