Q1 2020 Earnings Call
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I'd now like to hand to conference over to your speaker today to Jason WRECO head of Investor Relations. Thank you. Please go ahead Sir.
Thank you operator, and welcome to Sprouts Socials first quarter 2020 earnings conference call.
Like all of our employees and many of you were working from home. This afternoon.
We will be discussing the results announced in our press release issued after market close today.
With me here Sprouts, social CEO, Justin Howard CFO, Joe del Prado, and senior Vice President of Global sales Ryan Beretta.
Please note that we will be providing more transparency into our business that normal today in an effort to help our investors and analysts that are understand how our business is performing through this period of economic volatility.
You should not expect us to continue at this level of granularity into future and such disclosures should be considered as onetime in nature.
Today's call will contain forward looking statement, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Forward looking statements include statements concerning financial and business trends.
Our expected future business and financial performance and financial condition.
Our guidance for the second quarter 2020, and the full year 2020.
And can be identified by words, such as I expect anticipate intend plan believe C Corps well.
These statements reflect our views as of today only should not be relied upon as representing our views that any subsequent date and we do not undertake any duty to update these statements.
Forward looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially for discussion of the risks and other important factors that could affect our actual results, including potential disruption from Cogent 19. Please refer to our annual report on form 10-K filed with the Securities and exchange.
In addition, our quarterly report 10-Q, two the filed with the FCC and our other periodic filings with the FCC.
During the call. We will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principle reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in our earnings press release, which has been furnished to the FCC and is also available on our website.
Got investors Dot sprouts, social dot com.
With that let me turn the call over to Jonathan Justin.
Thank you, Jason and good afternoon, everyone. Thank you for joining us today.
The World has certainly changed since last time, we were together and we hope that you and your families are healthy and finding ways to make the best of this difficult situation.
Sprout, our first priority is the well being of our people our families our communities in our customers.
To that end, we began implementing precautions in February and move fully to work from home across the company in early March.
We're fortunate to have no reported cases of cold within the crowd organization and we'll continue to employ policies that not only keep watching state, but also reflect our commitment to the well being of those around us.
I'm grateful that we have a team customer base and business model that have allowed us to respond quickly to this crisis and adapt with minimal disruption as things up quickly a ball.
Well share a lot of detailed today around the impact and trends, we're seeing within our business and how the rest of the year may unfold for sprout, but in short our diverse customer base agile team strong culture and high volume business model have allowed us to deliver a strong first quarter with healthy guidance into Q2, and an abundance of data to make thoughtful.
Decisions as the crisis continues to evolve.
We're also seeing some really interesting trends emerge around the acceleration of digital adoption by Brad's with an increased reliance on social as a primary communication channel and many behavioral changes that we expect are likely to become permanent post coated.
As we'll discuss there were certainly challenges in March and April and something that will remain to some degree for the foreseeable future.
Many of our key operating metrics Soc compression for a two to three week period beginning in mid March.
So many have recovered are trending that way in a more recent weeks.
We attribute this to a few things.
First sprout has a very diverse customer base across segments and verticals with balanced exposure by market segment. In industries. This has helped minimize the impact of the crisis on our business.
Next we were able to transition to work from home quickly getting back to virtually full operational capacity within about a week.
The majority of our new business implementation and account management has always been done virtually so the adjustments to our customer facing activities were minimal.
We also benefit from a high volume in bound funnel and rapid sales cycles that give us granular visibility into key metrics at a daily level.
This has helped us quickly adapt and apply resources, where they're most impactful.
Lastly, the increased importance of social both as a communication channel and then I'll alternative to advertising had led to strong engagement across industries.
Even something you would expect to be retreating.
In fact, we closed our largest ever new business contract at the end of February and one of our largest expansion deals in April and the travel industry.
Well, we have lots to be encouraged by and we continue to invest in the growth of our business. We also believe it is important to address both the gravity of the global situation and the uncertainty that were made for some time.
We are operating from a conservative position and we'll lean back into an aggressive posture as we see indicators that are twice to do so.
Fortunately as I mentioned, we operate with high visibility of our key metrics. So we feel well equipped to adjust our posture quickly as needed.
If we continue to execute on our strategy, we believe will be positioned to capture disproportionate market share and accelerate out of this turn.
This visibility has also allowed us to be responsive to our customers and their evolving needs. During this crisis.
[noise] understanding which of our customers have been most impacted has allowed us to devote resources to their wellbeing of success.
To develop joint efforts with our network partners for Cobot relief facilitate pure discussions among our customers and develop resources to help them navigate the situation.
