Q2 2024 Sprout Social Inc Earnings Call
Meg: Thank you for standing by. My name is Meg and I will be your conference operator today. At this time, I would like to welcome everyone to the 2024 Q2 Sprout Social, Inc. conference call. All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this session, please do so now.
Operator: phone your telephone keypad. If you would like to submit your question, press star one again. Thank you. I would now like to turn the conference over to Mr. Jason Rechel, Vice President of Investor Relations. Please go ahead.
Speaker Change: If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Mr. Jason Rechel, Vice President of Investor Relations. Please go ahead.
Jason Rechel: Thank you, operator. Welcome to Sprout Social's second quarter 2024 earnings call. We'll be discussing the results announced in our press release issued after market close today and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social CEO Justin Howard, CFO Joe Del Preto, and President Ryan Barretto.
Jason Rechel: Thank you, Operator. Welcome to Sprout Social's second quarter 2024 earnings call.
Speaker Change: We'll be discussing the results announced in our press release issued after market close today and 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.
Speaker Change: 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-looking.
Speaker Change: 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.
Speaker Change: During the call, we'll discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles.
Speaker Change: Thank you, Jason. And thank you to everyone for joining us today. I'm honored to kick us off and what will be my last earnings as CEO before stepping into the exec chair role.
Speaker Change: When we founded Sprout 14 years ago, we believed that social media would change the relationship between brands and their customers in new and profound ways.
Justin Howard: Today, social has become a primary and mission-critical channel for the entire customer relationship and the entire customer journey from awareness to acquisition to support. I am incredibly proud of this team's dedication and hard work to put us in this position as we strive to win this market in a category that is increasingly becoming a must-have for any brand that aspires to be competitive moving forward. I am grateful to everyone that's been part of our journey so far and the support of our shareholders. Sprout remains focused on leading our industry, which is driven by the success of our customers who rely on our platform as their social command center.
Speaker Change: I am incredibly proud of this team's dedication and hard work to put us in this position as we strive to win this market in a category that is increasingly becoming a must-have for any brand that aspires to be competitive moving forward.
Speaker Change: I am thrilled to be passing the torch to Ryan and excited for my own transition into a supporting role for this incredible team where I will be able to dig into some of our most exciting opportunities.
Ryan: Thank you, Justyn. I'm excited to spend time with all of you today and to share the progress we've been making despite the more challenging environment we're all operating in.
Ryan: On that note, I'm pleased to share that we're tracking ahead of the plan we outlined for UNBAY.
Speaker Change: The buying environment in Q2 mirrored what we observed in Q1.
Justin Howard: Our team is strengthening, our pipeline is rapidly expanding, and our platform is delivering incredible value. The three areas where we believe we can best deliver value are through, number one, our accelerated pace of product innovation. Number two, by getting even closer to our customers. And number three, by accelerating our pace of pipeline and opportunity creation.
Speaker Change: The three areas where we believe we can best deliver value are through, number one, our accelerated pace of product innovation, number two, by getting even closer to our customers, and number three, by accelerating our pace of pipeline and opportunity creation.
Justin Howard: Inside of our install base, this approach was validated this quarter through improving gross retention rates across each segment of our business and a broader positive change as our mix further shifts to more sophisticated customers with annual and multi-year contracts. We also saw competitive win rates improve, and we grew this quarter with an incredible list of customers like Salesforce, Honda, Applied Materials, Church and Dwight, Synpath, Metropolitan Transportation Authority, Green State Credit Union, and Alanto Animal We view this as an opportunity to further differentiate our product. Our AI and automation are helping our customers analyze over a billion messages a day.
Ryan: Inside of our install base, this approach was validated this quarter through improving gross retention rates across each segment of our business and a broader positive change as our mix further shifts to more sophisticated customers with annual and multi-year contracts.
Ryan: We also saw competitive win rates improve, and we grew this quarter with an incredible list of customers like Salesforce, Honda, Applied Materials.
Speaker Change: Church, and Dwight can pass.
Speaker Change: Customers like these and many others contributed to a very strong large deal momentum with customers spending more than $150k ACV with us increasing by 64% year-on-year.
Ryan: We continue to hear from our customers that they're seeing our competitors investing less in both customer support and innovation. We view this as an opportunity to further differentiate ourselves.
Justin Howard: We're also accelerating our care offering with AI. Unlocking efficiency for teams with the release of auto classification of cases by intent, the ability to auto assign cases, and to automatically summarize conversations, listening customers can now leverage insights by AI to assist in positioning our platform to solve more problems by keeping workflow in. We've seen strong success after enabling all customer-facing teams to sell Tiger in January. A sample of that progress comes in the form of some incredible new tagger customers this quarter, like Netgear, Cummins, and Fairway Stores.
Ryan: We're also accelerating our CARE offering with AI, unlocking an efficiency for teams with the release of auto-classification of cases by intent, the ability to auto-assign cases, and to automatically summarize conversations.
Ryan: Listening customers can now leverage insights by AI Assist, positioning our platform to solve more problems by keeping workflow in Sprout.
Ryan: And our new publishing API endpoints enable enterprise marketing teams to integrate directly with our project and content management tools and pave the way for future Sprout partnerships.
Speaker Change: We've seen strong success after enabling all customer-facing teams to sell Tagger in January .
Speaker Change: Influencer marketing continues to be a rapidly emerging category that is top of mind for nearly every marketing leader we work with, and Tagger continues to be the fastest growing product at Sprout.
Justin Howard: This is also a great example of the opportunities we have to solve more problems for our customers while we expand our footprint within our 30,000 customer base. The Tagger customer base has brought us a new Sprout customer with good Rx who recently shared how to leverage these complementary products on a panel at Salesforce. Nicole Hampton, Senior Director of Content and Engagement Marketing at GoodRx said, "As a team that focuses on content, social, creator, and community engagement, as well as a longtime user of Tagger, we're looking for a complementary social platform to help streamline the full scope of our efforts." With Sprout's intuitive platform and Tagger's influencer insights and workflow, we're excited to leverage these tools hand-in-hand while looking forward to what's to come as the platforms start to evolve together.
Speaker Change: This is also a great example of the opportunities we have to solve more problems for our customers while we expand our footprint within our 30,000 customer base.
Speaker Change: A year into the acquisition, and enablement of our team has also worked in reverse.
Speaker Change: The Tagger customer base has brought us a new Sprout customer with good Rx who recently shared how to leverage these complementary products on a panel at Salesforce Connections.
Nicole Hampton: Nicole Hampton, Senior Director of Content and Engagement Marketing at GoodRx, said, As a team that focuses on content, social, creator, and community engagement, as well as a long-time user of Tagger, we are looking for a complementary social platform to help streamline the full scope of our efforts.
Nicole Hampton: With Sprout's intuitive platform and Tagger's influencer insights and workflow, we're excited to leverage these tools hand-in-hand while looking forward to what's to come as the platforms start to evolve together.
Justin Howard: With sufficient tools, we're able to focus on interacting and building relationships with our customers, gleaning important insights that help content and creator strategy. During Q1, we were named the number one best software product by G2's 2024 Best Software Award. And we expanded on the success in G2's 2024 summer reports as a leader in 211 categories. We earned the number one ranking in 88 categories, including social customer service, social media analytics, social media suites, social media listening tools, as well as the enterprise results index for social media management.
Speaker Change: With Efficient Tools, we're able to focus on interacting and building relationships with our customers, gleaning important insights that help content and creator strategies.
Speaker Change: During Q1, we were named as the number one best software product by G2's 2024 Best Software Awards.
Speaker Change: And we expanded on the success in G2's 2024 summer reports as a leader in 211 categories.
Speaker Change: We earned the number one ranking in 88 categories, including Social Customer Service, Social Media Analytics, Social Media Suites, Social Media Listening Tools, as well as the Enterprise Results Index for Social Media Management.
Speaker Change: Meanwhile, our partner ecosystem further strengthened with a new Snapchat partnership in Q2 and as a beta partner for the Threads API.
Metta: Here's what META had to say about our beta partnership.
