Q4 2020 Sprout Social Inc Earnings Call
[music].
Ladies and gentlemen, and thank you for standing by and welcome to the Sprout social fourth quarter earnings Conference call.
At this time, all participants are in a listen only mode and.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press the star one and your telephone please be advised the today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Mr. Jason Russell head of Investor Relations. Thank you. Please go ahead.
Thank you operator, and welcome to sprout, social <unk> fourth quarter and full year of 2020 earnings call.
We will be discussing the results announced in our press release issued after the market closed today and have also released an updated investor presentation, which can be found on our website.
With me are sprout, social CEO, Jeff and Howard CFO, Joe del Preto, and President Ryan Barretto.
Today's call will contain forward looking statements, which are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of $19 95.
Forward looking statements include statements concerning financial and business trends.
Our expected future business and financial performance and financial condition, our guidance for the first quarter of 'twenty 'twenty, one and the full year 'twenty and 'twenty one.
And can be identified by words, such as expect anticipate intend plan believe seek or will.
These statements reflect our views as of today only should not be relied upon as representing our views at 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 a discussion of the risks and important factors that could affect our actual results. Please refer to our annual report on form 10-K for the fiscal year ended December 31, 2019 filed with the Sip.
Charities and Exchange Commission, our quarterly reports on form 10-Q, and our annual report on form 10-K for the fiscal year ended December 31, 2020 to be filed with the SEC as well as our other filings with the SEC.
During the call, we'll discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles definitions of these non-GAAP financial measures along with reconciliations to the most directly comparable GAAP financial measures are included in our earnings press release, which has been furnished to the SEC.
And is also available on our website at investors day at sprout, social Dot com and with that let me turn the call over to Jonathan.
Thank you, Jason and good afternoon, everyone and thank you for joining us.
As we roll into a new year and our second as a public company I wanted to express my gratitude to our employees our partners and our customers.
We're in a fortunate position of share of amazing results today because of the many people that have contributed to our success.
Our teams delivered and emphatic close to 2020, and we expect to deliver a fantastic 2021, and social take center stage and the digital strategy for millions of businesses around the globe.
I want to first briefly touch on our fourth quarter results, then discuss high level trends and our business and market that have occurred over the past year, which will build into our priorities for 2021.
Our accelerating growth and strong results across the board and give us confidence and our strategy and the investments, we're making and our future.
Social has never been more mission critical and our momentum and competitive position have never been stronger.
During Q4, we delivered record net new <unk> added a record number of greater than 10-K customers drove meaningful improvements in customer retention and growth and saw an acceleration and ACB growth as our product and the upmarket strategies take hold.
We also delivered on our commitment to growth with leverage.
Many of our operating margins by more than 200 basis points year over year, while nearly doubling the air are added to our business and Q4 versus a year ago.
Looking back over the full year, 'twenty and 'twenty made it clear that social media will be a cornerstone and the next evolution of the business.
Social has dramatically changed the way businesses for each engage and serve and build relationships with their customers and potential customers. It's not simply the way to market of brand is increasingly becoming the brand and beyond marketing is helping companies evolved what they make who they'd make it for how they sell it how they compete and.
They deliver world class experiences.
Sprout has emerged as the platform that makes it possible for thousands of brands across the globe as the social system of record of action and intelligence.
We're being pulled into new use cases across our customers' organizations of social is taking on bigger and more diverse roles across business strategy.
This is also driving a second order of adoption of branch graduate to more sophisticated social strategies with a bigger footprint and larger levels of investment.
Meanwhile, our platform is getting better every day, it's getting structurally stickier and the barriers to entry of rapidly rising.
Our emphasis on world class user experience uniquely positions us for both Greenfield adoption as well as expansion and is more stakeholders become involved and social across more of the companies we serve.
Further the weak businesses and evaluate buy implement and integrate software has evolved.
Slowly over the past several years and then much more rapidly and 2020.
We're perfectly positioned for this evolution with the right technology culture and distribution model to match this new approach to buying software.
Buyers expect tools to be easy to use easy to buy and immediately familiar.
We believe the traditional playbook of buying and selling software based on sales pitches can't demos or slide, Texas, fading prospects should and will demand and to prove value for themselves.
For 10 years, we've been leading with the product and the shift and buyer expectations has expanded our advantage.
The growing role and importance of social strength of our product and our buyer aligned go to market strategy of combined to create an outsize of advantaged twin and already compelling and growing market.
Looking into 'twenty and 'twenty, one and we're driving investments and innovation to help our customers fully moving into the power of social media transform the entirety of their organizations.
We continue to invest and our core capabilities that power of the top customer and rated platform and our industry and build new capabilities to ship what's next.
We're investing and the next generation of messaging experiences social care, social commerce engagement publishing listening advocacy reputation and analytics.
We made material improvements to nearly every aspect of our platform and 2020 delivered eight new partner integrations and once again earned recognition from G. Two with top software awards at the different categories, including highest satisfaction product best product for marketers and best product for enterprise and best product for customer service.
Sprout also continues to be recognized for our standout culture team and our commitment to diversity equity and inclusion.
We were recently recognized by Glassdoor as one of the best places to work in 'twenty and 'twenty, one which is our fourth year of such an honor.
Battery ventures ranked sprout and number two on the list of 25 highest rated public cloud companies to work for during the period, where Covid and had transformed the way we all work.
Were also recognized by great place to work as the top workplace for parents and by Fortune as the top workplace for women.
Our commitments to our team and our customers arent just part of our values. They're also critical to our strategy and are proving to be a key advantage is our team is able to adapt quickly to of rapidly changing market and deliver world class experiences to our customers.
We're especially proud of both of our customer and workplace recognition with the backdrop of everything that was happening in 'twenty and 'twenty.
