Sprout Social, Inc. (SPT) Earnings Call Transcript & Summary

Okay. Great. Well, great. Thanks so much, everyone, for joining today. We're really excited to have Joe Del Preto, CFO of Sprout Social; as well as Alex Kurtz, VP of Investor Relations and Corporate Development, to actually kick off the post keynotes part of the session. So you're one of the first sessions. So really happy to have you here, and thanks for coming.

Yes, happy to be here. Very excited.

Fantastic. So I guess maybe just to start, Joe, for those in the room who are a little bit less familiar with Sprout Social, what you're trying to build as a company, maybe just lay that out for people.

Yes. So I mean the original idea of Sprout and still holds true today, which is what the founders came to market with, which was similar to phone and e-mail, social was going to change the way brands and consumers interact. This was going to be a new communication channel. This is where people would go to learn about brands. This is where they would discover them. This is where they would complain about them. This is where they would say good things about them and then say, hey, by the way, this is going to be something as consumers were using social, but at some point, brands are going to have to find or need a platform that's going to allow them to interact with those consumers. And if you think about it today, we integrate with over 3 dozen networks. We consume about 1 billion messages a day. And this is the #1 place where consumers are going to learn about brands, right? This is -- I think over 50% of people, before they buy something, are checking social first. The average person on social spends 2.5 hours a day on social, which is kind of crazy. And so the idea there was like, hey, by the way, whether you're going there to -- if you're a brand, you want to market on social, you want to reach different consumers at different places, whether it's social customer care, whether it's all the data and analytics, which we'll get into, but basically, the overarching idea was this is going to be the next communication channel between brands and consumers.

Great. That's really helpful. And Joe, you've been at Sprout since 2017. Maybe just talk a little bit about your career journey. What led you to Sprout? And then what maybe -- I mean, you've been through a lot of different iterations of Sprout over your time at the company. And so maybe where are we today from your perspective? What have you learned about that throughout that journey?

Yes, for sure. So when I started at Sprout, it was about a $50 million revenue business. And so as you know, we're well over $400 million now. And so prior to Sprout, I spent most of my career at mid-stage fast-growing businesses like in the software technology services type of space, companies that were started out in the smaller end but then upscaling very large. I was at -- Sprout is the fourth company I've been at that was a private company that went public. So I had a lot of experience navigating that transition between, okay, when you're a small private company, you've got VC and PE money, and then you eventually become a public company and then running and working at these public companies for many years. And so what attracted me at Sprout, which is probably still the case today for me, which is when I met with Justyn and Aaron, 2 of the original co-founders and some of the smartest people I've ever met, most motivated people, probably the most humble people. And even Ryan Barretto, our current CEO, was there at the time as well and the same thing, like super impressive people but very low egos. That's really how Sprout has been built over the years. And that's really what's kept me there, and what really drew me to this company was like, hey, we're building something really cool. Was a big believer in the space. I was a believer that, hey, by the way, I do think social is going to change the way brands and consumers interact. And these -- the people I'm working with have -- they just have those characteristics. And so I think what gets me excited, to your question, about -- the same thing that got me excited when I started at Sprout is -- what gets me excited and why I'm still there is as consumers, we've been using social for a very long time, but as far as businesses adopting platforms like Sprout, we're still very, very early. And so we forget sometimes social moves very quickly on the consumer side, but for brands, there are very few businesses that have adopted a platform like Sprout. There's 200 million businesses on social. Us and our competitors maybe have 200,000 businesses total. So you think about the market opportunity. It's pretty massive, but we're still very early stage as far as where the market is from a maturity standpoint. So what gets me excited about Sprout is like we're still very early on this journey. And that's why I love staying at Sprout, and that's why I really enjoy what we're building here.

That's great. And then, Alex, you've joined relatively recently. So maybe talk about your career path. I know you've been at other public companies before. And what is different about Sprout from your perspective?