Internally. This visibility has allowed us to quickly ship resources to react to customers and verticals, where we've seen demand increase.
Particularly in the enterprise segment, where we see increased engagement and our competitive advantages have become increasingly compelling as customers grow averse to long sales cycles expensive and lengthy implementations and services heavy platforms.
While this is an incredibly difficult time globally, we feel fortunate to have a team that has adapted well the ability to adjust quickly and the flexibility to keep our teams healthy and be there for our customers.
Now I'll spend a few minutes going over our first quarter performance as well as provide some color on how we're thinking about Q2 in the rest of the year.
We had an excellent first quarter with strong momentum across the entire business. Our total revenue for the first quarter was up 31% year over year to 30.5 million inorganic revenue grew 41% year over year.
We exited Q1 with an EMR of 124.6 million up 30% year over year and organic there are of a 123.1 million was up 39% year over year.
As a quick reminder, organic revenue inorganic air our exclude revenue from the 2017 acquisition of simply measured.
Inorganic revenue now accounts for 99% of our total.
We saw acceleration in our performance relative to Q4 across virtually every metric the investments, we're making strong demand and increased efficiencies led to remarkable performance across the board despite heavy headwinds in March.
We also introduced dozens of new product capabilities for customers in Q1 and were recognized by GE to and Trustradius and their annual software awards, winning a nine separate categories, including the top product best software company and highest customer satisfaction.
This is especially rewarding for us because this recognition is based on thousands of customer reviews.
Looking forward to Q2, we expect another relatively strong quarter is Joe will share in more detail shortly.
As we think about guidance for Q2 in the rest of the year. We wanted to provide some additional transparency and how we're modeling projections to help you with your own assumptions.
As I mentioned, we saw this thing compression and many of our key metrics beginning in mid March.
New business demand in churn all fell below our typical range would turn specifically dropping below one standard deviation from our norms measured against the 90 day period pre cobot.
Fortunately, we've seen those metrics return within expected ranges with some exceeding prior ranges on the demand side beginning a week of April six.
Some volatility remains but we have good visibility and remain optimistic that we took the brunt of the impact during that three week period.
We would expect those declines to flow through our typical sales cycle of 35 to 45 days with the bulk of new business impact seen in April and May.
More specifically, we saw demand in the form of trials and demo requests which are a primary sources a pipeline fall below our normal ranges from March 16th to March 26.
Beginning in the week of April six demand recovered and it's been above pre covert ranges each week sense.
While it's harder to quantify the quality of demand. During this period at this time, we feel good about the recovery and customer interest.
Contraction, which is a combination of gross churn and downgrades fell below our norms for March 23 to April six.
Beginning of the week of April six those levels came back within our normal ranges for the remainder of April.
Expansions boss slightly longer compression, but has remained within our 90 day pre Colgate norm ranges in the month of April with a steady recovery trend.
And finally, new business has remained within our pre coded ranges throughout this period with the exception of the week of April six where it fell below those levels briefly.
What we're seeing positive indicators in the data we feel it's appropriate to remain prudent with our guidance because there's so many unknowns related to covert.
Including the speed of economic recovery stimulus delivery prolong business disruption or future waves of the virus.
The low end of our guidance assumes that we see no improvement to our business relative to what we saw in March and April for the remainder of the year.
The midpoint in high end of our range reflect marginal improvements to the business consistent with the trends we've seen during April variation based on how quickly those trends stabilize.
Before I pass the cost to Ryan I want to wrap up by saying I'm extremely proud of our team our ability to adapt and execution, we've seen over the past few months.
Our platform has been is critical as ever for our customers. During this time and we expect this expanded reliance on social channels to continue postcode it.
We've seen our efficiency remained steady through this transition and continue to deliver value in new capabilities to our customers at our usual rapid pace.
We believe our focus on world class products, and our deep commitment to our people and our customers keep us well positioned to capture market share and this large expanding and increasingly important category.
And with that I'd now like to turn the call over to our senior Vice President of Global sales, Ryan Barretto, who will walk you through some of our customer success stories from this quarter.
Thanks, Justin and thanks, again to everyone for joining us.
I've been really proud to see how our team has responded in this environment.
We've led with empathy and in the process of many of the scrap values on display.
I'd like to think a few minutes discuss some of our key customer wins this quarter and share some of the exciting ways our customers are leveraging the platform.
Value proposition is resonating and we're really excited by what we see yet.
It's clear that we're living in challenging times and social has become an even more important part of the way we communicate.
We're seeing the thinner data.
In the last four weeks, our traffic was up 24% and our trials were up 14% in comparison to our Q1 pretty Tobin baseline.
