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Edited Transcript of SMWB.N earnings conference call or presentation 10-Aug-22 12:30pm GMT

Q2 2022 Similarweb Ltd Earnings Call Sep 26, 2022 (Thomson StreetEvents) -- Edited Transcript of SimilarWeb Ltd earnings conference call or presentation Wednesday, August 10, 2022 at 12:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Jason E. Schwartz Similarweb Ltd. - CFO * Or Offer Similarweb Ltd. - Co-Founder, CEO & Director * Raymond Jones Similarweb Ltd. - VP of IR ================================================================================ Conference Call Participants ================================================================================ * Arjun Rohit Bhatia William Blair & Company L.L.C., Research Division - Analyst * Brett Anthony Knoblauch Cantor Fitzgerald & Co., Research Division - Research Analyst * Jason Stuart Helfstein Oppenheimer & Co. Inc., Research Division - MD & Senior Internet Analyst * Noah Ross Herman JPMorgan Chase & Co, Research Division - Research Analyst * Patrick D. Walravens JMP Securities LLC, Research Division - MD, Director of Technology Research & Equity Research Analyst * Ryan Patrick MacWilliams Barclays Bank PLC, Research Division - Research Analyst * Sang-Jin Byun Jefferies LLC, Research Division - Equity Analyst * Tyler Maverick Radke Citigroup Inc., Research Division - VP & Senior Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to Similarweb Q2 Fiscal 2022 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. RJ Jones, Vice President, Investor Relations. Please go ahead, sir. -------------------------------------------------------------------------------- Raymond Jones, Similarweb Ltd. - VP of IR [2] -------------------------------------------------------------------------------- Thank you, operator. Welcome, everyone, to our second quarter 2022 earnings conference call. During this call, we will make forward-looking statements related to our business. These statements may include the expected performance of our business and our future financial results, our strategy, the potential impact of the COVID-19 pandemic and its associated global economic uncertainty, our anticipated long-term growth and overall future prospects. 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. Again, actual results and the timing of certain events may differ materially from the projected results or the timing predicted or implied by such forward-looking statements. Further, reported results should not be considered as an indication of future performance. Please review our Form 20-F filed with the SEC on March 25, 2022, in particular, the section entitled Risk Factors therein for a discussion of the factors that could cause our actual results to differ from the forward-looking statements. Also note that the forward-looking statements made on this call are based on available information as of today's date, August 10, 2022. We undertake no obligation to update any forward-looking statements we make today, except as required by law. As a reminder, certain financial measures we used in presentation of results and on our call today are expressed on a non-GAAP basis. In particular, we referenced non-GAAP operating loss, which represents GAAP operating loss less share-based compensation, adjustments and payments related to business combinations, amortization of intangible assets and certain other nonrecurring items. We use this and other 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 taking 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. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings release, which can be found on our Investor Relations website at ir.similarweb.com. Today, we will begin with brief prepared remarks from our CEO, Or Offer; and CFO, Jason Schwartz, then we will open up the call to questions from sell-side analysts in attendance. Please note that we published a detailed discussion of our second quarter 2022 results in a letter to shareholders for investors to reference as well as an updated investor presentation with a strategic overview of the business, both of which are available on our Investor Relations website. With that, I will turn the call over to Or Offer, CEO of Similarweb. -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, RJ. And also thank you to everyone joining the call today. We posted an excellent result in our second quarter as we focused on more efficient growth for our company. Revenue grew 46% over Q2 last year to $47.6 million in the second quarter. The expansion of our global customer base consisting of SMB, Enterprise and Strategic accounts remaining strong. Our customer base grew 25% year-over-year to over 3,800 and our average account spend about $51,000 with us annually, up 16% in just a year since our IPO. Furthermore, over 53% of our annual recurring revenue comes from customers who spend more than $100,000 per year with us. Today, 36% of our relationships consistent of multiyear contracts, a metric that has continued to expand year-over-year since 2020. As the global macroeconomic environment has become more uncertain, Similarweb offering and solution has become even more important to our customers. The visibility into the digital ecosystem and how it behaves and change is critical information to -- in those times that help our customers make the right strategic decision to navigate through economic stormy weather and be successful. As a reminder, we collect extensive online data, then we refine it and package it into solution of actionable insights for our customers, which enable them to make better decisions in their competitive markets. The solution we built on top of our data impact the revenue-driven teams of our customers, including sales, marketing, analytics and e-commerce and are designed to help a wide range of users from the C-suite to the operational teams. Every quarter, we seek to innovate and improve upon our solution and add to our underlying data. Our customer look forward to our regular feature additions. This quarter, we took a major step forward that enable us to provide more value to our customer. First, we acquired Rank Ranger, which immediately