Metta: We're thrilled to partner with Sprout Social, a leader in social media management software, to enable our customers to drive engagement, build brand loyalty and achieve their marketing goals across Meta's family of apps.
Speaker Change: We believe our product and brand leadership, customer scale, and differentiated partnerships with both network and technology partners have Sprout better positioned than ever before to define and lead what is meant for brands to operationalize a sophisticated social media strategy.
April Pence: April Pence, Head of Communications and Engagement at Kroger, is a great example of how Sprout is bringing this to life with our amazing customers.
April Pence: As April shared, at Kroger, we are fresh for everyone.
April Pence: Not only do we sell fresher-than-fresh foods,
April Pence: Our enterprise social team also delivers thousands of pieces of fresh content every year. Tools like Sprout Social allow Kroger and our family of companies to effectively and efficiently publish and analyze numerous pieces of content over multiple platforms to our brand fans.
Justin Howard: All while creating additional capacity for a world-class marketing team to focus their creativity and talent on creating content that is engaging and impactful. Erica has been a founder and, more recently, an established product executive who has driven innovation and adoption with some of the most well respected and successful products, both at Google and at Lab.
April Pence: All while creating additional capacity for a world-class marketing team to focus their creativity and talents into creating content that is engaging and impactful.
Speaker Change: In addition to our product, customer and partner value we delivered this quarter, we are thrilled to add an amazing new leader with our new Chief Product Officer, Erika Traven.
Speaker Change: Erica has been a founder and more recently an established product executive who has driven innovation and adoption with some of the most well-respected and successful products both at Google and at Lassian.
Justin Howard: Her leadership will be invaluable as we look to accelerate our foundation of product innovation, growth, and scale, which have been the drivers of our success and recognition. We're continuing to work hand-in-hand with the product teams at Salesforce, and our broader partnership strategy is performing well. I'm excited for our team to have the opportunity and honor to present again at Dreamforce later this quarter.
April Pence: Her leadership will be invaluable as we look to accelerate our foundation of product innovation, growth, and scale, which have been the drivers for our success and recognition.
Speaker Change: The hard work of our teams is building into what we anticipate will be a stronger second half of the year. Our opportunity is improving after an acceleration in Q2 pipeline creation and strengthening competitive win rates.
Speaker Change: We're continuing to work hand-in-hand with the product teams at Salesforce and with our broader partnership strategy performing well. I'm excited for our team to have the opportunity and honor to present again at Dreamforce later this quarter.
Justin Howard: I'm grateful and energized to officially step into the CEO role a few months from now, and I'm looking forward to all the value we'll collectively create for our customers, partners, employees, and shareholders as we scale towards our multi-year goals. And with that, I'll turn it over to Joe to run through the financials. Okay?
Speaker Change: I'm grateful and energized to officially step into the CEO role a few months from now, and I'm looking forward to all the value we'll collectively create for our customers, partners, employees, and shareholders as we scale towards our multi-year goals. And with that, I'll turn it over to Joe to run through the financials.
Joe Del Preto: Our Change in Deferred Condition Amortization, Non-GAAP research and development expenses for Q2 were $19.1 million, or 19% of revenue. We continue to make targeted multi-year investments in AI and social customer care. Non-GAAP operating income for Q2 was $5.3 million for a 5.3% non-GAAP operating margin. Non-GAAP Net Income for Q2 was $4.9 million for a Non-GAAP Net Income of $0.09 per share based on 56.7 million weighted average shares of Common Stock outstanding.
Joe: Thanks, Ryan. I'll now run through our financial results and guidance.
Joe: We're pleased that we're track ahead of the revised plan outlined in May.
Joe: Revenue for the second quarter was $99.4 million, representing 25% year-over-year growth.
Joe: Subscription revenue was $98.5 million, up 25% year-over-year.
Joe: Services revenue was $0.9 million of 44% year-over-year.
Speaker Change: The number of customers contributing more than $10,000 in ARR grew 21% from a year ago.
Joe: Q2ACV was 13,403, up 36% year-over-year.
Speaker Change: We expect strong ACV growth to continue over the medium-term, driven by rapidly shifting enterprise mix, strengthened premium module attach rates, influencer marketing, and customer care.
Speaker Change: In Q2, non-GAAP gross profit was $78.6 million, representing a non-GAAP gross margin of 79.1%, up 100 basis points from a year ago.
Speaker Change: non-GAAP sales and marketing expenses for Q2 were $38.0 million, or 38% of revenue, down from 40% a year ago.
Speaker Change: Our change in approved commission amortization reduced sales and marketing expenses by $3.9 million compared with a year ago.
Speaker Change: non-GAAP research and development expenses per Q2 were $19.1 million, or 19% of revenue, up from 18% a year ago.
Speaker Change: We continue to make targeted multi-year investments in AI and social customer care.
Speaker Change: We expect to deliver consistent G&A leverage as a percent of revenue moving forward.
Speaker Change: non-GAAP operating income for Q2 was $5.3 million for a 5.3% non-GAAP operating margin.
Speaker Change: Non-Gap Net Income for Q2 was $4.9 million for a Non-Gap Net Income of $0.09 per share based on 56.7 million weighted average shares of Common Stock Outstanding.
Speaker Change: Compare to a non-GAAP net income of $3.8 million and $0.07 per share a year ago.
Joe Del Preto: Turn to the balance sheet and cash flow statement. We have $93 million in cash, cash equivalents, and marketable security. Operating cash flow in Q2 was $2.1 million, down from $6.3 million a year ago. Non-GAAP Free Cash Flow was $2.5 million, down from $6.0 million a year ago.
Speaker Change: Turning to the balance sheet and cash flow statement, we end at Q2 with $93.2 million in cash, cash equivalents, and marketable securities.
Speaker Change: Deferred revenue at the end of the quarter was $149.3 million.
Speaker Change: Looking at both our billed and unbilled contracts.
Speaker Change: RPO totaled $295.1 million, up from $290.0 million as in Q1, and up 43% year-over-year.
Speaker Change: Applying a CRPO growth rate of 38% year-over-year.
Speaker Change: We continue to believe that all of our leading indicators are converging towards CRPO over time.
Speaker Change: Operating cash flow in Q2 was $2.1 million, down from $6.3 million a year ago.
Speaker Change: Non-GAP free cash flow was $2.5 million, down from $6.0 million a year ago. Shifting to formal guidance.
Speaker Change: For the third quarter of fiscal 2024, we expect revenue in the range of $101.9 million to $102.1 million.
Joe Del Preto: [inaudible] We expect non-GAAP operating income in the range of $6.5 million to $7.5 million. This is from the 57.1 million weighted average basic shares of Common Stock Outlook. The systems are greater than 20% organic sprout revenue growth and accelerated tagger subscription revenue growth. We split non-GAAP operating income in the range of $28 million to $29 million.
Speaker Change: for a growth rate of more than 19%.
Speaker Change: We expect non-GAAP operating income in the range of $6.5 million to $7.5 million.
Speaker Change: We expect a non-GAAP net income per share between $0.12 and $0.13.
Speaker Change: This assumes 57.1 million weighted average basic shares of Common Stock Outstanding.
Speaker Change: For the full year 2024, we continue to expect revenue in the range of $405.0 million to $406.0 million.
Speaker Change: The systems are greater than 20% organic sprout revenue growth and accelerated tagger subscription revenue growth.
Speaker Change: For the full year 2024, we expect non-GAAP operating income in the range of $28 million to $29 million.
Speaker Change: This applies annual non-GAAP operating margin improvement of roughly 560 basis points.
Joe Del Preto: We've picked non-gap net income per share between $0.45 and $0.46, assuming 57.1 million with average basic shares of Common Stock. With that, Justin, Ryan, and I are happy to take any of your questions. Operator. Your first question comes from the line of Raimo Lenschow. Please go ahead. Hey, this is Frank on behalf of Raimo.
Speaker Change: We've picked non-GAAP net income per share between $0.45 and $0.46, assuming 57.1 million weighted average basic shares of common stock outstanding.