As Ryan and Joe will discuss shortly in 'twenty and 'twenty. One we will continue to invest aggressively and driving new business, expanding our existing customer relationships expanding the opportunity and contribution of our add on products investing in international growth and improving yields across our sales and marketing processes.
The foundation, we've built and product culture customer experience and distribution and position us well for and expanding market opportunity we.
We've told you previously that we have of $25 billion of current market opportunity and of greater than $50 billion expanded Tam.
A year. After publishing this numbers are <unk> are up nearly 20% new use cases have emerged and according to Facebook the number of businesses on Facebook properties alone has more than doubled from 19 million and integrated and $200 million.
Our opportunity is rapidly expanding the need to address social is rising and our value proposition is growing disproportionately we plan to update you with more specific granularity on our Tam and our formal analyst event later this year.
Before I turn the call over I also want to acknowledge Ryan's recent promotion to president.
As you've all seen for yourselves, Brian is a remarkable leader and a person for the past four plus years, Ryan has made an outsized impact to our people our customers our culture and our business.
And Ryan's new role, we formally aligning the sales success and marketing organizations to expand all of the success, we've seen and the fluid relationship across these functions throughout the customer lifecycle.
I'm looking forward to Ryan's continued contributions and working with the more closely with him as we tackle the opportunities in front of US Congratulations Ryan now over to you.
Thank you Justin and thanks for the ongoing guidance and support I'm incredibly proud of our teams and fourth quarter performance, which shines a light on the sheer size of our opportunity.
Justin right social is more important to more businesses than ever before and we feel like we're just warming up.
Our business and competitive Differentiators are becoming more pronounced which is why this is the perfect time to more closely align our sales success and marketing efforts and are tightly integrated go to market motion and.
I'm excited to partner, even more closely with their talented CMO of Jamie Gilpin and our entire marketing team have been building one of the best inbound engines and SaaS.
My goal for today is to provide insight into what we're seeing from customers and what it looks like when organizations begin to fully operationalized social.
I'll start by sharing some interesting data points about the way buyer behavior of the whole thing.
According to a recent report from trust radius, 87% of BTB technology buyers now of self service option.
The trust radius found that the top three things of buyers trust and are influenced by our free trials product demos and user reviews as.
And as you know well, we'd lead with the trial and according the G. Two which compiles the feedback from more than 3000 customers sprouts user reviews and lead the industry and every category.
We've built a product and the sales motion that matches the modern software buyer with the products they want to buy.
It's our mission to get the users' hands from the keyboard empowering them to engage with our technology and our team well before they need to make the commitment to us and this is how we win.
These preferences are likely to of permanently shifted over the past 12 months.
According to a study by Mackenzie more than three quarters of buyers and sellers.
And they now preferred digital self serve and remote human engagement over the face to face interactions.
And that's likely the sustained moving forward because we have not only adapted to this new reality, but we've seen the efficacy of remote engagement improve the 1000 basis points and 2020.
Coming out of a year and which social media was the center of gravity for conversations around Covid, Rachel and Justice and the presidential election, where recently alerted to how conversations on credit and other social networks can literally move markets as well.
Brands of all sizes and across all departments, including PR Comms Investor Relations and the C suite are well aware of that social is fundamental and mission critical to their business.
To quote Mckenzie and the best companies intimately understand their customers' experience they use data and analytics to synchronize the e-commerce experience with the physical stores and social media and other channels, making it seamless for the customer to shift the momentum and this is exactly where we fit in.
Sprout is the social system of record, giving brands and central management platform harnessed the power of social.
Shifting to our quarterly performance net new listening air grew sequentially at the fastest pace in 'twenty and 'twenty.
Premium analytics had a record quarter on all metrics and our premium products and aggregate continued to deliver greater than 100% year over year growth.
Leveraging sprout these customers can now unlock significant business insights with the trillions of data points that exist on social today.
It was very impressive to see another quarter, where all of our segments were strong, especially up market.
Customer retention and structurally improving.
And customers continue to come to sprout with acute and urgent needs to address social.
Sample of the brands that we grew with this quarter includes Radisson Hotel group I'll Miss the University, Eddie Bauer, Wipro pure Jim's Patriot duty and you'd of me.
A great example of a new customer brand and that selected sprout is ring central a leading provider of global Enterprise Cloud Communications collaboration and contact Center solutions through Sprout <unk> Central is now able to more effectively service their customers across all social channels and gather insights to provide better customer support by.
By utilizing our social listening solutions. They can monitor the health of their brand and actively measure of overall brand performance and the market.
We also began working with Panera bread.
<unk> of the social media care and brand protection manager said, we made the decision to go with spreads this year and an effort to find and intuitive tool for our marketing and customer service teams and.
And less than two months, we've got and response times and social from the 28 minutes to 10 minutes on average even despite higher volumes.
We gave so much efficiency with the smart inbox and asset library that we've changed our 2021 and target from 30 minutes to 15 minutes for customer response times.
Thrilled with the fast tangible return on investment and we've realized and value of our partnership with sprout.
We also began a new relationship with WWE and USA, formerly known as weight Watchers Robin Nike senior of social media manager of shared self service and ease of use for two of our most important qualities when choosing a partner and sprout has been a dream.
Sprout has a robust feature set to enable us to effectively manage our social media marketing efforts, but it is not compromised seriously user friendly experience.
Whether it's seamless collaboration on our social campaigns or the use of social listening to consistently monitor our brand pulse spreads platform allows us to do everything we need and one unified environment.
Wrapping up I continue to be inspired by the performance of our people at sprout. Our success has raised the bar for and even better 2021.
Our strong employer brand culture innovative business model and disruptive technology are a unique combination.
This has enabled us to build and ALLETE team and to take great care of our customers.
We are excited by what lies ahead and as always we appreciate your support.
With that I'll turn it over to Joe to run through the financials Joe.
Thanks President of Sorrento.
