Sprout Social, Inc. Q1 FY2026 Earnings Call

Hello, everyone. Thank you for joining us, and welcome to Sprout Social First Quarter 2026 Earnings Call. I will now hand the conference over to Lexi Johnson, Investor Relations. Lexi, please go ahead.

Thank you, and welcome to Sprout Social's First Quarter 2026 Earnings Call. We will be discussing the results announced in our press release issued after market close today and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social's CEO, Ryan Barretto; and Vice President of Investor Relations and Corporate Development, Alex Kurtz. Today's call will contain forward-looking statements, which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward looking. These include, among others, statements concerning our expected future financial performance, including our Q2 and 2026 outlook and business plans and objectives and can be identified by words such as expect, anticipate, intend, plan, believe, seek, opportunity, target or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements address matters that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the year ended December 31, 2025, as well as our quarterly report on Form 10-Q for the quarter ended March 31, 2026, to be filed with the SEC. During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures are included in our first quarter earnings release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com. Last quarter, we introduced a new metric, approximated subscription revenue contribution for customers contributing $30,000 and above in ARR. This metric is intended to approximate the subscription revenue of a subset of customers over historical periods by using their average ARR as a proxy, ensuring this quarterly estimate on a trailing 12-month basis. For brevity, we'll refer to this metric through the rest of this call as 30,000-above subscription revenue. With that, let me turn the call over to Ryan. Ryan?

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

Thanks, Ryan. I'll run through our financial results and the guidance. Our first quarter results were highlighted by a quarterly non-GAAP operating margin of 11.6%, up 16 basis points year-over-year and ongoing improvement driven by our $30,000-and-above customer segment. Total revenue was $121.5 million, representing 11.2% year-over-year growth. Subscription revenue was $120 million, up 10.4% year-over-year. We ended the quarter with 3,875 customers contributing $30,000 or more in ARR and 2,085 customers over $50,000 ARR, up 12% and 18%, respectively, on an annual basis. Since the fourth quarter of 2022, we have added over 1,800 customers contributing $30,000 or more in ARR and 1,100 customers contributing $50,000 or more in ARR. Growing these more socially sophisticated customers remains a central part of our long-term strategy. For the past three years, Sprout has focused on a strategy aimed at multiyear contracts with these larger customers, which enhances our visibility to the customer base and opens up more paths for multiproduct sales and customer success. This quarter marked a milestone as monthly customers fell below 10% of our contract mix for the first time. And this is the first quarter in which multiyear deals represent a larger percentage of our ARR than one-year deals. Turning to cash flow. We generated $24.7 million in non-GAAP free cash flow during the quarter, an increase of approximately 27% from the prior year. As we have communicated previously, we expect our non-GAAP free cash flow margin to closely track our non-GAAP operating margin on an annual basis, and we remain committed to growing non-GAAP operating leverage on a fiscal year basis. Q1 ACV increased 14.5% year-over-year, reflecting the continued mix shift towards larger, more sophisticated customers and broader adoption of higher-value products across the platform. Expanding ACV remains a core part of our strategy, and we see continued opportunity to grow customer value through products like influencer marketing, customer care, premium analytics and NewsWhip. Our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates such as influencer marketing, customer care, premium analytics and now NewsWhip. RPO totaled $395.3 million, representing growth of 9.7% year-over-year. We expect to recognize 71.3% or $281.7 million of total RPO as revenue over the next 12 months, representing CRPO growth of 10.1% year-over-year. We ended the quarter with $111.6 million in cash and equivalents, up from $100.9 million a year ago. And as Ryan mentioned earlier, today, we announced Sprout's first share repurchase authorization of up to $50 million. We believe this program will give us the flexibility to act on the valuation dislocation Ryan discussed while continuing to invest in organic product development and selective strategic opportunities; we view it as a disciplined extension of our capital allocation framework and another tool to return capital, manage dilution and support long-term shareholder value creation. Now on to guidance. For the second quarter of fiscal 2026, we expect revenue in the range of $121.7 million to $122.5 million, non-GAAP operating income in the range of $9.5 million to $10.3 million, non-GAAP net income per share between $0.15 and $0.16. This assumes approximately 60.3 million weighted average basic shares of common stock outstanding. For fiscal year 2026, we expect revenue in the range of $492.5 million to $495.5 million. Non-GAAP operating income in the range of $54.9 million to $60.4 million. For modeling purposes, we expect to exit Q4 with a non-GAAP operating margin close to 15% and non-GAAP net income per share between $0.88 and $0.97, assuming approximately 60.7 million weighted average basic shares of common stock outstanding. We have not yet made any assumptions regarding share repurchases for purposes of our EPS guidance as the timing and amount of repurchases is inherently uncertain and subject to a number of restrictions and other requirements. Our full year outlook reflects continued discipline on spend while preserving flexibility to invest behind Trellis, AI-driven product expansion and the self-serve motion for customers below $30,000. We continue to expect meaningful operating leverage for the year. Finally, we are reaffirming our target of reaching 30% under our Rule of 40 framework by the fourth quarter of fiscal 2027. We expect the path to come from continued growth in our $30,000-and-above customer segment, a more efficient motion for our customers below $30,000 and ongoing operating leverage across the business. This is not a margin-only framework for us. Our focus is improving the quality and durability of growth while continuing to expand our non-GAAP profitability. We appreciate your interest in Sprout Social. And with that, Ryan and I are happy to take any of your questions. Operator?