enhanced our SEO capabilities with the complementary technology and data. This acquisition represents a great example of our M&As as a strategy, which we aspire to continue. Second, we launched our App Intelligence product that incorporates data from our data.ai, formerly App Annie, partnership, which gives our customers an expanded view of activity across the digital world. The initial customer responses are positive, and we plan to add more features over time. Lastly, we are in the middle of exciting build cycle for our Investor Intelligence solution, which will deliver timely insights for a new experience to our investor customers. We anticipate we will bring in the new experience to market in the back half of the year. Again, our customers greatly appreciate the value we deliver, especially in times of uncertainty, we are adopting to the macroeconomic environment with our customers as we continue to innovate and grow. We are also focusing more on operational efficiency that will lead us to becoming profitable. We are only just beginning to unlock our potential within a multibillion-dollar market opportunity. Jason, I will turn the call over to you. -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [4] -------------------------------------------------------------------------------- Thank you, Or, and thank you to everyone joining us on the call today to discuss our second quarter results. I will briefly address our financial performance, and then we will open up the call to questions. Our results in the second quarter continued to show our commitment to disciplined execution. Revenue reached $47.6 million for the quarter and exceeded our outlook of $45.9 million on the high end of our range. Importantly, our overall dollar-based net retention rate, or NRR, increased to 115% as compared to 106% in the second quarter of 2021. And for our $100,000 ARR customer segment, NRR increased to 127% as compared to 118% in Q2 last year. Our remaining performance obligations, or RPOs, increased 53% year-over-year to $160 million, 87% of which will be realized over the next 12 months. As we exceeded our plans in revenue, we also exceeded expectations on our bottom line. Our non-GAAP operating loss was $19.8 million, which was less than the $23 million loss on the low end of our guidance range. The 2 factors driving this result were sales above expectations and operating efficiency across the business. As a reminder, this result includes noncomparable expense impacts from our acquisitions as compared to the prior year. Turning now to Q3 2022. We expect total revenue in the range of $48.8 million to $49.2 million. For the full year, we continue to expect total revenue in the range of $196 million to $197 million, representing 43% growth year-over-year at the midpoint of the range. Non-GAAP operating loss for the third quarter is expected to be in the range of $20.9 million to $21.5 million and for the full year, between $80 million and $81 million. Compared to last year, our outlook includes impacts to cost of goods sold relating to our data.ai partnership and to the acquisition of Embee Mobile. We anticipate non-GAAP gross margin will be approximately 74% to 75% in Q3 2022 and between 75% to 76% for full year 2022 as a result of these impacts. Our second quarter 2022 results indicate we are running our business very efficiently during the time of increasing challenges globally. The decisions we are making reflects our focus on maintaining strategic flexibility and balance sheet resilience and pursuing profitable growth. With that, Or and I are happy to take your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Ryan MacWilliams with Barclays. -------------------------------------------------------------------------------- Ryan Patrick MacWilliams, Barclays Bank PLC, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Guys, just as we enter a more difficult macro environment. I appreciate you calling out in the prepared remarks that you're starting to see maybe a little more softness from customers in the EU and maybe those that are more focused on the SMB as well. Can you just highlight some of the things you're seeing on the ground and how that maybe impact your strategy over the next 6 to 12 months? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [3] -------------------------------------------------------------------------------- It's Or speaking. Thank you for the question. So I think that we do see a softness in the market. I think it's -- you feel it's more just a little bit harder to do business, just the life cycle of closing a deal takes longer as I think there's like a lot of haptics when the customers as people switch jobs all day and allocating the budget, et cetera. So we've seen the slowness, I think, a lot in Europe, but also in other regions. -------------------------------------------------------------------------------- Ryan Patrick MacWilliams, Barclays Bank PLC, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- That's so much what we're seeing with basically across the software universe and that makes sense. And for Jason, just for -- on free cash flow in the quarter. Can you provide some puts and takes there? Any changes that are going out? And then how can we think about the path forward from here for the rest of this year, just on the free cash flow line? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [5] -------------------------------------------------------------------------------- Yes, sure, Ryan. So I think that you see that same kind of disciplined execution. We've given some cost on that we think that the free cash flow -- the normalized free cash flow should not exceed $50 million for the year. And so we're here at the halfway point, I think we've been managing that. Well, just as a reminder, from a cash flow perspective, a significant amount of our renewals happen in Q4 and Q1. And so a lot of that cash flow comes in at the end of Q4 or beginning -- in the Q1 to April of the year. So we're getting into the trough from a billing standpoint of the seasonal weaker part of our cash flow cycle. And so what we always do is look at it on a rolling 12-month basis. The one other thing to call out is that you saw in the release is that we did move into our new headquarters here in Israel. So we had cash -- capital expenditures that -- related to that for the build-out and the new headquarters here that we had talked about a few quarters ago, and you see that coming through on the cash flow line this quarter. We break that out and show you both the total free cash flow and a normalized free cash flow in the release. