Sprout Social, Inc. (SPT) Q1 2025 Earnings Call Transcript

Thank you for standing by. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Alex Kirks, VP, Investor Relations and Corporate Development. Please go ahead.

Thank you, Operator, and welcome to Sprout Social's first quarter 2025 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 CEO Ryan Barreto and CFO Joe DelPretto. Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. These include, among others, statements concerning our expected future financial performance, including our Q2 and 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 risk uncertainties that could cause actual results to differ materially for discussion of the risks and other important factors that could affect our actual results, please refer to our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2025 to be filed with the SEC as well as our most recently filed 10-K. During the call, we will discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures along with the reconciliations and the most directly comparable GAAP financial measures are included in our first quarter earnings release. This 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 first quarter earnings call for fiscal 2025. We reported first quarter results with revenue of $109.3 million, representing year-over-year growth of 13%, highlighted by strong revenue execution and operating margin expansion. Our current remaining performance obligations, which reached 255.8 million, represented 21% year-over-year growth. Our go-to-market teams delivered another solid quarter with 22% growth in the 50K ARR customer cohort. We also landed strategic wins with global brands like Palo Alto, NASCAR, Interscope Records, Avis Budget Car Rental, and Axos Bank. These customers demonstrate our continued execution and strategic fit with the most socially sophisticated enterprise customers. We are expanding our sales capacity this year and will continue to throughout the first half of the year, which we believe will drive further momentum in our pipeline generation and enterprise coverage as we move into FY 2025 and beyond. We're also excited about the continued momentum in our influencer marketing product, which has become increasingly strategic to how we engage with our most socially sophisticated customers. I also wanted to provide a quick update on the macro environment and what we experienced during the quarter. Q1 track is expected with spending patterns similar to those seen in 2024. We continue to see elongated procurement and purchasing processes that were very similar to the prior year. While we expect these impacts to persist through the remainder of 2025, we were encouraged by the enterprise pipeline generation during the quarter and are seeing the early signs of the improved process and discipline that our new GTM leadership is bringing to the company. Building on last quarter's discussion about Sprout's unique position in the social media management market, I want to share how our products are enabling brand discovery in today's rapidly evolving digital landscape. Also provide updates on our four key growth drivers before handing the call over to Joe. A growing trend we're seeing and hearing from our customers is the ongoing shift from traditional search engines to social platforms for discovery. Research from Forbes shows 46% of Gen Z now prefer social media over conventional search, a behavior that signals where brand engagement is headed. And we believe this isn't a passing trend, but a fundamental rewiring of online behavior that will play out over the next several years. As the majority of search is now zero-click with AI, traditional content strategies face headwinds as their traffic is changing in real time. Social media's authenticity, immediacy, and community-driven nature fill the gap, offering businesses strong ROI outcomes. social platforms enable real-time discovery and customer connections fostering trust and driving conversions gen z's preference for social search provides critical directional data pointing to a future where brands must view their social presence as a top business priority this shift amplifies the role of influencer marketing which is central to social search dynamics creators and influencers shape discovery by delivering relatable content that resonates in algorithm-driven feeds, guiding consumers from curiosity to purchase. Nearly 70% of consumers trust influencer recommendations over information from brands according to Marketing Drive. And Sprout's research shows just about half of consumers make purchases at least once a month because of influencer posts. This past quarter, we announced the rebrand of our influencer marketing platform, formerly AgriMedia, to sprout social influencer marketing. This product is designed to enable brands to turn creator strategies into a top driver and multiplier of ROI, which is crucial given the role influencer marketing plays in the current digital landscape. In mid-April, we launched significant enhancements to the product, including AI-powered natural language discovery to enable marketers to identify creators through topic-led search, a customizable brand safety solution to better align creator partnerships with a brand's value, and new creator vetting features that reduce the time spent in discovery so marketers can refocus on strategic creative tasks. A reimagined influencer marketing product is grounded in AI and is designed to help brands find and vet the most valuable creators that fit their unique strategy faster and safer than ever before. We are excited about the opportunity this opens for brands to maximize their impact in today's increasingly social-first ecosystem, and we look forward to expanding on the success our customers are seeing from these updates next quarter. Equally critical is social customer care as the