Sprout Social Inc (SPT) 2025 Q2 法說會逐字稿

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social second quarter 2025 earnings call. (Operator Instructions) Thank you. I would now like to turn the call over to Alex Kurtz, Vice President of Investor Relations Corporate Development. Please go ahead.

Thank you, operator, and welcome to Sprout Social second quarter 2025 earnings call. We'll be discussing the results announced in our press release issued after the market closed today and I've also released an updated investor presentation which can be found on our website. With me are Sprout Social's CEO Ryan Barretto and CFO, Joe Del Preto.

Today's call will contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking. These include, among others, statements concerning our expected future financial performance, including our Q3 and 2025 outlook and business plans and objectives.

It can be identified by words such as expect, anticipate, intend, plan, believe, seek opportunity or will. These statements reflect our views as of today only and should not be relied upon as representing our views at any subsequent date and we do not undertake any duty to update these statements.

Forward-looking statements address matters that are subject to risk and uncertainties that could cause actual results to differ materially. For a discussion of these 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 30, 2024, as well as our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2025 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 the reconciliation to the most directly comparable GAAP financial measures are included in our second quarter earnings release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com.

With that, let me turn the call over to Ryan. Ryan.

Thank you, Alex, and welcome to our second quarter earnings call for fiscal 2025. We reported second quarter results with revenue of $111.8 million, representing year over year growth of 12% and non-GAAP operating margin expansion of almost 400 basis points.

Our current remaining performance obligations, which reached $251.6 million, represented 18% year over year growth. Our go to market delivered another solid quarter with 18% growth in the $50000 and above ARR customer cohort.

We landed strategic wins with global brands like Honda, Cigna, Kimberly Clark, Authentic Brands Group, LaCroix, Smockers, the US Department of Transportation, and Texas Tech. These customers demonstrate our continued execution and strategic fit with the most socially sophisticated enterprise customers.

During the quarter, Sprout continued to earn industry recognition. We secured 164 [meter] badges and G2's latest reports with top rankings in enterprise social media suites, analytics, and customer service across North America, EMEA, and APAAC.

We also earned Trust Radius 2,025 top rated awards in eight categories, including social media marketing, audience intelligence, and online reputation management, reinforcing the meaningful business outcomes customers achieve with Sprout.

Additionally, we received silver for Best Influencer Marketing Platform at the Global Influencer Marketing Awards and a Silver Shorty Award in the micro-influencer strategy category for our own innovative influencer strategy that turns Sprout's listening data into thought leadership and helped shape industry conversations.

Today, I'm excited to begin by discussing our recent acquisition of NewsWhip, a leader in AI powered predictive media intelligence. Headquartered in Dublin, Ireland, NewsWhip was a privately held company with approximately 70 employees, and we couldn't be more excited to welcome the team to Sprout.

NewsWhip has become a mission-critical tool for some of the largest global brands, media companies and agencies for crisis management, real-time media monitoring, research, and strategy. Strategic customers such as Nissan, The Associated Press, a Fortune 50 Media Company, two Fortune 50 technology companies, and a Fortune 100 consumer beverage company, all rely on NewsWhip for real-time monitoring of news articles, social posts, and other media related to their brand, products, and their competitors.

I want to outline our strategic rationale for acquiring NewsWhip, and why we see this as a pivotal milestone that combined with our existing product roadmap will drive unique crisis management, trend detection and AI offerings from spread over the next several years.

First, NewsWhip 's AI powered predictive media intelligence can help identify which stories and narratives are about to go viral. This has become mission critical for brands as new stories can quickly escalate across various social media platforms.

NewsWhip provides three core values, real-time alerts and predictive analysis, key insights into emerging trends and conversations, and sophisticated AI alerting capabilities that are leveraged by crisis management teams and the C-suite.

Over time, we expect to enable early crisis detection from NewsWhip to seamlessly flow to customer care teams working in the platform, creating a truly differentiated end to end experience which transforms insights into action. We also believe integrating NewsWhip's capabilities with Sprout's listing products and its extensive social interaction data will create a comprehensive 360 degree view of social and media ecosystems.

Together, we will combine predictive media intelligence with agile social action to drive impactful earned, owned and paid media strategies. This integrated approach will enable real-time trend detection, targeted engagement, and clear ROI reporting, delivering measurable outcomes for businesses.

During the second quarter, NewsWhip launched its AI agents, which have garnered strong interest among Newswe's larger customers, with over 70% of brand customers leveraging them in just over a month. NewsWhip AI agents proactively scan global news and social data, identifying stories and themes gaining momentum before they peak, and giving brands the strategic edge to own the narrative.

But the massive volumes these brands have to manage, these agents are designed to separate the signal from the noise and to drive clear efficiency for practitioners while also ensuring they never miss a critical moment. NewsWhip pool enable Sprout to enter into the mission-critical PR and crisis monitoring space with a new offering.