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question comes from the line of Jason Helfstein with Oppenheimer. -------------------------------------------------------------------------------- Jason Stuart Helfstein, Oppenheimer & Co. Inc., Research Division - MD & Senior Internet Analyst [7] -------------------------------------------------------------------------------- Just want to ask one, just about how you're thinking about gross margins into next year. So there's obviously been investments that have depressed the gross margin first half of this year. Do you feel like next year with what you have in kind of the product pipeline, we should be able to see meaningful growth in the gross margins? I mean, I don't know if it will get back to 70%, 79% but something, call it, more like high 70s, more something like we saw in '22 -- 2020, '21. And then separately, how you're thinking about sales and marketing investment to the extent that the world is a little bit slower. And if you let more flow to the bottom line? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [8] -------------------------------------------------------------------------------- So thank you, Jason. So let's talk about the gross margin. So the short answer is, yes, we are hoping to improve the numbers. Not saying that we're going to get to the 80s like the long-term model, but definitely improving, most of the calls are coming from the operational data acquisition. This is the biggest chunk around that, like, about our cost there. And I think looking into the future, I think it's definitely not going to increase. So we are in a very good place and currently. So the answer is yes, and this probably would increase nicely. Regarding S&M, again, we make a lot of decisions to be more efficient. It's very important in this time. So we are optimizing and hopefully have also good improvement around spend in sales and marketing going forward. Jason, do you have anything to add on that? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [9] -------------------------------------------------------------------------------- Yes, I agree with you Or on that. And I think that one of the things is you're already start seeing that efficiency flow through this quarter. We have a 200 basis point improvement on the sales and marketing line and a lot of that revenue growth fell to the bottom line in this quarter with making decisions actively to be more efficient, it's part of the strategy, and I think you're starting to see that come through in the numbers already in Q2. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question comes from the line of Brent Thill with Jefferies. -------------------------------------------------------------------------------- Sang-Jin Byun, Jefferies LLC, Research Division - Equity Analyst [11] -------------------------------------------------------------------------------- This is John Byun for Brent Thill. So looking through the guidance for the rest of the year, it looks like Q4 implies similar growth to Q3. So wondering how you're thinking about how much macro is embedded? And also how the -- wonder how the trends are going so far in the quarter in July, August, whether it's notable change from, let's say, June? And then second part of question, I wanted to ask about just in terms of the broader operational efficiency, how are you thinking about the cost structure, rest of the year and into next year? Any change in head count plans and so on? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [12] -------------------------------------------------------------------------------- John, thanks for the question. So on -- first, we'll talk about the growth trend and then talk about how we think about the operating efficiency. So as Or mentioned, we're not immune to the macroeconomic trends that we see happening where we talk about deal cycles that are getting done, they're just taking longer or requiring additional levels of reviews within the organization. And that's stuff that we take into account as we prepare our guidance. You've heard me say before that we'd like to give guidance that we know we can meet. And so that is -- those assumptions that we have are baked into the guidance. And from an efficiency standpoint, like I said, we are proactively making decisions to balance that growth and cash flow and to be more efficient. And you see that coming through on the lines already. And we do -- as we mentioned in the shareholder letter that we released last night, this is something that we are focused on to work diligently as we have with that kind of disciplined execution and focus on our unit economics to drive those operational efficiencies to get to sustained cash flow. So that is baked into our assumptions as we start thinking about planning and guiding for 2023. -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [13] -------------------------------------------------------------------------------- I would add on top of that, that we did now looking into the head count plan for 2023 that Q3 and Q4 now is the time that we have started hiring and planning to hiring the people for next year, for 2023. And of course, we're taking into account because of the decision we made to be more efficient, it will probably impact the future of hiring plan. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Our next question comes from the line of Tyler Radke with Citi. -------------------------------------------------------------------------------- Tyler Maverick Radke, Citigroup Inc., Research Division - VP & Senior Analyst [15] -------------------------------------------------------------------------------- I was wondering if you could talk about your performance in other geographies relative to plan. We've heard mostly from companies that they're seeing some issues in Europe. But just wondering if you're assuming that those conditions that you saw in Europe spread to the rest of the geographies and kind of what you're baking in from a geo perspective for the rest of the year? