Sprout Social, Inc

Good day and thank you for standing by. Welcome to the Sprout Social Second Quarter 2021 Earnings 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 star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Jason Ruckel, Investor Relations. Sir, please go ahead.

Thank you, Operator, and welcome to Sprout Social's second quarter 2021 earnings call. We'll be discussing the results announced in our press release issued after 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 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 third 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, 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 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 available on our website at investors.sproutsocial.com. And with that, let me turn the call over to Justin. Justin? Thank you, Jason, and good afternoon, everyone. Thank you for joining us. Our company is executing at an exceptionally high level, and we're pleased to report our best quarterly metrics yet as a public company. I want to hit our second quarter highlights before turning the call over to Ryan and Joe to cover the details. Social continues to cement itself as the centerpiece of digital strategy. As new secular tailwinds to our market begin to emerge, our momentum has never been stronger and our opportunity never greater. Our growth rate has shifted into an even higher gear, which reinforces confidence in our opportunity, our strategy, and the aggressive investments we continue to make in our future. Yet again, we managed to break a series of our own records this quarter. We added a record number of net new customers, added a record number of customers contributing more than $10,000 in ARR, and further accelerated our ARR growth to 45% year over year. We reported our first ever non-GAAP quarterly profit We achieved positive free cash flow for a second consecutive quarter, and we eclipsed the rule of 50. Simply put, our business is rapidly accelerating while our growth is simultaneously becoming structurally more efficient. All of this underscores the nascency of our market and the attractiveness of our unit economics. We're pleased to rate our guidance forecast across the board. During the quarter in which our sales momentum was exceptional, our product and development teams were hard at work shaping the foundation for our future growth. We brought to market multiple new capabilities, including a first-of-its-kind social commerce solution, expanded access to Instagram messaging, and expanded case functionality to our integrations with Microsoft, Salesforce, Zendesk, and HubSpot. We continue to innovate quickly to create new and differentiated value for our customers. This focus enables us to fundamentally drive retention and growth higher over time while unlocking new pockets of addressable opportunity. And one of the biggest opportunities we now have in front of us is the rapid convergence of social and commerce. We've been speaking with you recently about the proliferation of use cases for our platform. This trend continues, but we've seen a new use case emerge and begin to crystallize. Social is becoming a true commerce platform. We were able to move quickly and in June announced new and expanded integrations with Shopify and Facebook Shops to enable brands to seamlessly manage their social commerce efforts within Sprout's unified platform. Being first to market with this type of disruptive social commerce solution was exciting for our team and for our customers, but it's only the beginning because this use case is continuing to expand. According to a study by the Harris Poll earlier this year, 93% of executives agree businesses are increasingly as social becomes more ingrained in the buyer journey. And about 8 in 10 businesses anticipate selling products via social commerce platforms in the next three years. Consumer preferences and expectations are shifting. We will now enable the extension of digital storefronts to social, where our customers can deliver engaging content, world-class customer care, and personalized interactions throughout the entire purchasing journey. The full buyer cycle from marketing to service will live within Sprouse platform and allow our customers to unite their commerce and social workflows and reduce friction in the buying process. The functionality and partner integrations transform how our customers think about publishing and engagement. And we've made the solution easily accessible for customers to adapt and leverage. These capabilities are powerful, elegant, and timely to the market, but we expect to deliver even greater value to our customers in the years ahead. Not to be overshadowed by the commerce launch was our expanded rollout of the Messenger API support for Instagram. This was one of our most requested features from our customers and will empower businesses to more efficiently utilize messaging at scale. This also aligns well with what our network partners term conversational commerce. We have worked for more than six months with the Instagram team on this release and we're heavily involved in early beta programs, highlighting the depth of our partnership together and our ability to jointly move quickly to deliver value for our customers. Behind the scenes, our teams are also doing some incredible things. We continue to prioritize our DEI work and during the quarter expanded our technology giving program in which we donate more than $1 million in software annually to advance more than 75 global causes as part of our effort to broaden the social impact of our software. We're working hard to provide more transparency to our ESG efforts overall and anticipate that we'll publish our first fully formed ESG disclosures later this year. We've also used the past year to rethink the future of how our team will work. Our offices in Chicago and Seattle officially reopened in a phased voluntary approach last month. But at Sprout, we know that the future is hybrid. Our goal is to empower our people to work wherever and however they thrive and to adapt quickly to changing demands and habits. We're committed to giving our employees the resources, support, and freedom to grow and succeed at Sprout, and we believe this approach will enable us to attract and retain elite talent as we continue to grow. To close, I want to revisit our core investment thesis. Social media has fundamentally transformed the way consumers connect with brands, which has changed the entire customer experience across virtually every part of an organization. Social cannot be compartmentalized. Billions of consumers are driving businesses to adopt new use cases as the market becomes consistently more complex and more challenging to manage. We've built organically and on a single code base the social system of record, intelligence, and action in a platform to be horizontally leveraged across a business of any size. From publishing and engagement to reputation, reporting, and advocacy to listening, analytics, and now commerce, There is no business on the planet that can't benefit from either a more sophisticated social strategy or a business strategy that is sharpened by social data. We're the industry's highest rated technology platform across every segment in the market, according to G2 and others. And while we're incredibly proud of the company we've built to date, we've also built a company that is inspired by and prepared to thrive in the future. We look forward to meeting with many of you this quarter and digging deeper into this investment thesis at our first investor day in September. With that, I will turn the call over to Ryan.

