Earnings Call: Q1 2021

May 4, 2021

Ladies and gentlemen, thank you for standing by and welcome to the Sprout Social First Quarter Earnings Conference. I would now like to hand the over to your speaker today, Mr. Jason Recker. Please go ahead. Thank you, operator, and welcome to Sprout Social's 1st Quarter 2021 Earnings Call. We'll be discussing the results announced in our press release issued after market close today, and we've also released an updated investor presentation, which can be found on our website. With me are Sprout CEO, Justin Howard CFO, Joe Del Prieto and President, Ryan Baretto. 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, Conference Call. Our guidance for the Q2 of 2021 and the full year 2021 and can be identified by words such as expect, 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 discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10 ks for the Call. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Good morning, everyone. As well as any future quarterly and current reports that we file with the SEC. During the call, we'll 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 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 Justin. Thank you, Jason, and good afternoon, everyone. Thank you for joining us. We are off to a fast start in 2021, thanks to our focus on delivering world class experiences to I want to touch on a few first quarter highlights before turning the call over to Ryan and Joe to cover the details. Our growth rate is shifting into an even higher year, which reinforces confidence in our strategy, our opportunity and the investments we're making in our future. During Q1, we added a record number of net new customers, added a record number of customers contributing more than 10 ks in ARR and delivered further acceleration in ARR growth. We also achieved positive free cash flow and inflected customers and the compelling unit economics of our business. We're focused on building a durable company for the long term, but our current growth and momentum has never been stronger. We are well equipped to capitalize on the convergence of multiple tailwinds in our market. We're continuing to prioritize our investments in these areas. In the early stages of 2021, the expansion of use cases for our platform has continued to accelerate. Stakeholders across nearly all functions of These expanded use cases have 3 distinct implications in our market and our company. More businesses need to adopt the social media management Conference because their challenges have both broadened and become more acute. There are more opportunities for seed expansion into new departments within our existing customer base And the opportunities and values for our data driven social listening and premium analytics capabilities are compounded by these first two factors. We expect this flywheel to remain in motion for many years to come and potentially be further strengthened by the looming convergence of social and e commerce. Further, the proliferation of social across an organization plays to our natural competitive strength. Our platform was built for the end user. The ease of use, rapid time to value, collaboration, security, permissioning and workflow management capabilities that are embedded in Sprout Our single code base and strategic scale allow us to execute against this strategy faster and more efficiently than anyone else in our market. To reiterate something I said last quarter, the multitude of global events over the past 12 months have made it clear that social media will be a cornerstone to the next evolution of business. We're seeing this in the inbound volume and quality of customers coming into our opportunity funnel. The growing importance of social was crystallized in a recent study by the Harris Call that was commissioned by Sprout. I encourage you to dig into the data for yourselves, but I want to call out a few of the most compelling data points that stood out to us. To grow by more than 50%. 2nd, 84% of business executives expect their company's use of social media for Poll also shows that 80% of consumers expect brands and companies that have a social media presence to interact with their customers in meaningful ways. 78% of consumers will buy from a brand after a positive experience on social media. These trends are even more pronounced younger generations that will soon represent the majority of both the workforce and consumer spend, creating a second order tailwind for the industry for many years to come. Conference. Let's deliver sophisticated intelligence that informs nearly every aspect of their digital strategy. Our emphasis on world class user experience uniquely positions us for both greenfield adoption as well as expansion as more of these stakeholders become involved in social across more of the companies we serve. And will further expand our investment in this area as product discovery, purchases and support all begin to merge in compelling new ways on social media. Our scalable platform and extensive ecosystem of network integration partners positions our company to play a valuable role as this market develops. Before I wrap up, I want to talk about the team that makes this all possible. Over the past quarter, our team has continued to raise the bar in the way we build, market and They brought increased focus and vision for our strategy during an uncertain time for our world. We're committed to fortifying our culture and supporting not just our team, but our customers, partners and our communities. We We're humbled when our commitment is recognized with awards such as Fortune's 2021 Best Places to Work in Tech and we are constantly investing in new ways to make a