Your first question comes from the line of Lucas Sarasola from Morgan Stanley.

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

Thanks, Lucas. Appreciate the question. I would point to the progress we saw in the quarter and the examples I shared in our prepared remarks. In those customer stories, you see a lot of consolidation. These are organizations with sophisticated needs that require multiproduct solutions, and they're identifying that Sprout is a platform that offers the full set of capabilities they need, including publishing, care, Listening, advocacy and engagement. We're seeing consolidation across the board, and that is showing up as a differentiator for us. Another piece that stands out is speed to value. Especially in the enterprise, customers today are looking for fast ROI. They want to know they can get up and running quickly and that the software is a good fit. Our trial-based model continues to be a real differentiator as we get in front of customers of all sizes, and the multiproduct approach is resonating.

Your next question comes from the line of Nate from KeyBank. Your line is live.

Looking at the social media platforms you engage with, are there specific social media platforms where you're seeing outsized customer engagement or monetization today? And how is that shaping your product investment priorities going forward?

Thanks, Nate. One of the biggest differentiators for us is the depth and breadth of access we have to social networks. Our customers think about and rely on a long list of networks every day: Reddit, TikTok, the Meta properties, LinkedIn, YouTube and many others. Our customers have to show up wherever their customers are, and that happens across a diverse set of networks. The last time we shared this data, over 90% of our customers used five or more networks to reach their customers. For us, it's about delivering depth and breadth so customers can log into Sprout in one place and engage across networks—whether that's sending marketing campaigns or responding to customer service inquiries. Each customer has nuances about where their audience is, and that dictates where they need to spend time. It's our job to build against that demand. It is a challenging engineering feat because of the number of integrations and how quickly APIs change, but our engineering organization is strong and this capability has been a differentiator for Sprout over our 16 years.

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

I appreciate it. Nothing specific to share yet on attach rates; we'll provide more detail in the future. As a reminder, we just reached general availability at the end of the quarter, so it's pretty early. But as I mentioned in my prepared remarks, the progress has been remarkable. Kudos to the teams behind the scenes—it's been extraordinary to see the adoption from our customers. We started with Trellis in Listening and we'll expand to other areas of the product over the year. So far, adoption and usage have been very encouraging and the speed to value from customers has been pronounced in both beta and GA. We expect continued adoption not just in Listening but across publishing and engagement as we expose Trellis more broadly. More to follow, but really good progress so far.

I'll just add that thousands of customers are engaging with the product now since going general availability.

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

I appreciate the go-to-market changes for the sub-$30,000 group of customers. Can you provide additional details on the updated onboarding experience and pricing system? Are there any learnings from the quarter or tweaks you need to make to better support this group of customers?