Justin, Ryan: With that, Justin, Ryan, and I are happy to take any of your questions. Operator?
Speaker Change: Thank you, Operator. Welcome to Sprout Social's second quarter 2024 earnings call.
Speaker Change: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: To raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when you're asking your question.
Speaker Change: Your first question comes from the line of Raimo Lenschow. Please go ahead.
Ryan Barretto: Thanks for taking the question. I want to see if we can get an update on some of the macro on how that has evolved specifically in regards to the pipeline issues from last quarter. Could you just double-click on those fronts and just what you're seeing in the field now relative to last quarter? And I had a follow-up. Yeah, Frank. This is Ryan.
Ryan Barretto: I appreciate the question. It's a very similar environment to what we saw in Q1, really mirrors it. It's some of the things that I highlighted in my prepared remarks here. You know, I think just generally there's pressures on buyers in terms of some new investments, and those things are manifesting themselves in longer sales cycles. So you're seeing for many of these buyers changing processes from what they're used to, new folks that are involved as stakeholders in the decision-making process, and longer time periods between steps in decision-making.
Speaker Change: Yeah, thanks, Frank. This is Ryan. I appreciate the question.
Ryan Barretto: Having said that, you know, I think as we, and you can see it in the data here as we turn to in terms of the execution, continued progress on the trajectory and the success that we've been having, and that showed up in the 10K, the 50K, and the 150K, and the team has done a really nice job going out and building more pipeline. And so for us, while sales cycles are longer, we're continuing to see a healthy amount of demand for our products and value in the products that we're serving customers with today. Thanks.
Speaker Change: And the team has done a really nice job going out and building more pipeline. And so for us, while sales cycles are longer, we're continuing to see a healthy amount of demand for our products and value in the products that we're serving customers with today.
Joe Del Preto: And then maybe for Joe, just in the past, you guys have talked about larger social studio ads potentially being up for grabs as we get closer to that shot clock going off in Q4. I just want to ask if there's anything embedded in the second half guide for that. Right, specific to the guide, it's just what you guys are sort of embedding in the guide for Social Studio. Yeah, so Frank, as you know, historically, I've been called out like a separate kind of call out for Social Studio. What I could say is, you know, very similar, built into the guide that we had coming out of Q1. You know, we're seeing really, you know, strong momentum on that side, especially on the Service Cloud side. And I'll let Ryan kind of chime in on what he's seeing on the front line.
Speaker Change: Yeah, I think the only thing I'd add is...
Speaker Change: We have a healthy amount of visibility into the social studio pipeline in front of us here. Even in this last quarter, we're introduced to some newer opportunities.
Frank: Thanks, Frank.
Ryan Barretto: But Frank, I would say there's not any material change in what we had baked in when we gave the four-year guide coming out. Hey guys, Ryan, I was hoping you could talk a little bit about pipeline coverage ratios heading into the back half of the year and perhaps how that compares to the prior year. I mean, look, this is normally not a question I would ask or really expect you to answer, but given the turbulence coming out of Q1 and what we can glean about bookings in Q2, I think it's fair in this case. I'd love to get your thoughts. Yep, it was very good.
Speaker Change: The prior year. I mean, look, this is normally not a question I would ask or really expect you to answer, but kind of given the turbulence coming out of Q1, what we can glean about bookings in Q2, I think it's fair in this case. I'd love to get your thoughts.
Speaker Change: Yeah, our pipeline ratios are the highest we've ever had. We actually created more pipeline than we've ever created within the quarter.
Speaker Change: We've done a great job really increasing the amount of customer-facing time and increasing the initiatives that we have to go out and make sure that we're in front of customers building.
Frank: Strong Demand. And so the best way to think about this is we're heading into the back half with a larger pipeline than we've ever had before, which gives us a lot of confidence around the back half performance that we're expecting from this team.
Speaker Change: And then maybe as a follow-up, look, one of the elements of the new pricing model that you introduced in late 22 was...
Speaker Change: Yeah, I mean, I think I'd probably just point back there to just and we talked a little bit about in our prepared remarks is our performance with gross revenue retention. We continue to see really good trajectory there, even in this market, which I think speaks to the strength of our products and the value that our customers are getting from us.
Speaker Change: We've you know certainly lapped the annual renewals on many of those customers and again for the majority of those customers that that we went through especially the folks that were on the annual contracts
Speaker Change: The actual increase were, you know, single-digit typically, so they were not material increases.
Ryan Barretto: Thank you guys. Hi guys, thanks for taking the question. Ryan, last quarter, I know you guys talked about some changes you made to go to market, one of those being verticalization of the teams. How do you feel that those changes have impacted the business to this point in the year? And specifically, on that verticalization piece, are there any particular areas of strength that you're seeing?
Ryan Barretto: Yeah, I appreciate the question. The changes have been helpful for us; the reps are ramping up nicely. I mean, you can see it in some of the customers that we talked about today that represent those verticals across healthcare, financial services, and the public sector. The biggest thing I'd highlight for us that's been exciting, aside from the logo wins, is just the learning in terms of, you know, the nuance and the use cases and the nuance and the language. And oftentimes, some of the very specific associations and groups that you need to align with to make sure that you're in the best possible position to build a pipeline and execute.
Speaker Change: Yeah, I appreciate the question. Yeah, the changes have been helpful for us. The reps are ramping nicely. I mean, you can see it in some of the customers that we talked about today that represent those verticals.
Speaker Change: across healthcare and financial services and public sector.
Ryan Barretto: And so we've seen some really good progress there. And again, similar to our commentary on the pipeline building in the back half, the team did a really nice job building a bunch of pipeline and opportunity that we're, you know, we're looking forward to executing again. Got it. That makes sense. Maybe to circle back to pipeline and dig a little bit deeper.
Frank: The biggest thing I'd highlight for us that's been exciting aside from the logo wins is just the learning in terms of, you know, the nuance in the use cases and the nuance in the language and oftentimes
Ryan Barretto: If you break it down by potential use case, call it marketing, care, PR, influencer marketing. Is there any particular subsegment there that you're seeing pipeline build be the strongest? Or is it pretty level across those different areas?
Speaker Change: Got it. That makes sense. Maybe to circle back to pipeline and dig a little bit deeper, if you break it down by potential use case, call it marketing, care, PR, influencer marketing, is there any particular sub-segment there that you're seeing pipeline build be the strongest or is it pretty level across those different areas?
Ryan Barretto: We've seen a healthy amount of demand across most of those areas. And so much of this is because if you think about the customers that are a perfect fit for us, they're these socially sophisticated customers that are consuming so many of our products. And that came up in our continued success within the premium module attach rate. But if I was to pick one that was probably leading the way, I'd say it was the customer care example.
Speaker Change: We've seen a healthy amount of demand across most of those areas, and so much of this is because if you think about the customers that are a perfect fit for us, they're these socially sophisticated customers.
Speaker Change: that are consuming so many of our products. And that came up in, you know, in our continued success within the premium module attach rate. But if I was to pick one, that that probably was leading the way I'd say to the customer care example. And it's logical when you think about it in that
Ryan Barretto: And it's logical when you think about it in that customer care is one of those things where it tends to have a lot of intensity around it. You know, when customers are on social and they're looking for support, those first comments that go up on your Reddit or your X-Files or your Facebook, or your Instagram are very public in nature. And there's a lot of pressure on brands to be able to respond quickly and to make sure that they're all over these things before others pile on and it becomes something that's viral.
Speaker Change: Customer care is one of those things where it tends to have a lot of intensity around it when customers are on social and they're looking for support.
Speaker Change: Those first comments that go up on your Reddit or your X or your Facebook or your Instagram are very public in nature. And there's a lot of pressure on brands to be able to respond quickly and to make sure that they're all over these things before others pile on and it becomes something that's viral. On top of that, we're just seeing more and more of these customers having a significant amount of volume happening on social. That's where their customers are and their customers expect to engage with them there. So to highlight that is one of the use cases that's been really, really successful for us.
