In 2019, the Board adopted the Semrush Holdings, Inc. 2019 Stock Option and Grant Plan (the “2019 Plan”), which provides for the grant of qualified incentive stock options and nonqualified stock options or other awards, including restricted stock unit awards, to the Company’s employees, officers, directors, advisors, and outside consultants for the purchase of up to 8,682,600 shares of the Company’s common stock. In July 2020, the 2019 Plan was amended to provide for the grant of qualified incentive stock options and nonqualified stock options or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the purchase of up to 10,163,772 shares of the Company’s common stock. Stock options generally vest over a 4-year period and expire 10 years from the date of grant. Certain options provide for accelerated vesting if there is a change in control (as defined in the 2019 Plan).

The Semrush Holdings, Inc. 2021 Stock Option and Incentive Plan was adopted by the Board on March 3, 2021 and approved by stockholders on March 15, 2021 and became effective immediately prior to the effectiveness of the Company’s registration statement in connection with its IPO. The 2021 Plan replaced the 2019 Plan as the Board determined not to make additional awards under the 2019 Plan following the pricing of the Company’s IPO. The 2021 Plan allows the compensation committee of the Board to make equity-based and cash-based incentive awards to the Company’s officers, employees, directors and other key persons (including consultants).

The Company initially reserved 13,503,001 shares of Class A common stock for the issuance of awards under the 2021 Plan. The 2021 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2022, by the lesser of 5% of the outstanding number of shares of Class A and Class B common stock on the immediately preceding December 31, or such lesser number of shares as determined by the compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. Effective January 1, 2023, the number of shares of Class A common stock reserved for the issuance of awards under the 2021 Plan was increased by 3,500,000 shares to 17,003,001 shares in accordance with the provisions of the 2021 Plan.

The Company has recorded stock-based compensation expense of $4,203 and $10,764 during the three and nine months ended September 30, 2023, respectively, and recorded $1,980 and $5,116 during the three and nine months ended September 30, 2022, respectively. The following table shows stock-based compensation expense by where the stock-based compensation expense is recorded in the Company’s unaudited condensed consolidated statement of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of revenue	$	33	$	20	$	82	$	52
Sales and marketing	822		189		2,190		599
Research and development	579		329		1,464		836
General and administrative	2,769		1,442		7,028		3,629
Total stock-based compensation	$	4,203	$	1,980	$	10,764	$	5,116

As of September 30, 2023, there was $19,446 and $664 of unrecognized compensation cost related to unvested common stock option arrangements granted under the 2021 Plan and 2019 Plan, respectively, which is expected to be recognized over a weighted-average period of 3.15 and 1.21 years, respectively. As of September 30, 2023, there was $22,147 of unrecognized compensation cost related to unvested restricted stock unit awards granted under the 2021 Plan, which is expected to be recognized over a weighted-average period of 2.90 years. For unvested performance stock units, these awards were granted with four-year vesting terms for which the probability of vesting achievement is assessed at each reporting period.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option-pricing model. As there was no public market for its common stock prior to March 25, 2021, which was the first day of trading, and as the trading history of the Company’s common stock is limited, the Company determined the expected volatility for options granted based on an analysis of reported data for a peer group of companies that issued options with substantially similar terms. The expected volatility of options granted has been determined using an average of the historical volatility measures of this peer group of companies. The expected life of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the share option. The Company has not paid, nor anticipates paying, cash dividends on its ordinary shares; therefore, the expected dividend yield is assumed to be zero.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Expected volatility	62.6	%	53.7	%	63.2	%	52.9	%
Weighted-average risk-free interest rate	4.03	%	2.65	%	3.71	%	2.52	%
Expected dividend yield	—		—		—		—
Expected life – in years	6		6		6		6


	Number of Options	Weighted-Average Exercise Price (per share)		Weighted-Average Remaining Contractual Term (in years)
Outstanding at December 31, 2022	6,865,265	$	4.82	7.68
Granted	2,568,239	9.17
Exercised	(997,964)	0.75
Forfeited	(261,364)	9.76
Outstanding at September 30, 2023	8,174,176	6.50		7.81
Options exercisable at September 30, 2023	4,278,634	3.35		6.60

The weighted-average grant-date fair value of options granted during the three and nine months ended September 30, 2023 was $6.15 and $5.58 per share, respectively. The weighted-average grant-date fair value of options granted during the three and nine months ended September 30, 2022 was $6.53 and $6.32 per share, respectively. Tax benefits of $653 and $696 were realized from options during the three and nine months ended September 30, 2023, respectively. No tax benefits were realized from options during the three and nine months ended September 30, 2022.