Thanks for the question. We're excited about the progress. Similar to Trellis, we're pretty early in the journey. We launched Essentials on the website at the end of Q1, and we're seeing good initial progress. Essentials is a purpose-built product focused on publishing, which is where these customers spend most of their time. The team has been working hard on product-led growth elements and self-serve capabilities for Essentials. The benefits we build for Essentials will also help across other Sprout products. We're making incremental changes to the onboarding experience, particularly for trial users, and seeing good product-market fit around publishing use cases. We'll have more updates as we gather more data now that Essentials is available on the website.

As we mentioned on the Q4 call, the pricing and packaging changes for Essentials are happening now. We do expect to see a modest deceleration in the sub-$30,000 segment this year as we implement these changes, and then we expect stabilization going into next year.

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

Thanks. Two questions: One for you, Ryan, and then Alex, one for you on margins. Ryan, you've been selling to marketing departments for a long time, and I'm sure that's informing how you think about Trellis. What patterns of behavior among marketing users give you optimism that Trellis could be an avenue to drive adoption of additional products like influencer marketing and premium analytics natively via an AI-driven platform? Any early reads would be helpful. And then a quick follow-up for Alex on Q2 margins and cadence.

Good to have you on, Rob. A few things to call out. First, speed to insights is a major value driver. Trellis is delivering social intelligence quickly. The example I shared about the entertainment company handling a reputational issue highlights that historically, a listening solution would require long manual workflows to get to the insight. With Trellis, customers can identify source, sentiment and themes within minutes and move to action. That speed and the quality of insights are resonating. As we expand Trellis across the product, customers are seeing better performing content and faster response to customer issues, which are meaningful value adds. These experiences feel unique in the market and are resonating with marketing customers. We believe Trellis will help drive adoption, usage and retention across Listening, NewsWhip and other modules, and ultimately help open doors for upsell into higher-value products.

Thanks. Alex, on the margins: Q1 looked strong, but Q2 guidance is a bit lighter. Can you help us understand the cadence and whether there's seasonality or timing of spend that impacts the margin profile?

Appreciate that, Rob. We are pleased with the Q1 leverage performance and the disciplined execution on spend. At the same time, we wouldn't view the Q1 beat as a dollar-for-dollar change in our full-year cost structure—much of the upside in Q1 came from expense timing and the pacing of investments early in the year, particularly around hiring. We're maintaining flexibility for the balance of the year and not assuming every Q1 expense benefit repeats. Importantly, this hasn't changed our operating discipline. We're pleased to raise operating margin a bit for the year, and we're still committed to exiting the year around a 15% non-GAAP operating margin and achieving the 30% Rule of 40 target by Q4 2027.

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

Could you speak to the conversations you're having with customers around their appetite to purchase social marketing products? Are you seeing continued budget tightness and how are AI initiatives being prioritized? If AI is a core criterion in purchase decisions, how is Trellis helping in that motion?

Thanks, Raimo. The demand environment is similar to what we experienced last year: some customers are facing budget constraints, but customers are still buying. They expect strong returns and fast ROI. This makes speed to value, quick onboarding and rapid adoption critical. We see opportunities to help customers grow revenue, reduce risk and contain costs. From a revenue perspective, Sprout helps customers run campaigns—organic and paid—that drive pipeline. From a care perspective, social has become a top channel for customer service, and brands must respond quickly. From a data perspective, social signal is massive, unfiltered and a valuable input for decision-making. Our role is to parse that data and deliver actionable insights that help customers make transformative decisions. These themes are central in our conversations with customers as they prioritize investments and justify spend to their CFOs.

A quick follow-up on Trellis monetization: Will Trellis be embedded within platform pricing or could it be a stand-alone SKU down the road?

Yes, the answer is yes. We'll share more on the monetization strategy at Breaking Ground. At a high level, Trellis will start with a hybrid model combining user access with usage-based monetization. This reflects how the product works: customers need access to the AI layer inside Sprout and usage should scale with the amount of value and compute consumed. Our initial priority is driving adoption and delivering magical experiences so customers build Trellis into workflows. As adoption and usage scale, we'll monetize consumption as well. We'll have a SKU and tiering that factors in expected costs and value, which will be another avenue to grow ACV and revenue as customers derive more value.

