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.