Q3 2024 Sprout Social Inc Earnings Call

Operator: Ladies and gentlemen, welcome to the 2024 Q3 Earnings Sprout Social Incorporated Conference. All lines have been placed on mute to prevent any background noise.

Ladies and gentlemen, welcome to the 2024, our Q3 earnings Sprout, Social incorporated conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number.

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, press star one. As a reminder, today's call is being.

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Alex Kurtz: I will now hand today's call over to Alex Kurtz, VP of IR and Corporate Development. Please go ahead.

Speaker Change: I'll now hand, todays call over to Alex Kurtz VP of IR and corporate development. Please go ahead Sir.

Alex Kurtz: Thank you, operator, and welcome to Sprout Social's third quarter 2024 earnings call. We will be discussing the results announced in our press release issued after the market closed today and have also released an updated investor presentation, which can be found on our website. with me are Sprout Social CEO Ryan Barretto and CFO Jelda Preto.

Alex Kurtz: Thank you operator, and welcome to Sprouts Socials third quarter 2024 earnings call, we will be discussing the results announced in our press release issued after the market closed today and have also released an updated investor presentation, which can be found on our website with me are sprout, social CEO Ryan Barretto.

Speaker Change: Gerald.

Alex Kurtz: Today's call will contain four 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. These include, among others, statements concerning our expected future financial performance. Including our Q4 and 2024 Outlook and Business Plans and Objectives, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, opportunity, or will.

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 I'd like to 95.

Speaker Change: All statements other than statements of historical fact are forward looking.

Speaker Change: These include among others statements concerning our expected future financial performance.

Speaker Change: <unk>, our Q4, and 2020 for outlook and business plans and objectives and can be identified by words, such as expect anticipate intend plan believe seek opportunity or well.

Alex Kurtz: These statements reflect our views as of today only and should not be relied upon as a 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.

Speaker Change: 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.

Speaker Change: Forward looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially.

Alex Kurtz: For a discussion of the risks and other important factors that could affect our actual results, please refer to our quarterly report on Form 10-Q for the quarter ended September 30, 2024 to be filed with the FCC. as well as our most recently filed annual report on Form 10.

Speaker Change: For a discussion of the risks and other important factors that could affect our actual results.

Speaker Change: Please refer to our quarterly report on Form 10-Q for the quarter ended September 32024 to be filed with the SEC.

Speaker Change: As well as our most recently filed annual report on Form 10-K.

Alex Kurtz: During the call, we will discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting Definitions of these non-GAAP financial measures, along with reconciliation. The Most Directly Comparable Gap Financial Measures are included in our third quarter earnings release. which will be furnished to the SEC and is available on our website at investors.sproutsocial.com.

Speaker Change: During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles.

Speaker Change: Definitions of these non-GAAP financial measures along with reconciliations to the most directly comparable GAAP financial measures are included in our third quarter earnings release, which.

Speaker Change: What you will be furnished to the SEC and is available on our website at investors thought sprout social dot com.

Ryan Barretto: With that, let me turn the call over to Ryan. Ryan.

Speaker Change: With that let me turn the call over to Ryan Brian. Thank.

Ryan Barretto: Thank you, Alex, and welcome everyone to our third quarter earnings call for fiscal 2024. We reported third quarter results with revenue of $102.6 million, representing year-over-year growth of $29.6 million.

Ryan Brian: Thank you, Alex and welcome everyone to our third quarter earnings call for fiscal 2024.

Ryan Brian: We reported third quarter results with revenue of $102 6 million, representing a year over year growth of 20%.

Ryan Barretto: This was also the first quarter exceeding $100 million in revenue, a meaningful and exciting milestone. Our current remaining performance obligations, which reached 220.7 million represented at 31% year over year. I want to thank the Sprout team for their solid execution in what remains a challenging macro Their hard work has allowed us to deliver these results while also building a stronger foundation for future growth. As evidenced by steady improvements in gross retention, favorable competitive win rates, Continued ACV expansion, ongoing momentum in our enterprise and 50k plus segments, and an expansive pipeline despite the market Our pipeline shows strength in size, health and trajectory.

This was also the first quarter exceeding $100 million in revenue, a meaningful and exciting milestone for <unk>.

Ryan Brian: Our current remaining performance obligations, which reached $227 million represented 31% year over year growth.

Ryan Brian: I want to thank the <unk> team for their solid execution in what remains a challenging macro environment.

Ryan Brian: Their hard work has allowed us to deliver these results while also building a stronger foundation for future growth.

Ryan Brian: Evidenced by steady improvements in gross retention favorable competitive win rates continued ACB expansion ongoing momentum in our enterprise and 50, K plus segments and an expansive pipeline despite the market conditions.

Ryan Brian: Our pipeline shows strength in size health and trajectory.

Ryan Barretto: The headwinds we've seen in fiscal year 2024 is driven by longer enterprise sales cycles and increased budget We are encouraged by the progress we're seeing as we build a healthier foundation for growth at On that note, today, I'd like to spend more time sharing the initiatives we're focused on to drive growth and execute against the Market Opportunity Act. With new leaders in place, like Erica Trotman, leading products, and Mike Wolf, leading sales, we have a more defined approach to these growth plans with incredible leaders here to drive the We are focused on four key areas to drive First is to win the which means driving increased pipeline creation and strategic customer wins and accounts over 50K plus in ARR.

Ryan Brian: The headwinds we've seen in fiscal year, 2024 is driven by longer enterprise sales cycles and increased budget scrutiny.

Ryan Brian: We are encouraged by the progress we're seeing as we build a healthier foundation for growth at sprouts.

Ryan Brian: On that note today I'd like to spend more time sharing the initiatives, we're focused on to drive growth and execute against the market opportunity ahead of us.

Ryan Brian: With new leaders in place like Erica Trotman, leading products and Mike Wolfe, leading sales we have a more defined approach to these growth plans with incredible leaders here to drive the execution.

We are focused on four key areas to drive growth.

Ryan Brian: First is to win the enterprise, which means driving increased pipeline creation and strategic customer wins and accounts over 50, K plus and <unk>.

Ryan Barretto: We plan to accomplish this through a product roadmap that is increasingly aligned with the requirements of enterprise customers, and second, within GTM, driving more awareness with senior executives and making it clear that we are the experts and leaders in the social. Over the next year, expect more feature releases that will allow us to better meet the requirements of the largest enterprises and drive larger ACV transactions. This includes more scale in our customer care product, deepening our listening analytics features and support for larger scale We have already made solid progress in delivering key enterprise capabilities, which is evident in the September G2 fall report, which recognized Sprout with 94 number one badges, including number one in the enterprise grid for social media management, and number one in social media Some of our product highlights from this year have included In listening, we built pre-trained industry themes that leverage AI to automatically generate relevant insights for industries like healthcare and education.

Ryan Brian: We plan to accomplish this through a product roadmap that is increasingly aligned with the requirements of enterprise customers.

Ryan Brian: Within GTS driving more awareness with senior executives and making it clear that we are the experts and leaders in the social space.

Ryan Brian: Over the next year expect more feature releases that will allow us to better meet the requirements of the largest enterprises and drive larger ACD transactions.

Ryan Brian: This includes more scale in our customer care products deepening our listening analytics features and support for larger scale deployments.

Ryan Brian: We have already made solid progress in delivering key enterprise capabilities, which is evident in the September <unk> fall report, which recognized sprout with 94 number one badges, including number one in the enterprise grid for social media management and number one in social media suites.

Ryan Brian: Some of our product highlights from this year and have included in.