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [16] -------------------------------------------------------------------------------- So it's an interesting question. We did that also internal look around that. Interesting enough, we have some regions that had a good quarter like our Japan operation was doing well and our U.S. also, I think, was doing very well. It represents now almost 55% of our revenue. And I think it was up -- sorry, it was 50% to U.S., and it was up 55%. So U.S. was good performing. Europe was interesting dynamic. For example, we have a very good scaling operation in Germany. And -- but U.K. and France, we were more struggling. I'm trying to think if any more information or thoughts on maybe you have anything on. No. So I think this is a good overview about the global impact. -------------------------------------------------------------------------------- Tyler Maverick Radke, Citigroup Inc., Research Division - VP & Senior Analyst [17] -------------------------------------------------------------------------------- Yes. And sorry, Jason, maybe just what you're assuming on the guidance from a geographic perspective, if you're assuming things get a bit worse and kind of stayed the same? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [18] -------------------------------------------------------------------------------- So we've taken some assumptions over there based on regions and some of the things that we see in the pipeline already. Even in Europe, we've got still a good solid pipeline that's there. And so we look at all of those factors as we put together our guidance. So there's some things that will be -- we assume will be similar, some things that will assume, who knows. And we want to make sure that we're always giving guidance that we can make. -------------------------------------------------------------------------------- Tyler Maverick Radke, Citigroup Inc., Research Division - VP & Senior Analyst [19] -------------------------------------------------------------------------------- Great. And from a hiring perspective, could you just give us a sense what are the areas that you're maybe slowing down or pulling back on the most? Is it primarily kind of marketing related? Or is it on the direct sales side? Just give us a sense of where you're spending less on from a head count perspective? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [20] -------------------------------------------------------------------------------- So let me try to think about how -- so I think on the marketing side, we did a lot of changes lately. I think -- and we were to optimize our marketing organization as it was a little bit bigger than what we are planning. And so we did probably reduce the head count down in the marketing organization, maybe a little bit around client services and maybe a little bit about in R&D areas. I think those are the major and also on HR and in recruiting. When -- we have planned to recruit x amount of people and may be x amount of recruiter now only doing adoption to your higher income. So you need less workforce to execute on that. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Our next question comes from the line of Arjun Bhatia with William Blair. -------------------------------------------------------------------------------- Arjun Rohit Bhatia, William Blair & Company L.L.C., Research Division - Analyst [22] -------------------------------------------------------------------------------- I think you mentioned a couple of times in your prepared remarks and in the shareholder letter that demand could increase in uncertain times, certainly makes sense as customers, I think, rely on data to drive their business a little bit more. Could you just maybe dig a little bit deeper into how that's actually coming through? Is that -- are there certain products that you expect will benefit more than others in a more uncertain environment within your portfolio? Do you think it's going to be more concentrated in new customers versus existing customers? I'm just curious how you're thinking that might play out? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [23] -------------------------------------------------------------------------------- Yes, of course. So we see in the past, a similar phenomenon when COVID hit, when the world was going on distress and many sectors were struggling and travel was a great example. When we thought back then, we're going to lose all of them. They all came back and bought more in order to adapt our strategy. So we do think that we're going to get into a similar motion now as the market gets more hectic. One area we do see now that there is a little bit increase in demand, for example, is in the investor vertical. And we're seeing that a lot of public investors now try to realize and when is the right time to market to bounce back? So the more signals they can get and about when things start a little bit better, they can start planning when to start investing again. So -- and Similarweb is the best data source that will give you those indications, both on digital world performance. So we start seeing them having more interest to get more data, more services from us. And I think those are the first vertical that start thinking about let's use the situation. So we're probably going to see more of those verticals and start getting more demand for market -- for digital market data. -------------------------------------------------------------------------------- Arjun Rohit Bhatia, William Blair & Company L.L.C., Research Division - Analyst [24] -------------------------------------------------------------------------------- Got it. That's very helpful. And then maybe one for Jason. Just it seems your net retention rate is obviously doing very well in this environment. Can you just give us a sense for how you expect that might play out for the remainder of