Sprout Social, Inc.
Q1 2021 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by and welcome to Sprout Social First Quarter Earnings Conference Call. I would like to hand the call over to speaker today, Mr. Jason Rechel. Please go ahead.
- Jason Rechel:
- Thank you, operator, and welcome to Sprout Social’s first quarter 2021 earnings call. We’ll be discussing the results announced in our press release issued after market closed today. And we’ve also released an updated investor presentation, which can be found on our website.
- Justyn Howard:
- Thank you, Jason, and good afternoon, everyone. Thank you for joining us. We are off to a fast start in 2021, thanks to our focus on delivering world-class experiences to our customers and ongoing execution and resiliency our team. More businesses than ever invested in Sprout during the first quarter, as social take center stage in the digital strategy for what comes next. I want to touch on a few first quarter highlights before turning the call over to Ryan and Joe to cover the details. Our growth rate is shifting into an even higher year which reinforces confidence in our strategy, our opportunity and the investments we’re making in our future. During Q1 we added a record number of net new customers, added a record number of customers contributing more than 10k in ARR and delivered further acceleration in ARR growth. We also achieved positive free cash flow and inflected above the Rule 40 benchmark, each for the first time and much sooner than forecasted. These points underscore the value we’re delivering to our customers and the compelling unit economics of our business. We’re focused on building a durable company for the long term, but our current growth and momentum has never been stronger. We’re well equipped to capitalize on the convergence of multiple tailwinds in our market and we’re continuing to prioritize our investments in these areas.
- Ryan Barretto:
- Thank you, Justyn. You said we’re off to a fast start and you are right, the momentum is building and we’re set for even bigger 2021 than we had planned. Our teams are delivering across the board and we’re seeing incredible brands continuing to invest in Sprout platform. In this new era of work, changes to the way that companies find, evaluate and buy software has never been more pronounced, which is only strengthening our technology and go to market differentiators. Social has become the central fabric of society, forcing businesses to rapidly adopt and adapt and Sprout is optimized to help brands lean into social as a centerpiece of digital transformation that will ultimately shape your new future. The recent results from the Harris Poll validated this. Consumers are choosing social as their preferred communication channel, and brands simply don’t have a choice, they must embrace social for customer marketing, engagement and intelligence. Now, I typically highlight one specific team that exceeded my expectations. But I won’t be able to do that because during Q1, every team delivered in a meaningful way. Our product and partnership organization is on fire. They’re continuing to find ways to innovate our customers, make our platform stickier and add tremendous value. Our marketing team delivered on our top of funnel goals with insightful content, strong inbound trial volumes, and improvement in overall quality and in conversion rate, with even more room to grow. Each of our new business segments were very strong this quarter led by our mid-market teams. Our customer success teams also executed remarkably well in a critical renewal period. Our investments in customer on-boarding and success are paying off as we move into a phase of growth with higher overall customer retention and customer growth. A record number of new customer additions is not accomplished without outsized contributions by each of these teams. The success that I’m seeing with some of the world’s largest and most beloved brands makes me even more excited about our opportunity within the enterprise space. Not only did we have a record overall customer additions, but we also set new records in a greater than 10k net additions as well, underscoring our momentum at market and our success in selling our premium modules. To that point, a sample the brands that we grew with this quarter is a fantastic list that includes McKesson, Danaher, Oliver Wyman, Heidrick & Struggles, Brother International, Cole Haan, Tumi, Hanes Brands, Sur La Table, Grammarly and Academy Museum of Motion Pictures.
- Joe Preto:
- Thanks, Ryan. I’ll walk you through our first quarter results in detail before moving on to guidance for the second quarter and full year 2021. Total revenue for the first quarter was 40.8 million representing 34% year-over-year growth. Excluding the impact on legacy Simply Measured, organic revenue was up 35% year-over-year. We expect the impact from legacy Simply Measured to be immaterial to revenue and ARR going forward.
- Operator:
- Your first question comes from the line of Raimo Lenschow from Barclays. Your line is open.