Every business is being impacted in some way and is now getting a crash course and digital first communication.
Our customers are doing amazing things with the platform and we've been fortunate to being a central partner for them.
It's been remarkable how our marketing sales and customer success organizations from leaders to individual contributors have responded to this crisis.
As Justin mentioned the transition of work from home was more seamless and we could've predicted we're seeing impressive things from our teams. This is included building a crisis communication playbook for social media managers.
Creating a cobot 19, social listening report, which we gave to every listening customer at no extra charge.
During our daily sales activity metrics historic levels, both in terms of speed and volume.
And we are hosting our largest ever digital event on May 13, it's over 5000 practitioners registered and brands like track Twitter TV to into cloud joining us to co present.
In this market customers are looking for partners that can respond faster with solutions that cannot immediate value.
The 30 day free trial continues to be or secret weapon, even in the enterprise.
The legacy software playbook that required onsite custom demos long evaluations and even longer and expensive deployments has become antiquated.
We're in the age of the user and companies expect to be able to not just see but to use the technology before they invest and that's where we mean it.
Our free trial model has been highly disruptive enabling customers to implement spoke before they even see one of our competitors demos.
The Ohio State University, Hobspot Girl Enterprises, Harrods Blue Nile Altera Mountain Kendra, Scott, Boston Scientific and Adam and we're just a few of the incredible brands that invested in spreads this past quarter.
Ohio State ran a very competitive RFP with the goal selecting one provider for all of their schools departments and hundreds of social media accounts.
The deployment of this size they were laser focused on finding a partner that can deliver the usability security and functionality as required by all of their stakeholders and most importantly, how to track record of implementing quickly and successfully.
The sound, all that and sprout and I'm pleased to say that they already started rolling out to their schools.
Another great story came from one of the largest and oldest retailers in North America. During a time like this connecting with their customers on digital whats Paramount there are struggling with the usability and reporting of their previous enterprise software vendor and we're looking for an all in one solution with better user adoption and reliable support.
Thanks to our trial models broke up this retailer up and running during their evaluation, giving them the confidence they needed to sunset the legacy vendor.
We're also seeing customers use social and creative and resourceful ways to continue driving their businesses Ford.
One of my favorite stories with learning more about how trek bikes are leveraging spiro.
Shelter in place. Many parents have found themselves looking for new ways to keep kids busy and off of their devices I know this very well.
In response to this demand truck is using spread to market their free home delivery service and to engage and measure their campaign efforts.
Every business needs to be faster to create and respond to demand and track is a perfect example brand that is doing as well.
Another great stories from Mount Sinai Health systems in New York, and Amazing organization and one that is truly on the front lines.
Mount Sinai has been leveraging the spread platform to tap into social web conversations analyze pass content performance and plant feature content across the major networks.
Our content has included touching stories about their staff and sharing appreciation for the NYSE businesses supporting them.
In turn this content has been re shared by celebrities like Jonah Hill and Ellen.
It's an incredible example of the amplifying power social media.
In summary, it's been a rewarding time to be leading at sprouts.
Our people have listened to the challenge and our operating at new levels and most importantly, the taking fantastic care of our customers.
Our virtual standup.
Scavenger Hunt and spreads on version of MTV, Chris has served to bring our people closer than ever.
This culture extends to our customers who feel the overwhelming daily support and know that we've put them first.
I look forward to being able to share more these stories with all of you in the future and with that I'll turn it over to Joe's to run through the financials Joe.
Thanks, Ryan I'll walk you through our first quarter results in detail well moving into guidance for the second quarter and full year 2020.
We're pleased with this quarter strong results adjusted noted total revenue for the first quarter was 30.5 million, representing 31% year over year growth.
Excluding the impact from legacy simply measured products, our organic revenue was up 41% year over year.
This growth was driven by increased demand from both new and existing customers and strong sales execution.
We've maintained a strong financial profile, hi, Mark 99% recurring subscription revenue.
Total a are exiting Q1 was 124.6 million a 30% year over year.
Organic air with 123.1 million, 39% year over year.
319, net new customers in Q1 to finished the quarter with 24083 customers.
A number of customers contributing more than 10000 air our weeks 2404, 58% from year ago and up from 2185 in Q4 2019.
Can you didn't add value to existing customers inland increasingly large initial deal side with newer customers as we focus on high quality customer lead generation.
And it's got the remainder of the income statement. Please note that unless otherwise noted all references to our expenses operating results and share count on a non-GAAP basis I reconcile to our GAAP results in earnings press release that was just issued before the call.
In Q1 gross profit was 22.6 million, representing a gross margin of 74%.
