Sprout Social, Inc. (NASDAQ:SPT) Q2 2023 Earnings Call Transcript

Adam Hotchkiss: Great, thanks for taking my questions. I guess the start would be great to just dig a little deeper on what you’re seeing in the mid to high end of the market. It looks like on one hand, the 50,000 plus ACV cohort was your strongest 2Q that you’ve seen to date. But I think it was a little bit softer once you got below 50,000 even when you back out to the very low end of the market. So I guess that’s the question in two parts. One, how would you characterize the success you’re seeing in the 50,000 plus, is that more wins in the enterprise against some of your larger competitors? Is that upsells? How should we think about that? And then two, is there anything to call out from that some 50,000 cohort that we should be aware of? Thank you.

Ryan Barretto: Yeah, thanks. Thanks for the question. We’re incredibly excited about the progress that we continue to see in that 50,000 it’s up 48% in terms of representative of ARR our logos was up nearly 3x sequentially. And then the 10,000 side of things, what I’d highlight there is from an ARR perspective is pretty similar, in terms of value from Q1. From Q1 but if we looked at the ARR contribution, the 50,000 bucket was much greater then Q1, with an accelerating growth rate. So I’d just highlight that the deals were much bigger. And we were seeing a lot of deals within that bucket, then that more than made up for the reduction and logo count in the sub 50,000.

Adam Hotchkiss: Okay, great, that’s really helpful. And then second, just to double click on Tagger appreciate all the color that you’ve given there, but could you give us more of a sense for why now on buying that business? And how you thought about that from M&A environment and balance sheet perspective? Was this just a function of you’re hearing accelerating demand for this and your customer base and wanted to be sure to build out a presence there early? Or how did you think about the sort of why now?

Justyn Howard: Yes, this is Justyn, I can speak to the kind of why now and how we’re thinking strategically about this. So you’ve heard me start talking about this space probably as early as beginning of last year late the prior year. This is a part of the market and part of the category that we know is grown increasingly important to our customers, we referenced in the remarks we’re seeing this in a substantial amount of the enterprise and even the mid-market deals that we’re working on. And that’s been on an upward trend for some time now. When we think about the timing on this, we were mostly focused on finding the right partner here. Finding the right team, the right product, didn’t have specific designs around the win.

But it certainly lines up nicely. I think that it’s happening when it is because we’ve got a real opportunity not only to meet a much larger set of customer demands, and kind of follow the demand trends that we’re seeing around this space, it’s also reached a level of maturity, where CMOs are starting to take it seriously. as you heard around kind of the increased investments there. But also gives us an immediate opportunity to create a category winner here, increase the competitive win rates in our own business in the core products, and really stand out from a competitive differentiation standpoint to have a foothold in this part of the market that we expect is going to grow pretty substantially over the next many years.

Ryan Barretto: And I’ll maybe just add in from a team and customer perspective, the folks on our team had been paying a lot of attention to the space Justyn’s been talking about this space for a while, we’ve been developing a point of view around the space for a while, and the Tagger team, and product just really stood out. And when we started to bring some of the rest of our team in the go to market or as well as R&D together to take a look at Tagger, the excitement was off the charts in terms of the fit for us and the opportunity. And to Justyn’s point in our enterprise, over half of the opportunities we have talking about influencers, so we saw just a great fit there, we saw the opportunity to differentiate. And I remember when I think about real time my team’s sending me texts right now, even in the hour plus since this news is dropped, we’ve had over 40 inbound from brands and companies that you know well that are incredibly excited about spending some time with us on this product either because they need it and or they’ve been asking us for it and asking us to get in this space.