- Frank:
- Hey, this is Frank out for Raimo. Congrats on another very strong quarter here. I was wondering if we could touch on your customer conversations at a high level, just given the strength in net adds. So, what are you seeing as we start to move past the dynamic? Has there been any momentum in any particular verticals or is the strength really a bit more broad-based in nature?
- Ryan Barretto:
- Frank, this is Ryan. Thanks for the question. We’ve seen a lot of positive trends here. This is a lot of the stuff that we saw coming off of Q3 and Q4 into the year. Our marketing teams continued to deliver a really strong top of funnel and we’re seeing a lot of progress. I would say that it’s across a variety of verticals. One of the advantages that we have here is you’re hard-pressed to think of a business or brand that isn’t thinking about social right now. And so we’ve got a long-tail of really successful customers in a variety of industries but given the number of customers that we have today, most verticals and industries have hundreds of different examples that are using Sprout. So it’s been pretty much across the board that we’ve seen success. Some of the ones that probably we’ve mentioned in the past that I think has been surprising but really interesting for us are things like higher education in terms of trying to connect with the community, retail, travel and hospitality, restaurants. Many of these organizations that had more challenging times last year are continuing to need to find ways to build their brand and their connection with customers. So it’s been a nice long-tail for us and we’re seeing success across a variety of verticals.
- Frank:
- Okay. Perfect. That’s great color. And then just with ACV growth looking strong again, I want to ask about the momentum in the listening and premium analytics products. I think those doubled last quarter in aggregate. I was wondering if there’s any more color you could provide there for this quarter?
- Ryan Barretto:
- Yes. We continue to see very similar success to last quarter for both the premium modules. One of the things that’s really stood out is just the importance and value of data, both the data that you have within your own four walls, your own organization, we think about our premium analytics and the data that exists across all of social, outside of your four walls, when we think about our listening product. And so we’ve seen tremendous success in both of those premium products. One of the things that we’ve highlighted in the past, I think it’s important to know, is it’s not just in the mid-market and enterprise, we’re seeing the same success with these modules in our SMB segment, in our mid-market segment, and in our agency segment as well.
- Frank:
- Great. Thank you.
- Ryan Barretto:
- No problem.
- Operator:
- Thank you. And your next question comes from the line of Rob Oliver from Baird. Your line is open, sir.
- Rob Oliver:
- Great. Thank you very much, guys, for taking my question. Ryan, one for you as well. So I was looking at the expansion deals that you guys talked about this quarter. I mean some of those are big companies that I think traditionally would have bought software the old way, monolithic, kind of larger deals. And so I’m curious, as you expand with customers like that, both from a seat perspective, departments, new use cases, how are the conversations with those buyers, particularly if you get up toward more of a managerial level? Any change and are you seeing some Eureka moments from buyers about kind of the power of your model relative to maybe some of your competitors? And then I just had a quick follow-up for Joe.
- Ryan Barretto:
- Yes. Thanks, Rob. Yes, we definitely -- the Eureka moment is going off for a lot of companies and customers. We love the seed and grow. We are landing in places, and to your point, being able to get in front of different departments or divisions or brands or geographies for that matter and the conversation for us is very similar to the new business side. We still get customers -- if they’ve landed and, for example, they came in, maybe on a marketing use case, they’re thinking about us for campaigns and content but they didn’t necessarily leverage us for listening or premium analytics, we’re leveraging that trial model as well even for our current customers. So we’re getting their hands on the product. We’re giving them a chance to experience the technology but they have the advantage, they’ve been leveraging our product for a little bit of time, so it’s even quicker for them to ramp up on some of these premium products and get value right away. And because we’ve already gone through procurement and legal, it’s easier for us to grow those add on. So these tremendous examples and use cases and really excited about what we’ve seen from our customer growth and our customers success teams that are supporting our customers.
