Greetings, and welcome to the Similarweb Q1 Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rami Myerson, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Welcome, everyone to our first quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer and our CFO, Jason Schwartz. Yesterday, after market close, we released our results for the first quarter and published a discussion of our results in a letter to shareholders, as well as an investor presentation with a strategic overview of the business on our Investor Relations website at ir.similarweb.com. Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements. Additionally, certain non-GAAP financial measures will be discussed in the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or and Jason's highlights of the quarter and then we will open up the call to questions from sell-side analysts. With that, I'll turn the call over to Or. Orr, please go ahead.

Thank you, Rami, and welcome everyone joining the call today. I'm extremely proud of the first quarter financial results that we reported yesterday. Revenue increased by 14% to $67 million ahead of our expectation. Our customer base grew 19% year-over-year to more than 5,700 ARR customer at quarter end. We reported six quarter of positive free cash flow, while we continue our investment to realize the long-term potential of our business. The investments we begin in the fourth quarter in sales and R&D are starting to generate positive returns. We doubled the number of inside sale reps selling in this quarter, as compared to Q1 last year and our progress on releasing new features like GenAI, traffic intelligence and free AI agents, our staff to be proud of. We completed and accelerated recruitment of new salespeople at the end of the first quarter and we are encouraged by the indication of improved productivity as they ramp. More than 80% of the new hires should be fully ramped by Q3 and we expect this team to deliver in the second-half of the year as planned. I'm excited by our customer reaction to the launch of the new products since the beginning of the year. Those products provide tools that empower our customers to maximize ROI they get from our data and reduce them to value. We launched App Intelligence, expanding our app data and incorporating the acquisition of 42matters last year. I'm super happy that Similarweb can now provide digital data on more than 4 million iOS and Android mobile apps in 58 countries. App Intelligence give our customer visibility on app data, including download, usage, patterns, engagement, retention and audience demographics. We are seeing strong demand and 484 of our customers have already signed up for the App Intelligence. We're…

Thanks, Or, and everyone joining on the call today to discuss our first quarter results. I'll provide highlights of our financial performance and then we'll open up the call to questions. We generated $67.1 million of revenue in Q1, a 14% increase relative to Q1 '24. Revenue growth was driven by the 19% growth in customers, mainly in the below $100,000 ARR cohort, as well as expansions and upsells from our over $100,000 ARR customers. NRR for our over $100,000 customers increased by 400 basis points year-over-year to 111% and 300 basis points year-over-year to 101% for the overall customer base. We are proud that 52% of our ARR is contracted under multi-year contracts, up from 42% last year. We believe this demonstrates the importance and critical nature of our data to our customers and we expect these multiyear contracts will contribute to improved retention rates ahead. Our remaining performance obligations or RPO totaled $253 million at the end of Q1, up 18% year-over-year. We expect to recognize approximately 69% of total RPO as revenue over the next 12 months. Our operational performance in the quarter was in line with expectations and we reported a non-GAAP operating loss of 2% in Q1 due to the increased investment in sales and R&D discussed in the past. We're committed to profitable growth over time and if returns on these investments do not materialize as planned, we're prepared to rapidly respond and improve profitability as we have in the past. We think it's worthy to note that over the last three years, we've improved operating margins by more than 4,000 basis points from minus 45% in the first quarter of 2022. This performance and our unit economics provide us with confidence in our ability to achieve our profit and cash flow targets. We…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Arjun Bhatia with William Blair & Company. Please proceed with your question.

Great. Thank you so much. I'm curious, obviously the investments are a big part of the -- in Q4 and into Q1 a big part of the story here. And it seems like you've completed the accelerated hiring process. I'm curious or how you feel just about the hires you've made, the quality of the team that's been brought on. And as you're tracking kind of the ramp to productivity for some of the go-to-market investments and the sales reps, what exactly are you looking at just to make sure that there is ROI on those investments and the ramp to productivity is happening in line with expectations to get your team kind of up and productive by, I believe it was Q3 that you mentioned here?

