Sprout Social Aktie

Hello, everyone. Thank you for joining us, and welcome to Sprout Social First Quarter 2026 Earnings Call. [Operator Instructions]. 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 close today and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Ryan Barretto; and Vice President of Investor Relations and Corporate Development, Alex Kurtz.

Today's call will contain forward-looking statements, which are made pursuant to 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 31, 2025, as well as our quarterly report on Form 10-Q for the quarter ended March 31, 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 historical periods by using their average ARR as a proxy, ensuing this quarterly estimate on a trailing 12-month basis. For brevity, we'll refer to this metric through the rest of this call as 300 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 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 are also seeing customers making longer-term commitments to Sprout with multiyear contracts now representing nearly half of our contract mix up from about 1/3 2 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 Spirit'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 in spreads 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 11, our CTO, Alan Voice, 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 onetime 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 Thales 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 listing 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 NewsWhip, 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 stroke because Trellis has 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 for 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 new 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 13, we will introduce the largest AI release in spreads history, bringing Trellis beyond listening and into workflows across the pro 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 to receive the recording at sproutsocial.com/breaking ground.

Moving on, during our fourth quarter earnings call, we introduced two important and highly connected strategic initiatives. First, our multiyear plan to drive our 2 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 2 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 2 primary customer segments. As we discussed last quarter, our strategy is increasingly focused on larger, more sophisticated customers, where Sprouts platform breadth, product road map 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-month 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 30,000-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 30,000, we generally see a much higher multiproduct attach rate which is multiples of our corporate average with products like influencer marketing and NewsWhip, 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 AR continues to compound as we added 72 net new customers in this 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 growth at 18% year-over-year, with that segment's contribution moving closer to 50% of total subscription revenue. Now let me take you through 3 customer stories from the quarter that should help illustrate why we see so much opportunity here.

This quarter, we closed a 7 figure new business deal with a Fortune 500 multinational financial services leader, underscoring Spreads 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 advance 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 6-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 accelerate 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 900,000 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, they're leveraging spreads premium analytics and listening to gain deep dive global market intelligence. This allows them to refine regional messaging by denying high-performing engagement drivers and to quantify social's 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 31, 2026, compared to 61% in the trailing 12 months ending March 31, 2022. This 20-point shift reflects our multiyear 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 this customer segment, it has clearly been a drag to the growth of spread 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 improved 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 in its pro customer base.

Over time, we believe this can help us serve this segment with better unit economics while creating a natural expansion path as customers social needs become more sophisticated. As we look ahead, I'm confident in the foundation we are building. Our 30,000 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-300 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. Alex?

Thanks, Ryan. I'll run through our financial results and the guidance. Our first quarter results were highlighted by a quarterly non-GAAP operating margin of 11.6%. And up 16 basis points year-over-year and ongoing expense of our 30,000 and above customer segment. Total revenue was $121.5 million, representing 11.2% year-over-year growth. Subscription revenue was $120 million, up 10.4% year-over-year. We ended the quarter with 3,875 customers contributing 30,000 or more in ARR and 2,085 customers, over 50,000 ARR, up 12% and 18%, respectively, on an annual basis. Since the fourth quarter of 2022, we have added over 1,800 customers contributing $30,000 or more in ARR and 1,100 customers contributing 50,000 or more in ARR.

Growing these more socially sophistiated customers remains a central part of our long-term strategy. For the past 3 years, Sprout is focused on a strategy aimed at multiyear contracts with these larger customers, which enhances our visibility to the customer base and opens up more paths for multiproduct sales and customer success. This quarter marked a milestone as monthly customers fell below 10% of our contract mix for the first time. And this is the first quarter in which multiyear deals represent a larger percentage of our ARR than 1-year deals.

Turning to cash flow. We generated $24.7 million in non-GAAP free cash flow during the quarter, an increase of approximately 27% from the prior year. As we have communicated previously, we expect our non-GAAP free cash flow margin to closely track our non-GAAP operating margin on an annual basis. and we remain committed to growing non-GAAP operating leverage on a fiscal year basis. Q1 ACV increased 14.5% year-over-year, reflecting the continued mix shift towards larger, more sophisticated customers and broader adoption of higher-value products across the platform.

Expanding ACV remains a core part of our strategy, and we see continued opportunity to grow customer value through products like influencer marketing, customer care, premium analytics and NewsWhip. Our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates to as influencer marketing, customer care, premium analytics and now NewsWhip.

RPO totaled $395.3 million, representing growth of 9.7% year-over-year. We expect to recognize 71.3% or $281.7 million of total RPO as revenue over the next 12 months. representing CRPO growth of 10.1% year-over-year. We ended the quarter with $111.6 million in cash and equivalents, up from $100.9 million a year ago. And as Ryan mentioned earlier, today, we announced Sprout's first share repurchase authorization of up to $50 million.

We believe this program will give us the flexibility to act on the valuation dislocation Ryan discussed while continuing to invest in organic product development and selective strategic opportunities, we view it as a disciplined extension of our capital allocation framework and another tool to return capital, manage solution and support long-term shareholder value creation.

Now on to guidance. For the second quarter of fiscal 2026, we expect revenue in the range of $121.7 million to $122.5 million. non-GAAP operating income in the range of $9.5 million to $10.3 million, non-GAAP net income per share between $0.15 and $0.16. This assumes approximately $0.3 million weighted average basic shares of common stock outstanding. For fiscal year 2026, we expect revenue in the range of $492.5 million to $95.5 million. Non-GAAP operating income in the range of $54.9 million to $60.4 million. For modeling purposes, we expect to exit Q4 with a non-GAAP operating margin close to 15%.

And non-GAAP net income per share between $0.88 and $0.97, assuming approximately 60.7 million weighted average basic shares of common stock outstanding. We have not yet made any assumptions regarding share repurchases for purposes of our EPS guidance as the timing and amount of repurchases is inherently uncertain and subject to a number of restrictions and other requirements. Our full year outlook reflects continued discipline on spend while preserving flexibility to invest behind Trellis, AI-driven product expansion and the self-serve motion for customers below 30,000.

We continue to expect meaningful operating leverage for the year. Finally, we are reaffirming our target of reaching 30% under our Rule of 40 framework by the fourth quarter of fiscal '27. We expect the path to come from continued growth in our 300 and above customer segment, a more efficient motion for our customers below 30,000 and ongoing operating leverage across the business. This is not a margin-only framework for us. Our focus is improving the quality and durability of growth while continuing to expand our non-GAAP profitability.

We appreciate your interest in Sprout Social. And with that, Ryan and I are happy to take any of your questions. Operator?

[Operator Instructions]. Your first question comes from the line of [ Lucas Sarasola ] from Morgan Stanley.

As you see more customers consolidate their point solutions on to Sprout, what are the clearer signs that this consolidation trend is strengthening and where is it showing up most deals today?

Thanks, Lucas. Appreciate the question. Yes, I think I'd probably point to just the progress that we saw in the quarter and our 30,000 plus shared some stories in our prepared remarks, a couple of Fortune 500 is a really large product company. And in all of those examples, you're seeing a lot of consolidation. These are organizations that have pretty sophisticated needs -- they need multiproduct to solve the problems that they have, and they're identifying that Sprout is a platform that has all the products that they need. Be it the publishing care listening, advocacy engagement, it's really across the board.

So we've seen a lot of consolidation from that standpoint that's really showing up as a differentiator for us. And then the other piece that's really stood out for us here is just the speed to value. You've heard me talk about this before, but especially in the enterprise, and especially in an environment like this, customers are looking for fast ROI. They want to know that they can get up and running really quickly on the software, and they want to know that it's a perfect fit for them.

So our trial-based model continues to be a real differentiator for us as we're getting in front of customers, large and small, but this multiproduct approach.

Your next question comes from the line of [indiscernible] from KeyBank. Your line is live.

[indiscernible] on for Jackson Ader. So looking at social media platforms you engage with, are there specific social media platforms where you're seeing outsized customer engagement or monetization today? And how is that shaping your product investment priorities going forward?

Thanks, Nate. Appreciate the question. One of the biggest differentiators for us is the depth and breadth of access that we have to the social networks. And so for us, there's a long list of social networks that our customers think about and count on every single day. Certainly, there's names you know out there at the Reddits and TikToks and all the Meta properties and LinkedIn and YouTube and the list goes on and on. But the reality is our customers really have to show up wherever their customers are.

And it happens across a diverse set of networks I think the last time we shared this data, the number was 90% plus of our customers use five or more networks to get in front of their customers. So for us, it's really about the depth and breadth that we're bringing to bear for our customers. it's allowing our customers to log in, in one place in Sprout and be able to engage with their customers, whether that's sending out marketing campaigns, responding to customers from a customer care engagement perspective, we're really analyzing all of the data and really understanding the performance across all of the networks.

So each customer will have some nuance for them and where more of their customers may exist. But the places in which their customers exist really dictate where they need to spend time. And it's our job to make sure that our teams are building against that demand and that we have it built into the product. And that is certainly a pretty challenging engineering feat when you think about the number of companies that we integrate in and how quickly these APIs change. But we've got an unbelievable engineering organization behind this, and this has really stood out as one of the differentiators for Sprout over 16 years.

Yes. That's helpful color. And then I guess a second question. I know it's still early with the Trials rollout. But do you guys have any incremental color on trials attach rates with contracts so far and what you expect going forward?

Yes. I appreciate it. Nothing specific to share there on attach rates will definitely be coming back to you in the future and just sharing some of the progress. Just as a reminder, we just went general availability with it at the end of the quarter here in Q1. So pretty early on. But the progress, as I shared in my prepared remarks, has been remarkable. Just a ton of kudos to the teams behind the scenes that have been working on this.

It's been extraordinary to see the adoption from our customers. We started with Trellis in the listing part of the product. We will be expanding that as we get through the year. But so far, the adoption has been really exciting -- we're seeing some really interesting things in terms of usage from our customers and then just speed to value from our customers. We saw that in the beta. We've already seen it in the general availability. And we expect that there's going to be a lot of good adoption here, not just in listening, but certainly as we get across the rest of the an exposed Trellis to customers that may be in publishing your engagement and not listening as well. So more to follow there, but really good progress so far.

Yes. I'll just -- it's Alex. I'll just add in the prepared remarks, we mentioned that thousands of customers are engaging with the product now since going general availability.

Your next question comes from the line of Arjun Bhatia from William Blair & Company.

[indiscernible] on for Arjun Bhatia. I appreciate the go-to-market changes in the sub-300 group of customers are reset. Can you get additional details on the updated onboarding experience and pricing system. Are there any learnings from the quarter or peaks you need to make to better support this group of customers?

Yes. Well, thanks for the question. We're really excited about the progress that we're making. Similar to Trellis, pretty early on in the journey there. We launched Essentials on the website, basically the end of Q1, but we're seeing really good progress there.

Again, I think that the biggest thing to call out is this is a purpose-built product really focusing in on publishing, which is where those customers spend the majority of their time ensuring that we have the right features and capabilities for those customers at a price point that makes sense. The team has been working pretty hard behind the scenes on all the PLG elements, the self-serve elements of that Essentials product.

And the beauty of this as well is those benefits will certainly help us in Essentials, but they help us across all of our products for Sprouts. So I think the big takeaways for us so far is -- we're continuing to see a lot of good progress as we're making incremental changes to the onboarding experience. as people are coming in through the trial. We are -- we're seeing good progress in terms of the product market fit in terms of the publishing use case. And I think we'll have more updates for you in the future once we have a little bit more time with this being available on the website.

Yes. And I'll just add, Will, that we mentioned this on the Q4 call, and it's worth mentioning again A lot of these implementations on the pricing and packaging Essentials, this is just happening right now. So we do expect to see a modest deceleration in the sub-300 segment this year and then looking to stabilize going into next year.

Your next question comes from the line of Rob Oliver from Baird.

Great. Appreciate it. I'm on for myself. Can I -- two questions, one for you, Ryan, and then Alex, one for you, a follow-up. I mean, Ryan, you've been selling to marketing departments for a long time. And I'm sure that's informing how you guys are thinking about Trellis. And I know we're going to get more next week, but I guess I maybe ask the question a different way. What are you seeing in terms of patterns of behavior among users within marketing department users of Sprout that gives you optimism that Trellis may perhaps be an avenue or an opportunity to get more of those additional products, say, influencer marketing, new premium analytics into customers' hands natively via kind of an AI-driven platform.

Any early reads there would be helpful recognizing we're going to get obviously more on that next week. And then I had a quick follow-up.

Yes, appreciate it. Good to have you on, Rob. A few things I'd call out. So one, I think one of the biggest things here is just speed to insights. We talk a lot about social intelligence and Trellis is really landing that for customers. We gave the example in the prepared remarks of the entertainment company that had a reputational issue that was going viral on social Historically, for most listening solutions, that would have been a very difficult thing for a practitioner or a marketer to be able to figure out. You think about the amount of time to be able to try and go through and create a bully and clearing report to be able to identify this type of issue to get the data to then have an analyst go through it and then make some decisions and take action.

And we're talking about minutes now in which our customer was able to figure out what the situation was, where it was happening, what the sentiment was, what the source was. It can quickly turn that into updating an executive team and then turning it into action. So there's just a ton of value for customers and the speed to insights and really delivering social intelligence. We're also just seeing for our customers, as you can imagine, as we go past listening into other parts of the platform, the ability to create better performing content or to ensure that you're responding to customer issues that might be gaining traction, those are really big value adds customers that are really resonating for customers today and feel like pretty unique experiences that exist in the market.

So those things are all things that are really standing out for our marketing customers today and we're excited to have it in more hands as we get trellis across listing in the rest of the product set.

Okay. Great. Really helpful color. And then, Alex, just 1 for you on the margins. Obviously, really strong margin in Q1, nice speed and the full year was raised, but a little bit lighter on Q2. And just if you could just refresh us or help us understand just that the cadence there or is there some seasonality in where that additional margin is going in terms of spend?

Appreciate that, Rob. Good to have you on. So we're pleased with the Q1 leverage performance and the disciplined team showed on the spend side. At the same time, we wouldn't view the Q1 beat as like a dollar for dollar change in the full year, like cost structure. So a meaningful portion of the upside for Q1 came from expense timing and spend cadence. And particularly around hiring and just the pacing of investments early in the year, right?

So we're maintaining the flexibility for the balance of the year, not assuming that every Q1 expense benefit repeats Importantly, this has not changed our operating discipline. So we're pleased to raise the operating margin a bit for the year, but we're still committed to 15% operating margin exiting the year and getting to that 30% number for Q4 2027.

Your next question comes from the line of Raimo Lenshow from Barclays.

To what people have been asking so far. Could you speak to the conversations you're having with customers and they're out had to purchase social marketing products? And are you seeing continued tightness around budget to the result of AI? And if AI is a core criteria during these deals, how petrol is helping on this motion?

I think you're on mute for the first part of your question. Would you mind just repeating yourself?

Yes, absolutely. No, I was just going to say that my question was more around the buying environment and sort of what you're seeing in front of you. If you could speak to the conversations you're having with the customer is about their appetite to purchase total marketing tools at the mid bifurcation between AI and non-AI budgets that would be really helpful.

Yes, I appreciate the question. I think like everywhere, the demand environment is similar to what we experienced last year, there's customers that are certainly facing budget constraints today, but you can see it in -- so the customer stories that we've had and the performance in Q1 customers are still buying. They're just expecting really strong return on investment on those purchases, and they're expecting that the speed to value the speed to onboarding and adoption happens really quickly.

And similar to one of the earlier questions that I'd highlight, this really comes down to what kind of impact are you having for customers today in this environment? How can you help them either grow revenue reduce risk or contain costs. And so we see our opportunities across all of those things. A revenue growth perspective, certainly, this is a great opportunity for customers to be able to run really great campaigns, whether they're organic or paid and to know exactly how to leverage their dollars to drive greater pipeline for the organization. We're also seeing that our customers have to be where their customers are.

And the reality is today, social is becoming one of the #1 channels for customers to go to from a customer service perspective. And when they show up on social, they have a high bar in terms of expectation on you responding and the timeliness of that. So ensuring that our customers are set up to respond as fast as possible to have these conversations with their customers are incredibly important. And then -- the social intelligence, the data component of this is huge, right? The signal that exists on social is absolutely massive. Unfiltered. It's unbiased. It's your customers and the customers you want to get.

And we have the ability to parse through all of this data and give real insights to our customers to help them make really transformative decisions in how they're running their business. So these are all the things that end up being at the forefront as customers are in cycles with us today and as we're helping justify the value for them as they're investing in Sprout and convincing their CFOs that this is a really smart thing for the growth of their business.

Okay. Perfect. And maybe just one follow-up on Trellis, it's really nice to hear the early traction you guys are seeing from a going GA. If you think about the long-term opportunity within the platform from a monetization perspective, is there a possibility -- I mean, it sounds like it might be just being embedded within the platform pricing. But is there an opportunity in the long tail of it to be sort of a stand-alone pricing level? Or how are you guys thinking about that?

Yes, I appreciate the question. And so the answer is yes. And we mentioned on the call, but we'll be going a little bit deeper into the monetization strategy as well bunch of the AI advancements that we're making at breaking ground on May 13. So hopefully, you and a bunch of others will join us. But at a high level, the way to think about this is Trellis initially will use a hybrid model will combine user access with usage-based monetization. And this really reflects how the product works.

So customers need access to the AI layer inside of Sprout and that usage should scale with the amount of value and compute being consumed. So our goal really is simple to start in that we want to drive adoption. We want to make sure that customers are getting in there that they're having these magical experiences with the product and seeing value, they're building it into workflows.

And then as we're getting it in customers' hands, we expect that it's going to drive usage, and it's going to happen across listening today in news with but later broader spread platform. as more of those customers adopt Trellis across all of those capabilities, we expect to see that usage and value go up, which we'll be monetizing as well. So we will have a SKU for it that we'll be talking about.

We do see it as another area of opportunity for us to be able to grow our ACVs and to grow our overall revenue with our customer base while adding more value.

Your next question comes from the line of Adam Hotchkiss from Goldman Sachs. Your line is live.

Okay. Great. I'd love to ask a quick follow-up around the AI products. How do you think about token costs within the context of these AI products that they scale? I sort of think of social platforms, obviously, is having high volumes of data. And I'm curious if there's inherently higher inference loads associated with that compared to more narrow application use cases. So, maybe just talk at a high level about how that impacts scalability of use cases or whether they are mitigating factors that we should know about in terms of token usage and inference loads.

Yes, Adam, I appreciate it. I mean, I think probably a few things that I would take away here. One, we feel really good about our ability to manage the costs related to AI and tokens. Two, a lot of credit to our engineering team who spent a lot of time within all of this, thinking about the models that we use in the back end and the way that we approach these things and ways to be most cost efficient in the work that we're doing.

Obviously, the use of AI and the use of models varies depending on the use cases that go in. there's this opportunity for us to be able to swap out things in the back end and make sure that we're optimizing token costs based on what our customers are doing. And then we're doing, as you might imagine, a ton of modeling the background, we've had the opportunity while Trellis was in beta to understand usage patterns from customers and developing our monetization model.

And then obviously, making sure that the SKU that we'll be sharing more details on factors in the expected cost as well as we'll have tiering systems to allow us to make sure that we're monetizing any of the consumption that's going in. So this ends up being a really good net positive for the company while customers get more value.

Okay. Got it. Great. That's really helpful color. And then I guess, second, could you just update us on what the mix of your channel for new logo looks like, particularly for some of the 30,000-plus new adds that you're doing today maybe versus historical I know we had historically talked about things like social studio conversions and the Salesforce relationship, and you obviously have the robust drug sales team. But how should we think about that mix today and how you think about that going forward?

Yes. I appreciate it. The majority of our business is direct through our sales teams. We certainly have some great relationships out in the market. Salesforce is a great example. We continue to be in a lot of events with Salesforce and our integrations into things like Service Cloud and agent force help us get referred in and help us co-sell many places. We've built some amazing integrations into other places like Canva and Adobe and a number of other organizations, which ends up being a helpful thing for us as we think about the ecosystem value of having integrations.

But the majority of our channel is direct for us. And there's a healthy mix in our customer base of inbound versus outbound and then customers that are moving from other competitors and then customers that are either using an agency or might be just directly in the native networks. So we see it as many different opportunities for our sales teams to be able to create pipeline and go execute against that opportunity.

I would just add, Adam, as you'd expect and is going through some of these customer stories on the call today, I mean when you're getting into deals for customers over 30,000, over 50,000 in ARR, those are majority direct. I mean, agency is still a really critical part of our go-to-market strategy, but it's a little bit more down market at times.

Next question comes from the line of Scott Berg from Needham & Company.

[indiscernible] on for Scott Berg. Maybe just a question for you, Alex. It's been a few years since the company moved from ARR to CRPO for measuring bookings on a quarterly basis, but it really hasn't been kind of a perfect proxy to date. And I guess with the RPO kind of growing that 10% year-over-year versus where the 1Q revenue growth rate took out. I guess what you say, are we at the point that CRPO gives the right view kind of on the current business momentum?

So the question about RPO performance in the quarter or just how to better understand the business?

Yes, just kind of how to better understand kind of CRP is the right metric to be watching.

Yes. So I can talk a little bit about RPO, then we can talk a little bit about the segmentation we provided last quarter. So RPO and CRPO reflects the demand environment we're operating in today and reflective really of the performance from 2025, right? So both metrics grew approximately 10% year-over-year, which is now much more aligned with revenue growth. So from a revenue visibility standpoint, we feel the guide appropriately reflects what we're seeing in the business today.

That said, we're not satisfied with the bookings performance underneath those metrics. The pressure is not broad-based of customer value or renewals, right? So the renewal base remains durable. Customers continue to make longer commitments to Sprout, which we talked about with our multiyear contract mix, which is now half of our overall contract mix. The opportunity is moving the pace of new business and expansion in the current environment. Really, that's what Ryan and the team are focused on. The part of the business that's most aligned to our strategy continues to perform better, right?

So 30,000 and above that grew 21% year-over-year and crossed that 60% threshold for total subscription revenue. And then customers above 50,000 grew nicely in the quarter as well. So I think that's where I would leave the RPO discussion. I think when we contemplated the data disclosure on the Q4 call, we really wanted to help investors and analysts understand how to better model the business. And that's why we gave you the 30,000 above and below because we really think that's what is ultimately the strategy of the company that we're driving at right now for both segments. And we understand that we had to come back with something when we took ARR away a couple of years ago.

Your next question comes from the line of David Heinz of Canaccord Genuity.

This is Ryan on for DJ. So AI has obviously led to this great reevaluation of existing tools across the tech stack. So a bit of a 2-parter. But do you typically find that social has its own dedicated budget for AI experimentation? Or is it included within marketing? And then if it is within marketing, where would you say it stacks up against other competing priorities?

Yes, I appreciate the question, Ryan. I think from a budget perspective, I don't know that -- our customers today are thinking about it as 1 and the same. I do think we have a huge opportunity here to help them with it. most customers we're talking to are trying to figure out how to better leverage AI to move their business forward. I think there's a huge opportunity that we see as we're getting in front of customers to help them see the art of the possible to help them see specifically in the marketing department there's massive opportunity for them.

The examples that we gave on the call today with Trellis and with AI are some really good examples of where value is coming, speed to insights for customers enabling you to create better content that's going to perform, helping you differentiate against your competitors identifying potentially challenging reputational issues. So these are some of the things that we get to take these AI needs and put some real products and solutions behind them, which I think is really, really helpful for our customers. in terms of how they think about the stack rank and the prioritization, what we hear from our customers today is budgets are right, but we got to figure out a way to grow, and we've got to figure out a way to make sure that we're reducing risk and consolidating cost.

And so similar to an earlier question that I provided some feedback on, we see opportunities to help customers in all those things. From a growth perspective, we can help you create amazing content, well, whether it's organic or paid to make sure that you're driving the right amount of awareness or pipeline from a social campaign perspective. We know that our customers more and more are getting into social to be able to engage with customers from a community management or a social care perspective. And then we know that the data that exists on social can really help them thinking about the investment strategy that they need.

So it tends to be one of those things because of the way that social sites up on where our customers' customers are that it becomes pretty important. But I think in this budget environment, making sure that you're really tying the ROI back for customers and ideally in many cases, consolidating some of their other solutions or spend is really how you help?

Okay. Makes sense. And then maybe more of a higher level one. So we saw Meta acquired book a couple of months ago. So I was just wondering, as agents get more sophisticated and conversational, do you think there's a legitimate risk that these large social networks will develop their own conversational agents for brand users to directly engage with their customers.

Yes. I mean one of the -- the reasons that we exist is that we really -- kind of going back to an earlier question that we had today, just about the networks that our customers use and the proliferation of those and which ones are most important -- we see this every single day. And so kind of going back to that stat, 90% of our customers use 5 or more social networks. The reality is that's just continuing to grow. Certainly, across all the meta properties, but then all of the social networks. And our customers need to show up across all of them.

They can't just work within one social network and hope that they're addressing all the things that they need to do. a marketing perspective, a sales perspective, a customer support perspective. And so historically, through time, we'll see some of the social networks create some sorts of productivity assets for their own internal network. But what we hear from our customers is that's not going to be it's not going to be the full solution, it's not going to allow them to change their workflows because they need to think holistically about their social strategy.

And that's where we come into play. Our customers log into social every single day. Our practitioners are spending hours a day in our platform, and this is how they're accessing all the social networks. This is how they're sending out their marketing campaigns and engaging with customers. I expect that in scenarios like that, that might play for a customer that's maybe more in the SMB space that might only be on one network, but from a business tool perspective, and for the customers where we're really focused, they need to be thinking across all of their networks, and they need a platform like Sprout to be able to show up in the right places.

Next question comes from the line of Jack McShane from Stifel.

This is Jack on for Parker. Ryan, for you, kind of a 2-parter, but can you speak on how your current AI feature set and road map has resonated in the market to the extent that it's had any material impact on the top of funnel. And similar to that, within your existing base, have the launches of launch and marketing of Trellis impacted upsell conversations around the core underlying premium products like listening and NewsWhip?

Yes, I appreciate the question, Jack. So in terms of the AI features and resonating, I'd say, again, we're pretty early on here. The progress has been strong. from the standpoint that we were in beta for the end of the last year going into this year, we went general availability at the end of the first quarter here. So pretty early on, too early to really call out any specific numbers, but I will say that it is differentiating us in conversations with customers.

We're getting a lot of great feedback from new business customers and prospects, and then on the cost side of things, clearly, we've had a lot of good adoption in a short period of time and listening with the thousands of users that have got access to it. Certainly, it is a huge opportunity for us. One, from a driving adoption and value perspective and listening in news for the customers that have. And then certainly, from an upsell opportunity, as you can imagine, these products deliver these magical experiences.

And if you've used something like listening. There's not many products that look like news with, but if you've tried to understand what's happening from a a PR perspective. And then you look at what Trellis offers to our customers today, it's really a magical experience. It's enabling customers to get insights in a way that wasn't available before, it wasn't possible before. And so we certainly see this as something that's going to help us over time from a new business perspective, from an expansion perspective and then certainly from an adoption usage retention and renewal perspective.

Got it. And on the Essentials package, just to be curious, is this more so targeting low-end existing customers or [indiscernible]?

Yes, it would be targeting net new customers. We know that there's an addressable market out there. We know that we have a code base and a platform that could serve those customers today. We see them coming into our inbound funnel. But in the historic state, the pricing and packaging wasn't the right fit. The product had too many capabilities for what those customers were coming in for. And so now we've got a really targeted effort for those customers with the right product mix, but the right pricing and packaging. And then for us, it's with the PLG and self-serve motion of it, it's really reducing the customer acquisition cost against it. So it's definitely targeting new customers, and we think that there's a lot of customers out there that will get great value from it.

Your final question comes from the line of Matt VanVliet.

Curious on how you're approaching, I guess, third-party models and agents from accessing the data in Sprout to run workflows across the business. I guess what's your approach on sort of a more open platform versus monetizing that access point and understanding that there's a lot of unique and critical data here and not wanting to just simply be a data source and actually help with those workflows.

Yes. Thanks, Matt. I appreciate the question. And actually, the answer is really wrapped up in the final part of your question here is we are sitting on really important incredible data that is not easily accessible in most cases, not accessible at all by any of these frontier models or the -- it's -- the data set that we have is incredibly rich in real-time and unbiased -- and a huge part of what we do is taking that data and making sense of it.

If we think about the work that we've done over the last 16 years to be able to understand the various data sources, the sentiment behind these sources to be able to categorize this and put it in a place that we can leverage AI to make sense of it is a huge part of the secret sauce here at Sprout and the value that we're adding to customers. And so for us today, this really isn't about having third-party agents and models tapping in to the raw data and the things that we're doing.

Over time, I think there's a conversation to be had in terms of how do we take the insights and the things that we've uniquely done with our proprietary models and put it in a place that can hand off to agents so that customers can use it in the rest of their ecosystem. So I think a future conversation to happen there, but so much of the work that we're doing today is so nuanced -- and that's really what our competitive advantage is from an AI perspective and the work that we're doing for our customers today and trellis.

Very helpful. And then as you look at the customer care offering, curious on what you're seeing in terms of usage and resolution rate and ultimately, where you think you can take that as Trellis is built more fully into that product as well?

Yes. We are really excited about this. We talked a lot about it last year in that we really surged within the customer care use case we've got some massive organizations and brands that entrust us every single day to be able to manage the massive volume that they have from a social customer care perspective.

We built a lot last year when we think about our cases, our integration into the Service Cloud, our ability to really drive up human agent productivity and to help customers understand what's happening from a service perspective and then to take that data and have it go across the rest of the organization. And certainly, as we think about trellis we believe that there's these massive opportunities to drive even more efficiencies for the service centers that are in social customer care every day.

Part of what goes into the work that we're doing here as well is just thinking about where our customers are on the adoption scale for this. Because of the public nature of social, human in the loop is really important to our customers. So having AI solutions that might help you get much quicker at potential ideas to answer question from our customer or to triage and route MVP customers to a certain spots to make sure that you're delivering on SLAs. So these are all things that the AI can help with. And then if we can do it in a way that increases the efficiency and productivity of agents, but still keeps human in the loop, humans in the loop.

