Sprout Social, Inc. (NASDAQ:SPT) Q3 2023 Earnings Call Transcript

I’m certain we’ll have more to share around some of those specific releases as we get into 2024. I would say that the impact that our customers that have adopted some of these early features have been able to make is certainly improving their social efforts and their social strategy. I think the areas where we’re going to start to see really big customer value unlocked are some of the things that are in the works now, some of the things that are coming down the road. But tons of excitement, tons of interest by the customers, a lot of really positive feedback with the customers that we’ve shared sort of more depth on our AI vision, reflecting back to a bit of the strategy that we talked about in Investor Day. That’s something that’s been resonating really, really well with our customers across segments, but in particular in the enterprise.

And it will see a lot of more interest build heading into next year.

Joe Del Preto: And I might just add onto that that the way that the product team has approached this I think is really impressive, but clearly similar to everything that we’ve done in Sprout, we want this to be approachable and elegant and fit within the workflow. And that’s part of the feedback we get from customers as well, implementing these AI features just fits within the workflow. They don’t have to change to get the benefits from it. And to Justyn’s point, the red map that’s coming is really exciting. Some of the stuff that we’ve done on care is a great example of how we’re changing the game for our customers. You think about the volume of customer feedback, a customer care feedback that you get on social, those social teams typically are already small and there’s a lot of volume.

And our product is enabling them to prioritize where they should be spending time because we’ve given them the ability to see sentiment in their customer care inbox. We’ve allowed them to respond in a way that’s going to be better for the customer, a faster for the customer through our AI assist functionality. So all these things are starting to take shape right now. And the initial feedback to Justyn’s point’s been great and we see a lot more in the future here.

Robert Morelli: Got it, appreciate the color. Congrats on the quarter.

Joe Del Preto: Thank you.

Operator: Our next question comes from the line of Rob Oliver with Baird. Please go ahead.

Robert Oliver: Great, good evening guys. Thanks for taking my question. I wanted to follow-up on the question earlier or touch on Tagger. I guess two parts to the question. One is what sort of an impact are you seeing Tagger having on these large customer wins over 50K and over 200K? And then the second part of the question is what, obviously there’s a strategic element to the acquisition here and just be curious to hear any color around the extent that this improves your competitive position with the upper end of mid-market and enterprise in some of these larger deals given the sort of depth and breadth that this adds to your product and portfolio? Appreciate it.

Joe Del Preto: Yes, thanks Rob. So I think on the first piece, just in terms of large deal execution and opportunity, I think we’re still early. We see a lot of potential and opportunity and we shared a little bit before that Tagger so far has performed in a short period of time that they’ve been part of the company. So, we’re very excited about what we’ve seen both in terms of being ahead for the quarter, as well as the pipeline that we’re developing. And certainly, we see this in the mid-market and enterprise. That was a huge part of our thesis when acquiring Tagger was that they had great progress and success already in the enterprise place, where we saw them playing really nicely with Sprout. So, we continue to see that.

We’re seeing in the pipeline that’s being developed and I think we’ll have more specific stories to share there on the success that we’re seeing. From a competitive positioning perspective, absolutely we do believe that this is going to have really positive impacts on our ability to win against other competitors within the space to really differentiate and to increase our ACVs in the deals that we’re in. And when we looked around at the market and looked at the opportunity, we didn’t see anybody else, who had anything like Tagger. And when we think about the combination of Tagger and the core Sprout product, adds tremendous value for customers. If you just think about it today, on the core Sprout side, that organic that they were thinking about those customers today, and the publishing and engagement and listening and analytics really important.

And now, this influence on marketing pieces and other investment that they’re thinking about. You can have all that, in one place now through one company. So that is certainly going to be a major differentiator for us and the teams are doing a great job, getting enabled and taking it to market today. And we expect to have more stories for you in future quarters on the progress.

Robert Oliver: Great, looking forward to it. Thanks, Ryan. Thanks, team. appreciate it.

Ryan Barretto: Thank you.

Operator: Our next question comes from the line of Michael Turits with KeyBanc. Please go ahead.

Michael Vidovic: Hi, this is Michael Vidovic on for Michael Turits and thanks for taking my question here. Just wanted to follow up on the tagger contribution question. Could you point to the level of ARR contribution you’d expect for the fourth quarter and full-year ’23 or just not at this time?

Joe Del Preto: Yes, Michael. not this time, I think that the data point, like I said earlier, the one that we were getting out is the revenue that we expected to generate from that. We talked about the $3 million over the last five months and more ahead of that pace. And from there, you can kind of probably back into the ARR number. but similar to last quarter, we’re not giving out specific guidance on the Tagger ARR.

Michael Vidovic: Okay. And then on the Salesforce opportunity, are you landing material number of Salesforce customers not in Social Studio today? Or is that something you’d expect to pick up maybe starting in 2025 here?

Joe Del Preto: We are starting to and we expect to see more and more of those. That’s the long tail of the opportunity that we have in front of us. I think what’s also been really exciting is, some of these deals that we’ve already closed from a Social Studio perspective, in some cases, where we’re only using one part of the platform and it might have been more on the marketing side. And then as we introduced our integration to the service cloud, all of a sudden you have this opportunity that goes beyond marketing into social customer care and they’re starting to use the service cloud integration. And as some of the logos that we talked about this quarters are great examples of those things happening today. So, it’s growing and we expect to see more of it going into next year and beyond.

Michael Vidovic: Great, thank you. I appreciate it.

Operator: Our next question comes from the line of Fiona Hynes with Morgan Stanley. Please go ahead.