Non-GAAP operating margin improved by more than
35 percentage points
Similarweb Ltd. (NYSE: SMWB) ("Similarweb" or the "Company"), a
leading digital data and analytics company powering critical
business decisions, today announced financial results for its
second quarter ended June 30, 2023. The Company published a letter
to shareholders from management discussing these results, which can
be accessed at the link:
https://ir.similarweb.com/financials/quarterly-results, located on
the Company's investor relations website.
“We delivered another quarter of revenue growth and expanded our
operating margin significantly compared to last year at this time,”
said Or Offer, Co-Founder and CEO of Similarweb. “We now help over
4,300 businesses win their market. Our customers tell us that our
unique data and actionable insights are critical to their success.”
Offer added, “We recently announced a new milestone for the Company
with the launch of SimilarAskTM in beta release. SimilarAsk is the
first digital intelligence generative AI assistant of its kind that
answers questions by accessing Similarweb Digital Data, which we
believe unlocks tremendous value potential for us."
Second Quarter 2023 Financial
Highlights
- Total revenue was $53.7 million, an increase of 13% compared to
$47.6 million for the second quarter of 2022.
- GAAP operating loss was $(9.8) million or (18)% of revenue,
compared to $(26.5) million or (55.6)% of revenue for the second
quarter of 2022.
- GAAP net loss per share was $(0.12), compared to $(0.29) for
the second quarter of 2022.
- Non-GAAP operating loss was $(3.5) million or (6)% of revenue,
compared to $(19.8) million or (42)% of revenue for the second
quarter of 2022.
- Non-GAAP operating loss per share was $(0.04), compared to
$(0.26) for the second quarter of 2022.
- Cash and cash equivalents totalled $73.0 million as of June 30,
2023, compared to $77.8 million as of December 31, 2022.
- Net cash used in operating activities was $(2.3) million,
compared to $(13.1) million for the second quarter of 2022.
- Free cash flow was $(2.8) million, compared to $(28.9) million
for the second quarter of 2022.
- Normalized free cash flow was $(2.7) million, compared to
$(18.9) million for the second quarter of 2022.
Recent Business
Highlights
- Grew number of customers to 4,301 as of June 30, 2023, an
increase of 12% compared to June 30, 2022.
- Annual revenue per customer was approximately $50,600 in the
second quarter of 2023, as compared to $50,700 in the second
quarter of 2022.
- Grew number of customers with ARR of $100,000 or more to 356,
an increase of 15% compared to June 30, 2022.
- Customers with ARR of $100,000 or more contributed 55% of the
total ARR as of June 30, 2023, compared to 53% as of June 30,
2022.
- Dollar-based net retention rate for customers with ARR of
$100,000 or more was 109% in the second quarter of 2023 as compared
to 127% in the second quarter of 2022.
- Overall dollar-based net retention rate was 101% in the second
quarter of 2023 as compared to 115% in the second quarter of
2022.
- Multi-year subscriptions now comprise 42% of our overall ARR as
of June 30, 2023, as compared to 36% as of June 30, 2022.
- Remaining performance obligations increased 9% year-over-year,
to $174.8 million as of June 30, 2023, as compared to $160.5
million as of June 30, 2022.
Financial Outlook
“We made progress towards our goal of generating sustained
positive free cash flow quarterly by the fourth quarter of 2023,”
said Jason Schwartz, Chief Financial Officer of Similarweb. “We
continue to focus relentlessly on improving our operating
efficiency in this challenging demand environment.”
- Total revenue estimated between $54.1 million and $54.5
million, representing approximately 9% growth year over year at the
mid-point of the range.
- Non-GAAP operating loss estimated between $(2.8) million and
$(3.2) million.
- Total revenue estimated between $216.0 million and $218.0
million, representing approximately 12% growth year over year at
the mid-point of the range.
- Non-GAAP operating loss estimated between $(16.0) million and
$(17.0) million.
- We expect to reach sustained positive free cash flow in the
fourth quarter of 2023.
The Company’s third quarter and full year 2023 financial outlook
is based upon a number of assumptions that are subject to change
and many of which are outside the Company’s control. Actual results
may vary from these assumptions, and the Company’s expectations may
change. There can be no assurance that the Company will achieve
these results.
The Company does not provide guidance for operating loss and
gross margin, the most directly comparable GAAP measures to
non-GAAP operating loss and non-GAAP gross margin, respectively,
and similarly cannot provide a reconciliation of these measures to
their closest GAAP equivalents without unreasonable effort due to
the unavailability of reliable estimates for certain items. These
items are not within the Company’s control and may vary greatly
between periods and could significantly impact future financial
results.
