Q1 2024 Sprout Social Inc Earnings Call

[music].

Operator: Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by May mean, Cindy and I will be your conference operator today at this time I would like to welcome everyone to this pro social press quarter 'twenty 'twenty four earnings call. All lines have been placed on mute to prevent any background nice up there the speaker's remarks, there Washington and answer session. If you would like to ask that quest.

And during this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again. Thank you I would now like turn the call over to Jason Graco, Vice President of Investor Relations. Please go ahead.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Jason Rechel, Vice President of Investor Relations. Please go ahead.

Jason Graco: Thank you operator, welcome to sprout, social first quarter 2024 earnings call, we'll be discussing the results announced in our press release issued after the market closed today and I've also released an updated investor presentation, which can be found on our website.

Jason Rechel: Thank you, operator. Welcome to Sprout Social's first quarter 2024 earnings call. We'll be discussing the results announced in our press release issued after the market closed today, and we have also released an updated investor presentation, which can be found on our website. With me are Sprout Social CEO Justyn 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 provisions of the Private Securities Litigation Reform Act of 1995. Therefore, all statements other than statements of historical fact are forward-looking.

Jason Graco: With me are sprout, social CEO, Justin Howard CFO, Joe del Preto, and President Ryan Barretto.

Jason Rechel: These include, among others, statements concerning our expected future financial performance and business plans and objectives, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, opportunity, or will. These statements reflect our views as of today only and 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.

Jason Graco: Today's call will contain forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact are forward bucket.

Jason Graco: Include among others statements concerning our expected future financial performance and business plans and objectives and can be identified by words, such as expect anticipate intend plan believe seek opportunity or will.

These statements reflect our views as of today, only and 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.

Jason Rechel: For a discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the fiscal year ended December 31st, 2023, filed on February 23rd, 2024, as well as any future reports that we file with the SEC. During the call, we'll discuss non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles.

For a discussion of the risks and other 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, 2023 filed on February 23, 2024, as well as any future reports that we file with the SEC.

Jason Graco: During the call, we'll discuss 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 first quarter earnings press release, which has been furnished to the SEC and is available on our website.

Jason Rechel: Definitions of these non-GAAP financial measures, along with reconciliation to the most directly comparable GAAP financial measures, are included in our first quarter earnings press release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com. And with that, I'll turn the call over to Justyn. Okay?

Jason Graco: Investors Dot sprout social backup.

Jason Graco: And with that let me turn the call over to Justin Justin.

Justyn Russell Howard: Thank you, Jason and thank you to everyone for joining us we always appreciate your time.

Justyn Russell Howard: Thank you, Jason, and thank you to everyone for joining us. We always appreciate your time. I'm excited to get us started today by expanding on our news to promote Ryan Barretto to CEO before handing things over to him. Ryan and I have had an incredible partnership over the past eight years, but it only took me a few of those years to recognize that he should and would become our CEO. Several years ago, we both agreed and committed that it didn't matter which role either of us was in as long as we put Sprout in the best position to win and that we were in it together.

Justyn Russell Howard: I'm excited to get US started today by expanding on our news to promote Ryan barretto to CEO before handing things over to him.

Justyn Russell Howard: Ryan and I have had an incredible partnership over the past eight years, but it only took me a few of those years to recognize that he should and will become our CEO.

Justyn Russell Howard: Several years ago, we both agreed and committed that it didn't matter, which will either of us were in as long as we put sprout in the best position to win and that we were in it together.

Justyn Russell Howard: That's why we're so excited about the natural progression of this transition. Throughout our time together, Ryan has often had the biggest impact in the areas typically aligned with the CEO role. And I've often made my biggest impact when I can think deeply about our biggest opportunities, get forensic with our data, and push our product strategy forward. Over time, and as we've grown, the role of the CEO has changed and naturally become more aligned with areas where Ryan is exceptional.

Justyn Russell Howard: That's why we're so excited about the natural progression of this transition.

Throughout our time together Ryan has often had the biggest impact in the areas typically aligned with the CEO role.

And I have often made my biggest impact when I can think deeply about our biggest opportunities differentiate with our data and push our product strategy forward.

Justyn Russell Howard: Over time and as we've grown the role of the CEO has changed and naturally became more aligned with areas, where Brian is exceptional.

Justyn Russell Howard: The same skills and perspectives that allowed me to architect our success over the past 14 years aren't the same things required of the role today. And conversely, I've had far less time for the areas where I can bring exponential value to the business. Together, we're an incredible team.

Justyn Russell Howard: The same skills and perspective that allowed me to architect our success over the past 14 years arent the same things required of their old today.

Justyn Russell Howard: And Conversely, I had far less time for the areas, where I can bring exponential value to the business.

Justyn Russell Howard: Together, we are an incredible team adjusting the positions we play to match, where we are heading gives us the opportunity to add significantly more value and move faster and capturing the opportunity ahead of us.

Justyn Russell Howard: Adjusting the positions we play to match where we're heading gives us the opportunity to add significantly more value and move faster in capturing the opportunity ahead of us. In a moment, I will turn it over to Ryan to talk about how we intend to make that happen. But first, I want to say thank you and congratulations to Ryan. As a founder, board member, team member, and shareholder, I am as excited as I've ever been about the opportunity in front of us with you leading this incredible team. Thank you, Justyn. I'm deeply grateful for this opportunity.

Justyn Russell Howard: In a moment I will turn it over to Ryan to talk about how we intend to make that happen.

Justyn Russell Howard: But first I want to say, thank you and congratulations to Ryan.

Ryan Paul Barretto: As a founder and board member team member and shareholder I'm as excited as I've ever been about the opportunity in front of US with you leading this incredible team.

Ryan Paul Barretto: Thank you Justin I am deeply grateful for this opportunity.

Ryan Paul Barretto: It's been an amazing honor to work alongside Justyn for the last eight years building this team and business together. Getting the opportunity to step into the CEO role with his continued partnership and support creates an amazing foundation for me and for Sprout. I want to thank the Sprout Board of Directors for your ongoing trust, my team for putting me in this position, our shareholders for your commitment, and our customers for their advocacy and for helping us get better every day. I want to be really clear up front on my goals and aspirations for this. We are here to win.

Speaker Change: It's been an amazing honor to work alongside Justin for the last eight years building this team and business together.

Speaker Change: Getting the opportunity to step into the CEO role with his continued partnership and support creates an amazing Foundation for me and for Sprouts.

Ryan Paul Barretto: I want to thank the spread board of directors for your ongoing Trust my team for putting me in this position our shareholders for your commitment and our customers for advocacy and for helping us get better every day.

Ryan Paul Barretto: I want to be really clear upfront on my goals and aspirations for this team.

Ryan Paul Barretto: We're here to win this will be a winner take most market and I believe sprout is best positioned to be that winter and a growing market.

Ryan Paul Barretto: This will be a winner-take-most market, and I believe Sprout is best positioned to be that winner in a growing market. We have the number one product in software, an award-winning culture, and the team most well known for driving customer success. I'm going to be deeply focused on raising the bar on all of these competitive. We intend to drive excellence in everything we do and to deliver outsized value for our employees, customers, and shareholders along the way. Our team can expect me to lead from the front as we work to deliver.

Ryan Paul Barretto: The number one product in software and award winning culture and the team most well known for driving customer success.

Ryan Paul Barretto: I'm going to be deeply focused on raising the bar on all of these competitive advantages.

Ryan Paul Barretto: We intend to drive excellence in everything, we do and to deliver outsized value for our employees customers and shareholders along the way our team can expect me to lead through the plants as we work to deliver here.

Ryan Paul Barretto: Let's start with Q1 results.

Ryan Paul Barretto: Let's start with Q1 results. We had a strong quarter in many dimensions, but we ultimately didn't meet our revenue goal. After a record-breaking half of 2023, where the majority of our focus was deeply weighted on closing deals versus creating new pipes, we've locked into 2024 with a different business. We're now enterprise heavy, and the linearity of our business has changed materially, which affects our revenue recognition and planning. Our months, quarters, and years are now more heavily weighted to the traditional enterprise buying cycle.

Ryan Paul Barretto: We had a strong quarter on many dimensions, but ultimately didn't meet our revenue goals.

Ryan Paul Barretto: After a record back half of 2023, where the majority of our focus with deeply weighted on closing deals versus creating new pipeline, we've locked into 2024 with a different business.

Ryan Paul Barretto: We're now enterprise heavy and the linearity of our business has changed materially which affects our revenue recognition and planning.

Ryan Paul Barretto: Our months quarters and years and now more heavily weighted to traditional enterprise buying cycles.

Ryan Paul Barretto: We underestimated the magnitude of this shift and the quickly changing dynamics in our. On top of this, we made several important strategic decisions heading into Q1, such as building new vertical sales teams, accelerating promotions in our mid market and enterprise, adjusting our account coverage model, and prioritizing tiger enablement for all of our customers. We thought we could manage these changes without disruption, but they collectively set us back. I believe each of these moves supports our long-term strategy and better positions us for the future, but in the short term, there were execution headwinds that were self-induced.

Ryan Paul Barretto: We underestimated the magnitude of the shift in the quickly changing dynamics in our customer mix.

Ryan Paul Barretto: On top of this we made several important strategic decisions heading into Q1, such as building the vertical sales teams accelerating promotions in our Midmarket and enterprise teams.

Ryan Paul Barretto: Adjusting our account coverage model and prioritizing tighter enablement for all of our customer facing teams.

Ryan Paul Barretto: We thought we can manage these changes without disruption, but they collectively set us back.

Ryan Paul Barretto: Each of these new support our long term strategy and better positions us for the future, but in the short term there were execution headwinds that were self induced.

Ryan Paul Barretto: Although Q1 net new revenue added was less than Q1 of last year and not where we expected it to be, there was a lot of important learning, progress, and momentum coming out of this process. I own this and fully expect us to be much better going forward.

Ryan Paul Barretto: Although Q1 net new revenue added was less in Q1 of last year and not where we expected it to be there was a lot of important learning progress and momentum coming out of this process I own this and fully expect us to be much better going forward.

Ryan Paul Barretto: Our go to market Org is now better positioned for scalable growth, our total pipeline increased 37% year over year.

Ryan Paul Barretto: Our go-to-market org is now better positioned for scalable growth. Our total pipeline increased 37% year over year. Previum module attach rates continue to rapidly increase.

Ryan Paul Barretto: Premium module attach rates continue to rapidly increase and our gross retention is over performing plan each positioning sprout for another strong annual performance.

Ryan Paul Barretto: And our gross retention is overperforming plan, each positioning Sprout for another strong annual performance. Kager ARR meaningfully accelerated in growth and is seamlessly folding into our platform strategy. And we expect that our Q1 added new ARR will be our low watermark with strong sequential growth over the year. Shifting to the go forward.

Ryan Paul Barretto: CAGR <unk> <unk>.

Ryan Paul Barretto: Meaningfully accelerated in growth and as seamlessly folding into our platform strategy and we expect that our Q1 added new <unk> will be our low watermark with strong sequential growth over the year.

