Sprout Social, Inc

Ladies and gentlemen, welcome to the 2024 Q3 Earnings Sprout Social Incorporated conference call. All lines have been placed on mute to prevent any background noise. 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 recorded. I will now hand today's call over to Alex Kurtz, VP of IR and Corporate Development. Please go ahead, sir.

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's CEO, Ryan Barreto, and CFO, Jelda Prado. 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. All statements other than statements of historical fact are forward-looking. 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. 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. 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 quarterly report on Form 10-Q for the quarter ended September 30th, 2024 to be filed with the FCC, as well as our most recently filed annual report on Form 10-K. During the call, we will 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, for the most directly comparable GAAP 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. With that, let me turn the call over to Ryan. Ryan?

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 20%. This was also the first quarter exceeding $100 million in revenue, a meaningful and exciting milestone for Sprout. Our current remaining performance obligations, which reached $220.7 million, represented 31% year-over-year growth. I want to thank the Sprout team for their solid execution in what remains a challenging macro environment. 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 conditions. Our pipeline shows strength in size, health, and trajectory. The headwinds we've seen in fiscal year 2024 is driven by longer enterprise sales cycles and increased budget scrutiny. We are encouraged by the progress we're seeing as we build a healthier foundation for growth at Sprout. 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. 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 execution. We are focused on four key areas to drive growth. First is to win the enterprise, which means driving increased pipeline creation and strategic customer wins and accounts over 50K plus in ARR. 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 space. 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 deployments. 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 suites. 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. Additionally, we introduced real-time trend detection to help customers identify emerging conversations as they happen, improved sentiment analysis for better context and nuance, and expanded multi-language support. 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 differentiates us. In admin controls, we delivered functionality that allows for custom role creation and updating user permissions in bulk. Additionally, advanced audit logs were introduced to provide detailed tracking of user activity, improving security and compliance oversight. These capabilities speed up onboarding and increase control and security for our largest customers for bringing on larger teams across many departments and use cases. 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 Care, we built AI Assist, which enhances efficiency and response times by routing conversations to case queues automatically. We've also introduced round-robin case assignment, AI-generated message intent, 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. 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 CRO, Mike Wolfe, is driving increased accountability in the field, and better defining our resource allocation model across our different customer and geo segments. Mike is also strengthening the operational cadence of the go-to-market teams and driving better alignment with key partners inside the organization. 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. Second, we're increasing our focus on customer health and driving improved onboarding and adoption behaviors. 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 ROI. 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. We're already seeing positive trends in gross retention, which we believe demonstrate the value of our products, and we know we can do more to deliver for our customers. 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 the conference. In addition, our go-to-market alignment with agencies remains a central component of our push into the enterprise market. We continue to see this channel as a key contributor to ACV expansion. 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 levers for Sprout. 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. Finally, I'm excited about the new executive team members we have brought to Sprout over the last year. Erica leading product, Mike, running revenue, Crystal Boyson, who leads our people team, and Scott Morris, who leads the marketing team. These new leaders join a strong and tenured executive leadership team who know our team and customers incredibly well. 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 vision. 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 in the market. During the third quarter, we closed a $1.8 million multi-year TCV transaction with a global electronics brand. 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. 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. Our intuitive listening and reporting capabilities have made it easier for users to generate the insights they need and make more data-driven decisions. The customer noted that Sprout allows them to do everything at a faster pace across their teams in a more approachable platform. Looking ahead, we also see opportunities where we can add more value to this customer by expanding our footprint within other modules. 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 networks. 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 accounts. becoming one of their most viral posts to date with nearly 1 million engagements and 400 million impressions. The Coast Guard was able to leverage Sprout's smart inbox feature during Hurricane Milton to monitor social media for distress calls. The Coast Guard is now looking at social, powered by the Sprout social platform, as a new channel to manage their distress calls. Alongside these stories, we're also thrilled to celebrate new and expanded relationships with well-known brands like Zoom, Gavoline, Scrub Daddy, Campbell's, Church & Dwight, and Honda. Our work with these customers underscores the importance that Sprout plays in the market across a wide set of use cases and industries. 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. 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, Ryan. I'll now run through our financial results and guidance. 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 growth retention trends Our win rates in the enterprise segment remain elevated and our RPO growth rates remain steady. We also generated 9.3 million in non-GET pre-cash flow during the quarter and 23.1 million year-to-date. On to a quick summary of the quarter. Revenue for the third quarter was 102.6 million, representing 20% year-over-year growth. 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 and strengthening premium module tax rates, such as influencer marketing and customer care. RPO totaled $311.5 million, 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 time. Non-GAAP operating income totaled $7.5 million, up from negative $0.6 million a year ago, for a non-GAAP operating margin of 7.3%, demonstrating continued growth in our margin profile. Turning to guidance. For 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 million. We expect a non-GAAP net income per share of between 15 cents and 16 cents. This assumes approximately 57.6 million weighted average basic shares of common stock outstanding. 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. We expect non-GAAP net income per share between 46 and 47 cents, assuming approximately 57.0 million weighted average basic shares of common stock outstanding. During Q4, we implemented restructuring to improve the efficiency and effectiveness of the R&D org, which includes elimination of approximately 50 roles. We expect the majority of this headcount will be reallocated to different areas of the reorganized R&D org over the next several quarters. We expect to record a severance expense of approximately $3 million that will be excluded from our 4Q non-GAAP results. We are not viewing this as an incremental driver to leverage next year. 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 units, better visibility and category leadership in an increasingly important market. With that, Ryan, Alex, and I are happy to take any of your questions. 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 one again. Your first question is from the line of Parker Lane with Siebel.