the year as the macro backdrop gets a little bit more challenging. And I'm wondering if you have any more granularity in that metric that you can share with us in terms of which customers are expanding and how the gross retention might be changing, if at all. -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [25] -------------------------------------------------------------------------------- So Arjun, it's great to hear from you. The gross retention numbers are actually, for the most part, pretty stable. The thing, I think, that we look at is really the rate of expansion and the buying power that a lot of customers have. One of the things that gives us some confidence in our numbers and the durability of our ARR is that already 36% of the ARR is on -- signed up for multiple years. And so those are things, even though we report and think of our business as an annual recurring revenue business, but having already 36% of that signed up on multiyear deals means that that's revenue that is not up for renewal, if you will, during that period of time. And so that gives us that confidence over there. We're seeing in a number of the large customers that the things that they need or getting more detail, as Or mentioned, being able to get that intelligence in different regions. So people are expanding within products to additional regions. And also where they need some of the deeper product information like Shopper where we -- so Shopper Intelligence pick up this quarter, I think that's something that we're starting to see. And more and more customers are actually integrating our solutions into their stuff, and we're seeing some great movement on our OEM strategy as more and more customers are integrating Similarweb into their products. So those kinds of things, to the extent that they continue during these kind of macroeconomic trends we think are going to be upsides to the number and things that we continue to watch for. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Our next question comes from the line of Noah Herman with JPMorgan. -------------------------------------------------------------------------------- Noah Ross Herman, JPMorgan Chase & Co, Research Division - Research Analyst [27] -------------------------------------------------------------------------------- And congrats on a solid quarter. Can you provide us any color on maybe customer usage on the platform. What are your expectations for pricing going forward? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [28] -------------------------------------------------------------------------------- Sizing on the platform. Can you repeat the question? -------------------------------------------------------------------------------- Noah Ross Herman, JPMorgan Chase & Co, Research Division - Research Analyst [29] -------------------------------------------------------------------------------- Yes. Just any change in maybe pricing? Or maybe if you could touch on any maybe pricing power you have for the platform itself? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [30] -------------------------------------------------------------------------------- And the pricing and packaging, I think, it's an area that we are still not optimized as well as they want us to be. And I think that the more our solution is that more deep and more holistic be able to better introducing a better pricing and packaging to our customer to have a win-win scenario. We have a strong belief about putting will win that the more our customers get more ROI on the platform, then we can able to increase the price. So we are thriving into an area where each one of the lines of business. We have 5 of them. We will have a very strong metered approach on top of that to have a good, better, best to each one of them and as add-on and plug in we can add on top of that. So we're not in a perfect place, but we're always optimizing and we just hired a Director of Pricing and Packaging. So I really hope that there's a lot of leverage to get more efficient though. I hope it answers the question. -------------------------------------------------------------------------------- Noah Ross Herman, JPMorgan Chase & Co, Research Division - Research Analyst [31] -------------------------------------------------------------------------------- Got it. And just maybe any color on what you're seeing in terms of usage from customers maybe over the past few months and what you've been seeing heading into the most recent quarter as well? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [32] -------------------------------------------------------------------------------- Usage is going up and always. And we are putting a lot of efforts in our product into work on the scalability and easy to use of the platform. So we have ongoing teams that are always working to improve usage and not only the day-to-day usage, also to help customers to discover more and more features. We have a very, very big platform with many functionalities. So it's something that we are working currently and we're having great success. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. -------------------------------------------------------------------------------- Brett Anthony Knoblauch, Cantor Fitzgerald & Co., Research Division - Research Analyst [34] -------------------------------------------------------------------------------- Or and Jason, I was just wondering if you could provide some incremental color on the demand you're seeing for your App Intelligence product. Is that exceeding your expectations? And then similarly, an update on maybe adoption of your Shopper Intelligence product as well as that has much higher ACVs. How is the sales force thinking about selling those 2? Are they prioritizing either of them or are they still landing with your core digital research and digital marketing products? -------------------------------------------------------------------------------- Or Offer, Similarweb Ltd. - Co-Founder, CEO & Director [35] -------------------------------------------------------------------------------- Yes. So first of all, thank you for the question. So regarding the App Intelligence model. So the first