positive impact. As our people potentially return to offices later this year, we will continue to prioritize well-being and reshape the way we work and communicate. Culture is central to our work at Sprout and I'm thankful for the opportunity to lead such a talented, dedicated and diverse team. With that, I will turn it over to Ryan. Thank you, Justin. You said we're off to a faster and you are right. The momentum is building and we're set for an even bigger 2021 than we had planned. Our teams are delivering across the board and we're seeing incredible brands continue to and Best in Spreads platform. In this new era of work, changes to the way that companies find, evaluate and buy software has never been more pronounced, which is only strengthening our technology and go to market differentiators. Social has become the central fabric of society, Forcing businesses to rapidly adopt and adapt. And Scrap is optimized to help brands lean into social as a centerpiece of digital transformation Consumers are choosing social as their preferred communication channel and brands simply don't have a choice. They must embrace social for customer marketing, engagement and intelligence. Now, I typically highlight one specific team that exceeded my expectations, But I won't be able to do that because during Q1, every team delivered in a meaningful way. Our product and partnership organization is Conference. They're continuing to find ways to innovate for our customers, make our platform stickier and add tremendous value. Our marketing team delivered on our top of funnel goals with insightful content, strong inbound trial volumes and improvement in overall quality and in conversion rate with even more room to grow. Each of our new business segments were very strong this quarter led by our mid market teams. Our customer success teams also executed remarkably well in a critical renewal period. Our investments in customer onboarding and success are paying off as we move into a phase of growth with higher overall customer retention and customer growth. A record number of new customer additions is not accomplished without outsized contributions by each of these teams. The success that I'm seeing with some of the world's largest and most beloved brands makes me even more excited about our opportunity within the enterprise Not only did we have a record overall customer additions, but we also set new records in a greater than 10 ks net additions as well, Before I highlight customer stories, I want to expand on Justin's message about the growth of social use cases. Investor Relations is a perfect example. As you're all acutely aware, social has recently burst into the mainstream as a central platform for investors to discuss and disseminate investment ideas. This quarter, we hosted a panel with several investor relations leaders. Mike Coffey, the VP and Head of Global Partnerships and Alliances at Q4 said, More retail investors are investing in the market than ever before and they're choosing to discuss their ideas and tactics very publicly on Reddit, Twitter and other platforms. Investor Relations officers have taken note. Whether it's to gauge social sentiment, engage with shareholders like Coinbase did through its IPO process, monitor for potential volatility and risks This is amazing insight on a growing use case. Now shifting to a couple of new Sprout customer stories. Fred Spinelli, Senior Vice President of Marketing, Brand and Sales Development and Performance Food Group said, we turned to after rethinking what social would and could mean to our business. We realized that we need transparent real time visibility across our operations and social listening helps us stay ahead of the curve, not just for our brand and products, but also our performance within the industry. We're able to actively surface these social trends to our executive team, creating actionable insights for our company. That were happening around specific brand campaigns, both to understand the competitive positioning and to gain visibility into how their content was performing on social. They determined that our social listing and premium analytics products would empower their team to capture critical insights that would enhance their strategy and deliver a compelling ROI. Wrapping up, I continue to be proud and grateful for the performance of our people at Sprout. We've raised the bar for 2021, while also laying the foundation for our success well into the future. We're excited by the multitude of opportunities ahead of us and as always, we appreciate your support. With that, I'll turn it over to Joe to run through the financials. Joe? Thanks, Ryan. I'll now walk you through our Q1 results in detail before moving on to guidance for the Q2 and full year 2021. Total revenue for the Q1 was $40,800,000 representing 34% year over year growth. Excluding the impact from legacy simply measured, organic revenue was up 35% year over year. We expect the impact from legacy simply measured to be immaterial to revenue in ARR going forward. Total ARR as in Q1 was $172,000,000 up 38% year over year. Organic ARR was $171,000,000 up 39% year over year. We added a record 1404 net new customers in Q1 to finish the quarter with 28,122 customers, up 17% year over year. This is a reflection of very strong performance in each of our segments. We continue to be focused on high quality revenue yield from our new customer cohorts. The number of customers contributing more than $10,000 in ARR reached 3,514, up 46% from a year ago and up from 3,149 in Q4 2020. Our ACV surpassed $6,000 and was up 18% year over year. Broadening use cases as customers operationalize social, Rising attach rates of our premium