Ryan Paul Barretto: Entering 2023, we took an important strategic step of deprioritizing the very low-end and unproductive parts of our business. Coming into 2024, with that business largely cycled out, we have new clarity on where to optimize and redraw our teams and go-to-market efforts to accelerate our path to $1 billion in revenue. While we believe this is a powerful unlock for both our growth and efficiency, the benefits will not materialize immediately. We believe that redrawing our go-to-market model around the most successful cohorts is a massive unlock to our future potential. We know that our best customer cohorts are our most efficient customers to acquire. They are the most efficient expansion opportunities, and they're the least likely to happen, each by orders of magnitude.

Ryan Paul Barretto: Shifting to the go forward entering 2023, we took an important strategic step of de prioritizing the very low end and unproductive parts of our business.

Ryan Paul Barretto: Coming into 2024 with that business largely cycled out we have new clarity on where to optimize and redraw our teams and go to market efforts to accelerate our path to $1 billion in revenue.

Ryan Paul Barretto: While we believe this is a powerful unlocks for both our growth and efficiency the benefits will not materialize overnight.

Ryan Paul Barretto: We believe that redrawing our go to market model around the most successful cohorts is a massive unlock through our future potential.

Ryan Paul Barretto: Know that our best customer cohorts are our most efficient customers to acquire there.

Ryan Paul Barretto: Most efficient expansion opportunities and there are the least likely to cancel each by orders of magnitude.

Ryan Paul Barretto: We will invest aggressively against these cohorts with improved economic efficiency. At the same time, we plan to de-invest in the parts of the market where these attributes don't exist, even if this results in walking away from immediate revenue. We're already beginning to realize the benefits to gross retention from our 2023 model changes being nicely ahead of Q1 planning. And we believe that by prioritizing the market cohorts where we can predict future economic potential and get surgical with where we will allocate our time, we can scale a durable, efficient upmarket land and expand motion. We believe the results will be higher future NDR and improved efficiency across the entire organization.

Ryan Paul Barretto: We'll invest aggressively against these cohorts with improved economic efficiency.

Ryan Paul Barretto: At the same time, we plan to be invest in the parts of the market, where these attributes don't exist.

Ryan Paul Barretto: Even if this results in walking away from immediate revenue.

Ryan Paul Barretto: We're already beginning to realize the benefits to gross retention from our 2023 model changes being nicely ahead of Q1 plan here and we believe that by prioritizing the market cohorts, where we can predict future economic potential and get surgical with where we will allocate our time, we can scale, a durable efficient market land and expand motion.

Ryan Paul Barretto: We believe the results will be higher future MTR and improved efficiency across the entire organization.

Ryan Paul Barretto: As we all know with compounding SaaS models, our Q1 performance does flow through the year from a revenue perspective.

Ryan Paul Barretto: As we all know, with compounding SAS models, our Q1 performance does flow through the year from a revenue perspective. With the downward pressure from Q1 revenue flowing through, the changing linearity of the business, and the need to create space as we execute on our go-to-market changes, I needed to tighten up our forecast to ensure we delivered. The underlying reality is that our business today is orders of magnitude different from the business you knew at the time of our IPO. Once a completely inbound, highly transactional model, we're now enterprise-heavy and are constructed that way from products to customers. Because of this, we should be measured on different metrics that properly align to this current state.

Ryan Paul Barretto: With the downward pressure from Q1 revenue flowing through the changing linearity of the business and the need to create space as we execute on our go to market changes I needed to tighten up our forecast to ensure we deliver on our commitments.

Ryan Paul Barretto: The underlying reality is that our business today is orders of magnitude different from the business unit at the time of our IPO once a completely inbound highly transactional model, where now enterprise heavy and are constructed that way from products through customer success.

Ryan Paul Barretto: Because of this we should be measured on different metrics that properly aligned to this current state.

Ryan Paul Barretto: As I transition into the CEO role I want to ensure that we move forward with this in mind.

Ryan Paul Barretto: As I transition into the CEO role, I want to ensure that we move forward with this in mind. We've told you that ARR growth should have a similar trajectory to revenue growth, while metrics like RPO and CRPO are more appropriate indicators of performance trends for our business. As such, we'll no longer be disclosing ARR on a go-forward basis, an approach that is consistent with enterprise SaaS companies in our peer set, including our direct competitors.

Ryan Paul Barretto: We told you that <unk> growth should have a similar trajectory to revenue growth while metrics like <unk> and <unk> are more.

Ryan Paul Barretto: Indicators of performance trends for our business as such we will no longer be disclosing on a go forward basis and approach that is consistent with enterprise SaaS companies in our peer set including our direct competitors.

Ryan Paul Barretto: We've been consistently sharing some four years that we don't measure our success in total logos, our total customer count and our sales team are not measured are compensated on these metrics.

Ryan Paul Barretto: We've been consistently sharing for four years that we don't measure our success in total logos or total customers, and their sales team is not measured or compensated on these metrics. We're now at a point where a single large enterprise customer is worth more than hundreds of smaller ones. With enterprise being the priority, total logo count is not a key performance indicator of our current business. As such, we'll no longer be disclosing the total number of customers.

Ryan Paul Barretto: We're now at a point, where a single large enterprise customer is worth more than hundreds of smaller customers.

Ryan Paul Barretto: With enterprise being the priority total logo count is not a key performance indicator of our current business as such we will no longer be disclosing total customer accounts.

Ryan Paul Barretto: Further, to the goal of transparency, we had previously disclosed phone numbers and contributions from our partners. However, we recognize that this has actually served as more of a distraction than a helpful data point. So we won't be continuing that practice.

Ryan Paul Barretto: Further with the goal of transparency, we had previously disclosed logo numbers and contributions from our partner channel. However.

Ryan Paul Barretto: However, we recognize that this is actually served as more of a distraction than a helpful data point, so we won't be continuing that practice.

Ryan Paul Barretto: The idea that all of our growth comes from temporal partner contributions is unfounded. So I want to ensure that everyone has the same understanding and more clarity on the actual data. Salesforce partner revenue, including both social studio and non-social studio business, accounted for slightly less than 15% of our new business in 2023 and less in 2020. This amounts to a roughly 3% contribution to our total 2023 revenue growth, which I believe is significantly less than many may have previously assumed. We value our partnership with Salesforce and other key partners, and we see a strong opportunity for future growth that powers through a 3% potential headwind in 2025, especially given all the opportunities we are creating within our ecosystem.

Ryan Paul Barretto: Idea that all of our growth comes from temporary partner contributions as unfounded. So I want to ensure that everyone has the same understanding and more clarity into the actual data.

Ryan Paul Barretto: Salesforce partner revenue, including both social studio and non social studio business accounted for slightly less than 15% of our new business in 2023 and less in 2022.

Ryan Paul Barretto: This amounts to a roughly 3% contribution to our total 2023% revenue growth, which I believe is significantly less than many may have previously assumed.

Ryan Paul Barretto: The value of our partnership with Salesforce and other key partners and we see a strong opportunity for future growth the powers through a 3% potential headwind in 2025, especially given all the opportunities we are creating within our ecosystem.

Ryan Paul Barretto: We have a tremendous opportunity in front of us. And I'm excited about the innovation and change that we are driving the business to deliver on our goals. We're aligning ourselves with the best and fastest growing cohorts of our market, which you can see in our 44% large customer growth, 41% HCV growth, and ongoing rapid growth in RPO and CRP. We expect we're going to see both accelerating new business, accelerating expansion momentum, and improving efficiency over a multi-year period of time as we build on our product leadership, world-class culture, and history of exceeding for our customers every day. I'm excited to bring Justyn and her founders' original vision to life as Sprout defines how businesses can operationalize social. And with that, I'll turn it over to Joe. Joe

Joseph M. Del Preto: Thanks, Ryan. I'll now run through our financial results and guide. Revenue for the fourth quarter was $96.8 million, representing 29% year-over-year growth. Subscription revenue was $95.8 million, up 28% year-over-year. Services revenue was $1.0 million, up 112% year-over-year.

Joseph M. Del Preto: Despite underestimating the impact of the strategic changes Ryan outlined earlier, we continue to deliver top quartile growth, and the number of customers contributing more than $10,000 in ARR grew 24% from a year ago. The number of customers contributing more than $50,000 in ARR grew 44% from a year ago. ARR growth approximated subscription revenue growth in Q1, which underperformed our plan for the reasons Ryan outlined. However, we have materially fewer net customer losses compared with the back half of 2023, consistent with the early benefits from our model.

Joseph M. Del Preto: You should think about Q1 ARR being even smaller as a percentage of the full year compared with the prior period, and you should continue to think about the rate of growth of the total customer base improving throughout 2020. Q1 ACV was $12,892, a 41% increase year over year.

Joseph M. Del Preto: As we left our first full quarter of new business pricing, new business ACV again grew double digits year over year, and we expect strong ACV growth to continue over the medium term for my rapidly shifting enterprise. Strengthening Premium Module Attach Rates, Influential Marketing, and Customer. In Q1, non-GAAP gross profit was $76.0 million, representing a non-GAAP gross margin of 78.5%, down 30 basis points from a year ago. Non-GAAP sales and marketing expenses for Q1 were $37.2 million, or 38% of revenue, down from 40% a year ago.

Joseph M. Del Preto: We continue to hire aggressively in our enterprise sales and growth organization. As our customer base has shifted away from SMB and into enterprise, we have changed our accounting for deferred commission amortization from three years to five. This is consistent with our peers in enterprise software. This accounting change resulted in a $4.4 million reduction in Q1 sales and marketing expenses.

Joseph M. Del Preto: We expect an operating income and benefit in all future. This accounting change has no impact on cash flow and will mean that non-GAAP operating margins and non-GAAP free cash flow margins are likely to be increasingly correlated moving. Non-GAAP research and development expenses for Q1 were $18.3 million or 19% of revenue, roughly flat from a year ago. We continue to invest in our future, our increasingly targeted investments in AI and social customer care, and are delivering strong results. Non-GAAP General Administrative Expense for Q1 was $14.5 million, or 15% of revenue, down from 17% a year ago.

Joseph M. Del Preto: We expect to deliver consistent G&A leverage as a percent of revenue moving forward. Non-GAAP Operating Income for Q1 was $6.0 million, for a 6.2% non-GAAP operating margin. Non-Gap Net Income for Q1 was $5.7 million for Non-Gap Net Income of $0.10 per share, based on 56.3 million weighted average of common stock compared to non-get net income of $3.4 million and six cents per share a year ago.

Joseph M. Del Preto: Turning to the balance sheet and cash flow statement, we end Q1 with $95.2 million in cash, cash equivalents, and marketable security. This is down from 98.1 million at the end of Q4. Deferred revenue at the end of the quarter was $147.1. Looking at both our billed and unbilled contracts, RPO totaled 290.0 million.

Joseph M. Del Preto: Up from $275.0 million exiting Q4, and up 54% year-over-year, we expect to recognize 73%, or 210.6 million, of total RPO revenue over the next 12 months. Implying a CRPO growth rate of 48% year over year. We continue to believe that all our leading indicators are converging towards CRPO. Operating cash flow in Q1 was a record $11.2 million, up from $8.3 million a year ago. Non-gap free capital with a record $11.3 million, up from $7.9 million a year ago.