That's really what our customers are looking for. So we're excited about the work that we're going to be able to do with Trellis customer care, and we think that it's going to be an additional unlock for customers as they think about how they're serving their customers, especially with a lot of the brands that just have such high volume. And similar to what I said before, the expectation on social is that you are responding faster than many other channels and the pressure on a brand to do that is heightened given the social nature of it.

So we know that we have a really big role to play there. We're excited about what we've been seeing with customers today, and we think we get some unlocks when we unlock trellis for those customers.

That concludes our question-and-answer session. I will now turn the call back over to Ryan Barretto, for closing remarks.

Thanks very much, and thank you all for joining us this saving. I know it's a busy night across software, and we will be connecting with many of you in the days ahead. Before I close, I just want to highlight a few of the takeaways from the first quarter. First, our 3 customer segment remains a clear growth engine for the company, up 21% year-over-year and now representing more than 60% of our subscription revenue for the first time. These customers are demonstrating stronger retention, broader multiproduct adoption, greater expansion potential and deeper alignment with our social intelligence vision.

Second, we are still early in the changes we're making below 30,000. This part of the business requires a different product and go-to-market motion, and we're now implementing that through the Essentials product and self-serve we've created a more efficient onboarding and support model. We expect this cohort to continue to desell through 2026, which is reflected in our outlook with the overall benefits of the strategy becoming more visible as we move into 2027.

Third, we're making real progress with Trellis and AI. We spent a lot of time on that tonight. trellis is now live across listening in NewsWhip, we're seeing adoption scaling, and we're really looking forward to sharing more at breaking ground on May 13, including our broader AI road map and the monetization framework that we're rolling out as well. And then finally, our board's authorization of a $50 million share repurchase program reflects our confidence in the durability of this business, our free cash flow generation and the long-term opportunity we see ahead. We believe there's a meaningful disconnect between the current valuation levels and the long-term value we expect to create. And we see this as a compelling use of capital.

And I'll end with just a big thank you to our customers for their continued trust and partnership and to our team for their focus and discipline and the care they bring to their work every single day. We appreciate all of your time tonight and your continued interest in Sprout, and we will talk to you soon. Have a great evening. Thanks, everybody.

That concludes today's call. Thank you for attending. You may now disconnect.

All right. Thank you, and welcome to Sprout Social's discussion of our System of Record and Action AI strategy at the company. My name is Alex Kurtz, Head of IR and Corp Dev here at Sprout Social.

Our discussion will cover foundational architecture of our platform, the data engineering that fuels Sprout Social, an overview of our products and customer use cases and the power of true AI capabilities. With me are Sprout Social's CEO, Alan Boyce; and distinguished engineer, Kevin Stanton.

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 product road map, including our AI strategy and the development of our Trellis AI capabilities, AI agents and agent Studio, the expected benefits of proprietary data assets and data enrichment capabilities, our ability to scale our platform infrastructure efficiently, our plans for product automation and integration capabilities, our competitive position and defensibility of our technology and data, our partnerships with social networks and other technology partners, our expectations regarding the use of AI in our products and internal development processes.

These statements can be identified by such words 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 a discussion of these 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 31, 2025, filed with the SEC on February 27, 2026, as well as our most recently filed 10-K and 10-Qs. With that, I appreciate everyone hanging with me on that one. Let's start the call. Let me introduce the team.

So with me are Alan Boyce and our CTO has been with Sprout for 15 years, has seen it all. And Kevin Stanton, one of Sprout's distinguished engineers and with Sprout just about roughly the same time, about 14 years and has been a really critical driver to a lot of our engineering efforts at the company.

With that, I'm going to hand it over to Alan to take us through the presentation. I will say, along the way, if you want to put questions into the Q&A function, then we can start reviewing those and then we get to the Q&A, we'll start asking some of your questions. So with that, I'm going to hand it over to Alan.

Thanks, Alex. Appreciate it. Hello, everybody. My name is Alan, but it's probably 15 years, like Alex said, it's crazy to think of, but Kevin and I both have -- together have 29 years of experience in the social space, believe it or not, it's pretty crazy. Today, we wanted to offer a deeper dive into what it takes to run our platform at scale and why we believe that we're well positioned to take advantage of AI.

We both strongly believe Sprout has built a differentiated platform that allows for us to act as both the system of record and action for social. And it's really driven by 3 core technical architectural areas. And so the first is the platform at scale or how we manage 1 billion plus social artifacts through our platform.

The second is our deeply integrated workflows between our product and partners. And then third is our trials, AI platform and how we expect it to unlock future value for customers. And we're going to dive into each 3 of these today. And so to deep dive on our platform, I'll pass it on to you, Kevin.

Yes. Thank you, Alan. Hi, everyone. I'm Kevin Stanton. I'd first like to start off by giving an overview of our platform today. We spent the last 15 years building the system of record for how the world's biggest brands manage social, every public and private message, every workflow and decision flows through our platform, and we handle a ton of jobs for our customers.

The AI revolutions change what's possible, but agents don't run on models. They run on context and our customers have built theirs within our platform. Even in this high-level diagram, there's a lot of complexity to cover, so I'll kind of walk through right to left. On the right-hand side, our ingestion services handle over 1 billion messages and metrics per day.

It requires an insane amount of algorithmic orchestration just to make sure that we can say and sync in real time with the APIs that are constantly shifting around. As we move towards the middle, we structure and standardize the data and enrich it for our customers. Our efficient ML models powered by GPUs categorize every message in real time and without huge infrastructure costs. At this point, the messages are in the system of social record that powers hundreds of workflows, and we store more than 4 petabytes of data. Just a single enterprise customer today has almost 1 billion messages. In spite of this scale and our 30,000 customers, we can deliver search and analytics over the entire corpus of data in seconds.

Along the top, we integrate with dozens of partner APIs, like Alan mentioned, that unlock the workflows for customers where they need it, like routing cases over to Salesforce. And on the bottom, our platform services provide critical capabilities for customers with thousands of employees to execute workflows without stepping on each other's toes and doing it securely.

And in the past 9 months, we've added model context protocol to our internal existing APIs to enable our AI agents to leverage that system of record. And we do all this with incredible engineering discipline that I can't stress enough like last year, our hosting costs were only 2.7% of total revenue. I want to dig a little deeper into the system of record and why it's so valuable. As you can see on the left, every action that's taken by a human or an automation or an agent, everything our customers configure their tags, their rules, how they label data for their business adds proprietary data to the system of record. Our customers are defining what's important and what's not like what inbound messages are high priority for customer care.

They define how they expect workflows to be done for their business, such as preventing posts that could damage the brand's reputation or create regulatory risk. Every action by a human user or an automation or an agent is important behavioral signal. It is like -- it's what's -- it's telling us what kind of messages they respond to the most, how they triage, what important metrics they track or if they prefer to tag and group messages in a certain way that their business understands and can report on.

So our system of record encodes how each of our customers do social for their business and their industry. It's a structured, querable and governed shared history that allows teams of humans and agents to do workflows at scale without tripping over one another. When an AI agent needs to know how to handle something or be prevented from doing something risky, we believe the answer is already in the system. This makes AI agents possible at scale. So the natural question that may get asked is why can't someone just throw an LLM at raw social data and skip all of this.

Anyone can vibe code a demo agent, but making agents reliable requires both a robust system of record and the engineering rigor to prove it. AI agents need evaluations just like software needs tests. Evals are an entire engineering discipline around measuring and optimizing AI agents on specific tasks in specific domains. If you're shipping agents without these, it's like shipping unreliable code to production. An LLM is like someone who went to school but never worked a day in their life.

Evals are how agents learn on the job and get better through experience. Our evals measure industry standard things like hallucination rate, but more importantly, they measure task-specific quality scores and completion rates, adherence to customer rules and reliable use of our platforms tools. Every agent we build is continually tested against these benchmarks on real data. But evals are only as good as your ground truth, and ours comes from 2 different places. First is the system of record itself, 15 years of our real customer data that's enriched and labeled through years of real usage. And second, it's human experts, our ML scientists, product experts and the customers themselves telling us what good and bad agent behavior actually looks like.

As you know, LMs are nondeterministic. They've never seen our customers' data or specific prompts in its training data. This is why agents seem to work fairly well some of the time out of the box, but that's not good enough for businesses to rely on. This is why OpenAI and Anthropic emphasize the criticality of evals in spite of their own training and in-house evals.

When AI agents fail, those failures feed back into our evals, the agents get better, the ground truth gets richer. We have deep insight because of the depth and breadth of our customers in our platform, a brand crisis, a regulatory incident or a viral moment, these are rare for any one customer but common across tens of thousands. The flywheel we've built, we believe, enables us to continually improve the quality of our agents and our platform for our customers. To talk about how these integrations fit into the flywheel, I'll pass it back to you, Alan.

Yes. So not only do we have integrations into all of the native networks, but Sprout sits at the center of all of our customers' social workflows. And so we're connected to their CRMs, their help desks, analytics tools. We're connected to their digital asset managers, e-commerce platforms and then every major social network on top of that. That embeds us directly in the social transactions themselves.

So if every integration -- you can think of every integration as another job that Sprout does for our customers and yet another switching cost for competitors trying to displace us. When you -- but when you combine those integrations with AI, we believe we occupy a unique position in the governance, observability and compliance layer for everything social. Social teams have hundreds or thousands of people who rely on us for auditability and oversight. Computers as powerful as they are, can make mistakes faster than any human could have hoped for. That's why -- that's where our role as a guardian becomes critical.

We see it as escalations, auditing what your agents, human and AI alike are doing and then verifying they're acting within bounds, confirming that it's safe to proceed. Because we sit at the center of our customers' social workflows, we're uniquely positioned to be that layer of trust.

And as the cost of building with AI continues to fall, other things will start to emerge and stand out, reliability, stability, security. We're building on long-standing relationships with the networks and foundation our customers have trusted for years. With that platform and those integrations as our base, we wanted to share more about how we see AI transforming work with our customers. So for that, over to you, Kevin.

So here's our AI vision, what we've built, what's in development and what's coming next. About 9 months ago, we set out to build our first agent and in the process, built an entire agent platform layer on top of everything I showed earlier. Our listening agent delivers insights from massive sets of social data in seconds.

When we presented at our break and ground event in November, we received over 550 demo requests from customers, our biggest response ever. It's in the hands today with over 1,000 beta customers with full release on track for next -- for this month. That platform foundation and agentic UI framework you see in the column, it powers everything that comes next.

In development, we have an insights agent that will span across care, publishing and analytics, an agent studio, which will move us beyond chat to agents that run autonomously on a schedule, on a trigger in the background. and a revamped automation platform that will let customers combine deterministic rules and AI in a single workflow. Looking ahead, a care agent, AI-created boards and the ability to deliver insights where our customers work. We believe Trellis can unlock more value faster for our customers than anything we've built before. On vision -- our vision is that every workflow in Sprout can be assisted or automated with the right balance of AI and automation and human oversight for each customer. As AI reliability matures, so does the autonomy we can offer and our platform is built to make that transition seamless.

Here's a preview of our agents in action. On the left, our listening agent. So you're tracking brand sentiment and the agent surfaces a chart showing a sharp spike in negativity overnight. You ask what's driving it and the agent immediately breaks down the root causes, no digging through reports, no switching tools. It dynamically generates visuals and analysis in the moment.

On the right, our Insights agent, imagine the customer's content engagement has been declining for weeks and they need a lift. The agent analyzes what's been performing best, drafts new posts based on those patterns and drops you directly into our publishing workflow. AI does the analysis and drafts the work, you review and approve before anything goes out. Our listening agent is context-aware. It sees what the user sees and can access what the user can access while they being the same permissions and guardrails. Our Insights agent is being designed on the same platform. This is Trellis Studio currently in active development where we move beyond chat to autonomous agents. Imagine waking up Monday morning to an e-mail summarizing the competitive landscape over social from the weekend or flagging a crisis tied to your latest product release.

Studio will give customers a library of prebuilt tasks executed by our agents, each rigorously evaluated to reliably on our system of record. Customers will configure them to run on a schedule or a trigger like an anomaly spike in listening or inbound messages. Work gets done even when no one's at the screen.

And this is a platform play. Our vision is for every product team at Sprout to be able to contribute to studio over time. As the librs,abilities compound and customers will be able to get increasing value without having to change how they work. Here's what it looks like to configure an agent in studio. The customer won't have to write prompts, -- they'll select from the context they already know which social profiles are important for this task, which tags, which types of scheduled post -- it will be programmable without prompt engineering. That's the point. Customers will be able to get the power of a configurable agent using the language of their business, not the language of AI.

And behind the scenes, every task will have already been rigorously evaluated so the agent will behaved reliably regardless of how the customer configures it. Over time, we'll open up more control, letting customers define better agent -- define agent behavior to fit their specific needs, but we'll do it in stages, always grounded in the same eval rigor that ensures quality.

This here is a concept for the next evolution of our automation platform. We're building an entirely revamped system where customers can combine deterministic automations and AI agent tasks in a single workflow. Here's an example. Your top competitor just launched a product that's blowing up on social. A competitor's spike triggers an agent to analyze what people are saying and why it's resonating, and it pushes that summary straight to your competitive intelligence team Slack channel so they can get ahead of it. This will give customers a programmable workflow language without requiring technical expertise, but they won't have to build from scratch.

We envision delivering prebuilt workflows out of the box. And eventually, we believe agents themselves can help customers configure workflows. The integrations of our customers have already been configured -- that have already been configured can become an output layer for the agents and automations. They'll use deterministic automation where judgment is required, AI agents where intelligence is needed and the customer decides where each fits.

This is Sprout as the operating system for how brands run social. So agents will be able to run tasks, execute workflows and deliver results, but they won't -- but they'll also be able to reshape the product itself. This might look like a standard dashboard, but it's not. We call these boards. You'll describe what a user needs and the agent will compose the experience. The example here was built for a CEO who might want to engage with influencers when they interact with the brand.

Instead of giving the CEO access to the full platform, you give them a board the right data, AI-powered context and the ability to take action all in one place. The bigger idea here is that UIs no longer have to be hand-built for every single use case. Users will describe what they need, agents will build it, software that will shape itself to each user. Now back to Alan to talk about how we build at the speed of social.

And finally, in the same way we're building for our customers, AI is transforming how we work internally. Our most productive dev is now called Claude -- sorry, Kevin. Claude code is allowing us to take the manual toil of maintaining this many integrations and do it in a fraction of the time. Traditional engineering teams are constrained by when devs are working. We've built tooling that allows bugs, errors and package updates to all be event-driven in the cloud, meaning that when a dev wakes up, there's already work ready for him to review or her 24/7. And we're doing it in the same way that we're building for our customers, which is with safety and governance alongside automation and velocity.

To summarize, we have a massively complex platform with a track record of scale. We're ingesting more than 1 million -- 1 billion messages a day. We sit at the center of our customers' workflows, embedding us in the transactions and positioning us as a key trust and compliance layer.

And we've encoded how social actually works on top of the shelf -- off-the-shelf and proprietary AI models. And we believe we do it at some of the best margins in the industry with our hosting costs less than 3% of revenue. If you combine that all with our AI vision, we believe we're well positioned from a platform perspective to deliver great outcomes for our customers. With that, let's open it up to Q&A. Like Alex?

Yes. Thanks, Alan and Kevin. Great job. DJ, I see your question. Before we hop to DJ's question, I do want to maybe start with Kevin. If you go back to the platform architecture slide, if you could -- I don't know who has -- who's writing the slides right now.

I think it's important, kind of you maybe talk through the engineering efforts to bring all these disparate data sources into the platform, what it took to kind of build all that, right, the ingestion mechanisms and then to take all this at scale and then make it usable for customers. So maybe how that kind of built over time and why it's we think one of the best-in-class kind of defensible pieces of our platform.

Yes. Yes. Well, I mean, as Alan mentioned, we've both been around a long time, so it started small and scrappy. But the platform that we built in the ingestion layer probably like 6 or 7 years ago, we turned it into something that was a lot more robust and easy for anyone to add ingestion jobs so that we could keep pace with the change of the social networks. But there's a few things that stand out. Like one is the volume and variety of data. Like there's no data standard in social.

Every network is different, and we're ingesting the full firehoses of X and Reddit and blue sky. And it requires a robust and scalable system just to keep up and enrich and store all that data. And the APIs themselves are constantly changing, whether it's like releasing new features or just changes in the data, like the scale of data is so massive that like you would think that every message that comes across the wire fits the correct specification, but that's not really true.

So we have to adapt to any like kind of weird curve balls that we get thrown by the networks. The other thing is social data is spiky and evergreen. Like if you think about your bank statement, once March is closed, your bank statement is your bank statement, but a tweet or another message can go viral months later. So you have to be able to intelligently go grab fresh data whenever stuff is happening on social. So it's not as simple as just like receive it and you're done.

And the last thing is just like essentially, our platform is keeping all the social data in sync with what's happening on the social network, so our customers can do their jobs and making sure that, that's arriving in real time requires being able to keep pace and make sure that we're not like tripping over changes in the network or like anything that's happening at any given day.

That's helpful. And just a quick follow-up, Alan. Can you just talk about the partnerships that we have with the big networks and how that's evolved over time and how they've actually have become more selective in who they provide access to because of a lot of kind of bad use by other partners over the last few years. Just kind of like these are legally bound contracts. It's built on trust over many years of use, kind of building on the stuff that Kevin was talking about.

Yes, totally. It's been a long road with the networks, and we've grown with them. It's one of my favorite parts of Sprout is that social has kind of never solved. And so we have taken the long game with the networks. Early on, they -- a lot of our competitors would kind of break agreements in order to have the best features in market.

We never played that, and it's paid off for us in a big way in that we have kind of preferred access and in ways that we both with the networks and ourselves, both want a healthier social environment for customers and businesses to run on. And so for us, it's just about partnering and solving their problems, their customers' problems and our customers' problems, and they all overlap.

Great. I'm going to start with a question from DJ Heinz at Canaccord. and he's asking about our AI monetization philosophy and how you see the business model evolving over time. I think it's important just to preface this question with a couple of points before answering Alan. We we are very early in our market adoption within our customers, right? We typically have several users to a small team working in marketing teams that have deployed our technology.

This is not the situation where we have thousands of seats spread across large organizations, and there's all this kind of inconsistent use, right, Alan, that you would see maybe with some other SaaS vendors, right, who have been around a long time and they're in incumbent markets.

So I think it's also important to understand that, yes, monetization will likely change over time, and Alan will talk to that. But we're also not one of these vendors that has been pushing our user count like deep and wide into large groups of people. Like these are very early marketing teams that manage social, and we feel like there's more opportunity with those teams. So Alan, with that, maybe talk a little bit about the monetization philosophy that we think about with trellis.

Yes, totally. So we think of them in a couple of different frames. It's a really great question. I don't think anybody has kind of solved this, but AI is not one thing. We've got 40-plus models running in production today. They're doing everything from sentiment analysis to like deep image scanning. And so each one of these comes with completely different kind of like cost and benefit analysis.

We are also looking at like a chat experience that can break out of the app and bring more CMOs into the -- like a stand-alone Trellis agent that can sit alongside the CMO's desktop. And so I think we're going to really have to end up with a pricing model that matches both the user and the efficacy of the thing.

And so chat, while we have it today, we'll have like probably a per seat license for that to just cover basically the hosting cost side of it, all the way to background agents that are doing more and more work for our customers in which we'll be leaning into usage-based pricing or kind of like outcome-based pricing and things like that. But I wouldn't think of AI as just one thing in our platform. I think it solves many different things.

This is a question. Thanks for that, Alan, a question from Will Miller from William Blair. Is the Trellis and agentic suite incorporated into the core? Or will customers have to pay an additional fee to access it with the upcoming capabilities. So I know you kind of touched on it, but like how do we think about, how kind of be embedded in our core licensing. I know we're still kind of reviewing that right, Alan?

I just love speaking with investors because we say embedded in the core, I go right the architecture and technology is deeply embedded in the core. But we're actually talking about pricing and packaging here. So no, it will definitely be an additional cost. These are doing big lifts for our customers. We reserve the right to have some layer of AI that's just basically replacing how user interfaces get work done. But for any of these background agents that are doing work when your teams are off-line, we definitely want to monetize that because we're bringing huge amounts of value to customers they can't get now.

Okay. I got another question here. Just talking about how do larger customers leverage social data. So we talk a lot about that as the sort of core of our strategy, right, social intelligence. But what are they doing day-to-day with it, right?

And on this slide, we have a lot of different workflows that are happening, right, Kevin and Alan and they're publishing, they're doing listening and analytics, like what is their main use case around social data? And how does it kind of work through our platform? Like what are the top kind of value that they get out of that?

Yes, I can totally take that one. So on the data side, like these big customers are trying to understand their competitors, their customer, their landscapes they're using social for marketing, customer care, product development, lead generation, research, risk management. And then fundamentally, they just need to be where their customers are. And so you will see us continually adding new networks as they expand and as they kind of differentiate so that customers can keep track. But you could think of social as this massive amount of real-time information about what anyone's feeling anywhere in the world. And we keep trying to find ways to use AI and insights and other visualizations to help people reason about that.

Okay. I have another question here. On the topic of preferred access with the networks, what type of social data access does this give you versus what a generic AI agent would be able to ingest? I think it's a really important question because ultimately, a lot of the LLMs also have social networks, right, Alan and Kevin. And social data is going to be probably one of the most important training data platform like data pieces, data sets, right, that the world is going to use going forward, right, because that's all human interaction on social.

And so we play this really important neutral party, trusted party. So maybe Alan and Kevin, like an AI agent may be trying to scrape a social network, what does that mean legally kind of what you've seen out in the market? Maybe you could define that a little bit for us.

Yes. I think that it really starts with like preferred is a couple of different layers of things. And it might be increased rate limits. It might be access to APIs before they're built. Several of the networks have come to us to ask our advice for how to build real-time streaming networks because we're one of the biggest consumers of all these networks on the planet. And so with most of the networks, we're actually working with them ahead of time to build these APIs to leverage for our customers. One of the key distinctions that allows us to remain neutral and kind of at the center of aggregator of all the social data is we're not doing any of the scraping on our behalf. And so we're not training LLMs on their data.

We're not kind of doing any of these like privacy type things that other vendors have tried to do in the past and gotten shut down for. We're only trying to answer our customers' questions about their customers. And so most of the networks see us as this extension of their own ad platform customers.

And so with that, we get usually like much more elevated access to PII because we just do the right thing with that data and don't share it when we don't need it, don't train when we shouldn't be training. And that allows us to kind of keep the trust of the networks.

That's an important point. Well, listen, maybe just one last question here that I got. When an enterprise customer commits to a new Sprout multiyear contract, especially the larger ones, and this is a wide-ranging question, right, because it could be across different products that we have. But what are the top 3 kind of features or capabilities that make the biggest difference, right, when they're evaluating us and versus what they can't do with the stand-alone kind of native products in the networks?

That's a really good question. It is broad, but I will take my swing at it, Alex. I think I hear consistently across the largest customers, I hear 3 consistent things. The first is having all the data in one place. That's being able to connect the competitive landscape with the current social by gist across your publishing like history, along with what your competitors are doing is just all a desire.

And then that leads into the second one, which is every CMO we talk to wants to connect their internal teams. Every company has creative folks and they want them to be closer to the performance marketing team. And then they have a social team that's sitting somewhere else that doesn't know what either of those other teams are doing. And so with our platform, we're connecting the creatives to the performance marketers to the owned earned paid side of everything that lets them increase that flywheel of how they're doing marketing and care in a quicker kind of more collaborative fashion.

And then the third thing is just listening and Trellis together. I mentioned that social is this giant mountain of real-time customer information. Our listening product with Trellis lets people get access that are -- that don't need to be social experts. They don't have to be analysts. They can really like ask the normal everyday questions that they would have and get surprised by the answers that they're getting back.

Okay. Thanks, Alan. Thanks, Kevin. Well, I want to stay on time here. I think this was a great use of 30 minutes. I appreciate all the work that you guys put into this. Thanks for all the great questions. I believe we're going to host the recording on this on the IR site, so people can come back and reference it. If you have any questions, feel free to reach out to us, and have a great rest of the week. So Alan and Kevin, thanks for putting the time into this. Thank you very much.

Thank you.

Yes. Thanks.

Hello, everyone. Thank you for joining us, and welcome to Sprout Social Fourth Quarter 2025 Earnings Call. After today's prepared remarks, we will host a question-and-answer set. If you would like to ask a question, please press star again. I will now hand the call over to Alex Kurtz, VP of Investor Relations and Corp Development.

Thank you, and welcome to Sprout Social's Fourth Quarter 2021 Earnings Call. We will be discussing the results announced in our press release issued after the market closed today. And have all released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Ryan Barretto; and CFO, Joe Del Preto.

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 Q1 and 2026 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 in these 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 results, please refer to our annual report on Form 10-K for the year ended December 31, 2025, to be filed with the SEC as well as our most recently filed 10-K and 10-Qs.

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 the reconciliation to the directly comparable GAAP financial measures are included in our fourth quarter earnings release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com.

We have also developed a new metric, approximated subscription revenue contribution for customers contributing $30,000 in ARR. We believe this metric is useful in measuring our success in serving this particular customer cohort. Please refer to the detailed definition of this metric and how it's calculated in the appendix to the earnings presentation on our website. 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 showing this quarterly estimate on a trailing 12-month basis. For brevity, we will refer to this metric the rest of this call as 30,000 and above subscription revenue. With that, let me turn the call over to Ryan. Ryan?

Thank you, Alex, and welcome to our fourth quarter earnings call for fiscal 2025. And Sprout delivered another strong quarter with revenue of $120.9 million, representing 12.9% year-over-year growth, and we closed the year with non-GAAP operating margin at 10.5%, and up 306 basis points year-over-year. Current remaining performance obligations grew 14% year-over-year to $284.7 million and total remaining performance obligations grew almost 15% and with solid growth in our longer-term RPO balances.

This growth is being driven by multiyear contracts that now represent nearly half of our contract mix, up from about 1/3 two years ago, which illustrates our success moving upmarket. Our go-to-market team delivered solid growth in our $50,000-plus ARR customer count up 18% year-over-year. During this quarter, we landed strategic wins with amazing global brands like GE Aerospace, Archer Daniels Midland, PulteGroup, Caesars Entertainment, Cox Enterprises, Gibson Brands and the not worldwide. These customers demonstrate our continued success serving the most socially sophisticated enterprise customers.

Sprout also delivered strong non-GAAP free cash flow in the fourth quarter at $10.9 million and for the year at $45.9 million, an improvement of approximately 55% year-over-year. This improvement underscores our ability to drive leverage in our model. In 2025, we took a major step forward, enhancing the intelligence in our platform. With Sprout AI, we're using our differentiated layers and proprietary agents to help teams move from insight to action faster, starting with Trellis in listening and expanding across key workflows in 2026.

Alongside that, we strengthened our multiproduct portfolio with a reimagined influencer marketing platform meaningful advances in social care, Guardian for trust and compliance and the introduction of News wit for real-time PR and comms intelligence. Overall, our multiproduct strategy continues to drive meaningfully higher win rates.

We entered 2026 with strong product momentum and a clear opportunity to expand within our base as customers consolidate vendors. I'm also excited to share that Lori Gimenez has started as our new Chief Revenue Officer. Lori hit the ground running and let our revenue kick off last month. She brings great commercial software experience from to the enterprise after leading teams at companies like Box, Meta, Google and most recently, Work Ramp. I wanted to start today's remarks with important behind-the-scenes details to help you understand our business at a deeper level.

I know that many in the investment community are in the process of discerning the potential impacts of AI across categories and in specific companies in the software space. We'll talk more about our AI strategy and our progress in general. But first, I want to speak to two of the prevailing concerns directly.

The first concern is moat durability in a world where agents are becoming proficient at writing code. Even if an agent could generate perfect secure production-ready code on demand, that's still not the hard part. The hard part is making it work in production, commission data access, reliability at scale and governed workflows that enterprises trust.

On a given day, we ingest and publish more than 1 billion social interactions and data points from hundreds of volatile APIs across more than a dozen social networks. All of this is real time, uniquely structured across networks and message types and not meaningfully accessible to LLMs today. This data comes from our elevated network partnerships, which are made possible by deep, long-standing relationships in many cases, governed by complex legal agreements, rapid execution as platforms change, robust security and compliance and a track record of proven customer value.

Access to high-quality social data has been getting more restricted, not less. Platforms have tightened controls and increased enforcement against unimproved scraping, especially for AI training. We believe this makes reliable, compliant access under the right permissions a true differentiator. At the end of the day, social data access is permission and controlled by the platforms, not by the model layer. So reliable access at scale is earned, not assumed.

Even if the data were accessible, we believe the magnitude needed to power core features is unwieldly and untenable for in-house solutions or upstarts to manage. In fact, many of the largest LLM providers with their massive arsenal resources, our customers of Sprout and rely on our platform to meet this mission-critical area of their business.

We've built hundreds of features underpinned by a complex matrix of sources and end points optimized over more than 15 years of incredibly challenging engineering feats. We translate raw social activity at enormous volumes into structured comparable signals adding customer-specific context, routing logic, semantic meaning and workflow. Staying in constant lockstep with our network partners and evolving customer needs is even more involved still.

Together, these technical strengths form the foundation of Sprout as a social system of record in action, where social data becomes governed workflow, measurable outcomes and trusted execution across teams. We'll go deeper in an upcoming investor-focused webinar we are running with our CTO, Alan Boyce and distinguished engineer, Kevin Stanton. This event will take place on March 11th, and will be hosted on our IR website. More details to come.

Most people are surprised to learn about the complexity and scale of the engineering challenges involved in bringing all this together in an elegant platform for tens of thousands of brands around the world. These are arguably some of the most difficult challenges in SaaS. This moat is hard-earned and we believe is very durable in an AI world.

We also believe AI development will radically improve our own products, operations and efficiency, and it already is, but that's only possible because of the foundation we've built and the complexity we've already tackled. All of this is also a key factor in the second prevailing concern, the durability of revenue, potential seed erosion and the terminal value of SaaS businesses. We agreed that many categories of software will need to adapt to counter this potential, especially front-end heavy, narrow applications with less architecture and data complexity, touching large portions of the workforce.

We do not anticipate that this will play out in the same way in the relatively nascent and understaffed category of social media where trust, compliance, direct connection with customers and precision are inextricably linked to a brand's reputation. Rather, we believe that AI will unlock new capabilities, use cases and revenue opportunities throughout over time.

