Sprout Social, Inc. (SPT) Q2 2021 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the Sprout Social Second Quarter 2021 Earnings Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Jason Rechel, Investor Relations.

Thank you, operator and welcome to Sprout Social's second quarter 2021 earnings call. We'll be discussing the results announced in our press release issued after the market closed today. And we've also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Justyn Howard; CFO, Joe Del Preto; and President, Ryan Barretto. 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. Forward-looking statements include statements concerning financial and business trends, our expected future business and financial performance and financial condition, our guidance for the third quarter of 2021 and the full year 2021 and can be identified by words such as expect, anticipate, intend, plan, believe, seek or will. These statements reflect our views as of today only, 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 fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission on February 24, 2021 as well as any future quarterly and current report that we'll file 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 reconciliation to the most directly comparable GAAP financial measures are included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.sproutsocial.com. And with that, let me turn the call over to Justyn.

Thank you, Jason, and good afternoon, everyone. Thank you for joining us. Our company is executing at an exceptionally high level and we're pleased to report our best quarterly metrics since going public. I want to highlight our second quarter achievements before turning the call over to Ryan and Joe for further details. Social continues to assert itself as the centerpiece of digital strategy. As new secular tailwinds to our market begin to emerge, our momentum has never been stronger and our opportunity has never been greater. Our growth rate has shifted into an even higher gear, reinforcing confidence in our opportunity, our strategy, and the aggressive investments we are making in our future. Once again, we managed to break a series of our own records this quarter. We added a record number of net new customers, added a record number of customers contributing more than $10,000 in ARR, and further accelerated our ARR growth to 45% year-on-year. We reported our first ever non-GAAP quarterly profit, achieved positive free cash flow for a second consecutive quarter, and eclipsed the Rule of 50. Simply put, our business is rapidly accelerating while our growth is simultaneously becoming structurally more efficient. All of this underscores the attractiveness of our market and the strength of our unit economics. We're pleased to raise our guidance forecast across the board. During the quarter, our sales momentum was exceptional, and our product and development teams were hard at work shaping the foundation for our future growth. We brought to market multiple new capabilities, including a first-of-its-kind social commerce solution, expanded access to Instagram messaging, and enhanced case functionality for our integrations with Microsoft, Salesforce, Zendesk, and HubSpot. We continue to innovate swiftly to create new and differentiated value for our customers. This focus allows us to fundamentally drive retention and growth higher over time while unlocking new pockets of addressable opportunity. One major opportunity we now face is the rapid convergence of social and commerce. We've previously discussed the proliferation of use cases for our platform; this trend continues, with a new use case emerging, as social is becoming a true commerce platform. We are moving quickly and announced new expanded integrations with Shopify and Facebook Shops to enable brands to seamlessly manage their social commerce efforts within Sprout's unified platform. Being first to market with this type of disruptive social commerce solution was exciting for our team and our customers, but it's only the beginning. This use case continues to expand. A study by the Harris Poll earlier this year found that 93% of executives agree businesses are increasingly moving their e-commerce strategies to social media, with about eight out of ten businesses anticipating selling products via social commerce platforms in the next three years. Consumer preferences and expectations are changing. We will now enable the extension of digital storefronts to social, allowing our customers to deliver engaging content, world-class customer care, and personalized interactions throughout the purchasing journey. The full buyer cycle, from marketing to service, will live within Sprout's platform and enable our customers to unite their commerce and social workflows, reducing friction in the buying process. The functionality and partner integrations transform how our customers think about publishing and engagement. We've made the solution easily accessible for customers to adapt and leverage. These capabilities are powerful, elegant, and timely to the market, and we expect to deliver even greater value to our customers in the years ahead. Not to be overshadowed by the commerce launch is our expanded rollout of the Messenger API support for Instagram. This was one of our most requested features from our customers and will empower businesses to more efficiently utilize messaging at scale. This also aligns well with what our network partners term conversational commerce. We worked for over six months with the Instagram team on this release and were heavily involved in early beta programs, highlighting our partnership and our ability to jointly deliver value for our customers quickly. Behind the scenes, our teams are also achieving remarkable things. We continue to prioritize our DEI work and, during the quarter, expanded our technology giving program in which we donate over $1 million in software annually to support more than 75 global causes as part of our effort to broaden the social impact of our software. We are working hard to provide more transparency to our ESG efforts overall and anticipate publishing our first fully formed ESG disclosures later this year. We've also used the past year to rethink how our team will work in the future. Our offices in Chicago and Seattle officially reopened in a phased voluntary approach last month. However, at Sprout, we understand that the future is hybrid. Our goal is to empower our people to work wherever and however they thrive, adapting quickly to changing demands and habits. We are committed to giving our employees the resources, support, and freedom to grow and succeed at Sprout. We believe this approach will enable us to attract and retain elite talent as we continue to grow. To close, I want to revisit our core investment thesis. Social media has fundamentally transformed how consumers connect with brands, altering the entire customer experience across virtually every part of an organization. Social cannot be compartmentalized. Billions of consumers are prompting businesses to adopt new use cases as the market becomes increasingly complex and challenging to manage. We've built, organically and on a single codebase, the social system of record, intelligence, and action in a platform that can be leveraged horizontally across any size of business. From publishing and engagement to reputation, reporting, advocacy, listening, analytics, and now commerce, there is no business on the planet that can't benefit from a more sophisticated social strategy or a business strategy sharpened by social data. We are the industry's highest-rated technology platform across every segment in the market, according to GQ and others. While we're incredibly proud of what we've accomplished, we built a company that is inspired by and prepared to thrive in the future. We look forward to meeting with many of you this quarter and delving deeper into this investment thesis at our first Investor Day in September. With that, I'll turn the call over to Ryan.