Ryan Brian: And listening we built pre trained industry themes that leverage AI to automatically generate relevant insights for industries like healthcare and education.

Ryan Barretto: Additionally, we introduced real time trend detection to help customers identify emerging conversations as they Improved Sentiment Analysis for Better Context and Nuance, and Expanded Multilanguage These innovations enable our customers to quickly be alerted to the most important trends that impact their business with speed and usability that we believe differentiate. In Admin Controls, we delivered functionality that allows for custom role creation and updating user permissions. Additionally, advanced audit logs were introduced to provide detailed tracking of user activity, improving security and compliance. These capabilities speed up onboarding and increase control and security for our largest customers, who are bringing on larger teams across many departments and use cases.

Ryan Brian: Additionally, we introduced real time trend detection to help customers identify emerging conversations as they happen improve sentiment analysis for better context, or nuance and expanded multi language support.

Ryan Brian: Innovations enable our customers to quickly be alerted to the most important trends that impact our business with speed and usability that we believe differentiates us.

Ryan Brian: And admin controls, we delivered functionality that allows for custom role creation and updating user permissions and bulk.

Ryan Brian: Additionally, advanced audit logs were introduced to provide detailed tracking of user activity improving security and compliance oversight.

Ryan Brian: These capabilities speed up on boarding and increased control and security for our largest customers, we're bringing on larger teams across many departments and use cases.

Ryan Barretto: We know that speed to value is an advantage for us, and we're making it even easier and faster for large teams to move away from our competitors because of these additions. In C.A.R.E., we built AI Assist, which enhances efficiency and response times by routing conversations to case queues automatically. We've also introduced round Robin case. AI-generated. Conversation Summaries, Coactive Notifications for High-Priority Messages. and integrated sentiment analysis to help teams prioritize and respond to cases with greater speed, accuracy and Consumer expectations are increasingly high for social care. And we believe these features enable us to deliver for even the most sophisticated care On the sales front, our new CRO, Mike Wolfe, is driving increased accountability in the field and better defining our resource allocation model across our different customer and geo systems. Mike is also strengthening the operational cadence of the go to market teams and driving better alignment with key partners inside the organization.

Ryan Brian: That speed to value as an advantage for us and we're making it even easier and faster for large teams to move away from our competitors because of these additions.

Ryan Brian: In care, we built AI assess which enhances efficiency and response times by routing conversations to case cues automatically.

Ryan Brian: Also introduced round Robin case assignment AI generated messaging.

Ryan Brian: Conversation summaries proactive notifications for high priority messages and integrated sentiment analysis to help teams prioritize and respond to cases with greater speed accuracy and intelligence.

Ryan Brian: Consumer expectations are increasingly high for social care and we believe these features enable us to deliver for even the most sophisticated care teams.

On the sales front, our new CFO, Mike Walter is driving increased accountability in the field and better defining our resource allocation model across our different customer and GFS segments.

Ryan Brian: Mike is also strengthening the operational cadence of the go to market teams and driving better alignment with key partners inside the organization.

Ryan Barretto: I would also note that while we're continuing to strengthen our approach in the enterprise segment, we also have a well-established commercial business that we believe will drive strong customer value and sales velocity in this part of Second, we're increasing our focus on customer health and driving improved onboarding and adoption. We want our customers to discover and deploy all of the deep value within our platform so they can leverage our most sophisticated capabilities, can integrate Sprout into their core tech stack, can leverage Sprout data to better understand their social RL. You will see us delivering more strategic expert services, building and supporting more integrations and helping our customers to better measure and understand the impact of their work.

Ryan Brian: I would also note that while we're continuing to strengthen our approach in the enterprise segment. We also have a well established commercial business that we believe will drive strong customer value and sales velocity in this part of the market.

Ryan Brian: Second we are increasing our focus on customer health and driving improved on boarding and adoption behaviors.

Ryan Brian: We want our customers to discover and deploy all of the deep value within our platform. So they can leverage our most sophisticated capabilities can integrate spread into their core tech stack can leverage data to better understand their social ROI.

Ryan Brian: You will see us delivering more strategic expert services building and supporting more integrations and helping our customers to better measure and understand the impact of their work.

Ryan Barretto: We're already seeing positive trends in gross retention, which we believe demonstrate the value of our products.

Ryan Brian: We're already seeing positive trends in gross retention, which we believe demonstrates the value of our products and we know we can do more to deliver for our customers.

Ryan Barretto: And we know we can do more to deliver. Third, we will continue to invest in our partnerships with the likes of AWS and Salesforce. Relationships with strong global partners bring Sprout into strategic accounts and expand our reach into some of the largest digital marketing budgets. We were thrilled to be highlighted as a launch partner for AgentForce during Dreamforce and to be on stage several times during In addition, our go to market alignment with agencies remains an essential component of our push into the enterprise market. We continue to see this channel as a key contributor to ACV.

Ryan Brian: Third we will continue to invest in our partnerships with the likes of AWS and Salesforce.

Ryan Brian: Relationships with strong global partners bring sprout into strategic accounts and expand our reach into some of the largest digital marketing budgets.

Ryan Brian: We were thrilled to be highlighted as a launch partner for agent Force during Dream force and to be on stage. Several times. During the conference. In addition, our go to market alignment with agencies remains a central component of our push into the enterprise market.

Ryan Brian: We continue to see this channel as a key contributor to ACD expansion.

Ryan Barretto: And fourth, we're driving a deeper penetration into our customer base for both new and existing customers with use case expansion and premium modules. Seed expansion, both inside of departments and across use cases, AI capabilities, professional services and premium modules, such as Tagger, listening, premium analytics and advocacy, all serve as key growth leverage. We know social is incredibly horizontal and has wide utility and applicability across the business, and we can help our customers capitalize on opportunities they haven't tackled.

Ryan Brian: And fourth we are driving deeper penetration into our customer base for both new and existing customers with new use case expansion and premium modules seat expansion both inside of departments and across use cases, AI capabilities professional services and premium modules, such as Tiger listening premium analytics and <unk>.

Ryan Brian: Advocacy all serve as key growth levers for sprouts.

Ryan Brian: We know social is incredibly horizontal and has wide utility and applicability across the business and we can help our customers capitalize on opportunities they haven't tackled yet.

Ryan Barretto: Finally, I'm excited about the new executive team members we have brought to Sprout over the last Erica leading product, Mike running revenue, Krista Boyson, who leads our people team and Scott Morris, who leads the market. These new leaders join a strong and tenured executive leadership team who know our team and customers incredibly well.

Ryan Brian: Finally, I am excited about the new executive team members, we have brought to spread over the last year.

Ryan Brian: <unk>, leading product, Mike running revenue Crystal Boysen, who leads our people team and Scott Morris, who leads our marketing team.

Ryan Brian: These new leaders join us strong and tenured executive leadership team to know our team and customers incredibly well.

Ryan Barretto: As we plan for fiscal 2025, we believe we have the full team in place that has seen the movie with the experience, knowledge and know-how to help us execute on our Before passing the call to Joe, I'd like to take you through a couple of important customer stories from the third quarter that outline the impact Sprout is having. During the third quarter, we closed a $1.8 million multi-year TCV transaction with a global electronic This was a competitive win, as the customer is experiencing major challenges with their previous vendor, which had created siloed workflows, in turn hampering collaboration across the platform, creating reporting challenges, and ultimately leading to overall low user adoption.

Ryan Brian: As we plan for fiscal 2025, we believe we have the full team in place that has seen the movie with the experience knowledge and Knowhow to help us execute on our vision.

Speaker Change: Before passing the call to Joe I'd like to take you through a couple of important customer stories from the third quarter. The outline the impacts spread is having in the market.

