Sprout Social, Inc

Hello everyone, thank you for joining us and welcome to Sprout Social first quarter 2026 earnings call. After today's prepared remarks, we'll host a question and answer session. If you'd like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Lexi Johnson, Investor Relations. Lexi, please go ahead.

Thank you and welcome to Sprout Social's first quarter 2026 earnings call. We will be discussing the results announced in our press release issued after market closed today, and I've also released an updated investor presentation, which can be found on our website. With me are Sprout Social CEO, Ryan Barreto, and Vice President of Investor Relations and Corporate Development, Alex Kurtz. 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 Q2 and 2026 outlook, and business plans and objectives, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, opportunity, target, 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 a 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 year ended December 31st, 2025, as well as our quarterly report on Form 10-Q for the quarter ended March 31st, 2026 to be filed with the SEC. 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 to the most directly comparable GAAP financial measures, are included in our first quarter earnings release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com. Last quarter, we introduced a new metric, approximated subscription revenue contribution for customers contributing $30,000 and above in ARR. This metric is intended to approximate the subscription revenue of a subset of customers over a historical period by using their average ARR as a proxy and chilling this quarterly estimate on a trailing 12 month basis. For brevity, we'll refer to this metric through the rest of this call as 30K and above subscription revenue. With that, let me turn the call over to Ryan. Ryan?

Thank you, Lexi, and welcome to our first quarter earnings call for fiscal 2026. Sprout delivered another strong quarter with revenue of 121.5 million, representing 11.2% year-over-year growth, and we closed out the quarter with non-GAAP operating margin at 11.6%, up 16 basis points year-over-year. Current remaining performance obligations grew 10% year over year to 281.7 million and total remaining performance obligations grew approximately 10%. We're also seeing customers making longer term commitments to Sprout with multi-year contracts now representing nearly half of our contract mix up from about one third two years ago. This reflects the growing confidence in Sprout as a strategic platform and supports our broader motion with larger, more sophisticated customers. Sprout also delivered strong non-GAAP free cash flow in the first quarter at 24.7 million, an improvement of approximately 27% year over year, and our single largest non-GAAP free cash flow quarter in the company's history. On a trailing 12-month basis, the company has generated over 51 million in non-GAAP free cash flow. This improvement underscores our ongoing ability to drive leverage in our model as we focus on efficient investments. And today, we are pleased to announce that our board has authorized Sprout's first share repurchase program of up to 50 million. This authorization reflects our confidence in the durability of our business, our ability to generate free cash flow, and the long-term opportunity we see ahead. It also reflects our belief that there is a meaningful disconnect between current valuation levels and the long-term value we expect to create. We believe repurchasing shares at these levels is a compelling and disciplined use of capital, particularly because we can do so while continuing to invest in the areas that matter most, organic innovation, our AI strategy, and selective strategic opportunities. We believe this program will give us another lever to create long-term shareholder value, manage dilution, and act on the confidence we have and spread some long-term opportunity. On our last earnings call, we discussed how the rapidly evolving AI landscape is highlighting the critical importance of data architecture for enterprise software platforms. We believe the durability of our business is driven by our ability to solve the complexity of social data at scale, a challenge that has only become more pronounced as brands move from AI experimentation to integrated governed workflows. On March 11th, our CTO, Alan Boyce, and distinguished engineer, Kevin Stanton, hosted a technical overview of our data architecture. During the session, they detailed the scale and sophistication of our data operations, and I highly recommend reviewing the recording available on our IR website. This matters because social intelligence is not a one-time task or a fixed queue of work. Conversations, customer expectations, brand risks, competitive dynamics, and market opportunities are always changing. The value of AI in this category is not simply generating an answer. is helping teams interpret a continuous stream of real-time signals while applying business context and moving from insight to action with the right judgment and governance. That is where we believe Sprout has a clear advantage. We have remained focused on building the proprietary foundation that makes AI useful for the enterprise. In this quarter, our progress centered on putting our AI orchestration framework, Trellis, directly into the hands of our customers. During the first quarter, we moved Trellis out of beta, and it is now live for customers across listening and news web. Early customer feedback on Trellis has been very strong, particularly around the speed and