Thanks Justyn. I couldn't be more impressed by the work of our teams this quarter. We're delivering for our customers today while strengthening the foundation for our future success. The barriers to entry in our market are rising; our platform is becoming more differentiated, and we're adding value for our growing stakeholders. Our annual Sprout Social index, which we released this quarter, revealed the current state of the market. The report found that 71% of consumers are using social more than they were a year ago. Additionally, 88% of marketers believe their social media strategy positively influences their bottom line. It's clear that social is more mission-critical today than ever before. Sprout's efficient go-to-market motion is well-aligned with software buyers who want to prove value for themselves before committing. We have continued to hire aggressively across the company, and we are very impressed by the caliber of people wanting to join Sprout. Our recruiting efforts have been bolstered by recent awards, such as Fortune's Best Workplaces in Technology, Fortune's Best Workplaces for Millennials, and Great Place to Work’s Best Workplaces in Chicago. Because of all this, we feel well-positioned to capitalize on numerous opportunities ahead. Justyn mentioned how our product teams, along with their partner teams, are moving quickly to take advantage of new opportunities. In our marketing efforts, we're seeing accelerating customer demand, resulting in increased qualified trials and an improvement in our trial conversion rate. Our new business and customer growth sales teams were outstanding during Q2. Additionally, our increased investments in customer success and onboarding are paying off with structural improvements to retention. Our record in customer additions, combined with rising ACVs, underscores the incredible market opportunity we are experiencing. The metric that stood out to me most this quarter was our 10K net additions, which set another record, as well as the accelerated growth of the 10K customer cohort, which grew at 55% year-over-year. This success stems from the expansion of use cases, our momentum in the mid-market and enterprise sectors, and our triumph in selling our premium modules across our entire customer base. To highlight a few brands that grew with us this quarter, we proudly welcomed Kraft Heinz, The Department of Energy, Independence Blue Cross, Agrium, Franklin Electric, Levi's, Whataburger, Sisense, BARK, The AARP, and Kaplan Test Prep. Now, shifting to a few customer stories, we take pride in partnering with Penn National Gaming this quarter. Jennifer Weissman, Senior Vice President and Chief Marketing Officer, said, 'We chose Sprout to unify our various unique social media accounts under one management platform that will enable us to cultivate the most engaging conversations and content for our guests. Sprout was a natural choice to help us grow the social presence of our many locations because of its powerful, intuitive capabilities that will enable our casinos to quickly reap the benefits.' Penn shares a commitment to diversity and inclusion with Sprout, and we are pleased that Sprout's capabilities helped amplify their recently launched efforts like Penn's Diversity Scholarship program and the introduction of the mychoice myheroes program, which offers exclusive benefits to military members, veterans, and first responders. We also executed an exciting addition to Nutanix's already extensive enterprise package with Sprout. Nutanix, a leader in hybrid multi-cloud computing, recently expanded their social listening relationship with Sprout, adding several new users to better manage their global secondary presence on social media. By diversifying their publishing and engagement needs, they improved their reporting systems and processes to develop a more strategic and focused social strategy at scale. As they approach their next fiscal year, Nutanix will leverage our professional services for reporting. We are grateful to continue our partnership with Nutanix as they unlock insights from social data that will drive their strategy forward. Furthermore, we recently collaborated on a case study with New Jersey Transit, which had 15 million Twitter impressions last year and serves nearly 1 million daily riders across its trains, buses, and light rail. Customer care and experience are core to the New Jersey Transit brand. Leveraging the Sprout smart inbox, they achieved a 142% year-over-year increase in reply rate and reduced average customer response times on social media to just 30 minutes. Carolyn Mack, New Jersey Transit's Director of Events and Social Media, stated, 'When people think of transit, we don't want them to think of just equipment and stations; we use social to give our employees a voice and humanize them to the public. Sprout understands us and treats us as individuals. Every time we reach out, Sprout gives us the same customer care we were promised from our first conversation. They are truly 100% there for us—extraordinary work.' Overall, we had another record-breaking quarter where our teams delivered, and our customers gained tremendous value. I'm really proud of how our people are showing up for each other and our customers. Because of this, we approach our third quarter with immense energy and momentum. With that, I'll turn it over to Joe to review the financials.