Ryan Barretto: On top of that, we're just seeing more and more of these customers have a significant amount of volume happening on social. That's where their customers are, and their customers expect to engage with them there. So I'd highlight that as one of the use cases that's been really, really successful for us. The product teams that have been working on that product have just done a fantastic job in terms of the innovation and the value that we're delivering.
Speaker Change: The product teams that have been working on that product have just done a fantastic job in terms of the innovation and the value that we're delivering. Maybe one last point on that, that I think is really important here is,
Ryan Barretto: Maybe one last point on that that I think is really important here is that when you think about that product, what's critically important because there are a lot of users that end up being in care, especially social customer care, is that the product needs to be intuitive. It needs to be very easy to learn and ramp up on, and you need to be very fast in responding to customers. And that is just perfectly aligned to the DNA at Sprout. And that's why it's been so appealing for customers. Got it. I appreciate all the color.
Frank: If you think about that product, what's critically important, because there's a lot of users that end up being in care, especially social customer care, is that the product needs to be intuitive. It needs to be very easy to learn and ramp on, and you need to be very fast in responding to customers. And that is just perfectly aligned to the DNA at Sprout, and that's why it's been so appealing for customers.
Speaker Change: Got it. Appreciate all the color, Ryan.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Arjun Bhatia. Please go ahead.
Ryan Barretto: Right. Thank you. Your next question comes from the line of Arjun Bhatia. Please go ahead. Hi there. Thank you guys for taking the questions. Ryan, I have one for you, if I can start out with it.
Arjun Bhatia: Hi there, thank you guys for taking the question.
Ryan Barretto: I'm just curious what you're observing in terms of how the market and your end customers are prioritizing social at this point, and whether you've seen any change in terms of whether it's moving up or down their priority list. I know certainly CMOs and other buyers have a lot on their plate right now to consider budgets as well. But I'm curious if the application of social to certain domains is outpacing that of others, whether it's service over core presence, and how you think that might play out towards the rest of the year here. Yeah, thanks, Arjun. I think there are a couple different flavors of that.
Frank: Ryan.
Arjun Bhatia: One for you, if I can start out with. I'm just curious what your...
Arjun Bhatia: Observing in terms of how the market and your end customers are prioritizing social at this point and whether you've seen any change in terms of whether it's moving up or down their priority list. I know there's certainly CMOs and other buyers have
Speaker Change: A lot on the plate right now to consider budgets as well, but I'm curious if the application of social to certain domains is outpacing that of others, you know, whether it's service over
Speaker Change: You know core presence and and how you think that might kind of play out towards the the the rest of this rest of the year here
Ryan Barretto: Flavor one is what we were just touching on in terms of social customer care. And, you know, marketing leaders care about this; anybody who's responsible for the customer experience cares about this. But in this environment, if you have a lot of volume and interaction and your customers are on social, which is the case for pretty much everybody, you need to be there. And whether you're there or not, customers are going to be on your social profiles and trying to engage with you.
Speaker Change: Yeah, thanks, Arjun. I think there's a couple of flavors of that. Flavor one is what we were just touching on in terms of social customer care. And, you know, marketing leaders care about this. Anybody who's responsible for the customer experience cares about this.
Speaker Change: But in this environment, if you have a lot of volume and interaction and your customers on social, which is the case for pretty much everybody, you need to be there. And whether you're there or not, customers are going to be on your social profiles and trying to engage with you.
Ryan Barretto: And you need a platform like Sprout that has the ability to programmatically enable you to capture all those interactions to respond fast. And these customers expect, oftentimes, responses in minutes, and to be able to leverage it to read it into different places like your CRM, for example. And so that is definitely one thing that's standing out. From a marketing use case, one of the things that have really stood out over the last little while is just the value of organic, right? In so many of these places, we're seeing a cut on paid spend.
Speaker Change: Fast, and these customers expect oftentimes responses in minutes.
Speaker Change: And to be able to leverage it to route it into different places like your CRM, for example. And so that is definitely one thing that's standing out. From a marketing use case, one of the things that's really stood out over the last little while is just the value of organic, right? In so many of these places, we're seeing a cut on paid spend. And when you think about marketers, when they're having budgets cut in certain areas, i.e. paid, they're looking for better performance in channels like social and social organic.
Ryan Barretto: And when you think about marketers, when they're having budgets cut in certain areas, i.e., paid, they're looking for better performance in channels like social and social organic. It's really about the staff that you have and the campaigns and the creative that you're executing against. So we're spending, certainly, from a customer perspective and a new business perspective, really making sure that customers see the true value in the reporting and the data that they get on which campaigns are working.
Ryan Barretto: And then, again, even though you might be reducing paid, because we have both paid and organic reporting in Sprout, a platform gives you the ability to see what's working really well so that you can amplify it. That might mean you're doing more organic campaigns, or it might mean that you're boosting or putting more dollars behind some of your campaigns that are really performing well.
Speaker Change: Because we have both paid and organic reporting in SPROUT,
Ryan Barretto: So those are a couple of things that I'd highlight there. And then maybe one last one, just on tagger and influencer marketing. I think this is another example where we think of, and it certainly is, influencers as a newer area of growth. But if we think about the idea of celebrities and the types of people who have, for years and years and years, been endorsing products, it's a flavor of that. And so what we've seen from a lot of our customers is oftentimes these very expensive influencers don't have perfect overlap with their audience. They're spending a significant amount of budget and not getting the return that they need.
Speaker Change: I'm just on tagger and influencer marketing. I think this is another example where, you know, we think of, and it certainly is influencer as as a more new area of growth. But if we think about
Speaker Change: The idea of celebrities and the types of people who for years and years and years been endorsing products, it's a flavor of that. And so what we've seen from a lot of our customers is oftentimes these very expensive influencers don't have perfect overlap with their audience. They're spending a significant amount of budget and not getting the return that they need. So we've been having a lot of conversations around how do you optimize your campaigns and your spend with a more localized.
Ryan Barretto: So we've been having a lot of conversations around how you optimize your campaigns and your spend with a more localized influencer strategy. So I'd highlight it's all about ROI across this group and how you can, in many cases, drive better returns on the investments that you're making.
Ryan Barretto: And then just another one, if I kind of zoom out and think about what's happening in the, in the social landscape, I know your value proposition, which Sprout was positioned for, is to kind of unify across all the all the social networks, obviously, right. But when you look at activity from your customers, are you seeing any change in which networks are more active than maybe they were one or two years ago? And whether that activity is getting more concentrated at all? If there's Yeah, if there's any changes there, I would be curious to hear that.
Speaker Change: Perfect and that's super helpful and then just another one if I if I kind of zoom out and think about what's happening in the
Speaker Change: More concentrated at all. If there's any changes there, I would be curious to hear that.
Ryan Barretto: It is really so dependent on the brand and the business that we're working with. And if you think about it, it's, you know, we have the benefit of working with 30,000 plus customers across, you know, pretty much every industry vertical globally. And so what that means is so many of these organizations have different social networks that they lean into B2Bs will be more on LinkedIn, you'll see retailers that tend to be more on Instagram, you'll see folks who are on TikTok.
Speaker Change: You know, we have the benefit of working with
Speaker Change: You know, 30,000 plus customers across, you know, pretty much every industry and vertical globally.
Ryan Barretto: So I'd actually highlight that it tends to be dictated by the type of brand and where their customers are. Certainly, you know, we continue to see a lot of gravity around things like TikTok. And, you know, more recently, with the introduction of threads, that's been something that's been really interesting for our customers as well. For us, though, you're right, the value prop is the unification of all these things, the complexity that comes with it, and the ability for customers to know that when they invest in Sprout, they have the opportunity to execute against their individual strategies. Thanks, Arjun.
Speaker Change: Understood. Perfect. Very helpful. Thank you, Ryan.
Ryan Barretto: Your next question comes from the line of Adam Hotchkiss; please go ahead. Great, thanks for taking the questions. Ryan, I just wanted to follow up on an earlier question. You could talk a little bit about what you've learned over the last three months as you re-evaluated the pipeline and the sales team. I'd just be curious what you view as being in your control on turning growth around versus maybe just some of these more macro-driven issues.