Joseph M. Del Preto: Moving the Formal Guide, For the second quarter of fiscal 2024, we expect revenue in the range of $98.5 to $98.6 million, or a growth rate of more than 24%. We expect non-gap operating income in the range of $4.6 million to $5.0 million. There serves a non-gap operating margin of 4.9% at the midpoint and includes an estimated benefit of our deferred commission accounting. We split the non-gap net income per share between $0.07 and $0.08.

Joseph M. Del Preto: This assumes 56.6 million weighted average basic shares of common stock outside. For the full year 2024, we are reducing total revenue to the range of $405.0 million to $406.0 million. This assumes a greater than 20% organic sprout revenue growth and accelerated tag or subscription revenue growth and incorporates each of the changes Ryan. For the full year 2024, we are raising non-GAAP operating income to the range of $28 million to $29 million.

Joseph M. Del Preto: This provides annual non-GAAP operating margin improvement of roughly 560 basis points. Excluding the accounting change, we are reiterating our prior non-GAAP operating income guidance, which now implies year-over-year non-GAAP operating margin improvement of $240,000. We expect non-GAAP net income per share between $0.45 and $0.46, assuming 57.0 million weighted average basic shares of Cabin Stock.

Joseph M. Del Preto: We believe we've transformed our business model to position us to deliver increasingly durable and increasingly efficient growth. With that, Jess and Ryan and I are happy to take any of your questions. Operator.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loud speaking on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Ryan Paul Barretto: Again, press star 1 to join the queue. Your first question comes from the line of Raimo Lenschow with Barclays. Hey, thank you. Ryan, my first question for you is, if you think about the go-to-market changes, if you think about software historically, that usually takes like two to three quarters for go-to-market changes to kind of settle down the organization. Can you speak a little bit about how you see it, like maybe more specifically compared to your prepared remark, what you did there? Is that two to three quarters kind of still valid? And then I had one follow-up appointment.

Ryan Paul Barretto: Yeah, thanks, Raimo. Yeah, I mean, we're kind of, I would say, most of the way through some of those things today. We made a lot of those shifts heading into Q1. If I think about the things that we did, really important strategically for where we're going as a market organization, if you think about the investments in things like vertical sales, in the account coverage that we implemented, and in the enablement that we were doing as a team, all those things were playing out in Q1.

Ryan Paul Barretto: When we think about the guidance, it's all been factored through both the compounding of subscription revenue through the year, as well as the impact of the changes that we're making through Q2 and getting the rest of our team ramped up. So they've all been factored in here. And I think, you know, a good portion of it has been felt in Q1. And we feel really good as we go into Q2 with where our team is at.

Ryan Paul Barretto: Yeah, and then since maybe it's for all of you, like, since you took away ARR, like, now we kind of need to kind of think like, okay, how do I judge you? And how do I judge the progress of the business? And Joe, you said, like, ARR is probably worth the trust in Q1. Like, is there any kind of handholding you want to give us here? Or did you just kind of need to wait for the outcome?

Ryan Paul Barretto: Yeah, I'll start on that one. You know, I think just going back to the rationale here, the linearity of our business and the composition of our customer base have been changing in really material ways. As we've been going through this transformation up market and becoming more back end loaded, we view revenue and RPO as the best indicators for our business. And that's, you know, consistent with our peers. We also believe that for all of you, this is going to be the most accurate and a less complicated and less noisy way to measure our business.

Ryan Paul Barretto: So I'd highlight revenue and the RPO as sort of the lagging leading indicators that are going to give you a good indication of where the business is going. And we realize that this is, you know, a change, and we've added some work for all of you tonight. And so, our team will make sure that we are providing the right level of support as you dial in your models. Okay, thank you. And your next question comes from the line of Arjun Bhatia with William Blair. Your line is open.

Joseph M. Del Preto: Maybe to start just on the guidance, and obviously, we took a pretty big cut to the full year number here, but maybe for Joe, if I think about it historically, at least over the last couple of years, I think there hasn't really been that much room or cushion in the guidance for variability in the business. And now, it seems like there are some more changes that are coming from an operational and strategic perspective.

Joseph M. Del Preto: And so can you just walk us through maybe what you're baking into the guidance and how much cushion you've left yourself as you work through some of these changes over the course of 2024 here? Yeah, so Arjun and some of this Ryan stuff, but I'll kind of reiterate the things that are baked in there.

Joseph M. Del Preto: First of all, all the kind of go-to-market changes that Ryan indicated are kind of baked in the guidance and how that kind of, you know, we're still making those changes flow into Q2, but we feel really good about the momentum, the fact that you know, the flow through on revenue, the soft Q1 revenue that we had and how that flows through. And then the other thing we've kind of factored in here is that our business is definitely becoming more Q3, Q4 weighted.

Joseph M. Del Preto: And so when we look at the full year, you know, we're putting way more weight on the back half of the year, and that's the one that takes revenue down to a level that we felt was a high level of confidence to execute through these changes and give us an opportunity to have a successful, you know, back half of 2020. Okay. And then, Ryan, for you, you mentioned something in your prepared remarks, and I may have missed the details, but you mentioned that, you know, there's some immediate revenue that you might walk away from if it wasn't the right strategic fit for you long term. Can you just help flush that out for us? What is it that you're deprioritizing?

Ryan Paul Barretto: Is that different from the transition that we've been talking about over the last year or so? And maybe, you know, how much more complexity does that add to your go-to-market motion as you try to reallocate resources to the ideal customer profile for you? Yeah, thanks.

Ryan Paul Barretto: Thanks for the question. Step one of a lot of the change that we were making last year was getting the composition of our customer base to a place where we felt like it perfectly matched our ideal customer profile and really transforming both the inbound and outbound motion, so our new customers as well as our current customer base. And going through that, the next part of it, and the biggest opportunity, is really identifying where our most sophisticated customers live and where we have the greatest opportunity to be able to maximize our investment.

Ryan Paul Barretto: And so as we've looked at the data and looked at our customer base and the cohorts of customers, we've identified some really exciting opportunities for us to really put our teams, the majority of which are in the upmarket and mid market enterprises, against some amazing opportunities when we think about our outbound activities and where we invest our time prospecting, as well as where we think about our marketing efforts and all of the inbound actions that we take to drive really healthy inbound And so it was really a commentary that we've identified pockets of just the overall opportunity that we don't want to go as hard at, because we know that it has different metrics, like CAC and higher churn rates, compared to the opportunity with some of these cohorts that just convert faster, they land bigger, they stay longer.

Ryan Paul Barretto: So it was really a comment on focusing on our team on some of these areas that we've just got more surgical with with the data that we've got in our business. Okay, got it. Thank you. And your next question comes from the line of D.J. Hynes with Canaccord Genovese.

Ryan Paul Barretto: Hey, guys, thanks for taking the question. Ryan, if I interpret your comments right about Q1 softness, it sounds like it was a function of kind of shots on goal, right, a little bit less pipeline generation in the second half of 23. I'd be curious to kind of extrapolate from that and ask about like sales cycles. What are you seeing? I mean, Sprout has always been really quick.

Ryan Paul Barretto: Ryan if I interpret your comments right about Q1 softness it sounds like it was a function of kind of shots on goal right a little bit less pipeline generation in the second half of 'twenty three I'd be curious.

Ryan Paul Barretto: To kind of extrapolate from that and ask about like sales cycles. What are what are you seeing I mean sprout has always had really quick.

Ryan Paul Barretto: Close Rates and Short Sales Cycles. Is that changing now with the push to enterprise? I mean, you talk more about Q3, Q4 waiting, maybe that's more tied to budget cycles, but I'd love to hear just specifically on sales cycles, what you're seeing. Yeah, thanks for the question, DJ. Yeah, you're right.

Ryan Paul Barretto: Close rates and short sales cycles is that changing now the push to enterprise I mean, you talk more about Q3 Q4 waiting maybe thats more tied to budget cycles, but I'd love to hear just specifically on sales cycles, what youre, saying.

Speaker Change: Yes. Thanks for the question Vijay, Yes, Youre right I mean, we are definitely seeing lengthening of our sales cycles as the composition of the customer base and the prospect base is changing these are larger opportunities theyre larger lands and they have larger opportunities for expansion and so it is changing.

Ryan Paul Barretto: I mean, we are definitely seeing lengthening of our sales cycles as the composition of the customer base and the prospect base is changing. These are larger opportunities, they're larger territories, and they have larger opportunities for expansion. And so it is changing. We've, we still feel like we're in a great position because we leverage our product in an effort to get customers to more quickly see the value and realize that Sprout is a great fit.

Ryan Paul Barretto: <unk>.

Ryan Paul Barretto: We still feel like we're in a great position, because we leverage our product in an effort to get customers to more quickly see the value and realize that <unk> is a great fit but we also see ourselves in more rfps today than we ever did before which is a really positive thing for the business. If you look at some of the logos that we've been talking.

Ryan Paul Barretto: But we also see ourselves in more RFPs today than we ever did before, which is a really positive thing for the business. If you look at some of the logos that we've been talking about over the last few quarters and even this quarter, the likes of P&G and Universal Pictures, American Honda, great examples of large companies that land much bigger for us and have much bigger expansion opportunities later. So I would say that the lengthening of the cycle is a dynamic in our business, which ties to a lot of the commentary around the backloaded nature of where our business is transforming.

Ryan Paul Barretto: Over the last few quarters, and even this quarter or the likes of P&G and Universal Pictures and American Honda Great. Examples of large companies that land much bigger for us and have much bigger expansion opportunities later, so I would say that the lengthening of the cycle is a dynamic in our business which ties to.

Ryan Paul Barretto: A lot of the commentary around the.

Ryan Paul Barretto: Back loaded nature of where our business is transforming.

Ryan Paul Barretto: Okay. And then maybe as a follow-up, just with all that's happening from a regulatory standpoint surrounding TikTok, can you remind us, like, A, how material that is to the business from a revenue standpoint today? And then B, I'd love to pick up any industry chatter that you're hearing, how folks are thinking about this, like, what would happen if TikTok were to go away in the U.S.? And any comments there would be helpful.

Speaker Change: Yes, okay.

Ryan Paul Barretto: And then maybe as a follow up just with all that's happening from a regulatory standpoint surrounding tictoc can you remind us like how material that is to the business from a revenue standpoint today, and then be I'd love to pick up any industry chatter that youre hearing how folks are thinking about this like what would happen. If tictoc were to go away in the U S and any comments there would be helpful.

Ryan Paul Barretto: Yes, I think the biggest thing to highlight here is we don't really monetize specifically on any of the network. So if you think about just our customer strategy the way that they think about as they think about it.

Ryan Paul Barretto: Yeah, I think the biggest thing to highlight here is that we don't really monetize specifically on any of the networks. So if you think about just our customers' strategy, the way that they think about social is they think about social holistically, and they've got all these different channels that they need to execute against. And so much of this is actually dictated by where their community and their customer base is, and that's where they lean.