rise of social search heightens the need for seamless integration of care strategies. Consumers turning to social platforms for discovery expect immediate personalized responses. Sprouts updates to its customer care solutions empower brands to meet customers where they are, with the goal boosting satisfaction and retention. As social search grows, integrating robust care strategies is no longer optional. It's essential for building trust and loyalty. These innovations allow us to capitalize on the changes of an increasingly social-driven world and empower brands to reshape the future of the business, delivering measurable value. As we dive into our growth drivers, you'll see how these advancements paired with our vision are fueling enterprise business and helping solidify our leadership in the market. Similar to the last few quarters, I want to provide a quick update on our four key growth drivers for Sprout that include, number one, win the enterprise. Number two, customer health and adoption. Number three, expand our partnership and ecosystem. And number four, drive improved account penetration. Then I'll take a few minutes to provide some quick updates on each of these key focus areas. To win the enterprise, we intend to expand the pipeline, close more 50k plus deals, and accelerate adoption with a product roadmap built for enterprise needs. Let's start with key product releases in the quarter. For AI, we released generate post by AI Assist that enables social media managers to leverage fresh content ideas through Generate's recommendations. With a few clicks, users can create a range of concepts to captivate their audience. With convenient access from either the publishing calendar or Compose window, users are able to generate creative written content in their unique brand voice to help drive productivity and inspiration for their social strategy. For Care, our latest innovations are built for brands managing high-volume engagement at scale. During the quarter, we released our AgentForce integration to be generally available for Service Cloud and Sprout customers. With Sprout and Salesforce's AgentForce, brands can accelerate case resolution time with faster access to multi-channel case insights, personalized customer responses through consolidated contact summaries, and enhanced brand experience with customer insights across case and channels. We also released LinkedIn DMs, which allows teams to reply to private messages sent to a LinkedIn business profile from Sprout's smart inbox or cases. By consolidating these messages in one place, care and community management teams can more efficiently engage with private inbound messages that could be sales leads, customer support issues, or job candidates. We're strengthening enterprise scalability, security, and compliance to help organizations manage complexity with confidence. Large distributed teams need consistency and control, and we're excited about a new release during Q1 called Dynamic Role Sync, which is designed to provide customers with greater oversight of user permissions and access security. As teams grow to meet the demands of social, brand safety continues to be top of mind for businesses, and this release is designed to offer customers further confidence in ensuring the right team members have the proper access. Finally, we are one of the first to market with a key accessibility feature where customers can now add or edit alt text on image posts on Instagram and Pinterest in Spro, including using AI Assist to generate image description in one click. Alt text is a simple but powerful way to make social content more accessible to those globally with visual impairments. It brings images to life for those using screen readers or other assistive tech and helps brands prioritize inclusivity while reaching a broader audience. This is especially impactful for our customers in state and local government that will need to comply with the updated digital accessibility requirements from the ADA by April 2026. I also want to spend a few minutes discussing some additional strategic enterprise wins in the quarter that you'll find in our earnings presentation. This quarter, we closed a seven-figure new business deal with a Fortune 500 medical device manufacturer looking to take an enterprise approach to social and to consolidate their tech stack for publishing, engagement, analytics, listening, and influencer marketing. They chose Sprout for our ability to deploy quickly. And because of the access they get to our team of expert professional services who can help enable a true enterprise strategy with stronger operations and increased visibility. Now, instead of managing silo tech and multiple vendors, they'll be able to manage their entire social strategy in Sprout, which can enable a faster time to value and a stronger ROI. Another new business customer that closed in the quarter was with a Fortune 500 food and beverage manufacturer. This was another example of a company using multiple tools and seeking consolidation into one easy-to-use platform. They ultimately wanted a solution where they could understand current customer trends, pair them with their historical great products, and amplify that content while receiving immediate feedback on its performance. with sprout they're able to centralize marketing and customer support in one intuitive platform to monitor feedback track campaign success and engage with consumers in real time they're also now going to be able to generate real-time reports to identify trends leveraging that data to align with a product strategy and ultimately drive loyalty and repeat purchases the next customer story we want to highlight is a 600k expansion win which highlights the growth opportunities within our existing customer base. This Fortune 500 restaurant chain was already managing their marketing, care, and