And I'll walk you through our fourth quarter and full year, 'twenty and 'twenty results and detail before moving onto guidance for the first quarter and full year 2021.
Total revenue for the fourth quarter was $37.3 million, representing 33% year over year growth.
And the impact from legacy simply measured organic revenue was up 36% year over year.
For the full year 2020, total revenue was $132 9 million up 29% year over year.
<unk> revenue was up 36%.
Total exiting Q4 was $158 3 million up 34% year over year organic <unk> was $157 2 million of 36% year over year.
And again achieved record net new <unk> are with health across the entirety of our business and the acceleration and ACB.
We added 1162, net new customers and Q4 to finish the year with 26718 customers of 13% year over year.
Fantastic net add the result is a reflection of very strong performance across all of our segments.
And your quarterly reminder, we remain focused on long term double digit customer growth the.
And high quality unit economics the.
The number of customers contributing more than $10000 and are are the 3149 of 44% from a year ago and up from 2000, and 790 and Q3 'twenty and 'twenty.
The attach rates of both listening and premium analytics are rising across the customer base as business has harnessed the power of social data.
We are leaning into a full platform because of our customers are operationalized and social across the entirety of their business.
We expect that this will drive durable ACB expansion and even stronger unit economics for many years to come.
Our mix of enterprise and mid market customers is also growing within this our large customers are getting bigger.
This resulted in acceleration and our ACB to 19% growth, even if for two quarters in a row, the accelerating overall customer growth.
And discussing the remainder of the income statement. Please note debt unless otherwise stated all references to our expenses operating results and share count ground and non-GAAP basis are reconciled to our GAAP results and the earnings press release and was just issued before this call.
And Q4 gross profit was $27 9 million EBIT of gross margin of 74, 6%. This is up 210 basis points compared to a gross margin of 72, 5% of a year ago.
74, 4% last quarter.
Sales and marketing expenses for Q4 for $15 7 million of 42% of revenue down from 46% of a year ago.
And to accelerate our pace of hiring accustomed with our sales and marketing teams. So we of the rig capacity to meet very strong inbound demand.
Research and development expenses for Q4 for $7 3 million or 20% of revenue down from 24% of year ago.
We have aggressive R&D growth goals in 'twenty and 'twenty, one as we pull for multiyear product engineering and best in planes to be an expanding set of use cases.
General and administrative expenses for Q4 for $8 2 million or 22% of revenue down from the 25% of a year ago.
We expect general and administrative expenses to decrease as a percentage of revenue as we continue to scale our operations.
Non-GAAP operating loss for Q4 was $3 3 million for negative 9% operating margin.
This compares to the negative 21% operating margin a year ago.
The meaningful outperformed our expectations due to higher revenue and the timing of many key hires that had the start date in January of 'twenty and 'twenty one.
For the full year, 'twenty and non-GAAP operating loss was $20 9 million of negative 16% operating margin compared to the operating margin of negative 21% and 2019.
Pleased with the 570 basis point annual improvement in the operating margin.
Non-GAAP net loss for Q4 was $3 4 million for a net loss of <unk> <unk> per share based on $53 1 million weighted average shares of common stock outstanding.
Net to a net loss of $5 9 million a year ago.
Turning to the balance sheet and cash flow statement, and a coupon with $163 9 million and cash cash equivalents and marketable securities down from <unk>.
$167 3 million at the end of Q3, 'twenty and 'twenty.
Deferred revenue at the end of the quarter was $43 8 million looking.
And both of our billed and Unbilled contracts, our remaining performance obligations or our appeal to the approximately $64 4 million up from $53 9 million as the in Q3, 2020 and up approximately 53% year over year.
We expect to recognize approximately 85% of $54 7 million of total RPM as revenue over the next 12 months.
Operating cash flow and Q4 was negative $22 million compared to negative $4 7 million a year ago.
Free cash flow was negative $1 $97 million and Q4 from a negative 5% free cash flow margin.
Compared to a negative for $9 million and negative 17% free cash flow margin a year ago.
As a reminder, our Q4 2020 and free cash flow included approximately $1 8 million of one time expenses to build out our Seattle office.
For the full year 2020 free cash flow was negative $15 million of negative 12% free cash flow margin.
And the negative 15% free cash flow margin and 2019.
The addition to leverage and our financial model I'm going to shift to annual and multiyear contracts as the positive impact and our free cash flow.
In 'twenty and 'twenty, our overall dollar based net retention rate was the 110%.
The 110% and 2019 our day.
All of the base net retention rate, excluding SMB customers was 117% in 'twenty and 'twenty.
Compared with 120% and 2019.
As we have talked about previously we initially saw headwinds and our business from COVID-19, and we're relatively isolated within Q2.
This impact was primarily elevated at the beach stern and slower expansion activity and our agency and mid market segments. However, these factors each reversed and the second half of 'twenty and 'twenty, we're very pleased with the current trajectory of net retention.
And Q4 of 'twenty and 'twenty, our overall dollar based net retention exceeded a 110% and our ex SMB dollar based net retention exceeded 120%.
We believe that increasing platform stickiness.
And the earnings expansion changing segment mix and rising attach rates of our premium modules for each positively impact the expansion rates and drive the multiyear acceleration and India from current levels.
Moving on to guidance for the first quarter of fiscal 'twenty 'twenty. One we expect total revenue and the range of 39, 6% to $39 7 million a growth rate of 30%.
We expect the organic growth rate to be low single digit percentage points faster and a reported growth rate as we lap inorganic revenue from a year ago.
And this will be the last quarter, and which we experienced a material difference and organic and reported growth rates, we do not expect to discuss the difference beyond the first quarter.
We expect non-GAAP operating loss and the range of $5 4 million the 5.0 of millions.
This represents the anticipated operating margin of negative 13, 1% and improvement of more than 1100 basis points year over year.