Conference Call
Information
The financial results and business highlights will be discussed
on a conference call and webcast scheduled at 8:30 a.m. Eastern
Time on Wednesday, August 9, 2023. A live webcast of the call can
be accessed from Similarweb’s Investor Relations website at
https://ir.similarweb.com. An archived webcast of the conference
call will also be made available on the Similarweb website
following the call. The live call may also be accessed via
telephone at (888) 428-7458 toll-free and at (862) 298-0702
internationally.
About Similarweb: As a trusted platform for understanding
online behavior, millions of people rely on Similarweb Digital Data
and insights to strengthen their knowledge of the digital world. We
empower anyone — from the curious individual to the enterprise
business leader — to make smarter decisions by understanding why
things happen across the digital ecosystem.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements relating to
our guidance for the third quarter and full year of 2023 described
under "Financial Outlook". Forward-looking statements include all
statements that are not historical facts. Such statements may be
preceded by the words “intends,” “may,” “will,” “plans,” “expects,”
“anticipates,” “projects,” “predicts,” “estimates,” “aims,”
“believes,” “hopes,” “potential” or similar words. These
forward-looking statements reflect our current views regarding our
intentions, products, services, plans, expectations, strategies and
prospects, which are based on information currently available to us
and assumptions we have made. Actual results may differ materially
from those described in such forward-looking statements and are
subject to a number of known and unknown risks, uncertainties,
other factors and assumptions that are beyond our control. Such
risks and uncertainties include, without limitation, risks and
uncertainties associated with: (i) our expectations regarding our
revenue, expenses and other operating results; (ii) our ability to
acquire new customers and successfully retain existing customers;
(iii) our ability to increase usage of our solutions and upsell and
cross-sell additional solutions; (iv) our ability to achieve or
sustain profitability; (v) anticipated trends, growth rates, rising
interest rates, rising global inflation and current macroeconomic
conditions, and challenges in our business and in the markets in
which we operate; (vi) future investments in our business, our
anticipated capital expenditures and our estimates regarding our
capital requirements; (vii) the costs and success of our sales and
marketing efforts and our ability to promote our brand; (viii) our
reliance on key personnel and our ability to identify, recruit and
retain skilled personnel; (ix) our ability to effectively manage
our growth, including continued international expansion; (x) our
reliance on certain third party platforms and sources for the
collection of data necessary for our solutions; (xi) our ability to
protect our intellectual property rights and any costs associated
therewith; (xii) our ability to identify and complete acquisitions
that complement and expand our reach and platform; (xiii) our
ability to comply or remain in compliance with laws and regulations
that currently apply or become applicable to our business,
including in Israel, the United States, the European Union, the
United Kingdom and other jurisdictions where we elect to do
business; (xiv) our ability to compete effectively with existing
competitors and new market entrants; and (xv) the growth rates of
the markets in which we compete.
These risks and uncertainties are more fully described in our
filings with the Securities and Exchange Commission, including in
the section entitled “Risk Factors” in our Form 20-F filed with the
Securities and Exchange Commission on March 23, 2023, and
subsequent reports that we file with the Securities and Exchange
Commission. Moreover, we operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. It is not
possible for our management to predict all risks, nor can we assess
the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and
assumptions, we cannot guarantee future results, levels of
activity, performance, achievements, or events and circumstances
reflected in the forward-looking statements will occur.
Forward-looking statements represent our beliefs and assumptions
only as of the date of this press release. Except as required by
law, we undertake no duty to update any forward-looking statements
contained in this release as a result of new information, future
events, changes in expectations or otherwise.
Non-GAAP Financial Measures
This press release contains certain financial measures that are
expressed on a non-GAAP basis. We use these non-GAAP financial
measures internally to facilitate analysis of our financial and
business trends and for internal planning and forecasting purposes.
We believe these non-GAAP financial measures, when taken
collectively, may be helpful to investors because they provide
consistency and comparability with past financial performance by
excluding certain items that may not be indicative of our business,
results of operations, or outlook. However, non-GAAP financial
measures have limitations as an analytical tool and are presented
for supplemental informational purposes only. They should not be
considered in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Free cash flow
represents net cash provided by (used in) operating activities less
capital expenditures and capitalized internal-use software costs.