Ryan Paul Barretto: Social Holistically and they've got all these different channels that they need to execute against and so much of this is actually dictated by where their community and their customer bases and that's where they lean in Tictoc is obviously been a great partner for US we're really excited about the product suite built alongside of them.

Ryan Paul Barretto: But at the same time, when we look at our customers.

Ryan Paul Barretto: TikTok's obviously been a great partner for us; we're really excited about the products we've built alongside them. But at the same time, you know, when we look at our customers, they typically have multiple networks that they're leveraging. And so any changes that happen here from a brand perspective will just mean that they end up leaning heavier on some other social network where the traffic goes, where their customers go, and where they will spend time.

Ryan Paul Barretto: <unk> typically have.

Ryan Paul Barretto: Multiple networks.

Ryan Paul Barretto: They are leveraging and so any changes that happen here from a brand perspective.

Ryan Paul Barretto: Just mean that they ended up leaning heavier in some other social network, where the traffic goes where their customers go and where they will spend time and so for us that's a huge part of the importance of the work that we do is making sure that we have excellent partnerships and that our products add a ton of value across all of the social networks.

Ryan Paul Barretto: And so for us, that's a huge part of the importance of the work that we do is making sure that we have excellent partnerships and that our products add a ton of value across all of the social networks. And this is just, and I'll add, yeah, it's on the ecosystem commentary. I think at this stage, you know, there's not a lot. I don't think brands are contemplating in a big way that there's an inevitable disruption here with TikTok.

Ryan Paul Barretto: This is Jeff and I'll add.

Ryan Paul Barretto: Jeff on the.

Ryan Paul Barretto: The ecosystem commentary.

Ryan Paul Barretto: I think at this stage.

Ryan Paul Barretto: Theres not a lot.

Ryan Paul Barretto: I don't think brands are.

Ryan Paul Barretto: Often plating in a big way that there is an inevitable.

Ryan Paul Barretto: <unk>.

Ryan Paul Barretto: It's just the sentiment that we kind of feel from customers is it's been talked about for a while on the kind of see what happens, but not shifting around there.

Ryan Paul Barretto: That's just the sentiment that we kind of feel from customers is that it's been talked about for a while. They'll kind of see what happens, but not shift around their time or energy at this point. And then broadly, you know, I think that platform is powerful in a lot of ways, and we value the partnership there. What's sticky about that for consumers and brands is the very short form and unproduced video content. And should something happen and TikTok become unavailable, then that effort is just going to shift to something else with that same sort of characteristics and footprint. You know, Reels is one example.

Ryan Paul Barretto: Energy at this point.

Ryan Paul Barretto: And then broadly I think that platform as is.

Ryan Paul Barretto: Powerful and a lot of ways and we value the partnership there.

Ryan Paul Barretto: Thinking about that for consumers and brands is.

Ryan Paul Barretto: At the very short form and Unproduced.

Ryan Paul Barretto: Video content and should something happen.

Ryan Paul Barretto: And to talk to come on available then that effort just going to shift to something else with that same sort of characteristic in footprint.

Ryan Paul Barretto: There are others. So, it's filling a spot in the market based on the type of content. The network itself, you know, is the carrier of that.

Ryan Paul Barretto: <unk> is one example, and there is others.

Ryan Paul Barretto: So its filling a spot in the market based on the type of content the network itself.

Ryan Paul Barretto: As the carrier of that but this is part of the social strategy and that type of content as part of the social strategy and the engagement.

Ryan Paul Barretto: But this is part of a social strategy, and that type of content is part of the social strategy, and the engagement that it provides is something that's going to be part of the ecosystem, part of the landscape, you know, regardless of where it is. Okay, that makes sense. Thank you guys. Your next question comes from the line of Parker Lane with Stifler.

Jeffrey Parker Lane: Our bias.

Ryan Paul Barretto: It's something that's going to be part of the ecosystem part of the landscape.

Jeffrey Parker Lane: Regardless of where it is.

Jeffrey Parker Lane: Okay that makes sense. Thank you guys.

Ryan Paul Barretto: Your next question comes from the line of Parker Lane with Stifel.

Jeffrey Parker Lane: Hey, guys. Thanks for taking the question Ryan maybe just to double down on one earlier you referenced that the sales changes it happens really before the start of the year a lot of it took place in Q1, but it's still lingering here in <unk>.

Ryan Paul Barretto: Hey guys, thanks for taking the questions. Ryan, maybe just to double down on one earlier, you referenced that the sales changes happened, you know, really, before the start of the year; a lot of it took place in Q1, but it's still lingering here in 2Q. When we look at your tight guidance range, how confident are you that peak disruption and go-to-market is behind us and that there's not going to be any level of additional sales execution risk here in? Yeah, thanks for the question, Parker. And just to clarify, decisions were made in Q1. And the implementation of those changes. Sorry, the decisions on all this happened in Q4, and the execution of it happened in Q1.

Parker: When we look at your tight guidance range. How confident are you that peak disruption and go to market is behind us and that there is not going to be any level of additional sales execution risk here in <unk>.

Ryan Paul Barretto: Okay.

Speaker Change: Yes. Thanks for the question Parker and just to clarify decisions were made in Q1 and the implementation of those changes sorry.

Ryan Paul Barretto: And going to guide, we feel good about the way that we've built out the guide for Q2 and the rest of the year. The majority of the actions that needed to take place, and the changes with the sales teams, and some of the enablement that we were doing happened within the quarter. So we feel good about all that. And that's being contemplated within the guide. I think it's also a helpful context here just to talk about the type of changes that we're talking about.

Ryan Paul Barretto: Decisions on all of this happened in Q4 and the execution of it happened in Q1 and going to guide.

Ryan Paul Barretto: We feel good about the way that we've built out the guide for Q2 and the rest of the year. The majority of the actions that needed to take place and the changes with the sales teams and some of the enablement that we're doing happened within the quarter. So we feel good about all of that and Thats been contemplated within the guide.

Ryan Paul Barretto: I think it's also helpful.

Ryan Paul Barretto: Context here just to talk about the type of fees that were talking about this.

Ryan Paul Barretto: This, you know, where a big shank change in go-to-market strategy might take a couple of quarters to take hold. This is a layer below that, in that we're talking about some pretty tactical decisions around account coverage, spending time with the team on tagger enablement, things like this. So rather than a large kind of strategic change or going after a different part of the market or something like that, these are some tactical things that, from a time, energy, and calories spent in Q1 perspective, created some headwinds for us.

Ryan Paul Barretto: This is a layer lower than that in that we're talking about some pretty tactical decisions around account coverage.

Ryan Paul Barretto: Spending time with the team on tag of enablement things like this.

Ryan Paul Barretto: Kind of strategic change, we're going after a different part of the market or something like that using some tactical things that from a time energy and calories spent in Q1 perspective.

Ryan Paul Barretto: <unk> created some headwind for us, but I just want to make sure. It's clear that we're not talking about some radical change.

Ryan Paul Barretto: But I just want to make sure it's clear that we're not talking about some radical change that's going to take a while to play out. Most of it, you know, things like the enablement, et cetera, are done. That's a binary thing.

Ryan Paul Barretto: That's going to take a while to play out most of it.

Ryan Paul Barretto: Things like the enablement et cetera are done a binary thing.

Ryan Paul Barretto: <unk>.

Ryan Paul Barretto: And that the.

Ryan Paul Barretto: <unk>.

Ryan Paul Barretto: Momentum stutter.

Ryan Paul Barretto: Is fairly finite.

Speaker Change: Got it I appreciate that feedback and then one more you talked a lot about aligning your go to market around your best customer cohorts.

Ryan Paul Barretto: And that the momentum stutter is fairly finite. Got it. I appreciate that feedback. And then, Ryan, one more thing. You talked a lot about aligning your go-to-market around your best customer cohorts. From our perspective, should we interpret that to mean 10k, 50k cohorts? Or is there a level of depth beyond that so that customers under 10k that are providing the right signals are still going to be emphasized? Yeah, there's, sorry, this is Justin, but this is a project that I've spent a lot of time on. So I'll jump in here.

Justin: From our perspective should we interpret that to mean 10-K 50, K cohorts or is there a level of depth beyond that so that customers under 10-K that are providing the right signals are still going to be episodes here.

Ryan Paul Barretto: Yes.

Justyn Russell Howard: I think that, you know, when we talk about taking that next step beyond moving past the very low end of the customer base, and now we've got a customer base on the whole, that is much healthier, that's going to have better unit economics, etc. There's a next layer there, which is, you know, now, rather than assuming that, okay, the rest of that customer base kind of behave similarly, perform similarly, etc., being able to get a much clearer look at different patterns across different industry types, B2B versus B2C, different approaches to social, different social footprints, things like that, allows us to recognize that, you know, there are, there's variance in any given segment.

Ryan Paul Barretto: Sorry, this is Justin but this is a.

Justyn Russell Howard: Our projects that I've spent a lot of timeline Paul jump in here.

Justyn Russell Howard: I think that when we talk about taking that next step beyond.

Justyn Russell Howard: Moving past the very low end of the customer base and now we've got a.

Justyn Russell Howard: Our customer base on a on a whole.

Justyn Russell Howard: That is much healthier thats going to.

Justyn Russell Howard: There is a next layer there which is.

Justyn Russell Howard: Now rather than assuming that the rest of that customer base kind of behave similarly perform similarly et cetera, being able to get a much clearer to look at different patterns across different industry types <unk> versus <unk>.

Justyn Russell Howard: Different approaches to social different social footprint things like that allows us to recognize that.

Justyn Russell Howard: There are.

Justyn Russell Howard: So let's say enterprise, companies that have a very, very different growth profile even with similarly sized, other similarly sized companies, where rather than painting with a broad brush, we're able to categorize these further and look at opportunities where there are, you know, if we look at even under 10k, there's a dramatic difference in potential in, let's call it, the 10k to 15k bucket.

Justyn Russell Howard: Even with a similarly sized.

Justyn Russell Howard: Other similarly sized companies.

Justyn Russell Howard: There rather than painting with a broad brush we are able to categorize these further and look at opportunities where.

Justyn Russell Howard: We look at even under 10-K.

Justyn Russell Howard: As a dramatic difference in potential in let's call it.

Justyn Russell Howard: Within that that group of customers very very different behavior and potential and now we've dialed that in and figuring out where should we be spending our colleagues where it shouldn't be spending our time.

Justyn Russell Howard: Within that group of customers, there are very, very different behaviors and potential, and now we've dialed that in and figured out where we should be spending our calories, where we should be spending our time. Thinking about how to talk to those different groups differently and how we show up in the market with those different groups differently is a really powerful unlock, and that's kind of some of the background on those. You understand.

Justyn Russell Howard: Thinking about how to talk to those different groups differently than how we show up in market with those different groups differently.

Justyn Russell Howard: <unk> is a really powerful unlocked in that kind of some of the background on on those points.

Speaker Change: That makes sense thanks, guys.