- Rob Oliver:
- Okay. Great. That’s really helpful. Thank you. And then, Joe, just for you, I know, but thinking about some of your investment areas, mid-market, obviously, enterprise reps you’re still hiring. I know you in the past, you’ve talked a little bit about international with APAC and Latin America. Maybe could you just drill down and give us a little bit of color on where we are in some of those investment cycles and where you feel like you’re getting a really good return right now? Thanks, guys.
- Joe Del Preto:
- Yes. Thanks, Rob. So a couple of things there and I want to make sure that we’re investing in the sales and marketing side, and I’ll hit that real quickly first, but we’re also making some significant investments on the R&D side. We’re seeing a lot of areas where we can continue to build out the product. We’re seeing these use case expansion and so it’s more than just on the sales and marketing side, a lot, and we can dig into those product things, if you like, as well. On the sales and marketing side, a couple of areas. One is the geographic expansion, right. We’re investing in APAC, LATAM, EMEA and you definitely see us ramping up in those areas. We hired a GM of APAC in the quarter and so you’re going to see some increased investment there. And then you’re going to continue to see investment in mid-market enterprise, we are definitely seeing outsized returns in that area. We’re seeing a strong top of funnel, but then we’re also seeing on the outbound side, a lot of success with some of the opportunities, large enterprise clients. And so I think you’re going to -- those will be the main area of focus, but at the same token, we’re always going to be focused on as well. That’s really driven by the marketing side of the house. And Ryan spoke this earlier as we saw really good success in each of those segments in Q1 as well on the inbound side. And so those are probably the main areas of focus for us.
- Rob Oliver:
- Great. Thanks again.
- Operator:
- Thank you. Our next question comes from the line of Matt VanVliet from BTIG. Your line is open.
- Matt VanVliet:
- Yeah, thanks for taking my question, guys and nice job on the quarter. I guess, thinking about some of the answers so far, just couple of questions, maybe from a different angle a little bit. The growth in the 10k ARR customer was pretty significant again. Are you seeing some new customers when you win new logos come in at a larger scale? Are they buying more modules at a time? Maybe just help us think about kind of what that new land looks like as maybe you have customers coming that didn’t see the light before but now are forced to be a little more reliant on social than the current environment?
- Ryan Barretto:
- Yes. Thanks, Matt. Yes, we are seeing that, and we’ve seen really good progress. Again, across the board, I would highlight, certainly, that mid-market and enterprise continue to prove great execution. But we’re seeing growth in deals, even in the SMB and the agency space as well. I think it’s a combination of things. One, certainly, for the customers that are a little further in the journey, more sophisticated, it’s the analytics and the listening and the need to have more data to formulate their strategy, but we’re also seeing for many organizations just in the expansion of seats and use cases. And for us, what used to be years ago, maybe just one person in marketing on social, today, you’re seeing teams of marketers that are in the solution that are not just there from a social perspective, they’re thinking about content and brand and PR and comms, and that’s expanding out into things like customer care and customer support and sales. And so it’s kind of a combination of things between use cases and users and then our premium modules.
- Matt VanVliet:
- Got it. Got it. And then, Joe, on the gross margin side, it’s a pretty good improvement. You measure -- you mentioned scale in the business and sort of finally weaning off the Simply Measured. But is that something that you expect to continue to scale forward? Are there any meaningful kind of step function investments that you’re going to make over the next couple of quarters that maybe pulls that back in the short term. Just thinking about kind of the overall operating structure there?
- Joe Preto:
- Yes, Matt. So for the rest of this year, we feel pretty good about where we’re at, where we ended Q1, be able to maintain that for the rest of this year. We don’t see any pull back on that front. And then I think when we get into 2022, you’ll start to see a little bit more increase or a little bit more leverage on the gross margin, as we move into 2022.
- Matt VanVliet:
- Wonderful. Thank you.
- Operator:
- Thank you. Our next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open.
- Chris Merwin:
- Great. Thanks very much for taking my question. As you move more up market, what are your customers asking you for that isn’t part of the suite today? So obviously, you’ve shown very strong traction up market already, and clearly, the products you have are resonating. But as you continue to grow in this customer segment, can you just talk a bit more about what the feedback you’re getting and how that perhaps is influencing the product roadmap? Thanks.
