Sprout Social, Inc. (NASDAQ:SPT) reported its financial results for the first quarter of 2024, missing revenue targets but expressing confidence in its long-term strategy. The company announced revenue of $96.8 million, a 29% increase year-over-year, and a non-GAAP operating income of $6.0 million. Despite the shortfall, Sprout Social detailed a revised go-to-market strategy aimed at accelerating its path to $1 billion in revenue, with a focus on larger, more sophisticated customers and improved sales productivity. The company also announced the promotion of Ryan Barretto to CEO and a shift away from reporting certain metrics like ARR, customer count, and logo numbers, which it no longer deems reflective of its business.
Key Takeaways
- Sprout Social's Q1 revenue hit $96.8 million, a 29% rise from the previous year, with subscription revenue at $95.8 million.
- Non-GAAP operating income reached $6.0 million, with a margin of 6.2%.
- Q2 revenue is projected between $98.5 million and $98.6 million, while full-year guidance is adjusted to $405.0 million to $406.0 million.
- The company no longer discloses ARR, total customer count, or logo numbers.
- Sprout Social is realigning its go-to-market strategy to focus on larger and more sophisticated customers, with an emphasis on enterprise mix and premium modules.
- The company remains optimistic about overcoming challenges and achieving significant growth in the latter half of 2024.
Company Outlook
- Sprout Social expects to see accelerating new business and expansion momentum.
- The company is focusing on raising the bar on its competitive advantages.
- Sprout Social is confident in its market position and the momentum for a successful second half of 2024.
- The business is becoming more weighted towards Q3 and Q4, with Q1 being the low point.
Bearish Highlights
- The company did not meet its revenue goals for the quarter due to customer mix shifts and execution headwinds.
- Salesforce (NYSE:CRM) partner revenue accounted for less than 15% of new business in 2023 and contributed about 3% to total revenue growth.
- Sales cycles are lengthening as the company targets larger opportunities.
Bullish Highlights
- Large customer growth, ACV growth, and rapid growth in RPO and cRPO were highlighted.
- Sprout Social sees a strong opportunity for future growth despite Salesforce partnership revenue being a small fraction of new business.
- Positive feedback on customer care solution and Tagger product indicates upsell potential.
Misses
- The company is rebuilding its opportunity pipeline after not having enough built to close in Q1.
- Sprout Social is deprioritizing certain immediate revenue opportunities that don't align with their long-term strategic goals.
Q&A Highlights
- The company discussed the impact of regulatory changes surrounding TikTok, stating they are prepared to adapt to changes across social networks.
- Sprout Social emphasized their positive relationship with Salesforce and the opportunities beyond Social Studio.
- The company reassured investors of a strong pipeline up 37% in Q1 and gross retention performing well.
Sprout Social's first quarter of 2024 may have seen them miss revenue targets, but the company's revised outlook and strategic adjustments point toward a confident push for future growth. With a focus on larger, more sophisticated customers and a clear path to $1 billion in revenue, Sprout Social is adapting to market demands and setting the stage for a stronger performance in the upcoming quarters.
InvestingPro Insights
Sprout Social, Inc. (SPT) has demonstrated a robust gross profit margin of 77.14% in the last twelve months as of Q1 2023, signaling its ability to maintain profitability on its services. This strength is particularly noteworthy as the company revises its market strategy to target larger clients and enhance sales productivity. The impressive gross profit margins are a testament to the company's efficient cost management and high-value product offerings, which may bode well for its ambitious revenue goals.
While the company's strategic pivot seems promising, an InvestingPro Tip suggests that the stock is currently in oversold territory, which could indicate a potential rebound opportunity for investors. The RSI, or Relative Strength Index, is a momentum oscillator that measures the speed and change of price movements, and an oversold condition typically suggests that a security may be undervalued and due for a positive correction.
Despite the recent performance, Sprout Social's market capitalization stands at a solid $2.72 billion, and analysts predict the company will be profitable this year, according to another InvestingPro Tip. This forecast aligns with Sprout Social's own confidence in its market position and its ability to achieve significant growth in the second half of 2024.
InvestingPro offers a wealth of additional tips, with 9 more insights available to help investors make informed decisions about Sprout Social. Interested readers can access these valuable tips by visiting https://www.investing.com/pro/SPT and can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Sprout Social Inc (SPT) Q1 2024:
Operator: Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Jason Rechel, Vice President of Investor Relations. Please go ahead.