Hi, Arjun. Of course, thank you everyone for joining the call today. We look forward to speaking with everyone and thank you Arjun for the first question. And so regarding the quality of the hiring, we're very happy from the quality. We've earned a lot over the past few years about how we can bring the right persona to sell our specific offering that are about insight, data and analytics. And we've built a very good process about measuring the activities and what we expect from those new hires to deliver in every part of the onboarding process, how many meetings, how many win rates we expect to see. And so right now looking good.

Okay, great. And then on the product side, you've kind of integrated the AI chatbot traffic data into your platform now. What sort of early indications of usage or interest are you seeing from your customer base? Obviously, very pertinent and timely, given some of the comments we've heard recently from the ecosystem of maybe traffic starting to shift from search to the AI chatbots, but would love to hear what you're seeing in your customer base in terms of interest of your innovation on that front?

Yes. So it's super, super nice. The customer are really excited about it and its -- they see that and it's like that there is like a wow effect when they -- when we showed them the data. It's very unique. So it's very nice to see that it's feel like, in the early days when we launched similar web and felt like magic that people didn't realize that this data is out there and the insights we can get out of it. So the reaction is super nice and its surface up a lot of interesting insight and visibility of something that right now is very black box. I think most of the website owners right now out there don't have idea about the impact of how much traffic those chatbot are start generating as a channel. And also they have no visibility about what people are asking as prompt and we bring those two data now. And it's very nice to see. Given them and the impact is super nice.

All right, perfect. Thank you, Or.

Thank you. Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Hey, guys. This is [Damon Cavan] (ph) on for Raimo Lenschow. Thanks for taking the question. Great to hear that the new talent you recently recruited has been driving improved yield and strong pipeline. Can you help us understand the level of visibility that you have for some of the deals that are supporting the revenue reacceleration in the second-half of the year? Just trying to gain clarity on the mechanics of the growth implied by the guide in the second-half?

So we hire many people all across the go-to-market organization and there's many different position there. You have AM that need to drive upsells and renewal. And you have in the sales, in the new sales, you have few peers of sellers, you have inside sales that need to let to land like 20,000 deals, you have enterprise people that need to land higher deals, you have start people that need to do high expansion sales. They also have like a lot of entry level that needs to work on our self-serve customers there and move them to yearly. So each one behaves differently and have different ramp time and the more senior the rep and the more enterprise and the public is taking longer, as much longer sales cycle. And so in the inside sales organization, you can see much faster the ramp and you can recognize the yield. The other was taking more time by nature.

Got it. Thanks, Or. And then maybe just one for Jason. Is there anything factored in to the top and bottom line guide from the Search Monitor acquisition?

Yes, nothing material on that. There was a small business where we're excited to have him on board, not material contribution for the quarter or the year.

Got it. And then just one quick way, if I may. Is there any change to your guidance philosophy for the rest of the year? I understand that it's an uncertain environment, so just kind of understand some of the mechanics for the rest of the year? Thanks, guys.

We haven't changed a lot of the assumptions, FX and the like, but we'd like to give guidance that we know that we can meet. So the same philosophy.

Thanks guys.

Thank you. Our next question comes from the line of Surinder Thind with Jefferies. Please proceed with your question.

Thank you. Or can you maybe talk a little bit about your larger clients, the 100,000 clients, the behavior that you're seeing there and some of the ongoing conversations perhaps? It looked like the NRR number dipped a little bit quarter-over-quarter by about a percentage point.

Yes, of course. So I think the decline of this 1% was kind of a mechanism, because last year in Q3, we had big upsells in Q1, sorry. And I think it's increased the base a lot. So this year, the upsell was not as big as Q1, so this is why you have that. And overall, this bucket of $100,000 customers, I think we have above $400,000. You see that it's also a few different types. We have a lot of very big, big companies and Fortune 100 that are engaged and looking at us as the trusted digital market data provider and they continue to buy more and more different data sets and they're growing significantly. And then we have a big part of this company that are digital first and digital is very important and they are engaging above $100,000 with that.

