Similarweb Announces Third Quarter 2023 Results

Rhea-AI Summary

Similarweb Ltd. (NYSE: SMWB) Achieves Record Gross Profit and Gross Margin, Reports Non-GAAP Operating Profit for the First Time

Achieved company record gross profit and gross margin

Achieved Non-GAAP operating profit for the first time

TEL AVIV, Israel--(BUSINESS WIRE)-- 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 third quarter ended September 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 in a challenging demand environment, and we achieved non-GAAP profitability for the first time, which is a tremendous accomplishment for us as a team,” said Or Offer, Co-Founder and CEO of Similarweb. “During the quarter, we launched the latest generation of our platform, Similarweb 3.0, which brings more actionable insights to more customers than ever before, especially in our Research and Marketing solutions, and we are excited about the traction we are seeing.”

Third Quarter 2023 Financial Highlights

• Total revenue was $54.8 million, an increase of 10% compared to $50.0 million for the third quarter of 2022.

• GAAP operating loss was $(4.9) million or (9)% of revenue, compared to $(20.6) million or (41)% of revenue for the third quarter of 2022.

• GAAP net loss per share was $(0.06), compared to $(0.28) for the third quarter of 2022.

• Non-GAAP operating profit (loss) was $1.1 million or 2% of revenue, compared to $(13.3) million or (27)% of revenue for the third quarter of 2022.

• Non-GAAP operating earnings (loss) per share was $0.01, compared to $(0.18) for the third quarter of 2022.

• Cash and cash equivalents totalled $67.4 million as of September 30, 2023, compared to $77.8 million as of December 31, 2022.

• Net cash used in operating activities was $(4.8) million, compared to $(21.7) million for the third quarter of 2022.

• Free cash flow was $(4.9) million, compared to $(29.5) million for the third quarter of 2022.

• Normalized free cash flow was $(4.6) million, compared to $(25.1) million for the third quarter of 2022.

Recent Business Highlights

• Grew number of customers to 4,371 as of September 30, 2023, an increase of 12% compared to September 30, 2022.

• Annual revenue per customer was approximately $50,580 in the third quarter of 2023, as compared to $51,570 in the third quarter of 2022.

• Grew number of customers with ARR of $100,000 or more to 355, an increase of 10% compared to September 30, 2022.

• Customers with ARR of $100,000 or more contributed 55% of the total ARR as of September 30, 2023, compared to 53% as of September 30, 2022.

• Dollar-based net retention rate for customers with ARR of $100,000 or more was 108% in the third quarter of 2023 as compared to 123% in the third quarter of 2022.

• Overall dollar-based net retention rate was 99% in the third quarter of 2023 as compared to 112% in the third quarter of 2022.

• Multi-year subscriptions now comprise 43% of our overall ARR as of September 30, 2023, as compared to 37% as of September 30, 2022.

• Remaining performance obligations increased 6% year-over-year, to $167.7 million as of September 30, 2023, as compared to $158.0 million as of September 30, 2022.

Financial Outlook

“We achieved record gross margin and our first ever profitable quarter on a Non-GAAP operating basis,” said Jason Schwartz, Chief Financial Officer of Similarweb. “This reflects our ongoing efforts to improve our operating efficiency, which enables the conditions for profitable growth and sustainable positive free cash flow.”

• Q4 2023 Guidance

• Total revenue estimated between $55.5 million and $56.0 million, representing approximately 9% growth year over year at the mid-point of the range.

• Non-GAAP operating profit estimated between $0.5 million and $1.0 million.

• FY 2023 Guidance

• Total revenue estimated between $216.8 million and $217.3 million, representing approximately 12% growth year over year at the mid-point of the range.

• Non-GAAP operating loss estimated between $(8.6) million and $(9.1) million.

• We expect to reach sustained positive free cash flow in the fourth quarter of 2023.

The Company’s fourth 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, November 8, 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 (877) 407-0726 toll-free and at (201) 689-7806 internationally.

About Similarweb

Similarweb powers businesses to win their market with the best Digital Data. Similarweb reveals what is happening online and provides businesses with the essential digital data & analytics needed to build strategy, optimize customer acquisition and increase monetization. We empower our users to be the first to discover and capture the best business opportunities and stay alert to react instantly to emerging threats to their business. Similarweb products are easy to use and integrated into users’ workflow, powered by the most advanced technology, and based on the most comprehensive and accurate digital data on the planet.