Speaker Change: During the third quarter, we closed a $1 8 million dollar multi year TCE transaction with a global electronics brand.

Speaker Change: This was a competitive win as a customer is experiencing major challenges with their previous vendor, which have created siloed workflows and turn hampering collaboration across our platform, creating reporting challenges and ultimately leading to overall low user adoption.

Ryan Barretto: with Sprout and our Salesforce Service Cloud. This company's marketing and care teams are now able to seamlessly work together in one platform. Our intuitive listening and reporting capabilities have made it easier for users to generate the insights they need and make more data driven The customer noted that Sprout allows them to do everything at a faster pace across their teams in a more approachable platform.

Speaker Change: With sprout and our Salesforce service cloud integration this company's marketing and care teams are now able to seamlessly work together in one platform.

Speaker Change: Our intuitive listening and reporting capabilities and made it easier for users to generate the insights they need and make more data driven decisions.

Speaker Change: Customer noted that spread allows them to do everything at a faster pace across their teams and a more approachable platform.

Ryan Barretto: Looking ahead, we also see opportunities where we can add more value to by expanding our footprint within other The second story I want to highlight is how the United States Coast Guard deployed Sprout across its communications department and to all of its regional operational commands that manage worldwide Coast Guard operations. They are using Sprout to inform their digital strategy, leveraging the data provided by Sprout to consolidate and optimize hundreds of social media accounts across various. During the recent Helene and Milton hurricanes, the Coast Guard was able to quickly identify posts from a local USCG account about a successful rescue attempt and amplify these posts across its regional and headquarters.

Looking ahead, we also see opportunities, where we can add more value to this customer by expanding our footprint within other modules.

Speaker Change: The second story I want to highlight is how the United States Coast Guard deployed across its communications department and to all of its regional operational commands that manage worldwide Coast Guard operations.

They are using sprout to inform their digital strategy leveraging the data provided by sprout to consolidate and optimize hundreds of social media accounts across various networks.

Speaker Change: During the recent Helane and Milton Hurricanes the Coast Guard was able to quickly identify post from our local U S. CPG accounts about a successful rescue attempts and amplify these posts across its regional and headquarters accounts, becoming one of their most viral posts to date with nearly 1 million engagements and 400 million.

Ryan Barretto: becoming one of their most viral posts to date with nearly 1 million engagements and 400 million The Coast Guard was able to leverage Sprout's Smart Inbox feature during Hurricane Milton to monitor social media for distress. The Coast Guard is now looking at social powered by the Sprout social platform as a new channel to manage their Alongside these stories, we're also thrilled to celebrate new and expanded relationships with well known brands like Zoom, Valvoline, Scrub Daddy, Campbell's, Church and Dwight. Our work with these customers underscores the importance that Sprout plays in the market across a wide set of use cases.

Speaker Change: Dollars impressions.

Speaker Change: The coast Guard was able to leverage spreads smart inbox feature during hurricane Milton to monitor social media for distress calls.

Speaker Change: The Coast Guard is now looking at social powered by the social platform as a new channel to manage their distress calls.

Speaker Change: Alongside these stories, we're also thrilled to celebrate new and expanded relationships with well known brands like Zoom Valvoline, Scrubbed Daddy, Campbell's church, and Dwight and Honda.

Speaker Change: Our work with these customers underscores the importance at sprout plays in the market across a wide set of use cases and industries.

Ryan Barretto: Our entire team, from our individual contributors to our leaders to our executive team, are aligned on our vision and the work we will do to realize it.

Speaker Change: Our entire team from our individual contributors to our leaders to our executive team are aligned on our vision and the work we will do to realize that.

Ryan Barretto: We look forward to sharing more progress along our journey.

Speaker Change: We look forward to sharing more progress along our journey and with that I'll turn it over to Joe to run through the financials, Joe Thanks, Brian.

Joe Preto: And with that, I'll turn it over to Joe to run through. Joe.

Joe Preto: Thanks, Ryan. I'll now run through our financial results and get We were pleased with Q3 results, given the ongoing macro challenges that have continued from the first half of 2024, as we crossed the quarterly milestone of exceeding 100 million in revenue. And while sales cycles remain under pressure, we are encouraged by gross retention trends, our win rates in the enterprise segment remain elevated, and our RPO growth rates remain. We also generated $9.3 million in non-GET free cash flow during the quarter and $23.1 million year-to-date.

Joe: I'll now run through our financial results and guidance.

Joe: We were pleased with Q3 results given the ongoing macro challenges. They have continued through the first half of 2024 as we crossed the quarterly milestone of exceeding $100 million in revenue.

Joe: Meanwhile, sales cycles remain under pressure, we are encouraged by gross retention trends our win rates in the enterprise segment remain elevated and our RPM growth rates remained steady.

Joe: We also generated $9 3 million and non-GAAP free cash flow during the quarter and $23 $1 million year to date.

Joe Preto: On to a quick summary of the quarter. Revenue for the third quarter was $102.6 million, representing 20% year-over-year. Subscription revenue was $101.8 million, up 20% year-over-year. Services revenue was $0.8 million, up 13% year-over-year. The number of customers contributing more than $10,000 in ARR grew 12% from a year ago. The number of customers contributing more than $50,000 in ARR grew 29% from a year ago. Q3 ACV was 13,959, up 26% year over year. As Ryan discussed earlier, our strategy to drive ACP growth remains focused on shifting to a higher enterprise mix. Strengthening Premium Module Attach Rates, such as Influencer Marketing and RPO totaled $311.5 million.

Joe: Until a quick summary of the quarter.

Joe: Revenue for the third quarter was $102 6 million, representing 20% year over year growth.

Joe: Subscription revenue was $101 8 million up 20% year over year.

Joe: Services revenue was $2 8 million up 13% year over year.

Joe: The number of customers contributing more than $10000 and <unk> grew 12% from a year ago.

Joe: The number of customers contributing more than $50000 in the IRR grew 29% from a year ago.

Joe: Q3, ACB was 13959 up 26% year over year.

Speaker Change: As Brian discussed earlier, our strategy to drive ACB growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates, such as influencer marketing and customer care.

Speaker Change: <unk> totaled $311 5 million.

Joe Preto: up from $295.1 million as in Q2 and up 36% year-over-year. We expect to recognize 71% or 220.7 million of total RPO as revenue over the next 12 months. implying a CRPO growth rate of 31% year over year. We continue to believe that all of our leading indicators are converging towards CRPO over Non-GAAP operating income totaled $7.5 million, up from $-0.6 million a year ago, for a non-GAAP operating margin of 7.3% Demonstrating continued growth in our margin profile.

Speaker Change: Up from 295 1 million in Q2.

Speaker Change: 36% year over year.

Speaker Change: We expect to recognize 71% or $227 million of total <unk> as revenue over the next 12 months.

Speaker Change: Implying a C RPM growth rate of 31% year over year.

Speaker Change: We continue to believe that all of our leading indicators are converging towards CRP overtime.

Speaker Change: non-GAAP operating income totaled $10 5 million.

Speaker Change: Up from negative <unk> 6 million a year ago for a non-GAAP operating margin of seven 3%.

Speaker Change: Demonstrating continued growth in our margin profile.

Joe Preto: Turns a guy In the fourth quarter of fiscal 2024, we expect revenue in the range of $106.3 million to $107.1 million. We expect non-GAAP operating income in the range of $8.7 million to $9.5 We expect a non-gap net income per share of between $0.15 and $0.16. This assumes approximately 57.6 million weighted average basic shares of common stock.

Speaker Change: Turning to guidance.