experience through our platform and service cloud integration. Our expanded relationship was driven by their acute need to significantly increase their coverage of social profiles across 15,000 locations. Now they can easily manage guest interactions and reviews across thousands of locations, helping ensure that messages aren't missed and that complaints are efficiently addressed. This is a great example of how critical social is for the health of our customer's brand and reputation and our ability to meet the needs of a large-scale, complex enterprise organization globally. Our second growth driver is a sharper focus on customer health, onboarding, and adoption to maximize long-term value. This quarter, we successfully implemented a new customer success platform that enhances our ability to score and assess customer health. With this improved visibility, we're better equipped to proactively identify both renewal risks and expansion opportunities. We also continue to strategically scale our customer success team by tailoring our approach based on customer segments. SMB and mid-market customers now benefit from stronger community resources and enhanced technical support. While our enterprise clients receive a higher touch experience through professional services, AI-driven insights, and product usage signals. Moving on to our third driver, we will continue to invest 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. In the first quarter, we added new leaders in product partnerships and channels to lead and expand our efforts across Salesforce, AWS, and beyond. We also deepen our Salesforce Alliance with a strong presence at the Sydney World Tour in February, the flagship event for APAC customers. Expect us to ramp up activity on the partnership front in fiscal 2025, as we believe our social network, technical integrations, and go-to-market partnerships can be a long-term acceleration to our business model. A key focus in the next few quarters will be working to build out our network of international resellers that can increase our access to more European-based customers, and over time to replicate this in APAC. Our fourth growth driver is deepening customer engagement through use case expansion and premium modules, with our field team seeking to drive greater value across both new and existing customers. We built on our momentum from Q4 by launching a multi-product campaign in Q1 across our go-to-market teams. Multi-product selling is now a core component of every sales rep's compensation plan. To support this shift, We're equipping our reps with a robust set of account-based intent signals to help them identify high-potential expansion opportunities and uncover untapped markets. Looking forward, we believe the strategic investments we are making in robust customer care, integrated AI-powered solutions, and influencer marketing will help define this product category in a world where social is not just important, but essential. I'm excited about what's ahead and look forward to sharing more progress along the way. And 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 in guidance. Our first quarter results were highlighted by a record quarterly non-GAAP operating margin of 11.5%, up over 500 basis points from the year-ago period. We generate a record $19.5 million in non-gap free cash flow during the quarter, up $8.1 million from a non-gap free cash flow in 1Q 2024, an increase of 72% on a year-on-year basis. We remain committed to growing operating leverage on a fiscal year basis and will continue to evaluate our ability to drive greater profitability as the year progresses. On to a summary of the quarter. Total revenue for the first quarter was $109.3 million, representing 13% year-over-year growth. Subscription revenue was $108.7 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 22% from a year ago. Q1 ACV was $14,961, 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 strengthening premium module tax rates such as influencer marketing and customer care. RPO totaled $360.2 million, up of $351.5 million, exiting Q4, and up 24% year-over-year. We expect to recognize 71% or $255.8 million of total RPO as revenue over the next 12 months, implying a CRPO growth rate of 21% year-over-year. Non-GAAP operating income totaled $12.5 million, which is well ahead of the high end of our outlook. This was up from $6.0 million a year ago and equates to a non-GAAP operating margin of 11.5%, a quarterly record for operating margin. We're pleased that our progress here demonstrates our focus on continued growth and our margin profile. Before moving on to guidance, a few additional comments. Based on the latest data we gathered during Q1 that reflects our current macro environment, expect us to continue to take a measured view on how we look at the business this fiscal year. As Ryan mentioned earlier, we do not expect the demand environment to improve in fiscal year 2025 from what we experienced in fiscal year 2024, and we are closely monitoring this dynamic spending environment impacted by tariffs and federal spending cuts. Now on to guidance. For the second quarter of fiscal 2025, we expect revenue in a range of $110.4 to $111.2 million. We expect non-GAAP operating income in the range of $8.4 million to $9.4 million. We expect a non-GAAP net income per share of between 14 cents and 16 cents. This assumes approximately 58.8 million weighted average basic shares of common stock outstanding. For the full year 2025, we're raising our guidance from the prior quarter and now expect revenue in a range of 448.9 million to 453.9 million. We're also raising our non-GAAP operating income guidance and expect it to be in the range of 40.7 million to 45.7 million. We now expect non-GAAP net income per share between $0.69 and $0.77, assuming approximately $59.1 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?