As we expand our AI products called Trellis across the platform, we expect the ROI customers are seeing to translate into durable business results for Sprout through deeper adoption, broader use cases and over time, new monetization levers inline with outcomes we're delivering. In May at breaking ground, we'll share our road map in initial packaging and pricing framework including how we're scaling trials from listening into publishing, reporting and care.

Now I'd like to dedicate the remaining portion of my remarks today, discussing two important and highly connected strategic initiatives. First, our multiyear 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 2 years with a new target of reaching against our Rule of 40 framework by 4Q 2027.

Let's start with our two customer segments. As Alex highlighted in his intro, to provide greater visibility into these customer cohorts, we're now disclosing 2 years of historical data for an approximated subscription revenue metric, which you can find in our IR deck on our website. Over the last year, we have provided insight into our $50,000 and above customer segment. We continue to see success in this segment since we initiated our focus here in 2023 and with approximated subscription revenue contribution growth of 27% in FY 2025, driven by strategic investments in our products, marketing and go-to-market resources.

Moving forward and from what you'll see in our IR presentation, we are widening the discussion of our larger customers to now include those over $30,000 of approximated subscription revenue. Customers over $30,000 are generally more socially sophisticated, have more advanced marketing strategies, have deeper budgets and view social as a more strategic part of their business.

This customer spend level and above is more broadly representative of how we manage our go-to-market and R&D investments as well as the fact that these customers provide a strong expansion pipeline to matriculate to $50,000 and above. In FY 2025, $30,000 and above subscription revenue grew by 20% and represented 59% of our total subscription revenue across all customers.

These customers are looking for a highly scalable platform that can deliver the capabilities, workflows, security, speed and innovation that's required to deliver on their social strategies at scale, and that's what we are bringing to them and to the market. We are now consistently winning larger ADV opportunities with some of the most socially sophisticated customers, and our win rates continue to trend positively against our core competitors. And win rates are multiples higher when an opportunity includes a premium product.

In addition to the revenue growth here, the success of this multiyear strategy to serve more socially sophisticated customers has put us in a position to serve Fortune 500 companies like Honda, McDonald's, Procter & Gamble, Palo Alto Networks, and Xerox. We couldn't be more proud to partner with these globally recognized brands. The success we have seen has been driven by major advancements in our social care capabilities, strong adoption of our influencer marketing platform as well as consistent updates to our core publishing and listening capabilities.

We see even more opportunity as our go-to-market teams bring news deeper or customer base to solve complex real-time PR comms challenges, and our guardian capabilities deliver the trust, security and compliance enterprises need. We are committed to deepening our success with this customer segment and believe we have the products, road map and teams to continue to win here.

As we move throughout fiscal 2026, you will see Sprout unequivocably believe, is the market's richest data asset that we have built over the last 15 years and will power a whole new set of AI and enterprise capabilities. This includes, number one, Trellis. Trellis as spreads proprietary AI agent that transforms social data into actionable insights by giving teams instant contextual answers eliminating manual time-intensive analysis. In our early beta with listening, more than 1,000 users are already empowered to produce executive ready insights in minutes instead of hours, pinpointing what's driving sentiment shifts and isolating the themes behind them.

Our 2026 road map focuses on high-value use cases in listening, publishing, reporting and care that will give customers intuitive ways to interact with social data and build custom agent workflows. We believe deep cross-product integrations, unified data and a standardized agent platform will position Sprout to lead the emerging social intelligence category.

Number two, security and compliance. In 2026, we will make significant investments in the enterprise grade foundation that large organizations require through our guardian product. We will deliver automated user provisioning, including system for cross-domain identity management integration, streamline group configuration and advanced tag management to reduce administrative overhead at scale.

For regulated industries, we will advance Guardian with blocked words approval, data unmasking, AI assist for custom data types and customer audit improvements giving compliance and legal teams the controls they need to run social operations with confidence.

And number three, autonomous media monitoring and crisis intelligence. This is Sprout's AI-powered media monitoring agent that detects breaking stories and delivers analyst grid intelligence reports within minutes. Our 2026 road map will deliver comprehensive context, including share of voice, sentiment analysis, geographic distribution and predictive growth trajectory, transforming media monitoring from reactive tracking to strategic crisis preparation.

Our $30,000-plus customer segment has stronger unit economics, a 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 $30,000, we generally see a multiproduct attach rate well over 70%, which is multiples of our corporate averages with products like influencer marketing and News WIP, which carry higher ACV.

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 $1.4 million new business deal with a global information systems leader. We successfully consolidated fragmented point solutions into a single enterprise-grade platform for 450 users, significantly reducing operational complexity. By unifying publishing, listening and advocacy, their 50-plus global teams are empowered to drive faster data-led decisions while maintaining centralized governance. This partnership demonstrates Sprout's unique ability to drive ROI and scale across a massive global footprint.

We also closed a $630,000 expansion deal with a Fortune 50 global technology company. By deeply integrating social intelligence within Salesforce Service Cloud, we have created a unified data set that allows their teams to make faster decisions and provide consistent customer care across every channel. This expansion was driven by our ability to replace legacy tools with a stable long-term solution that unifies the agent experience. Through this dedicated partnership, we've simplified complex workflows, ensuring their teams are up and running quickly to deliver exceptional secure social support at scale.

Last, I'd like to highlight a $1.3 million new business deal, the global nonprofit. Sprout has become the central engine for their national and regional communication strategy. We're enabling this organization to scale social operations nationwide across all 50 states, supported by a specialized national team. By deploying our advanced listening capabilities, we provide the localized state-level insights and trending content predictions necessary for them to maintain brand relevance in a complex media landscape.

This win highlights Sprout is critical for large-scale organizations to benchmark sentiment against competitors and to ensure data hygiene through precise custom reporting. Our platform is not just a tool for them. It's an intuitive workspace that has fundamentally improved their cross-team collaboration and mission-critical workflows.

Now let's turn to the sub $30,000 business. While we believe there is strong potential in this customer segment, it clearly has been a headwind to the growth spread over the last several years. It's a business that has its very own distinct dynamics as far as customer acquisition costs pricing and packaging and how these customers use our platform relative to larger customers.

We believe we can turn the sub-$30,000 segment from a drag on growth and profitability into a more productive and efficient part of the business over the medium term. Importantly, we continue to see healthy inbound interest in pipeline volume in this cohort. But today, the motion is too expensive, and we haven't had the right product market fit, which has made it a drag to growth and efficiency.

We're addressing that in two ways. First, we're evolving our self-serve motion, powered by automation and AI to move customers through evaluation, onboarding and support with minimal human touch. That lowers the cost to acquire and serve and we expect it to improve conversion and unit economics over time, while keeping our direct sales capacity focused on more socially sophisticated customers.

Second, we're launching a simplified product offering designed around the functionality these customers actually need with a faster time to value at a price point that matches their current willingness to pay. Over time, as a portion of these customers mature and their needs expand, we expect natural expansion into higher-tier plans and select premium modules like listening, influencer marketing and new web.

The goal is straightforward. Over the medium term, better conversion and retention at a much lower cost to serve creates a more efficient run rate business and a healthier contributor to the business. Next, I want to share more about a new company-wide objective. Using the Rule of 40 framework, we're targeting a combined growth plus margin of 30% by the fourth quarter of 2027.

We define that as year-over-year revenue growth plus current quarter non-GAAP operating margin. The path to this objective maps directly to the segment plan we just walked through. First, we keep scaling $30,000 by driving new business wins and by expanding within our customer base while increasing premium module attach rates in both areas.

Second, we stabilized sub-$30,000 by simplifying the offer improving time to value and shifting more to a self-serve so we improve unit economics.

And third, we expand margin through disciplined hiring and spend, more hiring in lower-cost markets, AI and automation to raise productivity while keeping our incremental spend and hiring focused on the highest levered priorities across R&D, go-to-market and G&A.

With the momentum we're seeing in $30,000-plus, the actions underway in sub-$30,000 and the leadership we've added, we believe we're well positioned to reach our 30% rule of 40 target by the end of 2027, with opportunity beyond that in subsequent years. The future of our category will be defined by AI native, real-time intelligence delivered through extensible platforms that customers trust to drive outcomes.

Our strategy is to be the social intelligence layer for modern organizations, connecting data, context and action, so teams can make better decisions faster. With our differentiated data, proven platform and deep enterprise relationships, we believe we're positioned to lead and our segment strategy gives us a clear path to execute.

Before I turn it over, I want to say thank you to Joe. As we shared a couple of weeks ago, Joe will transition in March to a new opportunity. Over the last 8 years, he's been a trusted partner and friend, and he's helped build a strong financial foundation through disciplined execution and a high-caliber team with a deep bench of leaders we rely on every day. With that, one last time, over to you, Joe.

Thanks, Ryan. On a personal note, I want to start by thanking Ryan, Justin, Aaron and the Board for giving me this opportunity 8 years ago to lead the finance function here at Sprout. It's been an honor of a lifetime and I'm leaving the finance team in a very strong position.

I'll now run through our financial results and guidance, and then provide some additional comments on our $30,000 customer segments and Rule of 40 plans, as I mentioned. Our fourth quarter results were highlighted by a quarterly non-GAAP operating margin of 9.5%. For the year, we finished at 10.5% non-GAAP operating margin, up 306 basis points from fiscal 2024.

For a company of our scale, we believe this year-over-year leverage improvement is a strong testament to our ability to improve customer retention and at the same time, optimize costs across our platform.

Turning to cash flow. We generated $10.9 million in non-GAAP free cash flow during the quarter. For the full year, we generated $45.9 million, an increase of approximately 55% from the prior year. As we have communicated previously, we expect our non-GAAP free cash flow margin to closely track to our non-GAAP operating margin on an annual basis. Importantly, we remain committed to growing operating leverage on a fiscal year basis.

On to a summary of the quarter. Total revenue was $120.9 million, representing 13% year-over-year growth. Subscription revenue was $118.5 million, up 12% year-over-year. Q4 ACV was up 16% year-over-year. As Ryan discussed earlier, our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthen premium and module attach rates such as influencer marketing, customer care, premium analytics and now news web.

RPO totaled $404.0 million, up from $357.1 million in Q3 representing growth of 14.9% year-over-year. We expect to recognize 70.5% or $284.7 million of total RPO as revenue over the next 12 months representing CRPO growth of 14.2% year-over-year. Our success in closing multiyear contracts is clearly exhibited in the sequential growth of total RPO in Q4, which increased approximately $47 million quarter-over-quarter. In 2025, overall dollar-based net retention rate, or NDR, was 100%. And excluding SMB customers, was 102%.

The main challenge to our NDR remains expansion revenue, which was partially offset by gross retention improvements on a year-over-year basis in 2025. As Ryan mentioned, our target revenue growth plus operating margin consistent with the Role of 40 framework has reached 30% for the fourth quarter of fiscal 2027. Regarding this framework and target, a few additional notes. For our $30,000-plus growth segment, we will continue investing behind enterprise expansion and driving premium module attach rates.

For our sub-$30,000 repositioning, it's a slow growth segment today, and we're updating the product at and go-to-market to improve quality and efficiency. We expect the growth profit remains subdued as that transition plays out in 2026. Margin expansion, we will drive operating leverage through disciplined hiring and spend more hiring in lower-cost markets, AI and automation to raise productivity, and scaling self-serve starting in Q1 while keeping our incremental spend and hiring focused on the highest leverage priorities across R&D, go-to-market and G&A.

As we move through fiscal 2026, we plan to execute with discipline. scaling $30,000-plus, repositioning sub-$30,000 and driving operating leverage with capital allocation decisions anchored to the 30% target.

With that, turning to guidance. We're ticking off the fiscal year with what we believe are achievable target -- and as always, the first quarter for Sprout is our traditionally lowest point of visibility for the fiscal year as we build our new business activity in the first half to drive the results through the remainder of the year.

For the first quarter of fiscal 2026, we expect revenue in the range of $119.9 million to $120.7 million. Non-GAAP operating income in the range of $9.2 million to $10.0 million. Non-GAAP net income per share of between $0.15 and $0.16. This assumes approximately 59.8 million weighted average basic shares of common stock outstanding. For fiscal year 2026, we expect revenue range of $49.2 million to $195.2 million.

Non-GAAP operating income in the range of $54.2 million to $59.2 million. For modeling purposes, we expect as a Q4 with a non-GAAP operating margin close to 15% and non-GAAP net income per share between $0.88 and $0.97, assuming approximately 60.8 million weighted average basic shares of common stock outstanding.

We appreciate your interest in Sprout Social. And with that, Ryan, Alex and I are happy to take any of your questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Scott Berg with Needham & Company.

And Joe, it's been a good time. I enjoyed our conversations here at Sprout over the years. Yes, I guess, first question here. Ryan, as you think about this Rule of 30 goal, 8 quarters from now, what does that composition look like? Kind of think about the growth rate of the company and what you've guided to here in fiscal '26, looks like total revenue growth of, call it, high single digits, 8%, plus or minus. But what does that look like as we start looking at 27? I know you're not guiding to '27 obviously today, but what do we how do we think about those puts and takes? .

Yes, Scott, I'll actually take that one, and I appreciate the kind words and really appreciate working with you as well. So if you think about the Rule of 40 as go out over the next couple of years, I think a couple of things to call out there in the way we're thinking about it from a strategy standpoint. First, we're definitely going to look for opportunities to drive growth.

We still think growth is more important margin than margin in this environment right now. But that being said, we do believe we can drive a margin a bit over the next couple of years through a couple of means. One, as the greater than $30,000 core continues to become a larger part of our business, that's just going to drive incremental margin because unit economics of that part of the business is just stronger than the rest.

And then if I think about what we're doing to stabilize the sub-300 cohort with the self-serve offering and some of the way that we're going to acquire those customers in a much more efficient way that will also drive like incremental margin in the business. And then the other thing I would call is, if we think of the rest of the business, G&A, R&D, the things we're doing internally, right? We're using AI to be more efficient. We're hiring in more of our low-cost locations, and we're really being focused on the areas where we believe the most value to Sprout, what are the high leverage priorities for us. And so I think if you think about all those together, we believe we can drive a decent amount of leverage in this business over the next couple of years.

Yes. And I think I'd just add, this has been a long discussion with myself and the management team and the rest of the Board as we think about the opportunities in front of us, and we're excited to hear as we go through '26 with the work that we get to do on both the above $30,000 cohort as well as the below $30,000 cohort. .

Got it. Understood. And then Ryan, I know you got a change in new CRO starting here and it changes, I guess we'd expect to see as we get through the year. But how would you characterize your larger kind of enterprise-type sales in the fourth quarter? Like your 30,000 cohorts in your 50,000 cohorts at least, they're down we'll call it, a reasonable level on a year-over-year basis for net new adds. And 1 quarter is not necessarily a trend, but it's been a really strong segment for you lately and it just looks maybe as strong as what we've seen over the last couple of years. .

Yes, I appreciate the question, Scott. We are actually very encouraged with what we saw in Q4. We saw really good execution on the large deals, solid ACVs, more customers coming in with a multiproduct footprint, like many of the calls -- the deals that we actually talked about on the call, it's representative of the types of logos that the teams are getting a chance to work with. As you know, as we look at the $50,000, the net add count can move around quarter-to-quarter and based on timing and mix. And it doesn't always perfectly reflect what's happening at the very high end.

But if we think about Q4, we had a meaningful big deal momentum large new business wins where customers were consolidating multiple point solutions on Sprout, major expansion deals where we are embedding social intelligence into customer care workflows. So I think the thing that I'd highlight is that we feel really good about the upmarket motion and trend. And we're seeing really good strength from both the execution as well as the pipeline that the teams have been building.

Your next question is from Elizabeth Porter with Morgan Stanley.

This is Lucas on for Elizabeth Porter. Can you share how AIS adoption is trending across your larger customer cohorts and whether you're seeing any early impact on retention or expansion behavior?

Yes, I appreciate the question. We've been really pleased with what we're seeing from an AI and an AI assist perspective. the use cases you might imagine, across many different parts of our platform you see it from the marketing use case to the care use case. The thing that we've been talking about a little bit here on the prepared remarks is what we've been seeing from a listening perspective with Trellis. We are going to go general availability on that shortly here, but the initial uptake from it has been excellent. We've got over 1,000 users that are in the platform.

And if we think about something like listening and what Trellis brings, this has historically been a really important part of the product, but generally listening has been something that's very difficult for companies right? It's trillions of data points that are in here that are unstructured data. Usually users have to be fairly sophisticated in how they drive insights from the platform.

Sprout has built this a really intuitive way, and we constantly get feedback that the way that we have built it is more approachable than most solutions in the marketplace, but this really turbocharging the ability for customers to get value. The ability to go in and similar to our prompt window to ask questions around sentiment, competition or market share or anything else and immediately get back insights has really been a game changer for our customers.

So we've seen really good trend rates so far, and we're excited to go GA with this product. And then similarly to the prepared remarks, I think it's important to note that it's starting and listening, but it will cut across other parts of the platform. And then that, again, is one of the biggest benefits in the way that we've architected our solution because our customers are thinking about completing workflows in every part of their business, not just in one isolated part.

Got it. That's super helpful. And then with multiyear contracts nearing half mix, how should we think about duration impacting growth visibility?

Yes. I think we've talked about this before, but you're going to continue to see this convergence between CRPO and our revenue growth, right? And those numbers are getting closer and closer. So I think as you see more of these multiyear deals over the next 12 to 24 months, I definitely think you're going to see that be a pretty good indicator as far as where our growth is going. We're not there yet, but we're making a lot of progress. .

Your next question comes from Arjun Bhatia with William Blair & Company.

Camilo on for Bhatia. Maybe to start with the new disclosure. Can you maybe help us understand better this disclosure? And if it's better watch this versus the $50,000 plus ARR cohort. Just trying to understand this $20,000 or differential between the cohorts and what it means?

You're breaking up. Can you just repeat that, middle part of the question there? .

Sure. So I'm asking about new disclosure around $30,000-plus ARR customers. And I'm trying to better understand, is this a better metric to watch versus a $50,000-plus ARR cohort. I'm just trying to understand that $20,000 differential between the 2 groups and what it means.

Yes. We haven't given out historically like the trailing -- the last 2 years on the $50,000 cohort. So the way we're looking at this is we do believe the $30,000 disclosure that we gave out that kind of books out the trailing 12-month revenue over the last couple of years, will be the metric we update you on every single quarter. And then we will continue to give you the $50,000 customer count number going forward, but we really are trying to position this new metric is the way to look at the business. And so I think that will be the more meaningful one when you're trying to track the performance of the business overall.

Yes. And maybe just to add, as we looked at the data and looked at ways in which we could give even more direction on the trajectory of the business, was a clear breakpoint for us getting above 30,000 less about a single price step and more about the scope of the deployment. This is about customers with teams, not individuals. They're running social as a workflow with broader use cases, and they have higher social maturity and larger social audiences. And this is also where we see more durable adoption and budget allocation. So we're excited to be able to give you all more visibility into the trajectory of that business and the dynamics there as we grow.

And then one more question, if I may. I appreciate the color in the prepared remarks about better addressing the $30,000 ARR and below customer cohort. Can you give us more color into the 2 initiatives in terms of go-to-market in the new product SKU, have you already made those changes? Or will you be making them throughout the year? .

Yes. So let me start on the $30,000 and above. I think what's really important to note here is this is the same strategy that we have been talking about for the last number of years. we feel really great about the opportunity above. You've seen us doing a lot of things from a product perspective, whether it's been the evolution of care offering, the introduction of Guardian from a compliance and security perspective, our work with News wit and listening in Trellis. So all of those things and then obviously the investments we've made on the go-to-market upmarket, those are all things that we've been very focused in on. .

On the sub 30, I think it's also important to note that we've always served that part of the market and a proxy for that is SMBs. These customers that we've served in this market from an SMB perspective have been the ones that have been more socially sophisticated, where the needs and usage have looked a lot like a bigger, more mature company. And over the last few years, similar to the comments I was just making, we made a shift to focused resources around the strongest part of the growth engine, which was for the socially sophisticated customers. And we invested in the product depth and go to market, and we've seen great growth from the $30,000 and $50,000.

On the earlier stage SMB side, the demand hasn't gone away. Those customers still show up in our funnel. The fundamentals are still there for the company, strong practitioner brand. We've got healthy inbound. We've got the low friction trial-led entry point, but in the current product in motion, we are not serving them as well as we could have. And historically, when we serve those customers, it was with a high-touch sales and support model, but that came along with higher cost to acquire and higher cost to serve and higher churn because many of these customers weren't far enough along in their social journey to stick.

So what's real different now is the current setup, lets us approach these customers in a fundamentally more efficient way. So we're pairing a more purpose-built offer with the right packaging and price point, with the right motion. It's going to be self-serve PLG with AI that's really helping us improve the onboarding and support efficiency. And so the goal is to keep driving the business through the $30,000-plus while we're stabilizing the sub-$30,000 and improving conversion and retention there. And then eventually skilling that part of the business into a more durable contributor.

I'd also just add, so in terms of where we are in that journey, we've started the work on the sub-$30,000 with the pricing and the packaging got work to do on it this year. We'll still see some modest deceleration within that segment this year with stabilization coming in 2027.

Your next question is from Mark Lane with Stifel. .

Ryan, looking back to when you first made that big emphasis on upmarkets and you guys raised prices in '22, '23. Big impact on the down market component of the business, both net new and existing it sounds like these changes are primarily top of funnel and becoming more efficient the way you sort of capture these businesses. Can you speak to what implications there are from this new strategy to the existing customers that are in that or you anticipate any elevated churn? Any differences in the way that you serve them? Or is this simply about how you acquire businesses?

Yes. Thanks, Parker. I appreciate it. I think the first thing to note, this is fundamentally about product -- so if we think about it, the first thing that's really important is we're introducing a new product that's purpose-built for customers within that space. If you think about those customers, typically don't have large audiences yet. They are more in the marketing use case. They're looking for ways to be more effective and efficient in their marketing efforts.

This product will help them with publishing tools to allow them to do that better give them the types of analytics that they need to make sure that they're doubling down on the success and ultimately trying to grow their audience and their base, leveraging this platform. Obviously, we'll be building pricing and packaging that has a stronger willingness to pay that aligns with that use case, but I think that's really important to note because the customers that are in our platform today that are using many products or using many different use cases across marketing and care or other places won't be a fit for this type of product.

The reason we are leaning so heavily into this purpose-built solution as well as we continue to see demand in the top of funnel today, but it's not served with the solution set that we have that's for more of a sophisticated audience. This is really aimed at making sure that we can support those customers in a new way. And again, the way that we're approaching it will really reduce the CAC and the cost to serve while providing these customers with a really great solution.

Understood. I appreciate that feedback. And then maybe, Joe, one for you on the numbers here. Looking at the DBNR and '25, I think it was a 4-point step down, 6-point step down SMB, in the context of the guide you just provided, any thoughts on how NRR should trend throughout 2026.

Yes. And 1 comment on the NRR side park, a couple of things. One is, we talked about this throughout the year. The pressure we saw on that was really around the expansion side. We talked the budget constraints we had throughout the year. I think it's important to note that we did see improvement on gross retention year-over-year that really kind of gives us a strong indication that our existing customers really like our product. They really like the values are getting added. And so the real impact on that metric was on the expansion side.

So if I think about guidance as we go into 2026. There's a couple of things. One, it assumes that gross retention continues to improve. So that will have a positive impact on that metric. If I think about the products that we came to market with last year, News, Guardian, the customer care side and some of the Trellis and AI things we're rolling out in 2026, We do think that will help drive better expansion in '26. And so we do think there's upside to that metric as we move throughout the year and 2026.

Your next question is from Matt VanVliet with Cantor.

I guess first, on the margin outlook, for both this year and the target for the Rule of 40 framework in '27. Curious how you're breaking down the margin expansion is pretty substantial in the next couple of years. How should we think about gross margins being impacted and embedded within maybe OpEx, what are the head count expectations to achieve that? Because it seems like more than just gross leverage?

No, you cut out on the last part of that question after gross margin RN. I'm sorry, can you repeat the last part after the gross margin side?

How much is coming from gross margin. How much -- or what are the expectations for head count that are built into that because it all seems a little bit more than just top line growth leverage.

Yes. Good question. So gross margin, there will be a little bit there, Matt, not a ton. We think gross margins will be pretty consistent, maybe up 50, 100 basis points, 26% to 27%. So that's not going to be the largest driver. I think what it's going to come down to is probably what you alluded to. If you think about the things we talked about as far as the go-to-market self-serve motion and the efficiencies we're going to get from that, the low-cost location hiring that we're talking about and the way we're using AI internally, we feel like we don't need to do a ton of hiring over the next couple of years. to get to the targets we need. And so I think you'll just see a lot of leverage come out of -- below the gross margin. So a lot of that leverage will come from OpEx. .

And then as you're launching the Trellis product, how should we think about that from a monetization standpoint? Is that something that will be directly an add-on type of feature set? Or are you going to embed that in the products and use it as more of a demand driver for both new and expansionary sales?

Yes. Thanks for the question. It's a bit of both. Our focus right now is getting customers into the product to have those magical moments to breakthrough moment. So it's really about driving awareness and delivering value today. As you might imagine, where a lot of this stuff will there will be in our most advanced plans. So you're going to be getting it just in terms of the value that they're investing upfront. .

It's starting and listening today and then it's going to cut across the rest of the platform. It also came out in News wit as well from an agent perspective. The other way to think about it for us is there'll be a baseline of access that you can get. And as usage increases, there'll be a usage-based way that we'll be monetizing on top of that. So right now, the focus is really driving usage and adoption and driving awareness and then it will be a monetization lever for us. And when we get back together here in May for breaking ground, we'll be sharing more of the approach and the framework.

Your next question is David Hynes with Canaccord Genuity.

Joe, first, congrats to you. You'll be missed on these calls. I appreciate all the help over the years. Ryan, I'm going to start with you. So I think you said something in your prepared remarks, and I'm paraphrasing a bit here, but it was something like social data is not meaningfully accessible to the LLM today. Can you just unpack that a bit more, like what social data is accessible to LLMs and homegrown agents? And what social data isn't.

Thanks, Jay. I appreciate the question. Yes, there's a few different layers to this. I mean, I think just first, generally, we are sitting in an elevated partner status. So if you think about the relationships that we have today with the social networks, it's privileged access some very private APIs that are governed by legal contracts and licensing requirements and agreements. It is also just -- when I think about that piece of it today, which is really important to note, that is that many of these social networks also happen to be LLMs.

So as you might imagine, a lot of the data that exists today is not shared across those different domains. It's a very limited subset of data that exists. I mean even if you end up going into any of these LLM and in searching for data, it's not the full set of data that exists. So there's that limitation that is there today. And for us, we've got full access across all these social networks that we're ingesting billions of data points in here that we're leveraging.

And then against that, we're also enriching these things with a ton of social activity, we are adding specific context in routing logic and semantic meaning and workload on top of all of these things. So, there's a few different layers. And then maybe the last piece that I did share in the prepared remarks that I think is an interesting point as well. Many of the largest LLM providers who clearly have a lot of resources our customers have spoke and rely on our platform every day to meet this mission-critical area of their business.

And then maybe just a follow-up to some of the announcements today. Do you feel like you guys are moving fast enough with agents? And I asked, I mean, look, you talked about initial pricing and packaging for Trellis coming in May. But we're already seeing a bunch of as companies that are generating real agentic revenue. They're scaling those efforts quickly. So I'd love to get your thoughts just are you guys moving quick enough here?

Yes. I appreciate the question. I will tell you, we're putting a healthy amount of pressure on ourselves to continue moving fast. I've been really pleased with the work that the teams are doing. This answer is also just we in your first question, DJ. Like the amount of data that we're ingesting the structure behind it, the infrastructure required, all of the things that are required to ensure that we are able to execute on the AI at scale without hallucinations is critically important.

And so for us, we're moving incredibly quickly to build these products. We need to make sure that they are incredibly effective for our customers. We know that trust is such an important part of the work that's happening here, and we want to make sure that as we're putting AI and agents in our customers' hands that they're having these magical moments and that they trust these products to be able to do the work.

So I will always tell you that we want to move faster I've been really pleased with the work that the teams have been doing. And the customer feedback that we've been getting from the 1,000-plus users that are in Trellis today has been really, really wonderful. So I appreciate the work that the teams are doing. And I think you all will see a lot of good stuff from us on this point as we move through listening into the other parts of our product.

And DJ, just to follow up. It's Alex here. We're going to be hosting the call on March 11. Ryan mentioned it in his prepared remarks, which will be a call with some of our -- with our CTO and one of our top engineers to discuss how the platform is built, how Sprout kind of functions as a system of record in action. So just all that will be on our IR site and looking forward to having everyone on the call.

We have 3 remaining questions. Your next question is from Adam Hotchkiss with Goldman Sachs. .

Let's go to the next question, and we'll just reach out to Adam directly to see if we can jump back on. .

Perfect. Your next question is from Patrick Schultz with Baird.

Just maybe first on the go-to-market focus. There's been a lot of product evolution over the past year or so with the addition of influencing marketing, NewsWhip, trait, et cetera. If you were just to narrow it down, what are the top priorities for the go-to-market engine in '26? And can you also touch on the sales kickoff now that you have lower on board to lead sales. Just what was the key message for the team there.

Patrick, I appreciate the question. Yes, I mean, you nailed it. I think our sales team would tell you they're very excited about the number of things that they have in their bag to take the customers today. Multiproduct sales is a huge part of the focus for us. So if I think about the kickoff and the enablement that we're doing with the teams, our customers today, one of the biggest things that they're trying to do is they're trying to consolidate.

They want to do all of the work that they need to do in social in one platform. And they want one platform with one partner, and as we're seeing the benefit for something like Trellis and our ability to go from listening to care to publishing across all of the different areas in our product is a huge differentiator for us. So the multiproduct was certainly a standout for us kickoff Trellis and AI has certainly been a standout for us, a kickoff as well. And -- and yes, just a big welcome to Lori. She joined us for the kickoff in early January.

We handed our Sprouts social tracks gutter on stage in front of the team, and she's a being laser focused in on making sure that we're driving the right enablement for the team in all of these areas and really focused in on our execution.

I appreciate the color there. And maybe a quick follow-up, too, just on partner perspective and Salesforce is probably a good example is they put a lot of emphasis on agent force. But as customers are starting to adopt different AI solutions across customer care, are you seeing this have any impact to your pipeline? And maybe more broadly speaking, what's the top priority for the partner system this year?