Thanks Ryan. I'll walk you through our second quarter results in detail before moving on to guidance for the third quarter and the full year 2021. Revenue for the second quarter was $44.7 million, representing 42% year-over-year growth. ARR exiting Q2 was $189.1 million, up 45% year-over-year. We were pleased to see record quarterly customer additions, healthy retention, and very strong expansion. We added a record 1,490 net new customers in Q2, ending the quarter with 29,612 customers, an increase of 22% year-over-year. This reflects our balanced and robust performance across all segments. We continue to focus on high-quality revenue yield from our new customer base. The number of customers consuming more than $10,000 in ARR reached 3,936, up 55% from a year ago and up from 3,514 at Q1 2021. Our ACV increased by 19% year-over-year. The rising strategic importance of social, blogging use cases as customers operationalize social, along with the momentum in the market, remain sustainable growth drivers for our 10,000 customer cohort and our global medium-term ACV growth. In discussing the remainder of the income statement, please note that unless otherwise stated, all references to our expenses, operating results, and share count are non-GAAP and reconciled in our GAAP results in the earnings press release that was issued just before this call. In Q2, gross profit was $33.8 million, representing a gross margin of 75.6%. This is up 160 basis points compared to the gross margin of 74.0% a year ago. We've seen a positive impact on gross margins as we lap the elimination of infrastructure hosting costs from legacy resources and benefit from the natural efficiencies of scale in our business. Sales and marketing expenses for Q2 were $17.1 million, or 38% of revenue, down from 43% a year ago. We are pleased with the quality of hires who are choosing to join Sprout and are continuing to accelerate our pace of hiring across both our sales and marketing teams. Total sales and marketing expense growth has accelerated for the fourth consecutive quarter, indicating a healthy trend line of investment while we improve efficiency. Research and Development expenses for Q2 were $8.1 million, or 18% of revenue, down from 22% a year ago. We continue to set aggressive R&D growth goals in 2021 as we address an expanding set of opportunities. Many key R&D hires started in June, with more planned throughout Q3 2021. General and administrative expenses for Q2 were $8.5 million, or 19% of revenue, down from 27% a year ago. We expect G&A expenses to decrease as a percentage of revenue as we scale. However, we anticipate this margin expansion to occur at a much slower pace over the next 12 to 18 months compared to the previous 12 to 18 months. Non-GAAP operating income for Q2 was $0.1 million, with a positive operating margin of 0.3%. This compares with a negative 19% operating margin a year ago. We are pleased with the improved efficiency as we scale the company, exceeding our expectations due to higher revenue and the timing of key hires. Non-GAAP net income for Q2 was $0.0 million with net income of $0.0 per share, based on 54.8 million weighted average shares of common stock outstanding, compared to a net loss of $5.8 million and $0.11 per share a year ago. Looking at the balance sheet and cash flow statement, we ended Q2 with $171.5 million in cash, cash equivalents, and marketable securities, up from $167.8 million at the end of Q1 2021. Total revenue at the end of the quarter was $54.5 million. Our built and unbuilt contracts remaining performance obligations or RPO approximated $1.2 million, up from $74.9 million exiting Q1 2021, an increase of approximately 59% year-over-year. We expect to recognize about 84% or $68.2 million of total RPO as revenue over the next 12 months. Operating cash flow in Q2 was $4.4 million compared to a negative $4.0 million a year ago. Free cash flow was positive $4.1 million in Q2 for a free cash flow margin of 9%, compared to a negative $4.5 million and negative 14% margin a year ago. Our ongoing momentum in the mid-market enterprise and the shift towards annual multi-year contracts positively impact free cash flow as we grow. We are pleased to announce positive non-GAAP operating income for the first time in our history and positive free cash flow for the second consecutive quarter. Accelerating free cash flow margins and revenue growth place us above the Rule of 50 benchmark this quarter, underscoring the attractiveness of our unit economics. I want to emphasize that we continue to optimize for future growth. We now expect to be sustainably profitable or free cash flow positive in all upcoming quarters. We generally anticipate free cash flow margins to be several hundred basis points better than operating margins through the remainder of 2021. Shifting to formal guidance, for the third quarter of fiscal 2021, we expect total revenue between $47.3 million to $47.4 million, a growth rate of 41%. We expect a non-GAAP operating loss between $4.3 million to $3.9 million, representing an anticipated operating margin of negative 8.7%, which is an improvement of over 400 basis points year-over-year. We're making aggressive growth investments throughout the company, while simultaneously improving our margins, highlighting efficiencies as we scale. We expect a non-GAAP net loss per share between $0.08 and $0.07, assuming approximately 53.9 million weighted average basic shares of common stock outstanding. For the full year of fiscal 2021, we now expect total revenue between $182 million to $182.6 million, which indicates an overall reported growth rate of approximately 37%, a significant increase from our previous annual growth rate expectation of 32% to 33%. For 2021, we anticipate a non-GAAP operating loss in the range of $11.0 million to $10.6 million, implying a non-GAAP operating margin of negative 5.9%, more than 400 basis points better than our previous annual guidance, and an improvement of roughly 1000 basis points year-over-year. We're pleased to see faster growth combined with greater efficiency. We now expect a non-GAAP net loss per share between $0.21 and $0.20, assuming approximately 53.8 million weighted average basic shares of common stock outstanding. Notably, our offices in Chicago and Seattle reopened in mid-July, and we continue to hire aggressively across the organization. We've accounted for this office reopening in our expense forecast for the remainder of the year and expect this will likely lead to a moderation in the pace of G&A margin expansion over the next 12 to 18 months, relative to the previous 12 to 18 months. In summary, we believe we are well-positioned to capitalize on opportunities for durable multi-year growth as social becomes central to digital strategy. Our accelerating growth rates, compelling financial leverage, and strong free cash flow performance provide us confidence to make investments that we believe will enable us to reach our full potential in the coming quarters and years. Justyn, Ryan, and I are now happy to take any of your questions.