Yeah, hi, guys. Thanks for taking the questions here 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?

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

Got it. And, you know, earlier this year, you talked about some realignment and retargeting of different sales and go-to-market resources you have. You just brought Mike on. You're not 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, first off, we're thrilled to have Mike here. Mike has a long tenure and history of successfully running revenue organizations, and we can already see in his just over 60 days He's done a great job bringing 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 been great to see. I think the thing that I call out 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. So no major changes just to call out. All right. Thanks. Parker, next question, please.

Your next question is from the line of Davey Hines with Canaccord Genuity.

Hey, guys. Ryan, you alluded to this in the prepared remarks, but what are enterprise customers asking for on the social customer care side that you're not delivering today? Help us think about kind of the future roadmap there.

Yeah, thanks, DJ. I appreciate it. Yeah, I mean, so much of what the enterprise customers are looking for are things that 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 customers Deep workflow in security, and these are all things that we've added in. 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.

Yeah, got it. 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? 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 factored into the visibility we have in the pipeline in Q4. And we're really excited about, as we go into Q4 and go into next year, just the ongoing partnership we've had with Salesforce and the Service Cloud. And 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.

Yeah, perfect.

Thank you, guys.

Thank you. Thank you. Next question, please.

Your next question is from the line of Raymond Linshaw with Barclays.

Hey, perfect. Thank you. Can I stay on that AgentForce subject a little bit? How do you fit in there in the future? How do you see your... playing in the kind of more genetic AI world? Like, you know, how deep is integration? How crucial are you going to be there? And I have one follow-up for Joe.

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. 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 agent force, which is coming, it means that that data is enriching those CRM 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 they're always answering, no matter what channel, with the most relevant information to help customers.

Yeah, okay, perfect. 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 booking number of the CRPO. That ticked down a little bit. It's tough to come. 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, Ramo, I think the key here is just to continue to focus on the overall CRPO number and how that number continues to grow. And so if you think about, you know, the 31% on the CRPO side that we delivered last 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. Next question, please.

Your next question is from the line of Arjun Bhatia with William Blair and Company.

Perfect. Thank you for taking the questions. Ryan, maybe to start off with you, it sounds like, this is not new obviously, but expanding Sprout into multiple departments across 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 that those departments might need inside your customers? And where are you in that kind of journey today?

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. 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. And then, Joe, I wanted to come back to, you made some comments just on the restructuring in the R&D org and 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 R&D org? Just help us understand that a little bit more, please.

Yeah, Arjun, the way we're thinking about it is we are going to reinvest those resources in other parts of the R&D org. And so it's just kind of a realignment reallocation of the team. And so don't expect a lot of leverage in 2025 based on that.

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. So we feel really good about the future that we're moving towards here. Thanks, Arjun. Next question, please.

Your next question is from the line of Adam Hoschkiss 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? Any more color 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. 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 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.

Got it. Got it. That's helpful. 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. 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 Tagger, and where could that be over the next year or so as you ramp the go-to-market process? Could Tagger be attached to kind of any of your customers, or is there some bifurcation to consider on who the target customer would be?

Yeah, thanks, Elizabeth. You know, we're still 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. And then I wanted to follow up on Raymo'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 the mix of our customers. We still have a series of month-to-month customers. We have annual customers. We have multi-year customers. So I think as we move more up market and more of our customer base becomes annual and multi-year customers, 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.

All right. Thank you, Elizabeth. Next question, please.

Your next question is from the line of Brett Noblech 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, uh, influencer marketing as a way to win over younger crowds and voters. I guess as you're going through the RFP process with customers, how much has a 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 products?

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. So we do see it as something that helps us with the win rates, but I don't know that I'd call it out as a major theme in RFPs today.

Awesome. Thanks. 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. 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.

All right, thank you. 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. 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.

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, your kind of two-thirds coming from new logos and the one-thirds coming from expansion. Thanks.

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 at all out there.

Thank you.

All right. Thank you. Next question, please.

Your next question is from the line of Jackson Adder with KeyBank Capital Markets.

Good evening, guys. Thanks for taking our questions. Joe, on CRPO, 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, or should there be some major departure?

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 and 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. Okay, got it. Then on expenses in the fourth quarter, so outside of the reorg, which in R&D, which I think I understand, what, you know, we've got a bunch of new, you know, wonderful leaders in place. And so I would assume that, you know, 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, I'm sure.

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

Okay, thank you. All right, thank you for the question. 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 Morale, Wendigo 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 Studio as 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 with Social Studio? Thanks.

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 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.

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 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? Thanks.

Yeah. We highlighted that the macro feels very similar in terms of sales cycles and 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. Thanks, McCulloch.

At this time, there are no further audio questions. 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. I wanted 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.

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