Yes. I wouldn't call out any change in behavior based on that. I mean I think one of the biggest things that we go back to that's really, really important here is that the social data that we're talking about, this system of record and action specific to social is what we do every single day. And so this data doesn't exist in many different places. The ability to execute doesn't exist in many places. Our customers are logging into Sprout, to respond to customer care that comes through social through a variety of different platforms.

And I go back to, on the note partnership, that's really been one of the biggest things in terms of our partnership with Salesforce and the Salesforce Service Cloud, I mentioned one of those case studies in our prepared remarks with a Fortune 50 company that is leveraging us to connect that social customer care back into their service cloud. So that's just been a huge part for us. We expect it to be very similar as we move forward.

From a partner ecosystem perspective, we're continuing to look for places where we can add more value to our customers on helping them with their workflows. Salesforce was a great example. In the last call, we talked about Canva Adobe as great examples from a creative perspective. So you can expect for us to be leaning into these places where there's tangential products where we have the ability to help a customer not have that swivel chair and to be able to complete their workflows in a more productive way by connecting Sprout into other parts of their tech stack.

Next question is from Jackson Ader with KeyBanc.

And Joe, been nice for with and congrats on whatever comes next. The first question I have is, I appreciate that the product and packaging changes down market are to try and stimulate some top of funnel. But you've been on this kind of the deemphasis or deemphasizing the downmarket journey for a while now. I'm just curious on the -- maybe on the cost side, what costs or investments are you currently making down there that you still need to optimize?

Thanks, Axon. I appreciate the question. A tweak just in terms of the interpretation of that a little bit in that. For us, if I think about that SMB, it's more focused in on the conversion than the increasing top of funnel. Certainly, we hope to attract more customers that might be a great fit for that purpose-built marketing solution for customers that are -- have a lower social maturity, but for us, we see these signals in our pipeline today, and we have an opportunity to convert more in a way that really reduces the the CAC and cost to serve.

From a cost perspective, because those customers are still showing up in the pipeline and kudos to the team through the years from a marketing perspective and from a brand perspective, we have a great reputation with folks in the field and practitioners. And so customers still show up in the funnel, and they do end up in many cases, still in front of our sales team, but with a product that isn't a perfect match for the things that they need to do, or for their willingness to pay.

So we see this from really removing some of the distraction for our sales team. We see it as an improvement to the conversion with the signals that we have. And then on the other side of it, we also believe that when these customers come in and we close them on the right type of product here, the future retention for customers that come in on that product will be healthier as well.

Okay. All right. Great. And then real quick. The international expansion, it's was growing ahead of the Americas in recent times. I'm just curious what you're thinking in terms of the -- how it plays into your Rule of 30 targets over the next couple of years?

Yes. I think -- good question, Jackson. I think the way we're thinking about on the Europe side, we're definitely keeping a very, I would say, consistent playbook that we have here in the U.S. I think of like, hey, how do we want to go to market the sub-$30,000 with the self-serve, how do we want to address and continue to invest in the upmarket. So I wouldn't say that there's a largely different strategy for the European business is for the Americas. So I would say very consistent strategies there. .

There are no questions at this time. I will now turn the call back to Ryan Barretto, CEO, for closing remarks. Please go ahead.

Great. Thanks very much, and thanks, everyone, for the time tonight and thoughtful questions. As Alex mentioned, we hope you all will join us on March 11 for that dive with Alan and Kevin, where we'll get into the technical notes and in of our system of record and action I want to end with a big thank you to our customers for their continued trust and support. And of course, a big thank you to our team for their ongoing focus and execution. We appreciate all of your time. Have a good night, and we'll talk to you soon. .

Okay. Welcome to our next session.

Let's start. So for Sprout, there's obviously what we see like in the market for all of software, not pretty. Sorry, for all of us. And loss of tooth and everything here this year is like it's going to be always a tough year. But from a management perspective, just in the real world, how did the year play out so far?

What I would say was throughout the year, it's gotten better every single quarter. So holistically, do we want -- you want the year to go better than it probably did? Yes. But what I would say is the momentum we've seen, like Q2 is better than Q1, Q3 was better than Q2, and Q4 is looking pretty good. So I feel like there's been more momentum this year as we move throughout the year. So I think that's a net positive.

I think for us, we're seeing success. If I look at the year, we're seeing really strong success upmarket. We've talked about our 50,000 customers and how well that part of the business is doing. We've been really happy with some of the product launches and the things we've done around social customer care, the things we're doing on influencer marketing, the things we're doing around social listening. We did the NewsWhip acquisition. And so I think -- and we just did the launch of our AI. We did -- we had breaking ground, which is our big like quarterly release. We demoed our AI packs that are going to be coming here shortly in November. And so I feel like there's a lot of product momentum in the business. And so we feel like the year has gone well as it moved on.

Also, I think at a high level, I think we've done a really good driving margin in the business. So I think our operating margin continues to be really strong on a year-over-year basis. So I think net-net, we feel good about how the year has progressed. Obviously, this is a much different environment than we were a couple of years ago. And so I think from that perspective, we always want to be doing better. So let me be very clear, like management feels like we could always be doing better.

And what are you seeing -- so does that -- is that driven by end demand getting more stable because at the beginning of the year, people were like tariffs, volatility, et cetera, and now it's settling down? Or what's driving -- is that -- talk to end demand a little bit.

Yes, I would say -- I think what's driving probably a stronger back half, first of all, most of -- historically over the last 3 or 4 years, we've gotten stronger in the back half. I think that's -- generally, you see budgets open up a little bit more. People tend to spend a little bit more money depending on how the year is going. I think also some of the product investments we made earlier in the year are starting to play out in the market. We've released some really good functionality around social customer care. We've done some really good things around influencer marketing.

And so I think some of those things have allowed us to win some of these larger deals. And so I think part of it is just like the normal slope of the year, but also -- and I think you're going to see this over the next couple of years, I think consumer behavior is consistently shifting to Social. And I think that continues to play out throughout the year as well. That's kind of driven some of the success we've seen in the back half.

Yes. Okay. And I'm sorry for -- it sounds like a tough question, but if you look at the growth profile, and you and I have been at this conference for many years, et cetera, like the growth profile for the whole industry looks different. Can you maybe speak a little bit about where we are in that industry -- terms of evolution of the industry and where we are now? And like -- but also it does sound like you are getting more and more excited again. So like where are we going from here?

Yes. I think what you've seen in our industry over the last, let's say, 12 months is probably different than like you said a couple of years before that is you have to remember, we're still very early in this journey. Most companies that we come across don't have budget allocated to this sector, right? And so a lot of the time, we're educating customers. We're trying to build the market with our competitors. It's not like something like e-mail marketing or marketing automation or CRM that's been around for 20 years inside these companies, they have budget allocated. They already know exactly what they want to do, and they're just looking at other folks in the space.

When we get those type of deals where they -- hey, they're brought into social, it's strategic to their company. They have us or one of our competitors. In those situations, we see a lot of success. But in a lot of scenarios, what's happened over the last 12 to 18 months, Raimo, as budgets has gotten a little tighter, as AI has kind of made people pause and look at their overall spend, if this isn't a category they already had invested in, it's probably not what we've seen, especially down market, not one of the top priorities because they're looking at other areas. So I think that's been one of the things from a, I would say, like a cyclical standpoint that's been different in the last 12 months versus a couple of years before that.

But on the flip side, if you look at consumer behavior, like I said earlier, we feel like that's going to start to shift over the next couple of years. If you think about 50% of consumers now will check social before they buy something. 55% of consumers before they buy something are influenced by someone in influencer marketing. And so the trends of where consumer behavior is going, I mean the average consumer spends about 2.5 hours a day on Social. And so we believe like this -- eventually, these businesses that haven't had this become a priority, this will start to become a priority over the next couple of years. It's just not been the top of the list historically because, like I said, this category hasn't existed within these organizations for a very long time.

Yes, yes, yes. And so you talked about like that pause from AI coming in. Do you see like a slightly better understanding of people around that to you already?

I think what we're seeing -- and we -- and we're doing it internally as well. It's not so much, okay, we think AI is -- there's other products that can do what you're doing in AI. We don't see that at all. It's more like, hey, if I've got another dollar to spend in my organization, I'm going to stop and I say, "Hey, is that going to go into the marketing org. Is that going to go into sales org? Or am I going to look at internally, is this something -- is that money going to go towards some kind of AI product?

So I think it's more of like just this overall -- a lot of companies are just pausing or reevaluating where they're putting their dollars before they spend the next dollar. And I think that's been across all of software, especially front office software. It's where is that incremental dollar going to go. And I think right now, we're kind of in this like let's wait and see where we might put that money.

Yes, yes. Okay. Makes sense. And then you guys changed as well as an organization, like now if I look at the customers that you're signing, it's like, oh, I know them. Like you remember like a few years back, it was like very low end where it was tough. Now we're like very well-known brands are shown up on the list. Can you talk a little bit about that evolution to go more upmarket?

Yes. I think the evolution started a couple of years ago when we started to invest in the product and what some of those upmarket customers are looking for. And there's a couple of areas there. One, they want integrations. They want to be able to bring the data into other parts of their platform. So making sure, like, for example, the integrations into things like Service Cloud or other parts of a platform that are really important, whether across an organ. So bringing data across the organization.

For example, we launched an integration at Canva and Adobe Express. And so these enterprise customers want to understand or they want to be able to take social data to other places within their platform. So investments in that area. Investments in Social Customer Care and workflow management and be able to triage like mass inbound messages. We talked in Q2, we signed a customer that has around 90,000 customer cases a month that come inbound. If you think about that volume on Social, if you remember on Social, when someone post a message on Facebook or Instagram or X, it doesn't say it's a Social Customer Care. It's just a post. And so what we've been able to do is take all these inbound messages in an automated fashion, weed out what support, what's spam, what's marketing feedback.

And so being able to build that out for these large organizations to automatically triage these messages is another huge area that's been to allow us to go upmarket. And then I would say the things we're doing on the influencer marketing side have been -- as that catalog continues to expand, a lot of these larger organizations are understanding that they have to be working with these creators. And so a lot of the success we've seen upmarket has been driven by the product investments that we've made.

Yes. And then as part of that, there's a product aspect and then there's the organizational aspect in terms of go-to-market, et cetera. Can you -- because that has also been on a journey. Can you speak to that?

Yes. Yes. So definitely, if you look at the investments over the last couple of years on the go-to-market side, it's definitely been up in the enterprise segment, right? Almost half of our sales and marketing spend is now going into the enterprise, what we would say, sector of our business. And that's not just AEs, but think about sales enablement, solution engineers, professional services that help like demo these products and get in front of customers.

And so that's definitely been a direct investment based on the inbound nature of like the demand we were seeing. So we were getting pulled into these larger deals that historically won't be pulled into. The product was starting to resonate with these larger enterprise customers. And so what we had to do is we had to follow that up with -- on the sales side, making sure we had the right level of AEs with the organization and the right support system between.

And then on top of that, as we've expanded outside of like the core use case, right, we've introduced some new products either via acquisition or via our own development. When you get in these organizations and now you're selling multiproduct, you've got to have AEs that understand what's the use case I'm solving for. I don't want to go into this customer and try and sell them everything. And so you need a little bit different type of sales leader and AEs in these accounts in order to understand the dynamic there.

And then the -- it did obviously have also an implication for the low end. So -- and it's going back now a little bit that you had like disruptions there. Are we kind of fully settled? So we know the level of investment I need to do low end and I kind of have that kind of tied up and the larger -- the bigger push is probably more high end going forward?

Yes, we definitely have the investments figured out. I think for us, where we've seen and we talked about this a little bit earlier, like where we see the most pressure from a demand standpoint in the budget has probably been more in the lower mid-market and the SMB market, right? They're just a little bit more constrained. And so I think we have the right level of investment in that part of the market. We've made changes where we think we have more of a lower touch type of approach to that of the market. Now we think there's a huge opportunity there over the long term. But I think we've kind of rightsized the level of investment internally into that segment of the market. Now it's just a matter of like how can you continue to execute in this kind of more self-serve, low-touch kind of approach that's a lot different than, for example, the enterprise approach.

So internally, we definitely have separated those motions. -- and have a better understanding of like what those customers want. They don't need all the bells and whistles sometimes -- obviously, of the enterprise customers. And so how do you make sure when you're approaching those customers from a product standpoint that you're only showing the things they actually want to do. Maybe they just want to do some publishing and light engagement and reporting. Let's not show them very complex features that they might be like, well, I don't really need that. And so like we're always trying to figure out what's the right part of the product to show those types of customers.

Yes. And maybe summarizing this part of our conversation, like -- so it does look like -- I mean, you're still gaining market share because I'm looking at your peer group as well. So you're gaining market share. Growth is lower for everyone. listening to you, it sounds more this is like a cyclical thing because there's other forces going on rather than a structural thing. Would you agree with that?

I would agree with that. I would say that, like I said, if you look at some of the stats and where consumer behavior is going. And I think right now, like a lot of companies we talked about earlier and the pressure on front office software and AI, I do think this is something that over time will shift because consumer behavior is shifting. And like that's where consumers are going to learn about products, that's where they're going to complain or promote products. I think the rise of the creator space. So we do believe there's this longer tailwind in our industry. And right now, we're still in the early stages of that. And so I do think this is not something that's more structural. I think it's more temporary.

Yes. Okay. And then shifting gear a little bit. So AI is this big new thing. How should we think about AI for your work?

Yes. We actually are pretty excited about AI because you think about it, we're one of the very few companies that have access to the social data that's out there, right? This is data that's not available to a lot of players in the space. You can't scrape the information. We integrate with over 3 dozen different networks. We ingest about 2 billion messages a day. So you think about the data that we've accumulated over the years, and then we can apply AI on top of that. And so what you're going to see from us, and we talked about this in our breaking ground release of our AI product, which is going to be Trellis, there's lots of different use cases we're looking at right now.

The first one you're going to see is an AI agent around social listening. So historically, you had to go manually build these queries. And obviously, it was a lot easier in our platform than others because it wasn't custom code you had to write, but you sort of understand what you want to go look for and what you had to ask, you had to have these queries running. And if you look at the demo we did, it's pretty cool where you can just go into the social listing and go to our AI agent and just start asking your questions. It will go out and just do the work for you. And then on top of that, you can set it up where we actually proactively go out and say, "Hey, by the way, we noticed this trend over the last 6 months or 12 months". And so it's going to make the accessibility of the data information for these companies that have really struggled to understand what's going on. It's going to be a huge advantage for them.

And then there's things we're doing, for example, on the -- like Social Customer Care or engagement side where we can have an AI agent automatically identify messages and understand, okay, do I need to respond to this message? Do I not? Do I need to send this to somebody else? And so basically run triage within all the messages you're getting, where before someone would have to tag those messages, we had some auto routing, but you had someone kind of monitoring that inbox. But what if you had someone doing that for you so that you could kind of streamline that. And then the other thing that we talked about is you're going to see some really cool stuff on the influencer marketing side, where we can help you in a much easier fashion, find the creators that are best match for you using AI. We can go out across all these different networks based on the parameters you put in there and very -- in a proactive way, say, "Hey, by the way, here are the folks you should work with. This is the brand fit. This is brand safety".

So like we released a lot of things that a lot of businesses when they're looking for creators. They don't understand what has this creator done historically? Do I have a brand safety issue? Like, for example, if I'm selling kids' toys and this person has talked about drugs of alcohol, I probably don't want to have them online. And I can't go through and listen and watch every video they've ever done. They may have thousands of videos. And so what we're using is AI to go through all those videos and very quickly tell the customer, for example, hey, this is a good fit for your brand or this is a bad fit for your brand. And so things like that, you're going to see. Those are a couple of examples of why we get excited about what AI could do for our platform.

Like -- and I was just talking with an executive of a large company in there, and they run tests. The issue is like you run you get so much more insight from the data that you then can use. But -- so in theory, you are in a very good position then for that.

Yes, 100%. And then along those same lines, when it comes to the data and some of the things we're doing on the AI front, and we haven't talked about it, but the NewsWhip acquisition we did. It's like a real-time version of what's going on across social media and traditional media, which we can get into. But we also think like the data available via NewsWhip is another area that we're super excited about.

And maybe talk to that a little bit, like maybe not everyone in the audience is like fully up to speak, like so why is that deal so important?

Yes. So what NewsWhip had built, which was really interesting and cool in the market. They have some really large clients can go to the website and see the types of clients they work with, very large Fortune 500 companies. What they built was -- the ability to look and understand the crossover before across traditional media, websites, blogs, newspaper, like local newspaper articles and social. So for example, what you've seen in media these days is if something is bubbling up on Reddit, all of a sudden, you might see it in a local like article in a newspaper then it blows up or vice versa. There's a big article locally in some, for example, some small city and then all of a sudden, it's blowing up on social.

What NewsWhip built was this real time. I'm saying like minutes and hours ability to look at both of those things together and alert customers, for example, within organizations say, "Hey, by the way, this thing over here, and it has this predictive analytics that it does, which tells you like this thing is going to be a big problem in a couple of hours or this is going to die out pretty quickly based on like, they have all this data on historically how have news articles and social media articles trended over time, so they can let you know this is a problem or not a problem." And so what we built -- what they've recently come out with and what we've come out with is this AI agent that does that for you in an automated fashion that is constantly looking across these things and alerting you and telling you, for example, this is something you should worry about or not.

And so what we found is that this has been really critical for a lot of organizations. Think about PR, think about crisis management, like there's a lot of things here that customers really want to know about instantly. A great example is like one of the customers we talked about that we landed in Q3 was the Royal family. So they bought the product because they want to know real time what's going on, articles coming out about us. Do we need to be monitoring this real time. And so they, for example, signed up with our NewsWhip product that could -- and it's not -- it's a little different than social listening. Social listening is more deep long research. What's happened over the last 6, 12, 18 months. I ran a campaign a year ago, I ran another campaign today, is this better or worse?

NewsWhip is like real time. It's like literally minutes of what's happening in the market with your brand, so you can understand if there's something you need to deal with. And sometimes they use it not just for crisis management, but for like supply chain management. Like, for example, we have some large manufacturing companies that use it to understand are there issues bubbling up in my plant? Are there issues like bubbling up in like my supply chain because there's like issues with weather or there's issues with like different situations. And so they might not just -- they might use it just to run their like general day-to-day business, not so much crisis management as well.

Yes, yes, yes. Like question though, though, like from a product perspective, you as the CFO, you kind of probably think a little bit more like us in terms of, okay, how do I monetize it? How do I have to think about this product as a tool?

As a tool, yes. So the way we think about it, a couple of things when it comes to monetization, one of the reasons we did the deal to begin with was they had very little distribution. So they had like 5 AEs. They were -- they're based out of Dublin. They had spent -- they had really invested in the product over the years and not really in distribution, but a really awesome product that a lot people didn't know about because they didn't have a lot of distribution. So when I thought -- when we looked at this deal, one of the huge opportunities we saw from a monetization standpoint is able to put that into our sales force, which has got hundred -- a couple of hundred AEs that can now sell this across varying platforms. And so from that standpoint, we got really excited. Their ACV is around, on average, 3x higher than ours. And so from that perspective, we thought it was a huge opportunity to like really find another level to monetize that product that didn't exist prior to us buying them.

Yes, yes. So did you give any -- so how should we think -- I mean, if they only had 5 AEs, the numbers were probably small like you bought them. How big do you think this will be? Like I mean, if I'm listening to you, it's almost I could cross-sell it to every single of my customer.

Yes, it's like everything else. So you've got to go out there and educate the market. You've got to make sure they understand what the product does. I'm trying to say like we believe this is a product that over the next 3 or 4 years can be a real like value add within our AEs, but it's going to take some time to make sure that the market understands what we're doing and educating people in the market. So it's not like something that overnight, I don't think that everyone is going to start buying it. I think we have to do a good job educating the market.

And how do you think about from a growth perspective as an organization, you have like your core solution, but then you bought a company to get you into influencer marketing. We now uses it. Like one way you could say is you just keep adding products and the sales guys keep selling it, but that's -- I don't think that's kind of long term a good strategy. Like how do you bring that all together?

Yes, I think you're right. I think historically, you know we haven't historically done a lot of acquisitions. We've built a lot of things from scratch. And so over the last couple of years, what we've done is can we find really good technology that would take us a couple of years to build ourselves that has very -- that hasn't really gone to market very hard with it. And can we quickly -- have they built it in a way that the way we build products, which means is it scalable? It's not heavy custom code. It's something that can be available throughout like our customer base.

So if you look at all the things that we have acquired, they're built in a very similar way of Sprout. And is there a very good overlap with what we're doing? Are they focused in some way on social? Because like at core, Sprout wants to solve the social -- like we want to be the #1 place to go for everything social. And so that's -- those are the kind of the premise we use when we've acquired these companies. And so we found some really good technology here. At the same time, we are building out a lot of our own kind of feature sets intern like I talked about. We built a lot of integrations into other platforms. We're building out our Social Customer Care. So we're doing a bunch of different things.

So I don't think we're going to be largely acquisitive going forward, to your point. And these aren't huge products that like, in my mind, if you can't build on top of these products and do distribution, they actually don't help fuel your growth. I'm trying to say, but I do think our customers are continually asked to do more in Sprout. They're like -- and that was the main reason we bought the influencer marketing company we did is because our customers were coming to us saying, "Hey, by the way, we're starting to get into this area. We do everything else in Sprout. We would love for you to be -- like we would do this if you had a product. And so a lot of the times, the things we're getting into is feedback from our customers. And internally, we have to decide, hey, how long would it take to build that thing? Or do we think there's a really good product to market that makes sense to acquire. And so that's always been kind of our thesis behind whether we build something or buy something.

And going back to my question, like how do you monetize it is like some companies take like a kind of a SKU kind of approach of I'll give you more and each SKU has a little bit more of the capabilities. Like how are you thinking about that?

Yes. So the way we think about it is every product is a little bit different depending on the use case. For example, influencer marketing, the way we're starting to price that product is more about how much money are you putting through the creator space and how many creators you want to use, right? For example, if you're going to have 1,000 creators and spend $20 million through our platform, you're going to -- you're willing and will pay a lot more than someone that maybe wants 10 creators and they're willing to put $1 million to the platform. And so for that product, for example, it's more of like what's the amount of volume you want to do to the product.

Very similar on the NewsWhip side, it's about like what's the breadth of the product you want to use. It's not so much about the user-based pricing. It's more about like what's the value you're getting out of the product. And then you have our core platform that historically has been more user-based, but social listening is a little bit different because that's based on how many queries you want to run, what's the consumption you want to do. And so I think the way we're thinking about it is it doesn't have to be one price fits all. Like we don't need to have one pricing model for everything we do. I think what we're learning in the market is the market is evolving pretty quickly in the space.

And so what we're trying to do is let's tie the customer -- what's the customer value they're getting out of our product and help drive the pricing versus trying to just make everyone fit into the same square like, hey, historically, everyone has to be a per user type of product, well, it doesn't always have to be per user. I think what we're finding in this environment is you've got to be a little bit flexible with your pricing strategy, especially as things are moving as quickly as they are. And so I think what you'll see from us is you're going to see different type of pricing models depending on what's the product they want to buy and what's the use case they're using it for.

Yes. So it's evolving.

It's evolving. Yes. And so -- and we've always taken that approach is like let's not just be stuck in one way to price the product because I think it can vary.

Yes. Now going back to our world, like you said at the very beginning, things are feeling a little bit better. How do we measure you? Like -- and that's been a debate we had for a few years. Like from your perspective now, if you look at the progress and where you're growing, what do I look at?

Yes. I think what you're going to see more from us is we sort of talked about this on our last call, Raimo. I think the there's 2 parts of our business right now. There's the 50,000 customer cohort that we talked about, like that's almost 50% of our business, and that's growing in the high 20s. And so I think that's going to be -- continue to be a data point that we give people to understand, okay, here is the part of our business that's doing very well. It's becoming a larger part of our business. And so I think that's a good leading indicator of like is this business moving in the right direction or not. And then we have the customers.

And when you say high 20s, that's revenue.

Yes, percent of -- like the revenue growth. Yes, revenue in the high 20s...

Revenue growth.

For that cohort, it's almost 50% of our business. And then you have the sub-50,000 cohort that's growing low single digits, right? And so that's still going to be an important part of our business going forward. And the key there is going to be how do you stabilize that part of the business? How do you figure out how to serve that part of the business? How do you make sure that they're getting all the value out of the product. We talked about that a little bit earlier.

And so I think for us, right now, where we're at, because if you look at it holistically, it looks like the business is doing okay, but not as good, but it's really -- there's 2 things happening in our business. And I think what we're going to try to do a better job going forward is kind of explaining those dynamics and why one thing is working really well, why this thing is okay, but could be doing better. And so I think you're going to see more from us that kind of breaks those things out and helps you understand what's really going on behind the scenes.

Yes. Okay. Yes, I'm looking forward to that. Yes. Yes. Okay. The last couple of minutes, profitability. So talk a little bit there. We've seen good improvements there. Is that like you using AI? What are the initiatives?

Not yet. I mean we definitely are doing some things on the AI front internally. I think there's like probably 3 areas there that you're going to see us focus on. And this is not probably uncommon for a lot of companies. One, I think there's a huge opportunity on the engineering side and the ability to ship more product move things along quicker. I think there's an area on -- we've got some things going on, on the support side. I think we can get way more efficient with some of the tools that are out there.

And then I think you can see things on like the sales enablement side, right? I think a lot of the sales processes, the early sales processes, I think you're going to see benefit. But that historically has not been what's been driving our margin. I think that's what you're going to see us, how we use AI going forward and how that can help going forward. Historically, what we see over the last couple of years, we've been able to drive decent margin over R&D. A lot of that has to do with when we did the influencer marketing acquisition a couple of years ago, that whole R&D team was based in Poland. And historically, all of our engineers have been in the U.S. And so we've started over the last couple of years to not only use that for the influencer marketing product, but we started moving more and hiring more folks in low-cost locations, which has really allowed us to, for example, get a little bit more leverage off of R&D.

And then you've also seen it on the sales and marketing side, as we move more upmarket, we've seen better unit economics, you see more leverage in the model. I think that's probably the biggest opportunity going forward. I do think you can see us as we expand, as our ACVs grow, as we do more of these multiproduct deals, I do think you can see leverage off of the sales and marketing line. I think there's a big opportunity there over the next 5 years. I think that's where a lot of the leverage will come from. And then obviously, you get your probably standard scale off of G&A as you see other organization.

Yes, yes. So how -- if you -- because we are at this time of the year, if you think about budgeting, and I don't want numbers, but like is that -- the starting point is my margins need to go up and to be stable? Or how do you think about and.

They have to go up. I mean I think our internal philosophy is like every year, every year since I've been there, we've drive incremental operating margin in the business year-over-year. And I don't see us changing course. I feel like it's really important. And I don't think we have to, to be successful. I think we can continue to drive the investments in growth that we need to do without sacrificing margin.

So you definitely will see margin improvement going forward. I don't see us ever going backwards on that front. So we've kind of talked about that and committed to that and not just externally, but internally as well, that's kind of like the management team is really focused on making sure that we're driving incremental margin in the business.

Yes. And then we have 1 minute left, so I have one quick question. Capital allocation. So we had like small acquisitions, in theory, your share price is kind of at a level where it kind of makes sense to kind of look at that as well. Like how do you think about that allocation?

I think right now, given that we have positive free cash flow, as you know, we never went out and did a big like debt raise. We never did a big like convert. So it's not like we have tons and tons of cash on the balance sheet to do anything like, for example, like I don't see us doing any major investing into the organization as it relates to that because we want to keep a certain amount of cash on the balance sheet. So you might see us do some small acquisitions over the next couple of years, but nothing major just given the cash balance that we have. And I don't see us going out and doing some huge debt round in order to do something at this stage. I think we're going to be pretty cautious in the way we spend our money.

Yes, yes. Okay. That's a good closing statement.

Perfect. All right. Thank you so much. I appreciate it.

Thank you. Good to see you.

Hello, everyone, and welcome to Breaking Ground, our quarterly launch event where we gather to celebrate social media, share strategy and learn what's new in the Sprout platform. Today's Breaking Ground, the social-powered AI engine is a milestone event where we'll reveal one of our biggest product innovations yet.

While we're waiting for people to log in, please navigate over to the live chat and share. Outside of work, what is one task you wish AI could handle for you that it doesn't do yet today? And I'll share one to get us started, I recognize this is a little bit lazy on my end. But if AI could somehow put on my duvet cover over my duvet, the thought of doing laundry would be so much less daunting, and I would look forward to it, so much, much more.

Okay. Yes, laundry. It seems like I'm not alone there. That makes me feel a little bit less lazy, mopping the floors. That's a great one. I'm getting a lot of cleaning themes. Really, we need AI to clean for us. Okay, I see that there are some duvet fellows with me here. I appreciate that. Yard work, that's a really good one. Litter box, I saw. I have the Cat litter robot. I don't know if we have any cat pet owners here, but that's not necessarily AI, but automation. It has changed my life.

Taxes, meal prep, wow, these are amazing. I am so inspired now. So whoever can get on the AI cleaning capabilities, that would be great. All right. Looks like we have most of everyone in the event now. So it looks like we're ready to kick off. So hi, everyone. My name is Tazi Flory. I'm a Product Marketing Manager here at Sprout, and I will be your host for today's event.

We are so thrilled to have you join us for Breaking Ground, the social-powered AI engine. But before we get started, we need to cover just a few housekeeping items. So during today's event, we're going to be making some forward-looking statements. This is just a reminder that while today's session will include some very exciting previews of what's in development, Sprout customers should make decisions based on what's already live and available today.

During this broadcast webinar, we encourage you to engage with the Sprout team and with your fellow attendees, and you guys all already have 10 out of 10 love seeing in active chat. But please continue to use the live chat to share your reactions and engage with each other. As you take part in the live chat, there are 2 things we ask you to remember. First, please keep things respectful. We're here to create a positive and inclusive space for everyone.

And second, as the chat gets active, it's likely some questions may be lost. So if you have a question you'd like answered by the Sprout team or any of our guests today, please enter it in the Q&A and we'll do our best to respond to questions live during today's event. And as always, if you have a technical issue or a question specific to your account, it's best to reach out to support or your dedicated account manager.