Got it. And then just kind of the reverse with maybe some of the smaller clients in the SMB space?

Do you want to know what type of customer are in that bucket?

No, no. Just in terms of just the trends and the demand, it sounds like you onboarded a lot of new customers, this quarter in terms of just the number of accounts that grew. And just kind of what you're seeing there, it sounds like still a healthy appetite, actually improving appetite, if I was to potentially characterize it?

Yes. We still see a big demand on top of the funnel and we have many, many registrations, 100s of 1,000s per month and we're seeing great success converting them to customers, yearly customers. And also as we said in the earning call, we see a big increase in the multi-year engagement that is something very good that is good for us -- a good indication of companies that want to engage for the long-term with us that we see value in our offering.

That's helpful. And then just one final one for me. As you think about your strategy around building insights for the different chatbots, can you -- is there any color that you can provide on all of the different partnerships that you can get to? Or what coverage you can get versus what you currently have?

So I think that regarding coverage, we feel confident that we can cover all of the big chatbots out there and provide a full visibility. We hope to launch this quarter like a full module around AI Intelligence that will have the mix of the first product we launched that give you that traffic intelligence. And the second part will help you track your market share and your -- how much you're visible on the chatbot, because a lot of the time, the chatbot are quoting your brand, talking about your product, but don't give you link and send you outside to go to other websites. So there's two-side of the data brands we want to see. One, how much traffic they're getting from chatbots and the prompts generate those traffics. And then they want to see overall how much market, how much time my brand has been mentioned versus competition and if the mention was, if the sentiment was positive or negative. So this second part would launch this quarter and we will have a very strong offering for companies, who want to get better visibility and success on this new digital channel, I will call it.

Thank you.

Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer & Company. Please proceed with your question.

Thanks, everybody. I guess I'll ask a few. So, one is, as you look to sell the AI related products, is it a different like you're selling to a different audience at the client? I mean, a lot of what you started with typically is with the right the marketing department, but then does it have to kind of go to a bigger level? So just how is -- how do you envision selling the AI products differently than some of the legacy products? Two, how -- I guess besides upgrading the overall quality of sales people like how is the strategy different now under the new Chief Revenue Officer? And then I guess lastly, the billings did slow in this quarter. I don't know if there is like and again last year, first quarter was your slowest growth in billings. So I don't know if there is like an emerging pattern around first quarter is the slowing billing quarter, but just any color, Jason, just on around that like I don't know if there is like there were some comments about upsells last year and that made tougher comps, but just any other color there? Thank you.

Okay. So thank you, Jason, for the questions. I heard three questions, the first one who is the ICP, Ideal Customer that can buy the AI intelligent module? The second one is around CRO and the third one is billing. I will start answering the first two and I will give Jason to answer the billing. So regarding the Ideal Customer to buy the AI intelligent data, so as we all know it's a very new motion. Right now, we're presenting it to most of our users and there is a big excitement around all personas, because I think this is something very new and inside there appealing to many different roles from marketing, branding, SEO, PPC, product, executive. And so right now, the excitement is around all, all different customers we have in the platform. It's early to say who will be the buyer. I think it will end probably somewhere around marketing and I guess somewhere around search dimension acquisition or maybe brand? And regarding the second question on the CRO, so like every executive, our CRO just finished first year and usually when you hire Executive C level, they need one year to set up the organization the way they need and then they start to execute. So, our CRO just finished her first year in the company and we're excited to see how she's going to execute going forward with all the changes she rolled up. And I'll let Jason answer the billing question.

Hey, Jason. On the billing side, it's just a function of the invoicing schedules. Sometimes and that's really a seasonal thing. Sometimes there are customers that are asking for to move from one month to another month and you get some of that shifting. But overall, what you see is free cash flow is still very strong. We did a 7% free cash flow generation this quarter and I think we've guided that we'll continue to be positive free cash flow all throughout the year.

Thank you.