Justyn Russell Howard: Your next question comes from the line of Adam Hotchkiss with Goldman Sachs.

Ryan Paul Barretto: Thank you guys. Your next question comes from the line between Adam Hotchkiss and Goldman. Great, thanks for taking the question. I guess to start, how should we think about the performance of your direct and partner channels in the quarter? Is it fair to say that sales productivity was just below where you thought it would be, despite the record RFPs you mentioned? Or is there just more of a ramp that your direct salesforce has to get through before you can reaccelerate ATV?

Adam R. Hotchkiss: Great. Thanks for taking the question I guess to start how should we think about the performance of your direct and partner channels in the quarter.

Adam R. Hotchkiss: Is it fair to say that sales productivity was just below where you thought it be despite the record RFP as you mentioned or is there just more of a ramp that your direct sales force has to get through before you can reaccelerate ACB just anything around sales productivity, our morale would be useful.

Ryan Paul Barretto: You know, just anything around sales productivity or morale would be useful. Yeah, um, you know, I think some of it's actually what you said in the latter part of your comment. It's just some of this is a natural ramp for folks as we had some new hires and then changing roles happening within Q1. And we expect to see that ramp coming into full play here as we go into Q2.

Ryan Paul Barretto: Yes.

Ryan Paul Barretto: I think I think some of it is actually what you said at the latter part of your comment. It's just some of this is a natural ramp for folks is we had some new hires and then changing roles happening within Q1, and we expect to see that ramp coming into full play here as we go into Q2 and going forward from.

Ryan Paul Barretto: And going forward, from a partnership and distributed distribution channel perspective, we saw relative good strength there as well and feel really good about the back half of the year and the partnerships that we have created. So I think these are all just natural things that are playing out in our business model today, where more and more of our team is more focused on the market. Okay, that's really helpful.

Ryan Paul Barretto: From a partnership industry distribution channel perspective.

Ryan Paul Barretto: We saw relative good strength, there as well and feel really good about the back half of the year and the partnerships that we've created.

Ryan Paul Barretto: I think these are all just natural things that are playing out in our business model today is more and more of our team is more focused up market.

Ryan Paul Barretto: Okay. That's really helpful. And then I'd just be curious how you would now think about that $1 billion revenue target I know that.

Ryan Paul Barretto: And then I'd just be curious how you now think about the billion dollar revenue target. I know that your prior long-term guidance implied something like a 25 or 26% CAGR. And based on that guidance, we're going to be the guidance that you gave, we're going to be a little bit below that exiting this year. Are you continuing to stick with that outlook today? And how should we think about your confidence in reaccelerating growth once we get past the end of this year? Yeah, we still very much have this in sight and in focus. The Q1 impact, when you think about it in isolation, is relatively small. It's a relatively small number relative to the billion dollar target.

Ryan Paul Barretto: Our long term guidance implies something like a 25% or 26% CAGR.

Ryan Paul Barretto: Are you continuing to stick with that outlook today, and how should we think about your confidence in the accelerating growth once we get past the end of this year.

Ryan Paul Barretto: Yes, we still very much have this insight and then focus the Q1 impact when you think about it in isolation is relatively small its a relatively small number relative to the billion dollar target.

Ryan Paul Barretto: And our intention here is really to set up Sprout to accelerate to and through that number. And so we think about that $1 billion target certainly as the next milestone, but not the finish line for us. And so much of the work that Justyn actually just touched on from a go-to-market perspective will impact our timelines and just how fast we can get there. So, you know, I'd say no changes right now. And as we have more data to share on this in future quarters, we'll definitely come back to you and share that. Okay, thanks, Ryan.

Ryan Paul Barretto: And our intention here is really to setup sprout to accelerate two went through that number and so we think about that $1 billion target certainly is the next milestone, but not the finish line for us and so much of the work that just actually just haven't touched on from a go to market perspective will impact our timelines and just how fast.

Ryan Paul Barretto: We can get there so.

Ryan Paul Barretto: I'd say no changes right now and as we have more data to share on this in future quarters will definitely come back to you and share that.

Ryan Paul Barretto: Your next question comes from the line of Rob Oliver with Baird.

Ryan Paul Barretto: Your next question comes from the line of Rob Oliver with Baird. Yeah, great. Hi, thanks. Good afternoon, guys.

Robert Cooney Oliver: Yes, Greg Hi, Thanks, Good afternoon guys.

Ryan Paul Barretto: Ryan, I think you said in your prepared remarks that you made reference to the quickly changing dynamics in the customer base. Just paraphrasing, if I didn't get it exactly right. I assume that references, in part, the move to enterprise, but I wanted to know if there's anything else being referenced there as well, because, you know, clearly, the move up market for you guys is one that's been telegraphed from when you kind of got out of the lower end of customers sort of beginning last year and then, you know, sort of through the end of the year. So, you know, just curious what you meant And there's something in addition to just, hey, our customers are getting bigger, that you wanted to call out. Yeah, thanks, Rob.

Rob: Ryan just I think you said in your prepared remarks, you made reference to the quickly changing dynamics in the customer base.

Rob: Paraphrasing, if I didn't get it exactly correctly.

Speaker Change: And I assume that research.

Speaker Change: That reference is in part the move to enterprise, but.

Speaker Change: Wanted to do if there is anything else being referenced there as well because clearly the move up market for you guys is one that's been telegraph from when you.

Rob: You've got out of the lower end of customers sort of beginning last year.

Rob: And then sort of through the end of the year. So.

Rob: Just curious what you meant by those dynamics if theres something in addition to just hey, our customers are getting bigger that you wanted to call out.

Ryan: Yes, thanks, Rob.

Ryan Paul Barretto: It's really that, you know, we, if you think about it, the business is really transformed; it's very different from the business we knew at IPO, which was highly transactional and inbound with a lot of small SMB type businesses. And when we think about today, the opportunity that we have in front of us, the way that our customer dynamics have changed, the way that our capacity and staffing models have changed, and the customers that we're in front of, there are a lot more of these larger, sophisticated customers that come with larger opportunities to land and larger opportunities to grow and longer sales cycles.

Ryan Paul Barretto: That.

Ryan Paul Barretto: If you think about it the business has really transformed is very different from the business. We knew at IPO that was highly transactional and inbound with a lot of small SMB type business and when we think about today the opportunity that we have in front of us the way that our customer dynamics have changed.

Speaker Change: Great. Okay. Thanks helpful. And then just one other one I can't remember if it was you were Joe that debt.

Ryan Paul Barretto: That referenced the Salesforce contribution.

Ryan Paul Barretto: Social studio plus with the momentum around.

Ryan Paul Barretto: The Salesforce customer service native integrations, so I'd be curious and I know you've been seeing you with some of the World tour events for Salesforce. So I'd be curious to hear is this.

Ryan Paul Barretto: So it was really more a comment on that and the changing dynamics of the business that we've been going through, native integration. So I'd be curious, and I know you've been, and I've seen you at some of the world tour events for Salesforce.

Ryan Paul Barretto: Persistence the Salesforce partnership I know you've already been talking about it more in the context of a longer term opportunity, but just wanted to help.

Ryan Paul Barretto: Yes. This is Jonathan I want to start with just a quick clarification not worthy might've been a little.

Justyn Russell Howard: So I'd be curious to hear, is this a de-emphasis on the Salesforce partnership? I know you've already been talking about it more in the context of a longer-term opportunity, but just want to help us, if you can, frame those comments relative to Salesforce. Yeah, this is just that I want to start with just a quick clarification.

Ryan Paul Barretto: That wording might have been a little tricky, but it was up significantly year over year from 22 to 23, although we were saying that it was a smaller contribution in 22. But I want to make sure that that's heard. I'll let Ryan comment on the forward momentum, which is still something that we are very excited about, a lot of opportunity in front of us. So, I want to make sure that we don't take away the wrong things from those comments. Yeah, I would just add, we still feel great about that partnership. You're right. We were at New York World Tour, and we will be at Connections, where CMO Scott will be speaking next month.

Ryan: Turkey, but it was up significantly year over year from 'twenty to 'twenty three.

Ryan Paul Barretto: We were saying that it was a smaller contribution in 'twenty two.

Ryan: I'll, let Brian comment on the forward momentum, which is still something that we are.

Ryan: I want to make sure that we don't take away the wrong things from those comments.

Ryan: Yes, I would just add we still feel great about that partnership you're right. We were at New York World Tour, we will be at connections, where CMS Scott will be speaking.

Ryan: Next month, and so we feel really great about the relationship and the opportunity, especially around a lot of the other product lines beyond social studio. The commentary was really to make sure that we are properly framing the size and the impact of the business on our overall.

Ryan: Gross levers and the impact on sprout and so that was what the commentary was about.

Ryan Paul Barretto: And so we feel really great about the relationship and the opportunity, especially around a lot of the other product lines beyond Social Studio. The commentary was really to make sure that we are properly framing the size and the impact of the business on our overall growth levers and the impact on Sprout. And so that was what the commentary was about. Okay, great.

Ryan: Okay, great. Thank you.

Speaker Change: Thank you.

Ryan Paul Barretto: Thank you. Thank you. Your next question comes from the line of Rob Morelli with Equity Research. Hey, this is Raimo Releon with Scott Berg.

Ryan Paul Barretto: Your next question comes from the line of Rob Marelli with equity Rich research.

Ryan Paul Barretto: Yeah.

Ryan Paul Barretto: Thanks for the question. We'd love to get some color regarding the early results for your customer care solution. Have you seen any incremental upsell activity with this new release, or is it still too early?

Raimo Lenschow: Yeah. Thanks. Thanks for the question. We are we're really excited about what we're seeing in care.

Ryan Paul Barretto: Yeah, thanks. Thanks for the question. We are we're really excited about what we're seeing in care. I think there's been a lot of great feedback from customers today. If you think about some of the stuff that we've been building out just in terms of our prioritization of cases and routing of cases and the analytics that come along with agent productivity, we feel really good about the opportunity that we're developing in the marketplace.

Ryan Paul Barretto: I think theres been a lot of great feedback from customers today. If you think about some of the stuff that we've been building out just in terms of our prioritization of cases and routing of cases, and the analytics that come along with agent productivity.

Ryan Paul Barretto: Feel really good about the opportunity that we're developing in the marketplace. Our customer feedback has been really strong because we know they are seeing more and more volume showing up in social and it is critical for them to be in front of these customers every single day, we know that the expectations for consumers on social is much higher than any other channel.

Ryan Paul Barretto: Our customer feedback has been really strong because we know they are seeing more and more volume showing up on social, and it is critical for them to be in front of these customers every single day. We know that the expectations for consumers on social are much higher than any other channel.

Ryan Paul Barretto: And so showing up fast and intelligently is what they expect when when they're leveraging a platform like Sprout. So we are seeing lots of good opportunities. There's still lots of roadmap that the team's been working on, and yeah, I think you'll expect to see, as we go through the year, more and more features and functionality added in there, and more and more success stories from us on that note. Got it. Thanks for the color.

Ryan Paul Barretto: And so showing up fast and intelligently is what they expect when when theyre leveraging a platform like sprout. So.