These are potentially new buyers for Sprout, both new logos to Sprout, as well as growth opportunities within our existing customers. And in both cases, these are often groups of long-standing dedicated budgets. We're incredibly excited to discuss NewsWhip's capabilities with them in the coming weeks and months.

While there is some minimal customer overlap, we believe Sprout's full go to market distribution will accelerate these opportunities. We also believe that NewsWhip can further strengthen our gross retention goals among larger enterprise customers given its stickiness with crisis management teams.

NewsWhip has built an impressive list of top-tier customers over the last 10 years with contract sizes often at the higher end of Sprout's customer TCV range. Finally, we are thrilled about the future impact we expect the news whip team members will have at Sprout.

This agile team has built a must-have tool for some of the biggest brands, and we've been really impressed with the news whip engineering talent shaping the future of AI-driven real-time media monitoring. I'm also pleased to share that NewsWhip's co-founder and CEO, Paul Quigley, will step into the role of general manager for our listening business, overseeing both Paul Quigley and spreads listening products.

Paul is a great executive and will be a tremendous asset in leading this critical part of our business moving forward. Before handing the call to Joe, let me briefly take you through some customer wins and our four key growth drivers that include winning the enterprise, driving customer health and adoption, expanding our partnership and ecosystem, and driving improved account penetration.

To win the enterprise, we intend to expand the pipeline, close more 50,000 plus deals, and accelerate adoption with a product roadmap built for enterprise needs. Let's start with the key product releases in the quarter. For influencer marketing, we reimagined our influencer marketing platform now featuring a refreshed design and advanced AI-driven capabilities.

As social media becomes central to brand discovery, influencer marketing is an increasingly important strategy to drive ROI. Key updates include AI powered natural language discovery for search, driving more authentic and impactful activations, a customizable brand safety solution to align creators with brand values, and a new creator vetting feature that drastically reduces time spent in discovery so brands can refocus on their more strategic creative tasks.

In care, we introduce innovations for proactive customer engagement through enhanced efficiency and smarter workflows. With the introduction of cues, care teams can easily organize high volumes of inbound customer interactions by urgency, topic, or customer segment, significantly reducing response times and ensuring critical conversations receive immediate attention.

Additionally, new bot integrations and AI enhancements automate routine interactions, proactively resolve customer issues, and free up care agents to focus on higher value tasks. These innovations mean faster resolution times with increased agent productivity and more tailored and effective support for customers, ultimately cultivating greater customer satisfaction and loyalty.

Social media has become central to product discovery and purchasing, which means brands must deliver fast personalized social care across platforms or risk losing vital customer trust in business. In fact, 73% of consumers say they will buy from a competitor if a brand doesn't reply to them on social.

While reactive support is expected, the new innovations and care by Sprout empowers brands to deliver proactive care, turning positive interactions into business assets to build loyalty and attract new customers. For governance, we enhanced brand safety and customer data handling with the launch of our new product, Guardian by Sprout Social.

Guardian supercharges social customer care and social media management with innovative AI-driven tools that reduce brand risk, helping our customers securely and confidently handle their customer data. Guardian is a huge asset for security conscious and highly regulated industries, providing features like blocked words, data masking, and secure forms.

We're also pleased to share several strategic enterprise wins this quarter. The first one was a seven figure new business deal with the global brand management company consolidating their marketing care and customer experience under one tech stack. With premier success, listening, and premium analytics, they can unify social strategy across 50 plus brands, ensuring consistent governance and workflows.

They can also boost efficiency with powerful and intuitive reporting tools while reducing costs and complexity by consolidating the social management, publishing, and analytics into a single platform. The next story we want to highlight is an almost 90,000 expansion deal with a global health technology company that switched from a competitor due to its overly complex workflows.

They were seeking a seamless care agent workflow with their service cloud integration. With Sprout, this company can amplify its brand messaging with over 60 publishers and 15,000 advocates, expanding reach and boosting brand awareness. Sprout also enables real-time insights for deep customer behavioural analysis. Our service cloud integration allows them to manage 90,000 customer support requests per month to increase customer satisfaction.

They can also safely host data in the EU in a compliant manner, which is critical in a highly regulated industry. This final customer story is a 360000 expansion win, highlighting the growth opportunities that exist within our customer base.

This Fortune 500 global healthcare company, already a seven-figure sprout customer for marketing care and customer experience, expanded to include listening, premium analytics, influencer marketing, and employee advocacy. They are now able to unify social efforts globally for consistent brand messaging worldwide and to elevate brand reputation by tracking sentiment and covering key drivers of perception, and benchmarking against competitors in real time.

Our second growth driver is a sharper focus on customer health, onboarding, and adoption to maximize long-term value. This quarter, we introduced two new support offerings accelerated support and accelerated Support Plus, while also enhancing our existing Premier Success Light offering.

Features include two-hour response times and access to a dedicated customer experience specialist. Since launch, these offerings have gained strong traction, driving new deals and significant interest across our premier support suite. Our third driver is our continued investment in our partnerships with strong global partners that bring Sprout into strategic accounts and expand our reach into some of the largest digital marketing budgets.