Ryan Barretto: I know you've called out some sales changes previously, but when you look at the growth turnaround here and how much needs to come through changes on your side or just ramping up reps versus the macro, how do you think about those factors? Yeah, thanks, Adam. Yeah, I mean, the wrap-up of your question is something that we talk about a lot internally here at Sprout, which is controlling what we can control, right? And controlling.
Ryan Barretto: For us, there are a few things that we think about a lot. One, we think about just over delivering for our customers. So we think about showing up faster, showing up more knowledgeable, and thinking about the ways in which we differentiate. So this accelerated pace of innovation from our product clearly has been something that has differentiated us. And it has helped us with our win rates and put us in a position, especially with these new products, where we have to be able to solve new problems for customers. Getting closer to customers has certainly been a theme for us as well. We know that in today's environment, pipe coverage ratios need to be larger.
Ryan: Yeah, I mean, I think that wrapped up in your question is something that we talk about a lot internally here at Sprout, which is controlling what we can control, right, and controlling
Ryan Barretto: So we've been increasing the amount of customer-facing time. We've also been continuing to evolve the initiatives that we have from a pipeline generation perspective across marketing and our sales organization, and really getting in front of those opportunities is going to be the biggest difference maker. And so, as we look at these things, we know that the team is continuing to get better every single day. The level of effort has never been higher.
Speaker Change: Getting closer to customers has certainly been a theme for us as well. We know that in today's environment, the pipe coverage ratios need to be larger. So we've been increasing the amount of customer facing time. We've also been continuing to evolve the initiatives that we have from a pipe gen perspective across marketing and our sales organization. And really getting in front of those opportunities is gonna be the biggest difference maker.
Ryan Barretto: And the customers that we're getting a chance to interact with are providing great feedback. And for us, it's not just the feedback; it's them in the products oftentimes before they ever sign a contract with us. And then it's showing up in our gross retention and our 50k, and our 150k.
Speaker Change: are providing great feedback. And it's for us, it's not just the feedback, it's then in the products oftentimes before they ever sign a contract with us.
Ryan Barretto: So yeah, I'd underline the continued pace of innovation on the product, the continued increase in terms of customer facing time, and then just making sure that when we show up, we're really differentiating ourselves from everybody else in the market. Okay, great. That's really helpful.
Ryan Barretto: And then I just would love if you could touch on the broader Salesforce relationship. How helpful are they on the go-to-market side? And I guess, how should we think about the mix of business coming through partner versus direct? Yeah, the partnership continues to be something that we're really grateful for and we're really enjoying. As I mentioned, you know, this morning I was on with Ryan Nichols who had a product at Service Cloud.
Speaker Change: Okay great that's really helpful and then I just would love if you could touch on the broader Salesforce relationship. How helpful are they being on the go-to market side and I guess how should we think about the mix of business coming through partner versus direct?
Speaker Change: Yeah, the partnership continues to be something that we're really grateful for, and we're really enjoying. As I mentioned, you know, this morning I was on with Ryan Nichols, the head of product at Service Cloud, and we had 300 customers that had joined our webinar today that was very focused in on Sprout and Service Cloud and AI.
Ryan Barretto: And we had 300 customers that joined our webinar today that was very focused on Sprout and Service Cloud and AI. We're continuing to find opportunities to integrate and make sure that our products are adding a ton of value across the entire Salesforce customer base. We've been getting a lot of support going in jointly with the Salesforce team, but I would still consider these deals very direct in nature. When we go in with the Salesforce team, we're signing on our own paper. We are helping each other, but individually, we are closing these accounts.
Speaker Change: We're continuing to find opportunities to integrate and make sure that our products are adding a ton of value across the entire Salesforce customer base.
Speaker Change: We've been getting a lot of support going in jointly with the Salesforce team.
Speaker Change: I would still consider these deals very direct in nature. When we go in with the Salesforce team, we're signing on our own paper. We are
Speaker Change: Helping each other, but individually, we are closing these accounts. And so, for us, it's one of those ones where we've got these great product integrations that add more value to customers.
Ryan Barretto: And so for us, it's one of those ones where we've got these great product integrations that add more value to customers. And when we go in together, it's this combination that reinforces oftentimes the Salesforce platform, and it enables the Salesforce person to be able to grow their wallet share through some of their other products, where we have integrations like Tableau and Slack, for example, and certainly Service Cloud. And it adds more value to the customer by getting that 360 degree view.
Speaker Change: When we go in together, it's this combination of it reinforces, oftentimes, the Salesforce platform, and it enables the Salesforce person to be able to
Ryan: grow their wallet share through some of their other products where we have integrations like Tableau and Slack, for example, and certainly Service Cloud.
Ryan Barretto: So it's been really positive. And for those that will be there, you'll see us at Dreamforce as well, sharing more about the progress that we've made with our joint customers and then sharing a little bit more about the continued product innovation that we're going to have together. Okay, really helpful.
Ryan: and it adds more value to the customer and getting that 360 degree view. So it's been really positive and for those that will be there, you'll see us at Dreamforce as well, sharing more about the progress that we've made with our joint customers, and then sharing a little bit more about the continued product innovation that we're going to have together.
Speaker Change: Okay, all really helpful. Thanks, Ryan.
Ryan: Thanks.
Ryan Barretto: Thanks, Ryan. Your next question comes from the line of Jackson Ader. Please go ahead.
Ryan: Your next question comes from the line of Jackson Ader. Please go ahead.
Ryan Barretto: Great. Good evening, guys. Thanks for taking our questions. I have two questions, and they're actually both on the go-to-market changes. The first question is, is it possible that the slower pace of decision-making, just due to the macro environment, is actually... Helping in the sense that it's giving the changes that you made in the first quarter time to settle in, you know, put people in new roles, people in new geographies, or new verticals, rather than maybe needing to make these changes while you're on a full-on sprint. Hey Jackson,
Jackson Ader: Great. Good evening, guys. Thanks for taking our questions.
Jackson Ader: I have two questions, and they're actually both on the go-to-market changes. The first is, is it possible that actually the slower pace of decision-making, just due to the macro environment, is actually...
Speaker Change: Helping in the sense that it's giving the changes that you made in the first quarter time to settle in, you know, for people in new roles, people in new geographies or new verticals, rather than maybe needing to make these changes while you're on a full-on sprint.
Ryan Barretto: No, I don't think so. I mean, I think that's the first thing, and we shared this a little bit with some of the folks coming out of last quarter as well. I mean, so many of the changes that we talked about in Q1 really tied to the accountability I talked about before in terms of controlling what we can control and really wanting to be clear on things that we had worked on in Q1 that we felt also probably impacted the quarter.
Ryan: Hey Jackson. No, I don't think so. I mean, I think that's the first thing and we shared this a little bit with some of the folks.
Ryan: coming out of last quarter as well. I mean, so many of the changes that we talked about in Q1 really tied to the accountability I talked about before in terms of controlling what we can control, and really wanting to be clear on things that we had worked on in Q1 that we felt
Ryan Barretto: And, you know, that was a combination of some investments into our vertical strategy and then some enablement. But those things I would highlight as really important things for us, not just this year but in the long term. And so I don't know that I'd characterize the lower macro environment as helpful to those changes.
Ryan: also probably impacted the quarter. And you know, that was a combination of some investments into our vertical strategy, and then some enablement. But those things I would highlight as really important things for us.
Ryan: not just this year, but in the long term. And so I wouldn't, I don't know that I've characterized the lower macro environment as helpful to those changes.
Ryan Barretto: Yeah, okay. That makes sense. Thank you. And then, so as a follow-up, just, you know, pipeline build, good thing, but how, you know, this will be the first kind of, you know, the first year where it's time to close that pipeline, right, as we head into the third and fourth quarter. What are some of the changes that you would highlight that you've made that might help you actually?
Speaker Change: Yes, okay, that makes sense, thank you. And then, so as a follow-up, just, you know, pipeline build, good thing, but how, you know, this will be the first kind of, you know, the first year where it's time to close that pipeline, right, as we head into the third and fourth quarter.