Margin of 75% year ago, and 72.5% last quarter.
Turning now to operating expense.
As Justin touched on we have granular daily visibility into our key meant to inform our investment decisions. Both through this crisis in over the long term.
With very short sale cycles, we feel well equipped to adjust our posture quickly and as needed.
Sales and marketing expenses per Q1, or 13.4 million of 44% of ramp down from 45% a year ago.
We made significant investments in sales and marketing throughout 2019 folks and expanding our market reach we expect to continue to make smart investment folks and optimizing our sales and marketing spend.
We finished our Q in hiring on track with our expectation will continue to look for opportunities to invest through the lens of the current visibility into our business environment.
Our teams are adapting to remote onboarding and we feel fortunate that we are in the financial and business position to take advantage of hiring amazing people through this period of time.
Research and development expenses for Q1 was 6.8 million or 22% of revenue down from 27% a year ago.
We able to drive leverage in this area due to our approach to building software interesting okay.
Well continue to expand our offering and adding new capabilities for our customers.
General and administrative expense for Q1, or 9.8 million or 32% of revenue up from 26% a year ago.
This growth was primarily a function of public company expenses, which we did not have in Q1 2019 and expansion of our annual corporate training.
We expect general administrative expenses decreased as a percentage of revenue as a can you just scale operations overtime.
Non-GAAP operating loss for Q1 was 7.1 million for negative 24% operating margin.
This compares with negative 23% operating margin a year ago.
We did however, outperformed our expectations due to high incremental leverage from revenue outperform.
Non-GAAP net loss for Q1 was 6.96 million or net loss at 14 cents per share compared to a net loss of 5.2 million a year ago.
Turning to the balance sheet and cash flow statement. We ended Q1 with a 137.4 million in cash and cash equivalents up 135.3 million and end up 2090.
During Q1, we executed the Greenshoe following our December IPO.
Having a net cash flow proceeds of 10 point onemillion.
Deferred revenue it ended the quarter was 34.1 million.
Looking at both our billed and Unbilled contracts are many performance obligations. Our appeal total approximately 47.5 million up from 42.1 million as being point 90.
We expect to recognize approximately 88% or 41.8 million of total our appeal as revenue over the next 12 months.
Operating cash from Q1 was negative 4.9 million compared to negative 3.9 billion a year ago.
Pre cancer was a negative 4.8 million in Q1 for negative 16% free cash flow margin compared to negative 4.1 million and a negative 17% pretty careful margin a year ago.
Moving on to guidance.
For the thing quarter of fiscal 2020, we expect total revenue in the range of 31.1 million to 31.2 million or growth rate of roughly 26%.
We expect our organic growth rate to be mid to high single digit percentage points faster and our total reported growth rate.
We expect non-GAAP operating loss in a range of 8 million to 7 million.
As Justin discussed, we're continuing to invest in our products in our people in support of our long term growth.
In certain segments, we see opportunity increasingly leverage our competitive advantage.
But to be clear, they're tracking your business on a daily basis to ensure we are optimizing our pace overall invest.
Historically, our free cash flow margins have been a couple hundred basis points better than where you are.
We are building relationships for a long term or working with customers that have been adversely impacted by this crisis and flexible billing and payment term.
As a result, we would expect Q2 free cash flow margin to be roughly similar to <unk> operating margin.
To the extent the crisis persistence dynamic could persist into Q3.
We expect non-GAAP net loss per share between 15 cents in 14 cents, assuming approximately 50.5 million shares.
For the full year fiscal 2020, we expect total revenue in a range of 125.5 million to 130 point by doing.
This compares with our pre Cobrand guidance range of 131.7 million to 133.7.
At the midpoint. This is an expected overall reported growth rate of 25%.
We continue anticipate that organic revenue growth rate will be higher than reported revenue growth rate by mid to high single digit.
Implying a 2020 organic growth rate of greater than 30%.
We believe this forecast captures many unknowns, including the prevailing environment, which is adversely impacting many of our customers potential for future disruption from the virus and Sun, Pat a broader economic recovery.
As Justin reference we have seen many business indicator stabilize through the course of April.
The low end about 23 guidance range assumes that we see no improvement to our business relative to what we saw in March and April for the remainder of the year.
The midpoint in high end of our range reflect marginal improvements for business consistent with the trends we've seen during April variation based and how quickly those trends materialize.
For 2020, we expect non-GAAP operating loss in the range of 28.3 million to 25.3 million compared with our Prequaled range of 29.3 million 25.3.
We expect a non-GAAP net loss per share of between 55 cents and 50 cents compared with prior range at 57 cents and 50 cents, assuming approximately 50.6 million shares.