Ryan Paul Barretto: We are seeing lots of good opportunity there is still lots of roadmap that the team has been working on and I think you'll expect to see as we go through the year more and more features and functionality added in there and more and more success stories from us on that note.

Ryan Paul Barretto: Got it thanks for the color and then regarding the go to market shifts you touched on and continuing to enable customer facing teams with CAGR. While also noting tighter IRR meaningfully accelerated how does this I guess outperformance shifted your outlook for China for the remainder of the year and I guess, what's the overall opportunity here with the rate of here.

Ryan Paul Barretto: And then regarding the go-to-market shift you touched on in, you know, continuing to enable customer-facing teams with Tagger, while also noting Tagger ARR meaningfully accelerated. Has this, I guess, outperformance shifted your outlook for Tagger for the remainder of the year? And I guess, yeah, what's the overall, Yeah, all that's contemplated in the guide. I like we feel really good about the way that the team and the product are performing.

Ryan Paul Barretto: Yes, all of that's contemplated in the guide I'd highlight we feel really good just about the way that the.

Ryan Paul Barretto: There's clearly a ton of value that we're being able to deliver to customers. Now, a big part of the thesis that we shared with all of you before is that this is an area that our customers really care about. And they were either doing this very manually, trying to figure out how to build a strategy around this, or we're leveraging things like groups like agencies to execute.

Ryan Paul Barretto: The team and the product is performing.

Ryan Paul Barretto: There is clearly a ton of value that we're being able to deliver to customers and a big part of the thesis that we'd shared with all of you before is that this is an area that our customers really cared about and they were either doing this very manually trying to figure out how to build a strategy around this or we're leveraging things like groups.

Ryan Paul Barretto: Like agencies to execute and so what we've seen from our customers today is that they really appreciate the ability to be able to do their influencer discovery in our platform to be able to find the right folks that they should be leveraging for their strategy to be able to run campaigns through sprout and properly report on the ROI from all of that.

Ryan Paul Barretto: And so what we've seen from our customers today is that they really appreciate the ability to be able to do their influence or discovery in our platform to be able to find the right folks that they should be leveraging for their strategy, to be able to run campaigns through Sprout and properly report on the ROI from all that, all in one place with one team. And so we've seen a lot of great progress so far, both from a new business perspective, as well as going back to our current customer install base and adding to it. So all of this has been sort of contemplated within the guide, but we certainly see good progress, and we'll continue to update you on the things that are progressing here. I got it.

Ryan Paul Barretto: All in one place with one team and so we've seen a lot of great progress so far both from a new business perspective, as well as going back to our current customer installed base and attaching it.

Ryan Paul Barretto: So all of this has been contemplated within the guide, but we certainly see good progress and we will continue to update you on the things that are that are progressing here.

Speaker Change: Got it thanks.

Ryan Paul Barretto: Thanks. Your next question comes from the line of Jackson Ader with KeyBank Capital Markets. Great. Good evening, guys.

Ryan Paul Barretto: Your next question comes from the line of Jackson Ader with Keybanc capital markets.

Jackson Edmund Ader: Great. Good evening guys. Thanks for taking our questions.

Ryan Paul Barretto: Thanks for taking our questions. The first one is, Joe, I think you mentioned that there were still some go-to-market changes that are being, I guess, still being made and are still being kind of flowed through here in the second quarter. Just curious which ones have already gone into effect and which ones are still out?

Ryan Paul Barretto: First one is Joe I think you mentioned that there were still some go to market changes that are being I guess still being made are still being kind of flowed through here in the second quarter, just curious which ones have already gone into effect and which ones are still out there.

Joe: Yes, my comment was more about not necessarily changes, we're still going on but the impact of those had been contemplated in our in our Q2 guide in the back half of the year Jackson those that's what I was referring to.

Joseph M. Del Preto: Yeah, my comment was more about not necessarily the changes that were still going on, but the impact of those has been contemplated in our Q2 guide for the back half of the year, Jackson. That's what I was referring to. Okay, so all of the go-to just for clarity, all the changes that you plan to make have already been. I'll defer to Ryan to reiterate what he was talking about earlier. Yeah, I think the commentary is really more along the lines of the changes that were made in Q1 and just the flow through through Q2 as folks ramp into the roles and then also just the focus areas that we were talking about in terms of where we're directing the go-to-market teams. But there is, and this ties back to something that Justin said earlier.

Speaker Change: Okay. So all of the go to just for clarity all the changes that you plan to make have already been made.

Joseph M. Del Preto: Although for Orion.

Ryan: To reiterate what Ed was talking about earlier, yes, I think the commentary is really more along the lines of.

Ryan: The changes will be made in Q1, and just a flow through through Q2 as folks ramp into the roles and then also just the focus areas that we're talking about in terms of where we are directing their go to market teams, but there's and this ties back to something that Justin said earlier. There is no pivotal shifts that we are making in Q2.

Ryan Paul Barretto: There are no pivotal shifts that we are making in Q2 that should impact any of the data that we shared. Gotcha. Okay. And then, I'm just curious about the timeline, like when did these changes go into effect in the first quarter? And then how soon after that?

Ryan: It should impact any any of the data that we shared.

Speaker Change: Gotcha, Okay and then.

Ryan Paul Barretto: I'm just curious about the timeline like when when in the first quarter did these changes go into effect and then how soon after those.

Ryan Paul Barretto: Uh, you know, that time did you start to see the issues? in Deal closures and pipe, Yeah, and I want to I want to call out there were a few things that we highlighted here that all contributed to just the Q1 performance. We've highlighted some of the things that we believe were self-induced from an execution perspective in terms of, you know, introducing some new teams and changing some of the account coverage and taking the team off the floor for enablement. Those are all things that impacted the amount of customer facing time that we had in Q1.

Ryan Paul Barretto: That time did you start to see the issues in.

Ryan Paul Barretto: <unk>.

Ryan Paul Barretto: And deal closures and pipeline and things like that.

Ryan Paul Barretto: Yes.

Ryan Paul Barretto: There are other things that we highlighted as well, just in terms of where our focus was in Q4 with execution versus building pipeline for Q1. And some of this is also just the natural shift in our business that we've highlighted around longer sales cycles and larger deals that are going to fall in the back half. So just highlight those all of those things contributed to the end result. And then clearly, the piece that we haven't spent any time on, but we're aware of, and we've generally not leaned into, but we know that it exists is just the macro environment that we're operating in. It is is challenging.

Ryan Paul Barretto: I want to call out there was a few things that we highlighted here that all contributed to just the Q1 performance. We've highlighted some of the things that we believe were self induced.

Ryan Paul Barretto: From an execution perspective in terms of introducing some some new teams and changing some of the account coverage and taken the team off the floor for enablement. Those are all things that impacted the amount of customer facing time that we had in Q1. There are other things that we highlighted as well just in terms of where our focus was in Q4 ex.

Ryan Paul Barretto: <unk> versus building pipeline for Q1 and just some of this is also just the natural shift in our business that we've highlighted around longer sales cycles and larger deals that are going to fall in the back half. So just highlight those all of those things contributed to the unresolved then clearly the piece that we haven't spent any time.

Ryan Paul Barretto: But.

Ryan Paul Barretto: Where are and we've generally not leaned into but we know that it exists is just the macro environment that we're operating in is is.

Ryan Paul Barretto: And, you know, if I think about all of these things and you've seen it from us over the last few years, this team has been able to navigate all of those headwinds and execute really well. And, you know, if we were operating in a different macro environment, I think these things probably wouldn't even have shown up in Q1. So just wanted to make sure that we're properly framing all of those things, and I'd clarify that the self-induced changes or strategy shifts that we had made going into Q1 were really about sales focus and time in front of customers. Okay, all right.

Ryan Paul Barretto: Is challenging and if I think about all of these things.

Ryan Paul Barretto: And you've seen it from us over the last few years. This team has been able to navigate all of those headwinds and execute really well and if we were operating in a different macro environment. I think these things probably wouldn't even have shown up in Q1.

Ryan Paul Barretto: Wanted to make sure that we're properly framing all of those things and then I'd clarify that the self induced.

Ryan Paul Barretto: Changes are or strategy shifts that we had made going into Q1, we're really about sales focus and time in front of customers.

Speaker Change: Okay alright, thank you.

Ryan Paul Barretto: Your next question comes from the line of Alicia Best partner with Morgan Stanley.

Ryan Paul Barretto: Your next question comes from the line of Elizabeth Porter with Morgan Stanley. Hi, thanks for taking my question. You have Ryan Bresner on for Elizabeth here.

Ryan Paul Barretto: Yeah.

Ryan Paul Barretto: I'm just kind of curious, we could touch on Tagger here, just how how has progress been with the platform? How ramped is the sales team on this? How much work is there still to do here? Yeah, we've seen a lot of great progress. We've been really excited about the things that the team has been shipping. From a sales perspective and maturity of the sales team, we did a lot of enablement in Q1 across our entire customer facing organization to make sure that we were up to speed with all of the elements of Influencer and our Tiger platform.

Ryan Paul Barretto: Hi, Thanks for taking the question you have Ryan bressler onto our Elizabeth here.

Ryan Paul Barretto: Just kind of curious if you could touch on CAGR here, just how how's progress into the platform how it ramped as the sales team with this engine.

Ryan Paul Barretto: How much work is there still left to do here.

Ryan Paul Barretto: Yeah.

Ryan Paul Barretto: We've seen a lot of great progress we've been really excited about the things that the team has been has been shipping.

Ryan Paul Barretto: From a from a sales team perspective, the maturity of the sales team we did.

Ryan Paul Barretto: A lot of enablement in Q1 across our entire customer facing or to make sure that we are up to speed with all of the elements of Influencer and our Tegra platform.

Ryan Paul Barretto: So we're seeing really good progress from there, and that's why we called it out as well, just in the prepared remarks. Our customers really see value in this, and we believe it is the best solution on the market. We've got this really exciting opportunity to educate customers on the value of influencers and how this can nicely fit into their social strategy. And then we're bringing along this incredible technology that allows them to execute.

Ryan Paul Barretto: So we're seeing really good progress from there.

Ryan Paul Barretto: Why we called it out as well just in the prepared remarks, our customers really see value in this.

Ryan Paul Barretto: We believe it is the best solution that is on the market. We've got this really exciting opportunity to educate customers on the value of Influencer and how this can nicely fit into their social strategy and then we're bringing along this incredible technology that allows them to execute and then when you think about the value of the return on investment you put it.

Ryan Paul Barretto: And then when you think about the value of the return on investment, you put it against the rest of the things that we do. And, of course, Sprout provides customers with really great opportunities to increase their share of voice and their brand, and their own lead generation and revenue. So lots of good progress. The team is ramping up really well. And we expect to continue coming back to you, sharing the progress we're making with the team and with customers.

Ryan Paul Barretto: Against the rest of the things that we do and of course sprout.

Ryan Paul Barretto: <unk> customers with really great opportunities to increase their share of voice in their brand and their own lead generation and revenue.