Speaker Change: What are some of the changes that you would highlight that you've made that might help you actually start to get ink on the paper as we come to the all-important kind of fourth quarter for the enterprise?
Ryan Barretto: start to get ink on the paper as we come to the all-important kind of fourth quarter for the company. Yeah, I mean, I think the first thing is certainly that we have more pipeline than we've had before we created more pipeline this quarter. But we've been selling into these customers for a while, right? If I think about even just a lot of the Fortune 150 logos we've talked about on these calls in the past, the team has executed on some incredible logos. We've got a bunch of them that we named here today as well.
Speaker Change: Yeah, I mean, I think the first thing is certainly we have more pipeline than we've had before. We created more pipeline this quarter. But we've been selling into these customers.
Ryan Barretto: But in terms of the dynamics of the pipeline and things that we're constantly looking at and making sure that we're executing well, you know, for us, there's that customer-facing time that I referred to before, really, really focused on ensuring that we have the right velocity and activity happening in the field, across our AEs and our leaders. We're constantly looking at pipeline progression and the way that things are changing between stages to make sure that we're seeing enough movement in that pipeline to make sure that it's heading in the right direction.
Ryan: for a while, right? If I think about even just a lot of the Fortune 150 logos we've talked about on these calls in the past.
Ryan: The team is executed across some incredible logos. We've got a bunch of them that we named here today as well. But in terms of the dynamics of the pipeline and things that we're constantly looking at and making sure that we're executing well, you know, for us, there's that customer facing time that I referred to before, really, really focused in on ensuring that we have the right velocity and activity happening in the field across our AEs and our leaders.
Ryan Barretto: We think a lot about just executive sponsorship, both on the customer side and on our side, and making sure that we've got good connectivity inside and outside those organizations. And then the other piece for us is just making sure that we continue to have velocity, right? The intention for us is to continue to make sure that we're having the right amount of healthy pressure on our team, but more importantly, the right reasons for the customer to close at a certain time period.
Ryan: We're constantly looking at pipe progression and the way that things are changing between stages to make sure that we're seeing enough movement in that pipeline that it's heading in the right direction.
Ryan: We think a lot about just executive sponsorship, both on the customer side and our side, and making sure that we've got good connectivity inside and outside within those organizations. And then the other piece for us is just making sure that we continue to have velocity, right? The intention for us is to continue to make sure that we're
Ryan: Having the right amount of healthy pressure on our team, but more importantly, the right reasons for the customer to close at a certain time period.
Ryan Barretto: And so for us, the backdrop of, you know, the trial, for example, and having customers in the product is another helpful thing to help prove the value of the product and that we're a perfect fit. So all those things are ingredients that go into making sure that the team is executing and that we're, you know, going to finish the year strong.
Ryan: And so for us, the backdrop of, you know, the trial, for example, and having customers in the product is another helpful thing to help prove the value of the product and that we're a perfect fit.
Ryan: So all those things are ingredients that go into making sure that the team is executing and that we're, you know, going to finish the year strong.
Speaker Change: Got it. Okay. Thank you.
Ryan Barretto: Okay. Thank you. Thank you. Your next question comes from the line of Elizabeth Porter. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of
Joe Del Preto: Great, thank you so much for the question. I wanted to dig in on CRPO growth. And another metric that we look at is CRPO-based bookings growth. And when looking at that number, it suggests that CRPO-based bookings have been growing in the mid-teens year over year for both 2Q and Q1. So I was hoping to get a bridge on kind of what drives the confidence in the low 20s growth rate and revenue and what could be some of those factors making revenue grow faster than what we're seeing on the CRPO-based bookings growth side. Thank you. Yeah, Elizabeth. This is Joe.
Speaker Change: Great, thank you so much for the question. I wanted to dig in on the CRPO growth, and another metric that we look at is CRPO-based bookings growth.
Speaker Change: And when looking at that number, it suggests that CRPO-based bookings has been growing kind of mid-teens year over year for both 2Q and Q1.
Speaker Change: So I was hoping to get a bridge on what drives the confidence to the low 20s growth rate in revenue and what could be some of those factors making revenue grow faster than what we're seeing on the CRPO-based bookings growth side.
Joe Del Preto: Thanks for the question. I think first, I want to just call out that the RPO and CRPO numbers were, you know, kind of consistent with our expectations. Okay.
Speaker Change: Yeah Elizabeth, this is Joe. Thanks for the question. I think first I want to just call out that that the RPO and TRPO numbers were, you know, kind of were consistent with our expectations in the line of the guidance suggestion we made last quarter.
Speaker Change: And as you know, these balance sheet metrics primarily reflect the seasonality of the amortization of these accounts.
Speaker Change: As we become more heavily weighted to enterprise in Q4,
Speaker Change: You're naturally going to see the most value added in these metrics.
Speaker Change: Thank you for watching.
Speaker Change: Right? And so you saw that last year.
Speaker Change: And so we haven't seen anything that would change this dynamic in 2024, and continue to expect that you'll see very healthy contributions in the back half. So I think it's just a dynamic of how this amortizes over the first couple of quarters, and then you're going to see this pick up in the back half.
Ryan Barretto: And then just as a follow-up, I wanted to get a sense of the competitive environments, you know, as you're increasingly expanding the portfolio and looking at those larger customers, how much is around, you know, competitive displacement versus greenfield? You noted some great logo wins, but, you know, just with larger customers, is it still as much of a greenfield opportunity? Or is it switched to a little bit more displacement?
Speaker Change: Got it. And then this is a follow-up.
Speaker Change: I wanted to get a sense for the competitive environments, you know, as you're increasingly expanding the portfolio and looking at those larger customers.
Speaker Change: How much is around, you know, competitive displacements versus greenfield? You know, it had some great logo wins, but, you know, just with larger customers, is it still as much of a greenfield opportunity or has it switched to a little bit more displacements?
Ryan Barretto: Yeah, it's a healthy balance. I mean, I would say it's a healthy balance right now. Just generally, we are still so early in this market. And we've talked about it in the past on this call. So many of the logos and things that we've shared are these customers that didn't have a platform like Sprout before they invested. And then all of a sudden, they get to the level of complexity and
Speaker Change: Yeah, it's a healthy balance. I mean, I would say it's a healthy balance right now. Just generally, we are still so early within this market. And we've talked about it in the past on this call. So many of the logos and things that we've
Speaker Change: shared are these customers
Speaker Change: that didn't have a platform like Sprout before they invested.
Ryan Barretto: And that might be volume coming in because their customers are hitting them on social and they've been trying to do things manually where a platform is needed. Oftentimes, we'll also go in, even into the enterprise, and we'll win, you know, a use case or a department division and find that there are a bunch of other opportunities that are like size or even bigger that are also not having a solution today. So it's, you know; we see those as both really big opportunities.
Speaker Change: and then all of a sudden they get to the...
Speaker Change: To the level of complexity and needs, and that might be volume coming in because their customers are hitting them on social and they've been trying to do things manually, where a platform is needed. Oftentimes we'll also go in, even including into the enterprise,
Speaker Change: And we'll win, you know, a use case or a department division and find that there's a bunch of other opportunities that are like size or even bigger that are also not having a solution today. So it's, you know, we see those as both really big opportunities.
Ryan Barretto: Certainly, displacement from a competitive perspective is something that the team gets excited about. We are strong believers that, you know, our product is the best one in the market and that our team is the number one team and can better serve customers. So we've seen a lot of opportunity in this order and are just really proud of the execution that we saw from the team. Great, thank you. Your next question comes from the line of Matt VanVliet. Please go ahead. Good afternoon.
Speaker Change: Certainly displacement from a competitive perspective is something that the team gets excited about. We are strong believers that our product is the best one in the market and that our team is the number one team and can better serve customers.
Speaker Change: So we've seen a lot of opportunity, and it is Porter just really proud of the execution that we saw from the team.
Speaker Change: Great, thank you.
Speaker Change: Your next question comes from the line of Matt VanVliet. Please go ahead.