And finally, our most asked question, yes, this event is being recorded. You can expect a link to the replay before the end of the week. So we have a lot of exciting content today and big reveals in store for you. We'll kick things off with a look at how evolving AI changes the job of social. Then we'll learn about agentic AI that's powered by social data with our biggest product reveal yet.

Next, we'll dig into new and upcoming releases across the Sprout platform. And we'll wrap things up with a crowd favorite, our enter the chat panel discussion with special customer guests and AI experts. And then make sure you stick around after the event for additional Q&A with all of our speakers. Now who's ready to talk about the role of social in the era of AI. Let's jump in. The universe of social data is expanding, and there is more business-critical data on social networks than ever before.

As we learned in last quarter's Breaking Ground, the customer journey has shifted to social. Social search is the new SEO. Social content is the new marketing site map. Social shopping is the new storefront and social care is the new help desk. Social is where product discovery happens and it's where customers want to interact with your brand. For every part of this funnel, there is a wealth of data representing real interactions from the people your brand is trying to reach.

When we zoom out, we're talking about 5.4 billion people sharing hundreds of billions of messages, consuming tens of petabytes of data on social daily. This data is rich, unstructured, disorganized and streaming in real time. But out there in this awe-inspiring universe of social data, there's information your business needs to drive decisions.

When we look across this universe, we find valuable market data like insights from customers we need to improve our products or campaigns, customer sentiment, we need to understand our brand health, competitive intelligence, we need to stay ahead of the game and audience and cultural trends we need to know so we can stay relevant and plugged in. The problem is you don't have the tools to act on the social data at scale.

This is frustrating for social media teams, and it's disappointing for customers. 55% of users say they think brands are listening to them on social, but they are not taking actions often enough. There are missed opportunities. Your job as a social media leader is to solve this problem. You need to navigate the social universe and transform human interactions into insights so you can meet customers where they are and close open loops.

But you cannot do this without the right tools. Here's the good news. The latest generation of AI models are incredibly well suited to help us navigate and harness the data. New versions of large language models are faster. They're more capable and more accurate for analysis. Today, LLMs have smarter logical reasoning to break problems down step-by-step. Contact windows to handle more complex tasks from start to finish and better tool calling, so AI can leverage the right tools to get the job done.

AI is reliable and ready to handle professional workflows in the platforms we use every day. So let's take a minute to talk about some different types of AI and how they each fit into your workflows. Generative AI is the type of AI you're probably already familiar with. It creates new content based on patterns it has learned from massive amounts of data.

It's great for writing captions, generating visuals or summarizing posts. You make a request and it delivers. The next type of AI you need to understand is agentic AI. This is a newer, more advanced type of AI that can reason and take actions. Agentic AI goes a step further. Instead of just generating responses, it can take actions towards a goal, reasoning through steps, deciding what to do next and even using tools to complete a task.

You can think of it like a teammate who not only drafts ideas, but can also help you execute them. With agentic AI, we have technology that processes huge quantities of data and analyzes it using a step-by-step process that mimics human reasoning. For example, your typical workflow for analyzing social data today might look like writing the right queries, running a few reports, investigating and comparing results and eventually formatting your findings, you can share them out to stakeholders across your business.

But when we do this process manually, it really can feel overwhelming. You may fall down a few rabbit holes or run into some dead ends in your data. Relevant context is not always obvious. Even if you truly enjoy running and creating reports, which no judgment we're all data nerds here, this requires a lot of time and effort that takes away from energy you could be putting towards more effective data storytelling, strategic work, campaign creation or customer engagement.

When you bring agentic AI into that workflow, AI can speed run through the same steps you would take and more. It can examine the context and give you a more complete picture of your campaign performance, customer sentiments or a viral trend that's popping off. With agentic AI on your team, you get to flex new skills. Your task becomes writing clear prompts, asking curious questions and overseeing the results.

The social media managers who embrace this new way of working with agentic AI are the leaders in this new era of social intelligence. And this isn't just about a few productivity gains here and there. This is about owning an entirely new workflow that's yours to own because you are the part of your organization that is closest to your customers.

Now you can break down silos and enable every department across your business with real-time social intelligence. With your new optimized workflow, you can send customer feedback to product research and development, know whether a PR crisis is likely to blow over or need a response, sort real human fans from the bots and offer better support. You can design compelling moment-in-time brand campaigns, distribute promos and sell more products and enable sellers with insights to stay ahead.

Every part of your business can move faster. This is your AI engine powered by your social data, generating insights at a speed that was impossible to achieve before. Now I am very excited to pass the mic to our amazing VP of AI Product, Meg Christolini, who's going to show you how Sprout AI is powering a new era of social intelligence. She'll be unveiling some game-changing new capabilities her team is working on and showcasing our vision for the future. Welcome to Breaking Ground, Meg.

Thank you, Tazi. Hello, everyone. I'm Meg Christolini, and I am so excited to have the opportunity to share more about Sprout AI and introduce some of the innovation we've been working on over the past year. AI is by no means new to Sprout. We have been investing in AI to power up capabilities for over a decade. Looking at the numbers, just last year, Sprout customers sent over 14 million messages with the assistance of Sprout AI.

We have over 40 custom AI models in play, built specifically for social data and powering key workflows across the Sprout platform. These models power features like optimal send times, which help teams determine the best days and times to schedule posts to maximize organic reach. They power automations, helping ensure that conversations needing a response, make it into your queue with the necessary priority and context.

They also power sentiment, suggested hashtags and alt text. These capabilities and many others make up the foundation of Sprout AI. And now with agentic AI, we have the opportunity to connect these tools and the millions of data points across the Sprout portfolio to help you solve one of the biggest challenges that you face today, making sense of all of your social data and getting to insights faster.

This isn't only about making things easier for your social team, but about turning social data into a source of learning and action for your entire company. And this helps them make decisions and also move at the speed that you need to be moving. Over the past few months, we've been partnering with our customers to understand your workflows and bring social intelligence to life. Today, I am excited to introduce you to Trellis. Trellis is Sprout's AI agent designed to unleash social intelligence across your organization.

You can think of Trellis as a member of your team and a strategic partner within your company. We know you need to be able to reach insights faster, learn from those insights and use them confidently to take action. Let's take a closer look at how Trellis chat works with social listening. The conversational interface is the easiest way to explore social data and generate insights. You can chat with Trellis to complete all sorts of tasks like trend analysis, competitive research or campaign performance reporting based on listening topics and themes.

You likely know the feeling of being in a meeting or getting an e-mail or a message where someone asks you for some type of social data. What they don't understand is everything that goes into getting that insight ready to share. Now you and your team can just ask Trellis. If you're not sure what to ask, we've created some conversation starters with suggestions. When you kick off a conversation, this triggers Trellis to perform a task using the whole ecosystem of AI tools available to it.

Behind the scenes, Trellis is using those foundational proprietary AI models that we talked about earlier. And Trellis can plug into these existing tools across Sprout. So here, I'm asking Trellis to show me what's trending in a listening topic for our pet retail brand over the last week. It looked across thousands of conversations, and you can see it reveal this week's hottest themes, including a harness issue, acute pets campaign and our new pet color cam.

Key points about these themes are all summarized here for me. But this one about harness issues really stands out to me, and I want to learn more. But we know that insights are not always just one way. Sometimes you have questions and you need to have a back-and-forth conversation to fully understand the data. This used to mean hours of extra filtering and research. But with Trellis, you can just ask and get answers instantly.

One of the challenges with social data and social insights can be that spikes are helpful, trends are useful, but they're often too high level. You need to drill into what triggered the spike or trend to get down to the specific messages and profiles at the origin. Trellis can help with this. Here, I'm asking Trellis if we could take a closer look at the harness issue over the past 3 months.

Now I can see more information about what exactly is going on. And with this closer look, I'm seeing 3 major spikes and persistent concerns. Now I can share this insight back with our product development team, emphasizing how big of an ongoing issue this is. This insight will guide their improvements for harness design and hopefully our next trending theme on social could be something way more fun like the best holiday gifts for your pets. The chat interface for Trellis is in beta for listening today. This is already in the hands of several customers.

Some of you, I know, are here today, and thank you so much for being early adopters. Trellis will continue to roll out to professional, advanced and enterprise customers between now and the end of the year. However, I've got a special surprise. Every qualifying social listening customer who's on this Breaking Ground call today will be getting exclusive early access to Trellis over the next month. So please watch your e-mail inboxes, and we'll be reaching out to you when Trellis is activated for your account.

And in the coming months, we'll be expanding Trellis into more areas like publishing. With the help of Trellis, you'll be able to conversationally optimize your content calendar, get ideas for new content, compare content or campaign performance and discover ways to improve your planned posts. Trellis will also work for you in the smart inbox. You could ask Trellis to explain trends across conversations, understand the root cause of volume changes or collaborate with Trellis to prepare responses for customers.

So we've been talking a lot about chat, but Trellis is so much more than just the chat experience. In addition, there's a growing ecosystem of Trellis agents built to provide insights, sometimes before you even know to ask. One great example of this is the NewsWhip monitoring agent, which is now part of the Trellis ecosystem. This always-on agent is designed to detect emerging issues proactively, so comms teams can get ahead of them.

It does this by detecting meaningful shifts in online news. Then when they occur, the agent decides when to notify your team by judging factors like brand relevance and whether activity is predicted to grow. For NewsWhip customers, this agent delivers a concise analyst quality update that helps leaders act at the right time. We believe agentic AI is only going to become more capable and that teams will use Trellis agents to handle all sorts of tasks.

And with this growing number of agents, you are going to need a workspace where you can create, where you can manage and supervise them. This will be possible in Agent Studio. With Agent Studio, you will have the ability to create custom agents to power up tasks and team workflows. You'll be able to configure agents to run in the background like the monitoring agent I just mentioned or have them run on a schedule like to provide a weekly campaign report.

And what's more is that you won't need to be an engineer to create Trellis agents. Using our natural language builder, users will configure agents without writing a single line of code, basically just describe what you want the agent to do and the agent will build itself. We are so excited about where we're headed with AI agents, and we are so eager to get this into your hands. But we know that your work doesn't stop at the edge of Sprout. You're likely already using a conversational AI tool.

In this moment where everything is speeding up, you need easy access to information. This is why we're focused on connecting your social data into the tools your teams are already using. So today, we are launching our remote MCP server that enables a connection with ChatGPT. In case this concept is new for you, MCP stands for model context protocol, and it's an open standard way for AI tools to communicate with one another, similar to an API.

The connector allows teams to analyze and improve their drafted and upcoming content with the help of ChatGPT. You can also explore the performance of published content on TikTok and feed this back into your content strategy. So let's take a look. Here, we're asking ChatGPT to analyze top-performing TikTok posts and how they compare to the lowest performing posts over the past 30 days.

ChatGPT connects to Sprout through the MCP server. And next, it returns a 30-day performance comparison. It summarizes the format, impressions, comments, reactions, shares. And we can see our posts about mobile grooming vans with trending audio really popped off. The sort of high-energy clips did really well. But it looks like our Happy Friday Weekend Vibes content didn't really resonate.

And as it breaks down these key themes, it makes recommendations for us around narrative and storytelling. ChatGPT even gives us guidance to boost performance. For example, it lists out the specific themes that worked best. It suggests that we use more humor to improve generic posts, and it calls out where we should possibly add more relevant tags and provide some example CTAs to try.

For deeper analysis, we can follow the suggested prompts that ChatGPT generates or we can ask a new follow-up question. Here, we're asking which times and days of the week we should focus on moving forward. ChatGPT uses Sprout publishing data to build a table of post times for the past 30 days sorted by performance. It looks like our highest performing post was on Tuesday evening with 123 impressions. Weeknights performed best with our audience, but we should avoid Mondays and Fridays if we want to reach our customers.

You can imagine how powerful these strategic recommendations can be for planning your calendar and campaigns. And it's great to have this information available in ChatGPT alongside other apps that you use to get work done. The ChatGPT connection is available today for all Sprout customers who have a ChatGPT subscription of Pro or above. So far, we have talked about 2 new additions to Sprout AI, Trellis, Sprout's AI agent and the ability for Sprout to connect with AI applications in the ecosystem.

Both of these new innovations sit on top of Sprout's AI data layer powered by a growing number of proprietary models like the ones I was talking about earlier. Our latest addition to this foundational AI layer is a new model trained to detect an autocomplete spam. We have all seen spammy messages, full of handles, hashtags or maybe some sketchy links. Not only are these messages cluttering your inbox, they're throwing off your metrics because they take time to manually sift through.

Now when spam is identified, it will be categorized and can be automatically marked as complete, helping your teams spend less time sifting through noise and making it possible to get to the most important conversations faster. Also, by pairing spam with an automation rule, you can directly hide spammy comments from View on Facebook and Instagram. Spam detection is powered by Sprout AI, and it is live in the Smart Inbox today.

So I hope you'll go check it out. Another area where AI can radically improve workflows is within influencer marketing. Brands get better business outcomes when they pair with the right influencer partners. At last quarter's Breaking Ground, we showed you brand fit and brand safety scores in influencer marketing, which let you determine whether a potential influencer is a good fit for your brand at a glance.

With these AI-powered scores, teams like Sunkist have been able to take their vetting process for creators down from hours to minutes. And they're not just saving time, they're also more confident in that process overall. Our goal is to provide the best influencer matchmaking service in the industry, and Sprout AI will help us get there. Here's what you can expect next. Soon, Sprout AI will be able to analyze videos and imagery to identify content themes beyond what's possible in -- or available in post captions, revealing more attributes about creators such as their occupation, their hobbies and even their tone of voice.

This evolution in creator properties detection will give you even more confidence that the creator you're vetting is a perfect match for your brand or for your campaign. The possibilities here are awesome. Everything I have covered today is aimed to show you how Sprout AI and now Trellis are here to unleash social intelligence for your team and for your organization.

For over a decade, we've focused on making Sprout the central command center for social. Today, the rise of agentic AI meets our depth of social data, creating the perfect intersection of potential. Sprout's AI engine is here to unlock social intelligence for your entire business at the speed and scale never before possible. It brings every corner of your business closer to your customers and helps you turn that connection into unstoppable business momentum. We are so excited to get this into your hands. And with that, I'm going to hand it over to Paige, who has even more updates to share.

Huge, huge thank you to Meg for that amazing demo of Trellis and a look at what's next for Sprout AI. I'm loving all the excitement in the chat. And I know we've been hearing a lot of great things from customers who have gotten their hands early on Trellis. And we're all very, very eager to see the impact that it has on your -- in your team workflows.

Hey, everybody. I'm Paige Britton. I'm a Product Marketing Manager here at Sprout. And today, I have the pleasure of walking you through some of the other new and upcoming releases that we have in store. So first up, we have made a ton of updates in care to make sure that you and your teams have everything you need to be as productive as possible and can continue delivering amazing customer experiences. With bulk action enhancements, you can now make Smart Inbox updates significantly faster, taking action on up to 500,000 messages at once.

And with case macros, you can apply tags, type, priority, status or assignment without actually having to click into the case so that you can get more done faster. Auto close lets you close out cases that don't receive a customer response within a set amount of time so that your care metrics aren't negatively impacted if a customer goes radio silent on you.

And with feature access controls, you can set permissions in Sprout based on job function or other criteria so that your team members only have access to what's relevant to your role, helping reduce any distractions or mitigate brand risk. And finally, goal time reporting and agent status exports gives managers more tools to measure success. We talked a bit about NewsWhip monitoring agents earlier. And if you were at our Breaking Ground last quarter, you know that NewsWhip is our new predictive media intelligence solution.

NewsWhip shows you where conversations are headed so that you can make the right strategic moves at the right times. And last month, we rolled out NewsWhip Social Alerts, which unify real-time alerts and schedule digest across Reddit, TikTok, Instagram, Facebook, X, YouTube, and web articles, so the full gamut. This allows you to create your monitoring setup once and apply it everywhere. And you can also set up custom engagement thresholds, apply post-type filters and bulk create across networks.

And when something important happens, you'll get notified right away where your team already works, whether that's in Slack, Microsoft Teams or e-mail. These social alerts work alongside AI agents and AI digest to cover alerting needs across all of your networks. And you will get immediate signals, scheduled summaries and analyst-like insights in one place so that you can catch any reputational risk early and jump on opportunities before anybody else does.

In influencer marketing, we are deepening integrations with Snapchat and Instagram, 2 networks where stories are everything. On Snapchat, we recently launched support for Snapchat Stories and now have verified demographic data for tens of thousands of creators. And on Instagram, you can now get partnership ad recommendations, which suggest which posts will drive the highest ROI when you boost them. We're also integrating with the new creator marketplace API so that you'll have even more verified information about potential partners.

Altogether, Sprout's influencer marketing platform really helps you scale and drive business impact. We know for regulated industries, it can especially be a challenge to balance the goals of compliance with your social strategy. Guardian by Sprout Social embeds customizable intuitive guardrails into everyday social workflows, helping brands stay active on social while mitigating compliance risk. And this quarter, we are making Guardian even stronger with 3 critical updates.

First, secure forms will be PCI compliant, which will help our healthcare customers stay compliant while providing seamless social customer care to their patients. Next, we're going to be introducing custom variables with our existing data masking capabilities, meaning that you can proactively identify and mask sensitive information according to your organization-specific rules or any customer categorization that you might have.

And then the third big update, we are going to be rolling out Blocked Words and Employee Advocacy. This will ensure that your content stays on message when your team post and you can still achieve that massive reach and ROI without risking your brand's reputation. Now let's talk about some publishing wins, which is always my favorite. We recently launched support for first comments on Facebook and LinkedIn. So yes, you can go ahead and delete all 52 reminders that you have on your calendar to remember to drop a link in the comments.

And instead, now you can automatically schedule these straight from Sprout Compose. So a big win there. Building on more highly requested updates, we've got big, big news for brands on Instagram. Mixed-media carousels are on the way next month. We know that when you combine videos and images on Instagram, engagement goes up. And not talking about small numbers here, these posts see 24% more engagement and 18% more likes than a single image post.

Soon, you'll be able to take advantage of mixing images and video in one post for richer storytelling that really captivates and keeps your audience hooked while driving better results. So a big theme at today's event has been around the power of social listening. Listening is a gateway to that universe of social data that we've been discussing. And when you have access to more networks and more sources, you can gather more insights and activate more strategic plays.

And plus now you will have more data to power Trellis. So this is why we are glad to share that in a couple of weeks, we're launching Bluesky as a new source for social listening so that you can get comprehensive insights across this network. And then up next after that, we will be adding branded hashtags for TikTok so that you can monitor your brand holistically.

Soon after that, we'll be adding new listening sources for Instagram and Facebook, and this is all right around the corner, so we can't wait to see what inspiring campaigns that you create with these new unlocked sources. Now before we get to our highly anticipated panel discussion, I'd love if everybody could take a moment to answer our poll question. As we just learned, social listening is more powerful than ever now with Trellis and even more network sources.

And if you'd like to connect with our team to learn more about Trellis and social listening, please let us know by answering this poll question. We are here and ready to help you adopt AI in your workflow, and this is truly such a great opportunity to get ahead of the competition and make sure that social insights are flowing throughout your organization. Okay. Amazing. It looks like all the answers are in. If you ask for a demo, we will follow up with you after the event and make sure that we get time on your calendar.

Now on to something special, one of my favorite parts of Breaking Ground Enter the Chat. This is our episodic series where marketing professionals and experts come together and share stories about their firsthand experiences. So to get us started, I'd like everybody to please welcome Jamia Kenan.

Thanks, Paige. Hello, everyone. I'm Jamia Kenan, Senior Social Media Specialist here at Sprout and your host today for the Enter the Chat panel. Before we begin, do not forget to send your questions in through the Q&A box because we'll get to as many as we can after the panel. Today, I'm super excited because we have 2 AI experts who have made some impressive strides within social media. Today, we have Jeff MacDonald and Bianca Shaw. Jeff, can you come on and introduce yourself?

Absolutely. Nice to see you all, and thanks for having me back here. I'm Jeff MacDonald, I'm Director of Innovation and Technology at the Social Agency Movers and Shakers. And my job is to make sure that we keep our clients and our agency on the forefront of everything technology and AI.

Awesome. Thank you so much for being here. Bianca, welcome to Enter the Chat. Could you say hi, introduce yourself.

Hi, everyone. I'm excited to be here. I'm Bianca Shaw. I'm the Vice President of Enterprise Social and Digital Reputation for Caesars Entertainment, which includes 50-plus destinations across the U.S., our award-winning loyalty program of Caesars Rewards and our powerhouse brands of Caesars Sportsbook as well as Caesars Palace Online Casino. It's all about content and care over here and maximizing everything from an enterprise perspective.

Amazing. Thank you so much, Bianca, for being here. Okay. So let's dive right in. So one of my favorite generative AI eras was during like 2022 to 2023 when people were doing like those cookie AI remixes with cartoon characters like SpongeBob and Scooby-Doo to perform popular songs. So my question to you all to get us started, if we could use AI to have your favorite childhood character sing a song for the soundtrack of your life, who would you pick and what song would you choose? And anyone can jump in.

I will go first. Oh, you go ahead, Bianca.

Well, I grew up in the MTV era. So I'm probably dating myself. So I'm going to give an example of what's relevant to my almost 10-year-old daughter. She absolutely loves Groot from Guardians of the Galaxy. And I think that one of our favorite songs together is Safe and Sound by Capital Cities. So how cool would it be for a Groot, even though he's been done before to sing that song just for us.

I love that. Jeff, what about you?

For me, the kind of show that was just -- I feel like in the background of my entire childhood was The Simpsons. And I think it would butcher my favorite songs, but I'm just going to go ahead and say probably The Smashing Pumpkins 1979 for those that remember the episode where Homerpalooza comes through Springfield.

Oh, my gosh. Thanks so much for sharing this. I know for me it will probably be Penny Proud to do the [indiscernible] theme song because I just was obsessed with them growing up. So kind of staying on the whole like memory lane with AI, the presentation today really has me thinking about how AI has evolved so much over the past 10 years.

I know for me, like one of the first things that I think about when I reminisce on my first experience was when I was at AfroTech in 2022 and a speaker showed me a generative AI video of Will Smith eating spaghetti. And it was so alien like, but since then, AI images have gotten so good. So Jeff, what do you remember? And can you describe your first experience with AI?

Yes. I remember specifically, it was November of 2022, my daughter was just born. I was on paternity leave. And I've gotten the ChatGPT-3 beta access for the website UI and people really talking it up. And so I decided to start just like writing poems. I don't know like I was feeling particularly poetic at the moment.

And immediately, I saw the capabilities. Like I was like this is writing poetry today, tomorrow, it's creating decks for us. And so when I got back from my paternity leave, I immediately did an agency-wide presentation to everyone to show them kind of just like what AI could do today and then kind of thought starters on where it could be in a couple of years and how we should start going ahead and retooling what we were doing. And behold it, this is now like my full-time job.

I love that. I love how you both kind of have like memories connected to AI in your family, like that's so sweet. Bianca, what about you? What was your first experience like?

I don't say it's my first experience, but it's definitely one of my fondest experience. I think it was in 2023, Adobe just started delving into the generative AI capabilities. And much like many of you, we work on small but mighty teams, so budgets aren't necessarily the biggest. So my team was experimenting with natural language processing functionalities of the AI generation.

And we took an empty restaurant photo, plugged it into Adobe and decided to ask Adobe to add people to it. In 2023, which doesn't seem so long ago, it produced something hilarious. The faces were okay. The teeth were questionable, but the hands were just something alien-like. But it's amazing to see how much it's progressed. And now we have to have disclosures and filters to tell us what's AI and what's not.

That's so real. Like early AI was definitely like other worldly, like there were so many struggles with like details like fingers and teeth, like why are there humans with like 10,000 teeth. But earlier in the show, one of the things we talked about was generative AI and how it compares to agentic AI. How are each of you thinking about these different types of AI in your workflows? Let's start with Jeff.

Yes. For me, like I'm really in that transition period from AI as an assistant to AI as a coworker. And how I'm doing that like using agentic AI is simply I just got another monitor. Like there's so many ways you can set a task off with AI and have it completed on its own, a lot of the things that were shown today in the preview.

And so I kind of like started predicting that I'm going to need a space where I'm going to have that human in the loop moment where I'll see it needs the next step done for it or I need to see where it's completed. And then I can do like my more human tasks in my main browser where I can do like the things that are like more creative and then it can be analyzing spreadsheets over in another tab.

Right. I know I'm always looking for more time. So anything that agentic AI can do, I'm always looking to do that. Bianca, what are your thoughts?

Well, as a Sprout customer, generative AI has become a core function and just overall tool for me on a daily basis along with my team. Just being able to have the workflow efficiencies, as a complex organization as large as ours, you can imagine that if we're rolling out a campaign, we want to make sure that we diversify. So the AI assist is clutch when it comes to that.

But secondly, what I love about being a Sprout customer is that my customer success team listens. So on an annual basis, I do have a connect with our DEI team, and they're asking, what are you doing from a social media perspective for those customers that are looking for accessibility.

So I brought this to my customer success team and asked them, "Hey, if it's ever something I would love to see it on the road map." And one day, they came back and said, we have alt text generative descriptions now. What a game changer just because this has been something that I've been asking for and it would be a nice to have. And now we're able to utilize the function to generate alt text, not just from an SEO perspective, but once again, from an accessibility reader perspective.

That's so true. That's definitely a focus for us here at Sprout. And it's actually one of my favorite features, too. So like in my role, I support our social search strategy. And as you mentioned, it's definitely a must for an accessible experience, but using alt text also extends your reach because of indexing within social search. So when your content uses those keywords or phrases, people are going to discover your content so much more. Now Bianca, I have to ask, I know you had a chance to explore Trellis, Sprout's new agentic AI agent within listening. Can you share how Trellis has impacted your team so far?

Absolutely. So I am a data geek like many of us. When I was approached by my customer success team and Meg to ask if I wanted to participate in this alpha, I absolutely said, no-brainer, count me in. I'm a veteran within the industry. So I've worked with tools for those of you that know Radian6 back in the day, heavy hitter social listening program that required so much manual effort and just overall, the ability to set up the queries, setting up Boolean search, optimizing it based on the findings and specifically with the insights, that was a manual process.

But when I got my hands on Trellis, holy crap, like the ability to ask a questions, all these different prompts, what I would typically spend with hours, days, even weeks of making the analysis because I was trying to carve out moments in my schedule to be able to focus. It's provided so much ease in being able to extract a lot of the information that would normally take me so much time and bandwidth.

So it's a starting point. But it's a strong starting point because of the questions that I can ask it and the ability to drill down on sentiment as well as sources of where the detractors and overall contributors are coming from.

Thank you so much for that. Like you already know that I'm Team Trellis, and I'm so glad to hear that you've already made some incredible strides with that. And that's exactly what we're talking about when we mentioned the social-powered AI engine, right, getting those insights, empowering your team across the entire org, experiencing and seeing how you can use this new technology. So we've also talked a lot about how the customer journey lives on social. Let's speak to AI's role at each stage of the customer journey. Jeff, let's start with you.

Yes. For us, one of the things that we're doing at Movers and Shakers is trying to make brands popular on social and get their story out there ahead of everyone. And so we're really looking at how agentic AI can kind of be that always-on social listening expert that's looking and finding those new opportunities for us.

So it's really around awareness, like we're looking for stories that we can build around trends, around awareness and kind of build tools around that. And we think that there's a huge opportunity for agentic AI to help us with that because we can only scroll so much of our FYP to find trends. And at some point, we need somebody to step in and help us out and agentic AI is a perfect way to do that. And then if it can help us build a creative brief that then keeps us on brand and on trend much sooner than we would any other way, then that's a win as well for us.

Definitely. Bianca, I know you've kind of shared your thoughts on the customer journey. I love for you to speak to that as well.

Sure. So as social media marketers, everybody understands that we are part of the entire customer journey. For Hospitality and Gaming, you can only imagine, to Jeff's point, the awareness is something essential for -- especially from organic teams. But then the retention, the consideration part is something that we are deep in as well.

And AI has a part in all of that as well as the conversions. Where I really want to hone in on is really the social listening just because once again, with Trellis and the ability to leverage AI to work smarter, not harder, we have the ability to listen into conversations and pick up on conversations that we weren't even aware of to be able to grab those insights and understand the granular data that's happening.

I'll give an example for Reddit specifically. It's a little bit of a scary place for us brands to play in, but so precise and just a great source of information to really drill down on whether it's crisis related or if it's just the deep ambassadors of Redditors having conversations about things that you're not even thinking about today.

Yes. When you mentioned Reddit, I definitely was just like, yes, that's definitely a wow, it was there. I know for like at Sprout, that's one platform that we're experimenting on, which has me curious about how each of you are exploring AI. So what's one AI win or flop that blossom from curiosity or iteration? And what are some takeaways from those learning moments that other teams should consider?

Yes. For me, the big win that AI has had is us getting away from just like the surface level what AI can do and actually starting to find those like personalized use case. It's a lot of things that are on the back end. There's a lot of things behind the scenes that AI is making a change on. So it's helping us be more efficient. It's helping us get away from spreadsheets and get more in using our human intuition and our creativity.

Kind of what I always tell my team is if it seems like computers would be better at a task, it probably should be a computer doing that task, and you should be doing something that's uniquely human to you, like using your knowledge around insights and about culture and about human feelings, that's the things that we should be doubling down on, and we should be finding ways that we can automate tasks in places where humans were never meant to be selling for people who love spreadsheets.

I'm definitely team. Let's not use a spreadsheet. Let's pass along that work to the AI. Bianca, what's one of your AI wins or flops?

I would agree with everything that Jeff has said. Just once again, workflow efficiencies, AI is one of my best friends. And I want to address the elephant in the room that AI in speaking with some of my customer advisory Board members, it's not going to replace us. It's going to be our team member.

It's going to be our tools to help us once again work harder -- work smarter, but not harder. And really, just overall, what we've discussed is that customers don't want to see a full AI approach content strategy. I think that people are on the other side of it and just wanting to see the human aspect of being able to see that content that really resonates. There might be, once again, the ability to leverage AI to help us create different things that we're not -- we don't have the tools or budget for, but it's not replacing us from a care perspective, content, et cetera.