Yes. So joined, what, last October. So I was actually on the sell side for 15 years, covering software and other infrastructure companies. And then I helped take a company called HashiCorp public back in '21, which was quite an experience. And then so I had actually helped take Sprout public when I was at KeyBanc covering the stock. So I had known Joe and Ryan and Justyn years ago. So when the timing came together, it was a really good opportunity to jump onboard because, as Joe said, I think the opportunity ahead for social is very, very early. And so I think joining the company along with a great group of people was a no-brainer for me.

Okay. Fantastic. Before digging in further on the business, I just want to touch on the most recent quarter. You had acceleration in large customer adds, seems to be fitting with that upmarket strategy that you've been talking about for a number of quarters now, though forward-looking indicators did decelerate a bit. You attributed this to seasonality. Maybe just give us some more details on this dynamic and then what you're expecting from your customer base ahead of a -- what is supposed to be an enterprise-heavy renewal cycle in the second half.

Yes. So for those that aren't familiar, the business really grew up more down market, right? So a lot of month-to-month kind of contracts. And over the last 3 or 4 years, as we move more upmarket, we're moving away from more month to month to more annual and multiyear. But we still -- even on the enterprise side, they're still mostly annual deals. So what that means is we signed a lot of deals in Q3 and Q4. So we're still second half pretty heavy, but because we're not signing as many multiyear deals yet, those deals kind of burn off in the first couple of quarters. So some of the forward leading indicators like you maybe talked about like the cRPO and billings in the first couple of quarters always seem a little softer. But then when you get into the second half, when you get to the renewal of those deals from last year, we do a lot of business in Q3 and Q4, I think what you're going to see, Adam, is you'll see those metrics kind of turn back around, and they'll look really solid. We feel really good about those metrics looking really strong in the back half. And so that's kind of the dynamic that's going on our business, is we've got to start moving more to multiyear deals. We've moved away from month to month, which is great, more annual, but we need to start moving more into the multiyear deals as we get even more upmarket.

Okay. Got it. And then you mentioned sort of the 200 million businesses on social, and you mentioned that there's a massive gap between what you're serving and what that opportunity is. Maybe just talk a little bit about why that gap exists now that we're so far -- I mean, I remember doing my space so many years ago, and then it was Facebook and it was Instagram and TikTok. And I think a lot of investors have the question of what is going to cause this market to inflect from your perspective. How would you think about that?

There's a couple of things that are going on. If you think about -- over the last like, let's say, 10 years, most -- and let's just start with the marketing use case for example. Most marketing organizations have been built on traditional marketing strategies. And think about the people that are running those organizations. They did not grow up social first, right? They grew up in the SEO, SEM, offline advertising space. So a lot of these larger organizations, their whole team and everything built -- that they built their organization around has been built off of these more traditional, what we would call advertising approaches or marketing approaches. Now what's happening or what you're going to see happen is 5 to 7 years -- 5 to 10 years ago, when we were selling into a marketing organization, we were probably selling into like the social media team, which is probably the intern or the youngest person on the team 10 years ago, right? What you've seen over the last 10 years, and this is why we get excited over the next 5 years is now those folks are finally becoming like the VPs. Some of them have started becoming CMOs. And so we believe there's a couple of things going on in the world or in the market that's going to really help us. One is there's more and more folks that grew up social first. They're going to start becoming leaders, and they're starting to become leaders in the organization. And they recognize, for example, the importance of social to their strategy. Number two is the consumer behavior continues to shift, right? You've seen a lot of, even more recently, more and more search moving away from your traditional paid or SEO, SEM methods and more and more folks going to social to search. And a lot of that's caused the disruption of some of these AI companies. But what we believe, there's 2 things over the next 5 years that are going to really help us. One is the leaders of these organizations grew up social first, and then the consumer behavior continues to shift more and more away from the traditional kind of where they're finding brands. And so I think those 2 things will really help us. But a lot of these organizations, look at one of these large organizations, and you'd be surprised that they're very mature enterprises that have very, I would say, nascent social strategies even today, which would surprise you. But that's because the people on their teams just did not grow up in that kind of social environment.