Thanks, Justin. I couldn't be more impressed by the work of our teams this quarter. We're delivering for our customers today while strengthening the foundation for our future success. The barriers to entry in our market are rising, our platform is becoming more differentiated, and we're adding value to a growing list of stakeholders. Our annual Sprout Social Index, which we released this quarter, really brought the current state of the market to light. The report found that 71% of consumers are using social more than they were a year ago, and 88% of marketers believe their social media strategy positively influences their bottom line. It's clear. Social is more mission critical today than ever before. And Sprout's already efficient go-to-market motion is well aligned to software buyers that want to prove value for themselves before committing. We've continued to hire aggressively across the company, and I remain incredibly impressed by the caliber of people that are choosing to join Sprout. Our recruiting efforts have been propelled by recent awards like Fortune's Best Workplaces in Technology, Fortune's Best Workplaces for Millennials, and Great Place to Work's Best Workplaces in Chicago. Because of all this, we feel well-positioned to capitalize on the many opportunities in front of us. Justin mentioned how our product teams, which along with our partner teams, are moving at a fast pace to take advantage of emerging new opportunities. In our marketing efforts, we're seeing accelerating customer demand, resulting in an increase in the number of qualified trials and an improvement in our trial conversion rate. Our new business and customer growth sales teams were on fire during Q2, while our increased investments in customer success and onboarding continue to pay off with structural improvements to retention. A new record in customer additions combined with our rising ACVs underscores the incredible market opportunity we are seeing. The metric that jumped out to me most this quarter was our 10K net additions, which set another record. and our accelerated growth of the 10K customer cohort, which grew at 55% year over year. Contributing to the success with the expansion of use cases, our momentum at market, especially in mid-market and enterprise, and our success in selling our premium modules across the entire customer base. To that point, a sample of the brands that grew with us this quarter is a fantastic list that includes Kraft Heinz, the Department of Energy, Independence Blue Cross, Agrium, Franklin Electric, Levi's, Whataburger, Sisense, Bark, the AARP, and Kaplan Test Prep. Now, shifting to a few customer stories. We are incredibly proud to partner this quarter with Penn National Gaming. Jennifer Weitzman, Senior Vice President and Chief Marketing Officer, said, We picked Sprout to unify our various unique social media accounts under one management platform that will enable us to cultivate the most engaging conversations and content for our guests. Sprout was a natural choice to help us grow the social presence of our many locations because of its powerful, intuitive capabilities that our casinos will quickly harvest the benefits from. Penn shares a commitment to diversity and inclusion with Sprout. We are pleased that Sprout's capabilities helped us amplify recently launched efforts like Penn's Diversity Scholarship Program, as well as the introduction of the My Choice, My Heroes program, an exclusive set of benefits offered to members in the military, veterans, and first responders. We also executed an exciting addition to Nutanix's already expansive enterprise package with Sprout. Nutanix, a leader in hybrid multi-cloud computing, recently expanded their social listening relationship with Sprout, and during Q2 added a number of new users to help scale and better manage their global secondary handles on social media. By broadening their publishing and engagement requirements, they were able to level up their reporting systems and processes to build a more strategic and focused social strategy at scale. As they head into their next fiscal year, Nutanix is also leveraging our professional services for reporting. We are grateful to continue our work with Nutanix as they unlock insights from social data that will drive their strategy forward. We also recently partnered on a case study with New Jersey Transit, which had 50 million Twitter impressions last year and served nearly 1 million daily riders across its trains, buses, and light rail. Customer care and experience are at the heart of the New Jersey Transit brand. By leveraging the Sprout Smart Inbox, they were able to deliver 142% year-over-year increase in the reply rate and also reduce the average customer response times on social media to just 30 minutes. Said Carol Matz, New Jersey Transit Director of Events and Social Media, when people think of transit, we don't want them to think of just equipment and stations. So we use social to give our employees a voice and to humanize them to the public. Where Sprout came out on top was understanding us and treating us as individuals. Every time we reach out, Sprout gives us the same customer care that we were promised from the first time we spoke to them. They really are 100% there for us. Incredible stuff. To bring it all together, we had another record-breaking quarter where our teams delivered and our customers saw tremendous value. I'm really proud of the way our people are showing up for each other and our customers. And because of that, we're heading into our third quarter with a tremendous amount of energy and momentum. With that, I'll turn it over to Joe to run through the financials. Joe?