- Ryan Barretto:
- Yes. Thanks, Chris. This is Ryan. There’s probably a few things that we’ve seen and I think many of the things that you’ve just seen from us over the last little while are a very big part of this narrative. When I think about premium analytics and listening, two great examples of products that have a ton of utility and value for upmarket customers. We’re continuing to develop within those product lines today and add value. Integrations is another area where we’ve had some of our customers for integrations. We’ve actually, this past quarter, delivered some integrations from help desk perspective across Microsoft and Salesforce and HubSpot and ZenDesk. The thing that I’d highlight here as we’ve tackled all of these opportunities is how do you build these sophisticated features in a way that’s going to bring value to your customer right away and utility right away and adoption right away. And so those are the things that we’re thinking about and the product team is thinking about as they deliver, and I’m really excited about some of the evolution that we’ve seen on listening and analytics and on the integration side and you’ll continue to see more evolution from us there over the next quarters and years.
- Chris Merwin:
- Okay. Great. And then maybe one just quick follow-up is that -- also with this upmarket shift, I imagine there’ll be more of a shift toward annual billing and could that portends a widening gap between the cash flow margin and EBIT margin in a positive way? Or is there anything you can share there about the directional progression of cash flow margins relative to EBIT?
- Joe Del Preto:
- Yes. Chris, this is Joe. Great question. I think what you’re going to see is we’re definitely --over the last couple of quarters, we’re definitely seeing more like we talked about enterprise and mid-market. We’re also seeing, as we get into these larger deals, where the product becomes more sticky, customers are willing to sign up for longer-term contracts, right. They realize that, hey, if we’re going to deploy this across not just the marketing team, but the support team, for the sales team, we want to make sure that we’re -- that we will buy a little bit longer than we used to in the past. And so we’re definitely seeing a shift. I think it’s still a little early, just given the mix, as we’ve talked about this before. We still have almost like a 50
- Chris Merwin:
- Okay. Great. Thank you.
- Operator:
- Thank you. Our next question comes from the line of Arjun Bhatia from William Blair. Your line is open.
- Arjun Bhatia:
- Perfect. Thank you for taking my question and a great quarter to the team. If I can go back to maybe the customer dynamics a little bit, it’s obviously very interesting to hear the Harris result and hear about social taking better stage. I’d be curious what you’re seeing from maybe legacy brands or tech laggard, so to speak, that were previously not willing to dive head first into the social pool. Are those customers starting to really adapt how they’re approaching social and realize the value pr do you think we’re still early on that front and that’s something to come in greater volumes in the future?
- Justyn Howard:
- Yes. Thanks for the question. This is Justyn. So I think there’s a combination of things happening there. I think, one, to your point, we’re definitely seeing brands that have been a little more reluctant or just slow to get their strategy together on the social front coming to the table. I think maybe the more pronounced difference that we’re seeing is organizations that had kind of dipped their toes in and maybe made some investments now realizing how important this is going to be and really starting to take a more strategic position on social and how to operationalize it across the organization. And so there are -- I mean, even the most reluctant brand has really been kind of smacked in the face over the past year and realized this is something that we’ve got to get a handle on. But I think maybe the larger maybe opportunity initially is for that graduation from the very early stages of social adoption to those organizations that are now realizing that there’s a much bigger play to be made here. And that’s where we start to see jumping up from small investments, maybe initial investments or departmental level investments to much bigger opportunities for our expansion efforts within those accounts and then landing them certainly on the new business side. Another related trend that we see there is folks that have made an initial investment was maybe less of a priority starting to realize that the tools that they invested in are really just not cutting it. So that’s a great scenario for us to be stepping in as well, showing them what the platform can do for them relative to what they’ve been doing. That’s a conversation that goes very, very well for our sales organization as well.