Learn more: Similarweb | Similarweb Digital Data

Free Tools: Analyze any website or app | Verify your website | Browser extension

Follow us: Blog | LinkedIn | YouTube | Instagram | X

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 fourth 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, challenges in our business and in the markets in which we operate, and the impact of Israel's war with Hamas and other terrorist organizations on geopolitical and macroeconomic conditions or on our company and business; (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,				September 30,
	2022				2023
					(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	77,810			$	67,412
Restricted deposits		9,814				9,946
Accounts receivable, net		38,141				34,720
Deferred contract costs		9,789				8,681
Prepaid expenses and other current assets		6,628				6,898
Total current assets		142,182				127,657
Property and equipment, net		31,823				29,741
Deferred contract costs, non-current		8,348				5,862
Operating lease right-of-use assets		40,823				36,309
Intangible assets, net		9,561				5,956
Goodwill		12,867				12,867
Other non-current assets		441				33
Total assets	$	246,045			$	218,425
Liabilities and Shareholders' equity
Current liabilities:
Borrowings under Credit Facility	$	25,000			$	25,000
Accounts payable		7,144				11,400
Payroll and benefit related liabilities		18,512				13,342
Deferred revenue		93,195				89,818
Other payables and accrued expenses		27,990				23,617
Operating lease liabilities		9,091				6,785
Total current liabilities		180,932				169,962
Deferred revenue, non-current		974				394
Operating lease liabilities, non-current		40,075				33,929
Other long-term liabilities		2,113				1,958
Total liabilities		224,094				206,243
Shareholders' equity
Ordinary Shares, NIS 0.01 par value 500,000,000 shares authorized as of December 31, 2022 and September 30, 2023 (unaudited), 76,435,940 and 78,273,972 shares issued as of December 31, 2022 and September 30, 2023 (unaudited), 76,433,772 and 78,271,804 outstanding as of December 31, 2022 and September 30, 2023 (unaudited), respectively;		210				214
Additional paid-in capital		345,834				362,391
Accumulated other comprehensive loss		(367	)			(732	)
Accumulated deficit		(323,726	)			(349,691	)
Total shareholders' equity		21,951				12,182
Total liabilities and shareholders' equity	$	246,045				218,425

Similarweb Ltd. Consolidated Statements of Comprehensive Income (Loss) U.S. dollars in thousands (except share and per share data)
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(Unaudited)								(Unaudited)
Revenue	$	141,888			$	161,264			$	50,022			$	54,833
Cost of revenue		40,848				35,231				13,749				10,580
Gross profit		101,040				126,033				36,273				44,253
Operating expenses:
Research and development		45,927				42,452				15,156				14,199
Sales and marketing		92,539				79,362				30,051				24,274
General and administrative		35,836				31,941				11,681				10,665
Total operating expenses		174,302				153,755				56,888				49,138
Loss from operations		(73,262	)			(27,722	)			(20,615	)			(4,885	)
Finance income (expenses), net		4,796				3,026				(627	)			1,061
Loss before income taxes		(68,466	)			(24,696	)			(21,242	)			(3,824	)
Provision (benefit) for income taxes		197				1,269				(249	)			1,014
Net loss	$	(68,663	)		$	(25,965	)		$	(20,993	)		$	(4,838	)
Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.91	)		$	(0.33	)		$	(0.28	)		$	(0.06	)
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted		75,557,954				77,521,361				75,975,356				78,121,824
Net loss	$	(68,663	)		$	(25,965	)		$	(20,993	)		$	(4,838	)
Other comprehensive (loss) income, net of tax
Change in unrealized (loss) gain on cashflow hedges		(1,119	)			(365	)			209				(133	)
Total other comprehensive (loss) income, net of tax		(1,119	)			(365	)			209				(133	)
Total comprehensive loss	$	(69,782	)		$	(26,330	)		$	(20,784	)		$	(4,971	)

Share-based compensation costs included above:
U.S. dollars in thousands
	Nine Months Ended September 30,						Three Months Ended September 30,
	2022			2023			2022			2023
	(Unaudited)						(Unaudited)
Cost of revenue	$	463		$	482		$	143		$	155
Research and development		4,094			4,303			1,463			1,453
Sales and marketing		4,908			4,051			1,747			1,321
General and administrative		3,950			4,849			1,496			1,658
Total	$	13,415		$	13,685		$	4,849		$	4,587

