Sprout Social, Inc

ladies and gentlemen thank you for standing by and welcome to scrap social first 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 the session you will need to press bar then the number one on your telephone if you require any further assistance please press bar zero i would like to hand the call over to your speaker today mr jason raca please go ahead

Thank you, Operator, and welcome to Sprout Social's first quarter 2021 earnings call. We'll be discussing the results announced in our press release issued after market closed today, and we've also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Justin Howard, CFO Joe Del Preto, 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 second 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 discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 24, 2021, as well as any future quarterly and current reports that we file with the SEC. During the call, we'll discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures, are included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.spousesocial.com. And with that, let me turn the call over to Justin. Thank you, Jason, and good afternoon, everyone. Thank you for joining us. We are off to a fast start in 2021 thanks to our focus on delivering world-class experiences to our customers and ongoing execution and resiliency of our team. More businesses than ever invested in Sprout during the first quarter as social takes center stage in the digital strategy for what comes next. I want to touch on a few first quarter highlights before turning the call over to Ryan and Joe to cover the details. Our growth rate is shifting into an even higher year, which reinforces confidence in our strategy, our opportunity, and the investments we're making in our future. During Q1, we added a record number of net new customers, added a record number of customers contributing more than 10K in ARR, and delivered further acceleration in ARR growth. We also achieved positive free cash flow and inflected above the Rule of 40 benchmark, each for the first time and much sooner than forecasted. These points underscore the value we're delivering to our customers and the compelling unit economics of our business. We're focused on building a durable company for the long term, but our current growth and momentum has never been stronger. We're well equipped to capitalize on the convergence of multiple tailwinds in our market. We're continuing to prioritize our investments in these areas. In the early stages of 2021, the expansion of use cases for our platform has continued to accelerate. Stakeholders across nearly all functions of business are using Sprout to harness the power of social, unlock business intelligence, and broadly operationalize social across their organizations. These expanded use cases have three distinct implications on our market and our company. More businesses need to adopt the social media management platform because their challenges have both broadened and become more acute. There are more opportunities for seed expansion into new departments within our existing customer base, and the opportunities and values for our data-driven social listening and premium analytics capabilities are compounded by these first two factors. We expect this flywheel to remain in motion for many years to come and potentially be further strengthened by the looming convergence of social and e-commerce. Further, the proliferation of social across an organization plays to our natural competitive strengths. Our platform was built for the end user. The ease of use, rapid time to value, collaboration, security, permissioning, and workflow management capabilities that are embedded in Sprout have advantages that become even more powerful as more departments and users come online. We're working hard to build on top of these core advantages, introduce new functionality that can drive even more use cases, and to develop new capabilities for what comes next. Our single code base and strategic scale allow us to execute against this strategy faster and more efficiently than anyone else in our market. To reiterate something I said last quarter, the multitude of global events over the past 12 months have made it clear that social media will be a cornerstone to the next evolution of business. We're seeing this in the inbound volume and quality of customers coming into our opportunity funnel. The growing importance of social was crystallized in a recent study by the Harris Poll that was commissioned by Sprout. I encourage you to dig into the data for yourselves, but I want to call out a few of the most compelling data points that stood out to us. First, 91% of executives anticipate that their company's social media marketing budget will increase over the next three years, and more than half expect it to grow by more than 50%. Second, 84% of business executives expect their company's use of social media for external communication to increase over the next three years, and 90% agree that social media will soon become the primary communication channel for companies to connect with existing and potential customers. And third, 85% of business executives agree that social data will be a primary source of business intelligence for their company going forward. These plans on the business side also align with consumers' needs. The data from the Harris Poll also shows that 80% of consumers expect brands and companies that have a social media presence to interact with their customers in meaningful ways. 78% of consumers will buy from a brand after a positive experience on social media. These trends are even more pronounced in younger generations that will soon represent the majority of both the workforce and consumer spend, creating a second-order tailwind for the industry for many years to come. social has become a mission critical communication channel and organizations of all sizes must lean into the shift to thrive the sprout platform is perfectly aligned with the social system of record action and intelligence it empowers our customers to not only capitalize on social as an engagement channel but to deliver sophisticated intelligence that informs nearly every aspect of their digital strategy Our emphasis on world-class user experience uniquely positions us for both greenfield adoption as well as expansion as more of these stakeholders become involved in social across more of the companies we serve. Another significant shift in our industry is the rapid emergence of social as a true commerce platform. We shared with you last quarter that this was an area of focus for us, and we've been hard at work We're excited to introduce our first partner in technology integrations with you over the course of this current quarter and will further expand our investment in this area as product discovery, purchases, and support all begin to merge in compelling new ways on social media. Our scalable platform and extensive ecosystem of network integration partners positions our company to play a valuable role as this market develops. Before I wrap up, I want to talk about the team that makes this all possible. Over the past quarter, our team has continued to raise the bar in the way we build, market, and sell our product. They've brought increased focus and vision for our strategy during an uncertain time for our world. We're committed to fortifying our culture and supporting not just our team, but our customers, partners, and our communities. We're humbled when that commitment is recognized with awards such as Fortune's 2021 Best Places to Work in Tech, and we are constantly investing in new ways to make a positive impact. As our people potentially return to offices later this year, we will continue to prioritize well-being and reshape the way we work and communicate. Culture is central to our work at Sprout, and I'm thankful for the opportunity to lead such a talented, dedicated, and diverse team. With that, I will turn it over to Ryan.