- Ryan Barretto:
- Yes. I might just also add in there from an individual buyer perspective, the conversations have got a lot more interesting and that we’re seeing more senior executives get involved in conversations, especially around the topics of data, analytics and listening and what they could be leveraging that social data for to inform their strategy. So I know our teams across sales and success have really been energized by the customer interactions and the opportunities because those buyers just have a more zoomed out view of their organizations and understand how social might be leveraged, and the fact that we’ve also got a champion with the practitioner who’s already in the product.
- Arjun Bhatia:
- Great. That’s very helpful color. And then maybe another higher-level question, if I can. We’re seeing a lot of changes in the advertising ecosystem with the application of third-party cookies and exchange of IDFA. I’d be curious if this is something that your customers are talking about as they think about their approach to organic social? And maybe what do you think the impacts are, if any, to your business directly or derivatively from some of the changes that are going on?
- Justyn Howard:
- Yes. Yes, it’s a great question. I think that conversation in our world tends to be more derivative or indirect. And it’s typically kind of uncertainty around the advertising landscape and what some of these new platform changes or regulation might introduce and really just not understanding how the networks are going to be able to continue delivering that efficiency, though. I think they’ve spoken to that pretty well, so I’d say, for the most part, it’s uncertainty. But where Sprout comes into the picture is these organizations are thinking about, I think they have rightfully recognized over the past 12 to 18 months that the organic side of social has the edge against advertising is a pretty important aspect here and certainly, when it comes to customer relationships, maybe the most important aspect. And so starting to see an organization that may have been thinking primarily on the advertising, thinking about social from an advertising lens, really thinking about what the bigger picture is and how organic plays in, which is obviously where we play and where we can help them think through that.
- Arjun Bhatia:
- Great. Thanks for taking the questions, and great quarter, guys. Congrats.
- Operator:
- Thank you. Your next question comes from the line of Tom Roderick from Stifel. Your line is open.
- Parker Lane:
- It’s actually Parker Lane in for Tom. Thanks for taking my question. Ryan, maybe on the go-to-market opportunity, I mean, you’ve had a tremendous success with the top of the funnel and in the trial motion that you have in place, but as we think about more of the enterprise opportunities, particularly around verticals, can you remind us, once you get a handful of customers from a particular vertical in the funnel, how are you approaching that from a go-to-market perspective? Are you building teams around these opportunities yet or is it a situation where it’s a very horizontal approach?
- Ryan Barretto:
- Thanks, Parker. Yeah, today, it’s still more of a horizontal approach, horizontal from an AE sales perspective but we have got verticalized in terms of our support from a marketing perspective. We’re really lucky in that we have such a long tail across the marketing in terms of opportunity. And for the most part, most of these organizations that are coming to us have very similar use cases that are horizontal in nature. And it tends to be more along the lines of the verbiage or the language that needs to be customized for those customers. In some cases, if it’s fin serve or healthcare, may be more related to regulation. But our marketing team has done a phenomenal job in creating content that is focused in on those verticals to making sure that we have relevant use cases that we’re leveraging the relevant language. But today, the AE team is going out a horizontal. I think in the future, there’s opportunities for us to continue to think about how we specialize in segment but the execution so far across the board has been really strong. We feel good about the way that teams are operating today.
- Parker Lane:
- That’s helpful. And then, Joe, maybe a model question for you. I think there was some onetime CapEx items in the second half of last year related to headquarters build. A very low CapEx for this quarter. How should we expect that to trend here for the remainder of the year and maybe going forward?
- Joe Del Preto:
- Yes, Parker, I wouldn’t see any outsized CapEx. There might be a little bit related to coming back in the office in the back half of the year, if we decide to come back, getting the office ready, but nothing that I would say is material. So I would expect pretty consistent CapEx spend going forward.
- Parker Lane:
- All right. Thanks for the color. Nice quarter
- Operator:
- Thank you. Our next question comes from the line of Scott Berg from Needham. Your line is open, sir.