Normalized free cash flow represents free cash flow less capital
investments related to the Company's new headquarters, payments
received in connection with these capital investments and deferred
payments related to business combinations. Non-GAAP operating
income (loss), non-GAAP gross profit, non-GAAP gross margin,
non-GAAP operating margin, non-GAAP research and development
expenses, non-GAAP sales and marketing expenses and non-GAAP
general and administrative expenses represent the comparable GAAP
financial figure operating income (loss) or expense, less
share-based compensation, adjustments and payments related to
business combinations, amortization of intangible assets and
certain other non-recurring items, as applicable and indicated in
the above tables.
Other Metrics
Customer acquisition costs (CAC) represent the portion of sales
and marketing expenses allocated to acquire new customers. Customer
retention costs (CRC) represent the portion of sales and marketing
expenses allocated to retain existing customers and to increase
existing customers’ subscriptions. Annual recurring revenue (ARR)
represents the annualized subscription revenue we would
contractually expect to receive from customers assuming no
increases or reductions in their subscriptions. CAC payback period
is the estimated time in months to recover CAC in terms of
incremental gross profit that newly acquired customers generate.
Net retention rate (NRR) represents the comparison of our ARR from
the same set of customers as of a certain point in time, relative
to the same point in time in the previous year ago period,
expressed as a percentage.
Similarweb
Ltd. Consolidated Balance
Sheets U.S. dollars in thousands (except share and per
share data)
December 31,
June 30,
2022
2023
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
77,810
$
72,980
Restricted deposits
9,814
9,901
Accounts receivable, net
38,141
32,508
Deferred contract costs
9,789
8,997
Prepaid expenses and other current
assets
6,628
6,179
Total current assets
142,182
130,565
Property and equipment, net
31,823
30,944
Deferred contract costs, non-current
8,348
6,550
Operating lease right-of-use assets
40,823
37,901
Intangible assets, net
9,561
7,158
Goodwill
12,867
12,867
Other non-current assets
441
24
Total assets
$
246,045
$
226,009
Liabilities and Shareholders'
equity
Current liabilities:
Borrowings under Credit Facility
$
25,000
$
25,000
Accounts payable
7,144
7,412
Payroll and benefit related
liabilities
18,512
15,564
Deferred revenue
93,195
96,778
Other payables and accrued expenses
27,990
23,045
Operating lease liabilities
9,091
7,749
Total current liabilities
180,932
175,548
Deferred revenue, non-current
974
332
Operating lease liabilities,
non-current
40,075
36,080
Other long-term liabilities
2,113
1,794
Total liabilities
224,094
213,754
Shareholders' equity
Ordinary Shares, NIS 0.01 par value
500,000,000 shares authorized as of December 31, 2022 and June 30,
2023 (unaudited), 76,435,940 and 77,969,669 shares issued as of
December 31, 2022 and June 30, 2023 (unaudited), 76,433,772 and
77,967,501 outstanding as of December 31, 2022 and June 30, 2023
(unaudited), respectively;
210
214
Additional paid-in capital
345,834
357,493
Accumulated other comprehensive income
(loss)
(367
)
(599
)
Accumulated deficit
(323,726
)
(344,853
)
Total shareholders' equity
21,951
12,255
Total liabilities and shareholders'
equity
$
246,045
226,009
Similarweb
Ltd. Consolidated Statements of
Comprehensive Income (Loss) U.S. dollars in thousands
(except share and per share data)
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(Unaudited)
(Unaudited)
Revenue
$
91,866
$
106,431
$
47,586
$
53,681
Cost of revenue
27,099
24,651
14,004
12,575
Gross profit
64,767
81,780
33,582
41,106
Operating expenses:
Research and development
30,771
28,253
16,058
13,902
Sales and marketing
62,488
55,088
32,146
26,422
General and administrative
24,155
21,276
11,844
10,539
Total operating expenses
117,414
104,617
60,048
50,863
Loss from operations
(52,647
)
(22,837
)
(26,466
)
(9,757
)
Finance income, net
5,423
1,965
4,601
610
Loss before income taxes
(47,224
)
(20,872
)
(21,865
)
(9,147
)
Provision for income taxes
446
255
