Mediaboss Marketing

You should read the following discussion and analysis of our financial conditionand results of operations together with the unaudited condensed consolidatedfinancial statements, and related notes that are included elsewhere in thisQuarterly Report on Form 10-Q, along with the financial information included inour Annual Report on Form 10-K, as filed with the Securities and ExchangeCommission (the "SEC") on March 18, 2022. Some of the information contained inthis discussion and analysis, including information with respect to our plannedinvestments in our research and development, sales and marketing, and generaland administrative functions, contains forward-looking statements based uponcurrent plans, beliefs, and expectations that involve risks and uncertainties.Our actual results may differ materially from those anticipated in theseforward-looking statements as a result of various factors, including those setforth under the sections titled "Special Note Regarding Forward-LookingStatements" and "Risk Factors" included elsewhere in this Quarterly Report onForm 10-Q.Company OverviewWe are a leading online visibility management software-as-a-service ("SaaS")platform, enabling companies globally to identify and reach the right audiencein the right context and through the right channels. Online visibilityrepresents how effectively companies connect with consumers across a variety ofdigital channels, including search, social and digital media, digital publicrelations, and review websites. Our proprietary SaaS platform enables us toaggregate and enrich trillions of data points collected from hundreds ofmillions of unique domains, social media platforms, online ads, and web traffic.This allows our customers to understand trends, derive unique and actionableinsights to improve their websites and social media pages, and distribute highlyrelevant content to their targeted customers across channels to drivehigh-quality traffic.We generate substantially all of our revenue from monthly and annualsubscriptions to our online visibility management platform under a SaaS model.Subscription revenue is recognized ratably over the contract term beginning onthe date the product is made available to customers.In line with our business strategy, we have increased our activity with mergersand acquisitions. During the three months ended March 31, 2022, we completed twostrategic acquisitions of companies to complement our existing portfolio:Backlinko, LLC ("Backlinko") and Intellikom, Inc., which does business under thename Kompyte ("Kompyte").The purpose of the acquisition of Backlinko was to obtain valuable content andto access an existing revenue stream in Backlinko's SEO courses. We believe theonline traffic to Backlinko is valuable to our growth strategy and may bemonetized optimally through our resources, allowing us to grow organic trafficand sales.Kompyte is a provider of sales enablement and competitive intelligence softwarewe believe complements our core platform. We intend to support Kompyte'straditional enterprise customers, and we expect to begin developing new productsbetter suited for its small-to-medium sized business ("SMB") customer base. Webelieve there is a significant potential cross-sell opportunity for Kompyte'ssolution among the more than 87,000 customers on our core Semrush platform.We currently operate subsidiaries in Cyprus, the Czech Republic, Germany, theNetherlands, Poland, Spain, and Russia, with employees based in each location.Our business strategy has included the opening of new offices in Turkey,Armenia, Serbia, and Georgia to facilitate our growth in operations andinternational expansion.As a response to the Russian military action in Ukraine and subsequent U.S.,E.U., and other sanctions against Russia, we are actively winding downoperations in Russian and relocating employees outside of the country. We expectthese relocations to be substantially complete by September 30, 2022, 29--------------------------------------------------------------------------------and we expect to incur costs of approximately $24.5 million to $28.5 millionover the remainder of fiscal year 2022 with respect to such relocations. Theseexpenses relate both to the costs of relocation and the expected higher costs oftalent and labor in the geographies to which we are relocating these employees.For more information on the risks of geographic instability on our operations,see "Item 1A. Risk Factors-Most Material Risks to Us-Instability in geographieswhere we have significant operations and personnel, including in Russia, couldhave a material adverse effect on our business, customers, and financialresults".Our revenue is primarily generated through sales of our products around theglobe. The largest portion of our revenue continues to be driven by customersbased in the U.S. and UK, generating revenues of $25.8 million and $5.9 million,respectively, for the three months ended March 31, 2022, and $18.1 million and$4.2 million for the three months ended March 31, 2021, respectively.

We have one reportable segment. See Note 17 of our Unaudited CondensedConsolidated Financial Statements included elsewhere in this Quarterly Report onForm 10-Q for more information.

Key Factors Affecting Our Performance

We regularly review a number of factors that have impacted, and we believe willcontinue to impact, our results of operations and growth. These factors include:

Acquiring New Paying Customers

Retaining and Expanding Sales to Our Existing Customers

We calculate our dollar-based net revenue retention rate as of the end of aperiod by using (a) the revenue from our customers during the twelve monthperiod ending one year prior to such period as the denominator and (b) therevenue from those same customers during the twelve months ending as of the

end of such period as the numerator. This calculation excludes revenue from newcustomers and any non-recurring revenue.

Sustaining Product and Technology Innovation

Non-GAAP Financial Measures

Free cash flow and free cash flow margin

Three Months Ended March 31,

(in thousands)

revenue)

Components of our Results of Operations

Revenue

Cost of Revenue

Cost of revenue primarily consists of expenses related to hosting our platform,acquiring data, and providing support to our customers. These expenses arecomprised of personnel and related costs, including salaries, benefits,incentive compensation, and stock-based compensation expense related to

Operating Expenses

Research and Development

Sales and Marketing

Other Income, Net

Other income, net also includes amounts for other miscellaneous income andexpense, and gains and losses, unrelated to our core operations. We have electedthe fair value option in respect to the accounting for our convertible noteinvestments, allowing for increases and decreases in the fair value of suchinvestments to be recorded to other income (expense) for each reporting period.

Income Tax Provision

Results of Operations

General and administrative (1) 14,163 7,904Total operating expenses

(1)Includes stock-based compensation expense as follows:

Comparison of the Three Months Ended March 31, 2022 and 2021

Revenue

Revenue based upon the locations of our paying customers during the three monthsended March 31, 2022 and 2021 was as follows:

Cost of Revenue, Gross Profit and Gross Margin

General and Administrative

General and administrative $ 14,163 $ 7,904 $ 6,259 79 %Percentage of total revenue 24.8 % 19.8 %

The increase in other income for the three months ended March 31, 2022 wasprimarily due to a net increase in the value of our convertible notesinvestments, partially offset by realized and unrealized foreign exchange gainsand losses from transactions associated with our international activities.

Provision for Income Taxes

The provision for income taxes is primarily attributable to earnings in ourforeign jurisdictions.

Liquidity and Capital Resources

Our principal uses of cash in recent periods have been to fund operations,invest in capital expenditures, and strategically acquire new businesses. Thiscash is held in deposits and money market funds.

generate cash flows necessary to expand our operations, our business, results ofoperations, and financial condition could be adversely affected.

Our Credit Facility

Operating Activities

Investing Activities

Contractual Obligations and Commitments and Off-Balance Sheet Arrangements

Recent Accounting Pronouncements

Refer to the section titled "Recent Accounting Pronouncements" in Note 2 of thenotes to our Unaudited Condensed Consolidated Financial Statements includedelsewhere in this Quarterly Report on Form 10-Q for more information.

Critical Accounting Policies and Estimates

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SEMRUSH HOLDINGS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) - Marketscreener.com