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

A quick follow-up around AI products: How do you think about token costs within the context of these AI products as they scale? Social platforms generate high volumes of data—are there inherently higher inference loads compared to narrower application use cases? How does that impact scalability and token usage?

Good question, Adam. We feel confident in our ability to manage AI and token costs. Our engineering team has spent significant time optimizing the models and back-end architecture to be cost efficient. The AI load varies by use case, and we can swap models and optimize based on usage patterns. While Trellis was in beta we studied usage patterns to develop our monetization model. We'll design our SKU and tiering to factor in expected costs and provide options to manage consumption, so AI ends up being a net positive for the company while customers receive increasing value.

Thanks. Second question: Could you update us on the mix of your channel for new logos, particularly for the $30,000-plus adds today versus historically? Historically you talked about social studio conversions and the Salesforce relationship; how should we think about that mix today and going forward?

The majority of our business is direct through our sales teams. We have strong ecosystem relationships—Salesforce is a good example, and our integrations with Service Cloud help with referrals and co-selling. Integrations with partners like Canva and Adobe also add ecosystem value. But the majority of customer acquisition, particularly for $30,000 and $50,000-plus deals, is direct. We see a healthy mix of inbound versus outbound, customers migrating from competitors, agencies referring business, and customers moving from native network workflows. Our sales teams leverage multiple channels to create pipeline and execute.

To add: as you'd expect, when you're getting into deals above $30,000 or $50,000 in ARR, those are majority direct. Agencies remain important to our GTM but are often more downmarket in scope.

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

It has been a few years since the company moved from ARR to CRPO for measuring bookings on a quarterly basis, but CRPO hasn't been a perfect proxy. With RPO growing about 10% year-over-year versus where Q1 revenue growth took out, are we at the point that CRPO gives the right view on current business momentum?

Great question. RPO and CRPO reflect the demand environment and primarily reflect performance from 2025; both metrics grew about 10% year-over-year, which is now more aligned with revenue growth. From a revenue visibility standpoint, the guidance reflects what we're seeing today. That said, we're not satisfied with the bookings performance underneath those metrics. The pressure isn't broad-based within renewals; the renewal base remains durable and customers continue to make longer commitments—multiyear contract mix is now about half of our overall contract mix. The opportunity is in moving the pace of new business and expansion in the current environment. That's what Ryan and the team are focused on. The part of the business most aligned to our strategy—$30,000-and-above—continues to perform better, growing 21% year-over-year and crossing the 60% threshold of subscription revenue. We provided the $30,000 segmentation to help investors model the business following the removal of ARR disclosure a couple years ago.

Your next question comes from the line of Ryan on for DJ from Canaccord Genuity.

AI has led to a reevaluation of existing tools across the tech stack. Do customers typically have a dedicated budget for AI experimentation within social, or is it included in marketing budgets? If included in marketing, where does it rank among competing priorities?

Thanks. From conversations with customers, budgets aren't always separated cleanly between AI and marketing. Many customers are trying to figure out how to leverage AI broadly. We have a significant opportunity to show the art of the possible in marketing: Trellis helps speed insights, create better content, identify reputational issues and drive measurable outcomes. In this budget environment customers want clear ROI and many are looking to consolidate solutions and reduce cost. Our role is to tie AI and social investments directly to outcomes—revenue growth, risk reduction, operational efficiency—and that helps position our offerings favorably when customers prioritize spend.

We saw Meta acquire that conversational company a couple months ago. As agents get more sophisticated and conversational, is there a risk that large social networks will build conversational agents for brand users to engage directly with their customers?

It's likely some networks will build productivity assets for their own platforms, but our customers need to operate across many networks. Over 90% of our customers use five or more networks. A network-specific agent might work for customers focused on a single network or SMBs, but enterprise customers need a platform that consolidates workflows, governance and analytics across networks. That's Sprout's value proposition: practitioners spend hours daily in our platform because it enables cross-network campaigns, engagement and analytics. Network tools rarely replace the need for a cross-network platform in our target customer base.