Yes, definitely. It's more so like a sparring partner. And it's not going to replace us. It's something that we should look forward to saving more time, right, as we talked about during this entire conversation. So Jeff, Bianca, thank you so much for this conversation. I know I'm definitely walking away feeling inspired about what I can test and explore, and I'm sure the audience is as well.

So talking about feeling inspired, what a perfect segue into my favorite part of Enter the Chat, the Q&A. So I know we have a lot of great questions coming in, and I'm sure there's some more brewing. But remember, if you have a question, please add it to the Q&A box. The chat is absolutely on fire, which is amazing, but those questions might get lost in the chat, so make sure you're using the Q&A box.

And I think all of our speakers are able to stick around. So we're going to bring them back to the stage and try to answer as many questions as we can live. Okay. So let's get started. This first one is for Jeff. In the past, you've asked -- you said when AI does everything, it does nothing. Can you elaborate more on what this means?

Absolutely. Thank you for bringing that one up. I love that phrase. when AI does everything, it does nothing because it really describes how we've kind of -- and people in my profession specifically AI implementers have failed, a lot of our organizations and kind of that -- to that famous MIT study from this year, 94% or 98% of AI implementations fail. It's because we haven't made it personalized enough.

We've kind of just given an organization, ChatGPT or Gemini and said, use it. And we haven't really made the case for our employees about how it's going to make their lives better and how we're going to make their jobs more effective and how we'll get them back to the things that they loved about the industry that they're in. And in social, that's like the most important. Like we really are looking for ways that we can make it AI as effective as possible.

And what we've been waiting for are moments like today, where we're looking for ways where AI can be integrated into our existing workflows, into tasks that we need to accomplish and making it so that it's kind of task specific. And so when we get away from AI does everything, we can actually start getting away from that, it does nothing and finding those moments where it's useful. And I think that things like looking at the MCP integration with ChatGPT, that's going to be a huge win for professionals who are looking for better ways to integrate it into their workspace.

Thank you so much, Jeff. I love that phrase, everything -- AI can do everything, but can also do nothing. So this next one is for Tazi. How do we get access to Trellis, do we have to specifically request it?

Great question. So as Meg announced earlier, which we're so excited about, all of our customers who attended today who have social listening will be moved to the front of the line for early access. So we are in beta right now. Early access is going to be rolling out over the next month or so. You will get an e-mail from Sprout with your CSM CC'd with all the information. Once it is activated on your account, there'll be a lot of really fun resources to make sure you're getting the most out of Trellis.

Thanks, Tazi. This next one is for Meg. What's the difference between calling a generative AI like ChatGPT that can format and synthesize all these things in a true agentic AI?

Yes, that's an excellent question. And it really -- as we think about agentic AI or maybe first, we'll talk about generative AI. The kind that we see in tools like ChatGPT is designed to really be responsive. It takes a prompt and uses it to write and summarize and synthesize the information that you provide.

And it's a fantastic tool, but it doesn't really independently take action on its own. In contrast, agentic AI understands intent and is really built to take steps on your behalf. So this means it can select from a set of tools that it's provided and retrieve the necessary data and coordinate and sequence tasks to help you achieve outcomes like some of the things we were showing earlier. So it really moves beyond just creating content to actually helping you manage and execute workflows.

Thank you so much, Meg, for that breakdown. This next question is for Meg as well. Is there a minimum amount of data you need to get accurate insights from Trellis?

Yes, for sure. That's a super practical question about getting started. And the great news is that there's no like hard minimum requirement for data. Trellis is designed to be super flexible and can generate valuable insights from both small as well as very large data sets. That said, it's really important to know that the quality and depth of insights will really improve as you have more data available over time.

So the richer the data set, the more granular and actionable the results will be that you get to experience within Trellis. And this is exactly why, as Paige mentioned earlier, we are continuously adding more data sources into our listening product. And our goal is to ensure you have the richest possible data foundation for Trellis to generate insights from really to help your team. So yes, hopefully, that answers the question.

Yes, I definitely think so. Thanks so much, Meg. This next question is also for Meg. The chat is loving you today. Is Trellis only available if you have the social listening tool?

Yes. I love all these questions. This is great. And I love that you're eager to get started with Trellis. So we are starting with a very focused rollout. Trellis will initially be available for our listening customers on the professional plan and above. And as we shared earlier, all of you attending today's event will be receiving exclusive early access to Trellis over the next month. So that is super exciting.

Beyond that, our plan is to quickly expand Trellis and this access to everyone as Trellis becomes embedded across more of the Sprout platform, both in publishing as well as the Smart Inbox and covering more workflows over the next few months. So critically, we are building Trellis as a core capability. We know how important it is for all of you to stay ahead of your competition. So we'll be making this available to all customers on the professional plan and above at no additional cost.

Thank you so much, Meg. I appreciate that. Well, those were so many like knowledge gems, I loved all of those insights. It does look like we're close to the hour mark, and we've covered some great questions in the chat. Thank you again to our guests, Jeff and Bianca and to everyone in the audience for such thoughtful questions. This Enter the Chat has been so insightful. I'm going to pass it back to Tazi who's bringing us home with final words.

Amazing. Thank you so much, Jamia, and again, everyone, for participating and asking such great questions. And thank you again also to our panelists and Enter the Chat. So we are out of time. So we'll be wrapping things up for this edition of Breaking Ground. Thank you so much for joining us, and have a wonderful rest of your day. Bye, everyone.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social Third Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Alex Kurtz, Vice President of Investor Relations and Corporate Development. Alex, please go ahead.

Thank you, and welcome to Sprout Social's Third Quarter 2025 Earnings Call. We will be discussing the results announced in our press release issued after the market close today and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Ryan Barretto; and CFO, Joe Del Preto.

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 2025 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 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 31, 2024, as well as our quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2025, 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 the reconciliations to the most directly comparable GAAP financial measures are included in our third quarter earnings release, which has been 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 to our third quarter earnings call for fiscal 2025. Sprout delivered another strong quarter with revenue of $115.6 million, representing 13% year-over-year growth, and non-GAAP operating margin expansion of almost 460 basis points; a record high for Sprout at nearly 12%. Our current remaining performance obligations grew 17% year-over-year to $258.5 million, reflecting consistent demand, strong enterprise execution and the addition of NewsWhip. And we continue to see improvements in gross retention across all customer segments with multiyear contracts now representing nearly half of our contract mix. This is a strong signal of customer commitment to the Sprout platform.

Our go-to-market team continued to perform well, delivering 21% growth in our $50,000-plus ARR customer count. This progress was fueled by strong net additions and the inclusion of NewsWhip customers, which has added several of the largest global brands to our customer base. We're incredibly excited about the go-to-market progress we've made with NewsWhip, which has brought our strongest new product pipeline to date.

During the quarter, we managed strategic wins with amazing global brands like Xerox, Bentley Motors, Valvoline, NYU, Becton Dickinson, Hallmark and the Royal family. These customers demonstrate our continued success serving the most socially sophisticated enterprise customers.

We're pleased with our performance, particularly as demand trends have remained consistent with the first half of the year. Even more encouraging, despite the macro environment remaining unchanged, Q3 was Sprout's strongest non-Q4 quarter for large deals, driven by customer commitments above $200,000 in ARR and excluding any NewsWhip contribution. We also saw sustained pipeline strength with year-over-year growth that underscores continued enterprise demand.

Our $50,000-plus ARR cohort continues to be our fastest-growing customer segment and is now approaching 2,000 customers, an increase of nearly 700 over the past 2 years. This cohort now accounts for nearly half of our revenue and revenue grew in the high 20s on a year-over-year trailing 12-month basis. We'll continue with focused investments that enhance our capabilities to serve larger customers and refine our approach to our smaller accounts.

Within our enterprise success, two trends stood out. Number one, our platform's breadth, simplicity, scale and ease of use continue to resonate with large enterprise accounts. Our offering is truly differentiated and our strategy is well aligned with sophisticated customer needs. Number two, NewsWhip has energized our sales organization, broadened our conversations with customers and highlighted the differentiated value of social intelligence, a key area of competitive advantage for Sprout.

We also saw steady customer expansion driven by seat growth and continued adoption of Influencer Marketing, Premium Analytics, Care, Guardian and now NewsWhip. We're carrying this momentum into what we believe will be a pivotal fourth quarter for Sprout as we begin rolling out the foundation of our long-term AI strategy. We anticipate Q4 will be our most significant quarter yet for AI product expansion and will set the tone for how our products are crafted, designed and positioned moving forward, and how we can unlock an entirely new layer of value for our customers.

Before digging into these upcoming releases, I want to provide some context on how Sprout's products and platform were built and what that foundation means in a rapidly evolving landscape. Specifically, I want to share why we believe our advancements in AI strengthen Sprout's moat rather than diminish it and why we believe we're uniquely positioned to thrive in the next era of business software.

At Sprout, our founding ethos centers on the extraordinary value of the authentic digital conversations and interactions that shape brands, communities and societies. As AI reshapes software, we're thinking deeply about how our platform and products will evolve and deliver increasing value to customers. When you look ahead, we've returned to our founding belief in social as a cornerstone of business-to-customer relationships. That streamline has guided our strategy to this day, and we believe it will propel our value well into the next era of software.

Sprout's advantage in the AI era starts with the data we serve and the trust we've earned. Social data is among the most human, protected and context-rich sources of digital information created by people, governed by a few major networks and largely walled off from broad LLM access. With deep license partnerships and a neutral position across AI ecosystems, we believe Sprout is uniquely positioned to access, interpret and operationalize this data responsibly and at scale.

Our platform transforms that data into scalable conversations, actions and intelligence. Customers rely on Sprout as their operating system for social, connecting people, processes and workflows across the enterprise. As AI accelerates, they're looking to us not just for efficiency, but for orchestration, using intelligence to automate decisions, engagement, insight, content and collaboration. If social data is the world's sensory input, Sprout is the nervous system. And we believe our trusted access, domain expertise and enterprise-ready infrastructure make our moat durable and allow us to move faster with greater precision and impact than ever before.

We believe that our leadership position, model flexibility, purpose-built infrastructure in UI and network access mean that AI stands to be a tremendous tailwind for Sprout and our customers rather than a headwind. As our AI learns each brand's unique voice and workflows, it becomes more attuned and impactful over time, deepening adoption, strengthening retention and serving as a long-term driver of growth for Sprout.

In the coming weeks, we'll begin to unveil capabilities that set the foundation for Sprout's strategic bets in AI transformation. We believe these releases over time will have -- drive improved expansion and retention motions across our entire customer base. First, our flagship release is a proprietary AI agent for conversational data exploration, automated insights and recommended actions. It's designed to identify emerging trends, detect risks and suggest next steps, empowering brands to manage reputation, unlock strategic capacity and deliver content with optimal timing and precision. It does all this out of the box, which drives incredibly fast time to value.

Early feedback from beta customers using our agent has been overwhelmingly positive. One shared, I'm a huge fan of this already. I just used the agent to break down positive and negative sentiment for a listening query and report it to a stakeholder. This feedback came just hours after gaining access, underscoring how intuitive and immediately valuable this experience is. Our agentic approach also extends into the NewsWhip, where our agents are continuously monitoring global news and an online conversation to identify brand-relevant signals early, providing automated vigilance and clear insights with fewer false positives.

Second, we're bringing social insights into more tools where teams already work by adopting the model context protocol, MCP, which provides a universal open standard for connecting data to AI systems. We've built our remote MCP server to connect to widely adopted ChatGPT first, which positions Sprout's intelligence as a foundational input layer for AI-driven decision-making across the enterprise.

In addition, we've embedded specialized models throughout our platform from advanced spam detection to AI-powered influencer matching, illustrating our broader approach, intelligence seamlessly integrated into every workflow. For a better understanding of all of this, we encourage investors to join us at Breaking Ground on November 18, where we'll unveil these capabilities in full. If you'd like to join, please reach out to Alex for an invite.

This is a defining moment for Sprout. While AI will reshape software, the need for trusted systems that connect brands and customers will only grow. We believe Sprout is building the next-generation orchestration layer from a position of unique strength rooted in our data partnerships and platform architecture.

Turning to NewsWhip. We're very encouraged by the early results. Since closing the acquisition in late July, we've seen exceptional go-to-market momentum from NewsWhip, generating more pipeline than any new product in our history with initial ACVs at or above traditional enterprise levels, nearly 2x our company-wide average. The integration has gone smoothly, and we're thrilled to have the NewsWhip team fully on board.

Key wins in the quarter included a tourism board, a major crypto exchange, a digital security alliance and several strategic renewals. Two trends are emerging. Number one, NewsWhip is creating net new pipeline within larger Sprout accounts; and number two, NewsWhip is increasing deal size when bundled into existing Sprout opportunities. For example, a global online delivery platform that is nearly $400,000 in ARR expanded their annual spend by over 10% after adding NewsWhip to their suite. And earlier this month, we completed a competitive displacement, combining our core platform and NewsWhip that increased the customer's ARR by almost 50%.

We're thrilled with the early momentum as we integrate NewsWhip's real-time intelligence with our industry-leading listing capabilities. We're seeing clear validation of our social intelligence strategy and a strong foundation for continued differentiation.

Similar to the last few quarters, I want to provide a quick update on our four key growth drivers for Sprout that include winning the enterprise, driving customer health and adoption, expanding our partnership and ecosystem, and driving improved account penetration. To win the enterprise, we intend to expand the pipeline, close more 50,000-plus deals and accelerate adoption with a product road map built for enterprise needs.

Let's start with key product releases in the third quarter. We launched AI-powered translation for nearly 180 languages. Now our customers can communicate with a global audience effortlessly. Our AI assist translates and generates content for social posts, incoming messages and replies, empowering our customers to connect with a wider and more diverse audience. We rolled out Listening for TikTok, a highly requested new feature. Our customers can now tap into this massive platform to gain valuable insights, monitor brand health and make more informed marketing decisions.

We also launched our new integration with Canva, making it faster and easier for brands to create and share content. As the only social media management platform to offer this comprehensive integration, we're giving brands a decisive advantage in a highly competitive digital landscape. This partnership streamlines the entire workflow from design to publishing, allowing users to push finalized visuals, including images and videos directly from Canva into Sprout as ready to schedule posts. Brands like FedEx noted that the Canva integration has been a huge win for efficiency. Finally, we launched a similar one-click workflow this quarter with a new Adobe Express add-on. Content created in Adobe Express can now be sent directly to Sprout as well.

We're also pleased to share several strategic enterprise wins this quarter. We closed an almost $2 million expansion deal in the quarter with a new division of an existing Fortune 500 pharmaceutical customer. This major expansion proves the effectiveness of our land-and-expand model as we successfully transitioned from a pilot to a full-scale enterprise solution. With Sprout, this customer can now unify their global marketing workflows for over 350 users, creating a single source of truth for their social strategy. Our enterprise-grade platform enables them to confidently scale globally, consolidate their tech stack and empower their large distributed teams with a single user-friendly solution.

Another exciting deal from this quarter was a $1.2 million new business win with a national convenience store chain. They chose Sprout to consolidate their marketing and customer care, leveraging our Listening, Premium Analytics, Premier Success and Influencer Marketing products. This partnership is a prime example of how Sprout delivers a comprehensive solution. By unifying their social media and influencer marketing efforts on a single platform, we've helped them eliminate fragmented workflows and significantly reduce their high cost of ownership from managing multiple vendors. They can now make data-driven decisions using our advanced analytics and our AI-powered social listening, creating a single reliable source for reporting and strategic insights. We established a trusted long-term partnership with a dedicated success team directly addressing the previous struggles with high vendor turnover and inconsistent support.

The last win I'd like to highlight is an expansion deal for over $800,000 with a leading food and beverage company. This company is leveraging our platform to manage the marketing and customer care with a comprehensive suite of products, including Listening, Premium Analytics, Premier Success, Influencer Marketing, Guardian and our Service Cloud integration. This partnership showcases how Sprout helps companies consolidate their technology and streamline workflows. By integrating Sprout with Salesforce, we've created a more efficient system where teams can share data across departments, leading to significant efficiency gains. The client now has real-time visibility into their data, empowering both users and management to make quick decisions.

Our second growth driver is driving customer health. We launched our new AI support agent, an AI-powered help center in late August and are already seeing improved efficiency. We've achieved a 19% automated resolution rate and a 65% reduction in time spent in the help center, demonstrating that we are delivering faster and smarter customer support experiences.

Our third driver is our investment in partnerships. Sprout continues to expand our ecosystem. In August, we launched a new suite of integrations across TikTok, Bluesky, Instagram, Snapchat, Canva, Adobe Express and LinkedIn, helping brands turn every interaction into actionable intelligence. As customers increasingly rely on platforms like TikTok and Bluesky for discovery and real-time conversation, the ability to capture sentiment early and act fast is now essential. And we're seeing that in the data. Social is now the first stop for many consumers, especially Gen Z. And our job is to help brands show up across social search, SEO and AEO with content that performs, built around shared keywords, captions, hashtags and alt text and proven in analytics.

This quarter, we announced new and upcoming capabilities, including Instagram partnership ads and influencer marketing workspaces, expanding our Snapchat integration for influencer marketing, Adobe Express and Canva publishing integrations and LinkedIn personal profile metrics and document publishing. These capabilities are all built to turn every social interaction into insight, action and measurable business impact.

On October 23, Sprout was named a Preferred Partner in Reddit's Official Data Partner Program, a recognition of cutting-edge platforms that use Reddit's enterprise API to tap into real conversations and connect brands with key consumers. This partnership highlights Sprout standing among the most trusted forward-thinking platforms in social technology. As a preferred partner, we gain unique access to Reddit and the opportunity to collaborate on product road maps, innovation and strategic growth.

Our fourth growth driver focuses on deepening customer engagement. As I mentioned earlier, this quarter marked a new record for Sprout with our largest ever non-Q4 performance for large deals. Our flexible platform continues to win in the marketplace and our integration of NewsWhip alongside new network partnerships demonstrates our commitment to innovation and our ability to deliver for customers today while investing in their future success.

To provide greater visibility into these dynamics, we've added new slides to our investor presentation that highlight these growth drivers in more detail. The future of our category will be defined by real-time intelligence, extensible platforms and trusted AI. That's the foundation we're building at Sprout. With differentiated data, a proven platform and deep enterprise relationships, we believe we're positioned to lead in this next era of social intelligence.

And with that, I'll turn it over to Joe to walk through the financials. Joe?

Thanks, Ryan. I'll now run through our financial results and guidance. Our third quarter results were highlighted by quarterly non-GAAP operating margin of 11.9%, up nearly 460 basis points from the year ago period. This quarter marks Sprout's most profitable non-GAAP quarter in our history, a result of our consistent focus on strategic targeted investments and our revenue outperformance. I want to thank our employees for their focus and commitment to how we collectively invest in the business in a responsible manner. We generated $10.3 million in non-GAAP free cash flow during the quarter. And on a trailing 12-month basis, free cash flow is up over 80%. As we have commented before, expect our free cash flow margin for the fiscal year to closely track our non-GAAP operating margin. We remain committed to growing operating leverage on a fiscal year basis.

On to a summary of the quarter. Total revenue was $115.6 million, representing 13% year-over-year growth. Subscription revenue was $114.7 million, up 13% year-over-year. The number of customers contributing more than $10,000 in ARR grew 7% from a year ago. The number of customers contributing more than $50,000 in ARR grew 21% from a year ago. Q3 ACV was up 15% year-over-year. As Ryan discussed earlier, our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates such as Influencer Marketing, Customer Care, Premium Analytics and now NewsWhip.

RPO totaled $357.1 million, up from $347.0 million as in Q2, representing growth of 15% year-over-year. We expect to recognize 72% or $258.5 million of total RPO as revenue over the next 12 months, representing cRPO growth of 17% year-over-year. Non-GAAP operating income totaled $13.7 million, which was ahead of the high end of our outlook. This was up from $7.5 million a year ago and equates to a non-GAAP operating margin of 11.9%, a quarterly record.

Looking ahead, we're increasing our full year guidance to reflect our 3Q results. I want to provide some additional context about the fourth quarter outlook. As mentioned earlier, Sprout delivered strong non-GAAP profitability in the quarter. This was driven in part by our continued focus on targeted investments in the business, but also in part by hiring cadence in the quarter.

With that, now on to guidance. For the fourth quarter of fiscal 2025, we expect revenue in the range of $118.2 million to $119.0 million. We expect non-GAAP operating income in the range of $9.5 million to $10.5 million. We expect a non-GAAP net income per share of between $0.15 and $0.17. This assumes approximately 59.3 million weighted average basic shares of common stock outstanding.

For the full year 2025, we are raising our guidance and now expect revenue in the range of $454.9 million to $455.7 million. We are also raising our non-GAAP operating income guidance and expect it to be in the range of $46.1 million to $47.1 million. We expect non-GAAP net income per share between $0.77 and $0.79, assuming approximately 58.6 million weighted average basic shares of common stock outstanding. We look forward to continuing to innovate and create more opportunities for our customers to grow with us.

We appreciate your interest in Sprout Social. And with that, Ryan, Alex and I are happy to take any of your questions. Operator?

[Operator Instructions] Your first question comes from the line of Raimo Lenschow with Barclays.

Congrats on another kind of solid quarter. If I look at -- Ryan, if I listen to your large product wins, it really shows the momentum upmarket. I'm just trying to kind of marry that now, like you've been stable on the revenue growth side, which is kind of really good to see. Like how do you think about inflections or the next step from here? Because on the one hand, it does look like in the overall market, you're doing a lot better and you're moving nicely upmarket, but we haven't really fully seen it in the numbers yet. Like how do I marry these two?

Raimo, thanks for the question. I appreciate it. And yes, to your point, we're really excited about the progress that we've been making upmarket. And you could see that in the $50,000 growth, and just the execution, whether it's the big deals and logos we had a chance to talk about or just the acceleration within the number of customers within that segment. We certainly got a lot of conviction in the size of the market and the value that we're adding to customers as we continue to see social becoming the primary place for things like product discovery and brand awareness and customer care and commerce.

And at the same time, we do have two distinct businesses with different dynamics. As we talked about this enterprise large business where we've seen a lot of success and higher ACV and great net dollar retention continues to grow. And then we have another side of the business where on the smaller side, continued pressure that we've seen with SMB and agency, again, mostly on the new business side. But as we know that, that part of the business tends to have less GRR than the other pieces. And that's been a drag on our overall growth rate.

Having said that, as we look at that opportunity, we know that the market size is large, and we do see opportunities with pricing and packaging and now with AI to be able to evolve the way that we're serving that part of the market. So feeling good about the upmarket and the growth. And to your point, see opportunities here to continue pressing on that other side of the business to push on the growth rate.

Okay. Perfect. And then Joe, for you, like profitability was the main highlight this quarter. Can you talk a little bit about the path here in terms of like was that timing? Was that like good underlying levels? Can you speak to that? Thank you and congrats from me.

Yes. Thank you, Raimo. Yes, we're pretty happy about the performance there, 460 basis points year-over-year. I think there's a couple of things that drove that. One, the overperformance on revenue definitely helped and contributed that to the bottom line. We're definitely getting more efficient in parts of the business. We're using AI internally as well, and that's helping drive margin in the business. And also, we just had a little bit of push on the margin -- on the hiring side into Q4. And so we got a little bit of benefit in Q3, which is probably going to pick itself up in Q4. But overall, I feel really good about the momentum that we're seeing in the business on the margin side.

That concludes our question-and-answer session. I will now turn the call back over to Ryan Barretto for closing remarks.

Thank you, Tiffany. I appreciate it. I know tonight is a very busy night in software. So thanks for those joining us, and I know we're catching up with a bunch of others later tonight. I want to also just ask folks to join us on November 18 for Breaking Ground where we will be doing our customer webinar, and we'll have a chance to show off our new agent. So really excited to see a bunch of you there. And then I want to end by thanking our team for their continued dedication and effort. I am incredibly grateful for all the work that you're doing for our customers and our business, and we look forward to spending time with all of you later. Have a great night. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Okay. Great. Well, great. Thanks so much, everyone, for joining today. We're really excited to have Joe Del Preto, CFO of Sprout Social; as well as Alex Kurtz, VP of Investor Relations and Corporate Development, to actually kick off the post keynotes part of the session. So you're one of the first sessions. So really happy to have you here, and thanks for coming.

Yes, happy to be here. Very excited.

Fantastic. So I guess maybe just to start, Joe, for those in the room who are a little bit less familiar with Sprout Social, what you're trying to build as a company, maybe just lay that out for people.

Yes. So I mean the original idea of Sprout and still holds true today, which is what the founders came to market with, which was similar to phone and e-mail, social was going to change the way brands and consumers interact. This was going to be a new communication channel. This is where people would go to learn about brands. This is where they would discover them. This is where they would complain about them. This is where they would say good things about them and then say, hey, by the way, this is going to be something as consumers were using social, but at some point, brands are going to have to find or need a platform that's going to allow them to interact with those consumers.

And if you think about it today, we integrate with over 3 dozen networks. We consume about 1 billion messages a day. And this is the #1 place where consumers are going to learn about brands, right? This is -- I think over 50% of people, before they buy something, are checking social first. The average person on social spends 2.5 hours a day on social, which is kind of crazy. And so the idea there was like, hey, by the way, whether you're going there to -- if you're a brand, you want to market on social, you want to reach different consumers at different places, whether it's social customer care, whether it's all the data and analytics, which we'll get into, but basically, the overarching idea was this is going to be the next communication channel between brands and consumers.

Great. That's really helpful. And Joe, you've been at Sprout since 2017. Maybe just talk a little bit about your career journey. What led you to Sprout? And then what maybe -- I mean, you've been through a lot of different iterations of Sprout over your time at the company. And so maybe where are we today from your perspective? What have you learned about that throughout that journey?

Yes, for sure. So when I started at Sprout, it was about a $50 million revenue business. And so as you know, we're well over $400 million now. And so prior to Sprout, I spent most of my career at mid-stage fast-growing businesses like in the software technology services type of space, companies that were started out in the smaller end but then upscaling very large. I was at -- Sprout is the fourth company I've been at that was a private company that went public. So I had a lot of experience navigating that transition between, okay, when you're a small private company, you've got VC and PE money, and then you eventually become a public company and then running and working at these public companies for many years.

And so what attracted me at Sprout, which is probably still the case today for me, which is when I met with Justyn and Aaron, 2 of the original co-founders and some of the smartest people I've ever met, most motivated people, probably the most humble people. And even Ryan Barretto, our current CEO, was there at the time as well and the same thing, like super impressive people but very low egos. That's really how Sprout has been built over the years. And that's really what's kept me there, and what really drew me to this company was like, hey, we're building something really cool. Was a big believer in the space. I was a believer that, hey, by the way, I do think social is going to change the way brands and consumers interact. And these -- the people I'm working with have -- they just have those characteristics.

And so I think what gets me excited, to your question, about -- the same thing that got me excited when I started at Sprout is -- what gets me excited and why I'm still there is as consumers, we've been using social for a very long time, but as far as businesses adopting platforms like Sprout, we're still very, very early. And so we forget sometimes social moves very quickly on the consumer side, but for brands, there are very few businesses that have adopted a platform like Sprout.

There's 200 million businesses on social. Us and our competitors maybe have 200,000 businesses total. So you think about the market opportunity. It's pretty massive, but we're still very early stage as far as where the market is from a maturity standpoint. So what gets me excited about Sprout is like we're still very early on this journey. And that's why I love staying at Sprout, and that's why I really enjoy what we're building here.

That's great. And then, Alex, you've joined relatively recently. So maybe talk about your career path. I know you've been at other public companies before. And what is different about Sprout from your perspective?

Yes. So joined, what, last October. So I was actually on the sell side for 15 years, covering software and other infrastructure companies. And then I helped take a company called HashiCorp public back in '21, which was quite an experience. And then so I had actually helped take Sprout public when I was at KeyBanc covering the stock. So I had known Joe and Ryan and Justyn years ago. So when the timing came together, it was a really good opportunity to jump onboard because, as Joe said, I think the opportunity ahead for social is very, very early. And so I think joining the company along with a great group of people was a no-brainer for me.

Okay. Fantastic. Before digging in further on the business, I just want to touch on the most recent quarter. You had acceleration in large customer adds, seems to be fitting with that upmarket strategy that you've been talking about for a number of quarters now, though forward-looking indicators did decelerate a bit. You attributed this to seasonality. Maybe just give us some more details on this dynamic and then what you're expecting from your customer base ahead of a -- what is supposed to be an enterprise-heavy renewal cycle in the second half.

Yes. So for those that aren't familiar, the business really grew up more down market, right? So a lot of month-to-month kind of contracts. And over the last 3 or 4 years, as we move more upmarket, we're moving away from more month to month to more annual and multiyear. But we still -- even on the enterprise side, they're still mostly annual deals. So what that means is we signed a lot of deals in Q3 and Q4. So we're still second half pretty heavy, but because we're not signing as many multiyear deals yet, those deals kind of burn off in the first couple of quarters. So some of the forward leading indicators like you maybe talked about like the cRPO and billings in the first couple of quarters always seem a little softer.

But then when you get into the second half, when you get to the renewal of those deals from last year, we do a lot of business in Q3 and Q4, I think what you're going to see, Adam, is you'll see those metrics kind of turn back around, and they'll look really solid. We feel really good about those metrics looking really strong in the back half. And so that's kind of the dynamic that's going on our business, is we've got to start moving more to multiyear deals. We've moved away from month to month, which is great, more annual, but we need to start moving more into the multiyear deals as we get even more upmarket.

Okay. Got it. And then you mentioned sort of the 200 million businesses on social, and you mentioned that there's a massive gap between what you're serving and what that opportunity is. Maybe just talk a little bit about why that gap exists now that we're so far -- I mean, I remember doing my space so many years ago, and then it was Facebook and it was Instagram and TikTok. And I think a lot of investors have the question of what is going to cause this market to inflect from your perspective. How would you think about that?

There's a couple of things that are going on. If you think about -- over the last like, let's say, 10 years, most -- and let's just start with the marketing use case for example. Most marketing organizations have been built on traditional marketing strategies. And think about the people that are running those organizations. They did not grow up social first, right? They grew up in the SEO, SEM, offline advertising space. So a lot of these larger organizations, their whole team and everything built -- that they built their organization around has been built off of these more traditional, what we would call advertising approaches or marketing approaches.