Understood. No, that makes a lot of sense. And then I think it's a natural segue to the way the world is changing, AI. It almost feels like when we're talking about this gap and why it existed historically, it might not even matter in the next 5 to 10 years. And so talk about what your strategy is. What are you doing internally with AI? How are you embedding it in your product?

Yes. So I think the thing that gets us excited about the AI side of this for us is we're one of the very few -- there's probably a handful of companies that have access to the social networks' data and APIs, right? Like we have a pretty big moat around the industry because, like I said earlier, we integrate with over 3 dozen networks, 1 billion messages a day, and there's only a handful of us that have that access. And if you think about it, a lot of these folks that we integrate with are not going to be sharing data with any of the major AI players. For example, Google is not going to give all their YouTube data to Meta, right? Meta is not going to give all their data to OpenAI because they're all trying to build their own. And so we kind of sit as Switzerland. And so what does that mean for us? That means is that we then use -- for example, we use OpenAI, we use cloud, and we use that to run the -- with all the social data that we have, we can then take that and apply our own AI against it. And what does that mean? That means -- I'll take a very basic example. Let's say, historically, there was -- or let's say there's an issue brewing with a -- like a brand's got a customer service issue brewing somewhere. Let's say there's a product recall or people are getting sick. Historically, what happened is that would pop up and then there'd be all this internal communications that have to figure out what's going on. What we can do now, for example, is say, okay, we can automatically identify the situation. We see a bunch of support tickets coming up. We can then notify immediately the marketing organization that, hey, by the way, there's an issue blowing up on TikTok. There's an issue blowing up on Instagram. And at the same time to AI, we can then say, okay, by the way, here's suggested responses. Here's where you should deal with it. This is the part of the -- here's the part -- like, hey, this is a big deal on Instagram. It's -- we're not seeing this on Facebook. We're not seeing this on Reddit or maybe this is a completely Reddit issue. So what we can do is because we have all this data, we can very quickly, in that example, use AI to come across and tell you what you should be doing like real time versus, oh, by the way, I have to really be monitoring that on my own and understanding what's going on.

Yes. And I think it's a really good segue actually into NewsWhip, which you just acquired. Talk about what that adds for you. What -- in particular, what does it do that you weren't able to do before?

Yes. And maybe I'll let Alex, since Alex worked on that deal, kind of talk to the NewsWhip.

Yes. We're super excited about it. It's a really neat company. So we've always been getting feedback from our customers that we needed a real-time component to our listening products, right? So our listening products are really deep and wide. They capture a lot of data. They give very thematic, very detailed analysis and reporting to a customer. But to be able to identify a problem real time within minutes of something breaking on social, this is really where NewsWhip comes in. So they have a very wide net of -- they track a lot of different platforms with articles and press and media. And then they attach all the kind of social interactions to all that content, right? So they actually have a dashboard that can show you real time if an article is good or an article is bad. It can be predictive. So if you're in a PR and comms team, you can see within -- by the hour and by the minute if this thing is going to roll over or this thing is going to become a bigger issue for you and how to act against it. So that was something that was really -- in the UI is beautiful. So all of it really worked well for us. We saw that as a road map fit for us and like something that our reps could sell pretty quickly. So we've been pretty happy with the fit so far.

Yes. And I think one thing that -- we've seen a lot of momentum on to what Alex was hitting on, is this overlap between traditional journalism and social. So what you're seeing is you see these articles pop up in a local newspaper, for example, and then all of a sudden, they're trending very quickly on Instagram. They're trending really quickly on Reddit or vice versa. You now see journalists going into social to find articles. Like they'll go deep in Reddit and find something, and then they'll go write an article on it. What NewsWhip did, to Alex' point, is they -- it's the intersection of those 2 things. So they can say, oh, by the way, there's this local article that just got written in Kansas City. It's popping up on YouTube. You better deal with this right now because we have enough data and analytics to say this is going this way. And so it's really interesting because we think there's this overlap between all the traditional online media sources and social, and they're solving for that overlap.