Similarweb Ltd. Consolidated Statements of Cash Flows U.S. dollars in thousands
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(Unaudited)								(Unaudited)
Cash flows from operating activities:
Net loss	$	(68,663	)		$	(25,965	)		$	(20,993	)		$	(4,838	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,112				7,688				2,354				2,576
Finance expense		1,419				1,752				282				883
Unrealized loss from hedging future transactions		473				26				126				22
Share-based compensation		13,415				13,685				4,849				4,587
Gain from sale of equipment		(132	)			(1	)			(5	)			(2	)
Changes in operating assets and liabilities:
Change in operating lease right-of-use assets and liabilities, net		5,269				(3,938	)			3,174				(1,523	)
Decrease (increase) in accounts receivable, net		6,198				3,421				1,865				(2,212	)
(Increase) decrease in deferred contract costs		(2,129	)			3,594				229				1,004
Decrease (increase) in other current assets		886				(1,587	)			1,265				(707	)
(Increase) decrease in other non-current assets		(131	)			408				(46	)			(9	)
(Decrease) increase in accounts payable		(2,840	)			4,309				(4,242	)			3,966
Increase (decrease) in deferred revenue		5,433				(3,957	)			(6,900	)			(6,898	)
(Decrease) increase in other non-current liabilities		(561	)			(155	)			(133	)			164
Decrease in other liabilities and accrued expenses		(554	)			(6,051	)			(3,494	)			(1,805	)
Net cash used in operating activities		(33,805	)			(6,771	)			(21,669	)			(4,792	)
Cash flows from investing activities:
Purchase of property and equipment, net		(26,325	)			(1,377	)			(6,705	)			(62	)
Capitalized internal-use software costs		(2,495	)			(788	)			(1,120	)			(81	)
Decrease (increase) in restricted deposits		1,153				(132	)			1,047				(45	)
Payment in relation to business combinations		(3,787	)			—				—				—
Cash received in relation to business combinations		294				—				294				—
Net cash used in investing activities		(31,160	)			(2,297	)			(6,484	)			(188	)
Cash flows from financing activities:
Proceeds from exercise of stock options		1,904				2,125				143				295
Proceeds from employee share purchase plan		1,234				660				—				—
Borrowings under Credit Facility		25,000				—				25,000				—
Payments of contingent consideration, net		—				(2,363	)			—				—
Net cash provided by financing activities		28,138				422				25,143				295
Effect of exchange rates on cash and cash equivalents		(1,419	)			(1,752	)			(282	)			(883	)
Net decrease in cash and cash equivalents		(38,246	)			(10,398	)			(3,292	)			(5,568	)
Cash and cash equivalents, beginning of period		128,879				77,810				93,925				72,980
Cash and cash equivalents, end of period	$	90,633			$	67,412			$	90,633			$	67,412
Supplemental disclosure of cash flow information:
Interest received, net	$	(16	)		$	(89	)		$	—			$	(49	)
Taxes paid	$	417			$	1,857			$	176			$	244
Supplemental disclosure of non-cash financing activities:
Additions to operating lease right-of-use assets and liabilities	$	9,435			$	1,048			$	457			$	268
Deferred proceeds from exercise of share options included in other current assets	$	—			$	54			$	—			$	12
Deferred costs of property and equipment incurred during the period included in accounts payable	$	770			$	63			$	(2,684	)		$	22
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)	$	(657	)		$	—
Cash refund to be received resulting from adjustment to working capital		193				—
Property, plant and equipment		43				—
Goodwill and other intangible assets		4,361				—
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
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(In thousands)								(In thousands)
GAAP gross profit	$	101,040			$	126,033			$	36,273			$	44,253
Add:
Share-based compensation expenses		463				482				143				155
Retention payments related to business combinations		1,656				306				511				—
Amortization of intangible assets related to business combinations		3,319				3,504				1,168				1,169
Non-recurring expenses related to termination of lease agreement and others		35				—				—				—
Non-GAAP gross profit	$	106,513			$	130,325			$	38,095			$	45,577
Non-GAAP gross margin		75	%			81	%			76	%			83	%