Jason Rechel: Thank you, operator. Welcome to Sprout Social’s first quarter 2024 earnings call. We’ll be discussing the results announced in our press release issued after the market closed today, and have also released an updated investor presentation which can be found on our website. With me are; Sprout Social’s CEO, Justyn Howard; CFO, Joe Del Preto; and President, Ryan Barretto. 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 and business plans and objectives, and 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 risks and uncertainties that could cause actual results to differ materially. For a discussion of the risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the fiscal year ended December 31st, 2023, filed on February 23rd, 2024, as well as any future reports that we file with the SEC. During the call, we’ll discuss non-GAAP financial measures which are not prepared in accordance with Generally Accepted Accounting Principles. Definitions of these non-GAAP financial measures, along with reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings press release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com. And with that, let me turn the call over to Justin. Justin?
Justyn Howard: Thank you, Jason and thank you to everyone for joining us. We always appreciate your time. I’m excited to get us started today by expanding on our news to promote Ryan Barretto to CEO, before handing things over to him. Ryan and I have had an incredible partnership over the past eight years, but it only took me a few of those years to recognize that he should and would become our CEO. Several years ago, we both agreed and committed that it didn’t matter which role either of us were in, as long as we put Sprout in the best position to win and that we were in it together. That’s why we’re so excited about the natural progression of this transition. Throughout our time together, Ryan has often had the biggest impact in the areas typically aligned with the CEO role, and I’ve often made my biggest impact when I can think deeply about our biggest opportunities, get forensic with our data and push our product strategy forward. Over time and as we’ve grown, the role of the CEO has changed and naturally became more aligned with areas where Ryan is exceptional. The same skills and perspective that allowed me to architect our success over the past 14 years aren’t the same things required of the role today. And conversely, I’ve had far less time for the areas where I can bring exponential value to the business. Together, we’re an incredible team. Adjusting the positions we play to match where we’re heading gives us the opportunity to add significantly more value and move faster in capturing the opportunity ahead of us. In a moment, I will turn it over to Ryan to talk about how we intend to make that happen. But first, I want to say thank you and congratulations to Ryan. As a Founder, Board Member, team member and shareholder, I am as excited as I’ve ever been about the opportunity in front of us with you leading this incredible team.
Ryan Barretto: Thank you, Justyn. I’m deeply grateful for this opportunity. It’s been an amazing honor to work alongside Justyn for the last eight years, building this team and business together. Getting the opportunity to step into the CEO role with his continued partnership and support creates an amazing foundation for me and for Sprout. I want to thank the Sprout Board of Directors for your ongoing trust, my team for putting me in this position, our shareholders for your commitment and our customers for your advocacy, and for helping us get better every day. I want to be really clear upfront on my goals and aspirations for this team. We are here to win. This will be a winner take most market and I believe Sprout is best positioned to be that winner in a growing market. We have the number one product and software, an award winning culture, and the team most well-known for driving customer success. I’m going to be deeply focused on raising the bar on all of these competitive advantages. We intend to drive excellence at everything we do and to deliver outsized value for our employees, customers and shareholders along the way. Our team can expect me to lead from the front as we work to deliver here. Let’s start with Q1 results. We had a strong quarter on many dimensions, but ultimately didn’t meet our revenue goals. After a record back half of 2023, where the majority of our focus was deeply weighted on closing deals versus creating new pipeline, we walked into 2024 with a different business. We’re now enterprise-heavy and the linearity of our business has changed materially, which affects our revenue recognition and planning. Our months, quarters and years are now more heavily weighted to traditional enterprise buying cycles. We underestimated the magnitude of this shift and the quickly changing dynamics in our customer mix. On top of this, we made several important strategic decisions heading into Q1, such as building new vertical sales teams, accelerating promotions in our midmarket and enterprise teams, adjusting our account coverage model and prioritizing Tagger enablement for all of our customer-facing teams. We thought we could manage these changes without disruption, but they collectively set us back. I believe each of these moves support our long-term strategy and better positions us for the future, but in the short-term there were execution headwinds that were self-induced. Although Q1 net new revenue added was less than Q1 of last year and not where we expected it to be, there was a lot of important