initiative were great. So we have hundreds of requests from many, many customers for seeing demo or getting more and more information about this new offering. And it was a very good indication. And also, we already closed numbers of deals. So it's a good momentum but also as the market dynamic becoming tough, we're seeing that it's taking us longer to close this pipeline. So it's part of the market dynamically. We're also seeing the first initiative are great and we're excited about this offering going forward. Regarding Shopper Intelligence, so indeed, it was introduced to the market with very high ACVs mostly because we launched the product and we didn't put a lot of ways to have good, better, best offering. So we said it as much as you can for one big price. It was having good momentum in the beginning. But down the road, it was tougher to continue because every industry or sector wants different part of the platform, and it was out to charge them full price. So I think a few months ago, we changed and the ability for us to also slice and dice the Shopper offering and introduce good, better, best offering. And this enabled us to scale the longer acquisition for Shopper this quarter, and that was very good compared to the quarter before then. And regarding the core product, they're doing well as always. -------------------------------------------------------------------------------- Brett Anthony Knoblauch, Cantor Fitzgerald & Co., Research Division - Research Analyst [36] -------------------------------------------------------------------------------- Perfect. And then maybe just on your full year revenue guide, it kind of implies a 13.5% sequential growth between 3Q and 4Q, when you look at last year, you grew, call it, 12.5% or so in that time frame backdrop is obviously much more difficult in this macro environment. So can you just help us understand what gives you confidence that you're going to see the kind of acceleration in 4Q faster than maybe what you saw last year, given the relatively more uncertain macro environment? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [37] -------------------------------------------------------------------------------- Yes. So we look at the backlog and the deals that we've got in place and as well as just the pipeline that we're looking at and the discussions we're having. We put all that together, and that helps us form our guidance and confidence that we have to put that together. Our goal is to always aim to give guidance that we know we can meet, and we continue to do that through these times as well. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Our next question comes from the line of Patrick Walravens with JMP Securities. -------------------------------------------------------------------------------- Patrick D. Walravens, JMP Securities LLC, Research Division - MD, Director of Technology Research & Equity Research Analyst [39] -------------------------------------------------------------------------------- And let me add my congratulations on the continued growth. All right, Jason, let's talk about cash. So you have $94 million on the balance sheet. You burned $19 million on a normalized basis. I guess the collections will be better in the back half of the year. But even so, the operating losses you're guiding to are still in the $20 million per quarter. So the bear case, which I just think we should address it is that you have 5 quarters of cash, right? I know that's not the case, but let's address it. And you haven't guided yet for next year. So what can you tell us -- where are you comfortable having that cash balance bottom? When do you expect to be free cash flow positive? When do you think you'll make these decisions? -------------------------------------------------------------------------------- Jason E. Schwartz, Similarweb Ltd. - CFO [40] -------------------------------------------------------------------------------- Great. Pat, thanks so much for the question. So you're right, we ended the quarter with just under $94 million of cash on the balance sheet. But I remind you, we also have a $75 million undrawn credit facility. And so we view ourselves as having over $160 million of liquidity and feel very comfortable with the cash and the liquidity resources that we have available for us in order to execute on our plan. That being said, one of the things that we continue to do is focus on that same disciplined execution that we've done throughout our history. I'd like to always go back to where we were pre-IPO. Pre-IPO, we took this company from being a minus $26 million cash burning company in 2018 to following year cutting that burn by more than half -- by more than 50% to $11.5 million and then in the following year to less than $5 million in Q1 2021 right before going -- becoming public, we turned into a cash generating positive free cash flow company. And then what we did as part of our execution was to accelerate that growth, used the proceeds of the IPO to drive that growth on very favorable unit economics and deliver the kind of growth and outstanding results in terms of net customer adds in terms of ARPU per customer, revenue per customer and of course, the net retention numbers driving to an over 50% revenue growth. What we're doing now is continuing to balance growth and cash flow. And we're making those decisions proactively in order to be more efficient. You're already starting to see that come through this quarter in terms of the margin improvement all across the P&L. And we think that those are the indications that hopefully, the investment community will be following to show -- to see that operating efficiency come through. And as we've guided, this is something that we've been focused on to get to that sustainable free cash flow. I'm already talking about that earlier this year when we started our -- guiding our 2022 numbers. And that we continue to be focused on that as we plan for 2023 and beyond. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this concludes the question-and-answer session. On behalf of Similarweb, that concludes this conference. You may disconnect your lines at this time. Thank you for your participation.