module and our momentum upmarket remain 3 sustainable growth levels for our $10,000 customer cohort Conference for 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 on a non GAAP basis. And a reference to our GAAP results in the earnings press release that was issued just before this call. In Q1, gross profit was $31,000,000 representing a gross margin of 76%. Is up 190 basis points compared to gross margin of 74.1 percent a year ago compared to 74.6% last quarter. We've seen a positive impact on gross margins as we eliminate duplicate infrastructure hosting costs from what we can see is simply measure and for the natural efficiencies of scale in our business. Sales and marketing expenses for Q1 were $60,400,000 or 40% of revenue, down from 44% a year ago. We are pleased with the quality of people that are choosing to join Sprout. We are continuing to accelerate our pace Conference. Our sales and marketing team. Even as our total sales and marketing expense growth accelerate to the Q3 in a row, Research and development expenses for Q1 were $7,600,000 or 19% of revenue, down from 22% a year ago. We continue to have aggressive R and D growth goals in 2021 as we address an expanding set of opportunities. The timing of many key R and D hires will be weighted in Q2 and Q3 of 2021. General and administrative expenses for Q1 were $9,400,000 or 23 percent of revenue, down from 32% a year ago. G and A expenses were lower on a year over year basis and had a significant impact on our overall margin expansion due in part to the time of annual corporate training and employee off sites which occurred during Q1 of 2020 did not occur this quarter. We continue to expect a portion of these annual expenses may occur later this year or will be reinvested elsewhere in the business. At this time, it impacts the magnitude of quarter to quarter margin gains. We do expect general and administrative expenses to continue to decrease as a percent of revenue as we scale. Non GAAP operating loss for Q1 was $2,300,000 or negative 6% operating margin. This compares with negative 24% operating margin a year ago. We significantly outperformed our expectations due to higher revenue, Better than anticipated gross margins and the timing of many key hires which had April start date. Non GAAP net loss for Q1 was 2,500,000 for a net loss of $0.05 per share based on 53,400,000 weighted average shares of common stock outstanding compared to a net loss of $7,000,000 $0.14 a year ago. Turning to the balance sheet and cash flow statement. We ended Q1 with $167,800,000 in cash, cash equivalents and marketable securities, up from $163,900,000 at the end of Q4 2020. Conference revenue at the end of the quarter was $51,000,000 Looking at both our billed and unbilled contracts, Our remaining performance application or RPO totaled approximately $74,900,000 up from $64,400,000 as in Q4 2020 of approximately 58% year over year. We expect to recognize approximately 85% or $63,700,000 of total RPO as revenue over the next 12 months. Operating cash flow in Q1 was positive $3,600,000 compared to negative $4,500,000 a year ago. Free cash flow was positive $3,400,000 in Q1 or 8% free cash flow margin compared to a negative $4,800,000 and and a negative 16% free cash flow margin a year ago. Our ongoing momentum into the mid market enterprise, proving efficiencies in our billing process A mix shift towards annual and multiyear contracts are each having a positive impact on free cash flow as we grow. We are pleased to report positive free cash for the first time Conference. Much sooner than our prior forecast. The combination of accelerating free cash flow margin, accelerating revenue growth, plus it's above the Rule of 40 benchmark this quarter. We believe this milestone is an important validation of the unit economics in our business and the compelling efficiencies in our model. We generally expect free cash flow margins to be several 100 basis points better than operating margins throughout the remainder of 2021. Shifting to formal guidance. For the Q2 of fiscal 2021, we expect total revenue in the range of 43,000,000 of $43,100,000 our growth rate of 37%. We expect non GAAP operating loss in the range of $5,400,000 to 5,200,000 This represents an anticipated operating margin of negative 12.1 percent, an improvement of more than 600 basis points year over year. We are making aggressive growth investments across our company. We are doing this while delivering improvement in our margins, highlighting the efficiencies in our business as we scale. We expect a non GAAP net loss per share of between $0.10 to $0.09 assuming approximately 53,600,000 weighted average basic shares of common stock outstanding. For the full year fiscal 2021, we now expect total revenue in the range of $176,000,000 to 177,000,000 This is an expected overall reported growth rate of 32% to 33% in comparison with our prior annual expected growth rate of 30%. For 2021, we now expect non GAAP operating loss in the range of $18,500,000 to 18,000,000 Conference. This implies a non GAAP operating margin of negative 10.3%, more than 150 basis points better than our prior annual guidance and improved more than 500 basis points year over year. We are pleased to see faster growth with greater efficiency. We now expect a non GAAP net loss per share between $0.35 $0.34 assuming approximately 53,800,000 weighted average basic shares Conference during the second half of this year. The timing and number of employees that return in 2021 is at this point unknown, We have accounted for a full return in our annual expense forecast. Although we do not incur expenses for our annual corporate trading Conference and Travel in Q1 of 