We continue to ramp our partnership activities through the first half of 2025. As we mentioned last quarter, our social network, technical integrations, and go to market partnerships provide what we believe is a lasting competitive advantage in the market.

As we move into the second half of the year, we'll be expanding our partnerships and capabilities across key networks including publishing, reporting and listening capabilities with Blue Sky, engagement and reporting with Reddit, listing with TikTok, and building out personal profile reporting with LinkedIn.

Our four growth driver focuses on deepening customer engagement through use case expansion and premium modules with our sales team seeking to drive greater value across both new and existing customers. Expanding our trust and compliance offerings at Sprout has been a key priority.

As I mentioned earlier, this past quarter, we launched Guardian, a solution enabling our customers to securely manage their data while still personalizing interactions and enhancing brand safety. We've seen strong interest across highly regulated industries, especially healthcare and financial services, closing our first deal within just a couple of weeks of launch.

We're even seeing demand from less regulated industries as organizations increasingly recognize the inherent value of having these capabilities readily available. The acquisition of news bullets will significantly enhance our AI listening and care capabilities, enabling us to expand use cases and elevate our premium module offerings. We're excited to share more in Q3 as we begin introducing newslip to our customers.

In closing, I'd like to revisit our discussion last quarter of social search and the undeniable long-term trends we see playing out and how the news whip acquisition ties into this theme. As traditional search continues to trend towards zero click with AI, current content strategies face headwinds with traffic changing in real time.

We know nearly half of Gen Z starts product discovery on platforms like TikTok and Instagram, and over 80% of consumers say socials are top channel for product discovery. Organic website traffic is declining while paid search costs are rising. Social has become the new front door for discovery, but most brands are optimizing for it or they're not getting there first.

Our ability to drive discovery on social platforms is critical. It translates into AI search where platforms like Reddit increasingly contribute to source content and in traditional search where both Reddit and Instagram index on the first page of Google search results. Social media's authenticity, immediacy, and community-driven nature fill the gap as search behavior shift, offering businesses stronger ROI outcomes.

Sprout helps brands win in the new era of discovery. Our publishing tools are designed to optimize every post for maximum visibility using keyword rich titles, platforms specific formatting, and built in guidance for hashtags, alt texts, and timing to help ensure nothing gets missed in social search and brands can reclaim lost organic traffic.

And now NewsWhip in our view, is the perfect addition to the strategy, as Sprout will enable global brands with a greater ability to recognize real-time and predicted trends powered by AI agents. These innovations will help marketers know exactly what content they should be creating to benefit from social search momentum, as well as about issues before they arise with differentiated solutions for crisis management.

We believe the future of this category will be defined by real-time data and intelligence, extensible platforms, and trusted AI. That's the foundation we're building at SR, and we're excited about where it's taking us. And with that, we'll turn it over to Joe to run through the financials. Joe?

Thanks, Ryan. I'll now run through our financial results and guidance. Our second quarter results were highlighted by a quarterly non-GAAP operating margin of 9.2% of nearly 400 basis points from the year ago period. We generated $5.2 million in non-GAAP free cash flow during the quarter, up $2.7 million from a non-GAAP free cash flow in 2Q '24, an increase of 110% on a year on year basis and on a trailing 12-month basis, non-GAAP free cash flow is up 4X. We remain committed to growing operating leverage on a fiscal year basis.

Onto a summary of the quarter, total revenue for the second quarter was $111.8 million, representing 12% year over year growth. Subscription revenue was $111.1 million, up 13% year every year. The number of customers contributing more than $10,000 in ARR grew 6% from a year ago. The number of customers contributing more than $50,000 in ARR grew 18% from a year ago. Q2 ACV was 15,321 of 14% year over year.

As Ryan discussed earlier, our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthen premium module tax rates such as influencer marketing and customer care. Our PO totaled $347.0 million, down from $360.2 million as in Q1, 18% year over year. We expect to recognize 72% or $251.6 million of total RPO as revenue over the next 12 months, implying a CRPO growth rate of 80% every year. Non-GAAP equity income totaled $10.3 million which is ahead of the high end of our outlook.

This was up from $5.3 million a year ago and equates to a non-GAAP operating margin of 9.2%. We're pleased that our progress here demonstrates our focus on continued growth in our margin profile. Before moving on to guidance, few quick comments about our acquisition of NewsWhip. We acquired NewsWhip for a cash consideration of $55 million, with an additional $10 million in potential cash earnouts that are structured over the next two years.

We finance the acquisition, with our credit revolver and cash and believe this was an efficient use of capital as our products address the needs of our customers, and we believe the combined solution is a highly differentiated offering. Looking ahead, we're increasing our full year revenue guidance, primarily reflecting the early contribution from NewsWhip.

See strong early interest from new and existing enterprise customers, including new conversations with globally recognized brands that underscore the strategic value of this acquisition. We believe this early traction is a strong signal to the opportunity he had and reinforces the differentiation we believe Sprout is building. That said, we're early in the integration.