- John Godin:
- Everyone, this is John Godin on for Scott. Thanks for taking my question. I guess as you think about the time as opening factor, what are you expecting as far as type of social media trends and usage? Is there any additional use cases, particularly with some of these verticals that have been more heavily impacted that you think are interesting that might see some acceleration over the coming quarters? Thanks.
- Ryan Barretto:
- Hi, John. This is Ryan. So I mean, I think we are already starting to see some of those organizations reinvesting. I mentioned a few at the beginning in terms of retail and restaurant and hospitality. I think many of them are feeling a change of wins coming. They’re investing. Many of them have been investing even in 2020 in an effort to maintain community and relationship and brand. But I’m sure that there’s going to be increased investment as things start opening up. But just generally, I think all of 2020 in the pandemic really just encouraged brands and organizations to rethink the way that they’re building relationships from a digital perspective with their communities and their consumers. And so I think for many of those organizations, they started the work, they’re going to continue to invest in those places. And I think that we’re all in this place where the behaviors and habits we created over the last year aren’t going to change very much even as the world changes. So I think a lot of these things that we’ve got used to will be to go forward. And I think social is just going to continue to be a really important part of the way that organizations engage and communicate with their customers.
- John Godin:
- Awesome. Thanks, guys. Congrats.
- Operator:
- Thank you. And your next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open.
- Chris:
- This is Chris on for Stan. Thank you for taking my question. I mean it seems like all the headline metrics you guys had were super positive, especially looking at your large customer adds stronger than traditional enterprise Q4. Are there any lingering COVID uncertainties when you’re still going to market today or would you say that all of that is behind us now?
- Justyn Howard:
- Yes. I mean, certainly, we don’t want to invite something different here but we’ve really seen steady trends really Q3, Q4, Q1. We think that the next shift is likely around the future of work, return to office which we think bode well for us. We don’t anticipate COVID-related impacts other than just probably some continued acceleration around adoption and the understanding. It’s taken some time for some organizations to really activate on the understanding that social is a much bigger part of the picture than they may have anticipated coming into 2020 and I think we’ll continue to see that. But no real pent-up impact that we believe is coming.
- Chris:
- Got it. Super helpful. And if I could toss in a follow-up. I mean if we’re thinking about e-commerce or commerce in general, it’s been something that you guys have been talking about for a while now, and it feels like we’re pretty much like there. How would you think about the opportunity set, if you were to compare e-commerce use case versus the premium modules that have been really successful so far? How do you kind of rank order those two opportunity sets?
- Justyn Howard:
- Yes. So I think it depends on the time series we’re talking about. I think with the momentum we have on the premium modules, the attack rate and the success we’ve been selling those, we continue to be excited and are investing in those. And I think that those will continue to have a sizable impact for us throughout the year. While the social commerce discussion has been with us for a while now, I would say that there are still some unknowns there, right. I think we’re all talking about it, the network we’re all talking about it. The specifics have been somewhat sparse and I think we’re starting to get clarity around that. We have been at work and we’ll have more to say on that front soon. So it’s starting to come to life. I think the unknown there is at which speed and how big is this opportunity, what are the roles that the different parties are going to play. I think from a strategic perspective, we consider this probably the largest area of potential for the business but over what period of time that looks like and overall size and scope relative to some of the other parts of our business still unclear.
- Chris:
- Got it. Super helpful. Thank you.
- Operator:
- Thank you. Next one we have Clarke Jeffries from Piper Sandler. Your line is open.
- Clarke Jeffries:
- Well, thank you for taking my question. This has been slightly addressed by some questions, but I’ll ask it directly. Impressive to see another quarter of record customer adds. My question is really around the sustainability of that pace of customer acquisition. I know, Ryan, you touched on the improvement of top of funnel but should we think about this as sort of a revelation for the organization that could really drive that cadence go forward?