And how are companies dealing with this like sort of crisis management prior to something like this?

Yes. So a lot of the times, if they weren't using a tool like NewsWhip, it would -- it was already after it blew up, right? Oh, by the way, this thing blew up on us, and we didn't even know it. And oh, by the way, now we're on our heels. And now we're trying to figure out where this problem is the biggest. What networks is it on? Is this just a traditional media issue? Or is this actually blowing up on social? And so historically, they would just be caught flat-footed and be reactive. What we're -- what NewsWhip will do is they'll get ahead of it for you and say, oh, by the way, you need to get ahead of this. And also like positively as well, you should go -- you can go to their website and see some of their customer stories. They have a really interesting customer story. Ford is one of their big clients, and they have a really positive scenario where there was this big power outage, and basically, the local folks were using their like electric F-150s to help provide power. And Ford was able to -- NewsWhip to understand this was happening, this really -- like this was happening like real time within minutes. And then they could go ahead and promote that across the neighborhoods and the locations because this was happening. So it's not just necessarily always negative or crisis. Sometimes it can be a very positive thing that they're trying to promote.

Okay. Understood. Really helpful. I think it's a really good segue into the question we've all been talking about for the last 1 to 2 months, which is this question of the death of software, right? And we've seen the frontier models, generative AI more broadly, just a lot of commentary around what applications they may be able to come in and take care of themselves and displace at lower cost, something I'm not saying like Sprout. But I'm just curious how you think about your defensibility and moat in a scenario where those companies do start to build out an application layer themselves.

Yes. I think, for us -- and I mentioned this a little earlier. I think the unique place we sit is the access to the actual data, right? It would be really hard for an AI company to come in and disrupt us because they don't have access to all the data, and they don't have access to the APIs. And most of the networks or all the networks over the last 5 years actually downsized the number of folks that they're giving the data to for a couple of reasons. One is GDPR issues, privacy issues. Number two is they don't want people building their own very proprietary tools off of their social data that they believe is like -- remember, they use that for all their paid targeting, and like that's how they run their business. They've given it to us because they're like, okay, Sprout, you're 1 of the 4, 5 companies that is kind of agnostic. We're not trying to, for example, monetize that data directly. We're providing it to our customers who are their advertisers. And so one of the reasons we feel like we've got a pretty big moat around the kind of the AI -- the new AI companies is they're just not going to have access to the data.

I would just add, we also have 10-plus years of working with really large sets of data across social media, right, that can't be replicated by an AI tool like in a matter of days, right? So petabytes and petabytes of data, 1 billion messages a day, all this stuff that we've been normalizing and building into all of our data warehousing inside of Sprout. We think there's a lot of value in that and I think really strong moat to the business because we're allowing customers to interact with that data that's very rich, very deep with a lot of context to it that we think is pretty proprietary.

Okay. And maybe just give -- for investors who might not be as familiar, just maybe a little bit more detailed breakdown of what the difference is of a random company that wants to use an API to get certain low levels of Facebook or X data or something like that versus what you have access to? What's the fundamental difference?

The fundamental difference is like if you call up, for example, Meta tomorrow and say I want to access, the full firehose of all your data, they're just not going to do that. They won't even pick up the phone, right? They're going to be like, okay, what security do you have. How many customers do you have? Are my advertisers -- like their whole thing is are my advertisers actually using your platform or not. And so the problem is because we have almost 30,000 customers in over 100 countries, we're at a size and scale now where if you're a small company starting up and you don't have any size or scale, they're not even going to pick up the phone. And then number two is like what's your security around all this data information. What are you actually doing with it? Are you actually repackaging and selling it? Because that's where all the networks have really clamped down tremendously, is like, hey, if you're just repackaging my data and selling it out and you're not actually helping facilitate their advertisers -- remember, all our customers are their advertisers. And so there's a real synergy between what we're trying to do for them versus what someone else might be trying to do. And so because of that, you couldn't even call them up to get the access to the data at this point.