Now what's happening or what you're going to see happen is 5 to 7 years -- 5 to 10 years ago, when we were selling into a marketing organization, we were probably selling into like the social media team, which is probably the intern or the youngest person on the team 10 years ago, right? What you've seen over the last 10 years, and this is why we get excited over the next 5 years is now those folks are finally becoming like the VPs. Some of them have started becoming CMOs. And so we believe there's a couple of things going on in the world or in the market that's going to really help us.

One is there's more and more folks that grew up social first. They're going to start becoming leaders, and they're starting to become leaders in the organization. And they recognize, for example, the importance of social to their strategy. Number two is the consumer behavior continues to shift, right? You've seen a lot of, even more recently, more and more search moving away from your traditional paid or SEO, SEM methods and more and more folks going to social to search. And a lot of that's caused the disruption of some of these AI companies.

But what we believe, there's 2 things over the next 5 years that are going to really help us. One is the leaders of these organizations grew up social first, and then the consumer behavior continues to shift more and more away from the traditional kind of where they're finding brands. And so I think those 2 things will really help us. But a lot of these organizations, look at one of these large organizations, and you'd be surprised that they're very mature enterprises that have very, I would say, nascent social strategies even today, which would surprise you. But that's because the people on their teams just did not grow up in that kind of social environment.

Understood. No, that makes a lot of sense. And then I think it's a natural segue to the way the world is changing, AI. It almost feels like when we're talking about this gap and why it existed historically, it might not even matter in the next 5 to 10 years. And so talk about what your strategy is. What are you doing internally with AI? How are you embedding it in your product?

Yes. So I think the thing that gets us excited about the AI side of this for us is we're one of the very few -- there's probably a handful of companies that have access to the social networks' data and APIs, right? Like we have a pretty big moat around the industry because, like I said earlier, we integrate with over 3 dozen networks, 1 billion messages a day, and there's only a handful of us that have that access.

And if you think about it, a lot of these folks that we integrate with are not going to be sharing data with any of the major AI players. For example, Google is not going to give all their YouTube data to Meta, right? Meta is not going to give all their data to OpenAI because they're all trying to build their own. And so we kind of sit as Switzerland. And so what does that mean for us? That means is that we then use -- for example, we use OpenAI, we use cloud, and we use that to run the -- with all the social data that we have, we can then take that and apply our own AI against it. And what does that mean?

That means -- I'll take a very basic example. Let's say, historically, there was -- or let's say there's an issue brewing with a -- like a brand's got a customer service issue brewing somewhere. Let's say there's a product recall or people are getting sick. Historically, what happened is that would pop up and then there'd be all this internal communications that have to figure out what's going on.

What we can do now, for example, is say, okay, we can automatically identify the situation. We see a bunch of support tickets coming up. We can then notify immediately the marketing organization that, hey, by the way, there's an issue blowing up on TikTok. There's an issue blowing up on Instagram. And at the same time to AI, we can then say, okay, by the way, here's suggested responses. Here's where you should deal with it. This is the part of the -- here's the part -- like, hey, this is a big deal on Instagram. It's -- we're not seeing this on Facebook. We're not seeing this on Reddit or maybe this is a completely Reddit issue. So what we can do is because we have all this data, we can very quickly, in that example, use AI to come across and tell you what you should be doing like real time versus, oh, by the way, I have to really be monitoring that on my own and understanding what's going on.

Yes. And I think it's a really good segue actually into NewsWhip, which you just acquired. Talk about what that adds for you. What -- in particular, what does it do that you weren't able to do before?

Yes. And maybe I'll let Alex, since Alex worked on that deal, kind of talk to the NewsWhip.

Yes. We're super excited about it. It's a really neat company. So we've always been getting feedback from our customers that we needed a real-time component to our listening products, right? So our listening products are really deep and wide. They capture a lot of data. They give very thematic, very detailed analysis and reporting to a customer. But to be able to identify a problem real time within minutes of something breaking on social, this is really where NewsWhip comes in.

So they have a very wide net of -- they track a lot of different platforms with articles and press and media. And then they attach all the kind of social interactions to all that content, right? So they actually have a dashboard that can show you real time if an article is good or an article is bad. It can be predictive. So if you're in a PR and comms team, you can see within -- by the hour and by the minute if this thing is going to roll over or this thing is going to become a bigger issue for you and how to act against it. So that was something that was really -- in the UI is beautiful. So all of it really worked well for us. We saw that as a road map fit for us and like something that our reps could sell pretty quickly. So we've been pretty happy with the fit so far.

Yes. And I think one thing that -- we've seen a lot of momentum on to what Alex was hitting on, is this overlap between traditional journalism and social. So what you're seeing is you see these articles pop up in a local newspaper, for example, and then all of a sudden, they're trending very quickly on Instagram. They're trending really quickly on Reddit or vice versa. You now see journalists going into social to find articles. Like they'll go deep in Reddit and find something, and then they'll go write an article on it.

What NewsWhip did, to Alex' point, is they -- it's the intersection of those 2 things. So they can say, oh, by the way, there's this local article that just got written in Kansas City. It's popping up on YouTube. You better deal with this right now because we have enough data and analytics to say this is going this way. And so it's really interesting because we think there's this overlap between all the traditional online media sources and social, and they're solving for that overlap.

And how are companies dealing with this like sort of crisis management prior to something like this?

Yes. So a lot of the times, if they weren't using a tool like NewsWhip, it would -- it was already after it blew up, right? Oh, by the way, this thing blew up on us, and we didn't even know it. And oh, by the way, now we're on our heels. And now we're trying to figure out where this problem is the biggest. What networks is it on? Is this just a traditional media issue? Or is this actually blowing up on social? And so historically, they would just be caught flat-footed and be reactive.

What we're -- what NewsWhip will do is they'll get ahead of it for you and say, oh, by the way, you need to get ahead of this. And also like positively as well, you should go -- you can go to their website and see some of their customer stories. They have a really interesting customer story. Ford is one of their big clients, and they have a really positive scenario where there was this big power outage, and basically, the local folks were using their like electric F-150s to help provide power. And Ford was able to -- NewsWhip to understand this was happening, this really -- like this was happening like real time within minutes. And then they could go ahead and promote that across the neighborhoods and the locations because this was happening. So it's not just necessarily always negative or crisis. Sometimes it can be a very positive thing that they're trying to promote.

Okay. Understood. Really helpful. I think it's a really good segue into the question we've all been talking about for the last 1 to 2 months, which is this question of the death of software, right? And we've seen the frontier models, generative AI more broadly, just a lot of commentary around what applications they may be able to come in and take care of themselves and displace at lower cost, something I'm not saying like Sprout. But I'm just curious how you think about your defensibility and moat in a scenario where those companies do start to build out an application layer themselves.

Yes. I think, for us -- and I mentioned this a little earlier. I think the unique place we sit is the access to the actual data, right? It would be really hard for an AI company to come in and disrupt us because they don't have access to all the data, and they don't have access to the APIs. And most of the networks or all the networks over the last 5 years actually downsized the number of folks that they're giving the data to for a couple of reasons.

One is GDPR issues, privacy issues. Number two is they don't want people building their own very proprietary tools off of their social data that they believe is like -- remember, they use that for all their paid targeting, and like that's how they run their business. They've given it to us because they're like, okay, Sprout, you're 1 of the 4, 5 companies that is kind of agnostic. We're not trying to, for example, monetize that data directly. We're providing it to our customers who are their advertisers. And so one of the reasons we feel like we've got a pretty big moat around the kind of the AI -- the new AI companies is they're just not going to have access to the data.

I would just add, we also have 10-plus years of working with really large sets of data across social media, right, that can't be replicated by an AI tool like in a matter of days, right? So petabytes and petabytes of data, 1 billion messages a day, all this stuff that we've been normalizing and building into all of our data warehousing inside of Sprout. We think there's a lot of value in that and I think really strong moat to the business because we're allowing customers to interact with that data that's very rich, very deep with a lot of context to it that we think is pretty proprietary.

Okay. And maybe just give -- for investors who might not be as familiar, just maybe a little bit more detailed breakdown of what the difference is of a random company that wants to use an API to get certain low levels of Facebook or X data or something like that versus what you have access to? What's the fundamental difference?

The fundamental difference is like if you call up, for example, Meta tomorrow and say I want to access, the full firehose of all your data, they're just not going to do that. They won't even pick up the phone, right? They're going to be like, okay, what security do you have. How many customers do you have? Are my advertisers -- like their whole thing is are my advertisers actually using your platform or not.

And so the problem is because we have almost 30,000 customers in over 100 countries, we're at a size and scale now where if you're a small company starting up and you don't have any size or scale, they're not even going to pick up the phone. And then number two is like what's your security around all this data information. What are you actually doing with it? Are you actually repackaging and selling it? Because that's where all the networks have really clamped down tremendously, is like, hey, if you're just repackaging my data and selling it out and you're not actually helping facilitate their advertisers -- remember, all our customers are their advertisers. And so there's a real synergy between what we're trying to do for them versus what someone else might be trying to do. And so because of that, you couldn't even call them up to get the access to the data at this point.

Okay. That's really, really helpful. Very helpful color there. Want to dig in on the business. And I know we've talked a lot about AI, but let's go back to the traditional metrics and traditional life cycle. So just in terms of the enterprises, what do those conversations look like? Where do you land a customer? And then what does that upsell/cross-sell process look like when we think about net retention expansion, et cetera?

Yes. So that's evolved over time. I would say if you went back 4 or 5 years ago, when you were going into these enterprises, you might land with like the social media team. Maybe there were a couple of people, and you kind of started in a traditional kind of marketing use case. Oh, by the way, I'm on -- 95% of our customers are on fiber or more networks. So I'm on a bunch of different networks, and I've got to understand -- like I want to make sure I'm engaging with the right audience at the right time of day on these different networks. So it's the old -- like the original marketing use case.

Now what happens is, as that evolved over time, that could still be the core use case, but when you're going into these organizations, it's probably -- they probably have a whole social -- if they're sophisticated enough where they're calling us up. So I'm getting past, like I said earlier, like the sophistication level. So now I'm going into customers that are actually -- where social actually is their strategy, right? They have the resources. They have like the intention that they're -- like social is strategic to them.

They'll have a team of marketers usually. But sometimes now, Adam, we'll go in there and it might be a customer care use case. Oh, by the way, we're getting flooded with -- if they do a really good job on social, most people these days aren't going to e-mail or the 1-800 number. They're usually going to social. And so sometimes now they'll come in the front door saying, hey, by the way, I've got thousands of thousands of support tickets coming in on social. I need help.

So sometimes it could be support. Sometimes it could be marketing. But what's happening now is it's such a decentralized buying process in a lot of these large organizations, so back to your question. So like, for example, Honda is one of our clients. They have -- there's 32 different divisions at Honda. We landed our first division like 1.5 years ago, and now we're trying to find our way across the rest of Honda.

So usually, what happens is on these large enterprises broken down by brand or by geo, and then if we know we can get in, in one of those brands or geos, we've gone through a procurement, we've got the MSA signed, we've gotten through the finance work, then we can go out -- well, our team does. Your thing about expansion is we'll try to go out across the different parts of the organization or then we might come back with some of our additional modules that we have, social listening, NewsWhip, influencer marketing, which we haven't talked about. So then what we'll do is we'll expand not only across the different business units but also with some of our products.

University is -- higher ed is a great one. University is a huge vertical for us. And we might land at like Ohio State University in like the School of Music. And then we'll go into the business school and the law school because a lot of these organizations are -- there's not a centralized budget. And so that's usually how we expand as we can get in there and then go across different parts of the org.

Okay. Very helpful. And then you've been a couple of years now into really prioritizing that enterprise motion. And I remember when we were first talking about it when that shift -- we wouldn't even have to call it a shift. But as you started to focus on that piece of the business more, started to really take shape, I remember you telling me like there's a lot we have to learn as we go through and we do this at a much bigger scale. So maybe talk about what you've learned about the enterprise sales motion, good and bad.

Yes, yes. I'd say what we've learned is a couple of things. One is, like I said earlier, like there's definitely way more process as it relates to procurement and finance versus when you're down market, the practitioner can probably make the decision and buy that thing pretty quickly. As you move upmarket, the folks that are in the software every day, they want the software, but then they have to go convince -- they might have to convince the more senior executives in the team.

So what we've realized is when we go to these accounts -- and this is pretty common for most enterprise sales, which is we've got to make sure we've got the CMO bought in or whoever the head of customer support. Whoever is ultimately the decision-maker, we have to make sure they understand the problems we're solving. So we have to do more value selling than like feature selling.

When you're down market, it's like, okay, a handful of features probably make the difference. When you get upmarket, it's like, okay, make sure you understand the problem you're trying to solve and make sure you understand like what's the return on this investment they're going to make. And so it's a much -- like you have to have enterprise sales reps that understand you're solving a much bigger problem and not just trying to trade off this feature for that feature, which is more of like kind of probably the hand-to-hand combat that you get more down market.

So we've really learned that you've got to have that type of enterprise sales rep that understands how to navigate that. And so I think, which is more on the bad side, which is you got to figure that out, right? You don't -- like that's part of these organizations, is -- and then you also have to figure out in the space we're in, to what I was saying earlier, how mature is it. Like how much are they bought in the social? Do they already have -- do they have one of our competitors? Because if they have one of our competitors, then we know that they've already allocated budget to this.

And then we can go hard at it. We don't have to have that discussion of like, oh, by the way, is this something you already have in your budget or not, especially in today's buying environment. And so we also have to try to figure that out as well as making sure we understand where they are from a financial standpoint.

And where are you in that journey of, hey, we now understand we have to go to the -- help the CMO understand why they need this from a value perspective? I know you're not going to be obviously having a discussion with every CMO. But how do you feel about where you are today in that part of the buying situation?

Yes, I think we're getting a lot better. I think we have room to grow there. I think one thing -- what we're realizing is the amount of data and if you look at some of the analytics and the data we can provide with influencer marketing information and some of the social listening and some of the NewsWhip data, what we're finding is we can package up a lot of these reports and then we can deliver them to the CMOs. Hey, by the way, did you know this was happening with your brand? Did you understand this was the sentiment?

So usually, what we find with the CMOs and how to get in front of them more is with the data and reports, right? Like the day-to-day stuff, yes, the practitioners need to be doing that. But what they really care about is like what's the report if I'm a CMO that I can show my CEO. So we try to package up for the CMO is like here's a 1- or 2-page deck that you could deliver to your CEO to tell you the impact that social is having on the organization because that's what they really care about. So that's what we try to do as we're moving more upmarket, but we're still, I would say, pretty early in that journey.

Okay. That's great. And then just getting into the details around the growth algorithm. When you think about the mix of net new customers versus expansion versus seat additions, how should we think about that breakdown versus maybe what it's been historically? And where do you think there's maybe the most upside levers as you go into the next couple of years?

I mean over the next couple of years, the new logos is still going to be the bigger driver of growth and expansion. And most of it comes down to -- is what we talked about earlier, which is there's just a huge amount of like TAM out there that's just like we go in a lot of these businesses and they just don't have a platform at all. So like new logos will still be more than half of the way we grow over the next couple of years.

But I do think as we get more as a more mature software company, as you know, once you get to a certain size and scale, then I do think the expansion kind of then overtakes that, right? Like, okay, you get to a point where you can go into these organizations and really expand across the organization, but in the near term, it's definitely going to be more new logos just because it's a pretty big market. And we serve SMB up into enterprise, and so if you get below the high-end enterprise, it's a lot of, what I would say, folks that don't have a platform like Sprout or maybe they have a couple like point solutions, and we can help consolidate those point solutions.

And so that, to me, is what gets me excited, is that there's this huge opportunity on the new logo side. And although we are definitely focused, don't get me wrong, on expansion and the team is focused on that, a lot of what we want to make sure we're capturing is this broader market that's out there.

Okay. Very helpful. And I think that's a good segue into competition, right? And I know you have one big competitor upmarket. There are a number of them down market. How do you see yourself competing with those different players today?

Yes. So when we get upmarket, I think one of the things that kind of separates us from our main competitors upmarket is all 30,000 of our customers are on a single code base. And so what that means is when the -- especially in a space where the networks move very quickly and there's API changes happening all the time. There's new features rolling out all the time. So when one of those networks makes a change, for example, we apply to all 30,000 customers, get that change the next day. Most of our competitors upmarket were built over very -- either via acquisition or built very siloed experiences to solve their every use case. So like, for example -- Instagram makes a change for example. It might take them a month or 2 to get that change because they have to go call professional services. Our competitors upmarket are very heavy professional services, 9 to 12 implementations, a lot of hands-on to be able to get something up and running.

For us, it does -- like the up and running is within days and weeks. Like we're the only one upmarket that even in these large enterprises, you can go try our product. You can use all -- you can add dozens of users. You can use all the advanced features, and you can actually make sure the product works the way you want it to before you buy it, where none of our competitors can do that.

And so the biggest differentiator upmarket is that ease of use and the fact that all of the different things sit together. And like I mentioned earlier, in social, it's very important, for example, like, hey, if there's an issue blowing up on the care side, I want to real time be able to make sure my marketing team knows that right away. And in our platform, that's very seamless because, like I said, it's all on the same code base and the marketing can instantly understand what's going on in the care side and vice versa. And so that, when you get into these large enterprises, really matters within these organizations.

So I think that's probably the biggest advantage we have when we go upmarket. When we go down market, the thing is, for us, especially down market is a lot of the down market players are solving for maybe a couple of networks, 1 or 2 networks. They don't take all the data like we do in the back end and create it all into one single inbox.

So let's say, you're on 5 or more networks and you've got all these different networks you're trying to deal with, a lot of our competitors have siloed those networks in different experiences down market because it's much easier to do that, where we're aggregating that data. So the biggest advantage we have down market especially is that we aggregate all that information for you. And so it's just much easier.

Like if you're a 1-person shop down market or you only have 2 users, you can do all that in Sprout. It becomes really hard to do that with our competitors because their software is much harder to use if you're on more than a couple of networks. If you're only on 1 or 2 networks, probably don't need Sprout. And so usually, like if we're down market and we're going against one of our competitors down market and the customer only is on a couple of networks and they want to pay what Sprout costs, we're also more expensive down market, then they're probably going to go with one of our low-cost competitors.

Yes. No, that makes total sense. And then I know you've announced sort of an increase in sales investments in fiscal '25. Could you just maybe talk about the interplay between what is the right -- and you don't have to give a number, but just the right way to think about the quota you want your carriers to hit versus the actual capacity of sales that you need? And what makes you make the decision to say we need more sales capacity versus not? And I think this is just a question coming from the perspective of what -- how do you think about margin progression and margin expansion as you grow revenue?

Yes. So the -- we're really big internally on the efficiency of the sales and marketing. We measure it on a weekly, monthly, quarterly basis pretty aggressively. And a lot of that is because we grew up and still a lot of -- part of this is all driven inbound. We have so much data and information. We understand, for example, SMB up into the enterprise. We understand after 3 months, how well -- how should this rep be performing after 6 months, after 9 months, after 12 months. We have a lot of hits. We understand the success -- we can tell very early on whether or not a rep or an AE is going to be successful if they're on the right trajectory given how long we've been doing this.

Like -- and so what we do internally is when we see those metrics moving in the right direction and we see, oh, by the way, these folks are ramping faster, there's enough demand, then we -- and normally, what we do is we hire behind that, right? Because we're using the data and the information to drive the way we hire folks depending on what we're seeing on the customer side. And that's because -- like I said, a lot of that is inbound. So we get folks in the trial even up in the enterprise. We understand like, hey, how are these sales cycles maturing? What's the level of SDRs and BDRs we need. And so internally, it's all driven by the data and the information. We're not just, for example, hiring a bunch of AEs, account executives, and saying, okay, we hope you're successful.

Yes, that's crazy.

It's like we just never been run that way. It's -- we're always following the data.

Okay. No, that's great. And then just spend a couple of minutes on influencer marketing with the Tagger product that's now integrated. How is that going? And what's the value prop that your customers are seeing there now that's maybe a little bit different than when you first bought Tagger?

Yes. What I would say -- well, first of all, it's our fastest-growing product granted it's off a smaller base. We believe this is where like a lot of buying decisions are moving. I think already today, I think 49% of consumers say that they were influenced by a creator before they bought a product, right? And let's just think about the demographics of who the consumers are. As that changes, I think creators are becoming more and more important.

And what our influencer marketing product did that's different than the other ones is it allows brands to find all the micro influencers, the smaller influencers. Like the large influencers, like the big celebrities, like that, the ROI on that is not very strong. What these brands want to understand is who are all the smaller influencers in these different areas, in these different geos. Like, let's say, I'm a big golfer. Who are the local folks in my area? Who do I follow?

And what influencer -- what Tagger product allows you to do is it allows you to search for those, type in any search what you want. It brings up all their videos. You can see their content. You can see what their engagement is. You can actually see how much they charge because we keep all of that information. And then you could also -- we launched recently all this brand safety. So let's say, for example, I'm looking for -- I'm in the kids toy business, and I want to search for an influencer. I can put in certain safety words say, hey, have they ever talked about alcohol. Do they do have anything about drugs? Like you can basically make sure that you're not going to hire some creator -- a lot of brands are worried about hiring a creator that's got some like bad history of videos they've done.

What we've done is we can get all their videos and say, hey, this person is a very good brand match for you. And so that's really one of the powers of the platform, is the searchability is a big deal for them. And then it allows them to run their campaigns and do that all as well, gives you all the analytics, can tell you like the return on this investment on this creator versus this creator. And so we feel like there's a huge opportunity in this space.

We've also seen what surprised us is it makes a lot of sense for like your typical like retail brand. But what we found is we have like hospital groups that use us to run like their not-for-profit campaigns using influence. We've seen like big real estate companies that are opening up buildings and they want to have -- like it's amazing the industries that we've seen this product resonate with is more than what we originally thought like we thought. It doesn't go across all these other verticals, but it's pretty impressive, the different verticals that you'll see folks buying this product in.

Yes. That's really helpful. I know we're cognizant of time. I want to just quickly touch on the macro. I know you mentioned elongated sales cycles, that sort of thing. How is that impacting your business? What are you seeing out in the market? And as we think about future years, what are you hoping to see to help you reaccelerate growth?

Yes. We haven't -- the macro hasn't changed that much over the last probably 3 or 4 quarters. So what we saw probably mid last year coming through today is we've been operating in a pretty consistent macro environment. Most of the impact we're seeing is on the new business side when there's -- what I said earlier, when there's not a budget already allocated, right? Like if there's a budget, they have our competitors, they're invested, we're seeing a lot of success.

In the tougher macro now it's like, okay, we've got to go create new budget for this product, right? We don't have something already in-house. And now I've got to go internally and make sure that I can justify like spending the next new dollar. That's probably the pressure we see on the macro, and that hasn't changed a lot. So no major change from our standpoint.

Okay. Great. And then for both of you, just in the last 15 seconds here, what are you both most excited about over the next year or 2 with Sprout?

Go ahead, Alex.

I just think everything we're doing with data, right? I think the NewsWhip acquisition, the existing listing capabilities and being able to execute against our large data sets, I think, is pretty exciting.

Yes. I think the one thing I'll add to that is I do think there's a shift happening. More and more consumers are going to social for search. And I think this trend is going to start to continue. We've got customers coming to us and saying, hey, by the way, the same search words I used to see in Google, I'm now seeing in YouTube. I'm now seeing it in Instagram. And so I do think there's this shift happening because there are already a lot of consumers going to social and learning about brands, but I think you're going to see more and more move that way.

Fantastic. Joe, Alex, thanks so much for being here. Appreciate it. Thank you.

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social Second Quarter 2025 Earnings Call.

I would now like to turn the call over to Alex Kurtz, Vice President of Investor Relations, Corporate Development. Please go ahead.

Thank you, operator, and welcome to Sprout Social's Second Quarter 2025 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 Barretto; and CFO, Joe Del Preto. 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 Q3 and 2025 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 a discussion of these 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 31, 2024, as well as our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2025, 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 the reconciliations to the most directly comparable GAAP financial measures are included in our second quarter earnings release, which has been 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 to our second quarter earnings call for fiscal 2025. We reported second quarter results with revenue of $111.8 million, representing year-over-year growth of 12% and non-GAAP operating margin expansion of almost 400 basis points. Our current remaining performance obligations, which reached $251.6 million, represented 18% year-over-year growth.

Our go-to-market delivered another solid quarter with 18% growth in the $50,000 and above ARR customer cohort. We landed strategic wins with global brands like Honda, Cigna, Kimberly-Clark, Authentic Brands Group, LaCroix, Smuckers, the U.S. Department of Transportation and Texas Tech. These customers demonstrate our continued execution and strategic fit with the most socially sophisticated enterprise customers.

During the quarter, Sprout continued to earn industry recognition. We secured 164 leader badges in G2's latest reports with top rankings in enterprise social media suites, analytics and customer service across North America, EMEA and APAC.

We also earned TrustRadius 2025 top-rated awards in 8 categories, including social media marketing, audience intelligence and online reputation management, reinforcing the meaningful business outcomes our customers achieve with Sprout. Additionally, we received Silver for Best Influencer Marketing platform at the Global Influencer Marketing Awards and a Silver Shorty Award in the micro Influencer Strategy category for our own innovative influencer strategy that turned Sprout's listening data into thought leadership and helped shape industry conversations.

Today, I'm excited to begin by discussing our recent acquisition of NewsWhip, a leader in AI-powered predictive media intelligence. Headquartered in Dublin, Ireland, NewsWhip was a privately held company with approximately 70 employees, and we couldn't be more excited to welcome the team to Sprout.

NewsWhip has become a mission-critical tool for some of the largest global brands, media companies and agencies for crisis management, real-time media monitoring, research and strategy. Strategic customers such as Nissan, The Associated Press, a Fortune 50 media company, 2 Fortune 50 technology companies and a Fortune 100 consumer beverage company, all rely on NewsWhip for real-time monitoring of news articles, social posts and other media related to their brand, products and their competitors.

I want to outline our strategic rationale for acquiring NewsWhip and why we see this as a pivotal milestone that, combined with our existing product road map, will drive unique crisis management, trend detection and AI offerings from Sprout over the next several years.

First, NewsWhip's AI-powered predictive media intelligence can help identify which stories and narratives are about to go viral. This has become mission-critical for brands as news stories can quickly escalate across various social media platforms. NewsWhip provides 3 core values: real-time alerts and predictive analysis, key insights into emerging trends and conversations and sophisticated AI alerting capabilities that are leveraged by crisis management teams and the C-suite.

Over time, we expect to enable early crisis detection from NewsWhip to seamlessly flow to customer care teams working in the Sprout platform, creating a truly differentiated end-to-end experience, which transforms insights into action. We also believe integrating NewsWhip's capabilities with Sprout's listing products and its extensive social interaction data will create a comprehensive 360-degree view of social and media ecosystems.

Together, we will combine predictive media intelligence with agile social action to drive impactful earned, owned and paid media strategies. This integrated approach will enable real-time trend detection, targeted engagement and clear ROI reporting, delivering measurable outcomes for businesses.

During the second quarter, NewsWhip launched its AI agents, which have garnered strong interest among NewsWhip's larger customers with over 70% of brand customers leveraging them in just over a month. NewsWhip's AI agents proactively scan global news and social data, identifying stories and themes gaining momentum before they peak and giving brands the strategic edge to own the narrative.

With the massive volumes these brands have to manage, these agents are designed to separate the signal from the noise and to drive clear efficiency for practitioners while also ensuring they never miss a critical moment. NewsWhip will enable Sprout to enter the mission-critical PR and crisis monitoring space with a new offering. These are potentially new buyers for Sprout, both new logos to Sprout as well as growth opportunities within our existing customers. In both cases, these are often groups of long-standing dedicated budgets. We're incredibly excited to discuss NewsWhip's capabilities with them in the coming weeks and months.

While there is some minimal customer overlap, we believe Sprout's full go-to-market distribution will accelerate these opportunities. We also believe that NewsWhip can further strengthen our gross retention goals among larger enterprise customers given its stickiness with crisis management teams. NewsWhip has built an impressive list of top-tier customers over the last 10 years with contract sizes often at the higher end of Sprout's customer TCV range.

Finally, we are thrilled about the future impact we expect the NewsWhip team members will have at Sprout. This agile team has built a must-have tool for some of the biggest brands, and we've been really impressed with the NewsWhip engineering talent shaping the future of AI-driven real-time media monitoring. I'm also pleased to share that NewsWhip's Co-Founder and CEO, Paul Quigley, will step into the role of General Manager for our Listening business, overseeing both NewsWhip and Sprouts listening products. Paul is a great executive and will be a tremendous asset in leading this critical part of our business moving forward.

Before handing the call to Joe, let me briefly take you through some customer wins and our 4 key growth drivers that include: winning the enterprise, driving customer health and adoption, expanding our partnership and ecosystem and driving improved account penetration. To win the enterprise, we intend to expand the pipeline, close more 50,000-plus deals and accelerate adoption with a product road map built for enterprise needs.

Let's start with the key product releases in the quarter. For influencer marketing, we reimagined our influencer marketing platform, now featuring a refreshed design and advanced AI-driven capabilities. As social media becomes central to brand discovery, influencer marketing is an increasingly important strategy to drive ROI. Key updates include: AI-powered natural language discovery for search, driving more authentic and impactful activations, a customizable brand safety solution to align creators with brand values and a new creator vetting feature that drastically reduces time spent in discovery so brands can refocus on their more strategic creative tasks.

In Care, we introduced innovations for proactive customer engagement through enhanced efficiency and smarter workflows. With the introduction of [ Queeues ], Care teams can easily organize high volumes of inbound customer interactions by urgency, topic or customer segment, significantly reducing response times and ensuring critical conversations receive immediate attention.

Additionally, new bot integrations and AI enhancements automate routine interactions, proactively resolve customer issues and free up care agents to focus on higher-value tasks. These innovations mean faster resolution times with increased agent productivity and more tailored and effective support for customers, ultimately cultivating greater customer satisfaction and loyalty.

Social media has become central to product discovery and purchasing, which means brands must deliver fast, personalized social care across platforms or risk losing vital customer trust and business. In fact, 73% of consumers say they will buy from a competitor if a brand doesn't reply to them on social. While reactive support is expected, the new innovations in care by Sprout empowers brands to deliver proactive care, turning positive interactions into business assets that build loyalty and attract new customers.