Thank you, Justin. You said we're off to a fast start, and you are right. The momentum is building, and we're set for an even bigger 2021 than we had planned. Our teams are delivering across the board, and we're seeing incredible brands continue to invest in Sprout's platform. In this new era of work, changes to the way that companies find, evaluate, and buy software have never been more pronounced, which is only strengthening our technology and go-to-market differentiators. Social has become the central fabric of society, forcing businesses to rapidly adopt and adapt. And Sprout is optimized to help brands lean into social as a centerpiece of digital transformation that will ultimately shape their new future. The recent results from the Harris Poll validated this. Consumers are choosing social as their preferred communication channel. And brands simply don't have a choice. They must embrace social for customer marketing, engagement, and intelligence. Now, I typically highlight one specific team that exceeded my expectations, but I won't be able to do that because during Q1, every team delivered in a meaningful way. Our product and partnership organization is on fire. They're continuing to find ways to innovate for our customers, make our platform stickier, and add tremendous value. Our marketing team delivered on our top of funnel goals with insightful content, strong inbound trial volumes, and improvement in overall quality and in conversion rate, with even more room to grow. Each of our new business segments were very strong this quarter, led by our mid-market teams. Our customer success teams also executed remarkably well in a critical renewal period. Our investments in customer onboarding and success are paying off as we move into a phase of growth with higher overall customer retention and customer growth. A record number of new customer additions is not accomplished without outsized contributions by each of these teams. The success that I'm seeing with some of the world's largest and most beloved brands makes me even more excited about our opportunity within the enterprise space. Not only did we have a record overall customer additions, but we also set new records in a greater than 10K net additions as well, underscoring our momentum of market and our success in selling our premium modules. To that point, a sample of the brands that we grew with this quarter is a fantastic list that includes McKesson, Danaher, Oliver Wyman, Hydric & Struggles, Brother International, Cole Haan, Tumi, Hanes Brands, Sur La Table, Grammarly, and the Academy Museum of Motion Pictures. Before I highlight customer stories, I want to expand on Justin's message about the growth of social use cases. Investor relations is a perfect example. As you're all acutely aware, social has recently burst into the mainstream as a central platform for investors to discuss and disseminate investment ideas. This quarter, we hosted a panel with several investor relations leaders. Mike Coffey, the VP and head of global partnerships and alliances at Q4 said, More retail investors are investing in the market than ever before, and they're choosing to discuss their ideas and tactics very publicly on Reddit, Twitter, and other platforms. Investor relations officers have taken note. Whether it's to gauge social sentiment, engage with shareholders like Coinbase did through its IPO process, monitor for potential volatility and risks, or improve strategic messaging, it has become increasingly clear that social is a channel that can no longer be ignored. This is amazing insight on a growing use case. Now, shifting to a couple of new Sprout customer stories. Fred Sinelli, Senior Vice President of Marketing, Brand and Sales Development at Performance Food Group said, we turned to Sprout after rethinking what social would and could mean to our business. We realized that we need transparent, real-time visibility across our operations and social listening helps us stay ahead of the curve, not just for our brand and products, but also our performance within the industry. were able to actively surface these social trends to our executive team, creating actionable insights for our company. We chose Sprout because of its powerful, intuitive, and industry-leading platform. And a leading CPG company was looking to better understand social conversations that were happening around specific brand campaigns, both to understand the competitive positioning and to gain visibility into how their content was performing on social. They determined that our social listening and premium analytics products would empower their team to capture critical insights that would enhance their strategy and deliver a compelling ROI. Wrapping up, I continue to be proud and grateful for the performance of our people at Sprout. We've raised the bar for 2021 while also laying the foundation for our success well into the future. We're excited by the multitude of opportunities ahead of us, and as always, we appreciate your support. With that, I'll turn it over to Joe to run through the financials. Joe?