Thank you, sir. Our first question comes from Raimo Lenschow of Barclays. Please go ahead.

Hey, this is Frank on for Raimo. Congrats on another really great quarter here. You noted strong performance and lower costs first; what was the biggest contributor? Was it mostly from the premium products like listening or analytics, or was it more from growing seats and expanding across departments?

Thanks for the question. The growth of our customer base is primarily driven by increasing user seats, additional use cases, and involvement from various departments, followed by the premium add-ons like listening and analytics. Depending on the specific company and their maturity within the market, the priorities may vary.

Okay, very helpful. It was great to see you guys moving toward social commerce. I know this has been on the horizon for a while. Can you help quantify the opportunity here? How do you see this as a potential area for further partnerships or M&A in the future?

Great question. The initial launch back in June is truly just a small part of what we believe is the total opportunity and our plans there. A lot of it is still developing. We expect that our efforts will combine additional integrations, starting with platforms that will gain significant reach and traction in the market. We favor some existing relationships but will definitely extend to more integrations and enhance our capabilities. Moreover, there is potential for this to become a monetizable skew as we continue to build it out, but we are being deliberate in our approach. While the opportunity is unfolding for us and our partners, forming a thesis, getting into the market, and ensuring we can learn and build from these opportunities is important. So expect to see more from us regarding commerce.

Great. Thanks again.

And our next question comes from Arjun Bhatia of William Blair. Please ask your question.

Thank you and congrats on the great quarter. I wanted to delve more into the e-commerce opportunity. It's great to see it launched in the market. Could you share any insights about customer reaction or adoption, usage, etc.? I know it's early, but any details would be appreciated. Also, regarding customer adoption trends, do you see this primarily being adopted by existing customers, or is there also an opportunity to attract new customers from under-penetrated verticals?