Speaker Change: For the fourth quarter of fiscal 2024, we expect revenue in the range of $106 3 million to $107 1 million.

Speaker Change: We expect non-GAAP operating income in the range of $8 7 million to $9 5 million.

Speaker Change: We expect a non-GAAP net income per share of between 15 and 16.

Speaker Change: This assumes approximately $57 6 million.

Speaker Change: Weighted average basic shares of common stock outstanding.

Joe Preto: The full year 2024, we expect revenue in the range of $405.1 million to $405.9 million. The full year 2024, we expect non-gap operating income in the range of $27.5 million to $28.3 million. We expect non-GAP net income per share between $0.46 and $0.47. Assuming approximately 57.0 million weighted average basic shares of common stock.

Speaker Change: The full year 2024, we expect revenue in the range of $405 1 million to $405 9 million.

The full year 2024, we expect non-GAAP operating income in the range of $27 5 million to $28 3 million.

Speaker Change: We expect non-GAAP net income per share between <unk> 46, and <unk> 47.

Speaker Change: Assuming approximately 57.0 million weighted average basic shares of common stock outstanding.

Joe Preto: During Q4, we implemented a restructuring to improve the efficiency and effectiveness of the R&D or which include the elimination of approximately 50... We expect the majority of this headcount will be reallocated to different areas of the reorganized R&D org over the next several. Expect to record a severance expense of approximately $3 million. that will be excluded from our 4Q non-GAAP.

Speaker Change: During Q4, we implemented restructuring to improve the efficiency and effectiveness of the R&D org.

Speaker Change: Which include the elimination of approximately 50 roles.

Speaker Change: We expect the majority of this head count will be reallocated different areas of the reorganized R&D or over the next several quarters.

Speaker Change: We expect to record a severance expense of approximately $3 million.

Speaker Change: Will be excluded from our <unk> non-GAAP results.

Joe Preto: We are not viewing this as incremental driver to leverage. As Ryan mentioned, we're implementing a series of initiatives at the company that we believe will lead to greater customer adoption, more success across our key business unions.

Speaker Change: We are not viewing this as incremental driver to leverage next year.

Speaker Change: As Brian mentioned, we are implementing a series of initiatives at the company that we believe will lead to greater customer adoption.

Speaker Change: Our success across our key business units better visibility and category leadership and an increasingly important market.

Joe Preto: Better Visibility and Category Leadership in an Increasingly Important With that, Ryan, Alex and I are happy to take any of your questions.

Speaker Change: With that Brian Alex and I are happy to take any of your questions operator.

Operator: Operator. At this time, if you would like to ask a question, press star 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star 1 again.

Speaker Change: At this time, if you would like to ask a question press star one on your telephone keypad.

Speaker Change: Question has been answered and you would like to remove yourself from the queue.

Speaker Change: Star one again.

Parker Lane: The first question is from the line of Parker Lane. Yeah, guys, thanks for taking the question to this afternoon. Ryan, up on the top, you talked about the challenging macro environment you continue to see out there. And, you know, if we take these numbers in context, I'd love to get your characterization of just what things look like out there relative to 90 days ago, maybe even the start of this year. What's going particularly well for the business right now? And what are some areas that you expect to see some improvement in a potentially thawing macro?

Speaker Change: Your first question is from the line of Parker Lane with Stifel.

Parker Lane: Yeah, Hi, guys. Thanks for taking the questions here this afternoon.

Ryan up on the top you talked about the challenging macro environment do you continue to see out there and if we take these numbers in context I'd love to get your characterization that just what things look like out there relative to 90 days ago, maybe even that started this year whats going particularly well for the business right now and what are some areas that you expect to see some of it.

Parker Lane: Proven and potentially following macro.

Parker Lane: Okay.

Ryan Barretto: Thanks, Parker, appreciate it. Yeah, I would characterize the macro as pretty similar to what we've seen all year. And, you know, if we think about that, and the way it manifests itself in our day to day business, it's elongated sales cycles, it's procurement processes that continue to evolve on the customer side. So it's a lot of the same things that we've been seeing all year. In terms of, you know, the opportunities for us and the things that we're excited about, despite all of this, we've seen some really great progress in terms of the teams getting in front of incredible customers and the enterprise building really healthy pipeline.

Parker Lane: Thanks, Mark I appreciate it.

Speaker Change: Yes, I wouldn't characterize the macro is pretty similar to what we've seen all year and if we think about that and the way it manifests itself in our day to day business. It's elongated sales cycles, its procurement processes that continue to evolve on the customer side.

Speaker Change: It's a lot of the same things that we've been seeing all year.

Speaker Change: In terms of.

Speaker Change: The opportunities for us in the things that we're excited about despite all of this we've seen some really great progress in terms of the team is getting in front of incredible customers and the enterprise building really healthy pipeline our win rates against our competitive set has continued to be in the right direction and elevated and.

Parker Lane: Our win rates against our competitive set have continued to be in the right direction and elevated. And, and we, you know, as we're working through this, we're seeing some some good signs in terms of the opportunity in front of us. Got it.

Speaker Change: As we're working through this we're seeing some good signs in terms of the opportunity in front of us.

Speaker Change: Got it.

Ryan Barretto: And, you know, earlier this year, you talked about some realignments and retargeting of different sales and go-to-market resources you have. You just brought Mike on. You're now talking about alignment around enterprise. Can you just walk us through sort of the mechanics of how you anticipate the go-to-market motion changes and, you know, whether there'll be any further sort of disruptive elements in the near term as a result of some of this realignment? Yeah, thanks, Parker. Yeah, we are we are first off, we're thrilled to have Mike here. Mike has a long tenure in history of successfully running revenue organizations.

Speaker Change: Earlier this year you talked about some realignments.

Speaker Change: Re targeting a different sales and go to market resources, you have just brought Mike Don Youre not talking about alignment around enterprise can you just walk us through sort of the mechanics of how you anticipate that go to market motion and changes.

Speaker Change: Whether there'll be any further sort of disruptive element in the near term as a result of.

Speaker Change: Some of this realignment.

Speaker Change: Yeah. Thanks, Patrick Yes, we are.

Speaker Change: First off we're thrilled to have Mike here Mike.

Speaker Change: Long tenure in history of successfully running revenue organizations and we can already see it is just over 60 days.

Ryan Barretto: And you can already see in his just over 60 days, he's done a great job bringing, you know, increased rigor and accountability and process to our go to market teams. And he's doing it while building a winning culture. So I just want to call that out. That's, that's been great to see. I think the thing that I call it that's really important here is we're just really well aligned on executing against the strategy that I outlined in the prepared remarks. And when we think about the setup and the structure of the team today, we feel really good about where we are as we're going into Q4.

Speaker Change: Done a great job, bringing increased rigor and accountability and process to our go to market teams and he is doing that while building a winning culture.

Speaker Change: I just wanted to call that out that's been great to see I think the thing that I'd call. It. That's really important here is we're just really well aligned on executing against the strategy that I outlined in the prepared remarks, and when we think about the setup in the structure of the team today.

Speaker Change: Still really good about where we are or as we're going into Q4. So no no major changes to call out alright. Thanks Parker next question. Please.

Ryan Barretto: So no, no major changes just call out. Thanks.

David Hynes: Your next question is from the line of David Hynes with Ken Accordionilli. Hey, guys, Ryan, you alluded to this in the prepared remarks, but what what are enterprise customers asking for on the social customer care side that you're not delivering today?

Speaker Change: Your next question is from the line of David Hynes with Canaccord Genuity.