196
146
Net loss
$
(47,670
)
$
(21,127
)
$
(22,061
)
$
(9,293
)
Net loss per share attributable to
ordinary shareholders, basic and diluted
$
(0.63
)
$
(0.27
)
$
(0.29
)
$
(0.12
)
Weighted-average shares used in computing
net loss per share attributable to ordinary shareholders, basic and
diluted
75,350,079
77,222,490
75,661,037
77,579,279
Net loss
(47,670
)
(21,127
)
(22,061
)
(9,293
)
Other comprehensive (loss) income, net
of tax
Change in unrealized (loss) gain on
cashflow hedges
(1,328
)
(232
)
(1,414
)
45
Total other comprehensive (loss) income,
net of tax
(1,328
)
(232
)
(1,414
)
45
Total comprehensive loss
$
(48,998
)
$
(21,359
)
$
(23,475
)
$
(9,248
)
Share-based compensation costs included above:
U.S. dollars in thousands
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(Unaudited)
(Unaudited)
Cost of revenue
$
320
$
327
$
174
$
172
Research and development
2,631
2,850
1,422
1,460
Sales and marketing
3,161
2,730
1,788
1,356
General and administrative
2,454
3,191
1,379
1,701
Total
$
8,566
$
9,098
$
4,763
$
4,689
Similarweb
Ltd. Consolidated Statements of
Cash Flows U.S. dollars in thousands
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(Unaudited)
(Unaudited)
Cash flows from operating
activities:
Net loss
$
(47,670
)
$
(21,127
)
$
(22,061
)
$
(9,293
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
5,758
5,112
2,709
2,572
Finance expense
1,137
869
906
662
Unrealized loss from hedging future
transactions
347
4
343
31
Share-based compensation
8,566
9,098
4,763
4,689
(Gain) loss from sale of equipment
(127
)
1
(127
)
(1
)
Changes in operating assets and
liabilities:
Change in operating lease right-of-use
assets and liabilities, net
2,095
(2,415
)
(1,082
)
(1,190
)
Decrease in accounts receivable, net
4,333
5,633
3,847
4,989
(Increase) decrease in deferred contract
costs
(2,358
)
2,590
(591
)
1,141
Increase in other current assets
(379
)
(880
)
(1,483
)
(1,130
)
(Increase) decrease in other non-current
assets
(85
)
417
(85
)
(14
)
Increase (decrease) in accounts
payable
1,402
343
(92
)
1,402
Increase (decrease) in deferred
revenue
12,333
2,941
(185
)
(4,302
)
Decrease in other non-current
liabilities
(428
)
(319
)
(366
)
(225
)
Increase (decrease) in other liabilities
and accrued expenses
2,940
(4,246
)
454
(1,636
)
Net cash used in operating activities
(12,136
)
(1,979
)
(13,050
)
(2,305
)
Cash flows from investing
activities:
Purchase of property and equipment,
net
(19,620
)
(1,315
)
(14,836
)
(183
)
Capitalized internal-use software
costs
(1,375
)
(707
)
(995
)
(274
)
Decrease (increase) in restricted
deposits
106
(87
)
94
(43
)
Payment in relation to business
combinations
(3,787
)
—
(3,787
)
—
Net cash used in investing activities
(24,676
)
(2,109
)
(19,524
)
(500
)
Cash flows from financing
activities:
Proceeds from exercise of stock
options
1,761
1,830
1,152
438
Proceeds from employee share purchase
plan
1,234
660
1,234
660
Payments of contingent consideration,
net
—
(2,363
)
—
—
Net cash provided by financing
activities
2,995
127
2,386
1,098
Effect of exchange rates on cash and cash
equivalents
(1,137
)
(869
)
(906
)
(662
)
Net decrease in cash and cash
equivalents
(34,954
)
(4,830
)
(31,094
)
(2,369
)
Cash and cash equivalents, beginning of
period
128,879
77,810
125,019
75,349
Cash and cash equivalents, end of
period
$
93,925
$
72,980
$
93,925
$
72,980
Supplemental disclosure of cash flow
information:
Interest (received) paid, net
$
(16
)
$
(40
)
$
1
$
(46
)
Taxes paid
$
241
$
1,613
$
181
$
1,557
Supplemental disclosure of non-cash
financing activities:
Additions to operating lease right-of-use
assets and liabilities
$
8,978
$
780
$
4,699
$
610
Deferred proceeds from exercise of share
options included in other current assets
$
—
$
42
$
(479
)
$
26
Deferred costs of property and equipment
incurred during the period included in accounts payable
$
3,454
$
41
$
(7,088
)
$
(80
)
Deferred payments in relation to business
combinations held in escrow
$
—
$
1,269
$
—
$
—
Schedule A : Business
combinations
Working capital (deficit), net (excluding
cash and cash equivalents)
(668
)
—
Cash refund to be received resulting from
adjustment to working capital
Property, plant and equipment
43
—
Goodwill and other intangible assets