While the course pro-business continues to perform in line with the expectations we set at the start of the year, we fix some near term pressure on reproductivity as we train teams, align or go to market motion, and support customers through a more expansive conversation around listening and news. Only five months of revenue contribution remaining this year.

We're just starting to operate the news of business given the closing last week, we've taken a measured approach to modeling the impact. Lastly, while part of the acquisition, NewsWhip was expected to be an approximately break-even business in the back half of the year on a stand-alone basis. We're pleased that we were still able to raise our non-GAAP operating income outlook while absorbing the associated cost.

Now, onto guidance. The third quarter of fiscal 2025, we expect gravity in the range of $114.4 million to $115.2 million. We expect non-GAAP operating income in the range of $9.3 million to $10.3 million. We expect a non-GAAP net income per share of between $0.15 and $0.16. This assumes approximately $59.0 million weighted average basic shares of common stock outstanding.

For the full year 2025, we are raising our guidance from the prior quarter and now expect rather in a range of $452.9 million to $455.9 million. We're also raising our non-GAAP operating income guidance expected to be in the range of $43.1 million to $45.1 million. We expect non-GAAP net income per share between $0.71 and $0.75, assuming approximately $58.7 million weighted average basic shares of common stock outstanding.

We look forward to continuing to innovate and create more opportunities for our customers to grow with us. We appreciate your interest in Sprout Social, and with that, Ryan, Alex, and I are happy to take any of your questions. Operator?

(Operator Instructions)

Arjun Bhatia, William Blair & Co.

Yes, perfect. Thank you so much. I appreciate you guys, taking the question here. Maybe to start out with just if you can zoom out and just take a step back for a second, I'd be very curious to hear just how you would characterize the core business, as it stands today, and then I have a I have a follow up after that?

Hey Arjan, it's Ryan. I will start. Thanks for the question. Yeah, just in terms of the business, we, we've been really pleased with the progress that we've been seeing and incredibly proud of the effort from the team. It's the business being performing really well and tracking the plan that we laid out to all of you at the beginning of the year.

We, we've had some great wins this quarter, Cigna, Authentic Brands, Honda, Smuckers, Department of Transportation were a few that we had shared in the prepared remarks. And we grew both the 10000 and 50000 customer counts quarter over quarter. On top of that, our 50000 trailing 12-month revenue cohort is growing greater than 30%, which just shows the enterprise execution.

On the retention and renewal side, the performance has been really strong. We've seen steady improvement in gross revenue retention year over year. And we're seeing continued momentum with our teams and in closing more annual multi-year deals which will contribute to retention and certainly gives us better visibility in the business.

And then finally from a non-GAAP operating margin we're up nearly 400 basis points which I think really speaks to the execution and the operating discipline that we have in the business. So everything considered we're feeling really good about where the business is as we head into the back half.

All right. Perfect. Very helpful, and then just, as a follow up, as I'm looking at the guidance, can you just give us a sense of what the impact of NewsWhip is and what you incorporated into the guidance here.

Yeah, thanks, Arjun. This is Joe. I'll jump in on this one and thanks for the question. Maybe let me walk you through how we approach the guidance in total, and I think that'll be most helpful to address the question you're asking. I think first, our corporates came in, so they had in Q2 and chooses to track the plan we laid out to you at the start of the year.

Now we haven't seen a change in the broader demand environment and we flowed through a modest portion of the Q2 be into our updated for your guide to reflect that. For the news business, we're projecting that they contribute approximately $2.5 million over the final five months of the year.

And you got to remember, with any small talking and acquisition, we want to take a prudent approach looking ahead. We just closed the acquisition last week. There's still natural unknowns around renewal rates, pipeline conversion, other business fundamentals we need to consider. So as a result, we're taking a very measured approach with our guidance.

And then you know we're still early, but we believe this really sets us up to lead in the area that's becoming increasingly important to our customers and to the market, and we're really excited about this acquisition.

Scott Berg, Needham.

Yeah. I'm Rob, on for Scott Berg, thanks for taking the question. Just to double clear on the news with acquisition. Can you just touch on the timeline to integration of the teams and products, and you noted some positive momentum with enterprise conversations so far. Any other feedback from customers just regarding the, this acquisition of the capability being added to the suite. Thanks.

Yeah. Thanks Rob. Appreciate it. We're taking in as just said, we're about a week in, the teams are chugging along already. We've been working on, a bunch of, all hands with the teams and I actually just did all hands with the news with team yesterday and a company all hands last week. We've been getting the CRM together and aligning everything and and working really closely on the go to market strategies.

We've also just seen, a number of conversations already in the first week, so lots of progress being made on the integration. In terms of product integration pieces those will develop over the next probably few quarters or so, but the teams are working in the background. Obviously, you mentioned on the call Paul.

The co-founder is now the GM of our listening business and we'll be really working closely with the rest of the team there and then from a from a customer perspective, one, I just say that teams are internally incredibly excited about the opportunity to share the value of the news with product to our customers.