In summary in as Justin Ryan discuss the durability of our mission critical platform is resonating global customers accelerate their transition to digital first businesses.
The opportunity to help customers manage the increasingly relevant social channel continues to present compelling opportunities for sustainable growth.
Strong balance sheet and prudently manage cash flow gives a high degree of cabinet to continue to make balance and high ROI investments that will enable us to capitalize on a potential in the years ahead.
Well that Justin Ryan I'm happy to take any of your question operator.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone.
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Please standby, while we compiled acumen a roster.
I show our first question comes from Stan Zlotsky from Morgan Stanley. Please go ahead.
<unk>.
Perfect. Thank you so much guys and I'm glad to hear that.
Everybody on the call is doing well and the company is also doing well as far as not health and safety.
First question from my end.
What gives you confidence to provide guidance and your wide provide guidance for full year revenue considering if somebody other companies have pulled guidance. What do you. What are you seeing out there that's really giving you that that confidence and have a quick follow.
Yes. This is a dozen thinks dental all.
Address that and.
Certainly if my team has anything to add but.
And when we thought about what the remainder of the year looks like for a somewhat cute it looks like for US a lot of that confidence came from as we mentioned in her remarks, our ability to look at very detailed and granular data could business. So no given the the.
Dozens of trials that were adding to the top of the funnel in any given month, the tens of thousands of renewals and transactions that were doing.
Gave us a lot of insight into how those metrics were trending which periods of time they were impacted for in the degree of recovery I think while certainly theres a lot of unknown still the remain.
For the rest of the year.
D. assumptions that were making and where we felt good about putting the baseline of the guidance was around.
The.
End of extrapolating out the worst of what we've seen in March and April.
Which is counter to the trends that we've seen more recently, which is our much healthier.
And that that gave us the confidence that we needed at least.
To put a stake in the ground at the low into the guidance.
While we gather more data on how quickly or.
How much those trends that we've seen improve in the last several weeks what the level of stability is around those and so.
Part of this is the high volume kind of low lower HCV nature of our business.
Where we've just got a lot of predictability, we've got 99% recurring revenue.
Subscription revenue.
Low services, we've been virtual for a long time, and we've got that level of detail on our data.
On top of US 35 to 45 day average sales cycle has allowed us to see how a lot of this impact plays out.
In the time that the we've kind of been in a situation. So we felt like.
We've got strong visibility into at least the band that we provided.
Where it falls within that is we're going to look to data to to clarify that.
For ourselves, but the guidance that we gave its something that we're really competent in because of the reasons that I mentioned.
Perfect and he got looked at that certainly makes a lot of sense and.
Yeah, I certainly applaud you for for putting out that guidance to really helps at levels that the investors' expectations.
Considering the the confidence and you have any data.
Maybe just a very qualitative question in as much as you're starting just you started to see improvements in April what are you seeing specifically around brand new business activity you know route in April.
What's really bringing customers to pull the trigger on buying hub the buying sprout social software in the current environment and why do it now rather than you'd be so easy to say hey, let's kick the can down the road six months and figure it out later.
Okay. That's it for me thank you.
Thanks, Dan This is Ryan I happened to jump in and answer that.
I think it's really to both in terms of what we're seeing in terms of our customer base. One we've got this advantage where as Justin mentioned before highly data driven we're seeing good traffic in email trials in.
It seems that those customers are either hey, if needed to really start to prioritize social more than they were before and they need a platform today, because digital and specifically socialist become the most important channel to market to communicate to support their customers. So it's one of those things where they just need.
Get there and do today and they weren't doing it effectively before or they were on a platform that wasn't working really well.
Those customers. These challenges could certainly be amplified at this time right you've got more traffic coming in through social channels, you've got more money to engage in if the platform the half right now isn't easy to use.
You're not getting the data that you need from the analytics, where all of that platform that will cause you to raise your hand and seek help.
The secondary point for US there is that with our free trial model, we're able to get all these customers, including the enterprise customers into the trial actually using the platform. So they are proving for themselves that it's going to work exactly the way they needed to on a go for and so that's certainly being a big helping hand for us engaging customer.
Or is it in getting them through the buying process.
Perfect Thats very helpful. Thank you guys.
Thank you.
Our next question comes from Chris Merwin from Goldman Sachs. Please go ahead.
Hi, This is Kevin on for Chris Thanks for taking my question.
Yeah, maybe can you can you talk about adoption trends for some of your add on products like listening premium analytics and reputation and maybe what you're seeing across Midmarket and enterprise and <unk>.