4,565
—
Deferred taxes, net
(153
)
—
$
3,787
$
—
Reconciliation of Non-GAAP Financial
Measures to the Most Directly Comparable GAAP Financial
Measures
Reconciliation of GAAP gross profit to non-GAAP gross
profit
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(In thousands)
(In thousands)
GAAP gross profit
$
64,767
$
81,780
$
33,582
$
41,106
Add:
Share-based compensation expenses
320
327
174
172
Retention payments related to business
combinations
1,145
306
455
218
Amortization of intangible assets related
to business combinations
2,151
2,335
1,110
1,167
Non-recurring expenses related to
termination of lease agreement and others
35
—
26
—
Non-GAAP gross profit
$
68,418
$
84,748
$
35,347
$
42,663
Non-GAAP gross margin
74
%
80
%
74
%
79
%
Reconciliation of Loss from operations (GAAP) to Non-GAAP
operating loss
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(In thousands)
(In thousands)
Loss from operations
$
(52,647
)
$
(22,837
)
$
(26,466
)
$
(9,757
)
Add:
Share-based compensation expenses
8,566
9,098
4,763
4,689
Retention payments related to business
combinations
1,254
687
542
405
Amortization of intangible assets related
to business combinations
2,170
2,403
1,129
1,201
Adjustment of fair value of contingent
consideration related to business combinations
682
—
130
—
Non-recurring expenses related to
termination of lease agreement and others
559
13
241
—
Capital gain related to sale of operating
equipment
(127
)
—
(127
)
—
Non-GAAP operating loss
$
(39,543
)
$
(10,636
)
$
(19,788
)
$
(3,462
)
Non-GAAP operating margin
(43
)%
(10
)%
(42
)%
(6
)%
Reconciliation of GAAP operating expenses to non-GAAP
operating expenses
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(In thousands)
(In thousands)
GAAP research and development
$
30,771
$
28,253
$
16,058
$
13,902
Less:
Share-based compensation expenses
2,631
2,850
1,422
1,460
Non-recurring expenses related to
termination of lease agreement and others
87
—
64
—
Non-GAAP research and
development
$
28,053
$
25,403
$
14,572
$
12,442
Non-GAAP research and development
margin
31
%
24
%
31
%
23
%
GAAP sales and marketing
$
62,488
$
55,088
$
32,146
$
26,422
Less:
Share-based compensation expenses
3,161
2,730
1,788
1,356
Retention payments related to business
combinations
109
381
87
187
Amortization of intangible assets related
to business combinations
19
68
19
34
Non-recurring expenses related to
termination of lease agreement and others
381
13
110
—
Non-GAAP sales and marketing
$
58,818
$
51,896
$
30,142
$
24,845
Non-GAAP sales and marketing
margin
64
%
49
%
63
%
46
%
GAAP general and administrative
$
24,155
$
21,276
$
11,844
$
10,539
Less:
Share-based compensation expenses
2,454
3,191
1,379
1,701
Adjustment of fair value of contingent
consideration related to business combinations
682
—
130
—
Non-recurring expenses related to
termination of lease agreement and others
56
—
41
—
Capital gain related to sale of operating
equipment
(127
)
—
(127
)
—
Non-GAAP general and
administrative
$
21,090
$
18,085
$
10,421
$
8,838
Non-GAAP general and administrative
margin
23
%
17
%
22
%
16
%
Reconciliation of Net cash used in operating activities
(GAAP) to Free cash flow and normalized free cash flow
Six Months Ended June
30,
Three Months Ended June
30,
2022
2023
2022
2023
(In thousands)
(In thousands)
Net cash used in operating activities
$
(12,136
)
$
(1,979
)
$
(13,050
)
$
(2,305
)
Purchases of property and equipment,
net
(19,620
)
(1,315
)
(14,836
)
(183
)
Capitalized internal use software
costs
(1,375
)
(707
)
(995
)
(274
)
Free cash flow
$
(33,131
)
$
(4,001
)
$
(28,881
)
$
(2,762
)
Purchases of property and equipment
related to the new headquarters
18,279
1,100
13,823
52
Payments received in connection with
purchases of property and equipment
(8,017
)
—
(3,848
)
—
Payments received from escrow in relation
to contingent consideration
—
(380
)
—
—
Normalized free cash flow
$
(22,869
)
$
(3,281
)
$
(18,906
)
$
(2,710
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808072053/en/
Press Contact: David Carr
Similarweb press@similarweb.com
Investor Contact: Raymond
"RJ" Jones Similarweb raymond.jones@similarweb.com
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