Okay. That's really, really helpful. Very helpful color there. Want to dig in on the business. And I know we've talked a lot about AI, but let's go back to the traditional metrics and traditional life cycle. So just in terms of the enterprises, what do those conversations look like? Where do you land a customer? And then what does that upsell/cross-sell process look like when we think about net retention expansion, et cetera?

Yes. So that's evolved over time. I would say if you went back 4 or 5 years ago, when you were going into these enterprises, you might land with like the social media team. Maybe there were a couple of people, and you kind of started in a traditional kind of marketing use case. Oh, by the way, I'm on -- 95% of our customers are on fiber or more networks. So I'm on a bunch of different networks, and I've got to understand -- like I want to make sure I'm engaging with the right audience at the right time of day on these different networks. So it's the old -- like the original marketing use case. Now what happens is, as that evolved over time, that could still be the core use case, but when you're going into these organizations, it's probably -- they probably have a whole social -- if they're sophisticated enough where they're calling us up. So I'm getting past, like I said earlier, like the sophistication level. So now I'm going into customers that are actually -- where social actually is their strategy, right? They have the resources. They have like the intention that they're -- like social is strategic to them. They'll have a team of marketers usually. But sometimes now, Adam, we'll go in there and it might be a customer care use case. Oh, by the way, we're getting flooded with -- if they do a really good job on social, most people these days aren't going to e-mail or the 1-800 number. They're usually going to social. And so sometimes now they'll come in the front door saying, hey, by the way, I've got thousands of thousands of support tickets coming in on social. I need help. So sometimes it could be support. Sometimes it could be marketing. But what's happening now is it's such a decentralized buying process in a lot of these large organizations, so back to your question. So like, for example, Honda is one of our clients. They have -- there's 32 different divisions at Honda. We landed our first division like 1.5 years ago, and now we're trying to find our way across the rest of Honda. So usually, what happens is on these large enterprises broken down by brand or by geo, and then if we know we can get in, in one of those brands or geos, we've gone through a procurement, we've got the MSA signed, we've gotten through the finance work, then we can go out -- well, our team does. Your thing about expansion is we'll try to go out across the different parts of the organization or then we might come back with some of our additional modules that we have, social listening, NewsWhip, influencer marketing, which we haven't talked about. So then what we'll do is we'll expand not only across the different business units but also with some of our products. University is -- higher ed is a great one. University is a huge vertical for us. And we might land at like Ohio State University in like the School of Music. And then we'll go into the business school and the law school because a lot of these organizations are -- there's not a centralized budget. And so that's usually how we expand as we can get in there and then go across different parts of the org.

Okay. Very helpful. And then you've been a couple of years now into really prioritizing that enterprise motion. And I remember when we were first talking about it when that shift -- we wouldn't even have to call it a shift. But as you started to focus on that piece of the business more, started to really take shape, I remember you telling me like there's a lot we have to learn as we go through and we do this at a much bigger scale. So maybe talk about what you've learned about the enterprise sales motion, good and bad.