We've seen this as a mission critical solution for PR communications professionals and the ability to take the insights from NewsWhip and have them drive actions in the spread platforms really exciting. So initial feedback and again it's only been a week it's been strong and encourage all of you to take a look at the NewsWhip website and go to the customers stories. You get a great sense for that the quality of the customers there and the types of problems that they're solving.

Got it, that's helpful. Thank you. And then last quarter, there was a reference to the launch of a multi-product campaign. I understand it might still be early days, but have you seen any benefit from this effort resulting in expansions with existing customers or larger lands of new and they sort of jump in new customer artist since this is launched?

Yeah, thanks. Yeah, I mean, I will say it's been a massive focus for our team across both the product organization and go to market. We've been seeing healthy pipeline being created there clearly, NewsWhip has been a big contributor to that and will be in as we go forward.

I mentioned Guardian on the call as well, another great example of a product that we launched in the quarter. So I'd say lots of progress happening right now, but nothing else to add, and we'll certainly come back and share the progress along the way. Thank you for the question.

Thank you.

Adam Hotchkiss, Goldman Sachs.

Great. Thanks so much for taking the questions. I guess, I think we've heard from some of your peers and I think you had mentioned that the growing cost of advertising, particularly, if you're a smaller business, and I'd be curious if that is resonating with your customers when you talk to them about the value of social as a channel and if you're seeing any mix shift in the way that brands are thinking about their advertising strategies, it really feels like that's really picked up in the last couple of quarters. I'm just curious if that's impacted you and your deals at all.

Yeah, I appreciate the question, Adam. It ties a lot to the final piece of my prepared remarks as I got into the idea of social research. We are certainly seeing, customers talking a lot about the fact that they've seen pretty significant disruption to the things that they counted out in the past, specifically around search engine optimization and search engine marketing, and certainly we're in this world right now where that the cost per clicks on a lot of these things has increased significantly and people are clicking less.

So our customers are definitely looking for more help and how do they show up in the right places where discovery is happening and we're seeing more and more of that happening on social. So a lot of the conversations we're having with customers is how do you reclaim some of this lost traffic and performance in places like social and so if you think about what our platform does, it really helps customers figure out the right type of content to produce the right time to post it to their audience, give you analytics on both your paid and organic so that you can really double down on the things that are working and clearly in this environment that's something that's really critical.

So I'd say that's it's a material part of the conversations that we're having with customers and I'd say, most of our customers are having that conversation right now with the disruption of the market for their funnels.

Okay. That's really helpful. Thanks, Ryan. And then just on the RPO and the cRPO dynamic, I noticed that step down sequentially. I think you mentioned it and RPO I think was even below Q4 levels. Is that just, turn at the low end of the market or anything else to call out their seasonality would be helpful? Thank you.

Yeah, Adam. I think really what it's attributed to the last thing you said there was, which is the seasonality of part of the business. So as we move more up market over the last couple of years, a lot of our bigger renewals and the larger deals we're signing in Q3 and Q4.

And so what you'll see is, in the back half of this year you'll see that those dollars start to kick up, in the next couple of quarters and feel pretty good about how we'll exit the year, in 2025 as it relates to those metrics. So we feel good about the momentum there. It's the seasonality that you called out.

Okay. Thanks so much, Joe.

Parker Lane, Stifel

Yeah. Hey guys, this is John McShane on for Parker. Nice check question. So I wanted to touch on the macro, obviously there's been a lot of geopolitical headlines this quarter. So I'd be curious to hear how both the pipeline was impacted by the noisy macro and how renewal conversations have been impacted as well. Thanks.

Thanks, Jack. I appreciate that the question. I'll start off, on the pipeline side of it. Yeah, we clearly, we're still in the same demand environment. I wouldn't call it anything that's materially changed for us this quarter from the last previous quarters. For us, it's definitely leaning into the value prop.

Similar to the, my feedback on the last question to Adam, a lot of this for our customers right now is this is this is an important part of the work that they're doing, whether it's discovery and making sure that they're getting their customers in the front door or thinking about how they respond to their customers from a care perspective.

We're certainly leaning in more, as I've shared in previous quarters on just the customer value and the ROI story, but I feel really good about what I'm seeing from the teams and the type of rigor that Mike and the team has created around pipe creation and pipe acceleration. So nothing to call out that's different from previous quarters there.

On the renewal side, we feel really good about that. We've seen a lot of progress year on year in terms of our retention and renewal rates. I think this also speaks to the value of the product for our customers and the fact that they're spending hours a day in our products and this is how they execute on their social strategy, but we've seen that as a strength for us.

Got it. And as a follow up, I'd be curious to touch on the customer care use case and more specifically, how Salesforce's emphasis on agent force has impacted the demand in the segment?

Yeah, no, I appreciate it. The care continues to be a really important use case for our customers. We shared a few stories today just highlighting with really large customers how they're leveraging care, one specifically was an example of a customer that moved over to us, a global health tech company, that moved over to use the first cloud integration.