- Justyn Howard:
- Yes. This is Justyn. I’ll take the first pass at that and certainly Ryan or Joe can jump in. For the first couple of quarters, when we saw customer adds that looked like this, we cautioned, let’s see a couple more data points before we call this a trend. It feels like we’re there. What we’re seeing in the funnel and what we’ve been able to deliver over the past three quarters tells us the ability to add. And I will, again, focus more on the revenue yield from those customers than the absolute number. But it feels like we’re in good shape that this wasn’t something that was situational, but something that the team has really set up and our sales model is set up to deliver on a go forward. We want to continue to advise that the revenue is going to be the focus for us. And if we think about things like the -- just the ACV growth that we’ve seen, any changes that we may want to make on our conversion funnel, etc., we may intentionally drive those numbers in one direction or another with the intent to make sure that the yield coming out is as healthy as possible.
- Clarke Jeffries:
- Got it. And it just seems like overall, the go-to-market is more effective than the place you were out last year. I guess just in relation to that question, what is the limiter for additional investment right now? And why not get more aggressive at this stage and invest and not drive positive free cash flow growth based on the traction you’re seeing?
- Justyn Howard:
- Yes. I mean I think that, that’s something that we’re constantly evaluating. And I think some of what Joe talked about in terms of the increased investments that we’re making now that we’ve made through Q1 really set us up to be able to answer that exact question, which is where -- what’s the return on these investments relative to the opportunity and where do we want to be optimizing. Obviously, we delivered the free cash flow positive sooner than we had forecasted and that’s great. But we want to make sure that we’re focused on the opportunity and the investments we need to make there, so it’s not something that we’re prioritizing. Expect to see us to continue to be aggressive and ambitious with the opportunity.
- Clarke Jeffries:
- All right. Perfect. Thank you very much.
- Operator:
- Thank you. And your last question for today is from DJ Hynes from CGS. Your line is open.
- Luca:
- Hi, guys. This is Luca on for DJ. So I’m curious about some of the more nascent social platforms out there that you don’t currently integrate with. TikTok being one of the more prominent. How do you think about that particular platform as well as other social channels opportunistically and as you add more channels like a Reddit recently or TikTok potentially, do you see those being a meaningful incremental adoption for monetization catalysts down the line?
- Justyn Howard:
- Yes. Yes, good question. I’ll start with the second part. I think there’s some second order effects to any time the scope of what we help our customer expands. And so on one end of that is the more networks to manage, the more places that our customers need to be present and have a solid strategy that makes our value proposition that much stronger. The more people involved and permissions and nuances across the networks. That all is strong. We also monetize the profiles themselves. So the addition of additional networks has impact there. In terms of what we kind of look for and what we’ve seen, so specific to TikTok, I think it’s a fantastic platform and I think that they’re thinking about all the right things. I think we’ve mentioned on this call, maybe sometime last year, the typical trajectory there is the networks will see a critical mass and adoption. They’ll start to think about monetization, then they’ll start to invest in the APIs and business tools, and that’s where we get involved in the conversation. And so there’s a pretty natural progression that these networks go through. We kind of know what to look for and when to get involved and have those conversations with them ahead of time to figure out how we can help them as they’re thinking through those programs. So, the two primary things that we look for are customer demand and the network readiness. Do they have the resources, the APIs, etc., for us to give our customers a world-class experience? And then we look to make those investments in the case of TikTok and others. We’re leaning into those out of time and we’ll be ready to go in there.
- Luca:
- Awesome. That’s helpful. Thanks.
- Operator:
- Thank you. That’s all the questions that we have for today. I will turn the call over back to Justyn Howard for any closing remarks.
- Justyn Howard:
- Wonderful. All right. Well, thank you, everyone, so much for your time. As always, thanks for the great questions. Really appreciate the support. As always, we look forward to connecting with you all throughout the quarter and back again a quarter from now. We’ll let you get to the rest of your day but thank you, as always.
- Operator:
- Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you all for joining. You may now all disconnect.
Other Sprout Social, Inc. earnings call transcripts:
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- Q2 (2023) SPT earnings call transcript
- Q1 (2023) SPT earnings call transcript
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