Sprout Social, Inc

Ladies and gentlemen, thank you for standing by and welcome to the Sprout Social's third quarter 2020 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, to Mr. Jason Reckle, Head of Investor Relations. Thank you. Please go ahead, sir.

Thank you, Operator. And welcome to Sprout Social's third quarter 2020 earnings conference call. We will be discussing the results announced in our press release issued after the market closed today. With me are Sprout Social's CEO, Justin Howard, CFO, Joe DelPretto, and Senior Vice President of Global Sales, Ryan Barreto. 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. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, our guidance for the fourth quarter of 2020 and the full year 2020, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will. These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subjects to risks and uncertainties that could cause actual results to differ materially. For a discussion of the risks and other important factors that could affect our actual results, including potential disruption from COVID-19, Please refer to our annual report on Form 10-K filed with the Securities and Exchange Commission, our quarterly report 10-Q to be filed with the SEC, and our other periodic filings with the SEC. During the call, we will also discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.sproutsocial.com. And with that, let me turn the call over to Justin.

Thank you, Jason, and good afternoon, everyone. Thank you for joining us. As difficult as things have been this year, I hope you've all been able to stay healthy and productive. On our side, Sprout Social, again, delivered a strong quarter across the board, setting multiple new quarterly records. We're grateful to our team for executing remarkably well, and we're excited to share that our plan for 2020 is now well ahead of our prior guidance. Our mission is straightforward. We believe social sits firmly at the center of the brand customer relationship and is rapidly becoming the most powerful channel to win, serve, and connect with audiences. Our software platform is powerful, elegant, and easy to deploy across businesses of all sizes. We give small businesses the ability to punch well above their weight, and large enterprises the power, agility, and efficiency to delight their customers at scale. We have made it increasingly easy to standardize on Sprout as the centralized system of record for social and to help our customers maximize the value of this mission critical channel across the entirety of their organization. Digital transformation has become the top priority for brands across the globe. Social communication is fundamentally more important than at any time in our company's history. And it sits at the center of this new digital technology stack that includes social publishing, engagement, customer service, care, commerce, and business intelligence. We are perfectly positioned to help our customers thrive in this new reality. This quarter, more customers than ever invested in Sprout, and we're not slowing down. I want to spend a moment up front today on culture, which has been fundamental to our success. With all of the curves 2020 has thrown at us and the rapid pace of evolution our customers are facing, our culture has been our single most powerful advantage. We've focused from the very beginning on being an incredible place to work and an incredible place to be a customer, and we simply wouldn't be here without our remarkable team. This quarter, we were honored to be named as one of Fortune's 100 Best Medium Workplaces, as well as on Fortune's 25 Best Workplaces for Women list. These are a testament to the less quantifiable aspects of this business that allow us to deliver the kind of results we're talking about today. In August, we made our annual DEI report available to the public for the first time. While we know we have a great deal of work to do, we have a solid foundation in place and are proud of the equitable company we have built to date. We hold ourselves accountable to put our resources behind delivering change for traditionally underrepresented groups and we appreciate your support in that effort. We believe the transparency of this report and growing visibility of our healthy employer brand will further strengthen our ability to attract and retain great people as we grow together in the years ahead. We had quite simply a breakout quarter. Several trends that were starting to take shape when we last spoke crystallized during the third quarter, and our teams executed with precision. We're pleased to deliver record net new customer additions record net new ARR, record customer growth metrics, and standout successes in the enterprise segment, all with improving efficiency in our financial model and while formally sunsetting the legacy Simply Measured platform. The funnel remains very strong and our forward indicators are very healthy. Ryan and Joe will share many of the specifics with you while I outline several areas of focus to position our company for an even stronger future. There are three topics I'd like to discuss, upmarket momentum, integrations that bolster our social ecosystem, and targeted areas of investment that we're making for 2021. Beginning with our accelerating momentum upmarket, during the third quarter, we signed the largest new ACV contract in our company's history, onboarded several Fortune 500 brands, including multiple wins from highly competitive RFPs, and delivered 42% growth in our greater than 10K ARR customers. We have a disruptive platform, an innovative sales playbook, the right go-to-market motion, and a customer success model in place to build repeatable success on these metrics. We raised the bar in every aspect of our upmarket business in the third quarter. The successful wins in large Fortune 500 RFP processes stand out for two reasons. The notable size of these deals and the implications on our served market suggest that established companies are beginning to invest considerable resources behind social. This supports our thesis that social media management is becoming a foundational layer in the digital tech stack. And we competed against every competitor in our space through sophisticated technology, security, and compliance evaluations. We believe we have many structural competitive advantages, and they all have begun to culminate in the success, which we expect to only expand in the coming years. Turning next to our technology integrations, we build software that is powerful, elegant, and easy to use, and our integration strategy is no different. We functionally integrated with eight new partners since we last spoke with you, which is an incredible achievement from our technology and partnership teams. These include new integrations with Microsoft Dynamics 365, Salesforce, Dropbox, Slack, a first-of-its-kind integration with Glassdoor, an enhanced listening relationship with Reddit, a new pro media video integration with Twitter, and our more recent work with Facebook to integrate the new messaging API, which supports Instagram messaging. Our platform allows customers to recognize maximum value from social across an organization. A variety of technology integrations across this ecosystem of new and existing partners enables our flywheel to help social further proliferate across the entire customer and brand journey. With visibility and collaboration more important across a growing number of business functions, we're establishing ourselves as the social system of record. Rich, fully integrated solutions offer a better user experience and deliver immediate value to our customers. This broadening ecosystem around our social platform also reduces friction in the enterprise deal cycles while further strengthening our customer relationships. Lastly, I want to touch on our priorities for 2021. We have aggressive investment goals that we believe position us well to capture a $50 billion and growing market opportunity. Our listening and premium analytics offerings are early, both in terms of market penetration and product roadmap. In 2021, we intend to continue to evolve these offerings as we further democratize the power of social data and intelligence. We're also making product investments to help bring the value of social further into our customers' organizations. We'll continue to perfect our core experiences and prioritize social customer care, commerce, engagement, and additional integrations. We'll also continue to accelerate our investments behind the strong trends we've seen in our sales and marketing efforts. Looking back to March, we made rapid adjustments to our business. Our strategy and go to market model allowed us to do this quickly, getting back to essentially full operating capacity within days. Over the next few months, we continued to adjust and help our customers navigate rapid change with our key metrics recovering relatively quickly. Late in the second quarter and throughout the third quarter, we saw the strength of our business and competitive differentiators really taking hold and have seen exactly what we wanted to see across the business. We're an objectively stronger company than we were entering the year, and importantly, this has been driven by fundamental strength rather than situational anomalies. I want to wrap up by reiterating my gratitude to our employees, our partners and our customers. Social is being validated as a mission critical communication channel and our ability to win the market stands out in the new digital environment. Over the course of the past six to 12 months, we have seen everything that we need to see to maintain confidence that the investments that we are making and will continue to make will enable us to maximize our potential. We believe our relentless focus on world-class products and our deep commitment to our people and our customers keep us well-positioned to deliver durable growth into 2021 and for many years beyond. And with that, I'd now like to turn the call over to our Senior Vice President of Global Sales, Ryan Barreto, who will walk you through some of our customer success stories this quarter.