2021. At this stage, we expect to incur these expenses again in Q1 of 2022, most likely the following Q1 of 2023. In summary, we believe we are uniquely positioned to capitalize on the opportunity for durable month to year growth and social moves to the center of digital strategy. Our compelling financial leverage and breakthrough free cash flow performance gives us confidence to make Optimized investments that we believe will enable us to achieve our full potential in the quarters and years ahead. With that, Justin, I'm happy to take any of your questions. Operator? Thank you. Conference. Your first question comes from the line of Ray Molchan from Barclays. Your line is open. Hey, this is Frank on for Raimo. Congrats on another very strong quarter here. I was wondering if we could touch on your customer conversations at a high level So what are you seeing as we start to move past the pandemic? Has there been any momentum in any particular verticals or is the strength really been more broad based in nature? Hey, Frank, this is Ryan. Thanks for the question. We've seen a lot of positive trends here. This is a lot of the stuff that we saw coming off of Q3 and Q4 into the year. Our marketing teams continued to deliver a really strong top of funnel And we're seeing a lot of progress. I would say that it's across a variety of verticals. One of the advantages that we have here is you're hard pressed to think of a business or brand that isn't thinking about social right now. And so we've got a long tail of really Successful customers in a variety of industries. Given the number of customers that we have today, most verticals and industries have 100 of Different examples that are using Sprout. So it's been pretty much across the board that we've seen success. Some of the ones that probably we've mentioned in the I think it's been surprising, but really interesting for us are things like Higher education in terms of trying to connect with the community, retail, travel and hospitality, restaurants, Many of these organizations that had more challenging times last year are continuing to need to find ways to build their brand and their connection with customers. So it's been a nice long tail for us and we're seeing success across a variety of verticals. Okay, perfect. That's great color. And then just with ACV growth looking strong again, I want to ask about the momentum in the listening and premium NOI products. I think those doubled last quarter in aggregate. I was wondering if there's any more color you can provide there for this quarter. Yes, we continue to see very similar success to last quarter for both the premium modules. One of the things that's really stood out is just the importance and value of data, both the data that you have Within your own four walls, your own organization, we think about our premium analytics and the data that exists across all of social Inside of your 4 walls when we think about our listening product. And so we've seen tremendous success on both of those premium products. One of the things that we've highlighted in the past, I think it's important to note, is it's not just in the mid market and enterprise. We're seeing the same Great. Thank you. No problem. Thank you. And your next question comes from the line of Rob Oliver from Baird. Your line is open, sir. Conference. Great. Thanks very much guys for taking my question. Ryan, one for you as well. So, I was looking at the expansion deals that you guys talked about this quarter. Some of those are big companies that I think traditionally would have bought software the old way, monolithic, kind of larger deals. And so I'm curious, Conference. As you expand with customers like that, both from a seat perspective, the departments, new use cases, How are the conversations with those buyers, particularly if you get up towards more of a managerial level? Any change? And is there are you seeing some The moments from buyers about kind of the power of your model relative to maybe some of your competitors? And then I just had a quick follow-up for Joe. Yes. Thanks, Rob. Yes, we definitely the Eureka moment is going off for a lot of companies and customers. We love the seed and grow. We're landing in places and to your point being able to get in front of different departments or divisions or brands or geographies for that matter. And the conversation for us is very similar to the new business side. We still get customers if they We landed and for example they came in maybe on a marketing use case. They're thinking about us for campaigns and content, but they didn't necessarily leverage us for listening or premium analytics. We're leveraging that trial model as well even for our current customers. So we're getting their hands on the product. We're giving them a chance to experience Technology. They have the advantage in that they've been leveraging our product for a little bit of time. So it's even quicker for them to ramp up on some of these premium products and get value right away. And because we've already gone through procurement and legal, it's easier for us to grow those add ons. So just tremendous Good examples and use cases and really excited about what we've seen from our customer growth teams and our customer success teams that are supporting those customers. Okay, great. That's really helpful. Thank you. And then Joe, just for you, I know thinking about some of your investment areas, mid market, Obviously, enterprise reps are still hiring. I know you in the past you've talked a little bit about international with APAC and Latin America. Maybe could you just drill down and give us a little bit of color Where we are in some of those investment cycles and