learning, progress and momentum coming out of this process. I own this and fully expect us to be much better going forward. Our go-to-market order is now better positioned for scalable growth. Our total pipeline increased 37% year-over-year, premium module attach rates continue to rapidly increase and our gross retention is over-performing plan, each positioning Sprout for another strong annual performance. Tagger ARR meaningfully accelerated in growth and is seamlessly folding into our platform strategy and we expect that our Q1 added new ARR will be our low watermark with strong sequential growth over the year. Shifting to the go-forward. Entering 2023, we took an important strategic step of deprioritizing the very low end and unproductive parts of our business. Coming into 2024, with that business largely cycled out, we have new clarity on where to optimize and redraw our teams and go-to-market efforts to accelerate our path to $1 billion in revenue. While we believe this is a powerful unlock for both our growth and efficiency, the benefits will not materialize overnight. We believe that redrawing our go-to-market model around the most successful cohorts is a massive unlock to our future potential. We know that our best customer cohorts are our most efficient customers to acquire. They are the most efficient expansion opportunities, and they are the least likely to cancel, each by orders of magnitude. We will invest aggressively against these cohorts with improved economic efficiency. At the same time, we plan to de-invest in the parts of the market where these attributes don’t exist. Even if this results in walking away from immediate revenue. We’re already beginning to realize the benefits to gross retention from our 2023 model changes being nicely ahead of Q1 plan here, and we believe that by prioritizing the market cohorts where we can predict future economic potential and get surgical with where we will allocate our time, we can scale a durable, efficient upmarket land-and-expand motion. We believe the results will be higher future NDR and improved efficiency across the entire organization. As we all know with compounding SaaS models, our Q1 performance does flow through the year from a revenue perspective. With the downward pressure from Q1 revenue flowing through, the changing linearity of the business and the need to create space as we execute on our go-to-market changes, I needed to tighten up our forecast to ensure we deliver on our commitments. The underlying reality is that our business today is orders of magnitude different from the business you knew at the time of our IPO. Once a completely inbound, highly transactional model, we’re now enterprise-heavy and are constructed that way from products to customer success. Because of this, we should be measured on different metrics that properly align to this current state. As I transition into the CEO role, I want to ensure that we move forward with this in mind. We’ve told you that ARR growth should have a similar trajectory to revenue growth, while metrics like RPO and cRPO are more appropriate indicators of performance trends for our business. As such, we’ll no longer be disclosing ARR on a go-forward basis, an approach that is consistent with enterprise SaaS companies in our peer set, including our direct competitors. We’ve been consistently sharing for four years that we don’t measure our success in total logos or total customer count, and our sales team are not measured or compensated on these metrics. We’re now at a point where a single large enterprise customer is worth more than hundreds of smaller customers. With enterprise being the priority, total logo count is not a key performance indicator of our current business. As such, we’ll no longer be disclosing total customer count. Further, with the goal of transparency, we had previously disclosed logo numbers and contributions from our partner channel. However, we recognize that this has actually served as more of a distraction than a helpful data point, so we won’t be continuing that practice. The idea that all of our growth comes from temporal partner contributions is unfounded, so I want to ensure that everyone has the same understanding and more clarity into the actual data. Salesforce partner revenue, including both Social Studio and non-Social Studio business, accounted for slightly less than 15% of our new business in 2023 and less in 2022. This amounts to a roughly 3% contribution to our total 2023 revenue growth, which I believe is significantly less than many may have previously assumed. We value our partnership with Salesforce and other key partners and we see a strong opportunity for future growth that powers through a 3% potential headwind in 2025, especially given all the opportunities we are creating within our ecosystem. We have a tremendous opportunity in front of us and I’m excited about the innovation and change that we are driving the business to deliver on our goals. We’re aligning ourselves with the best and fastest growing cohorts of our market, which you can see in our 44% large customer growth, 41% ACV growth and ongoing rapid growth in RPO and cRPO. We expect we’re going to see both accelerating new business, accelerating expansion momentum and improving efficiency over a multiyear period of time as we build on our product leadership, world-class culture and history of over delivering for our customers every day. I’m excited to bring Justyn and our Founders’ original vision to life as Sprout defines how businesses can operationalize social. And with that, I’ll turn it over to Joe. Joe?