For governance, we enhanced brand safety and customer data handling with the launch of our new product, Guardian by Sprout Social. Guardian supercharges social customer care and social media management with innovative AI-driven tools that reduce brand risk, helping our customers securely and confidently handle their customer data. Guardian is a huge asset for security conscious and highly regulated industries, providing features like blocked words, data masking and secure forms.

We're also pleased to share several strategic enterprise wins this quarter. The first win was a 7-figure new business deal with a global brand management company, consolidating their marketing, care and customer experience under one tech stack. With Premier Success, listening and premium analytics, they can unify social strategy across 50-plus brands, ensuring consistent governance and workflows. They can also boost efficiency with powerful and intuitive reporting tools while reducing costs and complexity by consolidating their social management, publishing and analytics into a single platform.

The next story we want to highlight is an almost $900,000 expansion deal with a global health technology company that switched from a competitor due to its overly complex workflows. They were seeking a seamless care agent workflow with their Service Cloud integration. With Sprout, this company can amplify its brand messaging with over 60 publishers and 15,000 advocates, expanding reach and boosting brand awareness.

Sprout also enables real-time insights for deep customer behavioral analysis. Our Service Cloud integration allows them to manage 90,000 customer support requests per month to increase customer satisfaction. They can also safely host data in the EU in a compliant manner, which is critical in a highly regulated industry.

This final customer story is a $360,000 expansion win, highlighting the growth opportunities that exist within our customer base. This Fortune 500 global health care company, already a 7-figure Sprout customer for marketing, care and customer experience, expanded to include Listening, Premium Analytics, Influencer Marketing and Employee Advocacy. They are now able to unify social efforts globally for consistent brand messaging worldwide and to elevate brand reputation by tracking sentiment and covering key drivers of perception and benchmarking against competitors in real-time.

Our second growth driver is a sharper focus on customer health, onboarding and adoption to maximize long-term value. This quarter, we introduced 2 new support offerings, Accelerated Support and Accelerated Support Plus, while also enhancing our existing Premier Success Light offering. Features include 2-hour response times and access to a dedicated customer experience specialists. Since launch, these offerings have gained strong traction, driving new deals and significant interest across our Premier Support suite.

Our third driver is our continued investment in our partnerships with strong global partners that bring Sprout into strategic accounts and expand our reach into some of the largest digital marketing budgets. We continue to ramp our partnership activities through the first half of 2025. As we mentioned last quarter, our social network, technical integrations and go-to-market partnerships provide what we believe is a lasting competitive advantage in the market.

As we move into the second half of the year, we'll be expanding our partnerships and capabilities across key networks, including publishing, reporting and listening capabilities with Blue Sky, engagement and reporting with Reddit, listing with TikTok and building out personal profile reporting with LinkedIn.

Our fourth growth driver focuses on deepening customer engagement through use case expansion and premium modules with our sales team seeking to drive greater value across both new and existing customers. Expanding our trust and compliance offerings at Sprout has been a key priority. As I mentioned earlier, this past quarter, we launched Guardian, a solution enabling our customers to securely manage their data while still personalizing interactions and enhancing brand safety.

We've seen strong interest across highly regulated industries, especially health care and financial services, closing our first deal within just a couple of weeks of launch. We're even seeing demand from less regulated industries as organizations increasingly recognize the inherent value of having these capabilities readily available.

The acquisition of NewsWhip will significantly enhance our AI, Listening and Care capabilities, enabling us to expand use cases and elevate our premium module offerings. We're excited to share more in Q3 as we begin introducing NewsWhip to our customers.

In closing, I'd like to revisit our discussion last quarter of social search and the undeniable long-term trends we see playing out and how the NewsWhip acquisition ties into this theme. As traditional search continues to trend towards 0 click with AI, current content strategies face headwinds with traffic changing in real-time. We know nearly half of Gen Z starts product discovery on platforms like TikTok and Instagram and over 80% of consumers say, social is the top channel for product discovery.

Organic website traffic is declining, while paid search costs are rising. Social has become the new front door for discovery, but most brands are optimizing for it or they're not getting there first. Our ability to drive discovery on social platforms is critical and translates into AI search where platforms like Reddit increasingly contribute to source content and in traditional search, where both Reddit and Instagram index on the first page of Google search results.

Social media's authenticity, immediacy and community-driven nature fill the gap as search behavior shift, offering businesses stronger ROI outcomes. Sprout helps brands win in the new era of discovery. Our publishing tools are designed to optimize every post for maximum visibility using keyword-rich titles, platform-specific formatting and built-in guidance for hashtags, all text and timing to help ensure nothing gets missed in social search and brands can reclaim lost organic traffic.

Now NewsWhip, in our view, is the perfect addition to the strategy as Sprout will enable global brands with a greater ability to recognize real-time and predicted trends powered by AI agents. These innovations will help marketers know exactly what content they should be creating to benefit from social search momentum as well as issues before they arise with differentiated solutions for crisis management.

We believe the future of this category will be defined by real-time data and intelligence, extensible platforms and trusted AI. That's the foundation we're building at Sprout, and we're excited about where it's taking us.

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. Our second quarter results were highlighted by a quarterly non-GAAP operating margin of 9.2%, up nearly 400 basis points from the year ago period. We generated $5.2 million in non-GAAP free cash flow during the quarter, up $2.7 million from our non-GAAP free cash flow in 2Q '24, an increase of 110% on a year-on-year basis. On a trailing 12-month basis, non-GAAP free cash flow is up 4x. We remain committed to growing operating leverage on a fiscal year basis.

On to a summary of the quarter. Total revenue for the second quarter was $111.8 million, representing 12% year-over-year growth. Subscription revenue was $111.1 million, up 13% year-over-year. The number of customers contributing more than $10,000 in ARR grew 6% from a year ago. The number of customers contributing more than $50,000 in ARR grew 18% from a year ago. Q2 ACV was 15,321, up 14% year-over-year.

As Ryan discussed earlier, our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates such as influencer marketing and customer care. RPO totaled $347.0 million, down from $360.2 million as in Q1 and up 18% year-over-year. We expect to recognize 72% or $251.6 million of total RPO as revenue over the next 12 months, implying a CRPO growth rate of 80% year-over-year.

Non-GAAP operating income totaled $10.3 million, which was ahead of the high end of our outlook. This was up from $5.3 million a year ago and equates to a non-GAAP operating margin of 9.2%. We're pleased that our progress here demonstrates our focus on continued growth in our margin profile.

Before moving on to guidance, a few quick comments about our acquisition of NewsWhip. We acquired NewsWhip for a cash consideration of $55 million with an additional $10 million in potential cash earn-outs that are structured over the next 2 years. We financed the acquisition with our credit revolver and cash and believe this was an efficient use of capital as our products address the needs of our customers, and we believe the combined solution is a highly differentiated offering.

Looking ahead, we're increasing our full-year revenue guidance, primarily reflecting the early contribution from NewsWhip. We see strong early interest from new and existing enterprise customers, including new conversations with globally recognized brands that underscore the strategic value of this acquisition. We believe this early traction is a strong signal for the opportunity ahead and reinforces the differentiation we believe Sprout is building. That said, we're early in the integration. While the core Sprout business continues to perform in line with the expectations we set at the start of the year, we fixed some near-term pressure on rep productivity as we train teams, align our go-to-market motion and support customers through a more expansive conversation around Listening and NewsWhip.

Only 5 months of revenue contribution remaining this year, as we're just starting to operate the NewsWhip business given the closing last week, we've taken a measured approach to modeling the impact. Lastly, while prior to the acquisition, NewsWhip was expected to be an approximately breakeven business in the back half of the year on a stand-alone basis. We're pleased that we were still able to raise our non-GAAP operating income outlook while absorbing the associated cost.

Now on to guidance. For the third quarter of fiscal 2025, we expect revenue in the range of $114.4 million to $115.2 million. We expect non-GAAP operating income in the range of $9.3 million to $10.3 million. We expect a non-GAAP net income per share of between $0.15 and $0.16. This assumes approximately 59.0 million weighted-average basic shares of common stock outstanding. For the full-year 2025, we are raising our guidance from the prior quarter and now expect revenue in the range of $452.9 million to $455.9 million.

We are also raising our non-GAAP operating income guidance and expected to be in the range of $43.1 million to $45.1 million. We expect non-GAAP net income per share between $0.71 and $0.75, assuming approximately 58.7 million weighted-average basic shares of common stock outstanding. We look forward to continuing to innovate and create more opportunities for our customers to grow with us. We appreciate your interest in Sprout Social.

With that, Ryan, Alex and I are happy to take any of your questions. Operator?

Your first question comes from the line of Arjun Bhatia with William Blair.

Maybe to start out with, just if you can zoom out and just take a step back for a second, I'd be very curious to hear just how you would characterize the core business as it stands today? Then I have a follow-up after that.

Arjun, it's Ryan. I'll start. Thanks for the question. Yes, just in terms of the business, we've been really pleased with the progress that we've been seeing and incredibly proud of the effort from the team. The business has been performing really well and tracking the plan that we laid out to all of you at the beginning of the year. We've had some great wins this quarter, Cigna, Authentic Brands, Honda, Smuckers, Department of Transportation were a few that we had shared in the prepared remarks. We grew both the 10,000 and 50,000 customer accounts quarter-over-quarter. On top of that, our 50,000 trailing 12-month revenue cohort is growing greater than 30%, which just shows the enterprise execution.

On the retention and renewal side, the performance has been really strong, and we've seen steady improvement in gross revenue retention year-over-year. We're seeing continued momentum with our teams and closing more annual and multiyear deals, which will contribute to retention and certainly gives us better visibility in the business.

Then finally, from a non-GAAP operating margin, we're up nearly 400 basis points, which I think really speaks to the execution and the operating discipline that we have in the business. Everything considered, we're feeling really good about where the business is as we head into the back half.

Then just as a follow-up, as I'm looking at the guidance, can you just give us a sense of what the impact of NewsWhip is and what you've incorporated into the guidance here?

Yes. Thanks, Arjun. This is Joe. I'll jump in on this one, and thanks for the question. Maybe let me walk you through how we approach the guidance in total, and I think that will be most helpful to address the question you're asking. I think first, our core business came in slightly ahead in Q2 and continues to track to the plan we laid out to you at the start of the year. We haven't assumed a change in the broader demand environment, and we flowed through a modest portion of the Q2 beat into our updated full-year guide to reflect that.

For the NewsWhip business, we're projecting that to contribute approximately $2.5 million over the final 5 months of the year. You got to remember, with any small tuck-in acquisition, we want to take a prudent approach looking ahead. We just closed the acquisition last week. There are still natural unknowns around renewal rates, pipeline conversion and other business fundamentals we need to consider. As a result, we are taking a very measured approach with our guidance.

We're still early, but we believe this really sets us up to lead in an area that's becoming increasingly important to our customers and to the market, and we're really excited about this acquisition.

Your next question comes from the line of Scott Berg with Needham.

This is Rob Morelli on for Scott Berg. Just to double click on the NewsWhip acquisition. Can you just touch on the time line to integration of the teams and products? You noted some positive momentum with enterprise conversations so far. Any other feedback from customers just regarding this acquisition and the capability being added to the suite?

Yes. Thanks, Rob. I appreciate it. We're digging in, as Joe said, we're about a week in. The teams are chugging along already. We've been working on a bunch of all hands with the teams and actually just in all hands with the NewsWhip team yesterday and a company all hands last week. We've been getting the CRMs together and aligning everything and working really closely on the go-to-market strategies. We've also just seen a number of conversations already in the first week, so lots of progress being made on the integration.

In terms of product integration pieces, those will develop over the next probably a few quarters or so, but the teams are working in the background. Obviously, as we mentioned on the call, Paul, the Co-Founder is now the GM of our Listing business, and we'll be really working closely with the rest of the team there. Then from a customer perspective, one, I'd just say the teams are internally are incredibly excited about the opportunity to share the value of the NewsWhip product to our customers. We've seen this as a mission-critical solution for PR communications professionals and the ability to take the insights from NewsWhip and have them drive actions in the Sprout platform is really, really exciting.

Initial feedback, and again, it's only been a week, it's been strong. I encourage all of you to take a look at the NewsWhip website and go to the customer stories, you get a great sense for the quality of the customers there and the types of problems that they're solving.

Then last quarter, there was a reference to the launch of a multiproduct campaign. I understand it might still be early days, but have you seen any benefit from this effort resulting in expansions with existing customers or larger lands with new and sort of jump in new customer ARPU since this was launch?

Yes. Thanks, Rob. Yes. I mean I will say it's been a massive focus for our team across both the product organization and go-to-market. We've been seeing healthy pipeline being created there. Clearly, NewsWhip has been a big contributor to that and will be as we go forward. I mentioned Guardian on the call as well, another great example of a product that we launched in the quarter. I think lots of progress happening right now, but nothing else to add, and we'll certainly come back and share the progress along the way. Thanks for the question.

Your next question comes from the line of Adam Hotchkiss with Goldman Sachs.

I guess I think we've heard from some of your peers, and I think you had mentioned that the growing cost of advertising, particularly, if you're a smaller business. I'd be curious if that is resonating with your customers when you talk to them about the value of social as a channel and if you're seeing any mix shift in the way that brands are thinking about their advertising strategies. It really feels like that, that's really ticked up in the last couple of quarters. I'm just curious if that's impacted you and your deals at all.

Yes. I appreciate the question, Adam. It ties a lot to the final piece of my prepared remarks as I got into the idea of social search. We are certainly seeing customers talking a lot about the fact that they've seen pretty significant disruption to the things that they counted on in the past, specifically around search engine optimization and search engine marketing. Certainly, we're in this world right now where the cost per click on a lot of these things have increased significantly and people are clicking less.

Our customers are definitely looking for more help and how do they show up in the right places where discovery is happening. We're seeing more and more of that happening on social. A lot of the conversations we're having with customers is, how are you reclaiming some of the lost traffic and performance in places like social.

If you think about what our platform does, it really helps customers figure out the right type of content to produce, the right time to post it to their audience, give you analytics on both your paid and organic so that you can really double down on the things that are working. Clearly, in this environment, that's something that's really, really critical. I'd say that it's been a material part of the conversations that we're having with customers. I'd say, most of our customers are having that conversation right now with the disruption in the market for their funnels.

Then just on the RPO and the CRPO dynamic, I noticed that stepped down sequentially. I think you mentioned it. RPO, I think, was even below Q4 levels. Is that just churn at the low end of the market? Or anything else to call out there, seasonality would be helpful.

Yes, Adam, I think really what is attributed to the last thing you said there, which is the seasonality part of the business. As we move more upmarket over the last couple of years, a lot of our bigger renewals and the larger deals were signing in Q3 and Q4. What you'll see is in the back half of this year, you'll see that those dollars start to tick up in the next couple of quarters. We feel pretty good about how we'll exit the year in 2025 as it relates to those metrics. We feel good about the momentum there. It's the seasonality that you called out.

Your next question comes from the line of Parker Lane with Stifel.

This is Jack McShane on for Parker. I wanted to touch on the macro. Obviously, there's been a lot of geopolitical headlines this quarter. I'd be curious to hear how both the pipeline was impacted by the noisy macro and how renewal conversations have been impacted as well?

Thanks, Jack. Appreciate the question. I'll start off on the pipeline side of it. Yes, clearly, we're still in the same demand environment. I wouldn't call out anything that's materially changed for us this quarter from the last previous quarters. For us, it's definitely leaning into the value prop. Similar to my feedback on the last question to Adam, a lot of this for our customers right now is this is an important part of the work that they're doing, whether it's discovery and making sure that they're getting their customers in the front door or thinking about how they respond to their customers from a Care perspective.

We're certainly leaning in more, as I've shared in previous quarters on just the customer value and the ROI story, but I feel really good about what I'm seeing from the teams and the type of rigor that Mike and the team has created around pipe creation and pipe acceleration. Nothing to call out that's different from previous quarters there.

On the renewal side, we feel really good about that. We've seen a lot of progress year-on-year in terms of our retention and renewal rates. I think this also speaks to the value of the product for our customers and the fact that they're spending hours a day in our products, and this is how they execute on their social strategy, but we've seen that as a strength for us.

As a follow-up, I'd be curious to touch on the customer care use case and more specifically, how Salesforce's emphasis on Agentforce has impacted the demand in this segment?

Yes. No, I appreciate it. The Care continues to be a really important use case for our customers. We shared a few stories today just highlighting with really large customers, how they're leveraging Care. One specifically was an example of a customer that moved over to us, a global health tech company that moved over to use the Service Cloud integration. I mean this customer is literally managing 90,000 customer support requests every single month, and they're able to execute on that with that speed and customer satisfaction because of the integration that we've built with Salesforce.

It's continued to be a really important part of the strategy. Clearly, our customers are doing it directly in our product or they get the benefit of leveraging integrations like the Service Cloud, but more-and-more, we're seeing customers showing up on social as a place that they want to be served. Their expectations when they show up on social are higher than any other channel. The way that our platform is set up to support customers matters significantly.

Yes, on the Agentforce side of things, we're excited about the work that we're doing there. We're coming off of connections and getting geared up for Dreamforce. I believe this will continue to be kind of the next chapter in the value that we're adding to customers that are joint Sprout and Service Cloud and Salesforce customers.

Your next question comes from the line of Surinder Thind with Jefferies.

Can you maybe talk a little bit about just the sales of some of the premium modules and the attach rates that you referenced as part of the strategy? Does the environment like this make it a little bit more difficult? I mean it feels like things haven't really changed a lot in the last few quarters, but there just seems to be a lot of noise out there, and we're hearing different things from different channels.

Yes. I appreciate the question. Yes, I alluded to it a little bit before, but I've been proud of what I'm seeing from the team in terms of creating this multiproduct pipeline, but the product teams have been working hard in the background here. We've talked through a few of the use cases that we have. We've added Guardian, our Trust and compliance products this past quarter. Obviously, NewsWhip is another addition there.

I think this is just really important for us because what it means is it allows our sales team to show up to customers with a variety of different product problems that we can solve for our customer base. Clearly, the demand environment hasn't, to your point, changed over the last number of quarters, but that's why it's even more important for us to be able to really serve customers depending on where they are. We've got customers coming in where they got high volumes passing on social from a Care perspective, which we can do important. We've got other customers where we're seeing significant disruption at the top of the funnel from a marketing perspective and social ends up being a really important thing for them.

These are some of the examples. I think the last piece I'd leave you with is that from an attach rate perspective, we continue to see a lot of headroom and opportunity for us to sell our products both from a new business perspective to land bigger as well as from a current customer perspective to be able to attach more products to our current base of almost 30,000 customers.

Then when I think -- obviously, the international business, international clients is a little bit smaller part of the business. Just any color on the trends there? EMEA has been lagging the U.S. for a little bit, and I didn't see the Queue out yet. Just any color that you can provide there on some of those numbers and trends?

Yes, I appreciate it. You're right. International is still a smaller part of our business, but we feel really strongly about the market opportunity there and the teams that we have on the ground. Our distribution teams are still relatively small compared to the U.S. We're seeing good progress in terms of the pipeline and the opportunity. We're also with a lot of the multi-products that we're bringing to bear and the types of companies we're selling to, we're getting more of these global type opportunities where the footprint in the U.S. will open up opportunities for our teams in EMEA or in APAC.

I think the main takeaway is that we're still early on that journey, but there's quite a bit of room there. Over time, we'll be continuing to invest in our distribution. Thind, just to answer the last part of your question, as far as the mix for international, Q1 to Q2, it hasn't changed materially. When you see the Queue come out, the ratio of international revenue versus the rest is pretty consistent, so no major shift there as of yet.

Your next question comes from the line of Matt VanVliet with Cantor.

I guess when you look at where the NewsWhip technology fits in, in the current product platform, curious if this was sort of a discovered either gap or just a greater extension of the listening platform where you getting into situations where people are trying to push Listening into other use cases and you just needed more functionality. Just curious, I guess, if you could elaborate a little more on where it overlaps or complements the Listening platform?

Yes. I appreciate the question, Matt. It is an excellent complement for us. One of the things that we really appreciated about the NewsWhip team is what they do is really, really tied to a lot of our future product road map. Maybe the best way to think about this is we see it as really strengthening our overall approach to the market and really differentiating us against our closest competitors.

If you think about the Sprout Listening, Sprout Listening is really about deep analysis and longer-term understanding of social conversations and share of voice and brand sentiment. It's ideal for brands when they're trying to understand the why behind historical trends and insights. NewsWhips is the command center for real-time action. It's built for speed and high stakes. It's helping today's teams figure out this massive fragmented media landscape, and it's giving them these proactive alerts to breaking stories with real-time monitoring and predictive analytics that allow them to know exactly where the trends are.

It becomes this essential tool for crisis communications and any team that really needs to get ahead of the narrative. They've also just as a side note, and I mentioned it a little bit in my prepared remarks, they've launched some agents to their customers. which is being adopted really, really quickly here, and it's really helping customers cut through the -- from the signal to the noise. I think the main thing to highlight here is, it fits really well. It complements our overall strategy and a path towards our road map.

Then, Joe, you mentioned NewsWhip was on pace to be breakeven for the second half. Is that still incorporated in the guidance? Or is there some additional expenses related to integration, maybe speeding up anything they had in the works? I guess what's the second half impact or the next 5 months impact of NewsWhip on the operating income guidance?

Yes. No, good question, Matt. The guidance contemplated that they would be breakeven for the rest of the year. There shouldn't be any incremental expense or any other expenses that we're incurring. That's kind of an all-in when it comes to guidance. Then I think over the longer term, we definitely believe there's a lot of leverage that can come out of that business. We think about putting that product in our sales team and the distribution we get over the more fixed costs that they have right now, I think we feel good about the ability to drive more leverage Sprout overall coming out of '25.

Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets.

The first one is in the core business. Ryan, you've mentioned a bunch of times about trying to capitalize on the struggles of organic and paid search and switching things over to social. I'm just curious, you guys -- especially with new sales leadership, are you running any particular sales plays or special incentives or something to really capitalize on this -- the beginning of this possible mega shifts?

Yes. Thanks for the question. I think the biggest thing to highlight is we've definitely been enabling the team on the value prop behind this and the things that we can do to help customers in social search, but also in AI search and traditional search. A lot of this has just been reps enablement and then obviously, customer communication.

If we think about it, and I mentioned some of this in the prepared remarks, we're seeing more-and-more, especially in Gen Z, consumers showing up in social, searching in places like TikTok and YouTube and Reddit before they're going to traditional search. You showing up in the right place matters a ton, which our customers need to do. We also know that performing really well on social ties into how content is being presented in AI search. The better you do in social means that you will perform better in AI search.

Then finally, we're seeing more-and-more of these relationships happening between social and traditional search where things like Reddit and Instagram are indexing on the first page. Again, if you're performing really well, in social, you will have a byproduct sales stream impact that's performing better on traditional search as well. For us, all of these things are things that we're enabling the team on to be able to have those conversations with customers.

Then a quick follow-up. I think Joe, I think it was you, who mentioned in your prepared remarks that with any acquisition, there's always like the potential for some disruption as you train and add things to the plate of the salespeople. To an outsider, though, I hear NewsWhip's capabilities, and I think pretty similar to what the salespeople were already pitching, right, as far as like a value proposition. I'm just curious, is there something specific that you'll be adding to people's plate? Or is this just -- this is the business of acquisitions and things get a little noisy when you're integrating things?

Yes. Well, first, I'll say we're 1 week in. I think the biggest thing that I'd highlight is -- and it's actually tied up in your question there. It's enablement on making sure that we can perfectly articulate what I shared in an earlier question here around the differences between Listing, our core listing product and NewsWhip and how they fit together, both for our internal team and then certainly for customers. There's enablement. There's things that come with any integration here, but we're off to the races on that. We had an all-hands call last Friday. The revenue team kicked off on Monday. We're deep in that already.

I think to your point, these things are so close and so complementary. We also -- in many of our customer accounts, we have folks from the PR and media and [Quant] teams who are in our core platform. These are also people that we, in many cases, should know inside the organization and have an opportunity to now go and share more about this new solution that we have that can perfectly help us.

Your next question comes from the line of Rob Oliver with Baird.

I had 2. Ryan, first for you. I just wanted to ask about the influencer marketing portion of the business. It seems like still a lot of interest in the market around it, a lot of buzz around the potential impact of agentic AI or AI there? You guys obviously made a pretty strong tuck-in acquisition a couple of years ago, and you're not breaking that out anymore, but I just wanted to get a sense for how that's doing and how when you come in for those renewals for perhaps customers that don't have and how those negotiations are going? Then I had a quick follow-up for Joe.

Yes. Thanks, Rob. Appreciate it. We feel really good about the opportunity for influencer marketing, the artist formerly known as Tiger. The team -- I shared a little bit on the prepared remarks there, but the product teams have just been cranking in terms of some of the advancements that we've done there. There's been some really nice AI enhancements in the way that we think about creator discovery for our customers. We've been doing a lot actually from a brand safety perspective. As you might imagine, as these large brands are leaning in and trying to figure out the right creators, they need to make sure that these creators perfectly fit their brand and that there's no risk. That's something that we've also just really built into the platform that has added a ton of value.

Then just creator vetting to make it much easier for our customers to figure out how to build their strategy and how to add the right creators. A lot of automation and workflow and tools built into all of that. It continues to be a really nice wedge for us to go into accounts that might be vended for social media management, but this is a great way to land with a differentiated product and then leverage that to go back and be able to sell more to that customer later on. Continued progress there and feeling good about the opportunity in front of us.

Last thing I'll say is tied to some of the earlier questions around if you're having disruption with traditional SEM or SEO and paid, we've seen that influencer marketing is returning a 5x to 6x on the dollars in. This has been a really great opportunity for our customers to get good return on ad spend in places that they probably aren't investing today.

Then Joe, just one for you. A lot of questions, obviously, on NewsWhip, but I guess, more broadly speaking, you guys are doing some product investments. I know you've been working on the go-to-market on the enterprise and sales side, pace of innovation. Just not asking you to guide to next year or anything, but just wanted to think about how you're thinking about balancing all of those and the potential for more tuck-in acquisitions onto your platform with potential continued margin expansion?

Yes, Rob, thanks for the question. I think consistent with what we've shown over the last couple of years and what we've guided to this year, which is now you can expect a couple of hundred basis points of margin improvement year-over-year, and I don't see that changing in the near term. That's regardless of like what our growth rate is and what we're doing. I think we've got this commitment that, hey, we believe that we can manage this business in a very responsible manner in any type of condition, and we want to make sure we're continuing to drive that margin in the business. We're not moving off of that commitment to drive margin on a year-over-year basis.

Your next question comes from the line of Raimo Lenschow with Barclays.

Ryan, one for you. Like with all the changes in the industry where people -- customers have to think about search, you have to think about social, you need to think about like what do we do through LLMs. How does pipeline conversation change for you as you engage with customers in terms of like number of conversations, but also like size of potential deals?

Thanks, Raimo. Appreciate it. Yes, there's certainly a lot that our customers have to be thinking about. I mean I think the biggest thing here, just goes back to making sure that we are perfectly tuned into the biggest problems for these customers. That is so dependent, obviously, on the key stakeholders we're getting in front of. If you're in front of a marketing audience, they're absolutely thinking about how AI is impacting search, how their SEO and SEM may not be working as well, how their website traffic may not be working as well. We're thinking a lot about social as the front door and trying to figure out how can we help them show up in the right places, drive awareness, get a better return on ad spend.

Other customers might be seeing just a significant amount of demand changing channels from their call center or website into social from a care perspective. They've got to figure out how to manage that demand like that example of the 90,000 cases that we're managing. A lot of this just comes down to making sure that our teams are really doing a lot of discovery to understand where the biggest problem sets are and that we're leaning into those solutions and then tying that with real return on investment feedback on the places in which we think that we can help our customers.

There's a lot in there for our teams in terms of just investing in the right places and understanding the right problems, but I feel like we've been making a lot of progress there and have been really proud of how the team is showing up in front of customers.

Then I have one follow-up for Joe. If you think NewsWhip with kind of more AI usage, et cetera, is there any -- and you talked about breakeven already, but like is there anything we should be aware of in terms of gross margin implications from -- I assume they use GPUs, et cetera, that we need to consider?

No, Raimo, we feel pretty good about -- we did a lot of work during diligence on the tech side to understand the scalability of their platform, and that was one of the real positives and one of the big check the boxes for our CTO was the way they built the back-end infrastructure and how this is scaling with the AI considered. We feel pretty good, Raimo, that there's not going to be any major change in the cost structure of that business as this ramp.

Your final question comes from the line of David Hynes with Canaccord Genuity.

Ryan, 2 questions on NewsWhip. I get your positioning as command center for real-time action that makes a lot of sense. I didn't hear you say, does NewsWhip give you access to media sources that previously weren't being captured by the Listening offering?

Yes, DJ, it does.

Can you elaborate like, what are those?

Yes. I mean think about pretty much any of the media sources out there that we'd be consuming and looking at all the articles, the value prop of their platform, it takes a little bit of a different angle than we've taken on our listing, right? Our listening is more deep brand sentiment. Our customers use it from a research perspective. They're going back and looking at trends. NewsWhip’s full angle is consuming all the news and media and publications out there, identifying articles that are being created and then figuring out where there's gravity around those articles and what's trending.

This matters a lot for our customers because these articles -- as we've seen news breaking many different places over the last few weeks and months and years, these things can turn into real viral moments that are either good or bad, right? On the good side, it could end up creating a lot of demand if you're a product company. On the bad side, it can create a lot of crisis management. They're looking at those media articles and then figuring out where there's gravity around them in places like social to allow those PR and comms teams to figure out where they should be leaning in.

Then the second, follow-up to that, like what's the price point for NewsWhip? I know it's an enterprise product, but like how much are people spending on it?

Yes, it's an enterprise product. It's multiples bigger than our average deal size. If you go to their customer case studies, you'll see a lot of the large enterprises that are working with them fits really nicely into our enterprise segment, but we think that we'll see some opportunities there, certainly with agencies and mid-market as well.

I will now turn the call back over to Ryan Barretto for closing remarks.

Great. Thank you very much, operator. Thanks for joining us tonight and for the thoughtful questions. I want to end by thanking our team for their continued dedication and effort. I'm really grateful for all you do for our customers and for our business. We look forward to spending more time with the rest of you later over the next quarter, and we will talk to you soon. Have a great night.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.