Reconciliation of Loss from operations (GAAP) to Non-GAAP operating (loss) income
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(In thousands)								(In thousands)
Loss from operations	$	(73,262	)		$	(27,722	)		$	(20,615	)		$	(4,885	)
Add:
Share-based compensation expenses		13,415				13,685				4,849				4,587
Retention payments related to business combinations		1,991				851				737				164
Amortization of intangible assets related to business combinations		3,371				3,605				1,201				1,202
Adjustment of fair value of contingent consideration related to business combinations		744				—				62				—
Non-recurring expenses related to termination of lease agreement and others		977				17				418				4
Capital gain related to sale of operating equipment		(127	)			—				—				—
Non-GAAP operating (loss) income	$	(52,891	)		$	(9,564	)		$	(13,348	)		$	1,072
Non-GAAP operating margin		(37	)%			(6	)%			(27	)%			2	%

Reconciliation of GAAP operating expenses to non-GAAP operating expenses
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(In thousands)								(In thousands)
GAAP research and development	$	45,927			$	42,452			$	15,156			$	14,199
Less:
Share-based compensation expenses		4,094				4,303				1,463				1,453
Non-recurring expenses related to termination of lease agreement and others		87				—				—				—
Non-GAAP research and development	$	41,746			$	38,149			$	13,693			$	12,746
Non-GAAP research and development margin		29	%			24	%			27	%			23	%
GAAP sales and marketing	$	92,539			$	79,362			$	30,051			$	24,274
Less:
Share-based compensation expenses		4,908				4,051				1,747				1,321
Retention payments related to business combinations		335				545				226				164
Amortization of intangible assets related to business combinations		52				101				33				33
Non-recurring expenses related to termination of lease agreement and others		799				17				418				4
Non-GAAP sales and marketing	$	86,445			$	74,648			$	27,627			$	22,752
Non-GAAP sales and marketing margin		61	%			46	%			55	%			41	%
GAAP general and administrative	$	35,836			$	31,941			$	11,681			$	10,665
Less:
Share-based compensation expenses		3,950				4,849				1,496				1,658
Adjustment of fair value of contingent consideration related to business combinations		744				—				62				—
Non-recurring expenses related to termination of lease agreement and others		56				—				—				—
Capital gain related to sale of operating equipment		(127	)			—				—				—
Non-GAAP general and administrative	$	31,213			$	27,092			$	10,123			$	9,007
Non-GAAP general and administrative margin		22	%			17	%			20	%			16	%

Reconciliation of Net cash used in operating activities (GAAP) to Free cash flow and Normalized free cash flow
	Nine Months Ended September 30,								Three Months Ended September 30,
	2022				2023				2022				2023
	(In thousands)								(In thousands)
Net cash used in operating activities	$	(33,805	)		$	(6,771	)		$	(21,669	)		$	(4,792	)
Purchases of property and equipment, net		(26,325	)			(1,377	)			(6,705	)			(62	)
Capitalized internal use software costs		(2,495	)			(788	)			(1,120	)			(81	)
Free cash flow	$	(62,625	)		$	(8,936	)		$	(29,494	)		$	(4,935	)
Purchases of property and equipment related to the new headquarters		25,440				1,127				7,161				27
Payments received in connection with purchases of property and equipment		(11,192	)			—				(3,174	)			—
Payments received from escrow in relation to contingent consideration		—				(380	)			—				—
Deferred payments in relation to business combinations		413				260				413				260
Normalized free cash flow	$	(47,964	)		$	(7,929	)		$	(25,094	)		$	(4,648	)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231107435065/en/

Press Contact:

David Carr

Similarweb

press@similarweb.com

Investor Contact:

Raymond "RJ" Jones

Similarweb

raymond.jones@similarweb.com

Source: Similarweb Ltd.

FAQ

What are Similarweb Ltd.'s financial results for the third quarter of 2023?

Similarweb Ltd. (NYSE: SMWB) achieved record gross profit and gross margin and reported non-GAAP operating profit for the first time.

Who is the CEO of Similarweb Ltd. and what did he say about the financial results?

Or Offer, Co-Founder and CEO of Similarweb, stated that achieving non-GAAP profitability for the first time is a tremendous accomplishment for the team.

What new platform did Similarweb launch during the quarter?

Similarweb launched the latest generation of its platform, Similarweb 3.0, bringing more actionable insights to more customers, especially in the Research and Marketing solutions.

Where can the letter to shareholders from management be accessed?

The letter to shareholders from management discussing the financial results can be accessed at the link: https://ir.similarweb.com/financials/quarterly-results on the Company's investor relations website.