Joe Del Preto: Thanks, Ryan. I’ll now run through our financial results and guidance. Revenue for the fourth quarter was $96.8 million, representing 29% year-over-year growth. Subscription revenue was $95.8 million, up 28% year-over-year. Services revenue was $1.0 million, up 112% year-over-year. Despite underestimating the impact of the strategic changes Ryan outlined earlier, we continue to deliver top quartile growth in SaaS. The number of customers contributing more than $10,000 in ARR grew 24% from a year ago. The number of customers contributing more than $50,000 in ARR grew 44% from a year ago. ARR growth approximated subscription revenue growth in Q1, which underperformed our plan for the reasons Ryan outlined. We have materially fewer net customer losses compared with the back half of 2023, consistent with the early benefits from our model change. You should think about Q1 ARR be even smaller as a percentage of the full year compared with prior periods. And you should continue to think about the rate of growth of total customer base improving throughout 2024. Q1 ACV was $12,892, up 41% year-over-year. As we lapped our first full quarter of new business pricing, new business ACV again grew double-digits year-over-year, and we expect strong ACV growth to continue over the medium-term driven by rapidly shifting enterprise mix, strengthening premium module attach rates, influencer marketing and customer care. In Q1, non-GAAP gross profit was $76.0 million, representing a non-GAAP gross margin of 78.5%, up 30 basis points from a year ago. Non-GAAP sales and marketing expenses for Q1 were $37.2 million or 38% of revenue, down from 40% a year ago. We continue to hire aggressively in our enterprise sales and growth organizations. As our customer base has shifted away from SMB and into enterprise, we have changed our accounting for deferred commission amortization from three years to five years. This is consistent with our peers in enterprise software. This accounting change resulted in a $4.4 million reduction in Q1 sales and marketing expenses, we expect an operating income and benefit in all future periods. This accounting change has no impact on cash flow and will mean that our non-GAAP operating margins and non-GAAP free cash flow margins are likely to be increasingly correlated moving forward. Non GAAP research and development expenses for Q1 were $18.3 million or 19% of revenue, roughly flat from a year ago. We continue to invest in our future and are increasingly targeted investments in AI and social customer care and are delivering strong returns. Non GAAP general and administrative expenses for Q1 were $14.5 million or 15% of revenue, down from 17% a year ago. We expect to deliver consistent G&A leverage as a percent of revenue moving forward. Non-GAAP operating income for Q1 was $6.0 million or a 6.2% non-GAAP operating margin. Non GAAP net income for Q1 was $5.7 million for non GAAP net income of $0.10 per share, based on $56.3 million weighted average of common stock outstanding compared to non-GAAP net income of $3.4 million and $0.06 per share a year ago. Turning to the balance sheet and cash flow statement, we ended Q1 with $95.2 million in cash, cash equivalents and marketable securities. This is down from $98.1 million at the end of Q4. Deferred revenue at the end of the quarter was $147.1 million. Looking at both our billed and unbilled contracts, RPO totaled $290.0 million, up from $275.0 million exiting Q4, and up 54% year-over-year. We expect to recognize 73% or $210.6 million of total RPO as revenue over the next 12 months, implying a cRPO growth rate of 48% year-over-year. We continue to believe that all our leading indicators are converging towards cRPO over time. Operating cash flow in Q1 was a record $11.2 million, up from $8.3 million a year ago. Non-GAAP free cash flow was a record $11.3 million, up from $7.9 million a year ago. Shifting to formal guidance. For the second quarter of fiscal 2024, we expect revenue in the range of $98.5 million to $98.6 million or growth rate of more than 24%. We expect non-GAAP operating income in the range of $4.6 million to $5.0 million. There serves as a non-GAAP operating margin of 4.9% at the midpoint and includes an estimated benefit of our deferred commission accounting change. We expect a non-GAAP net income per share between $0.07 and $0.08. This assumes 56.6 million weighted average basic shares of common stock outstanding. For the full year 2024, we are reducing total revenue to the range of $405.0 million to $406.0 million. This assumes a greater than 20% organic Sprout revenue growth and accelerated Tagger subscription revenue growth and incorporates each of the changes Ryan outlined. For the full year 2024, we are raising non-GAAP operating income to the range of $28 million to $29 million. This divides annual non-GAAP operating margin improvement of roughly 560 basis points. Excluding the accounting change, we are reiterating our prior non-GAAP operating income guidance, which now implies year-over-year non-GAAP operating margin improvement of 240 basis points. We expect non-GAAP net income per share between $0.45 and $0.46, assuming 57.0 million weighted average basic shares of common stock outstanding. We believe we’ve transformed our business model to position us to deliver increasingly durable and increasingly efficient growth. With that, Justyn, Ryan and I are happy to take any of your questions. Operator?
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Raimo Lenschow with Barclays. Your line is open.
Raimo Lenschow: Hey, thank you. Ryan, first question for me is, if you think about the go-to-market changes, if you think about software historically that usually takes like two to three quarters for go-to-market changes to kind of settle down the organization. Can you speak a little bit how you see maybe more specifically compared to your prepared remark, what you did there? And is that two to three quarter kind of math still valid? And then I had one follow-up.
Ryan Barretto: Yeah. Thanks, Raimo. Yeah, I mean, we’re kind of – I would say, most of the way through some of those things today. We made a lot of those shifts heading into Q1. If I think about the things that we did really important strategically for where we’re going as a market organization. If you think about the investments into things like vertical sales, in the account coverage that we implemented, in the enablement that we are doing as a team. So all those things we’re playing through in Q1. When we think about the guidance they’ve all been factored through both the compounding of the subscription revenue through the year as well as the impact of the changes that we’re making through Q2 and getting the rest of our team ramped. So they’ve all been factored in here. And I think a good portion of it has been felt in Q1, and we feel really good as we’re going into Q2 with where our team is at.