where you feel like you're getting a really good return right now? Thanks guys. Yes. Thanks, Rob. So a couple of things there and I want to make sure that we're investing in the sales and marketing side and I'll hit that So quickly, first, we're also making some significant investments on the R and D side. We're seeing a lot of areas where we can continue to build out the product. We're seeing these use case expansion. So it's more than just on the sales and marketing side, Rob, and we can dig into those product things if you like as well. But On the sales and marketing side a couple of areas. One is the geographic expansion, right? We're investing in APAC, LATAM, EMEA and you definitely see us ramping We hired a GM of APAC in the quarter and so you're going to see some increased investment there. And then you're going to continue to see Investment in market and enterprise, we're definitely seeing outside returns in that area. We're seeing a strong top of funnel, but then we're also seeing on the outbound A lot of success with some of the efforts in these large enterprise clients. And so I think you're going to those would be the main areas of focus, but at the same token, Conference. We're always going to be focused on estimating as well. That's really driven by the marketing side of the house. And Ryan, this is earlier, we saw Really good success in each of those segments in Q1 as well on the inbound side. And so those are probably the main areas of focus for us. Great. Thanks again. Thank you. Your next question comes from the line of Matt Van Vliet from BTIG. Your line is open. Thanks for taking my question guys and nice job on the quarter. I guess, thinking about some of The answer to those last couple of questions maybe from a different angle a little bit. The growth in the 10 ks ARR customer was pretty significant again. Are you seeing some new customers when you win new logos come in at a larger scale? Are they buying more modules At a time, maybe just help us think about kind of what that new land looks like as maybe you have customers coming Yes, thanks, Matt. Yes, we are seeing that and we've seen really good progress. Again, across the board, I would highlight certainly that Conference. Midmark and Enterprise continue to prove great execution, but we're seeing growth in deals even in the SMB and agency space as well. I I think it's a combination of things. One, certainly for the customers, that are a little further in the journey, more sophisticated, It's the analytics and the listening and the need to have more data to formulate their strategy. But we're also seeing for many organizations just the expansion of seats and use cases. And for us, what It used to be years ago, maybe just one person in marketing that owns social. Today, you're seeing teams of marketers That are in the solution, that are not just there from a social perspective. They're thinking about content and brand and PR and comms And that's expanding out into things like customer care and customer support and sales. And so it's kind of a combination of things between use cases and users and then our premium modules. Got it. Got it. And then, Joe, on the gross margin side, It's a pretty good improvement. You measure you mentioned scaling the business and sort of finally weaning off the simply measured. But is that something that You expect to continue to scale forward. Are there any meaningful kind of step function investments that you're going to make over the next couple of quarters that maybe pulls that back In the short term, just thinking about kind of the overall operating structure there. Yes, Matt. So for the rest of this year, we feel pretty good about where we're at, where we ended Q1 and be able to maintain that for the rest of this year. We don't see any Pull back on that front. And then I think when we get into 2022, you'll start to see a little bit more increase or a little bit more leverage on the gross margin as we move into 2022. All right. Wonderful. Thank you. Thank you. Your next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open. Great. Thanks very much for taking my question. As you move more upmarket, what are your customers asking you Can you just talk a bit more about the feedback you're getting and how that perhaps is influencing the product roadmap? Thanks. Yes. Thanks, Chris. This is Ryan. There's probably a few things that we've seen and I think many of the things that you've just seen from us over the last little Utility and value for our upmarket customers. We're continuing to develop within those product lines today and add value. Integrations is another area where we've had some requests from customers for integrations. We've actually this past quarter Deliver some integrations from a help desk perspective across Microsoft and Salesforce and HubSpot and Zendesk. The thing that I'd highlight here as we've tackled all of these, Nadeem, is how do you build these sophisticated features in a way that's going to bring value to your customer right away and utility right away and adoption right away. And so those are the things that we're thinking about and that the product team is thinking about as they deliver. Okay, great. And then maybe one just quick follow-up is that also with this upmarket shift and more of a shift towards annual billing and could that portends a widening gap between the cash flow margin and EBIT margin in a positive way or is there anything you can share there about the directional progression of I think what you're going to see, we're definitely Conference. Over the last couple of quarters, we're definitely seeing more like we talked about enterprise and mid market. We're also seeing as we get