SimilarWeb Ltd. Q3 FY2024 earnings call

• Revenue growth accelerated to 18% Y/Y in Q3, driven by new customer growth and improved retention. Total customer count grew 21% Y/Y, and NRR increased by 2 percentage points.
• Implemented initiatives like improved marketing capabilities, strong customer success organization, and new CRO driving go-to-market improvements.
• Four options to capitalize on generative AI: digital data for LLM training, impact of LLM on customer behavior, integrating AI into products, and integrating AI into internal processes.
• Marketing team generated record high of over 0.5 million registrations and record meetings for go-to-market teams. Brand awareness is high with media outlets and leaders referencing Similarweb data.
• In Q3, marketing team had record registrations and meetings, and Similarweb data was referenced by notable figures like Sam Altman.

In Q3, Similarweb generated $64.7 million of revenue, with 18% year-over-year growth. The core product, Web Intelligence, continued to perform well. Sales Intelligence tool also had strong demand. Advisory services saw high demand from big brands. The remaining performance obligations (RPO) totaled $212 million at the end of Q3, up 27% year-over-year. The net revenue retention rate was 101% overall, and the NRR for the over $100,000 ARR customer segment was 111%, an improvement from Q2 2024.

• For 2024, total revenue is expected to be in the range of $249 million to $250 million, an increase of $2.5 million at the midpoint relative to previous expectations. Non-GAAP operating profit for the full year is expected to be between $14 million and $15 million.
• Q4 ’24 revenue is expected to be in the range of $64.7 million to $65.7 million, with non-GAAP operating profit in the range of $1.5 million to $2.5 million.
• Guidance reflects increased operating expenses due to accelerated hiring. Full guidance for 2025 will be provided at the start of the year.

• Risks related to macroeconomic uncertainty and geopolitical challenges that could impact business. - Uncertainty around the timing of contract recognitions and how LLM deals flow through revenue recognition.

Q: How did stronger new customer growth get driven?

A: Or mentioned marketing team driving brand awareness, more conversions, and strong top of funnel with over 0.5 million registrations and record meetings.

Q: How to think about 2025 revenue growth drivers?

A: Jason stated momentum and exit rates are good indicators, and focus will be on profitable growth with operating and cash flow profit quarterly.

Q: Product mix shift and areas of interest?

A: Or said core Web Intelligence, SCO (Sales Channel Optimization) with acquired Rank Ranger, Sales Intelligence tool, and advisory services are doing well.

Q: Revenue volatility in Q4 guide?

A: Jason explained it's about how deals come in, activate, and revenue recognition timing, with guidance given to meet.

Q: Why LLM data is special for training?

A: Or explained that digital data is critical for LLM training as it provides up-to-date web, conversation, and trending data needed for chatbots to have context.

Q: Q4 revenue guidance conservatism?

A: Jason said it's about deal timing and revenue recognition flow, using consistent methodology and giving guidance to meet.

Q: Impact of LLM on customer behavior seen in business?

A: Or said brands are starting to realize consumer behavior change with chatbots, seeking data to understand how they're perceived and drive transactions.

Q: Trajectory of net revenue retention?

A: Jason mentioned 45% of revenue in multi-year commitments and success in landing, retaining, and expanding customers as positive indicators.

Q: Journey of large 8-figure deals?

A: Or said long-term relationships with companies starting with Web Intelligence and expanding over years to more advanced solutions.

Q: Hiring acceleration and focus?

A: Or said hiring more to handle top of funnel demand and actively approaching enterprise clients with multi-solution offerings.

Q: New head of sales Susan Dunn?

A: Or said Susan is an industry leader from Nielsen IQ, ramping up go-to-market and setting up for success.

Q: Long-term model details?

A: Jason said at $400 million to $450 million revenue, the long-term model is 85% gross margin, 25% operating margin, and 30% free cash flow.

Q: Nature of AI deals and average sizes?

A: Or said AI deals involve training LLM with different data sets, starting from 6 figures and growing, and deals for brand understanding of chatbot impact start from 5 figures and can increase.