Raimo Lenschow: Yeah. And then since – maybe it’s for all of you, since you took away ARR, now we kind of - need to kind of think, okay, how do I judge you? And how do I judge the progress of the business? And Joe, you said like ARR is probably with the trough in Q1. Is there any kind of handholding you want to give us here? Or you would just kind of need to wait for the outcomes?
Ryan Barretto: Yeah. I’ll start on that one. I think just going back to the rationale here, the linearity of our business and the composition of our customer base has been changing in really material ways. As we’ve been going through this transformation upmarket and becoming more back-end loaded, we view revenue and RPO as the best indicators for our business, and that’s consistent with our peers. We also believe that for all of you, this is going to be the most accurate and a less complicated and less noisy way to measure our business. So I’d highlight the revenue in the RPO as sort of the lagging leading indicators that are going to give you a good indication of where the business is going. And we realize that this is a change, and we’ve added some work to all of you tonight. And so our team will make sure that we are providing the right level of support as you dial in your models.
Raimo Lenschow: Okay. Thank you.
Ryan Barretto: Thanks, Raimo.
Operator: And our next question comes from the line of Arjun Bhatia with William Blair. Your line is open.
Arjun Bhatia: Thank you. Maybe to start just on the guidance. And obviously, we took a pretty big cut to the full year number here. But maybe for Joe, if I think about it historically, at least over the last couple of years, I think there hasn’t really been that much room or cushion in the guidance for variability in the business. And now it seems like there’s some more changes that are coming from an operational and strategic perspective. And so, can you just walk us through maybe what you’re baking into the guidance and how much cushion you’ve left yourself as you work through some of these changes over the course of 2024?
Joe Del Preto: Yeah. So Arjun, and some of this Ryan covered, but I’ll kind of reiterate the things that are baked in there. First of all the kind of go-to-market changes that Ryan indicated, are kind of baked in the guidance and how that kind of we’re still making those changes that will flow into Q2, but we feel really good about the momentum. The fact that the flow through on revenue, the soft Q1 revenue that we had and how that flows through. And then the other thing we’ve kind of factored in here is, our business is definitely becoming more Q3, Q4 weighted. And so, when we look at the full year, we’re putting away more weight in the back half of the year and thus we wanted to take revenue down to a level that we felt like a high level of confidence to execute through these changes and give us an opportunity to have a successful back half of 2024.
Arjun Bhatia: Okay, got it. And then, Ryan, for you, you mentioned something in your prepared remarks, and I may have missed the details, but you mentioned that there is some immediate revenue that you might walk away from it was – if it wasn’t the right strategic fit for you long-term. Can you just help flesh that out for us? What is it that you’re deprioritizing? Is that different from what the transition that we’ve been talking about over the last year or so? And maybe how much more complexity does that add into your go-to-market motion as you try to reallocate resources to the ideal customer profile for you?
Ryan Barretto: Yeah. Thanks for the question. I mean, step one of a lot of the changes that we were making last year was getting the composition of our customer base to a place where we felt like it perfectly matched our ideal customer profile, and really transforming both the inbound and outbound motions, so our new customers as well as our current customer base. And going through that, the next part of it and the biggest opportunity is really identifying where our most sophisticated customers live and where we had the greatest opportunity to be able to maximize our investment. And so as we’ve looked at the data and looked at our customer base and the cohorts of customers, we’ve identified some really exciting opportunities for us to really put our teams majority of which in the upmarket and mid-market and enterprise, again some amazing opportunities when we think about our outbound motions and where we invest our time prospecting, as well as where we think about our marketing efforts and all of the inbound actions that we take to drive really healthy inbound. And so, it was really a commentary that we’ve identified pockets of just the overall opportunity that we don’t want to go as hard at, because we know that it has different metrics like CAC and higher churn rates compared to the opportunity with some of these cohorts that just convert faster, they land bigger, they stay longer. So it was really a comment on focusing on our team on some of these areas that we’ve just got more surgical with the data that we’ve got in our business.
Arjun Bhatia: Okay, got it. Thank you.
Operator: And your next question comes from the line of DJ Hynes with Canaccord Genuity.
DJ Hynes: Hey, guys. Thanks for taking the question. Ryan, if I interpret your comments right about Q1 softness, it sounds like it was a function of kind of shots on goal, right, a little bit less pipeline generation in the second half of ‘23. I’d be curious to kind of extrapolate from that and ask about like sales cycles. What are you seeing? I mean Sprout has always had really quick close rates and short sales cycles. Is that changing now with the push to enterprise? I mean you talk more about Q3, Q4 weighting. Maybe that’s more tied to budget cycles. But I’d love to hear just specifically on sales cycles, what you’re seeing?