Yes, yes. I'd say what we've learned is a couple of things. One is, like I said earlier, like there's definitely way more process as it relates to procurement and finance versus when you're down market, the practitioner can probably make the decision and buy that thing pretty quickly. As you move upmarket, the folks that are in the software every day, they want the software, but then they have to go convince -- they might have to convince the more senior executives in the team. So what we've realized is when we go to these accounts -- and this is pretty common for most enterprise sales, which is we've got to make sure we've got the CMO bought in or whoever the head of customer support. Whoever is ultimately the decision-maker, we have to make sure they understand the problems we're solving. So we have to do more value selling than like feature selling. When you're down market, it's like, okay, a handful of features probably make the difference. When you get upmarket, it's like, okay, make sure you understand the problem you're trying to solve and make sure you understand like what's the return on this investment they're going to make. And so it's a much -- like you have to have enterprise sales reps that understand you're solving a much bigger problem and not just trying to trade off this feature for that feature, which is more of like kind of probably the hand-to-hand combat that you get more down market. So we've really learned that you've got to have that type of enterprise sales rep that understands how to navigate that. And so I think, which is more on the bad side, which is you got to figure that out, right? You don't -- like that's part of these organizations, is -- and then you also have to figure out in the space we're in, to what I was saying earlier, how mature is it. Like how much are they bought in the social? Do they already have -- do they have one of our competitors? Because if they have one of our competitors, then we know that they've already allocated budget to this. And then we can go hard at it. We don't have to have that discussion of like, oh, by the way, is this something you already have in your budget or not, especially in today's buying environment. And so we also have to try to figure that out as well as making sure we understand where they are from a financial standpoint.

And where are you in that journey of, hey, we now understand we have to go to the -- help the CMO understand why they need this from a value perspective? I know you're not going to be obviously having a discussion with every CMO. But how do you feel about where you are today in that part of the buying situation?

Yes, I think we're getting a lot better. I think we have room to grow there. I think one thing -- what we're realizing is the amount of data and if you look at some of the analytics and the data we can provide with influencer marketing information and some of the social listening and some of the NewsWhip data, what we're finding is we can package up a lot of these reports and then we can deliver them to the CMOs. Hey, by the way, did you know this was happening with your brand? Did you understand this was the sentiment? So usually, what we find with the CMOs and how to get in front of them more is with the data and reports, right? Like the day-to-day stuff, yes, the practitioners need to be doing that. But what they really care about is like what's the report if I'm a CMO that I can show my CEO. So we try to package up for the CMO is like here's a 1- or 2-page deck that you could deliver to your CEO to tell you the impact that social is having on the organization because that's what they really care about. So that's what we try to do as we're moving more upmarket, but we're still, I would say, pretty early in that journey.

Okay. That's great. And then just getting into the details around the growth algorithm. When you think about the mix of net new customers versus expansion versus seat additions, how should we think about that breakdown versus maybe what it's been historically? And where do you think there's maybe the most upside levers as you go into the next couple of years?

I mean over the next couple of years, the new logos is still going to be the bigger driver of growth and expansion. And most of it comes down to -- is what we talked about earlier, which is there's just a huge amount of like TAM out there that's just like we go in a lot of these businesses and they just don't have a platform at all. So like new logos will still be more than half of the way we grow over the next couple of years. But I do think as we get more as a more mature software company, as you know, once you get to a certain size and scale, then I do think the expansion kind of then overtakes that, right? Like, okay, you get to a point where you can go into these organizations and really expand across the organization, but in the near term, it's definitely going to be more new logos just because it's a pretty big market. And we serve SMB up into enterprise, and so if you get below the high-end enterprise, it's a lot of, what I would say, folks that don't have a platform like Sprout or maybe they have a couple like point solutions, and we can help consolidate those point solutions. And so that, to me, is what gets me excited, is that there's this huge opportunity on the new logo side. And although we are definitely focused, don't get me wrong, on expansion and the team is focused on that, a lot of what we want to make sure we're capturing is this broader market that's out there.

Okay. Very helpful. And I think that's a good segue into competition, right? And I know you have one big competitor upmarket. There are a number of them down market. How do you see yourself competing with those different players today?