At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We request that you limit yourself to one question. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ryan Moolenshaw with Barclays. Your line is open.

Perfect. Thank you. Congrats on a great start. Ryan, you mentioned some interesting enterprise wins. can you talk a little bit about what you're seeing there more in the early stages of the pipeline? Like, obviously, it's volatile out there, but, like, you know, it still sounds very interesting that enterprises continue to do some work there. Can you just kind of go a little bit deeper in terms of what you're seeing in the field there, especially on the high end of the customer base?

Thanks, Remo. I appreciate the question. Yeah, we had some great wins in the quarter across the board. I think one of the things that's most interesting to us here is just the wide variety of industry and verticals you see, right? Even in the Fortune 500, you've got med device, you've got restaurant chains, you've got food and bev. From a pipeline perspective, we've seen some really healthy things from our enterprise team during the quarter. You know, a lot of credit to the team in terms of just the execution in the market right now and the conversations that we're having. I think this really comes down to where our customers' customers are. And more and more, they're on social, right? We're seeing customers on social two and a half hours a day, and there's a ton of gravity for these enterprise customers to manage them there. They need a platform like Sprout to be able to engage with them, and that's from a marketing perspective, a care perspective, an analytics perspective. So these are all the types of things that we're solving for customers today. And the team is finding themselves in more opportunities than before at a larger scale. So just really good progress on the pipeline creation.

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

Thanks. I appreciate it, guys.

Yeah, thanks, Rob. Yeah, Mike and the team have been doing a really nice job there. I mean, one of the biggest things that we're really focused in on, and you mentioned it in the question, is just ideal customer profile. And so one of the benefits for us is, you know, with nearly 30,000 customers across so many industries and verticals, we've got a really good sense of where our opportunities exist. And then on top of that, you know, when our customers are on social, we get really good signal on the things that they're doing, right? We also, as you all know, we lead with the product in a trial. So when prospects come in, even before they sign a contract and they're in our trial, we get a really good sense of how they're leveraging social. We get really good data and analytics that the team can use to make sure that we're engaging in the right places. We're ensuring that they're using the product in the right places and that we're solving their biggest problems. I think from an enterprise perspective, as you might imagine, customer care matters a ton to them. If you're not on social in front of your customers, it's really reputation roulette. And these customers care deeply about making sure that they're all over it. So those are some of the highlights for the team and where they're spending time with the enterprise.

Your next question comes from the line of Elizabeth. Porter with Morgan Stanley. Your line is open.

Great. Thank you very much. I wanted to follow up on your comments just about a really strong pipeline heading into the year. So, could you just give us some more context for some of the pipeline coverage ratios that you're including for 2025? Kind of where you may be today versus prior periods and how that gives you comfort to be able to move through a potentially more difficult macro, although I kind of recognize we're not seeing any of the impact yet today. Thank you.

Yeah, I appreciate the question. Yeah, we feel good about the coverage that we've had here. Similar to some of my comments just before, the team's doing a really good job in terms of pipeline hygiene. We're seeing really great effort in terms of creation from the top of the funnel. As you might imagine, we're paying very close attention to all of the metrics with uh pipe creation and pipe velocity um certainly like all of us paying very close attention to the things that are happening in the macro you know currently not seeing any uh anything material in terms of changes but paying a lot of attention there your next question comes from the line of david hines with can acquire genuity your line is open.

Hey, guys. Two for Joe.

Joe, I'm getting 6% CRPO-based bookings growth. Is that a decent proxy for enterprise bookings growth? And if not, what's it missing? And then the second question is, what are you seeing from a gross retention standpoint in that 10 to 50K cohort?

Yeah, thanks for the questions, DJ. You know, when we look at CRPO, I think there's a couple of things that we've talked about before. And I think overall, we were pleased with the growth, you know, the over 21% growth in CRPO in the quarter, I think there's two things that always skew that number, as we talked about before. Number one is you've got the seasonality, right, from Q4 to Q1. Q4 is always going to be really strong when it comes to CRPO, and then that's going to kind of burn off in Q1 and always be a little bit, you know, impacted by that seasonality. And the number two is just we still have the month-to-month aspect of our business. And so that kind of, you know, we've talked about this over the longer term, the CRPO growth number is going to be a real good indicator, but we're still at a point where we're still going to converge on that with revenue over time. With the gross retention side, we continue to see really strong gross retention in a It was up again quarter over quarter, and I think for us, it's a really strong indication of how mission critical our software is to our customers, and so continue to see improvement on the gross retention, not just in the enterprise. I would say across our customer base, even down in the SMB, we're seeing strong gross retention there.