If you've seen kind of a recovery in in adoption trends in recent weeks.
Yes. Thanks, Tim This is Ryan happened to jump in there.
Most of those products, but the listening Indiana mixed products are are performing really well I'm listening as grew nicely in Q1 and in fact premium analytics. This point is tracking ahead of listening from an air perspective. After a similar period of time in the market value proposition is definitely resonating.
And we're feeling really good about the ROI that both products and providing the customers.
Part of this is just we know that people are engaging on social media in a very different ways changing in terms of the engagement that they have and the types of messaging that is resonating with them and having access to the social data through listening and analytics is providing these brand customers with the critical insights that can help them shake their content their promotions.
Additive positioning and even their product development and again this rich information from both our analytics and listing product in a way that they can take action. So that's that's definitely been resonating in the marketplace not final thing I'd just say there is.
Both of these products need to live along side of the rest of your core platform and that's what they get sprout, they get the listening and analytics alongside of the publishing and engagement and that's a pretty big differentiator for us. So it's really good progress within Q1, and continuing to see a lot of value from those products.
Great. Thank you.
Thank you.
Our next question comes from Tom Roderick from Stifel. Please go ahead.
[noise] adjusting my generally Ryan grade to a great to hear from you guys and great to hear that everyone's doing well.
I guess I'd love to hear something anecdotally, a little bit more about this is the small it sounded like a pretty large travel deal that was signed in April maybe you can provide some anecdotes behind the customers urgency and getting that done, but particularly in light of their end industry can you just share some dynamics about sort of what push them over the edge and.
How real time, they're looking to engage the social channel in a world, which they may not be able to touch.
Their customers in a you know in a traditional manner.
Yeah, Hey, Tom This is Ryan happening jump in.
That is a great example, adjusting alluded to previously in his script as well we've seen it and travel we've seen it restaurant, we've seen in hospitality and lot of these organizations, which you would think are not spending not investing in this area absolutely our because they still have a need to ensure that they're engaging their communities in there.
For base and now more than ever right. They are going to get out of this on the other side and thriving in that smart.
They lean into digital channels, specifically in social and so does this organization that Justin alluded to a perfect example for right now that is needing to stay closer to their customer base. There as you might imagine from a customer care perspective have an influx of customers reaching out to them to talk about things like credits and Rebooking.
And so just generally I understand where their businesses and how would be supporting customers in the future would travel will look like in the future and then on top of that from a just a marketing perspective as well, it's really important even while these brands can't necessarily have as many customers or any customers traveling right now that the ability to stay in touch with that.
And keep that brand front and center within that consumers mine is critical so certainly not marketing trust always sina and in some of the other ones that a pilot as well because at the same dynamics behind them.
Outstanding that's that's really helpful.
Just in this one might be for you, but I'll, let any view handle it I want to take it but it's certainly sounded like you were kind of ahead of the curve and moving your employee base to work from home environment than I think the low touch model. Historically, it's something you were already adapt win so I guess now that we're starting to say hey.
Things are turning back up a little bit how soon to get there the question Mark right, but as you think about.
Turning the world back on and trying to get employees back into the office can you share with us some of your thoughts about how and when you'd like to see that happened. Then is there any urgency given that you seem pretty comfortable with the sort of low touch sales model in the a in the manner in which you're employees are working virtually quite well.
Yeah, I'm happy to happy to speak to that I think theres a lot of conversation as you can imagine going on around what.
You know return to normalcy looks like I think you know the key things for US we were early adopters in the sense of we moved to work from home pretty quickly.
Relative to most organizations and I would say that.
You would expect us or you can expect us to be a late adopter in terms of going back.
We certainly want to make our office is available to.
Those who.
Our struggling to work remotely either due to a living conditions or child care or whatever it might be that's going to be a different situation for everyone and we want to make sure that that's possible when needed when it safe and when it's feasible to do so but to your point.
We're seeing productivity across the organization.
As higher higher in some cases than it's ever been and that gives us a lot of flexibility and making sure that were being really thoughtful about what that return it looks like.
That we don't have the pressure are our sales cycle, our customer support our secure our success even our deployments.
I have been remote all these.
So, it's not something where we need to be trying to balance between the healthy safety of the team and our families versus the productivity the organization because the productivity is there and it's.
Then an outstanding and something that we're really proud of so.
Gonna be thoughtful we're not in a hurry as you said and we're going to be really making sure that we're prioritizing the team in the families. As we think about what that looks like.
Outstanding. Thank you congratulations on getting everything done from a far and looking forward see again, a person sometime soon take care.
Oh.
Thank you stop.