Ryan Barretto: Thanks for taking the question. I guess when you look at some of the newer channels that you're supporting, whether that's Reddit or threads that you talked about on beta or tick tock, how should we think about these as net revenue retention drivers? How much of this is then also kind of tying into just more usage, more stickiness rather than monetizing it? Curious on how you think about that on a balance going forward. Yeah, I appreciate the question. We do very much see this as a real value add in terms of adoption and usage, and value for customers. We don't directly monetize the new networks as they come in.
Matt VanVliet: Good afternoon. Thanks for taking the question. I guess when you look at some of the the newer channels that you're supporting, whether that's Reddit or threads that you talked about on beta or TikTok, how should we think about these as net revenue retention drivers?
Speaker Change: How much of this is then also kind of tying into just more usage, more stickiness rather than monetizing it? Just curious on how you think about that on a balance going forward.
Speaker Change: Yeah, appreciate the question. We do very much see this as
Speaker Change: A real value add in terms of adoption and usage and value for customers.
Ryan Barretto: But it's really an indication for us of the complexity of the customers dealing with the more networks that they are seeing their customers on, where there's information coming to them, the harder it is for them to manage. And because all these things are siloed, they need a platform like Sprout to be able to stitch them all together to give them the ability to engage and respond to customers and to be able to do something with the data.
Speaker Change: We don't directly monetize the new networks as they come in, but it's really an indication for us of the complexity that the customer is dealing with. The more networks that they are seeing their customers on, where there's information coming to them,
Speaker Change: The harder it is for them to manage, and because all these things are siloed, they need a platform like Sprout to be able to stitch this all together, to give them the ability to engage and respond to customers.
Ryan Barretto: And that might be really understanding what people are saying on the platform; it would be understanding opportunities that may exist, maybe understanding what their competitors are doing to differentiate. So we very much see it as something that adds more usage and adoption and value. And so for us, the relationships that we've developed over 14 plus years with so many of these networks are really valuable for us, and we've been really proud of the way that our teams, specifically the partnership and the product teams, have shown up. We are typically at the front of the line for any alpha or beta that comes out.
Speaker Change: and to be able to do something with the data. And that that might be really understanding what people are saying on the platform. It'd be understanding opportunities that may exist.
Speaker Change: Maybe understanding what their competitors are doing to differentiate. So we very much see it as.
Speaker Change: It's something that adds more usage and adoption and value. And so for us, you know, the relationships that we've developed over 14 plus years with so many of these networks are really valuable for us. And we've been really proud of the way that our teams, specifically the partnership and the product teams, have shown up.
Ryan Barretto: And we are typically one of the first companies that actually goes live across our full customer base with these products. And so that is just a massive differentiator and the great feedback that we've gotten from the social networks over time because of our ability to execute for customers at scale. All right, very helpful.
Speaker Change: We are typically at the front of the line for any alpha or beta that comes out, and we are typically one of the first companies that actually goes live across our full customer base with these products. And so that is just a massive differentiator and great feedback that we've got from the social networks over time because of our ability to execute for customers at scale.
Ryan Barretto: And then you mentioned tagger is the fastest growing product right now. Curious if that's just based on, you know, sort of year over year percentage growth rates, or if it's actually on sort of an ARR added basis. And then maybe more importantly, what's the rate of attach that you're seeing on net new customers buying tagger versus being sort of the first or second kind of expansionary sale that you're seeing down the
Speaker Change: All right, very helpful. And then you mentioned Tiger as the fastest growing product right now. Curious if that's just based on, you know, sort of year-over-year percentage growth rates, or if actually on sort of an ARR added basis?
Speaker Change: And then maybe more importantly, what's the rate of attach that you're seeing on net new customers buying Tagger versus being sort of the first or second kind of expansionary sale that you're seeing down the road?
Ryan Barretto: Yeah, today it would be a percentage, but it's, you know, I imagine given just how well that product is growing over time, we'll continue to see that compete pretty strongly as, you know, one of our most important modules that's being added in. I would say just in terms of, you know, product, if it's the first or second, you know, I think for us, it's interesting, and we kind of touched on it a little bit in the script, but we are seeing this opportunity to have tagger customers turn into core Sprout customers, and certainly in the reverse as well.
Ryan Barretto: Yeah, today it would be percentage, but it's, you know, I imagine given just how well that product is growing over time, we'll continue to see that compete pretty strongly as, you know, one of our most important modules that's being
Speaker Change: I would say just in terms of, you know, product, if it's the first or second, you know, I think for us, it's interesting, and we kind of touched on it a little bit in the script.
Speaker Change: You know, we are seeing this opportunity to have.
Ryan Barretto: Tagger customers turn into core Sprout customers and and certainly in the reverse as well. And oftentimes as we're going into these accounts
Ryan Barretto: And oftentimes, as we're going into these accounts, it might be the, you know, the first additional product that they've had, and not necessarily the third or fourth. So there's a lot of optionality for us in terms of being able to have these conversations around tagger. And we're just seeing a ton of interest in this area because it's something that most companies aren't doing today, or if they're doing it, they're doing it very manually.
Speaker Change: it might be the first additional product that they've had, and not necessarily the third or fourth. So there's a lot of optionality for us in terms of being able to have these conversations around TAGR, and we're just seeing a ton of interest.
Speaker Change: in this area because it's something that most companies aren't doing today or if they're doing it they're doing it very manually and if you want to execute on a influencer strategy at scale you need a platform like Sprout that's going to enable you to be able to pull that all together and programmatically execute on and then have the data you need to be able to scale it efficiently.
Ryan Barretto: And if you want to execute on an influencer strategy at scale, you need a platform like Sprout that's going to enable you to pull that all together and programmatically execute on it, and then have the data you need to be able to scale it efficiently.
Ryan Barretto: Great, thank you. Your next question comes from the line of Brian Schwartz. Please go ahead.
Speaker Change: Great, thank you.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Brian Schwartz. Please go ahead.
Ryan Barretto: Yeah, hi, thanks for taking my questions this afternoon. Ryan, I just wanted to ask you a question about the elongated sales cycles that I guess everyone is seeing these days. But, you know, does it vary at all between the sales cycles between what you're seeing with new logos versus the expansion business? Yeah, yeah, it would.
Brian Schwartz: Yeah, hi. Thanks for taking my questions this afternoon.
Brian Schwartz: Ryan, just wanted to ask you a question about the elongated sales cycles that I guess everyone is seeing these days.
Ryan Barretto: I mean, new business tends to generally, at any time, take longer than on the expansion side. And so I would say that it tends to be longer there. And, you know, when you dig into it, you know, many of those make sense in that for our current customers from an expansion standpoint, you know, we've typically had a relationship with them for a while, they've typically seen success, a lot of success from the products that are using them. Sometimes we've got PLG-type approaches within the product where they might, for example, see listening or analytics in the platform every day, but don't have it turned on.
Ryan: Yeah, yeah, it would. I mean, the new new business tends to generally
Ryan Barretto: So those are, you know, those are opportunities where there's probably less education and awareness, and then credibility and trust to build over time. So I would say that it is faster generally on expansion versus new business. Okay. And then the follow-up question I wanted to ask you is just where the business is today or the company in terms of the go-to-market transition that you've been embarking on. Maybe it's a difficult question to ask because of the macro headwinds that are out there, but where do you feel that the company is today in terms of optimizing those go-to-market changes that you started about a year ago?
Ryan Barretto: Thank you. And Brian, when you say the changes we made a year ago, were they more specific to our focus and execution on sophisticated customers? Yeah, not on the product side, but more just on the distribution side and the sales side and the move up market. I don't know if there's a baseball analogy here, but I just wondered.
Speaker Change: And Brian , when you say the changes we made a year ago, just more specific to our focus and execution on sophisticated customers?
Brian Schwartz: Yeah, not on the product side, but more just on the distribution side and the sales side and and the move-up market I don't know if there's a baseball analogy. I'm just wondering
Ryan Barretto: How much more or how much further you think it will be to kind of optimize that initiative? Moving up Markov? Got it. Yeah. Yeah, got it.
