00:06 Greetings, welcome to Similarweb Second quarter fiscal twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. [Operator Instructions] Please note that today's conference is being recorded. 00:26 With us today are Or Offer, Co-founder and CEO and Jason Schwartz CFO. At this time, I'll turn the conference over to Annie Rosenberg with Investor Relations. Annie, you may now begin.

00:39 Thank you, operator. During this call, we will make forward looking statements related to our business, including statements related to the expected performance of our business, future financial results strategy, the potential impact of the Covid-nineteen pandemic and associated global economic uncertainty, long-term growth and overall future prospects. 01:00 These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward looking statements. And reported results should not be considered as an indication of future performance. 01:25 Please review our filings with the Sec, including our final prospectus and the section entitled Risk Factors therein filed with the Sec on May twelve, twenty twenty one for a discussion of the factors that could cause our results to differ. Also note that the forward looking statements on this call are based on information available as of today's date. We disclaim any obligation to update any forward statements except as required by law. As a reminder, certain financial measures we use in this presentation and on our call today 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. 02:27 However, non Gaap financial measures have limitation 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. A reconciliation between these Gaap and non Gaap financial measures is included at the conclusion of our Earnings press release, which can be found on our Investor Relations website at ir. Similarweb.Com. 02:56 With that, I will turn the call over to Or Offer, CEO of Similarweb.

03:03 Thank you, Annie. And thank you all for joining us here today for our Q2 earnings call, which is also our first as a public company. It is real privilege to be here with all of you on the call today. Our recent Ipo was exciting milestones for our employees. Customers, investors and partners, and I want to thank them for their confidence in us over the years. 03:29 I also like to welcome our new investors to the Similarweb family. During today's call, Jason, our CFO and I will provide details of our Q2 results as well as provide Q3 and full year guidance for twenty twenty one. 03:46 I will start today by covering highlights of our financial performance. Q2 twenty twenty one was the record quarter for us. And I'm pleased to report that our revenue increased forty nine percent year over year to thirty two point five million dollars. We are also very happy that we were able to accelerate our growth versus Q2 twenty twenty continuing our trend of accelerating growth. We also took advantage of a strong demand for our solution as companies across the globe focus on digital transformation. In Q2 we also improved our gross margin by more than two hundred fifty basis points year over year to seventy eight point five percent highlighting the scalability of our platform. Our free cash flow was negative three point three million dollars reflecting the strong fundamentals of our business even as we expanded our operations. 04:47 I want to expand further on those results also touch on a few key trends that we see as existing for our business, but first, since many of you are new to Similarweb I wanted to spend a few minutes talking about our business and market opportunity.…

Thank you, Or. I'm going to start with an overview of our financial model, and then I will review our financial results for the quarter and wrap up with our guidance for Q3 and full year twenty twenty one. 21:11 Our financial model is built on the delivery of strong and predictable revenue growth, substantially all of which is generated from Saas subscriptions. We deliver a high net dollar base retention rate or NRR and also maintain high gross margins and unit economics, that drive cash efficiency. 21:30 In Q2 we delivered record revenue of thirty two point five million dollars reflecting forty eight point five percent year over year growth. We increased our total number of customers to three thousand sixty eight up twenty four percent from two thousand four hundred and seventy nine in Q2 last year. This includes as Or mentioned, a strong increase in our one hundred thousand dollars or more ARR customers, which grew by fifty two percent from one hundred and forty five in Q2 twenty twenty to two hundred twenty in Q2 twenty twenty one. Most of these customers began initially as small customers and have expanded through our successful land and expand motion. Today, these customers comprise forty nine percent of our overall recurring revenue base Our revenue on customer base is highly diversified and no single customer amounts to more than five percent of revenue. 22:28 In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses and operating results are on a non Gaap basis and are reconciled to the Gaap results in the earnings press release that was issued just before this call. 22:45 Our gross profit totaled twenty five point six million dollars in the quarter, representing a gross margin…

26:42 Thank you, Jason. I would like to close by thanking my leadership team and our employees around the world for working hard to deliver a very successful first half of the year. Our IPO was a milestone for us as we continue to grow, and I’m pleased to welcome our many new investors to the Similarweb family. With that operator, please open the call up for questions. Thank you.

27:12 Thank you [Operator Instructions]. And our first question is from the line of Sterling Auty with Jpmorgan. Please proceed with your question.