Great question. It's still early to share much about deal contribution and adoption metrics. However, we've been thrilled to see numerous fantastic brands adopting this feature. As we progress, we will provide more specifics regarding metrics. In terms of customer adoption, we see a large opportunity within our existing customer base, but we also view this as a way to attract new customers, particularly businesses that conduct most of their sales through e-commerce and are turning to social commerce.

I'll quickly add that we are already seeing an impact from helping new customers appreciate the benefits of Sprout due to our early entry into this market, making their workflow much easier with our social commerce integrations. So we see benefits for both existing and new customers here.

Got it, that's very helpful. Ryan, as we celebrate this great momentum in the business, can you help flesh out where you're hiring? Is it more in go-to-market or inside sales? Do you see more opportunity in the enterprise market for expansion reps? How should we think about the marketing investments you’re making?

We are hiring across various segments, focusing on mid-market and enterprise growth as well as success teams. You'll see expansion from both the new business development side and our growth teams, along with our international markets. Essentially, we want to ensure we have the right level of capacity and distribution in the areas that are emerging as opportunities.

Thank you very much and congrats again on the quarter.

Thank you.

And our next question comes from Parker Lane of Stifel. Sir, please go ahead.

Hi guys, thanks for taking my question. There’s been a lot of discussion around social commerce. I wanted to ask about advocacy for a moment. Can you provide an update on the demand environment for that particular use case? What are customers seeing in terms of ROI from advocacy?

Advocacy is an interesting space for us. This area of impact for businesses was recognized years ago. We were building against the idea that social provides opportunities not just for external voices but also internal ones to amplify the brand message, creating stronger relationships with audiences. Ryan shared some examples of successful implementations from our existing customers. We're observing increased demand here and see an opportunity to leverage a unified platform approach.

Understood. Regarding the 10,000+ ARR customer cohort, have the recent solid add-ons predominantly come from enterprise customers, or have SMB and mid-market customers also adopted the platform heavily to surpass that $10,000 mark?

We have a healthy balance of success with mid-market and enterprise adding customers over $10,000 in ARR. We've also seen good traction in our SMB and agency segments. Many SMBs grow up digital and social; it remains a significant mode of customer communication, so we continue to experience success in all customer segments.

Thank you once again for taking my question; great quarter.

Thanks a lot.

And our next question comes from Matt VanVliet of BTIG. Sir, you may go ahead.

Thanks for taking the question; great job on the quarter. Regarding the international side, you've ramped your management efforts over the last couple of quarters. Ryan, you mentioned hiring has really picked up on the go-to-market side. Can you discuss the current level of team building and their efficiency compared to US counterparts? What level of growth or contribution to overall growth are you seeing in the first half?

We're still in the early stages of understanding what the opportunity looks like internationally. Our European office, established in 2019, is beginning to bear fruit, and we're starting to see productivity increase there, but it remains quite new. We've expanded resources and great talent in the APAC and LATAM regions and have added leaders there. Because of our inbound model, we experience where demand exists before making investments. So, we see promising momentum with this group and are making strategic investments as needed.

As you consider the customer care opportunity longer term, given how much attention this area has gained—especially with larger companies writing significant checks—are you planning to release a fully productized offering similar to social commerce, or will it take a more customized approach for each customer?

Many of the foundational elements are in place already. A significant number of our customers rely on Sprout for care use cases, and there's room for further enhancement. The tools we provide have a decade of experience which positions us well. We can introduce a dedicated product or improve existing tools as we gain momentum on our roadmap.

Great, thank you for the insights and fantastic job on the quarter.

Thank you.

Our next question comes from Clarke Jeffries of Piper Sandler. Please go ahead.

Thank you, and congrats on the quarter. It's encouraging to see ARR growth accelerate over 40%, with net new ARR reaching a record for Q2. Year to date, ARR is already at 75% of what we achieved in 2020. Considering your execution strength and pipeline, do you believe it’s possible to replicate the traditional seasonal split of net new ARR between first and second halves of the year? How should we think about back half execution?

COVID has likely altered the typical seasonal patterns we've observed previously. The latter part of the year has historically been strong for us, and we don’t expect that to change. Given our guidance, it might seem a little different based on the COVID cycle context, but rather than focusing solely on quarter-to-quarter comparisons, we’ll emphasize sequential performance and record-setting activities, which will be our benchmarks moving forward.

Perfect. What are the top product-led growth initiatives for the remaining year? I assume hiring is high on the list, but could you detail other inbound growth investments?