Okay, thank you. Next question, please.

Your next question comes from the line of Adam Hodgkiss with Goldman Sachs. Your line is open.

Hey, guys. This is Grayson Skelbon for Adam. Thanks for taking the question. I wanted to touch on profitability quickly. Pretty nice beat in the quarter there as well as a nice raise to the full year guide. If you could just talk a little bit about what drove that beat and if there's any sort of changes or impacts to the full year investment philosophy following the outperformance in the quarter. Thank you.

Yeah, thanks for the question. You know, as far as, you know, what drove the beat, you know, a couple of things. One, the revenue over performance was one of the key areas. The other one is some of the hiring that we had in the quarter was more back end loaded in the quarter. And so that, you know, definitely benefited us. But what I will say overall, when you look at the full year guide, we're really trying to make sure we're still maintaining some flexibility to adjust for any kind of unknown risk throughout the year. But what I would say is very similar to Q1, if we continue to outperform on the top line, you'll definitely see more leverage in the business throughout the year.

Okay, thanks. Next question, please.

Your next question comes from the line of Scott Burke with Nidham. Your line is open.

Hi, everyone. This is Rob Morellian for Scott. I just take the question and congrats on the quarter. I understand the Asian force integration was still pretty recent. Any commentary you can provide on how that may have impacted pipeline or deal flow for the quarter? And any thought on the sort of contribution this can have for 2025 pipeline trends? Thanks.

Yeah, thanks, Rob. Appreciate the question. We're really excited about AgentForce and the partnership. This is just another chapter in terms of the partnership we've had with Salesforce growing from the service cloud. We're really early there. Obviously, we just went GA with that integration. We had a chance to talk about it a little bit at Sydney. We'll have a chance to talk about it as we head into marketing connections and then again at Dreamforce at the end of the year. But nothing else to call out this early in the stage. And as we come back, I think we can share a little bit more color around some of the progress that we're making there in the customer stories.

Okay, thank you. Next question, please.

Your next question comes from the line of Alan Verhofsky with Scotiabank. Your line is open.

Hey, guys. Thanks for taking the question. Good to see numbers for the full year going up on the top and bottom line uh i noticed your q2 revenue growth rate that was guided to is higher than what you guided for in q1 i know the comps are easier but given the q1 beat here can you just maybe talk about the biggest puts and takes um with respect to the guided q2 revenue number and then as a quick follow-up what drove the current deferred revenue in the quarter to fall for the first time on a sequential basis? Thanks.

Yeah, thanks for the question. On the first point, I think when it comes to, you know, the Q2 guide and then also on the full year, I think the only thing to call out there is, you know, and I mentioned this in my prepared remarks, is we're just trying to take a very measured, you know, approach in the way we guide. It's also, you know, Ryan called this out as well, we're assuming that the macro is consistent with what we saw in Q1 in most of 2024. and so we feel pretty good about you know the guidance we set out for the year and our ability to to achieve those numbers um as it relates to deferred revenue i think the biggest impact there is just the the fact that you know we we signed such large deals in q4 and i think q4 last year was one of the largest you know increases we've seen when it comes to annual multi-year deals and the impact on deferred revenue and as that burns off in q1 there was just a bigger sequential impact because of the size of the deals we were landing in Q1 or Q4, and that kind of drove that impact on Q1.

Next question, please.

Your next question comes from the line of Arjun Batheo with William Blair and Company. Your line is open.

Thank you so much. R.B., one for you. It seems like there's certainly going to be a lot of focus this year and beyond on cross-sell platform expansion, right, selling the entire Sprout platform as opposed to just the individual products, especially with influencer marketing and care. I'm curious how we should think about just penetration with those solutions and when you're thinking about increasing the role that they play in your growth rate, Is that mostly going to be through existing customer expansions or through more of the larger kind of enterprise deals that you're starting to sell, where we'll see attach rates for those increase?