Ryan Paul Barretto: That's a good progress the team is ramping really well and we expect to continue coming back to you sharing the progress, we're making with the team and with customers.

Speaker Change: Got it very helpful. Thank you.

Ryan Paul Barretto: Your next question comes from the line of Matt Vanvliet with BT IAG.

Ryan Paul Barretto: Very helpful. Thank you. Your next question comes from the line of Matt VanVliet with BTI. Yeah, good afternoon.

Ryan Paul Barretto: Thanks for taking the question. She talked about quite a bit of changing dynamics in the business going after a different customer set over the last couple years, and the product expanding quite a bit. What gives you confidence that the go-to-market team, especially the sales reps you have in place, are, you know, trained, have the right skills, are the right folks to lead this different market motion and go after a different set of customers, especially as you're making changes, and it doesn't seem to be sticking right away?

Ryan Paul Barretto: <unk> talked about quite a bit of changing dynamics in the business going after a different customer set over the last couple of years the products expanding quite a bit.

Ryan Paul Barretto: Training have the right skills are the right folks to lead. This there are different market motion and go after a different set of customers.

Ryan Paul Barretto: Especially as you're making changes and it doesn't seem to be sticking right away.

Ryan Paul Barretto: Okay.

Ryan Paul Barretto: Yeah, thanks for the question. I mean, I think the first thing that I should highlight is, you know, we've seen a lot of success in this customer base of this market. If we look at the 50k being up 44%, the ACV being up 41%.

Speaker Change: And then amongst the metrics in <unk> being up 54% and <unk> been up 48%. There is a lot of good signal and the execution that we've seen and then you add in a bunch of the logos that we've talked about over 2023 and here in Q1, we're seeing good execution from this team a lot of this when we think about Q1 is also again.

Ryan Paul Barretto: And the metrics and RPO being up 54% and CRPO being up 48%. There's a lot of good signals in the execution that we've seen. Then you add in, you know, a bunch of the logos that we've talked about over 2023.

Ryan Paul Barretto: Just the shape of the way that our years are going to go in this new model as we as we shift the business.

Ryan Paul Barretto: We've also over time, just continued to add really great talent to the team when I look at the folks that we have on the squad today.

Ryan Paul Barretto: They they're really really excellent we've taken the great people that had been at spreads that have continued to hone their skill set and prove that they can execute and we've complemented them with great folks from across the SaaS industry that have joined our team. So I think it's a combination of seeing in the data today and then feeling like we've been raising.

Ryan Paul Barretto: The bar on the talent, we're bringing in and we're confident that youre going to see that.

Ryan Paul Barretto: The fruit.

Ryan Paul Barretto: Third in future quarters here as we get into the back half.

Speaker Change: Thanks. Your next question comes from.

Ryan Paul Barretto: Apologies for your next question comes from the line of Clarke Jeffries with Piper Sandler.

Speaker Change: Hello, Thank you for taking the question.

Speaker Change: Ryan I think we've touched on it a lot, but what comes to mind is sort of endogenous exogenous.

Ryan Paul Barretto: And I think the biggest framework that we've always appreciated with the guidance as is it seems like the guidance is really set by the IRR that you exit at the prior quarter at and so when we think about that time spent away from customers aspect.

Ryan Paul Barretto: Was there anything surprising in terms of retention characteristics or was there just that lack of of time in front of customers that may have contributed to.

Ryan Paul Barretto: Something that you would characterize as.

Speaker Change: Yes. Thanks for the question I wouldn't characterize retention metrics within my commentary in fact, our gross retention performed nicely above plan within the quarter I think a lot of that is.

Ryan Paul Barretto: Is the moving upmarket and the dynamic of these larger customers that are going to have a greater lifetime value and be growing faster with us I think a lot of that is also the strategic shifts that we had made last year in changing the dynamic of our customer base and the folks that we were proactively targeting and going after.

Ryan Paul Barretto: And if I think about it for US. It was really this combination are not not enough customer facing time.

Ryan Paul Barretto: From an execution perspective within the quarter feel good about the work that the team did to create future opportunity our pipeline was up 37% within the quarter.

Ryan Paul Barretto: We just didn't get the number of deals we wanted to get done in the quarter.

Ryan Paul Barretto: For me Thats the combination of we Didnt cultivate enough of it in Q4, and then we didn't have enough time executing on deals in Q1, and then the shifting in that business model into the back half had some natural pressures behind it as well.

Speaker Change: Yeah. Thank you for the color and then <unk>.

Speaker Change: Joe just before we put <unk> to bed I was hoping you could maybe frame.

Ryan Paul Barretto: The exit growth rate of the business in any way you would choose.

Ryan Paul Barretto: Maybe a seasonality of the business that puts less time for IRR booked to be recognized as revenue just any way to frame maybe.

Ryan Paul Barretto: And here in Q1, we're seeing good execution from this team. A lot of this, when we think about Q1, is also again just the shape of the way that our years are going to go in this new model as we shift the business. We've also, over time, just continued to add really great talent to the team. When I look at the folks that we have on the squad today, they're really, really excellent.

Speaker Change: Yeah Clarke I think one of the things that you said it definitely makes sense, which is in Ryan talked about this our years are becoming more Q3 Q4 loaded and then within the quarters that even even the third month in the quarter now becoming really heavily weighted and so if you think about where our <unk> is going to be I think.

Ryan Paul Barretto: We've taken the great people that have been at Sprout that have continued to hone their skill sets and prove that they can execute, and we've complimented them with great folks from across the SaaS industry that have joined our team. So I think it's a combination of seeing it in the data today and then feeling like we've been raising the bar and the talent we're bringing in, and we're confident that you're going to see the fruits of this in future quarters here as we get into the back half. All right, great, thank you.

Ryan Paul Barretto: It's definitely it would be higher for example than what our implied revenue growth rate is and so I think from that perspective, youre definitely going to see way more IRR come from the back half of the year clock I think thats, a fair assumption as we move up into the enterprise business.

Speaker Change: Thanks very much.

Ryan Paul Barretto: Your next question comes from the line of sure Surinder <unk> with Jefferies.

Ryan Paul Barretto: Your next question comes from... Apologies, your next question comes from the line of Clarke Jeffries with Piper. Hello, thank you for taking the question. You know, Ryan, I think we've touched on a lot, but what comes to mind is sort of endogenous and exogenous.

Ryan Paul Barretto:

Ryan Paul Barretto: And I think the biggest framework that, you know, we've always appreciated with the guide is, you know, it seems like the guidance is really set by the ARR that you exit the prior quarter at, and so when we think about that time spent away from customers aspect, Um, you know, was there anything surprising in terms of retention characteristics? or was there just that lack of time in front of customers that may have contributed? Something that you'd characterize as...

Clarke Jeffries: When I kind of think about all of the changes that were made on the quarter.

Ryan Paul Barretto: How should we actually think about the impact on the opportunity pipeline here.

Ryan Paul Barretto: Affectively been reset at this point.

Ryan Paul Barretto: Do we need a couple of quarters to rebuild it.

Ryan Paul Barretto: Also given you're more focused on enterprise, which you can have a longer sales cycle. So.

Ryan Paul Barretto: Is there a perhaps larger than anticipated air pocket here that we should be thinking about.

Ryan Paul Barretto: Worst Retention Metrics, and then I have one follow-up. Yeah, thanks for the question. I wouldn't characterize retention metrics in my commentary.

Speaker Change: My commentary was walking into Q1, we didn't have enough pipeline built to close in Q1 that we needed to cover and if I think about that combination and so much of that was tied to the backend being so much more loaded than years past and you can see it in the numbers that we delivered in Q3 and Q4.

Ryan Paul Barretto: In fact, our gross retention performed nicely above plan within the quarter. I think a lot of that is, you know, the moving up market and the dynamic of these larger customers that are going to have a greater lifetime value and be growing faster with us. I think a lot of that was also the strategic shifts that we had made last year and changing the dynamic of our customer base and the folks that we were proactively targeting and going after. And, you know, if I think about it, for us, it was really this combination of not enough customer-facing time from an execution perspective within the quarter.

Speaker Change: So a lot of that time was focused in on execution, meaning that we walked in in Q1 with not as much as we would want to be ready to close in Q1, and then you add in.

Ryan Paul Barretto: Some of the changes that we implemented there with meaning that we just didn't have enough time customer facing time to go execute I feel really good about the pipeline that we've created were up 37% within Q1. We also have a bunch of pipeline that that we walked into the year with that wasn't ready to close in Q1 that is very.

Ryan Paul Barretto: I feel good about the work that the team did to create future opportunities. Our pipeline was up 37% within the quarter, but we just didn't get the number of deals we wanted to get done in the quarter. And I've, you know, for me, that's this combination of we didn't cultivate enough of it in Q4, and then we didn't have enough time executing on deals in Q1. And then the shifting of that business model into the back half had some natural pressures behind it as well, for the cover letter, and then. Joe, you know,

Ryan Paul Barretto: A live and active for this year, we've also been.

Ryan Paul Barretto: In more longer type sales cycles rfps for examples from larger companies that are going to be backend loaded. So we feel really good about the opportunity in front of US you take all of that and you add in that our ramps our reps are continuing to ramp and the maturity of the team continues to get better.

Joe: Got it and then.

Joseph M. Del Preto: Before we put A.R.R. to bed, I was hoping you could maybe frame... maybe the exit growth rate of the business in any way you would choose. Just as we think about, you know, maybe a seasonality of the business that takes less time for ARR booked to be recognized as revenue, just any way to frame maybe, growth in that new ARR, do you expect that to be higher in the second half year over year?

Joseph M. Del Preto: Is there perhaps a structural change in the business maybe that you are feeling that there is more churn in the business that makes it less predictable over over a 12 month period.

Joseph M. Del Preto: More perhaps youre going down the path of more transactional types of revenues.

Joseph M. Del Preto: I would like I am a little puzzled by the decision there because.

Speaker Change: By definition right. It's the revenue over the next 12 months.

Joseph M. Del Preto: That's on the books right.

Joseph M. Del Preto: Yes. This is this is Chuck and I'll jump in.

Joseph M. Del Preto: Q1 Commentary: Yeah, Clarke, I think, you know, one of the things that you said definitely makes sense, which is, you know, and Ryan talked about this, you know, our years are becoming more, you know, Q3, Q4, you know, loaded. And then within the quarters, like even, you know, even the third month in the quarter now is becoming really heavily weighted.

Joseph M. Del Preto: Thanks.

Joseph M. Del Preto: The spirit of the question is here.

Speaker Change: We actually see it the other way I think that.

Joseph M. Del Preto: If you look at how pronounced the move over the last couple of years has been.

Joseph M. Del Preto: Towards the back half periods, whether it be a quarter a month for the full year.

Joseph M. Del Preto: Our numbers in the air.

Joseph M. Del Preto: And so if you think about where our ARR is going to be, I think it's definitely gonna be higher, for example, than what our implied revenue growth rate is. And so from that perspective, you're definitely going to see way more ARR come from the back half of the year. Clarke, I think that's a fair assumption as we move up into the enterprise business. Thank you very much.