We're making aggressive R&D investments to address and expanding set of opportunities, we're continuing to accelerate the pace of hiring of across most of our go to market functions and are continuing to build depth across the rest of the company.
We're doing this while delivering improvement and our operating margins highlighting the efficiencies across the company as we scale.
We expect the non-GAAP net loss per share between 11 and 10.
Approximately $53 1 million weighted average basic shares of common stock outstanding.
For the full fiscal 'twenty 'twenty, one we expect total revenue and the range of $172 million to 102nd frequently.
This is the expected overall reported growth rate of 30%.
For 'twenty and 'twenty, one we expect non-GAAP operating loss in the rate of 22 million to $19 million, implying for the non-GAAP operating margin of negative 11, 9% and operating margin improvement of roughly 400 basis points and year over year.
And we remain focused and delivering durable multiyear growth with compelling profitability leverage.
We expect the non-GAAP net loss per share of between 40 and 37 cents.
Some of them approximately $53 6 million weighted basic shares of common stock outstanding.
Of note for 2021 planning purposes, we have of so many employees may return to our offices sometime midyear and then our annual corporate events and travel expenses will occur throughout the summer compared with Q1 during 2020.
In summary, we believe we are uniquely positioned to capitalize on the opportunity for durable and multiyear growth and.
Social moved to the center of digital strategy.
<unk> financial leverage and straightening pre cash flow trajectory give us confidence to make optimize investments that we believe will enable us to achieve our full potential.
With that Justin Ryan and happy to take any of your questions operator.
As a reminder to ask a question you will need to press star one and your telephone to withdraw your question press the pound key.
And your first question comes from the line of Raimo Lynch L from Barclays. Your line is open.
Hey, Thanks for taking my question and congrats on the great finish to the year.
And I wanted to go back to the dollar net retention numbers you gave out in the.
It's about 120% over and.
Two that we saw in Q4, if you ex out the SMB part like can you talk a little bit about the drivers of that and.
And what are the what how do you see this changing going forward or if all of the going forward other than it happened the follow up please.
Yeah, Hey room of how are you. This is just and I'll start with that and Joe may have some of it out here.
Generally speaking the the.
The ex SMB.
Bucket does contain our agency segment as well.
The S&P and agency were probably disproportionately impacted during.
The Q2 timeframe, which we talked about and.
And we did see some during that primarily Q2 and maybe part of Q3 time frame.
And some slower expansion and some of the existing customer base that may be looking to grow with us in the media and put a pause on things temporarily so that generally just.
Came back to what we would normally expect of those levels for the remainder of the year, which is where we saw that that upward trend and improved performance frankly over the last half of the year, but primarily just spill through from the Q2 impact that we saw.
Okay, Perfect and then just one follow up Mike as we all think about like the the world evolving this year with more of explanations et cetera, like what do you see in terms of early signals in terms of engagement levels with prospects prospecting et cetera like.
How do you see this year of playing out in terms of like is it like.
Decent first half stronger second half will look like for like how do you think about it as you kind of look out. Thank you.
Yeah, Hey, Raimo this is Ryan.
Thanks for the question, we feel really good about the trajectory of the business right now we've proven through 'twenty and 'twenty that our business.
Quickly evolve and we're set up for this remote engagement and all of the data that we're seeing.
Even with vaccines is really highlighting is that this road remote engagement digital interaction is going to be here to stay and so when we think about the the go to market motion that our team has our success and being able to get customers up and running and a remote fashion, having them not only implement but.
Drive adoption and a remote fashion has us really well set up on a go forward.
So we feel like when we look at the rest of the year, we're well positioned to keep keep executing the way that we've been executing through 2020.
Okay perfect. Thank you congratulations again.
Thank you.
Your next question comes from a line of Rob Oliver from Baird. Your line is open.
Great.
Hey, guys. Thank you very much for taking my questions.
Just and one for you you made a comment in your prepared remarks about being pulled into the new use cases within the enterprise and.
And I know just you know.
Just profile and you guys for a while you've got definitely it's always interesting to encountered different departments that are using your software, but that sounded like it might be a little bit more of that so just was wondering if you could maybe flush out that comment and then I had a quick follow up.
Yeah sure happy to do it here.
So you know I think.
What we're seeing really is.
And more.
Volume of adoption of the cross customers, where our most progressive customers previously had been looking at new use cases and had been starting to operationalize social.
Into things like their customer service and the product feedback loops.
And the retention strategies et cetera.
What we're seeing right now is more than anything and there's just more businesses that have reached that level of maturity where.
We're certainly seeing some new use cases as well I think.
The comps and the Investor relations of something that has come up more specifically and acutely over the last couple of quarters.
We're starting to see more of that so the.
The one that I would flag that I think is going to be more materials throughout 2021 is might be on the commerce side.
And the others are use cases that we need.
And just in small batches in the past, but it's starting to.
<unk> be something that we hear a lot more often and a lot more of the deals that marine or are thinking more holistically across the organization about social.
And they were in prior quarters or a year ago.
Great Okay.
That's really helpful. Thanks for that and and I don't know if this one's for <unk>.
For you or for for Ryder for Joe, but I mean, Joe I know you mentioned in your prepared remarks that the you're.
And the operating budget includes all of the investments for this year and and and just the she just and you gave us some color on.
And you know on what those were and the general sense.
And so maybe I'll take that because of the backdrop for Orion and say you know as you're seeing customers pull right now clearly really good demand for premium products with the 100% year over year of growth listening all of I can't remember your exact words, but it sounds like clusters of really scurrying to get this stuff.
Can you talk of maybe a little bit about you know oh, what what what some of those.
And its might be or and what you guys were thinking to the extent that you can add color. There. Thanks guys.
Yeah. Thanks for the question Rob in terms of of investments and one we feel really great going into this year with the momentum from last year, a few different areas that we see a lot of opportunity. We've continued to see the upmarket potential continuing.