quality of insights. Since reaching general availability, adoption has scaled quickly across thousands of customers. We are especially encouraged by engagement within listening, where half of our listening customers have already discovered Trellis in the product, reinforcing how naturally Trellis fits into our existing customer workflows. Trellis is now the most used AI feature across the Sprout platform. In NewsWeb, Trellis is available as an always-on agent purpose-built for communication teams, helping surface emerging stories, brand risks, and market-moving narratives with timely analyst quality updates. By identifying high-stakes developments and filtering out the noise, Trellis helps teams act faster with messaging that resonates in the moment. These organizations rely on Sprout because Trellis is built on more than 15 years of network-native social data, premium network partnerships, and structured workflows across social channels. We believe that foundation is a meaningful advantage. It helps Trellis turn social signals into timely, context-rich insights inside the workflows where brands operate. We are already seeing this advantage in action with one of the country's largest broadcasting organizations. By integrating Trellis into their daily workflow, they have transformed their content strategy from manual data digging to receiving quick, actionable insights. This efficiency is a game changer for their high pressure newsrooms, allowing teams to sift through massive volumes of online conversations to identify unique story angles competitors might miss. Trellis has moved the needle from simple reporting to active content gathering, ultimately providing a decisive edge in how the company's news stations and podcasts report on their markets in real time. We also saw Trellis create real impact for a leading hospitality and entertainment company during a fast moving moment with reputational risk. A pricing concern involving one of their premium offerings started gaining traction across Reddit and other digital channels, prompting executive leadership to ask the social team for immediate context. Instead of relying on a traditional listening workflow of building queries, filtering dashboards, and manually piecing together the story, the team was able to ask Trellis a direct question and identify the source of the conversation, the key themes driving engagement, and the underlying sentiment all within minutes. In a moment where executives need answers quickly, Trellis helped the team move from a fast-moving social escalation to a clear read on source, sentiment, and narrative while there is still time to shape the response and mitigate risk. The traction we're seeing in listening in NewsWhip is only the first phase. At breaking ground on May 13th, we will introduce the largest AI release in Sprout's history, bringing Trellis beyond listening and into workflows across the Sprout ecosystem. We will also share our usage-based pricing and packaging framework designed to support broad adoption while allowing monetization to scale with customer usage and value over time. Investors can register for the live webcast or receive the recording at sproutsocial.com backslash breaking ground. Moving on, during our fourth quarter earnings call, we introduced two important and highly connected strategic initiatives. First, our multi-year plan to drive our two distinct customer segments and how this plan can drive better overall growth at Sprout. And second, how we can improve the overall margin profile of the company over the next two years with a target of reaching 30% against our Rule of 40 framework by the fourth quarter of 2027. So I'd like to now provide an update on how we're executing against our two primary customer segments. As we discussed last quarter, our strategy is increasingly focused on larger, more sophisticated customers, where Sprout's platform breadth, product roadmap, and go-to-market investments are most aligned with customer needs. We are seeing that strategy show up in the mix of the business. This quarter, approximated trailing 12 months subscription revenue for customers contributing 30,000 or more in ARR grew 21% year over year and crossed 60% of total subscription revenue for the first time. This 30K plus customer segment has stronger unit economics, better retention and expansion profile, and they tend to adopt more of our strategic products than is typical with our smaller customers. On this point, for customers above 30K, we generally see a much higher multi-product attach rate, which is multiples of our corporate average with products like Influencer Marketing and News Whip, which carry higher ACV. As we look to the remainder of 2026, we would expect to see this segment represent an increasing percentage of our subscription revenue. Our logo count for customers contributing 30,000 or more in ARR continues to compound as we added 72 net new customers in the segment during the first quarter and 424 over the trailing 12 months. This quarter, we also saw customers contributing 50,000 or more in ARR grow at 18% year over year with that segment's contribution moving closer to 50% of total subscription revenue. Now, let me take you through three customer stories from the quarter that should help illustrate why we see so much opportunity here. This quarter, we closed a seven-figure new business deal with a Fortune 500 multinational financial services leader, underscoring Sprout's role as a mission-critical partner and navigating the complexities of highly regulated industries. By consolidating their fragmented social tech stack onto our unified