Yes. So when we get upmarket, I think one of the things that kind of separates us from our main competitors upmarket is all 30,000 of our customers are on a single code base. And so what that means is when the -- especially in a space where the networks move very quickly and there's API changes happening all the time. There's new features rolling out all the time. So when one of those networks makes a change, for example, we apply to all 30,000 customers, get that change the next day. Most of our competitors upmarket were built over very -- either via acquisition or built very siloed experiences to solve their every use case. So like, for example -- Instagram makes a change for example. It might take them a month or 2 to get that change because they have to go call professional services. Our competitors upmarket are very heavy professional services, 9 to 12 implementations, a lot of hands-on to be able to get something up and running. For us, it does -- like the up and running is within days and weeks. Like we're the only one upmarket that even in these large enterprises, you can go try our product. You can use all -- you can add dozens of users. You can use all the advanced features, and you can actually make sure the product works the way you want it to before you buy it, where none of our competitors can do that. And so the biggest differentiator upmarket is that ease of use and the fact that all of the different things sit together. And like I mentioned earlier, in social, it's very important, for example, like, hey, if there's an issue blowing up on the care side, I want to real time be able to make sure my marketing team knows that right away. And in our platform, that's very seamless because, like I said, it's all on the same code base and the marketing can instantly understand what's going on in the care side and vice versa. And so that, when you get into these large enterprises, really matters within these organizations. So I think that's probably the biggest advantage we have when we go upmarket. When we go down market, the thing is, for us, especially down market is a lot of the down market players are solving for maybe a couple of networks, 1 or 2 networks. They don't take all the data like we do in the back end and create it all into one single inbox. So let's say, you're on 5 or more networks and you've got all these different networks you're trying to deal with, a lot of our competitors have siloed those networks in different experiences down market because it's much easier to do that, where we're aggregating that data. So the biggest advantage we have down market especially is that we aggregate all that information for you. And so it's just much easier. Like if you're a 1-person shop down market or you only have 2 users, you can do all that in Sprout. It becomes really hard to do that with our competitors because their software is much harder to use if you're on more than a couple of networks. If you're only on 1 or 2 networks, probably don't need Sprout. And so usually, like if we're down market and we're going against one of our competitors down market and the customer only is on a couple of networks and they want to pay what Sprout costs, we're also more expensive down market, then they're probably going to go with one of our low-cost competitors.

Yes. No, that makes total sense. And then I know you've announced sort of an increase in sales investments in fiscal '25. Could you just maybe talk about the interplay between what is the right -- and you don't have to give a number, but just the right way to think about the quota you want your carriers to hit versus the actual capacity of sales that you need? And what makes you make the decision to say we need more sales capacity versus not? And I think this is just a question coming from the perspective of what -- how do you think about margin progression and margin expansion as you grow revenue?

Yes. So the -- we're really big internally on the efficiency of the sales and marketing. We measure it on a weekly, monthly, quarterly basis pretty aggressively. And a lot of that is because we grew up and still a lot of -- part of this is all driven inbound. We have so much data and information. We understand, for example, SMB up into the enterprise. We understand after 3 months, how well -- how should this rep be performing after 6 months, after 9 months, after 12 months. We have a lot of hits. We understand the success -- we can tell very early on whether or not a rep or an AE is going to be successful if they're on the right trajectory given how long we've been doing this. Like -- and so what we do internally is when we see those metrics moving in the right direction and we see, oh, by the way, these folks are ramping faster, there's enough demand, then we -- and normally, what we do is we hire behind that, right? Because we're using the data and the information to drive the way we hire folks depending on what we're seeing on the customer side. And that's because -- like I said, a lot of that is inbound. So we get folks in the trial even up in the enterprise. We understand like, hey, how are these sales cycles maturing? What's the level of SDRs and BDRs we need. And so internally, it's all driven by the data and the information. We're not just, for example, hiring a bunch of AEs, account executives, and saying, okay, we hope you're successful.

Yes, that's crazy.

It's like we just never been run that way. It's -- we're always following the data.