into these larger deals where The product becomes more sticky, customers are willing to sign up for longer term contracts, right? They realize that, hey, if we're going to deploy this across not just the marketing team, but the support team, The sales team, we want to make sure that we're that we buy a little bit longer than we used to in the past. And so we're definitely seeing a shift. I think it's still a little early just given the mix. We've talked about this, but we still have about almost like a fifty-fifty split between month of the month and annual contract. And so I do see that widening over the longer term. I think it's going to in the short term, it's probably not going to be As consistent, it still could be a little lumpy, but we're definitely moving in that direction. Okay, great. Thank you. Call. Thank you. Your next question comes from the line of Arjun Bhatia from William Blair. Your line is open. Call. Perfect. Thank you for taking my questions and a great quarter to the team. If I can go back to maybe the customer dynamics a little bit. It's obviously very interesting to hear the Harris results and hear about social taking center stage. I'd be curious What you're seeing from maybe legacy brands or tech laggards, so to speak, Customers starting to really adapt how they're approaching social and realize the value or do you think we're still early on that front and that's something to Yes, thanks for the question. This is Justin. Conference. I think there's a combination of things happening there. I think one to your point, we're definitely seeing brands that have been a little more reluctant or just Slow to get their strategy together on the social front, coming to the table. I think maybe the more pronounced difference that we're seeing is, organizations that had kind of dip their toes in and maybe made Some investments now realizing how important this is going to be and really starting to take a more strategic position on social and how to operationalize it across the organization. And so There are even the most reluctant brand has really been kind of smacked in the face over the past year and This is something that we've got to get a handle on. But I think maybe the larger, maybe opportunity initially It's for that graduation from the very early stages of social adoption to those organizations that are now realizing that There's a much bigger play to be made here. And that's where we start to see jumping up from small investments, maybe initial investments or departmental level investments to much bigger opportunities for our expansion efforts within those accounts and then landing them certainly on the new business side. Another related trend that we see there is folks that had made an initial investment when it was maybe less of a priority, Starting to realize that the tools that they invested in are really just not cutting it. So that's a great scenario for us to be stepping in as well, showing them What the platform can do for them relative to what they've been doing, that's a conversation that goes very, very well for our I might just also add in there from an individual buyer perspective, The conversations have got a lot more interesting in that we're seeing more senior executives get involved in conversations, especially around the topics of data analytics and listening and what they could be leveraging that social data for to inform their strategy. So I know our teams across sales and success Conference. Have really been energized by the customer interactions and the opportunities because those Buyers just have a more zoomed out view of their organizations and understand how social might be leveraged and the fact that we've also got That's very helpful color. And then maybe another higher level question, if I can. We're seeing a lot of changes In the advertising ecosystem with the deprecation of 3rd party cookies and changes to IDFA, I'd be curious if this is something that your Customers are talking about as they think about their approach to organic social and maybe what do you think the Yes. It's a great question. I think that conversation in our world tends to be More derivative or indirect and it's typically kind of uncertainty around the advertising landscape And what some of these new platform changes or regulation might introduce and Really just not understanding what how the networks are going to be able to continue delivering that efficiency though. I think they've spoken to that pretty well. So I'd say for the most part, it's uncertainty, but where Sprout comes into the picture is these organizations are thinking about and I think they Rightfully recognized over the past 12 to 18 months that the organic side of social as a hedge against advertising is a pretty important Conference here. And certainly when it comes to customer relationships, maybe the most important aspect. And so starting to see an organization that may have been thinking primarily on the advertising, thinking about social from an advertising lens, Really thinking about what the bigger picture is and how organic plays in, which is obviously where we play and where we can help them think through that. Thank you. Your next question comes from the line of Tom Roderick from Stifel. Your line is open. Hi, It's actually Parker Leitman in for Tom. Thanks for taking my question. Ryan, maybe on the go to market opportunity, I mean, you've had a tremendous success with the top of the funnel and then the trial Motion that you have in place. But as we think about more of the enterprise opportunities, particularly around verticals, can you remind us once you get a handful of customers from vertical in the funnel. How are you approaching