Thank you. Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.

Hey, gentlemen. Good morning. Thanks for taking the question. Wanted to follow-up on the questions around billings, but actually asked about bookings. It looks like current RPO bookings, if we just take a look at the sequential change in current RPO, that growth has slowed quite a bit over the last couple of quarters and I know there's been some pretty large compares in that number over the past 1.5 year with some of the large deals that you've signed. But help us understand what's driving that? And any changes that you're expecting in terms of seasonality to the business? In other words, should we expect that current RPO to reaccelerate or rebound in the back half of the year?

Hey, Tyler. Thanks for that. Yes, current RPO was up 9% year-over-year, but we do think of that as somewhat seasonal. You see some of those big deals that we -- bigger deals that we signed last year were in Q2, Q3. So those burned down and then, well, when the renewals come up, those get invoiced again. So the bookings and the current RPO will match that, we believe, going in the back end of the year. And I think that's just a function of some of that change that you had a year-over-year.

Got it. Okay. So we're lapping some pretty big deals in Q2, Q3, so we should see some replenishment of those numbers.

Exactly. And the same thing on the NRR comment that Or made before. Remember, all those big upsells and big deals, we announced last year two customers that crossed over to eight digit customers. At this point when we're at a 12 month look back, those are already in the baseline. So the NRR has to grow even bigger numbers. So we're feeling good on the pipeline, but understand that there are in the near-term over the next couple of quarters, we've got some big numbers to match.

Yes, great. And on the new customer additions, it looked like total new customers was quite strong. The quarter-over-quarter growth in new logos was well ahead of what you did in Q1 of last year. Can you just talk about like the size of those deals? Like are the -- is the average deal size for new lands, is it consistent with last year? Is it maybe lower because you're just prioritizing new logos? And any changes in the profile of customers now that you have kind of a new sales motion and a bigger sales force that's going after those?

I'm sorry about that. Yes, very consistent with our strategy that we laid out over the last 18 months. We talk about the barbell strategy and part of the strategy that we said is that on one hand, we've got 60%, 61% of our business that ARR of revenue that's generated from customers who spend more than $100,000 a year. And those customers are spending $300,000 on average nearly $370,000 each. But at the same time, we've got this momentum motion and velocity motion that is bringing in new customers every single day, every single quarter. I think we were up 230-some odd customers just quarter-over-quarter, just under 1,000 net new customers over the past year, that's the function of that. And yes, the land of those customers are -- is lower than the average revenue per customer and so you see that happening. But I think one of the interesting things, when you look at the over $100,000 customers, we have those 400-plus customers that today are $100,000 or more, more than 80% of those customers started well below $100,000. And so we have a history of knowing how to land, retain and expand, and that's what you see going on over the last couple of quarters and continued in Q1.

Great. Thank you.

Thank you. Our next question comes from the line of Luke Horton with Northland Capital Markets. Please proceed with your question.

Yes. Hey, guys. Thanks for taking the questions and congrats on the quarter. Jason, in your prepared remarks, you mentioned about the investments in the new sales hires that they don't end up performing as expected. You mentioned being prepared to kind of rapidly respond and improve profitability. So just wondering how long of the kind of timeline the new sales hires are given here to start to show some results? And then if it doesn't pan out the way it was thought, what are kind of those nearest levers that you could pull to improve that profitability?

Yes. We've done this before. One of the nice things that we mentioned in the quarter that we're already seeing more sellers selling and closing business in Q1 than we had last year. Looking at just the inside sales and as Or mentioned, the inside sales team, you actually see relatively quickly over the first couple of months whether these guys are ramped and able to sell or not. And we're very encouraged by that. And then looking at the pipeline that we have, we think and we've said I think now both in the letter and in Or’s comments is that we expect 80% of all of the new heads that we -- people that we added to the team to be ramped up by Q3. And that gives us a lot of confidence that if for some reason this is not going to be in place, we'll be able to reduce unproductive capacity and continue to execute. It's very similar to the change that we did, taking sales and marketing. If you look back historically, sales and marketing was about 65%, 66% of revenue going back to Q1 2022. And over the course of five, six quarters, it got down to below 50%. And that was just taking out unproductive resources and still driving revenue growth. And so we believe that the hires that we did should be accelerators on the back end of the year going into 2026, and that's what we're continuing to do.

