Sprout Social, Inc

ladies and gentlemen thank you for standing by and welcome to the sprout social fourth quarter earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during this session you'll need to press star one in your telephone please be advised that today's conference is being recorded i would now like to hand the conference over to your speaker today mr jason ruckel head of investor relations thank you please go ahead

Thank you, Operator, and welcome to Sprout Social's fourth quarter and full year 2020 earnings call. We will be discussing the results announced in our press release issued after the market closed today and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Justin Howard, CFO, Joe DelPretto, and President 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 first quarter of 2021 and the full year 2021, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will. These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of the risks and important factors that could affect our actual results, please refer to our annual report on Form 10-K for the fiscal year ended December 31st, 2019, filed with the Securities and Exchange Commission, our quarterly reports on Form 10-Q, and our annual report on Form 10-K for the fiscal year ended December 31st, 2020, to be filed with the SEC, as well as our other filings with the SEC. During the call, we'll discuss certain non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliation to the most directly comparable GAAP financial measures, are included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.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 we roll into a new year and our second as a public company, I want to express my gratitude to our employees, our partners, and our customers. We're in a fortunate position to share amazing results today because of the many people that have contributed to our success. Our team has delivered an emphatic close to 2020, and we expect to deliver a fantastic 2021 as social takes center stage in the digital strategy for millions of businesses around the globe. I want to first briefly touch on our fourth quarter results, then discuss high-level trends in our business and market that have occurred over the past year, which will build into our priorities for 2021. Our accelerating growth and strong results across the board give us confidence in our strategy and the investments we're making in our future. Social has never been more mission critical, and our momentum and competitive position have never been stronger. During Q4, we delivered record net new ARR, added a record number of greater than 10K customers, drove meaningful improvements in customer retention and growth, and saw an acceleration in ACV growth as our product and upmarket strategies take hold. We also delivered on our commitment to growth with leverage, expanding our operating margins by more than 1,200 basis points year over year, while nearly doubling the ARR added to our business in Q4 versus a year ago. Looking back over the full year, 2020 made it clear that social media will be a cornerstone in the next evolution of business. Social has dramatically changed the way businesses reach, engage, serve, and build relationships with their customers and potential customers. It's not simply a way to market a brand. It's increasingly becoming the brand. And beyond marketing, it's helping companies evolve what they make, who they make it for, how they sell it, how they compete, and how they deliver world-class experiences. Sprott has emerged as the platform that makes this possible for thousands of brands across the globe as a social system of record, action, and intelligence. We're being pulled into new use cases across our customers' organizations as social is taking on bigger and more diverse roles across business strategy. This is also driving a second order of adoption as brands graduate to more sophisticated social strategies with a bigger footprint and larger levels of investment. Meanwhile, our platform is getting better every day. It's getting structurally stickier, and the barriers to entry are rapidly rising. Our emphasis on world-class user experience uniquely positions us for both greenfield adoption as well as expansion as more stakeholders become involved in social across more of the companies we serve. Further, the way businesses evaluate, buy, implement, and integrate software has evolved slowly over the past several years and then much more rapidly in 2020. We're perfectly positioned for this evolution with the right technology, culture, and distribution model to match this new approach to buying software. Buyers expect tools to be easy to use, easy to buy, and immediately familiar. We believe the traditional playbook of buying and selling software based on sales pitches, canned demos, or slide decks is fading. Prospects should and will demand to prove value for themselves. For 10 years, we've been leading with the product, and the shift in buyer expectations has expanded our advantages. The growing role and importance of social, the strength of our product, and our buyer-aligned go-to-market strategy have combined to create an outsized advantage to win an already compelling and growing market. Looking into 2021, we're driving investments in innovation to help our customers fully lean into the power of social media to transform the entirety of their organizations. We continue to invest in our core capabilities that power the top customer-rated platform in our industry and build new capabilities to shape what's next. We're investing in the next generation of messaging experiences, social care, social commerce, engagement, publishing, listening, advocacy, reputation, and analytics. We made material improvements to nearly every aspect of our platform in 2020, delivered eight new partner integrations, and once again earned recognition from G2 with top software awards in eight different categories, including highest satisfaction product, best product for marketers, best product for enterprise, and best product for customer service. Sprout also continues to be recognized for our standout culture, team, and our commitment to diversity, equity, and inclusion. We were recently recognized by Glassdoor as one of the best places to work in 2021, which is our fourth year of such an honor. Battery Ventures ranked Sprout number two on a list of 25 highest rated public cloud companies to work for during the period where COVID had transformed the way we all work. We were also recognized by Great Place to Work as a top workplace for parents and by Fortune as a top workplace for women. Our commitments to our team and our customers aren't just part of our values. They're also critical to our strategy and are proving to be a key advantage as our team is able to adapt quickly to a rapidly changing market and deliver world-class experiences to our customers. We're especially proud of both our customer and workplace recognition with the backdrop of everything that was happening in 2020. As Ryan and Joe will discuss shortly in 2021, we'll continue to invest aggressively in driving new business, expanding our existing customer relationships, expanding the opportunity and contribution of our add-on products, investing in international growth, and improving yields across our sales and marketing processes. The foundations we've built in product, culture, customer experience, and distribution position us well for an expanding market opportunity. We've told you previously that we have a $25 billion current market opportunity and a greater than $50 billion expanded TAM. A year after publishing these numbers, our ACVs are up nearly 20%. New use cases have emerged. And according to Facebook, the number of businesses on Facebook properties alone is more than doubled from 90 million to greater than 200 million. Our opportunity is rapidly expanding. The need to address social is rising and our value proposition is growing disproportionately. We plan to update you with more specific granularity on our TAM and our formal analyst event later this year. Before I turn the call over, I also want to acknowledge Ryan's recent promotion to president. As you've all seen for yourselves, Ryan is a remarkable leader in person. For the past four plus years, Ryan has made an outsized impact to our people, our customers, our culture, and our business. In Ryan's new role, we formally aligned the sales, success, and marketing organizations to expand on the success we've seen in the fluid relationship across these functions throughout the customer lifecycle. I'm looking forward to Ryan's continued contributions and working even more closely with him as we tackle the opportunities in front of us. Congratulations, Ryan. Now over to you.