that from a go to market perspective? Are you building teams around these opportunities yet? Or is Still a situation where it's a very horizontal approach? Thanks, Parker. Yes, Conference. Today, it's still more of a horizontal approach. Horizontal from an AE sales perspective, But we have got verticalized in terms of our support from a marketing perspective. We're really lucky in that we have such a long tail across the market in terms of opportunity. And for the most part, most of these organizations that are coming to us Very similar use cases that are horizontal in nature and it tends to be more along the lines of the verbiage of the language that needs to be customized Conference for those customers. In some cases, if it's Fintur or Healthcare, maybe more related to regulation. But our marketing team has done a phenomenal job in creating Content that is focusing on those verticals and making sure that we have relevant use cases that we're leveraging the relevant language. But today, the AE team Conference. I think in the future there's opportunities for us to continue to think about how we specialize in segment. But the execution so far across the board has been really strong and we feel good about the way the teams are operating today. That's helpful. And then Joe, maybe a model question for you. I think there was some one time CapEx items in the second half of last year related to a headquarters build. Very low CapEx this quarter. How should we expect that to trend here for the remainder of the year and maybe going forward? Yes, Parker, I wouldn't see any outsized CapEx. There might be a little bit related to coming back in the office in the back half of the year if we decide to come back, getting the office Ready, but nothing that I would say is material. So I would expect pretty consistent CapEx spend going forward. All right. Thanks for the color. Next quarter. Thank you. Your next question comes from the line of Caught Berg from Needham. Your line is open, sir. Hi, everyone. This is John Godine on for Scott. Thanks for taking my question. I guess, As you think about economies opening back up, what are you expecting as far as potential social media trends and usage? Is there any additional use cases, particularly with some of these verticals that have been more heavily impacted, that you think are Hey, John. This is Ryan. So, I mean, I think we are already starting to see some of those organizations Reinvested. I mentioned a few at the beginning in terms of retail, restaurant and hospitality. I think many of them are feeling a change of wins They're investing. Many of them have been investing even in 2020 in an effort to maintain community and relationship and brand, but I'm sure that there's Conference. But just generally, I think all of 2020 and the pandemic really just encouraged Brands and organizations to rethink the way that they're building their agent with their communities and their consumers. And so I think for many of those organizations, they started the work, they're going to continue to invest in those places. And I think that we're all in this place where The behaviors and habits we created over the last year aren't going to change very much even if the world changes. So I think a lot of these things that we've got used will be to go forward. And I think social is just going to continue to be a really important part of the way that organizations engage and communicate with their customers. Thank you. And your next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open. Hey, this is Chris on for Stan. Thanks for taking the question. I mean, it seems like all the headline metrics you guys had were super positive, especially looking at your large Stronger than traditional enterprise Q4. Are there any lingering COVID uncertainties when you're still going to market today? Or would you say that all of that is behind us now? Yes. I mean, certainly, we don't want to Conference. Invite something different here, but we've really seen steady Conference really Q3 to Q4, Q1. We think that the next shift is likely around Conference. The future of work, return to office, which we think bode well for us. We don't anticipate COVID related impacts other than just probably some continued acceleration around adoption and Call. The understanding, it's taken some time for some organizations to really activate on the understanding that social is a much bigger part of the picture than they may have anticipated coming into 20 Conference. And I think we'll continue to see that, but no real pent up impact that we believe is coming. Conference. Got it. Super helpful. And if I could toss a follow-up. I mean, if we're thinking about e commerce or commerce in general, it's been something that you guys have been talking about for A while now and it feels like it's we're pretty much like there. How would you think about the opportunity set If you were to compare e commerce use case versus the premium modules that have been really successful so far, how do you kind of rank order those 2 opportunity sets? Yes. So I think it depends on the time series we're talking about. I think with the momentum we have on the premium modules, The attach rate and the success we've seen selling those, we continue to be excited and are investing in those and I think that those will continue to have Sizable impact for us throughout the year. While the social commerce discussion has been with us for a while now, Conference. I would say that there are still some unknowns there, right? I think we're all talking about it, the networks are all talking about it. The specifics Conference have been somewhat sparse and I think we're starting to get clarity