Okay, great. Yes, I appreciate the color there. And then just one last one here, just on the 2025 outlook, is this still accounting for that 1% to 2% foreign exchange headwind or revenues or has that assumption changed at all here as we kind of got through the quarter?

We haven't changed any of our assumptions. As I think we're all seeing that things keep on has volatility day-by-day and we're going to stay with that guidance that we -- the assumptions that we used in building our guidance at the beginning of the year.

Okay, got it. Awesome. Thanks for taking the questions, guys.

Thank you. Our next question comes from the line of Adam Hotchkiss with Goldman Sachs. Please proceed with your question.

Great. Thanks for taking the questions. Or just a high level question for you. What in your mind is the most important execution item for you this year, whether that's ramping salespeople, accelerating growth, selling new products, innovating the platform or is it something else? And then what do you need to see to validate the vision that you've laid out through doubling down on investment that you did earlier this year? Thanks so much.

Thank you for the question. I think if I had to choose one that I think can generate the most impact is to drive the upsell enterprise motion. We've been lucky to have more than 1,000 plus an amazing enterprise that engage in our customers that buying one or two solution and today we have at least seven, eight different solution to offer them that can really help and drive our life for them. So I see huge opportunity to drive more expansion on the book of business. And this is something that I'm excited about and I feel that if I will crack that to get top notch, it's drive a lot of impact. Also if you think AM enterprise, it's the function that has the most in this commercial organization. So if I will able to take this organization and make them over perform, it's going to drive a lot of impact.

Okay, great. That's helpful. And then, I know you've mentioned it a lot in the past. I didn't hear it as much on this call. Just your updated view of the data as a service and broader large language model or small language model opportunity, maybe how that progressed in Q1 relative to your expectations? Thanks.

Yes. So those motion are very successful internally. I think in the data as a service, we have OEM team that sells our data to other software vendors that use our data to improve the offering. This team is rocking and highly successful and we're seeing a lot of demand from a new vertical of software companies that want to give insight on chatbots and GenAI. So this is a nice opportunity. And also around everything about ChatAI data. So it's a hot topic, drive nice revenue. So it did perform very well this quarter.

Great. Thank you very much.

Thank you. Our next question comes from the line of Patrick Walravens with Citizens. Please proceed with your question.

Great. Thank you. This is Austin Cole on for Pat Walravens. Or I just wanted to go back to the AI Chatbot traffic product. This kind of idea of visibility into GenAI output is something you guys have talked about as an opportunity for a while now. So now that you have this kind of product offering, maybe you could comment just specifically on kind of what you're seeing in terms of engagement from customers and specifically on the pipeline as it relates to that product? And then how does that kind of inform your idea of the total opportunity there?

Yes, I think it's a great question. So the opportunity, I think that is the complete opportunity is once we're going to develop the second part of the AI offering is to help you measure, your market share and visibility on the Chatbot. Because if you think that out of, I will say, let's say million people that using Chatbot to ask questions about running shoes and the Chatbot, you know, give them answers about five, 10 brands, very small part are clicking and getting out of the Chatbots. And the majority are staying there or doing something else. So I think the second part that we're going to introduce this quarter of bringing you more visibility about how much time you appear and the sentiment, when we can develop that and combine that with the traffic, then we will have a very strong proposition and we will start monetizing it as a standalone model. Right now we opened traffic GenAI as a beta to our paying yearly customer and to see the reaction and drive engagement and our lives didn't start monetizing it. And but it did help to convert a lot of, no touch customer paying with credit card. They didn't have access to that model. So we're using this model really helped convert a lot of leads or credit card customer to yearly. So this is when we saw dollar impact, but I assume that this quarter after we launched the second part and start charging for this model, it will have a bigger impact.