Thank you I'm next question comes from our June Buck share from William Blair. Please go ahead.
Hi, guys. Thanks for taking my question, then hope you're all doing well first thing first one's probably for Ryan I know, we talked about kind of though the flexibility in the go to market motion and how you can adapt based on the data it's coming in.
Before the for the pandemic kind of hit I know, you know spread socialist kind of pivoting a little bit to focus more on expansions and a little bit more on larger customers would just be curious to hear how that trend is changing whether it's accelerating or you're focusing more on more on high volume transactions.
Now.
Could you maybe just walk us through those dynamics here in this in the current or Myrisk Aero now.
Yeah, androgen happy that to jump in and covered whether those things.
Both expansion and the enterprise segment continued to be areas of strength for us and areas of focus from an expansion standpoint.
Justin.
Discuss a little bit in the scrip, we've seen healthy growth from our customer base since being aligned with what we would expect from from our customers and Didnt face. The same level compression that you you might see in other areas within NDR. So that motion for us continues to to be a strong one I certainly.
Tied to the success of products like listening in analytics that are adding a ton of value to customers today. So on the expansion side feeling very strongly there on top of that on the enterprise side seeing some opportunities for acceleration in the opportunity to to grow our market share.
The challenge is highlighted in the past was that the long deployments expensive deployments challenging adoption due to user interface and and difficulties within implementations is becoming a pretty big challenge for a lot of enterprise companies in certainly at this time when so it feels more important than ever they.
Need to be able to deliver within that channel and so in leading with those trials that we arm getting these enterprise customers in the platform. They are able to start publishing through there they're engaging with their customers. They are using our analytics and proven to themselves hallmarks. So we've seen really nice progress from enterprise team.
As we ended Q1 and going into Q2 with these these account where they they need access to sprout and we have the ability to get them up and running really quickly, which removes a lot of the the burden of making a change, especially when you've implemented a good portion of sprout within the trial.
Got it thanks.
Justin I'll add something quickly there.
Oh, Yeah, sorry, if you don't mind I'll, just add add a couple of things I think.
One of the other benefits of.
Not only the team, but the agility that we have in our model is that.
We've been able to realign resources internally to kind of match, what we're seeing in the market.
And that's true both my customer success perspective, where we're able to align resources around those that may be struggling more.
More than others and make sure that they have to help that they need but also on the new business side and the growth side, where we're able to realign.
The team and the folks on our team around the areas, where we're seeing the most demand I think to that extent.
Being able to pick up on these signals that we've seen from the enterprise and even the midmarket.
And align resources around what we think is a use a heightened opportunity in that space.
May.
Act or or has acted certainly in a catalyst for how we're thinking about resources internally.
But may also act as an accelerator to the to the point that you mentioned I think we're still seeing success across all markets. They're all incredible all of our segments are incredibly important to us, but when a shift like this happens.
Our ability to react to that use the data to say hey, this is where we need to be pointing our people in our time.
Whether it's it's to support them or because that's where the demand is I.
I think it's been really really valuable for us.
Perfect and then a quick follow up if I can on that on listening, specifically or any kind of like the.
You mentioned that the current demand environment is still strong, but if I think about the pipeline.
I know these deals are generally taking longer than you kind of the core product and it's a little bit more of them involved sale are you seeing customers when they talk about maybe deploying this now we're in the future that they're saying, maybe I want to pause a put a pause on deploying listening or are those deals progressing as as you would use.
Can we expect despite kind of the macro uncertainty that's there in the environment.
Yes, good question.
Midmarket and enterprise space, we're still seeing good acceleration on those listening deals.
The majority of time they are acquiring those products with the rest is a core platform. They see it as part and parcel the entire solution, but they need in what we're certainly leading with that as the main value prop and that unified platform.
In the SMB market in the agency market, where they may not be it's very familiar with listening and that may not be the reason that they showed up within our pipeline. Those deals are certainly harder to close within our environment today, they're looking for the bare essentials I guess I see those is good seeding grow opportunities, but those those have had more challenge.
Compared to the Midmarket enterprise.
Great. Thanks for taking my questions and congrats on a good quarter.
Thank you.
[noise] speculate on next question comes from David Hynes from Canaccord. Please.
Please go ahead.
Hey, Thanks, guys. So one for Ryan it may be too early to asses, but I'm going to try anyway I'd like to here thinking so.
We're 30 days past the April six recovery rig, which I guess puts you kinda about the low end of a typical sales cycles. So.
I'm curious what you're seeing in terms of conversion on demos and trials right I think theres. This decrease okay, that's probably never been easier to get a prospect on the phone or signed up for a dumber trial.