You invest there our marketing team has been doing a fantastic job the top of the funnel has been incredibly healthy for us across all segments.
And we'll continue to invest in some areas there both from the SCO and SCM side is that's proven to be a really fruitful for.
The thing for US and then from a from a team perspective, we.
We see a lot of opportunity across all of our segments.
And you know the ones, where you could probably see outsized investment will continue to be the midmarket and enterprise space.
And in terms of products that the products team has been has been delivering some really great stuff for our customers youre seeing it and the net dollar retention, but also and the expansion of our new lands and so you'll continue to see us putting our foot down on the attach rates and those premium products.
Thanks again.
Yeah.
Thank you.
Your next question comes from the line of Alex Kurtz from Keybanc. Your line is open.
Hi, This is Michael on for Alex and congrats on the quarter. So as you head into 'twenty and 'twenty, one and are you, making any changes to the sales force compensation around expanding the customer spend versus acquiring the customers and then also on the selling more add on products.
And Mike This is Ryan, we're not making any changes to the the way that we compensate we've always had the same models. So one thing that's probably important to note here is we have dedicated sales teams on both the new business side.
And then on the customer side and says the same teams that are specialized and working with those customers. So you know.
Our approach to 2021 and look very similar to what it did in 2020 from a just from an expense standpoint.
Okay, Great and then.
King.
I'm sorry.
Sorry about that I was just going to and I think part of the spirit of the question was just around the mix shift that we're seeing and some of the attach rates.
To Ryan's point, we baked a lot of that into the compensation model to date.
So we're carrying that through and we think part of the the attraction that we're seeing and certainly that alignment.
But we see much the same opportunity in 2021.
Okay. Thanks, a lot.
And your next question comes from the line of Matt Vanvliet from BTG. Your line is open.
Yeah, Hi, guys.
Great job on the quarter and maybe just expanding on those last couple of questions thinking about it a little differently.
And you talked about the fourth quarter really recovered on and will go up market and so there are a dollar based revenue retention was 120 plus.
And as you think about kind of proliferating three of our existing customers with modules are already using ah versus selling some of the more premium all the modules and upsell cross sell.
Can you help us break it down a little bit in terms of that additional cell.
What's contributing more there and and maybe how you think about that heading into 'twenty one.
Yeah. This is Justin.
The add some color there so.
We see the.
The expansion of <unk> on the core platform.
And as well as the expansion when we've got a catchment of the premium products. Both of those are growing and a very healthy clip.
And we definitely are seeing more.
The customer engagements, where there are.
Not just needs for those additional products the need for additional seats across the organization. Some of those additional use cases that we talked about other departments, they're being becoming involved and social.
We also have.
There are some mechanics and the premium add ons.
You have a bit of leopard spend for them where and.
And even those add ons are adopted for their across the organization.
And there is greater investment involved with that and in terms of additional data additional queries and things like that.
So we've got a couple of different.
And sort of pricing principles of play there, but we love that we're seeing the core platform just the news and it's.
Intended use without the the add ons that is growing very nicely as well.
So both of those and combination has really been of great tailwind for us.
Alright very helpful. And then as you look at the your international markets. It's really been of good good driver of growth so far this year.
Where were you at or where do you feel like you and are you are in terms of of your longer term plan and.
Getting into specific markets, making the kind of step function investments of opening local.
The local offices and hiring local people.
I guess, how long should we think about that that is kind of a bigger chunk of the the investment pie versus getting to a level, where you can really start seeing some some tremendous efficiency there.
Thanks, Matt. This is Ryan, yes, I would say that we're still very early innings here, we opened up our first international office back in 2019 in EMEA and Dublin and have seen really good progress with that group from a productivity standpoint, and getting people in the market.
As has been very helpful for us locally being one of the right time zone and the write accident and the right language, we are continuing to invest there.
The big opportunity for us over the next number of years expanding beyond just the EMEA into APAC and Latam.
We are going to be increasing our head count there this year and the next few years and we also see just more localization opportunities.
Getting more marketing efforts within within the within those international locations and then also exploring channel opportunities internationally. So I'd say, we're early right now, but we do see it as the big lever and the future state of the company.
Alright, great. Thanks for taking my questions.
And do.
Your next question comes from the line of Tom Roderick from Stifel. Your line is open.
Great Hi, everyone. Thanks for taking my questions happy new year.
Justin Let me throw of product question at you here first and I'd love to hear a little bit more about how the reputation product is being embraced by customers, but I guess the product question and reputation would be just sort of.
How ready is the product from a data ingestion and machine learning analytics framework true.
And it could to be able to take advantage of all of that unstructured data and then how integrated is it with the rest of the portfolio so bit of and open ended question on that front, but would love to hear a little bit more about that.
Yeah.
To speak to it and were.
You had mentioned and the context of reputation is that correct.
Correct.
Okay cool yeah. So.
So the first part of that question and so the platform is built and away while the data is unstructured and it's.
And a little different than.
Some of the the data structures of the other social platforms of integrate with.
There's not a ton of variation right. There is some commonality is there and we built against kind of those common framework. So for us to add new data sources on ingest side.
Actually a pretty quick effort at this point like we've done the legwork to get there.
And now it's just about.
Getting those.
Relationships, where we may not have those for the ones that we do.
Deciding which capabilities, we want to turn on.
It's a pretty quick process and.
I do think that the.
Tools that are built.
And.
Are ready for the additional platforms that will add on that side.
The.
The big investments that Youll see from us on.
And the reputation segment.
Primarily to do with adding those additional data sources like you mentioned, but also looking into deeper analytics.
Better ability to identify opportunities for improvement and things like that particularly across the larger organizations.
So youre going to see that team within our product or make a ton of and enhancements, we still consider the reputation product to be very much kind of of beat one with.
And with tons of room to growth.