I mean this customer literally managing 90,000 customer support requests every single month and they're able to execute on that with that speed and customer satisfaction because of the integration that we've built with Salesforce. So it, it's continued to be a really important part of the strategy.

Clearly our customers are doing it directly in our product or they get the benefit of leveraging integrations like the service cloud, but more we're seeing customers showing up on social as a place that they want to be served and their expectations when they show up on social are higher than any other channel.

And so the way that our platform is set up to support customers matters significantly and yes, on the agent force side of things we're excited about the work that we're doing there. We're coming off of connections and getting geared for Dreamforce. So, I believe this will continue to be kind of the next chapter in the value that we're adding to customers that are that are joint scrub and service clouds Salesforce customers.

Thanks.

Surinder Thind, Jefferies.

Thank you. Can you maybe talk a little bit about, just kind of the sales of some of the premium modules and the attached rates that you referenced as part of the strategy? Does an environment like this make it a little bit more difficult? I mean, it feels like things haven't really changed a lot in the last few quarters, but there just seems to be a lot of noise out there and we're hearing different things from different channels.

Yeah, I appreciate the question. Yeah, I alluded to it a little bit before, but I've been proud of what I'm seeing from the team in terms of creating this multi-product pipeline, but the product teams have been working hard in the background here. We talked through a few of the use cases that that we have, we've added guardian, our trust and compliance product this past quarter obviously needs what's another addition there.

I think this is just really important for us because what it means is that it allows our sales team to show up to customers with a variety of different product problems that we can solve for our customer base, clearly that the demand environment hasn't to your point, changed over the last number. Our quarters, but that's why it's even more important for us to be able to really serve customers depending on where they are.

So, we get customers coming in where they got high volumes passing on social from a care perspective which we can support. You've got other customers who are seeing significant disruption in the top of the funnel from a marketing perspective, and social ends up being a really important thing for them.

So these are some of the examples, but I think that the last piece that leave you with is that from an attached rate perspective, we continue to see a lot of headroom and opportunity for us to sell our products, both from a new business perspective to land bigger as well as from a current customer perspective to be able to attach more products to our current base of almost 30,000 customers.

Got it. And then, when I think, obviously the international business, international clients a little bit smaller part of the business, but just any color on the trends there, [Emi] had been, lagging the US for a little bit, and I didn't see that the que out yet, so just any color that you can provide there on some of those numbers and trends.

Yeah, I appreciate it. You're right. International, still a smaller part of our business, but we feel really strongly that the market opportunity there and the teams that we have on the ground. Our distribution teams are still relatively small compared to the US. But we're seeing good progress in terms of the pipeline and the opportunity.

We're also with a lot of the multi-products that we're bringing to bear and the types of companies we're selling to, we're getting more of these global type opportunities where, the footprint in the US will open up opportunities for our teams in a MIA or an APAAC. So I think the main takeaway is that we're still early on that journey, but there's quite a bit of room there and over time we'll be continuing to invest in our distribution.

And Surinder, just to answer the last part of your question, as far as the mix for international, Q1 and Q2. It hasn't changed materially. So when we see the Q come out, the ratio of international revenue versus the rest is pretty consistent, so no major shift there as yet.

Thank you. All right.

Next question, please.

Matthew VanVliet, Cantor.

Hey, good afternoon. Thanks for taking the question. I guess when you look at where the NewsWhip technology fits in the current product platform. You curious if this was sort of a discovered either GAAP or just a greater extension of the listening platform where you're getting into situations where people are trying to push listening into other use cases, and you just needed more functionalities.

Curious I guess if you could elaborate a little more on where it overlaps or complements the listening platform.

Yeah, I appreciate the question, Matt. It is an excellent compliment for us. One of the things that we really appreciated, about the news team is what they do is some is really tied to a lot of our feature product road map and maybe the best way to think about this is we see it as really strengthening our overall approach to the market and really differentiating us against our closest competitors.

If you think about the start listening is really about deep analysis and longer term understanding of social conversations and shared voice and brand sentiment. It's ideal for brands when they're trying to understand the why behind historical trends and insights. NewsWhip is the command center for real-time action. It's built for speed and high stakes. It's helping.

Today teams figure out this massive fragmented media landscape and it's giving them these proactive alerts to breaking stories with real-time monitoring and predictive analytics to allow them to know exactly where the trends are. And so it becomes this essential tool for crisis communications and any team that really needs to get ahead of the narrative.

They've also just as a side note, and I mentioned it a little bit of my prepared remarks. They've launched some agents to their customers which is being adopted really quickly here, and it's really helping customers cut through the from the signal to the noise. So, I think that the main thing to highlight here is it fits really well. It compliments our overall strategy and it fast forwards our road map.

Okay, very helpful. And then Joe, you mentioned NewsWhip was on pace to be break even for the second half. Is that still incorporated in the guidance, or is there some additional expenses related to integration, maybe speeding up anything they have in the works. I guess what's the second half impact or the next five months impact of NewsWhip on the operating income guidance?