The aggregate intrinsic value for options exercised during the three and nine months ended September 30, 2023 was $2,521 and $7,923, respectively. The aggregate intrinsic value for options exercised during the three and nine months ended September 30, 2022 was $2,734 and $6,120, respectively.

The aggregate intrinsic value was calculated based on the positive difference, if any, between the estimated fair value of the Company’s common stock on September 30, 2023 and December 31, 2022, respectively, or the date of exercise, as appropriate, and the exercise price of the underlying options.

During the three and nine months ended September 30, 2023, the Company granted to employees RSUs for 68,463 and 1,908,880 shares of Class A common stock under the 2021 Plan, respectively. During the three and nine months ended September 30, 2022, the Company granted to employees RSUs for 55,729 and 1,045,658 shares of Class A common stock under the 2021 Plan, respectively. During the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense related to the RSUs of $2,461 and $5,702, respectively. During the three and nine months ended September 30, 2022, the Company recorded stock-based compensation expense related to the RSUs of $934 and $2,125, respectively.


	Number of Shares	Weighted-Average Grant Date Fair Value		Aggregate Fair Value
Unvested balance at January 1, 2023	1,269,743	$	11.97	$	15,194
Granted	1,908,880	8.83		16,855
Vested	(410,646)	12.03		4,940
Forfeited	(133,599)	13.14		1,755
Unvested balance as of September 30, 2023	2,634,378	$	9.83	$	25,896

During the three and nine months ended September 30, 2023, the Company did not grant employees PSUs. During the three and nine months ended September 30, 2023, an insignificant amount of expense has been recognized in connection with PSU awards. During the nine months ended September 30, 2022, the Company granted to employees PSUs for 1,395,596 shares of Class A common stock under the 2021 Plan. The Company did not grant PSU awards during the three months ended September 30, 2022. During the three and nine months ended September 30, 2022, $32 and $172 of expense was recognized in connection with PSU awards, respectively.


	Number of Shares	Weighted-Average Grant Date Fair Value		Aggregate Fair Value
Unvested balance at January 1, 2023	1,283,620	$	11.22	$	14,402
Granted	—	—		—
Vested	(5,226)	10.05		53
Forfeited	(200,668)	11.96		2,400
Unvested balance at September 30, 2023	1,077,726	$	11.61	$	12,512

The Semrush Holdings, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board on March 3, 2021 and approved by stockholders on March 15, 2021 and became effective immediately prior to the effectiveness of the Company’s registration statement in connection with its IPO. The ESPP initially reserves and authorizes the issuance of up to a total of 3,000,667 shares of Class A common stock to participating employees. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022 and each January 1 thereafter through January 1, 2031, by the least of (i) 1% of the outstanding number of shares

of Class A and Class B common stock on the immediately preceding December 31; (ii) 3,000,667 shares or (iii) such lesser number of shares of Class A common stock as determined by the ESPP administrator. The number of shares reserved under the ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization.

The first service period of the ESPP began on September 1, 2021, the second service period of the ESPP began on March 1, 2022, and the third service period of the ESPP began on September 1, 2022. The Company recognized $33 in stock-based compensation expense related to these service periods for the nine months ended September 30, 2023. The Company recognized $44 and $166 in stock-based compensation expense related to these service periods for the three and nine months ended September 30, 2022, respectively. On February 28, 2023, the Company issued 38,879 shares of its Class A common stock to its employees under its ESPP for the service period then ended. The ESPP program was discontinued after the last purchase on February 28, 2023. The Company did not recognize any stock-based compensation expense related to these service periods for the three months ended September 30, 2023.