Speaker Change: Hey, guys Ryan you alluded to this in the prepared remarks, but what our enterprise customers asking for on the social customer care side, but youre not delivering today like what does that.

Ryan Barretto: Like, what does that help us think about kind of the future roadmap there? Yeah, thanks, TJ. Appreciate it. Yeah, I mean, so much of what the enterprise customers are looking for are, are things that we're, we're doing today. So, you know, I'd highlight, for us, if you think about these organizations, they're high volume, and there's a lot of people that are in here, they need to get up and running really quickly on these platforms to be able to deliver for customers. Increasingly so, because of the volume, they're also looking for deep workflow in security. And these are all things that we've added in.

Speaker Change: Help us think about kind of the future roadmap there.

Speaker Change: Yeah, Thanks, Steve I appreciate it so.

Speaker Change: So much of what the enterprise customers are looking for or are things that we're doing today. So.

Speaker Change: Highlight.

Speaker Change: So for US if you think about these organizations, they're high volume and there's a lot of people that are in here they need to get up and running really quickly on these platforms to be able to deliver for customers increasingly so because of the volume they're also looking for.

Speaker Change: Deep workflow in security and these are all things that we've added and then the AI pieces that we've been bringing in alongside of this has really helped our customers from a productivity and speed perspective.

Ryan Barretto: And then the AI pieces that we've been bringing in alongside of this has really helped our customers from a productivity and speed perspective.

Unknown Executive: Yeah, got it.

Speaker Change: Yes got it.

Unknown Executive: And then can I ask just about the Salesforce opportunity as we start the near end of life for Social Studio? Does it feel like there's still a chunk of customers that have yet to do anything? Like, how are you thinking about that in Q4? Yeah, no, I appreciate it. Yeah, we feel really good about it. I mean, the customers that we have seen, we've won the vast majority of those, including in Q3. It's factored into the visibility we have in the pipeline in Q4. And, and we're really excited about as you know, as we go into Q4, and go into next year, just the ongoing partnership we've had with with Salesforce and the service cloud.

And then can I ask just about the salesforce opportunity as we start to near end of life for social studio does it feel like Theres still a chunk of customers that have yet to do anything like how are you thinking about that in Q4.

Speaker Change: Yes, I appreciate it.

Feel really good about it.

Speaker Change: The customers that we have seen we have won the vast majority of those including in Q3, it's factored into the visibility we have into the pipeline in Q4, and we're really excited about.

Speaker Change: As we go into Q4 and go into next year, just the ongoing partnership we've had with with Salesforce in the surface service cloud and I think you might've seen it as well, but just even the work that we've been doing with them. Most recently that was announced that Dream force as being one of the launch partners for agent Force.

Ryan Barretto: And you I think you might have seen it as well. But just even the work that we've been doing with them most recently, that was announced at Dreamforce as being one of the launch partners for AgentForce. Perfect.

Unknown Executive: Thank you, guys. Thank you.

Speaker Change: Alright perfect. Thank you guys. Thank you. Thank you next question. Please.

Raimo Lenschow: Next question, please.

Raimo Lenschow: Take your next questions from the line of Raimo Lenschow with Barclays. Hey, perfect. Thank you. Can I stay on that Agent 4 subject a little bit? How do you fit in there in the future? How do you see yourself playing in that kind of more gentic AI world? Like, you know, how deep is integration materials first? How crucial are you going to be there? And I have one follow-up. Thanks, Ramon. Yes, I appreciate the question. Yeah, I mean, we're really excited. We are the only channel here that is providing the access to the social data going in.

Speaker Change: Our next question is from the line of Raimo <unk> with Barclays.

Speaker Change: Perfect. Thank you.

Speaker Change: Can I stay on that agent for subject, a little bit and how do you fit in dairy in the future. How do you see your so playing into kind of more genentech AI world.

Speaker Change: How deepest integration teams as far as how.

Speaker Change: You're going to be there and I had one follow up for Joe.

Speaker Change: Thanks, very much I appreciate the question Yeah, I mean, we're really excited we are.

Speaker Change: The only channel here that is providing the access to the social data going in and so this builds on top of the work that we had already been doing with them within the service cloud as you. All know we're natively built in there into that console, which has really helped us and now with the addition of agent for switches coming it means that that data is enriching those.

Ryan Barretto: And so, you know, this builds on top of the work that we'd already been doing with them within the Service Cloud, as you all know, we've natively built in there into that console, which has really helped us. And now with the addition of AgentForce, which is coming, it means that that data is enriching those CRM records and going to be really empowering the AgentForce. Which is going to help all of those customers that are leveraging that to ensure that they're always answering no matter what channel with the most relevant information to help customers. Yeah, okay, perfect.

Speaker Change: Crem records and going to be really empowering the agent force, which is going to help all of those customers that are leveraging that to ensure that theyre always answering no matter what channel with the most relevant information to our customers.

Speaker Change: Yes, Okay, perfect and then.

Raimo Lenschow: And then, you know, you mentioned RPO, CRPO is becoming more important. Is there anything like if I think about like, for example, what we will do, obviously, is calculate a bookings number of the CRPO, that tick down a little bit, it's tough for comms. Is that kind of the right way you want us to look at the business going forward? Or any puts and ticks you should think about the numbers that we saw this quarter in the past? Thank you. Yeah, Raimo, I think the key here is just to continue to focus on the overall CRPO number and how that that number continues to grow.

Speaker Change: You mentioned <unk> is becoming more important is there anything like if I think about like for example, what we will do obviously is calculated bookings number.

Speaker Change: After <unk> that ticked down a little bit tougher comps is that kind of the right way you want us to look at the business going forward or any puts and takes you should think about the numbers that we saw this quarter in the past. Thank you.

Speaker Change: Yes, Raimo I think the key here is just to continue to focus on the overall <unk> number and how that that number continues to grow and so if you think about the 31% on the CRP outside that we delivered in the quarter I think that's the right number to focus on it as we talked about as we move forward that will continue to be a good leading indicator.

Ryan Barretto: And so if you think about, you know, the 31% on the CRPO side that we delivered in the quarter, I think that's the right number to focus on. And as we talked about, as we move forward, that'll continue to be a good leading indicator of future growth over the next, you know, 18 to 24 months. Thank you.

Speaker Change: Your growth over the next 18 to 24 months.

Speaker Change: Thank you next.

Arjun Bhatia: Next question, please. Your next question is from the line of Arjun Bhatia with William Blair & Company. Perfect. Thank you for taking the questions. Ryan, maybe to start off with you. It sounds like it's not new, obviously, but expanding Sprout into multiple departments. Cross your customer base seems like a big part of the growth strategy here. Can you just talk a little bit about how the product side fits into this? Meaning if you're trying to get into. Care, but also, you know, maybe into the product organization, into other departments. How much does the product need to evolve and change to cater to use cases?

Speaker Change: Next question please.

Speaker Change: Your next question is from the line of John <unk> with William Blair <unk> Company.

Speaker Change: Alright, thank you.

Speaker Change: You for taking the questions.

Speaker Change: Brian maybe to start off with you it sounds like it.

Speaker Change: We will not new obviously.

Speaker Change: Expanding sprout into multiple departments.

Speaker Change: Across your customer base seems like a big part of the growth strategy here.

Speaker Change: Can you just talk a little bit about how the <unk>.

Speaker Change: Product side fits into this meaning if you're trying to get into.

Speaker Change: There, but also.

Speaker Change: So the product organization into other departments, how much does the product need to evolve and change to cater to use cases.

Ryan Barretto: That those departments might need inside inside your customers and where are you in that kind of journey today?

Speaker Change: That those departments might need insights inside of your customers and where are you in that journey today.