27:43 Yes, thanks. Hi guys. So wanted to start with the question around the Aws marketplace partnership and deal. Can you help us understand does this just make it easier for customers to access the data and monetize? Does just change where they're getting the data from or does it actually add incremental reach to new customers that perhaps you weren't getting to before?

Hi Sterling. It's Or. I will try to answer this question. So I think the quick answer sellers is yes to all of the above. It will increase us the way to approach to many more customers than before that are operate on the Aws platform and buying data on the data marketplace. So we do expect to get more customers. It will give a easy way for them not only to access the data, but another layer of seller to sell them. So they need to get the Api, API key. It's more easy to get and access our data and also charge [Indiscernible] trying the data, because the data is already there and if they have AWS account, it's much more easy for them to buy, Use, try it and also charge because they’re already connect to the Amazon invoice system. And also, Amazon is putting rather incentivized on - for their customers and give them free credits to try many data sets on the data marketplace. So we also going to leverage this momentum of Amazon themselves pushing their customer to try and buy data assets.

29:33 Great. And then one follow-up, with the improvement in the net dollar retention, can you talk about the number of different ways that you can expand more users, more data more geographies, which one of those really stood out the most in the quarter in terms of driving that net dollar retention?

29:54 So I don't have the exact answer but I tell you what I feel that is driving really great expansion. One is the cross selling of offering. And I talk a little bit about shopper intelligence. So, we saw great success there, people buying one more solution for us. So I think buy more solution is a great driver. But I also saw great deal of people buying more users or other add-ons or integrating Apis. So, I think it's all across. But my feeling that is strong now is this quarter was the most solution we able to sell in introduced to our customer.

30:38 Great. Thanks, guys and welcome to the public markets.

30:43 Thank you, Sterling.

30:47 The next question from the line of Drew Foster with Citigroup. Please proceed with your question.

30:53 Hey guys. Thanks for taking the question. Jason, for the past six quarters or so, your top line has been growing sort of directionally in line with your sales and marketing spend this quarter, it was up another thirty points sequentially relative to Q1. So you’re clearly accelerating that. 31:08 To the extent that sales and marketing is a leading indicator for your top line like at a high level, how should we think about the pace and magnitude of investments within that envelope over the next six quarters. And then if you could just remind us to the breakdown of how much of that incremental spend there is marketing and advertising, where you might get a quicker return on those dollars and how much is related to adding incremental salespeople and sales infrastructure or the return on those investments is a bit more protracted?

31:37 Hey Drew. Thanks for the question. So, what we see right now is a huge Tam and opportunity ahead of us. And as a result of that, we're continuing to invest to capture a larger share of that market that we see. And so, we have accelerated hiring, I think you may have seen that in the press release that headcount has grown across the business. But our approach is really to invest in a responsible way balancing that growth and efficiency. And so that's what we're going to continue to do and we do think that that's an indication of further growth down the road. As far as the split, we don't break down the split between marketing dollars versus headcount dollars, but what we do say is about sixty percent of our marketing and sales spend goes to new customer acquisition and about forty percent of it is spent on customer retention and expansion.

32:53 Really helpful. Thanks. And then you had strong gross margin improvement. I think you called it out at the top of your press release. So could you just maybe unpack what's driving that and where you think you could drive those to over time? Thanks guys.

33:06 Yes. Sure. A lot of our cost of sales is comprised of fixed costs and in the infrastructure, the typical kinds of stuff that you have. We have hosting and support, we actually host at Aws as well as all of the investment that we make both internal cost and external cost in our data assets. And so which is really a fixed cost for us because it's the same amount of data that we need whether we're running - providing service to fifty five hundred or five thousand customers. So there's a natural leverage that we get on those fixed costs, and that's the improvement that you see not only in this quarter but over the trend over time over the last two, three years. We think that we’re comfortable with the guidance that we've given; we're staying in the same levels for the near term and then potentially going forward as we think about guidance going forward, we'll of course update you.

34:16 Thanks a lot.

34:18 Thank you.

34:20 The next question is from the line of Bhavan Suri with William Blair. Please proceed with your questions.

34:26 Hey guys, congrats and welcome to being a public company. Nice job. I guess I just wanted to touch quickly first on the new customer strength. I'd love to sort of understand what's driving momentum that obviously increased sales and marketing, you've got partners. But I guess as you look at that, are these customers sort of replace another vendor or is this web intelligence programs for the first time?