Okay. That's super helpful. And then maybe one for Jason. I had the same kind of question regarding what you said in your prepared remarks around the investments. Maybe just to put a point on it, it doesn't sound like it, but I just want to clarify that there isn't anything in the pipeline today that makes you think that you would need to make that change regarding investments?

No. There's nothing that we see today. And this was just a comment that sentiment that we had felt from a number of investors over the last couple of months, and we wanted to make sure that we clarify that.

Okay. Appreciate it. Very clear. Thank you.

Thank you. Our next question comes from the line of Scott Berg with Needham & Company. Please proceed with your question.

Hi, everyone. Thanks for taking my questions. I appreciate the comments on pipeline activity with the ramp in sales reps. But how is the expansion activity going? If I look at your customer additions over the last year, looks like you're coming in at a slightly lower maybe rate than some of your historical customers, but you've already had at least historically had a good opportunity to expand with customers over time? But how is that kind of process going in this macro? Are you seeing any changes to what that cadence looks like? Any commentary there would be helpful. Thanks.

Hey, Scott. It's Jason. A couple of things on that. We mentioned that we are seeing actually good, healthy pipeline build over here. We see bigger the NRR numbers are actually reflecting, as we mentioned earlier, some of the hurdles from that we said last year with some big sales and upsells that we had. But we had some good experience this quarter. And one thing that I think stands out to me was a large U.S. retailer, who became a customer in 2023. It's a Fortune 500 U.S. retailer who purchased Web Intelligence for their SEO and performance team going back in 2023, really to understand kind of standard voice and content strategies, the classic what I would call the classic keyword use case, they were $100,000 customer back in 2023. In Q1, they expanded to the category management team and e-commerce merchandising team. So they went from the marketing team to the category management team and the e-commerce merchandising team to really understand, to build out the custom segments and understand the category performance versus their competitors and then also bought shopper intelligence to look at the product level performance on Amazon versus their competitors. That customer now, that upsell that they did, that customer has grown 4 times in just two years. And again as an example of the kind of value that a large retailer could see and grow, it’s something that’s very encouraging to us and we’re looking forward, as Or said, to see more and more of these upsells with the portfolio of customer portfolio of products that we have over the remainder of the year.

Helpful. Thanks Jason. And then I heard there’s no real impact on guidance with your acquisition of the Search Monitor, but how do we think about that impacting your product platform going forward?

Yes. Thank you. So we’re very excited about this opportunity and this acquisition, because Search Monitor have I would say two main use case that we are not strong. One is to help PPC team paid acquisition at Search to save money on their brand protection budget. Many brands right now spending millions if not tens of millions of dollars on protecting their brand. In Google we have some of our customers in the insurance vertical banks, CPG that literally spend tens of millions of dollars monthly to protect their brand and they need to do it sometimes worldwide in many different countries. So they need a tool to monitor where they should spend more, where they can spend less. So this tool is very sticky and very AI driven. You can think that we will take this offering now with our current book of business we can really show great ROI for those PPC paid search teams. The second part they have is for affiliate team to help monitor the affiliate program to see that the affiliate they’re bringing on board to promote their products are not, are compliant with the guidelines they put for those affiliate and not start putting ads on their brand name. So those are two strong use cases with very clear ROI, very sticky, very operational offering that can fit perfectly with our assets and our market data. So combining our market data with their stickiness workflow tools can be very powerful. And so hopefully we integrate them and maybe Q4, Q1, we’re going to rolled out those new offerings into our existing book of business.

Thank you. We have reached the end of the question-and-answer session and I’d like to turn the floor back to CEO Or Offer for closing remarks.

Thank you everyone. We’re super excited for the call -- for this quarter and this year. And I want to thank you everyone for joining the call, especially our shareholder for their confidence. And we look forward to speaking with all of you in the next few weeks. Thank you so much.

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your line at this time. Thank you for your participation and have a great day.