So I'm just curious kind of what are there any data points that give you confidence that.
Conversion rates on all the activity that you've seen snapped back could actually looked like normal.
Yes, Thanks, David happen to jump in there we.
I think we still have a few more weeks together to get the full picture of what the trough look like from from kind of it but when they will tell you is we are seeing really good success and the engagement from our team today, certainly taking more activity than it did before to get customers to the same point.
But there in the trial, we're seeing good progress in the way that they are using the platform.
We're seeing good progress in the amount of demos that we've been having across the board and in every segment.
And seeing good deals closing along the way as well, we're paying very close attention on a daily basis to things like that can conversion rate and what we call the revenue per subscriber.
Just a number of subscription that are getting done within the within a market. Just so that we know how these are comparing to our baselines.
Good progress there just in terms of the amount of engagement with customers and just given the number of deals that were getting done at this point and deals with with those premium add ons.
Yes, Okay. That's helpful color I know it was a headwind to answer since were relatively early estimates.
And then maybe one for Justin a joke.
I see me answer to this is no based on what you you've said, but any anything you're seeing that changes you're thinking in terms of timeline to profitability for the business.
Yep from my perspective, and Joe Please chime in but my perspective is that there's some counterbalancing things that are happening in the business as you can see both from month to.
The performance as well as our projections.
I think the net impact is that we're not thinking about that timeline to profitability differently at this point.
Yeah Okay.
Very good that's helpful guys. Thanks very much.
Thank you. Thank you.
As a reminder to ask a question you would need to press star one on your telephone to which are your question press the pound key.
Our next question comes from Alex Curt from Keybanc capital markets. Please go ahead.
Yes. Thanks send out did you hear that everyone thought safe and healthy at sprouts.
Just a clarification for go then kind of a more of a demand question for the rest of the team.
Where DNA sit trend I think you may have mentioned kind of the linearity in DNA. So if you could go back to that I appreciate it.
And then for the broader question you guys had to a blog posts a week or two ago that kind of outlined kind of demand trends by vertical.
And maybe using that as reference point.
Talk about maybe where you're seeing some some challenges and where you're seeing some upside and then also strike that across like SMB versus like larger accounts.
The two quick questions here.
Yeah.
I'll take the DNA question first out sort of DNA side to the quarter. Despite you saw was for a couple of reasons. One was the is our first quarter of public company expenses that we didnt happen in Q1 of 19, and then our increase in our annual kind of training.
In the quarter, but did you look out the way I can look as if you. If you can expect that the fall back down into the low to mid 20, 20% range of revenue on a go forward basis.
Got it.
And maybe a quick clarifying question on the second half of that you mentioned kind of the blog post and what we're seeing it sounds like you're looking for commentary around what we're seeing both from a.
Vertical as well as kind of a segment basis, just where we're seeing.
Folks that are doing.
Well versus not as well et cetera is that kind of just to the question, yes, exactly so when we look at the.
Changes in the guidance and just how you're thinking about yet.
A little bit more context, and who is outperforming or underperforming.
Cool I'm going to put Ryan back on the spot then yeah happy to have pretty has that Alex.
In terms of where we've seen a lot of success on the vertical side and continued demand in places like government higher education gaming.
Tax and have all been really strong seem really good inbound demand from all those organizations good acceleration on deals.
In terms of compression or pressure.
Certainly have seen that in a.
A good portion of the SMB marked at and then in parts of the agency market, mostly in the small side.
Agency.
Does this is probably in the or areas where.
The impact mostly just felt in terms of opportunity in growth. We traditionally had good strength from the Midmarket and enterprise and that's continued to be the case all are growing but the midmarket enterprise continue to its kind of lead the pace fast.
Okay. Thank you.
Thank you.
No further questions in the queue at this time I'll like to turn the call over to Mr., Justin Howard CEO and co founder for closing remarks.
Great. Thanks, Okay.
So thank you offer spent some time with US we look forward to spending more time with you in the coming months, we'll be spending some time with investors virtually.
We'll be attending the Stifel cross sector insights as well as William Blair growth virtual conferences in early June.
And have up other opportunities and look forward to that at time of all of you in closing I just want again, thank our employees, our customers and our partners for their hard work and support.
And for helping close a terrific quarter.
More importantly, we are grateful for the hard work and agility on everyone's part to adapt quickly to the situation that we're all facing together.
And making sure that our team and customers are well supported.
And on behalf of the entire team. We also want to think that the frontline and healthcare workers, who are helping keep habit everything running.
So thanks again, we'll look forward to talking you soon I appreciate your time today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participate and you may now disconnect.
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