Joseph M. Del Preto: We have been.

Joseph M. Del Preto: That is shifting towards the end of the year.

Speaker Change: Weigh in.

Ryan Paul Barretto: Your next question comes from the line of Surinder Thind with Jeffrey. Thank you. Unknown Speaker, when I kind of think about all of the changes that were made during the quarter, how should we actually think about the impact on the opportunity pipeline here? Has it effectively been reset at this point?

Ryan Paul Barretto: Do we need a couple of quarters to rebuild it? Also given, you know, more focus on enterprise, which has a longer sales cycle. So, is there perhaps a larger than anticipated air pocket here that we should be thinking about?

Ryan Paul Barretto: And so as we go through this transition.

Ryan Paul Barretto: A publicly traded company and sharing metrics like this.

Ryan Paul Barretto: Going through this in real time, using a metric that is challenging at scale in a.

Ryan Paul Barretto: And enterprise heavy business and it's <unk>.

Ryan Paul Barretto: It is going to have.

Ryan Paul Barretto: Differences between the first half of the year in the second half of the year.

Don: And it's Don.

Ryan Paul Barretto: To build the size of this company.

Ryan Paul Barretto: And we commented on this.

Ryan Paul Barretto: In our prepared remarks is that retention outperformed plan for Q1, and we anticipate that we're going to continue to have strength there.

Ryan Paul Barretto: And also just highlight the RP O and CRP.

Ryan Paul Barretto: We are a really great indicators of the health of the business and where the business is going.

Speaker Change: Yes, Thanks for question.

Ryan Paul Barretto: Yeah, thanks for the question. First off, all those things have been contemplated and factored in to the guide. I also want to highlight, you know, my commentary was walking into Q1, we didn't have enough pipeline built to close in Q1 that we needed to cover. And if I think about that combination, and so much of that was tied to the back end being so much more loaded than years past. And you can see it in the numbers that we delivered in Q3 and Q4.

Ryan Paul Barretto: And so a lot of that time was focused on execution, meaning that we walked in in Q1 with not as much as we would want to be ready to close in Q1. And then you add in some of the changes that we implemented there, meaning that we just didn't have enough customer-facing time to go execute. I feel really good about the pipeline that we've created; we're up 37% within Q1. We also have a bunch of pipeline that we walked into the year with that wasn't ready to close in Q1, but is very much alive and active for this year.

Ryan Paul Barretto: Your next question comes from the line of Brian Schwartz with Oppenheimer.

Speaker Change: Yeah, Hi, Thanks for taking my question Ryan. Thank you so much lots of transparency on what's going on with the business. When you talked a little bit about the macro can I just touch upon that.

Ryan Paul Barretto: We've also been in longer-type sales cycles, RFPs, for example, from larger companies that are going to be back-end loaded. So we feel really good about the opportunity in front of us. You take all that, and you add in that our ramps, our reps are continuing to ramp, and the maturity of the team continues to get better. And we feel really good about the opportunity that we have in front of us.

Ryan Paul Barretto: Do you feel that the macro.

Ryan Paul Barretto: That changed at all had deteriorated at all since you last reported Q1, because it's been pretty tough for a while now and just wondering if you feel like it was the same or have deteriorated somewhat in the first quarter.

Ryan Paul Barretto: And sorry, just to clarify it compared to what time frame.

Ryan Paul Barretto: The last time, you updated us.

Ryan Paul Barretto: So your last time, you got shots in February.

Ryan Paul Barretto: Kind of just shifting back to the decision to no longer report ARR. Is there perhaps a structural change in the business? Maybe you're feeling that there's more churn in the business that makes it less predictable over a 12 month period? Um, perhaps you're going down the path of more transactional types of revenues. How should I phrase it? I'm a little puzzled by the decision there because, by definition, right? It's the revenue over the next 12, that's on the books, right? Yeah, this is this is Justin.

Justyn Russell Howard: I'll jump in on what I think the spirit of the question is here. We actually see it the other way. I think that, you know, if you look at how pronounced the move over the last couple years has been toward the backup periods, whether it be a quarter, a month, or the full year, it has created a lot of noise in the ARR numbers. We have a business that is shifting toward the end of the year. The... way in. This is different than where our company was when we came out, where it was highly predictable. It was smooth across months. It was smooth across quarters. It was smooth across the year.

Justyn Russell Howard: For those who have been following the story it alongside of Us.

Justyn Russell Howard: I don't think we've really ever leaned into the macro.

Justyn Russell Howard: We certainly acknowledge that this is a more challenging environment to execute within.

Justyn Russell Howard: But we've always just really being focused on controlling the things that we can control and making sure that we are highly accountable to our own execution.

Justyn Russell Howard: Like all of you we listen to.

Justyn Russell Howard: The calls from our peers and we network within the industry and we see the things that we see with within our own business as well and so I would highlight that the things that we have seen.

Justyn Russell Howard: Yes.

Justyn Russell Howard: Within the business as Youre seeing more scrutiny on budgets.

Justyn Russell Howard: Youre seeing more decision makers involved in making decisions.

Justyn Russell Howard: In some cases is probably low long gating some of the sales cycles. Those are all things that are happening in <unk>.

Justyn Russell Howard: The way, we think about it is how do we make sure that we absolutely show up at our best for our customers. How do we make sure that we are really clear on the value that we can deliver for them. How do we make sure that we are differentiating against the competition and in every conversation and making sure that our customers see just housebroke can help them with their share of voice.

Justyn Russell Howard: With their pipeline with their NPS with their customers. So I would say I think for most folks it exists in the environment today.

Speaker Change: We're really just focused on controlling what we can control and delivering on our goals.

Speaker Change: Thank you and then my follow up question for Joe.

Speaker Change: Thank you very much for the color on the seasonality that we should expect for CRP and Rps.

Speaker Change: But what can you share for us in terms of your growth expectations for <unk>. This year. Thanks.

Justyn Russell Howard: Yes.

Speaker Change: Yes. So so we still see Q1 is kind of like the low watermark in the way that you should look at those metrics and you can expect those to be steady and continue to increase.

Justyn Russell Howard: Without the year with Q4 being the high watermark part of the year, just given the way the curve of our business so low watermark in Q1.

Justyn Russell Howard: Okay.

Speaker Change: Thank you for taking my questions today.

Justyn Russell Howard: Thank you that concludes our Q&A session I will now turn the conference back over to Justin Howard for closing remarks.

Justyn Russell Howard: And so as we go through this transition as a publicly traded company, sharing metrics like this, we're going through this in real time, using a metric that is challenging at scale in an enterprise-heavy business. And it's not, we think, the best indicator for the health of the business. It is going to be, there will be big differences between the first half of the year and the second half of the year, and we don't think the best way, nor the most productive way, for us to be measuring the business, or for us to be thinking about our internal decisions that we're making, executing on our long-term strategy to build the best value for the business.

Speaker Change: Alright, thank you.

Justyn Russell Howard: The only other thing I'll add there, and we commented on this in our prepared remarks, is that retention outperformed plan for Q1. And we anticipate that we're going to continue to have strength there. And also just highlight the RPO and CRPO, which I think are really great indicators of the health of the business and where the business is going. Thank you. Yeah, thanks for the question. Your next question comes from the line of Brian Schwartz with Open Hyman.

Ryan Paul Barretto: Yeah, hi, thanks for taking my question. Ryan, thank you so much. Lots of transparency on what's going on with the business, and you talked a little bit about the macro. Can I just touch upon that? Do you feel that the macro has changed at all, or has deteriorated at all since you last reported Q1? Because it's been pretty tough for a while now. And I was just wondering if you feel like it was the same or had deteriorated somewhat in the first quarter. And sorry, just to clarify, compared to what time frame? The last time you updated us. So the last time you updated us was in February. Yeah, yeah.

Speaker Change: Now everyone's kind of busy schedule Tonight I'll keep it quick.

Ryan Paul Barretto: I mean, the first thing that I'll highlight, and I want to say it again, for those that have been following the story and alongside of us, I don't think we've really ever leaned into the macro. We certainly acknowledge that this is a more challenging environment to execute within. But we've always just really been focused on controlling the things that we can control and making sure that we are highly accountable for our own execution.

Ryan Paul Barretto: But like all of you, we listen to the calls from our peers, and we network within the industry, and we see the things that we see within our own business as well. And so I would highlight that, you know, the things that we have seen within the business are you're seeing more scrutiny on budgets, you're seeing more decision makers involved in making decisions. With their pipeline, with their NPS, with their customers? So I would say, you know, I think for most folks, it exists in the environment today.

Joseph M. Del Preto: We're really just focused on controlling what we can control and delivering on our goals. Thank you. And then my follow-up question for Joe, thank you very much for the color on the seasonality that we should expect for CRPO and RPO. But what can you share with us in terms of your growth expectations for CRPO this year? Thanks. Yeah, so we still see Q1 as kind of like the low watermark in the way that you should look at those metrics, and you could expect those to be steady and continue to increase throughout the year, with Q4 being the high watermark part of the year, just giving away the curve of our business. So, you know, a low watermark in Q1 and then a high watermark in Q4.

Joseph M. Del Preto: Thank you for taking my questions today. That concludes our Q&A session. I will now turn the conference back over to Justyn Howard for closing remarks. All right, thank you.

Ryan Paul Barretto: But really appreciate the opportunity to talk to you about what's going on in the business. Some of the things that we're excited about.

Justyn Russell Howard: I know everyone's got a busy schedule tonight, so I'll keep this quick. But I really appreciate the opportunity to talk to you about what's going on in the business, some of the things that we're excited about. I think that, you know, kind of contrary to the backdrop of Q1, the excitement that Ryan and I have, we've been moving in a way that feels like the energy and opportunity in front of us feels, you know, something akin to, you know, four or five years ago.

Justyn Russell Howard: Kind of contrary to the backdrop of Q1.

Justyn Russell Howard: The excitement that Ryan and I have.

Justyn Russell Howard: Ben Jennings in a way that.

Justyn Russell Howard: Fields.

Justyn Russell Howard: The plans that we have, the strategy changes that we've got in motion, the foundation that we've built, on top of, you know, making the adjustments that we need to make and expectations with all of you to be able to out deliver, is something that has us incredibly energized. You'll see that play out from us across the year.

Justyn Russell Howard: Energy and opportunity in front of us deals.

Justyn Russell Howard: Hi.

Justyn Russell Howard: Quint.

Justyn Russell Howard: Four five years ago.

Justyn Russell Howard: The strategy changes that we've got in motion the foundation that we've built.

Justyn Russell Howard: On top of making the adjustments that we need to make in expectations without the need to be able to out deliver.

Justyn Russell Howard: It's something that has us incredibly energized, you'll see that play out from us across the year I appreciate the chance to test a bit more with some of the folks later on in over the next several weeks. So I appreciate your time and look forward to catching up with you all soon.

Operator: I appreciate the chance to chat a bit more with some of you folks later on and over the next several weeks. So, appreciate your time and look forward to catching up with you all soon. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Operator: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: Ladies and gentlemen that concludes today's call.