around that. We're have been at work and we'll have more to say on that front soon. So it's starting to come to life. I think the unknown there is We consider this probably the largest area of potential for the business, but over what period of time that looks like Conference and overall size and scope relative to some of the other parts of our business Conference. Still unclear. Got it. Super helpful. Thank you. Thank you. Next one, we have Clark Jefferies from Piper Sandler. Your line is open. Hello. Thank you for taking the Conference. This has been slightly addressed by some questions, but I'll ask it directly. Impressive to see another quarter of record customer adds. My question is really around the Sustainability of that pace of customer acquisition. I'd say, Ryan, you touched on the improvement of top of funnel, but should we think about this as sort of a revelation for the organization that could really drive that cadence go forward. Yes, this is Justin. I'll take Call. For the 1st couple of quarters when we saw customer adds that looked like this, we cautioned Conference. Let's see a couple more data points before we call this a trend. It feels like we're there. What we're seeing in the funnel and what we've been able to deliver over the past three quarters tells us that the ability to add and I will again focus more on the revenue yield from those customers than absolute number. But it feels like we're in good shape that this It wasn't something that was situational, but something that the team has really set up and our sales model was set up To deliver on a go forward, want to continue to advise that The revenue is going to be the focus for us. And if we think about things like the just the ACV growth that we've seen any changes that we may want to make on our conversion funnel, etcetera. We may intentionally drive those numbers in one direction or another with the Intent to make sure that the yield coming out is as healthy as possible. Got it. And it just seems like overall the go to market is more effective than the place you were at last year. I guess Just in relation to that question, what is the limiter for additional investment right now and why not get more aggressive at this stage and invest in not drive positive free cash flow growth based on the traction you're seeing. Yes. I mean, I think that that's something that we're constantly evaluating and I think some of what Joe talked about in terms of the increased investments that we're making now that we've made through Q1 Really set us up to that exact question, which is, where Conference. What's the return on these investments relative to the opportunity and where do we want to be optimizing? Obviously, we delivered the free cash flow positive Sooner than we had forecasted and that's great. But we want to make sure that we're focused on the opportunity and investments we need to make there. So it's not something that we're prioritizing. Expect to see us to continue to be aggressive and ambitious with the opportunity. All right, perfect. Thank you very much. Conference. Thank you. And your last question for today is from DJ Heinz from CJS. Your line is open. Hey, guys. This is Luke on for DJ. So I'm curious about some of the more nascent social platforms out there that you don't currently Integrate with TikTok being one of the more prominent. How do you think about that particular platform as well as other social channels opportunistically. And as you add more channels like Reddit recently or TikTok potentially, Do you see those being meaningful incremental adoption or monetization catalysts down the line? Yes. Good question. So, and I'll start with the second part. I think There's some second order effects to any time that the scope of what we help our customer with expands. And so on one end of that is The more networks to manage, the more places that our customers need to be present and have a solid strategy, that makes our value proposition that much stronger. The more people involved and permissions and nuances across the networks, that all is strong. We also monetize the profiles themselves. So the addition of additional networks has impact there. In terms of what we kind of look for and what we've seen. So specifically TikTok, I think it's a fantastic platform. And I think that they're thinking about all Call. I think we've mentioned on this call maybe sometime last year, the typical trajectory there is The networks will see a critical mass of adoption. They'll start to think about monetization, then they'll start to invest in the APIs and business tools and that's where we get involved in the conversation. And so there's a pretty natural progression that these networks go through. Conference. We kind of know what to look for and when to get involved and have those conversations with them ahead of time, Figure out how we can help them as they're thinking through those programs. So it's the Two primary things that we look for are our customer demand and the network readiness. Do they have the resources, the APIs, etcetera, for us to give our customers a world class Conference. And then we look to make those investments in the case of TikTok and others. We're leaning into those at a time and we'll be ready to go with NARE. Awesome. That's helpful. Thanks. Conference. Wonderful. All right. Well, thank you everyone so much for your time as always. Thanks for the great questions. Really appreciate the support. As always, we look forward to connecting with you all throughout the quarter and back again a quarter from now. Conference. Thank you, ladies and gentlemen. This concludes today's Conference Call. Thank you all for joining. You may now disconnect.