Yeah, that's great feedback thanks for that and I guess as my follow up question here I'll I'll direct this one of the President Burrito.
Right and congratulations on the promotion greatly deserve and and.
Love to hear a little bit more about sort of your view on the upgrade path. I mean look you had 1200 of new customer adds last quarter. Almost 1200 again this quarter. It was just a tremendous number of relative to what you've been historically doing.
And so the flywheel seems like you can spend a little bit faster with respect of the upgrade path, but perhaps you could talk about that a little bit and the context of go to market. How your army of your your reps with the with the tools they need the successfully upgrade at a faster clip.
Yeah, Thanks, Tom I appreciate it.
We are really excited is as you said the customer adds have been awesome and it's a.
The combination of just great execution from the marketing team and driving awesome top of funnel as well as the sales team really getting after it.
And you add in there that for US obviously, we want of land as big as we can with our premium products, but the team also realized is that part of part of what's made us. So successful here is just the velocity of the sales motion and so when we get these customers and the product we get their hands on not just publishing and engagement, but analytic.
<unk> and listening and if we can secure the full deal right away. That's okay. We've got a sales team and of great customer success team on the other side, it's able to as you said kind of go in and and increase the velocity of the flywheel. So we're trying to win bigger, but even when we don't we're setting up the team from our customer success and growth perspective.
No what opportunities exists there that we're going to be able to grow and because we have those dedicated sales team on both the new business side and the growth side, we feel like we're well covered as we continue to have these these opportunities to grow and then the last thing of the stay here and just and touched on it earlier is for US it's not just the premium and add on products, which added true.
And its amount of value. We're just seeing the proliferation of use cases and users across the organization. So even if we land in marketing today, our growth teams of our customer success teams know theres a customer care use case on the other side and many others.
And so that's kind of how we're thinking of it right now and making sure that the team knows the full gambit of opportunity that exists when and when Theyre looking at the potential of an accounts.
Great detail, that's wonderful nice job and the on finishing of great year I'll jump back in the queue.
Thanks, Tom.
Your next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open.
Okay. Thanks, so much for taking the question.
I think one of the things you mentioned and the prepared remarks was improving the yield on sales and marketing spend and I know, there's an effort to grow internationally of course, you're showing great traction up market as well. So can you talk a bit about how you're balancing the increased.
And sales and marketing with improving net debt yield as well like what specifically will be driving that up as we move through 2021. Thank you.
Yeah. So one of the thanks for the question one of the things that is kind of a driving force in the in the new business acquisition and the top of the funnel.
And really revolves around conversion rates from the the demo process from the free trials et cetera.
And where we're able to.
And we make.
Improvements across all of that upper funnel and part of the business. So while we are investing heavily and making.
Tremendous progress building out the teams on the acquisition side Theres still an opportunity for improved yield.
And when we think about just what does the funnel look like from our content strategy into the trial and demo flow or from folks that are visiting our website et cetera, and getting them fully engaged and the and the sales cycle.
Okay, great. Thank you and maybe just a quick follow up for Joe on the billings number that was really strong and accelerated strongly and the in the quarter.
As you sign larger customers, who I assume are on annual billing can you talk a bit about to what degree you saw any sort of duration tailwind in the quarter.
And are you able to sort of say what it was like organically or maybe maybe the.
And there wasn't much of a tailwind, but just curious about any impact you could call out there. Thanks.
Yeah and on the billings from their credit I think one thing were seeing now and.
We've moved more to the Midmarket and enterprise, we're definitely seeing.
A much stronger, let's say Q4, and we have historically right. We're getting more of those enterprise deals that are closing towards the end of the year and so you saw a little bit of that with the acceleration of billings in the quarter were also the sales team is is intended to close annual deal. So there's definitely an incentive on that side.
When it comes to annual versus monthly and so.
And you're also going to see a little bit more momentum on that front, even downmarket in SMB and agency space, because theres more incentive now to kind of.
Kind of annual deals.
Okay perfect. Thank you congrats on congrats on a great year.
Your next question comes from the line of Arjun Bhatia from William Blair. Your line is open.
Hey, guys. Thank you for taking my question and I'll add my congrats on the results really great really great quarter.
Justin maybe I'll start off with with you on the first.
And related question you touched on your prepared remarks.
And investing more and core capabilities around care and commerce and.
<unk> emphasized commerce, and maybe a little bit to an earlier question, but as you are thinking of enhancing these capabilities I'm just curious how youre thinking of maybe.
Spinning these capabilities out of separate solutions versus incorporating them into the core platform and and giving customers access to it that are already subscribed to.
And to the engagement side of the slide of the platform.
Yeah, Great question so.
And from the product side I think that we there are a couple of flavors.
We're thinking about the roadmap and the things that we're going to be building.
A couple of categories that they fall into I think one is.
What we would consider to be part of the core capabilities, but certainly our enhancements and improvements for our customers, where there is an opportunity to drive.
Not only retention and expansion, but just deal size seat count et cetera, and.
And monetizing those improvements while not a new skus.
Very much in the way that flows through to the to the unit economics to the to the ACB as and to the growth opportunities.
So that's one flavor and then the other typically comes and when we've seen and up gravity around a certain set of features so similar to what you saw from us with reputation of analytics we're listening.
And once we built out the capabilities to a point where they are.
Bidding.
The specific use case, where they are above and beyond.
What the core platform.
What the customers need of the core platform. There is an opportunity for us to repackage that as an additional SKU and I think youre going to see some of that from us as well you'll also.
Reputations, and example of where we brought an entirely new capability into the fold.
And monetize that through the addition of profiles of the locations that our customers from energy.
And so theres, a bunch of different ways that that product development.
Starts to contribute to revenue.
And whether through a new SKU or the things I mentioned, where it's retention and expansion and additional seats et cetera.
Great that's very helpful color.
And then I wanted to touch on your customer additions.
About the for a little bit, but you know it.
