What Semrush's ($SEMR) 4Q23 Teaches Public Company Executives
- stevenrubis
- Mar 6, 2024
- 2 min read
Capital Markets / Investor Relations in Two Minutes or Less
What Semrush’s ($SEMR) 4Q23 Teaches Public Company Executives
Most management teams probably believe that their stock is undervalued.
Many believe that being undervalued is enough for investors to take a position in their underlying stock.
Public Company Executives need to be mindful that a stock can remain statistically cheap forever.
If management teams truly understood this syllogism, then I would not be unemployed!!!!!
Attracting long-term investors comes down to several components:
1. Credibility
2. Catalysts
3. Story Telling
4. Financial Expectations Management
A former Big 4 Auditor or Corporate FP&A type CFO often times cannot deliver on these four requirements to make a stock work.
These four components have nothing to do with having a CPA or FP&A credential.
A company’s stock does not increase because the finance team creates the best journal entries in the land.
A company’s stock price does not increase because the finance team loaded the best long-term forecast into Anaplan!
Why does it typically fall apart for a company?
Poor expectations management.
Accountants and Corporate Finance professionals without Investing experience typically lack:
1. Appreciation of How Important Financial Expectations Are to Valuation
2. Ability to Manage Financial Expectations
Good guidance requires understanding external variables plus internal forecasts and marrying the two to set achievable expectations in real time.
Truly an art!
Current Example Semrush’s 4Q23 Earnings
The company had a SaaS-plotion.
The FY23 results were great:
Revenue: +21% Y/Y; ARR +23% Y/Y; Free Active Customers +30% Y/Y; Paying Customers +12.5% Y/Y; NRR 107%.
Everything fell apart with the outlook:
First quarter revenue about 1.5% below the Consensus midpoint
FY24 revenue about 1% below the Consensus midpoint
The underlying stock is down 20% since earnings!!
Yesterday it was Snowflake, today it is Semrush, tomorrow it will be some other company.
Management teams need to stop overlooking the immense value of an accomplished and well-respected Investor Relations Officer.
The most valuable Investor Relations Officers deliver on the four soft skills of finance outlined above.
Combine these skills with a CFO that can execute on the numbers and a company is in business.
Accountant / FP&A CFO + Accomplished IRO = Lots of Shareholder Value!!!!
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