34:55 So, a good question. I think that the majority of the deal that we are at it's basically it's only us. We are not replacing. It's mostly a greenfield opportunity.

35:11 Got you. Got you. And then you re launched a platform in nineteen with sort of these five key use cases. Have you seen any change in how customers are adopting solutions, are they changing where they start and are they building different sort of data strategies once they've implemented a couple of solutions. How should we think about that progress the customer and sort of their strategy from when they adopt to when they change? Thank you.

35:36 It's a good question. I do see that the more we develop our offering and bringing new solution into the market, we kind of unlock new strategies for our customers, once we kind of introduce our solution better and I saw it also in our Cpg customers, now that we introduced Shopper solution to them and they get in this all new data and then they understand they can drive new strategy and one example we’re also on investors vertical when we come with the more sharp offering and then it's kind of giving them a whole perspective about how to think and develop strategy around data and insights like market data and insights going forward. So I do see that, I do see that it will come and a lot of the things we present are new and innovative even to the customers. And they understand the power that digital intelligence have and how they can use it to drive more strategic decision across the business.

36:41 Gotcha. Thanks for the color and nice job guys. Thanks for taking my questions.

36:50 Next question comes from the line of Brent Thill with Jefferies. Please proceed with your questions.

36:55 Hi, thank you. This is [John Dan] (ph) for Brent Thill. I had two questions. One of the five major solutions you have any particular strength to highlight among the five and maybe if you just could shed some light on the relative contribution. And then second, it’s probably for Jason. Just want to see if any comments on the linearity during the quarter, the trends by month, any particular variations to note including quarter date? Thanks very much.

37:27 So I will start answering the solution and then Jason can talk about the trend. So, all of the solution are growing very nicely. And we're very happy with the overall growth. And we saw a great success with the new tool offering for investors and the shoppers, so Cpgs are accelerating nicely. 37:51 But I think still the majority of our business is for our core solution that we start through our research solution and our marketing solution. That historically a lot of our customers used to buy together. And all of them are growing very nicely, and we're putting a lot of efforts to develop them and improve the offering. And Jason you want to answer the trend.

38:17 Yeah, sure. Within the quarter, there's some variability from quarter to quarter. But in general, because we run on an Arr model, we've got good visibility and predictability into the revenue trends as we start the quarter.

Great. Maybe just a little bit on that. I mean, were there anything that you noticed in terms of customer activity as opposed to the revenue trend? Ups and down, variation and that will be it for me. Thank you.

38:56 Not, not material. I think we see a lot of customer activity and a lot of customer demand throughout the quarter. And we're pleased with that continued motion.

39:13 Thanks again.

39:18 The next question is from the line of Raimo Lenschow with Barclays. Please proceed with your question.

39:24 Hi. This is Sheldon on for Raimo. Congrats on the Ipo and thanks for taking my question. Interested in the enhancements to the keyword generator tool. Can you help me understand how differentiated the new capabilities are compared to competitor solutions and the existing Google suite capabilities. And additionally on Youtube Seo, it seems like we're still in the early innings there. Can you provide any color on the opportunity? Thank you.

39:57 Yeah. So, thank you for question. And I will answer that. And so, I think that this new enhancement to give to our keyword generator is our show that we can bring very unique data asset like no other competitor in the market with our unique approach to provide the insights. And we know that today search is involving and Youtube is already their second biggest search engine out there and Amazon is the biggest search engine for e commerce, for shopping activity. And we recognize that our customers want to also understand the trend there and to develop their own sales strategies. So we realize that we can be innovative and give very high quality and results around our keyword generator and we're very happy with the data and the accuracy we put down, and really big coverage with almost eight hundred million keyword for you to check there. And I do think this motion will bring a lot of new ideas and new strategies to our customer to go after and acquire more traffic.

41:14 Great. Thank you.

41:19 Our next question is from the line of Jason Helfstein with Oppenheimer. Please proceed your questions.

41:25 Hey guys. This is Patrick Josephs on for Jason. Thank you for taking our questions and congrats on a strong start out of the gate. I just want to dive a little bit deeper into the record consolidated and ARR metrics. Specifically were there deals that leads into the second quarter that could not be closed during the pandemic? Or is it just broadly a shift in client behavior which is just driving more spend at Similarweb. Also, I know that you guys are guiding to NRR metrics, but should we expect NRR greater of one hundred five percent going forward, on a consolidated basis?