It looks like over the last two quarters I think you've added just as many new customers as you did in 2019, so great to see the momentum there.
But as Youre looking at this new cohort I'd be curious to see if you are.
And if you're noticing any differences in how these customers are coming into your funnel and how they're landing and the expansion cadence of anything else that you can point out with this cohort relative to what you've seen historically and new customers are kind of into the platform.
Yeah. Thanks for the question of art to this Ryan.
Most of it actually feels very similar so we're running a lot of the same players if I think about the marketing approach and are focusing on content marketing and and driving people to our site into our trial a lot of those players with the same we certainly increased the throughput on content.
And we're having great conversations with those customers, but the approach has been very similar.
What I will say as you know and you can see it and then ACB increase of 19%. We're landing these customers much bigger and we're having more growth opportunities for the current customer base.
The major takeaways are we've seen and evolution of all of the customers coming in just mentioned it a little bit before theres a different sophistication for these customers. There's more use cases, which means typically more users and oftentimes more of the add ons.
And and I think that's one of the big thing and the other thing and Joe mentioned, a few minutes ago is just the opportunity to grow these customers into longer term contracts as well. So generally just feel really great and the cohort that we've been seeing.
This full year, and especially in Q3 and Q4.
And a quick.
And right there I think another important point.
Net.
And I talked about it and the past is.
Someone out of the norm our customers the larger that they come in the the more likely and to greater magnitude day Rx growth.
And so it's not a case where.
They're one of our ACD is of growing that actually represent the bigger growth opportunity for us.
Which is counter to what you may see and some other models.
Perfect. Thank you and congrats again and the Brian Congrats on the promotion.
Thank you.
Your next question comes from the line of stands Lawsky from Morgan Stanley. Your line is open.
Perfect. Thank you so much guys.
I would say I wanted to follow up on the on the on the previous question on the.
Net adds but specifically focus on the on the the the much bigger customers you guys of landing I mean, essentially the greater than 10-K. The 359 that you put up net new and Q4.
And actually as much as you put up and all of the first half of 'twenty and 'twenty.
So how much of the of these larger you know the.
10-K, plus net new ads, how much of it was just existing customers kind of crossing over that threshold.
This is net new logo lands and then just a follow up on that specifically for the net new logo lands and what's driving those larger lands.
For those 10, plus 10 plus customers.
And that of a quick follow up.
Thanks, Dan This is Ryan it's actually a pretty healthy balance when you think about the net adds of 10-K, we've certainly seen our new business acquisition and continue to execute really well shoot for is historically of really strong quarter for the up market customers. So we saw a lot of success there.
But we've also seen a lot of growth happening from our current installed base.
And then that tends to be both users and add on so I would say, it's a pretty healthy balance right now and again. This goes back to the to the fact that we have dedicated teams on both the new business as well as the customer growth side.
Pretty pretty healthy one two punch there from that perspective and then.
Your second question was just about what's driving the larger growth the larger assets.
Yes.
The initial lands above the 10-K, what's driving that.
The the momentum there.
Yeah. So it's a it's kind of of healthy combination again of both of the users and the premium add ons from a user perspective, what I've seen change over the four and a half years that I've been here is just the number of users that want access to the platform and then when I first started what used to be.
Getting person that was responsible for social has expanded to social media teams they need access people and the marketing department and across PR Comms brand content and and now more and more we're seeing it go into care and social care sort of social support as well as business users who are trying to tap into the <unk>.
And this intelligence from from social So this was the combination of more users landing, but then we've added these premium products over the last couple of years and.
Really started to take hold over the last year from <unk>.
Listening and analytics perspective, so it's been a good combination of both but I would say the users.
<unk>.
Slightly greater than the add on products at this point.
Got it that's very helpful. Thank.
Thank you Ron and Mike, maybe just a follow up for for Joe.
Joe when we when we look at.
On the.
The commentary around your you guys getting into.
New use cases like Investor Relations communications as well I was just the very strong traction with.
Add ons like listening premium analytics and reputation.
And then we put them in the context for you you're saying that you know and net dollar retention rate can really start to accelerate from from here from the current levels. How high can they go right as we all sit down and kind of start to calibrate our models.
And how high can the net dollar retention rates go as we go into 'twenty, one 'twenty, two and beyond and thank you.
Yes, the I think without giving out of us.
Specific specific number I think over the next.
And multiple years, we see this number continue to increase we don't see a.
Really of feeling right now as far as like pegging to a number and I will say that our larger customers grow at.
Way more than the 120% and we have and so if we look back for example stand.
For seven years ago, and looking at our top decile of customers and what they were growing at Theres No reason to believe that for.
For five six years from now that we can't out of La.
Large part of our customer base growing at what our endear now is now and then our customers are growing even faster than that and so we feel pretty good about maintaining growth in those areas, but for at least the the future. We can see right now.
Got it. Thank you so much guys.
Your next question comes from the line of David Hynes from Canaccord Genuity. Your line is open.
Hey, Thanks, guys. Congrats on the results are great to see the acceleration.
Just and I want to ask a question about how you see the space.
All of them.
So if you take us from like Qual trucks, right and a bunch of us initiate coverage on that stock. This morning. So I think it's top of mind for investors.
If we think about what theyre doing and experienced management, where for them surveys of the primary mode of data collection and how do you think the problem, they're solving kind of overlaps with with your capabilities and and listening or a reputation like do you see the functional venn diagrams are use cases for the tech <unk>.
Verging overtime and and look obviously these are these are huge markets. There's plenty of room for both of you guys, but I'd love to get your thoughts on that.
Yeah, Yeah. Great question. Thank you. So a couple of things I'd say, there I think when we think about the type of data that exists in the.
The the listening and the analytics tools that we're providing for our customers.
That is data that is immensely valuable and specifically because it's not targeted.
As a survey might be where our focus group might be.