Ryan Barretto: Yeah. Thanks for the question, DJ. Yeah, you’re right. I mean, we are definitely seeing lengthening of our sales cycles as the composition of the customer base and the prospect base is changing. These are larger opportunities, they are larger lands and they have larger opportunities for expansion. And so, it is changing. We’ve – we still feel like we’re in a great position because we leverage our product in an effort to get customers to more quickly see the value and realize that Sprout is a great fit. But we also see ourselves in more RFPs today than we ever did before, which is a really positive thing for the business. If you look at some of the logos that we’ve been talking about over the last few quarters and even this quarter, the likes of P&G and Universal Pictures and American Honda (NYSE:HMC), great examples of large companies that land much bigger for us and have much bigger expansion opportunities later. So, I would say that the lengthening of the cycle is a dynamic in our business, which ties to a lot of the commentary around the back-loaded nature of where our business is transforming.
DJ Hynes: Yeah, okay. And then maybe as a follow-up, just with all that’s happening from a regulatory standpoint surrounding TikTok, can you remind us, a, how material that is to the business from a revenue standpoint today? And then b, I’d love to pick up any industry chatter that you’re hearing, how folks are thinking about this? What would happen if TikTok were to go away in the US? Any comments there would be helpful.
Ryan Barretto: Yeah. I think the biggest thing to highlight here is, we don’t really monetize specifically on any of the network. So if you think about just our customer strategy, the way that they think about it as they think about social holistically. And they’ve got all of these different channels that they need to execute against. And so much of this is actually dictated by where their community and their customer base is, and that’s where they lean in. TikTok has obviously been a great partner for us. We’re really excited about the products we’ve built alongside of them. But at the same time, when we look at our customers, they typically have multiple networks that they’re leveraging. And so any changes that happen here from a brand perspective will just mean that they end up leaning heavier in some other social network where the traffic goes, where their customers go and where they will spend time. And so for us, that’s a huge part of the importance of the work that we do is making sure that we have excellent partnerships and that our products add a ton of value across all of the social networks.
Justyn Howard: And this is Justyn. I’ll add thoughts on the ecosystem commentary. I think at this stage, there’s not a lot – I don’t think brands are contemplating in a big way that there’s an inevitable disruption here with TikTok. That’s just the sentiment that we kind of feel from customers. It’s been talked about for a while, they’ll kind of see what happens, but not shifting around their time and energy at this point. And then broadly, I think that platform is powerful in a lot of ways, and we value the partnership there. What’s sticky about that for consumers and brands is the very short form and unproduced video content. And should something happen and TikTok become unavailable, then that effort is just going to shift to something else with that same sort of characteristic and footprint. Reels is one example. There’s others. So it’s building a spot in the market based on the type of content, the network itself is the carrier of that. But this is part of a social strategy and that type of content as part of the social strategy and the engagement that it provides. It’s something that’s going to be part of the ecosystem, part of the landscape regardless of where it is.
DJ Hynes: Okay, that makes sense. Thank you, guys.
Operator: Your next question comes from the line of Parker Lane with Stifel.
Parker Lane: Hey, guys. Thanks for taking the question. Ryan, maybe just to double down on one earlier. You referenced that the sales changes happen really before the start of the year, a lot of it took place in Q1, but it’s still lingering here in 2Q. When we look at your tight guidance range, how confident are you that peak disruption in go-to-market is behind us and that there’s not going to be any level of additional sales execution risk here in 2Q?
Ryan Barretto: Yeah. Thanks for the question, Parker. And just to clarify, decisions were made in Q1 and the implementation of those changes – sorry, the decisions on all of this happened in Q4 and the execution of it happened in Q1. And going to guide, we feel good about the way that we’ve built out the guide for Q2 and the rest of the year. The majority of the actions that needed to take place and the changes with the sales teams and some of the enablement that we were doing happened within the quarter. So we feel good about all that, and that’s being contemplated within the guide.
Justyn Howard: I think it’s also helpful context here, just to talk about the type of changes that we’re talking about. This where a big change in go-to-market strategy might take a couple of quarters to take hold. This is a layer lower than that in that. We’re talking about some pretty tactical decisions around account coverage, spending time with the team on Tagger enablement and things like this. So rather than a large kind of strategic change or going after a different part of the market or something like that, these are some tactical things that from a time, energy and calorie spent in Q1 perspective, created some headwind for us. But I just want to make sure it’s clear that we’re not talking about some radical change that’s going to take a while to play out. Most of it, things like the enablement, et cetera are done, that’s a binary thing, and that the momentum stutter is fairly finite.