Ryan Barretto: Thanks, Arjun. Yeah, I mean, we're already there today. I think so many of the logos that we've talked about today and in previous quarters, are these multi-use case across many departments, from marketing to care, to support across the organization. And so for us, we're there today, from a product perspective, we're continuing to go deeper, you know, in the prepared remarks, I gave a bunch of highlights on the elements of the products that we're going deeper in within all of these departments. But we're seeing great success here today, especially in the enterprises going across departments. Okay, got it.

Arjun: Thanks Arjun.

Speaker Change: Yeah, I mean, we're all.

Speaker Change: Already there today I think so many of the logos that we've talked about today and in previous quarters are these multi use case across many departments from marketing to care to support across the organization and so for US. We're there today from a product perspective, we are continuing to go deeper.

Speaker Change: In the prepared remarks that gave a bunch of highlights on the elements of the products that we're going deeper in within all of these departments, but we're seeing great success here today, especially in the enterprise is going across departments.

Speaker Change: Okay.

Joe Preto: And then, Joe, I want to come back to, you made some comments just on the restructuring in the R&D org. what that might mean for leverage and margin expansion next year. Can you just clarify, are you planning to reallocate those roles into other areas and reinvest those dollars? Or is there something kind of structurally changing in the in the R&D? Or just help us understand that a little bit Yeah, Arjun, the way we're thinking about is we are going to reinvest those those resources and other parts of the R&D org. And so it's just kind of a real a realignment reallocation of the team.

Speaker Change: Got it and then.

Speaker Change: Joe I wanted to come back to you made some comments just on the restructuring and the R&D origami thats, what that might mean for <unk>.

Elaborate a marginal softening next year can you just clarify are you.

Speaker Change: Planning to reallocate those rolls into other areas and reinvest those dollars or.

Speaker Change: Is there something structurally changing in the into R&D or just help us understand that a little bit more please.

Speaker Change: Yeah Arjun.

Speaker Change: The way we're thinking about it is we are going to reinvest those those resources in other parts of the R&D Org and so it's just kind of a real a realignment reallocation of the team and so don't expect a lot of leverage in 2025 based on that.

Joe Preto: And so don't expect a lot of leverage in 2025 based on that.

Ryan Barretto: Yeah, and Arjun, sorry, just maybe build on top of that, I think one piece to just highlight, you know, these decisions, as you might imagine, are incredibly hard, especially when they impact really great people on your team that have made major contributions to the organization. So I just wanted to acknowledge that piece. And I think to Joe's point, part of what's really important here is, as R&D organizations scale and go through different evolutions, you at times have to make adjustments to resource allocations and org structure. And we saw a huge opportunity to do this in the spirit of being able to capture the opportunity in front of us.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Sorry, just maybe build on top of that I think one piece to just highlight these decisions as you might imagine.

Speaker Change: Incredibly hard, especially when the impact really great people on your team that have made major contributions to the organization. So I just wanted to acknowledge that piece I think to Joes point part of what's really important here is as R&D organizations scale.

Speaker Change: Scale and go through different evolutions.

Speaker Change: At times have to make adjustments to resource allocations and org structure and we saw a huge opportunity to do this in the spirit of being able to capture the opportunity in front of us So we feel.

Ryan Barretto: So we feel really good about the future that we're moving towards here. Thanks, Arjun.

Speaker Change: Really good about the future that we're moving towards here alright.

Operator: Next question, please.

Speaker Change: Thanks next question please.

Adam Hotchkiss: Your next question is from a line of Adam Hotchkiss with Goldman Sachs. Great, thanks so much for taking the questions. I guess to start Ryan, any update on how premium attach rates are progressing? Just any more color on on tagger or individual products, how they're performing as discretionary budgets feel like they're still under pressure? Yeah, thanks for the question. We continue to be really excited about the things that we've been seeing with Tagger. I can tell you, as I'm spending time with customers, it's one of the major topics that especially marketing executives want to dig into.

Speaker Change: Your next question is from the line of Adam Hotchkiss with Goldman Sachs.

Adam Hotchkiss: Great. Thanks, so much for taking the questions I guess I'll start Ryan any update on how premium attach rates are progressing just any more color on tanker or individual products. How they are performing as discretionary budgets feel like there are still under pressure.

Ryan Brian: Yes. Thanks for the question, we continue to be really excited about the things that we've been seeing with CAGR I can tell you is I'm spending time with customers. It's one of the major topics that especially marketing executives wanted to dig into there is a massive opportunity here in terms of thinking about the way that they leverage influencer, we're still so.

Ryan Barretto: There's a massive opportunity here in terms of thinking about the way that they leverage influencer. We're still so early within this category. So there's this opportunity for us both to drive awareness and education, and then we have this incredible product behind it. And as I think about just the success we've seen and look at the customer wins in Q3, what jumps off the page is our wins across so many industries. We had customers in airlines and sports teams, financial services, not-for-profit, cybersecurity. So just seeing really good progress with Tagger and a bunch of our modules.

Ryan Brian: Early within this category. So there is this opportunity for us both to drive awareness in education, and then we have this incredible product behind it and as I think about just the the success, we've seen and look at that.

Ryan Brian: Customer wins in Q3, what jumps off the page as our wins across so many industries customers and airlines and sports teams financial services not for profit cyber security. So just seeing really good progress with CAGR and a bunch of our modules.

Unknown Executive: Got it. That's helpful.

Speaker Change: Got it got it that's helpful. And then just to touch back on the R&D question any more color you can give us on the types of roles are areas within R&D that were eliminated and maybe what those reallocation priorities specifically are and relationships.

Joe Preto: And then just to touch back on the R&D reorg question, any more color you can give us on the types of roles or areas within R&D that were eliminated, and maybe what those reallocation priorities specifically are in relation to? Yeah, I think probably the best way to frame it is that, you know, for us, the resources are going to go into a lot of the themes that I highlighted in the prepared remarks in terms of the product areas. Thank you.

Speaker Change: Yes, I think probably the best way to frame it is that.

Speaker Change: For us the resources are going to go into a lot of the themes that I highlighted in the prepared remarks in terms of the product areas.

Speaker Change: Thank you next question please.

Elizabeth Porter: Next question, please. Your next question is from the line of Elizabeth Porter with Morgan Stanley. Great, thank you so much. I wanted to follow up on TAGR and the opportunity to expand kind of in your customer base. So just an update on kind of where are we today as it looks like for your customer base adopting TAGR? And where could that be over the next year or so as you ramp the go to market process? Could TAGR be attached to any of your customers? Or is there some bifurcation to consider on who the target customer would be?

Speaker Change: Your next question is from the line of Elizabeth quarter with Morgan Stanley.

Elizabeth Quarter: Great. Thank you so much I wanted to follow up on CAGR.

Elizabeth Quarter: And the opportunity to expand kind of in your customer base. So just an update on kind of where are we today is it looks like for your customer base adopting kanger tagline, where could that be over the next year or so as you ramp the go to market process.

Speaker Change: Could CAGR be attached to any of your customers or is there some bifurcation to consider on who the target customer with Ian.

Ryan Barretto: Yeah, thanks, Elizabeth. You know, we're still early, early days, I think it's only been just a year since they've been a part of the organization. We're still early also, just when I think about where we are in the journey of this market opportunity. You know, we see a lot of opportunity across our customer base, it's certainly not going to be everybody. But I think just even thinking about some of the verticals I just shared, we've had success in, we see a lot of the serviceable addressable market in the customer base that we have today. Got it.

Speaker Change: Yes, Thanks Elizabeth.

Speaker Change: Yes.