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

Ryan, how has your current AI feature set and roadmap resonated in the market with respect to impact on top-of-funnel? Within the existing base, have Trellis launches and marketing impacted upsell conversations around premium products like Listening and NewsWhip?

We're early but seeing strong resonance. Trellis was in beta late last year and reached GA at the end of Q1, so it's still early to call out specific numbers, but it is differentiating in new business conversations and driving great feedback from prospects and customers. Adoption in Listening and NewsWhip is growing quickly. These products deliver magical experiences—especially in Listening and news—and that can drive adoption, upsell and retention as customers see the value. We expect Trellis to help from new business, expansion, adoption, usage and renewal perspectives over time.

On Essentials, is it more targeted at lower-end existing customers or new customers?

Essentials is targeting net-new customers. We see an addressable market and inbound interest, but historically our pricing and packaging had too many capabilities for their needs. Essentials is a targeted product with the right mix of features at a price point aligned to how these customers buy, and the PLG/self-serve approach is intended to reduce acquisition costs. We believe many net-new customers will find high value in Essentials.

Your final question comes from the line of Matthew VanVliet.

How are you approaching third-party models and agents accessing Sprout data to run workflows across the business? What's your approach to a more open platform versus monetizing that access point, given the uniqueness of your data?

We sit on a uniquely rich, real-time, unbiased dataset that's not easily accessible to third-party models. Over the last 16 years we've built significant expertise in ingesting, structuring and enriching social data—sentiment, categorization and more—and that is a big part of Sprout's competitive advantage. Today, our focus isn't on third-party agents tapping raw data. Over time, we'll consider how to surface our proprietary insights so agents or other parts of a customer's ecosystem can use them, but much of our moat is the nuanced work we do to make social data actionable and safe for enterprise use, and that's central to Trellis and our AI strategy.

As you look at the customer care offering, what are you seeing in terms of usage and resolution rates and where can you take that as Trellis is built more fully into that product?

We're excited about customer care. We made significant investments last year—cases, Service Cloud integration and agent productivity features—and we serve brands that manage massive volumes of social customer care every day. Trellis can help drive more efficiency by enabling faster triage, routing and suggested responses while keeping humans in the loop, which is critical given the public nature of social. If we can increase agent productivity and maintain human oversight, we can help customers meet SLAs and improve outcomes. We believe unlocking Trellis in customer care will be a meaningful additional unlock for customers who operate at high volume.

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

Thanks very much, and thank you all for joining us this evening. I know it's a busy night across software, and we will be connecting with many of you in the days ahead. Before I close, I just want to highlight a few takeaways from the first quarter. First, our $30,000-and-above customer segment remains a clear growth engine for the company, up 21% year-over-year and now representing more than 60% of our subscription revenue for the first time. These customers demonstrate stronger retention, broader multiproduct adoption, greater expansion potential and deeper alignment with our social intelligence vision. Second, we are still early in the changes we're making below $30,000. This part of the business requires a different product and go-to-market motion, and we're now implementing that through the Essentials product and self-serve. We've created a more efficient onboarding and support model. We expect this cohort to continue to de-emphasize through 2026, which is reflected in our outlook, with the overall benefits of the strategy becoming more visible as we move into 2027. Third, we're making real progress with Trellis and AI. Trellis is now live across Listening and NewsWhip, we're seeing adoption scale, and we're looking forward to sharing more at Breaking Ground on May 13, including our broader AI roadmap and the monetization framework we are rolling out. Finally, our Board's authorization of a $50 million share repurchase program reflects our confidence in the durability of this business, our free cash flow generation and the long-term opportunity we see ahead. We believe there's a meaningful disconnect between current valuation levels and the long-term value we expect to create, and we see repurchases as a compelling use of capital. I'll end with a big thank you to our customers for their continued trust and partnership and to our team for their focus, discipline and care every day. We appreciate your time tonight and your continued interest in Sprout. Have a great evening. Thanks, everybody.

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