Okay. No, that's great. And then just spend a couple of minutes on influencer marketing with the Tagger product that's now integrated. How is that going? And what's the value prop that your customers are seeing there now that's maybe a little bit different than when you first bought Tagger?

Yes. What I would say -- well, first of all, it's our fastest-growing product granted it's off a smaller base. We believe this is where like a lot of buying decisions are moving. I think already today, I think 49% of consumers say that they were influenced by a creator before they bought a product, right? And let's just think about the demographics of who the consumers are. As that changes, I think creators are becoming more and more important. And what our influencer marketing product did that's different than the other ones is it allows brands to find all the micro influencers, the smaller influencers. Like the large influencers, like the big celebrities, like that, the ROI on that is not very strong. What these brands want to understand is who are all the smaller influencers in these different areas, in these different geos. Like, let's say, I'm a big golfer. Who are the local folks in my area? Who do I follow? And what influencer -- what Tagger product allows you to do is it allows you to search for those, type in any search what you want. It brings up all their videos. You can see their content. You can see what their engagement is. You can actually see how much they charge because we keep all of that information. And then you could also -- we launched recently all this brand safety. So let's say, for example, I'm looking for -- I'm in the kids toy business, and I want to search for an influencer. I can put in certain safety words say, hey, have they ever talked about alcohol. Do they do have anything about drugs? Like you can basically make sure that you're not going to hire some creator -- a lot of brands are worried about hiring a creator that's got some like bad history of videos they've done. What we've done is we can get all their videos and say, hey, this person is a very good brand match for you. And so that's really one of the powers of the platform, is the searchability is a big deal for them. And then it allows them to run their campaigns and do that all as well, gives you all the analytics, can tell you like the return on this investment on this creator versus this creator. And so we feel like there's a huge opportunity in this space. We've also seen what surprised us is it makes a lot of sense for like your typical like retail brand. But what we found is we have like hospital groups that use us to run like their not-for-profit campaigns using influence. We've seen like big real estate companies that are opening up buildings and they want to have -- like it's amazing the industries that we've seen this product resonate with is more than what we originally thought like we thought. It doesn't go across all these other verticals, but it's pretty impressive, the different verticals that you'll see folks buying this product in.

Yes. That's really helpful. I know we're cognizant of time. I want to just quickly touch on the macro. I know you mentioned elongated sales cycles, that sort of thing. How is that impacting your business? What are you seeing out in the market? And as we think about future years, what are you hoping to see to help you reaccelerate growth?

Yes. We haven't -- the macro hasn't changed that much over the last probably 3 or 4 quarters. So what we saw probably mid last year coming through today is we've been operating in a pretty consistent macro environment. Most of the impact we're seeing is on the new business side when there's -- what I said earlier, when there's not a budget already allocated, right? Like if there's a budget, they have our competitors, they're invested, we're seeing a lot of success. In the tougher macro now it's like, okay, we've got to go create new budget for this product, right? We don't have something already in-house. And now I've got to go internally and make sure that I can justify like spending the next new dollar. That's probably the pressure we see on the macro, and that hasn't changed a lot. So no major change from our standpoint.

Okay. Great. And then for both of you, just in the last 15 seconds here, what are you both most excited about over the next year or 2 with Sprout?

Go ahead, Alex.

I just think everything we're doing with data, right? I think the NewsWhip acquisition, the existing listing capabilities and being able to execute against our large data sets, I think, is pretty exciting.

Yes. I think the one thing I'll add to that is I do think there's a shift happening. More and more consumers are going to social for search. And I think this trend is going to start to continue. We've got customers coming to us and saying, hey, by the way, the same search words I used to see in Google, I'm now seeing in YouTube. I'm now seeing it in Instagram. And so I do think there's this shift happening because there are already a lot of consumers going to social and learning about brands, but I think you're going to see more and more move that way.

Fantastic. Joe, Alex, thanks so much for being here. Appreciate it. Thank you.