Parker Lane: Got it. I appreciate that feedback. And then Ryan, one more. You talked a lot about aligning your go-to-market around your best customer cohorts. From our perspective, should we interpret that to mean 10, 000 or 50,000 cohorts? Or is there a level of depth beyond that so that customers under 10,000 that are providing the right signals are still going to be emphasized here?
Justyn Howard: Yeah. There’s – sorry, this is Justyn. But this is a project that I spent a lot of time on, so I’ll jump in here. I think that when we talk about taking that next step beyond moving past the very low end of the customer base. And now we’ve got a customer based on the whole that is much healthier that’s going to have better unit economics, et cetera. There’s a next layer there, which is now rather than assuming that, okay, the rest of that customer base kind of behaves similarly, performed similarly, et cetera, being able to get a much clearer look at different patterns across different industry types, B2B versus B2C, different approaches to social, different social footprint, things like that, allows us to recognize that there are – there’s variance in any given segment, so let’s say, enterprise. Companies that have a very, very different growth profile even with some early size – other similarly-sized companies, where rather than painting with a broad brush, we’re able to categorize these further and look at opportunities where there are – if we look at even under 10,000, there’s a dramatic difference in potential in, let’s call it, the 10,000 to 15,000 bucket. Within that group of customers very, very different behavior and potential and how we’ve dialed that in and figure out where should we be spending our calories, where should we be spending our time. Thinking about how we’ll talk to those different groups differently and how we show up the market with those different groups differently is a really powerful unlock, and that’s kind of some of the background on those points.
Parker Lane: That makes sense. Thanks guys.
Operator: Your next question comes from the line of Adam Hotchkiss with Goldman Sachs.
Adam Hotchkiss: Great. Thanks for taking the questions. And I guess to start, how should we think about the performance of your direct and partner channels in the quarter? Is it fair to say that sales productivity was just below where you thought it’d be despite the record RFPs you mentioned? Or is there just more of a ramp that your direct sales force has to get through before you can reaccelerate ACV? Just anything around sales productivity or morale would be useful.
Ryan Barretto: Yeah. I think some of it is actually what you said at the latter part of your comment. It’s just – some of this is the natural ramp for folks is, we had some new hires and then changing roles happening within Q1, and we expect to see that ramp coming into full play here as we go into Q2 and going forward. From a partnership and distribution channel perspective, we saw relative good strength there as well and feel really good about the back half of the year and the partnerships that we have created. So I think these are all just natural things that are playing out in our business model today is more and more of our team is more focused upmarket.
Adam Hotchkiss: Okay. That’s really helpful. And then I’d just be curious how you now think about the $1 billion revenue target. I know that your prior long-term guidance implied something like a 25% or 26% CAGR. And based on that guidance, we’re going to be – the guidance that you gave we’re going to be a little bit below that exiting this year. Are you continuing to stick with that outlook today? And how should we think about your confidence in reaccelerating growth once we get past the end of this year?
Ryan Barretto: Yeah. We still very much have this insight and in focus. The Q1 impact when you think about in isolation is relatively small. It’s a relatively small number relative to the $1 billion target. And our intention here is really to set up Sprout to accelerate to and through that number. And so, we think about that $1 billion target certainly is the next milestone, but not the finish line for us. And so much of the work that Justyn actually just even touched on from a go-to-market perspective will impact our timelines and just how fast we can get there. So I’d say no changes right now. And as we have more data to share on this in future quarters, we’ll definitely come back to you and share that.
Adam Hotchkiss: Okay. Thanks, Ryan.
Operator: Your next question comes from the line of Rob Oliver with Baird.
Rob Oliver: Yeah. Great. Hi, thanks. Good afternoon, guys. Ryan, just – I think you said in your prepared remarks, you made reference to the quickly changing dynamics in the customer base, just paraphrasing if I didn’t get it exactly correct. And I assume that reference is in part the move to enterprise. But I wanted to know if there’s anything else being referenced there as well, because clearly, the move upmarket for you guys is one that’s been telegraphed from when you kind of – you got out of the lower end of customers sort of beginning last year and then sort of through the end of the year. So, just curious what you meant by those dynamics and there’s something in addition to just, hey, our customers are getting bigger that you wanted to call out?
Ryan Barretto: Yeah. Thanks, Rob. It’s really that. We – if you think about it, the business is really transformed, it’s very different from the business we knew at IPO that was highly transactional in inbound with a lot of small SMB type business. And when we think about today, the opportunity that we have in front of us, the way that our customer dynamics have changed, the way that our capacity and staffing models have changed. And the customers that we’re in front of, it’s a lot more of these larger, sophisticated customers that come with larger opportunities to land and larger opportunities to grow and longer sales cycle. So it was really more a comment on that and the changing dynamics of the business that we’ve been going through.