Speaker Change: Still early early days I think it's only being just a year since they've been part of the organization. We're still early also just when I think about where we are in the journey of this market opportunity.

Speaker Change: We see a lot of opportunity across our customer base, it's certainly not going to be everybody, but I think just even thinking about some of the verticals I just shared we've had success in.

Speaker Change: We see a lot of the serviceable addressable market and the customer base that we have today.

Speaker Change: Yes.

Elizabeth Porter: And then I wanted to follow up on Raimo's question, just looking at the new business side, the RPO-based bookings kind of being 11% and billings 12%, just help us unpack a little bit more of what drives the view that metrics should be converging up towards that mid-30s? Is it we just are going to have an unlock of new deals coming in Q4? Or do we have to wait until comps start to get a little bit better next year? Just if you could help me understand kind of the dynamics there, that'd be helpful. Yeah, Elizabeth, I think the way to think about it, we've talked about this, if you look at the CRPO number and how that's going to converge on the revenue growth rate that we've talked about, really, that has to do with with the mix of our customers, right?

Speaker Change: Got it and then I wanted to follow up on <unk> question.

Speaker Change: Looking at the new business side, the RPI based bookings kind of being 11% and billings, 12% just help us unpack a little bit more what types of your debt metrics should be converging towards that mid <unk> is that we just are going to have an unlock of new deals coming in Q4 or.

Speaker Change: Do we have to wait until comps start to get a little bit better next year. Just if you could help me understand kind of the dynamics there that'd be helpful.

Speaker Change: But I think the way to think about it we've talked about this if you look at the <unk> number and how thats going to converge on the revenue growth rate that we've talked about really that has to deal with with the mix of our customers that we still have a.

Ryan Barretto: We still have a series of month to month customers, we have annual customers, we have multi year customers. So I think, you know, as we move more up market, and more of our customer base becomes annual and multi year, that'll drive that convergence between CRPO and revenue growth. And so it's more about the mix of the length of the contracts within our customer base.

Speaker Change: Series, a month to month customers, we have annual customers, who have multiyear customer. So I think as we move more up market and more of our customer base becomes annual and multi year that'll drive that convergence between <unk> and revenue growth and so it's more about the mix of the length of the contracts within our customer base.

Speaker Change: Yes.

Elizabeth Porter: Thank you, Elizabeth.

Speaker Change: Alright. Thank you Elizabeth next question please.

Thomas Shinske: Next question, please. Your next question is from the line of Brett Knoblauch with Cantor Fitzgerald. Hi, this is Thomas on for Brett. Thank you for taking my question. I guess something that stuck out to me during the election was the immense use of influence. Influencer Marketing as a way to win over younger crowds and voters.

Speaker Change: Question is from the line of Brett <unk> with Cantor Fitzgerald.

Speaker Change: Hi, This is Thomas on for Brett. Thank you for taking my question I guess something that stuck out to me during the election was immense use of in Florida.

Speaker Change: Influencer marketing as a way to win over a younger crowd and voters I guess as youre going through the RFP process with customers. How much has tigers influencer marketing had an effect on win rates and then as we think of the premium module attach rates how much of that is coming from CAGR versus lessening or your other premier.

Thomas Shinske: I guess as you're going through the RFP process with customers, how much has Tagger's Influencer Marketing had an effect on win rates? And then as we think of the premium module attach rates, how much of that is coming from Tagger versus listening or your other premium? Yeah, thanks for the question, Thomas. Yeah, I'd say we're pretty early days, again, on the influencer side as it relates to RFPs. Occasionally, you'll see them in there. I see it as one of those things where our team's just done a really nice job introducing influencer and highlighting this as an important part of any social strategy.

Speaker Change: Products.

Speaker Change: Yes. Thanks for the question Thomas Yes, I'd say, we're pretty early days again on the Influencer side as it relates to Rsp's occasionally youll see them in there I see it as one of those things where our team has just done a really nice job introducing influencer and highlighting this as an important part.

Ryan Barretto: So we do see it as something that helps us with the win rates.

Speaker Change: Any social strategy. So we do see it as something that helps us with the win rates, but I don't know that I would call it out as a major theme in Rfps today.

Unknown Executive: But I don't know that I'd call it out as a major theme in RFPs today. Awesome. Thanks.

Ryan Barretto: Then just one more, if I may. It appears that the smaller customer segment, the 10K ARR, has seen more deceleration relative to the larger customer segment that continues to show some strong growth. I guess, could you provide some insight whether this trend is driven by a realignment of the sales force or if you're observing higher churn rates? Just anything to provide color there would be helpful. Yeah, I think the biggest thing, thanks for the question. The biggest thing that I'd highlight here is just our focus on the sophisticated customers. We're seeing a lot of progress here, which you can see in the 50k.

Speaker Change: Awesome. Thanks, and then just one more if I may.

Speaker Change: It appears that the smaller customer segment that 10-K IRR.

Speaker Change: Has seen more deceleration relative to the larger customer segment that continues to show some strong growth I guess could you provide some insight whether this trend is driven by a realignment of the sales force or if youre observing higher churn rates just anything to provide color there would be helpful.

Speaker Change: Yes, I think the biggest thing thanks for the question. The biggest thing that I'd highlight here is just our focus on sophisticated customers. We're seeing a lot of progress here, which you can see in the 50 K.

Ryan Barretto: You know, if you think about our platform today, and our premium modules and the use cases that we solve for, I think there's just been a lot of opportunity in those larger customers where we've seen some really healthy penetration.

Speaker Change: If you think about our platform today, and our premium modules and the use cases that we solve for I think there's just been a lot of opportunity in those larger customers, where we've seen some really healthy penetration.

Unknown Executive: All right, thank you.

Speaker Change: Alright. Thank you next question please.

Brian Schwartz: Next question, please. Your next question is from the line of Brian Schwartz for Oppenheimer. Yeah, hi, thanks for taking my questions this afternoon. Ryan, wanted to ask you a question about the pipeline compensation. You did get some qualitative commentary in your introductory comments, but are you seeing any changes in the duration of the deals that are filling up in the pipeline? Yeah, thanks for the question.

Your next question is from the line of Brian Schwartz with Oppenheimer.

Speaker Change: Yes, hi, Thanks for taking my questions. This afternoon, Brian wanted to ask a question about the pipeline compensation you did give some qualitative commentary in your introductory comments, but are you seeing any changes in the duration.

Speaker Change: The deals that are filling up in the pipeline.

Speaker Change: Yes, thanks for the question.

Ryan Barretto: Yeah, and I sort of alluded to this in the prepared remarks, but certainly from a sales cycle perspective, it is elongating in this market today, we felt really good about the types of companies that we're getting in front of the quality of those customers, the ACV opportunities behind them, and then just the engagement with them. But it is taking longer to close those deals in this market today.

Speaker Change: Yes.

Speaker Change: You sort of alluded to this in the prepared remarks, but certainly from a sales cycle perspective.

Speaker Change: It is a long gating in this market today, we felt really good about the types of companies that we're getting in front of the quality of those customers the ACB opportunities behind them and then just the engagement with them.

It is taking longer to close those deals in this market today.

Joe Preto: Okay, and then the follow-up I have for Joe is just a question on the composition of the bookings mix in the quarter. I'm just wondering if that was similar with historical trends, you're kind of two-thirds coming from new logos and the one-thirds coming from expansion. Thank you. Yeah, good question, Brian. Not a major change in our historical mix as it relates to the new business coming in. So no major change or call out there. Thank you. All right. Thank you.

Speaker Change: Okay and then the follow up I have heard Joe is just a question on the compensation.