Markov: How much more or how much further you think it will be to kind of optimize, you know, that initiative? Moving up, Markov. Got it. Yeah.
Ryan Barretto: One thing I want to make sure I clarify as well, you know, I mentioned a little bit earlier today, but so many of the changes that we talked about in Q1 are changes that we would make in any given year. And they're just things that go into helping scale a business, whether that be verticalization or enabling new products. Then, you know, moving to the enterprise is something that we've been doing for, you know, quite a few years, certainly with each passing year, because the opportunity we've seen because of the growth that we've seen within those accounts and the opportunity we still see in front of us, we've been investing behind that with a high degree of certainty about the opportunity that exists and our right to win.
Speaker Change: Yeah, got it. One thing I want to make sure I clarify as well, you know, and I mentioned a little bit earlier today, but so many of the changes that we talked about in Q1 are changes we would make on any given year. And they're just things that go into helping scale a business, whether that be verticalization or enabling on new products.
Ryan Barretto: Moving to the enterprise is something that we've been doing for quite a few years, certainly with each passing year because of the opportunity we've seen, because of the growth that we've seen within those accounts and the opportunity we still see in front of us.
Ryan Barretto: You will always hear me say that we have room to grow and to optimize, and we're continuing to do that. You know, even if I think about quarter and quarter, and I would have told you this throughout the history of time, we expect to get better every single day, we continue to innovate on our initiatives, we continue to ensure that we're coaching our people up and adding great talent. So, you know, I'd say that for us, we've seen great execution from this team over time; we have more capacity behind it. And, you know, we fully expect that this team is going to go out and continue to deliver. Very helpful.
Ryan Barretto: You know, we've been investing behind that with a high degree of certainty of the opportunity that exists and our right to win.
Speaker Change: You will always hear me say that we have room to grow and to optimize, and we're continuing to do that, you know, even if I think about quarter and quarter, and I would have told you this through the history of time, we expect to get better every single day. We continue to innovate on our initiatives.
Ryan Barretto: We continue to ensure that we're coaching our people up and adding great talent. So, you know, I'd say that for us.
Ryan Barretto: We've seen great execution from this team over time, we have more capacity behind it, and we fully expect that this team is going to go out and continue to deliver.
Speaker Change: Very helpful, thank you.
Ryan Barretto: Thank you. Thank you. Your next question comes from the line of Surinder Thind.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Surinder Thind, please go ahead.
Ryan Barretto: Please go ahead. Thank you. Just following up on the prior set of questions around just the sales force and the go-to-market strategy, how should we think about where we are in terms of a productivity perspective for the sales force? How quickly should they be able to get to kind of their run rate in terms of performance, as we kind of look out? Obviously, you've shifted people into new positions, and new responsibilities. When should we expect to see the full product?
Ryan Barretto: Thank you. Just following up on the prior set of questions around just the Salesforce and the go-to-market strategy, how should we think about where we are in terms of a productivity perspective of the Salesforce?
Speaker Change: How quickly should they be able to get to kind of their run rate in terms of performance as we kind of look out? Obviously, you've shifted people into new positions, new responsibilities.
Ryan Barretto: When should we expect to see full productivity?
Ryan Barretto: Yeah, I mean, we expect to be heading into productivity here in the back half. Certainly, you know, productivity changes by segment. And, you know, the reps that are in segments that have faster sales cycles tend to ramp up much quicker than the enterprise reps. And that has so much to do with the natural course of how enterprise deals close over time, but also, very, very much associated to the investments that we've made in the pipeline that we've built.
Speaker Change: Yeah, I mean, we expect to be heading into productivity here in the back half, certainly, you know, the productivity changes by segment. And, you know, the
Ryan Barretto: Reps that are in segments that have faster sales cycles tend to ramp much quicker than the enterprise reps, and that has so much to do with the natural course of how enterprise deals close over time, but very much associated to the investments that we've made in the pipeline that we've built.
Ryan Barretto: You know, we anticipate we're going to see increased productivity changes from a positive perspective in the back half here. Scott, and then I guess what that means from a capacity perspective? At what point do you think about headcount, accelerating headcount, those kinds of changes within sales.
Speaker Change: You know, we anticipate we're going to see increased productivity changes from a positive perspective in the back half year.
Ryan Barretto: Got it. And then I guess what does that mean from a capacity perspective? At what point do you think about headcount, accelerating headcount, those kinds of changes within the Salesforce?
Ryan Barretto: Yeah, I mean, we're constantly looking at the data to make sure that we feel great about the investments that we're making, and we're seeing the right type of rep productivity. When we look at the addressable market that we have in front of us, the pipeline that we have in front of us, the opportunities we see to win in the marketplace, we're constantly looking at that equation to determine if we feel great about capacity.
Ryan Barretto: Yeah, I mean, we're constantly looking at the data to make sure that we feel great about the investments that we're making, that we're seeing the right type of rep productivity. When we look at the addressable market that we have in front of us, the pipeline that we have in front of us,
Ryan Barretto: The opportunities we see to win in the marketplace, we're constantly looking at that equation to determine if we feel great about capacity. Typically this happens from an annual planning perspective, but we're constantly, between myself and Joe and our organizations across finance and the go-to-market organizations,
Ryan Barretto: Typically, this happens from an annual planning perspective, but we're constantly between myself and Joe, and our organizations across finance and the go-to-market organizations are looking to see how we feel about the productivity metrics and where there might be opportunities to invest more or pause on investment. So these are things that are pretty fluid in our business. And as we think about this year and the capacity that we have, we feel really good about the investments that we've made here and the productivity that we anticipate that we're going to see increase in the back half.
Ryan Barretto: are looking to see how we feel about the productivity metrics and where there might be opportunities to, you know, invest more or pause on investment. So these are things that are pretty fluid through our business. And, you know, as we think about this year and the capacity that we have, we feel really good about the, you know, the investments that we've made here and the productivity that we anticipate that we're going to see increase in the back half.
Ryan Barretto: So it sounds like from a planning perspective, it's kind of steady state on a go forward basis with all the changes you've made, and then you'll maybe reevaluate closer to year end depending on how the metrics are shaking out in terms of the pipeline and wins and so forth. Yeah, that's a fair assessment of how our planning goes and how we'll execute as we go into 25.
Ryan Barretto: So it sounds like from a planning perspective it's kind of steady state on go-forward basis with all the changes you've made and then you'll maybe reevaluate closer to year-end depending on how the metrics are shaking out in terms of the pipeline and wins and so forth.
Ryan Barretto: Yeah, that's a fair assessment of generally how our planning goes and how we'll execute as we go into 25.
Speaker Change: Thank you.
Ryan Barretto: Thank you. Thank you. Since there are no more questions, I will now turn the conference back over to Mr. Justyn Howard for closing remarks. Please go ahead. Yeah. Thank you so much.
Justyn Howard: Thank you.
Speaker Change: Since there are no more questions, I will now turn the conference back over to Mr. Justyn Howard for closing remarks. Please go ahead.
Justyn Howard: I appreciate all of the questions and discussion. We are very grateful to be able to talk through this progress and our perspective on the business moving forward. We have done, the team has done a tremendous job. And I want to thank our team, specifically, for continuing to show up and deliver every day for our customers, in all conditions, and particularly now. And we're seeing that in the progress that we're making.
Justyn Howard: Yeah, thank you so much. Appreciate all of the questions and discussion. We are very
Justyn Howard: Grateful to be able to talk through this progress and our perspective on the business moving forward. We have done, the team has done a tremendous job.
Justyn Howard: And I want to thank our team specifically for continuing to show up and deliver every day for our customers.
Justyn Howard: I appreciate everyone's time. I know this is a busy evening for you all. We'll have more time to spend with you in the coming days and weeks. I hope everyone has a great evening.
Justyn Howard: In all conditions, and particularly now, and we're seeing that in the progress that we're making. Appreciate everyone's time. I know this is a busy evening for you all. We'll have more time to spend with you in the coming days and weeks. I hope everyone has a great evening.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
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