42:02 So I will try to answer it from my side, and Jason can add his opinion. Our NRR growth over the past many quarters is it's a lot of hard work we did historically and now we start to collecting the fruits; a lot of improvement in our data, in our platform, in our sales approach, in pricing and packaging, our relationship build with our customer; introducing of new offering and adding more Roi and value to our customers. And this is why we see a great result of NRR; keep growing for the many quarters. And this is why they also spend more money with us. And Jason you want add to maybe from your side?

I think Or I agree with you on that. This is the result of a lot of hard work and of course all customer segments that we saw strengthening both on retention and upsell, which is what's driving that NRR metric.

43:11 Okay, great. Thanks. And just a follow-up question related to the app measurement product. Could you give us an update on the development of the app measurement product and whether there have been any delays given the ios update? Thanks.

43:29 Ad or app?

43:33 Sorry, the app measurement product.

43:36 Okay, so yes. So this deal we decide to double down on our app offering and provide more market insight around the app ecosystem. And a lot of great development there, and they’re going to introduce a lot of development to the Android data in the coming months, and hopefully also introduce a lot of improvement to the ios data by the end of the year. So a lot of great improvements coming in the next few quarters around this area. But we are doubling down and putting more effort to scale and reach our app offering.

44:15 Okay, great. Thanks for the questions.

44:20 Thank you. Your final question comes from Pat Walravens with Jmp Group. Please proceed your question.

44:28 Great. Thank you. And congratulations you guys. So my first one is, if you look at this, it's a great win expansion with the e commerce company, the three point five million dollars in Arr. So my first question is how much more room is there at a company like that? At three point five million dollars are you done or can it keep getting bigger?

44:50 This is a great question because I just have a great talk with my team. I told them that the target that this customer will be our first ten million dollar customer. This is what I hope and think. So there is much room to go.

45:08 Okay great. That's what I was hoping. And then how many other ones are there where, and Jason I don’t know if you disclose this, but have you told us how many you have that are north of a one million in Arr and if not that just what does the pipeline look like for other customers that can be north of one million dollars in Arr?

45:26 So we are not reporting, I’ll start, but to answer and then Jason can give, we’re not reporting right now, how many - how much seven figures customers we have. But we do see a [Indiscernible] to increase this sector of customers. And as I talk and presenting in the roadshow we have a big part of the fortune five hundred already as our customer. And I think most of them need to pay seven figures down the road, and hopefully, we will get though. Jason, you want to add on that? Yeah.

46:07 As Or said, today, our focus and the numbers that we talk about are that strategic customer group that are customers who spend more than one hundred thousand dollars with us. But we've seen, we saw that fifty two percent growth year over year this quarter in that cohort of customers. Today, that makes up about forty nine percent of our Arr. 46:32 We see over time that the same motion where we're seeing customers starting as smaller customers and growing into and expanding from in a single solution or as Or talked about the multi-solutions getting up to multi hundred thousand dollars and driving that lifetime value, we think over time, we can get number of customers to be those seven digit accounts.

47:03 Great. And then last one for me. Obviously, you're not guiding to the out years, but just Jason, how should we think about sort of what you aspire to in terms of longer term revenue growth so what's the plan that you're building internally in terms of your hiring your quotas and your products you're going to bring to market and putting all that together; how fast do you think that this company is growing over the longer term?

47:37 It's a great question pat. And like we said, we see a huge tam ahead of us. And we've also looked at the performance and how we've shown that we know how to both grow and do it in a responsible and efficient way. And so, to the extent that we can continue to do that, we will continue to invest smartly to balance that growth and efficiency. But we really will look forward to leaning in and capturing a larger share of that market that we see.

48:17 Okay. That’s it for me. Thank you.

48:22 Thank you. At this time, we've reached the end of the question and answer session. I’ll now turn the call over to management for closing remarks.

48:32 Thank you, everyone. I'm really excited to be here and answering for your question. It's our first time in call out of many to come, and we hope to continue deliver, make our investor happy. Thank you, and that's hope for amazing good year. Thank you for your question.

48:54 Bye.

48:55 Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.