Speaker Change: <unk> of the bookings mix in the quarter I'm just wondering if that was similar with historical trends youre kind of two thirds coming from new logos and the one third is coming from expansion. Thanks.

Ryan Brian: Yes, good question, Brian I could not a major change in our historical mix as it relates to the new business coming in so no major change to call out there.

Speaker Change: Thank you alright.

Jackson Ader: Next question, please. Your next question is from a line of Jackson Adder with KeyBank Capital Markets. Good evening, guys. Thanks for taking our questions. Joe, on CRPO, if that's, you know, if we take that as the right way to think about growth kind of going forward, then what should we expect for that metrics growth as we kind of look ahead? Are the magnitudes of the slowdown from the, excuse me, in the last few quarters, the right way to think about, you know, the magnitude of the slowdown going forward?

Speaker Change: Alright. Thank you next question please.

Speaker Change: Your next question is from the line of Jackson Ader with Keybanc capital markets.

Jackson Ader: Hi, Good evening guys. Thanks for taking our questions.

Speaker Change: Joe on <unk>.

Speaker Change: If we take that as the right way to think about growth kind of going forward. Then what should we expect for that metrics growth as we kind of look ahead or the magnitude of the slowdown.

Speaker Change: Excuse me in the last few quarters, the right way to think about.

Speaker Change: The magnitude of the slowdown going forward or should there be some major departure.

Joe Preto: Or should there be some Yeah, so Jackson, you know, we don't right now we're not guiding the CRPO, I think, you know, as we move forward, and as we kind of get more of the annual multi year deals, and as it starts to converge on revenue, I think we'll be in a better place to provide forward looking on CRPO. But right now, we're actually not providing any guidance on CRPO. Okay, got it.

Speaker Change: Yes, So Jackson, we don't right now we're not guiding the CRP L. I think as we move forward and as we kind of get more of the annual and multiyear deals and as it starts to convert on revenue I think we'll be in a better place to.

Speaker Change: To provide forward looking on <unk>, but right now, we're actually not providing any guidance on <unk>.

Speaker Change: Okay, Okay got it.

Joe Preto: then on expenses in the fourth quarter. So outside of the RE-ORG, which in R&D, which I think I understand, we've got a bunch of new wonderful leaders in place. And so I would assume that means that people are looking to make some investments. And so we've talked about R&D, but what about maybe some sales investments that are being contemplated now with Mike on board? Understood that it's only been 60 days, but still, there are plans being made.

Speaker Change: Then on expenses in the fourth quarter, so outside of the the re org, which which in R&D, which I think I understand.

Speaker Change: Yes.

Speaker Change: We've got a bunch of new wonderful leaders in place and so I would assume that means that people are looking to make some investments and so we've talked about R&D, but what about maybe some sales investments that are being contemplated now with.

Speaker Change: With Mike onboard understood that it's only been 60 days, but still there are plans being made I'm sure.

Joe Preto: Yeah, thanks, Jackson. I'll go ahead here. I wouldn't highlight any changes here. I think, you know, we feel really good about the structure that we have today. And in the investment strategy that we have as we move forward, so nothing to call out.

Speaker Change: Yes, Thanks Jackson.

Speaker Change: Go ahead here I wouldn't highlight any changes here I think we feel really good about the structure that we have today and in the investment strategy that we have as we move forward so nothing to call out.

Jackson Ader: Okay. Thank you.

Unknown Executive: All right, thank you for the question.

Speaker Change: Alright. Thank you for the question next question. Please.

Rob Morelli: Next question, please. As a reminder, to ask a question, press star one on your telephone keypad. Your next question is from the line of Rob Morelli, Winnetka Company. Yeah, hey guys, thanks for taking my question. Congrats on the quarter. You continue to sound optimistic surrounding service cloud opportunity, you know, as focus shifts away from social studios, it approaches sunset. Do you anticipate any, you know, go to market changes necessary to sort of really capture this opportunity? Or is the playbook for the partnership fairly similar to what's in place at social studio?

Speaker Change: As a reminder to ask a question press star one on your telephone keypad.

Speaker Change: Your next question is from the line of Rob Murali.

Speaker Change: Company.

Speaker Change: Yeah, Hey, guys. Thanks for taking my question Congrats on the quarter you continue to sound optimistic surrounding service cloud opportunity is focus shifts away from social studios that are purchased Sunset do you anticipate any go to market changes necessary to sort of really capture this opportunity, whereas the playbook for the partnership fairly similar to what's in place and social studio.

Ryan Barretto: Yeah, thanks, Rob. Yeah, it's the exact same. And the reason it's the exact same is, we've been really focused in on this service cloud opportunity, really, since we built the integration out about a year and a half ago, you saw more investment from us as we were that one of the launch partners there for AgentForce. But when I think about the go to market motion on it, and our partnership motion, it's the same as we end out the year and go into next year. So feeling really good about the progress and the alignment with them.

Rob: Yes, Thanks, Rob yes.

Speaker Change: It's the exact same and the reason it's the exact same is we've been really focused in on the service cloud opportunity really since we built the integration out about a year and a half ago you sound more investment from US as we were that one of the launch partners. There for agent force, but when I think about the go to market motion on it and our partnership motion.

Speaker Change: The same as we ended the year and go into next year, So feeling really good about the progress and the alignment with them.

Ryan Barretto: Got it, helpful. And then sorry, running a little late here. But apologies, this was already asked. But compared to what you guys saw in the first half, first half of 24. Did you notice any shift in sales cycles, you know, in 3Q versus, you know, the prior two quarters, any shortening or changing customer budgets? Yeah, no, we highlighted that the macro feels very similar. And in terms of sales cycles, we're seeing the same things, our win rates continue to be elevated, we've been creating a lot of healthy pipeline, sales cycles are just elongated. Got it.

Speaker Change: Helpful and then sorry, running a little late here, but.

Speaker Change: Apologize if this was already asked but compared to what you guys saw in the first half first half of 'twenty four.

Speaker Change: Did you notice any shift in sales cycles, and <unk> versus the prior two quarters, any shortening or changing customer budgets.

Speaker Change: Yes.

Speaker Change: We highlighted that the macro feels very similar in terms of sales cycles. We're seeing the same thing as our win rates continue to be elevated we've been creating a lot of healthy pipeline.

Speaker Change: Those cycles are just elongated.

Unknown Executive: Thanks for the call.

Got it thanks for the color.

Operator: At this time, there are no further audio questions.

Speaker Change: At this time there are no further audio questions I would now hand todays call back over to the presenters for any closing remarks.

Ryan Barretto: I will now hand today's call back over to the presenters for any closing remarks. Great. Thanks very much. And I just want to say thank you all for joining us today and for the thoughtful questions.

Speaker Change: Great. Thanks, very much and I just wanted to say thank you all for joining us today and for the thoughtful questions.

Ryan Barretto: I want to end by just thanking our incredible team here at Sprout for their dedication and hard work, which really drives everything that we're achieving. We're incredibly excited about the road ahead and confident in the strategy that we outlined today to really deliver meaningful value to our customers and shareholders. And we really appreciate your support. So thanks for joining us. Take care, and we'll talk soon.

Speaker Change: I wanted to end by just thanking our incredible teams here at <unk> for their dedication and hard work, which really drives everything that we're achieving we're incredibly excited about the road ahead and confident in the strategy that we outlined today to really deliver meaningful value to our customers and shareholders and we really appreciate your support so thanks for joining.

Speaker Change: Take care and we'll talk soon.

Operator: This concludes today's call. Thank you for joining. You may now disconnect your line.

Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: Sure.

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