These are the folks that don't have a specific polar inclination to provide feedback, but theyre speaking their minds, they're talking about their preferences and their trends.
And I think the that's a really important aspect of businesses has been starting to.
Really understand the value there and being able to understand not just the known universe, but what about all of the people that were not yet working with that we don't yet know what is it that they want and how can we better serve them. So I think that's an important distinction I think some of that.
Organizations like <unk> can start to get to so I, certainly think that there's a bit of overlap there, but the other thing and I'll say.
A lot of the value that our platform provides is because it's the horizontal in nature and what I mean by that is the people that the can then turn that information into action.
Other its plan and campaigns or understanding how to better serve.
Customers to engagement on the platforms et cetera, it's all fluid right. It's all happening and the same place the marketers the customer service people to product people, everyone can be working and the same place.
And that creates a really interesting dynamic for our customers. So it's kind of like Where's the proximity to the action.
And where can we get real time information.
The really kind of how the pulse on and on the world.
To drive quicker decisions and so I think that'll be a distinction.
But probably the bigger of the two is just the fact that all of those use cases are able to come together and sprout.
And able to drive.
And of immediate action across the platforms that are really shaken brands today. So I think that's kind of continued to be important.
Yes, yes, yes.
The good color there.
And then Oh.
And I spoke social commerce.
Look I am not sure if I've heard you talk about in the past and it's come up now of a handful of times on the call cash can you just elaborate maybe on like where specifically you see opportunities, there and and how sprout might participate.
Yes, yes totally so.
I'll start by saying.
It's.
The commitment from the platforms around Commerce has really picked up over the last couple of quarters I think we've heard that on some of the earnings and just seeing that and some of the things that they're focused on.
For us the opportunities in two dimensions. The first is.
Anytime that there is more engagement happening and social channels debt.
And an area where we are.
Can add value to our customers and stand the benefit right. The more business, that's happening through social channels, whether it's private and public et cetera.
The more need to have for tools like ours that are able to capture that conversation to be able to engage with it to drive those things et cetera. So it's kind of like a rising tide effect.
The more things that we do is consumers that are happening and social and the better.
The second dimension is kind of directly around commerce and the capabilities of the platform to introduce so.
Where are the opportunities for us to whether it would be.
To be providing analytics on.
And the efficiency of those efforts, whether it's to actually provide publishing tools around.
Getting those those products and those digital storefront and front of people.
Whether it's using the listening data to start to kind of tailor those offerings and adjusted and real time Theres a lot of different ways that that could play out.
We're working on a handful of things related to commerce that will evolve a lot through 'twenty, one, particularly as it becomes clear what the.
The kind of variety of of.
Efforts from the various platforms is going to be I think that's still kind of early days.
Yes, yes very helpful. Okay. Thanks, guys Congrats again.
Thank you.
Your next question comes from the line of Scott Berg from Needham and company. Your line is open.
Okay.
Hi, everyone and congrats on a great quarter and I see we're up against the clock. So I'll make it one question, but what I am trying to figure out is.
The platforms, obviously had a big big benefit from some of the work for at home trends and those people are just online more whether it's from the orders from the marketing kind of front office needs that we've spoken about historically, but how do you start thinking about the usage of the platform moving forward as things reopen a little bit here. This year at least I hope it's good.
Sales for this year.
Okay.
Yeah, Great question, I mean, I think the way that we think about it is.
The events over the last year really behaved as the catalyst for <unk>.
The new ways of of interaction and engagement.
It was.
The hurdle that allowed people to discover something better.
The interacting with brands and and buying products and this way et cetera.
It's a great experience right.
Similar to people, who maybe haven't made a purchase through Amazon Prime before and now they do and and they're discovering something that can be very beneficial so.
A lot of that is going to be at least in our opinion and lasting effect right.
This was inevitable over a longer period of time, it's been accelerated.
But we think that a lot of the trends in terms of just consumer engagement with brands across social.
It's going to stick around the hours might change as more people come into the office et cetera, but.
And that Hasnt shifted so dramatically over the last year that there is any reason to believe that there's like some pent up shift.
Shift happening.
We think it's probably just accelerating on a faster timeline and it might have on its own.
Great that does it for me congrats on the great quarter guys.
Alright. Thanks.
Your next question comes from the line of Brett Knoblauch from Bear and Bird capital markets. Your line is open.
Hi, guys. Thanks for taking my question.
Just one quick one for me you mentioned the messaging experience a bit and the prepared remarks I was wondering if you could elaborate on that and maybe how your product is currently set up or what you'd have to do and get it set up to enable your customers to engage with their customers via messaging channels. Thank you.
Yeah, Yeah, great question so.
The product is.
It's set up to do that today it does that today.
When we think about our investments around messaging.
Some of it has to do with just expansion of channels right. There are more options for.
And for people, who want to communicate that way with with with brands and the flow steady business with.
So we want to make sure that we've got good coverage there, but we've also seen as those as those patterns of evolved and as that's become the preferred channel of communication with many brands and Theres just additional capabilities that we can get out of here.
And it's this dine.
Dynamic environment, where you can introduce.
New capabilities that just aren't possible of her phone or E mail or others, and so us thinking about what is.
What is the next couple of generations of those messaging interactions look like.
And then making sure we've got that coverage and we're everywhere our customers need to be from of Medtronic messaging perspective, those are really our priorities on that aspect of the of the platform for sure.
Perfect. Thanks, so much for that.
Yeah.
There are no further questions at this time, Mr. Justin Howard I turn the call back over to you for some closing remarks.
Alright fantastic well. Thank you all for joining us today, thanks for the great questions.
I think we did go over a few minutes. So thank you for that I know there is a busy day today.
Thanks always for the support to.
The team and we look forward to catching up with you in.
And our conversations throughout the quarter of some of the events, we'll be attending have a wonderful evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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