enterprise platform, they are mitigating governance risk through rigorous standardized compliance controls. This transition enables them to move away from the latency of traditional agency reporting towards real-time monitoring of global conversations and crisis triggers, allowing for real-time brand pivots with enhanced security and consistency across all social networks. Sprout further drives operational agility by replacing manual spreadsheet based tracking and untrusted data exports with automated executive ready reporting. By streamlining the social life cycle from sophisticated scheduling to advanced sentiment analysis, Sprout supports their many global users on a single scalable infrastructure. This story illustrates Sprout's ability to execute on a seamless platform migration from one of the world's largest financial institutions while turning social data into a secure high fidelity strategic asset. We also landed a six figure new business deal with a global product design and technology company. By deploying a comprehensive suite of products, including Guardian, Service Cloud, Listening, and Premium Analytics, this customer has been able to manage a complex support environment of over 80 users with sophisticated automated routing and case management. Beyond operational efficiency, Sprout has enabled them to measure the true ROI of their influencer and brand health initiatives through high fidelity social listening. They're also leveraging our advanced scheduling tools to celebrate the distribution of short form video globally and are utilizing custom KPIs such as weighted engagement models to align their social data directly with overarching business objectives. This level of infrastructure consolidation and data integrity underscores our ability to drive enterprise scale impact and reduce platform latency for our largest partners. This quarter, we also secured a 900K new business deal with a Fortune 500 software company, a story that highlights our ability to modernize the social architecture for global enterprise leaders. By consolidating their strategic tools onto Sprout, this customer is now managing diverse social initiatives across North America, EMEA, and APAC through a centralized high governance framework. This transition has eliminated operational friction, allowing their teams to streamline internal workflows and ensure the rapid delivery of fast-breaking time-sensitive content across 75 global users. Beyond operational efficiency, their leveraging spreads premium analytics and listening to gain deep dive global market intelligence. This allows them to refine regional messaging by identifying high performing engagement drivers and to quantify socials impact beyond traditional pipeline data. By measuring brand awareness and educational reach through our sophisticated engagement metrics, this customer is achieving advanced impact attribution and a level of cross territory visibility that underscores Sprout's unique value as a scalable enterprise grade partner. Next, I'd like to turn to our strategy for customers below 30,000 in approximated subscription revenue. This cohort represents 40% of approximated subscription revenue in the trailing 12 months ending March 31st, 2026, compared to 61% in the trailing 12 months ending March 31st, 2022. This 20-point shift reflects our multi-year move towards larger, more strategic customers while also highlighting the opportunity we have to serve this part of the market with a more efficient product and go-to-market motion. While we continue to believe there is strong potential in the customer segment, it has clearly been a drag to the growth of Sprout over the last few years. It's a business that has its own very distinct dynamics as far as customer acquisition costs, pricing and packaging, and how these customers use our platform relative to larger customers. As you may recall, last quarter we shared our updated strategy for this customer segment. First, the evolution of our self-serve motion powered by automation and AI to move customers through evaluation, onboarding, and support with minimal human touch. We expect these enhancements will lower the cost to acquire and serve these customers and improve conversion and unit economics over time while keeping our direct sales team focused on more socially sophisticated customers. Second, we are reworking the lower end of the market around a simpler product and a more efficient self-serve motion. During the first quarter, we introduced Essentials on our pricing page, a focused entry point built around the core publishing workflows smaller customers need most, with faster time to value and a price point aligned to how they buy. While it's still early, the initial response has been encouraging and indicates that Essentials can become a more scalable entry point into the Sprout customer base. Over time, we believe this can help us serve the segment with better unit economics while creating a natural expansion path as customer social needs become more sophisticated. As we look ahead, I'm confident in the foundation we are building. Our 30K and above customer segment continues to become a larger part of the business. Trellis is moving from early adoption to broader platform expansion, and our new sub-30K strategy provides a path to efficiently serving an important part of the market over time. Combined with our free cash flow generation and disciplined capital allocation, we believe Sprout is becoming a more focused, more durable company that is better positioned to create long-term shareholder value. And with that, I'll turn the call over to Alex.