Yeah, thanks, Arjun. Appreciate the question. You're right. The cross-sell, the multi-products, a really important part of our strategy. We're continuing to see some really healthy trends there. You know, a big part of this, and I mentioned this in the prepared remarks, is just making sure that the teams had the right level of training across all the products, and then it's built into the commission plans and the compensation models. So that's been heading well. We also, from a penetration perspective, and we shared this before, we continue to see good progress on that, but we're still very early in the penetration rates for clearly our current customers of almost 30,000. And then lots of opportunity as we're landing new logos. So when I think about the growth rate for existing first new business, it's going to be a bit of both. We see opportunities to go and expand our current customers. And then we see a lot of opportunities on the new business side from an expansion perspective. And, you know, in my prepared remarks, I shared a great customer example of a restaurant chain that increased by 600K. And then on the new business side, we continue to see more of those customers showing up, wanting to solve more than one problem, wanting to do more than one specific area. So both of those things are going to be really important for our growth strategy.

All right. Thanks, Arjun. Next question, please.

Your next question comes from the line of Brian's course with Oppenheimer. Your line is open.

Yeah. Hi. Thanks for taking my question this afternoon. And Ryan, I just wanted to ask about kind of the state of the sales organization. You did say in the introductory comments that you are increasing investments this year in your sales reps. I guess two questions. One is, are you increasing capacity or are you just kind of pruning the low performers and then, you know, to bring in some new players there? And then along that line, do you feel that you're through the sales transition? Are you happy where the organization is in terms of targeting the upmarket, which is the longer-term strategy for the company? Thank you.

Yeah, thanks, Brian. I appreciate the question. Yes, it is increasing the capacity. And we tend to see this as we head into the back half of the year as well, just in terms of combination of hiring reps, but also having those reps being more productive in the back half. So you'll see naturally the quota carrying capacity increasing as we head into the back. And in terms of the sales transition, yes, we're feeling really good about all the things that we've done. I wouldn't really call out any transitions per se. You know, I think that the biggest thing that Mike and the team have been focused in on as we turn the year was just stability and getting out to a fast start so if we think about you know making sure territories were in place in in q1 very early compensation plans making sure that the enablement plans were set and that the teams knew exactly where our focus areas were those were all things that that were achieved really well in the quarter so feeling really good about where that sales organization is and our opportunity to execute here great thanks next question please your next question comes from the line of jackson aider with key bank capital markets your line is open great uh thanks for taking our questions guys um our question is about the potential for

i think you mentioned you know sales cycles elongating if if things were to you know get worse macro economy and i'm curious like is that because people are just simply trying to hold on to their cash a little longer, or is there something that's, like, where because of the area that the Sprout plays in, right, social media management, is there something where there are, like, advertising or social media budgets that might impact how you guys go for business? Thank you.

Yeah, I appreciate the question. One, I would just call out, we're not seeing any of those material changes today. So, you know, as I think about the Q1 performance that we saw and, you know, early in Q2, the dynamics look the same as they did in 2024. So really nothing to call out there. And then I would also just highlight, you know, we don't have exposure to traditionally ad budgets, right? We play on the organic side. And again, I'll go back to just the mission-critical nature of the product, right? Their customers are in the app three to four hours a day. They're leveraging it across a variety of use cases. Customer care is one of the biggest ones. Our customers need to be where their customers are. And more and more, we're seeing consumer behavior change where those customers are showing up in social from a customer service perspective. They are going there for search and for discovery. The brands that work with us are really needing that data, the analytics and the social listening data to inform their strategy. So we feel really good about the positioning of Sprout and the value that we're adding to our customers. And then, you know, if I just think about the gross retention dynamics that we've been seeing and the improvements there, I think it just really shows the resilience of the business.

All right. Thanks for the question.

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

Great. Thank you very much, and thank you all for joining us and for your thoughtful questions. I want to end by thanking our incredible team here at Sprout. Their dedication and commitment and hard work drives everything that we're achieving. We're incredibly excited about the road ahead and confident in our strategy to deliver meaningful value to our customers and our shareholders. We appreciate your continued support, and we'll talk to you all soon.

Thanks for joining us. ladies and gentlemen that concludes today's call thank you all for joining you may now disconnect