Our product-led growth efforts focus on improving onboarding processes, making advanced capabilities more visible and accessible for our new and existing customers. We want the product to help in the sales process, given the revenue driven through our trial model, constantly optimizing that funnel wherever we see opportunities.

Thank you for that insight.

And our next question comes from Stan Zlotsky of Morgan Stanley. Please ask your question.

Thank you, and congrats on the outstanding quarter. I wanted to further discuss the enterprise opportunity. Given your recent hiring of sales reps, how far up the enterprise ladder can you effectively compete with your product portfolio? How aggressively are you pursuing this enterprise opportunity?

We believe there's no ceiling on our potential here. We've closed deals with Fortune 500s and even Fortune 10s with our current products, receiving encouraging feedback. As we build out the enterprise sales team, we've been targeting customers that align well with our offerings and achieving notable success across all products. Therefore, we see ample opportunity for growth.

Just a quick question for Joe regarding billings. They were impressive, but are there any one-time factors in the billings number that we should be cautious about?

No, Stan, there are no one-time items. This is a natural progression as we continue to secure larger mid-market and enterprise deals, you can expect to see longer-term and larger-sized deals. There’s nothing unusual to note.

Great, thanks a lot.

And our next question comes from DJ Hynes of Canaccord Genuity. Please ask your question.

Hey guys, congrats on an excellent set of numbers. Regarding the record customer additions, if you had to rank the drivers, has it been more top-of-funnel increases, or improved conversion rates? Any thoughts on your win rates?

Great question. We owe some credit to our success in product organization. We've certainly seen structural improvements in our retention, and investments made in onboarding are paying off. The innovation in our roadmap adds value, so we believe there is a substantial lift there. We've seen great quality coming from the top of the funnel with improving conversion rates across all segments.

That's helpful. Ryan, one more question: can you provide a ballpark figure on the percentage of seats within social teams versus service, and how many seats are outside of those functions? It seems there's a significant opportunity for cross-functional use of social data.

It's challenging to quantify because organizations vary, and many have shifted their approach from centralized to decentralized teams. Yet, it's reasonable to say that marketing departments make up a majority of users dealing with customer service jobs, with customer care and potentially sales roles gaining traction. We're moving towards increasing specialized roles in the mid-market and enterprise segments.

Thank you for the insights; congrats on the quarter.

Thank you.

And our next question comes from Rob Oliver of Baird. Please ask your question.

Thanks for taking my questions. Regarding social commerce, the integration this quarter seems to have an accretive approach. How are customers responding? Are they feeling the pressure to upgrade their plans to utilize those features?

To reverse the order, the news from the Twitter team is exciting, and we look forward to collaborating on this. They provide a compelling proposition, and we are well-positioned to be involved. The overall opportunity across the board appears significant. Regarding our commerce capabilities, early on, we expect to see additional user seats being filled due to the current offerings being available to all customers. We intentionally aimed to ensure all customers have access to these powerful tools. As we refine our capabilities further, upselling or different structuring of offerings could come later.

Thanks, Justyn. Ryan, following up on the enterprise buying behavior, it appears the expansion numbers you're posting reflect a new appetite for solutions like yours in marketing departments. Can you comment on the trends in bottom-up purchasing acceptance?

Certainly. Our trial model is incredibly beneficial and instrumental to our growth. Numerous logos have entered through trials, allowing them to validate our product's fit prior to committing. Customers are recognizing this approach as a risk mitigator. Furthermore, we're accessing more executive decision-makers as social becomes a significant priority for many businesses.

Thanks again for the insights.

And our final question comes from Scott Berg of Needham & Company. Please ask your question.

Thank you and congrats on the excellent quarter. I'm curious if you believe you’re investing enough currently, considering the exceptional metrics of the last few quarters, and if there’s a tangible opportunity to accelerate growth further?

That's a valid question we take seriously. We're focusing on where to ramp up investments. We're committed to making informed decisions and finding opportunities to apply investments meaningfully. Our focus on visible opportunities allows us to capitalize without hesitation when warranted and we'll continue making plans. However, we remain cautiously optimistic as we believe we've been effective in leveraging our investments thus far.

From a follow-up perspective, can you share metrics regarding your customers' engagement levels with the platform compared to 12 to 18 months ago?

We don't have specific metrics to share publicly at this moment, but we do observe that organizations are increasing their involvement across the board—more departments, use cases, and more valuable offerings as the realization grows that social is central.

This concludes today’s conference call. Thank you all for participating. You may now disconnect.