Yeah, no, the guide, a good question, Matt. The guidance contemplated that they would be break even for the for the rest of the year. So there shouldn't be any incremental expense or any other expenses that we're incurring. That's kind of an all in when it comes to guidance. And then I think, over the longer term we definitely believe there's a lot of leverage that can come out of that business.

We think about putting that product in our sales team and the distribution we can get. That over, the more fixed costs that they have right now, I think we feel good about the ability to drive more leverage sprout overall coming out of.

Great. Thank you.

Thanks, Matt. Next question please.

Jackson Ader, Key Bank Capital Markets.

Great, good evening, guys. Thanks for taking our questions. The first one is in the core business, Ryan. You've mentioned a bunch of times about trying to capitalize on. The struggles of organic and paid search and switching things over to social.

So I'm just curious, you guys, the especially with new sales leadership, are you running any particular sales plays or special incentives or something to really kind of capitalize on this the beginning of this possible mega shift? Thanks.

Yeah, thanks for the question. I think the biggest thing to highlight is we've definitely been enabling the team on the value props behind this , the things that we can do to help customers. In social search, but also in AI search and traditional search and so a lot of this is just being rep enablement and then obviously customer communication.

If we think about it and I mentioned some of this in the prepared remarks, we're seeing more and more, especially in Gen Z, of consumers showing up in social searching in places like TikTok and YouTube and Reddit before they're going to traditional search. And so you showing up in the right place matters a time which your customers need to do.

We also know that performing really well on social ties into how content is being presented in AI search. So the better you do in social means that you will perform better in AI search. And then finally we're seeing more and more of these relationships happening between social and traditional for things like Reddit and Instagram or indexing on the first page.

So again, if you're performing really well in social, you will have a byproduct the impact of performing better on traditional search as well. So for us, all of these things are things that we're enabling the team on to be able to have those conversations with customers.

Okay, all right, got it. And then quick follow up. I think, so I think it was you who mentioned your prepared remarks that you know with any acquisition there's always like the potential for some disruption as you, train and kind of you know add things to the plate of the sales people.

To an outsider, though, I hear NewsWhip capabilities and I think pretty similar to what the sales people were already itching right as far as like a value proposition. So I'm just curious, is there something specific that you'll be adding to people's plates, or is this just, this is the business of acquisitions and things get a little noisy when you're integrating things. Thanks.

Yeah, it, I, well, first I'll say we're one in. I think that the biggest thing that I'd highlight is, and it, it's actually tied up in your question there. It's a, it's enablement on making sure that we can perfectly articulate what I shared in an earlier question here around the differences between listening our core listening product and news with and how they fit together so for internal teams and then certainly for customers.

So there's enablement. There's things that come with any integration here, but we, we're off to the races on that. We had [Mel Has] call last Friday, the revenue team kicked off on Monday, so we're deep in that already, and I think to your point these things are so close and.

So complimentary and we also in in many of our customer accounts we have folks from the PR and media and com teams who are in our core platform. So these are also people that we in many cases should know inside the organization and have an opportunity now go and share more about this new solution that we have that can that can perfectly help us.

Yeah. Okay, that makes sense. Thank you.

Thank you. Thanks, Jackson. Next question, please.

Rob Oliver, Baird.

Great, thanks guys. Good afternoon. I had to, Ryan, first for you. I just wanted to ask about the influencer marketing portion of the business seems like, still a lot of interest in the market around it, a lot of buzz around the potential impact of AI or AI there.

You guys obviously made pretty strong talking in acquisition a couple of years ago and you're not breaking that out anymore, but I just wanted to get a sense for how that's doing and how when you come in for those renewals for perhaps customers that don't have it, how those negotiations are going, and then I had a quick follow up for Joe.

Yeah, thanks, Rob. I appreciate it. We’ve been really good about the opportunity for influencer marketing, the artist formerly known as Tigger. The team I shared a little bit on the prepared remarks there, but the product teams have just been cranking in terms of some of the advancements that we've done there. There's been some really nice AI enhancements in the way that we think about creator discovery for our customers.

We've been doing a lot actually from a brand safety perspective as you might imagine as these large brands are leaning in and trying to figure out the right creators, they need to make sure that these creators perfectly fit their brand and that there's no risk.

And so that's something that we've also just really built into the platform that that has added a ton of value and then just creator vetting to make it much easier for our customers to figure out how to build their strategy and how to add the right creators.

So, a lot of automation workflow and tools built into all of that. It continues to be a really nice wedge for us to go into accounts that might be vended through social media management, but this is a great way to land with a differentiated product and then leverage that to go back and be able to sell more to that customer later on.

So, continued progress there and feeling good about the opportunity in front of us. Last thing I'll say is to some of the earlier questions around, if you're having disruption with traditional SEM or SEO and paid we've seen that influencer marketing is returning a five to six x on the dollar's end and so this has been a really great opportunity for our customers to get good return on ad spend in in places that they probably aren't investing today.

Got it. Really helpful. Thanks. I appreciate that. And then Joe, just one for you, a lot of questions, obviously on NewsWhip, but I guess more broadly speaking, you guys are doing some product investments so that you've been, working on the go to market on the, enterprise and sales side, pace of innovation, just, not asking you guys the next year or anything, just wanted to think about how you're thinking about balancing all of those and the potential for more talking and acquisitions onto your platform with potential continued margin expansion. Thanks.

Yeah, Rob, thanks for the question. I think consistent what we've shown over the last couple of years, and you know what we've kind of got it to this year, which is, you can expect a couple 100 basis points of margin improvement, year over year, and I don't see that changing in the near term. And that's regardless of like what our growth rate is and what we're doing.

I think we've got this commitment that hey, we believe that we can manage this business in a very responsible manner in any type of condition, and we want to make sure we're continue to drive that margin in the business. So we're not moving off of that commitment to drive margin on a year over year basis.

Okay, helpful to hear. Thank you, guys, very much.

All right, thanks, Rob. Next question please.

Raimo Lenschow, Barclays.

Thanks for squeezing me in. Ryan, one for you, like with all the changes in the industry where people, customers have to think about search, you have to think about social, you have to think about like, what do we do through LLMs. How does pipeline conversation change for you as you kind of engage with customers, in terms of like number of conversations, but also like size of potential deals?

Thanks very much. I appreciate it. Yeah, there's certainly a lot that our customers have to be thinking about. I mean, I think the biggest thing here, this just goes back to making sure that we are perfectly tuned in to the biggest problems for these customers, and that is so dependent obviously on the key stakeholders we're getting in front of.

If you're in front of marketing audience, they're absolutely thinking about how AI is impacting search, how their SEO and SCM may not be working as well, how their website traffic may not be working as well. And so we're thinking a lot about social the front door and trying to figure out how can we help them show up in the right places, drive awareness, get a better return on that and.

Other customers might be seeing just a significant amount of demand changing channels from their call center or website into social from a care perspective, and they've got to figure out how to manage that that demand like that example, the 90,000 cases that we're that we're managing.

And so a lot of it just comes down to making sure that our teams are really doing a lot of discovery to understand where the biggest problem. That's are and that we're leaning into those solutions and then and then tying back with real return on investment feedback on the places in which we think that we can help our customers.

So, that there's a lot in there for our teams in terms of just investing in the right places and understanding the right problems, but I feel like we've been making a lot of progress there and been really proud of how the team is showing up in front of customers.

Perfect. And then at one follow up for Joe. If you think news with kind of more AI usage, etc. Is there any like, and you talked about break even already, but like is there anything we should be aware of in terms of gross margin implications from I assume they use GPUs, etc. that we need to consider?,Thank you.

No, Raimo, we feel pretty good about we do a lot of work during diligence on the tech side to understand the scalability of their platform, and that was one of the real positives and one of the big check the boxes for our CTO was that the way they built the back end infrastructure and how this is scaling with the AI considered and so we feel pretty good, Raimo that there's not been any major change in the in the cost structure of that business as this.

Okay, perfect. Thank you.

Thanks Raymo. Next question, please.

David Hynes, Canaccord Genuity

Hey guys, Ryan, two questions on news web. So I get your positioning as kind of command center for real-time action that makes a lot of sense.

I didn't hear year-over-years ay, does the news give you access to media sources that previously weren't being captured by the listening offering?

Yeah, DJ, it does.

Can you elaborate? Like what are those?

Yeah, I mean, think about, pretty much any of the media sources out there that we, we'd be consuming and looking at all the articles, the value prop of their platform, it takes a little bit of a different angle than we've taken on our listing, right? Our listening is more deep brand sentiment; our customers use it from a research perspective.

They're going back and looking at trends. News with full angle is consuming all the news and media and publications out there, identifying articles that are being created and then figuring out where there's gravity around those articles and what's trending.

This matters a lot for our customers because these articles can, as we've seen news breaking many different places over the last weeks and months and years, these things can turn into real viral moments that are either good or bad, right? On the good side, it could end up creating a lot of demand if you're a product company on the bad side, it can create a lot of crisis management.

And so they're looking at those media articles and then figuring out whether there's gravity around them in places like social to allow those PR and comms teams to figure out where they should be leaning in.

Yeah. Okay, got it. And then the second, the follow up to that, like what's the price point for this? I know it's an enterprise product, but like how much are people spending on it?

Yeah, it's an enterprise product. It's multiples bigger than our average field size. If you go to the, their customer case studies you'll see a lot of large enterprises that are that are working with them fits really nicely into our enterprise segment, but we think that we'll see some opportunities there certainly with agencies in the market as well.

Yeah. Perfect. Okay. Thank you.

Thank you. I will now turn the call over to Ryan Barretto for closing remarks.

Great, thank you very much, operator, and thanks for joining us tonight and for the thoughtful questions. I want to end by thanking our team for their continued dedication and effort. I'm really grateful for all you do for our customers and for our business. We look forward to spending more time with the rest of you later over the next quarter, and we will talk to you soon. Have a great night.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.