Rob Oliver: Great. Okay, thanks. Helpful. And then just one other, and I can’t remember if it was you or Joe that referenced the Salesforce contribution in ‘23. And I think you were seeking there, I think, to indicate that, hey, we’re not dependent on Salesforce. However, I think you guys said it was down year-over-year from ‘22, which was surprising to me, because coming into the end of life of Social Studio Plus with the momentum around the Salesforce customer service, native integration. So I’d be curious and I know you’ve been – and I’ve seen you with some of the world tour events for Salesforce. So I’d be curious to hear, is this a de-emphasis of the Salesforce partnership? I know you’ve already been talking about it more in the context of a longer-term opportunity, but I just want to help us if you can frame those comments relative to Salesforce? Thanks.
Justyn Howard: Yeah. This is Justyn. I want to start with just a quick clarification. That wording might have been a little tricky, but it was up significantly year-over-year from ‘22 to ‘23. We were saying that it was a smaller contribution in ‘22, but I want to make sure that, that’s heard. I’ll let Ryan comment on the forward momentum, which is still something that we are very excited about a lot of opportunity in front of us. So I want to make sure that we don’t take away the wrong things from those comments.
Ryan Barretto: Yeah. I would just add, we still feel great about that partnership. You’re right. We were at New York World Tour. We will be at Connections, where CMO, Scott will be speaking next month. And so we feel really great about the relationship and the opportunity, especially around a lot of the other product lines beyond Social Studio. The commentary is really to make sure that we are properly framing the size and the impact of the business on our overall growth levers and the impact on Sprout. And so that was what the commentary was about.
Rob Oliver: Okay, great. Thank you.
Ryan Barretto: Thank you.
Operator: Your next question comes from the line of Rob Morelli with Equity Research.
Rob Morelli: Hi, this is Rob Morelli on for Scott Berg. Thanks for taking the questions. I’d love to get some color regarding the early results for your customer care solution. Have you seen any incremental upsell activity with this new release? Or is it still too early to tell? Thanks.
Ryan Barretto: Yeah. Thanks for the question. We’re really excited about what we’re seeing in care. I think there’s been a lot of great feedback from customers today. If you think about some of the stuff that we’ve been building out just in terms of our prioritization of cases and routing of cases and the analytics that come along with agent productivity, we feel really good about the opportunity that we’re developing in the marketplace. Our customer feedback has been really strong, because we know they are seeing more and more volume showing up in social and it is critical for them to be in front of these customers every single day. We know that the expectations for consumers on social is much higher than any other channel. And so showing up fast and intelligently is what they expect when they’re leveraging a platform like Sprout. So, we are seeing lots of good opportunity. There’s still lots of roadmap that the team has been working on. And I think you’ll expect to see, as we go through the year, more and more features and functionality added in there and more and more success stories from us on that note.
Rob Morelli: Got it. Thanks for the color. And then regarding the go-to-market shifts, you touched on continuing to enable customer-facing teams with Tagger while also noting Tagger ARR meaningfully accelerated. Has this, I guess, outperformance shifted your outlook for Tagger for the remainder of the year? And I guess, what’s the overall opportunity here for the remainder of the year? Thanks.
Ryan Barretto: Yeah. All that’s contemplated in the guide. I’d highlight we feel really good just about the way that the team and the product is performing. There’s clearly a ton of value that we’re being able to deliver to customers. A big part of the thesis that we shared with all of you before is that, this is an area that our customers really cared about, and they were either doing this very manually, trying to figure out how to build a strategy around this or we’re leveraging things like – groups like agencies to execute. And so what we’ve seen from our customers today is that, they really appreciate the ability to be able to do their influencer discovery in our platform to be able to find the right folks that they should be leveraging for their strategy to be able to run campaigns through Sprout and then properly report on the ROI from all that – all in one place with one team. And so we’ve seen a lot of great progress so far, both from a new business perspective as well as going back to our current customer installed base and attaching it. So all of this has been sort of contemplated within in the guide, but we certainly see good progress, and we’ll continue to update you on the things that are progressing here.
Rob Morelli: Got it. Thanks.
Operator: Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets.
Jackson Ader: Great. Good evening, guys. Thanks for taking our questions. The first one is, Joe, I think you mentioned that there were still some go-to-market changes that are being, I guess, still being made or still being kind of flowed through here in the second quarter. Just curious, which ones have already gone into effect and which ones are still out there?
Joe Del Preto: Yeah. My comment was more about not necessarily the changes were still going on, but the impact of those has been contemplated in our Q2 guide in the back half of the year, Jackson, that’s what I was referring to.
Jackson Ader: Okay. So all of the – just for clarity, all the changes that you plan to make have already been made?
Joe Del Preto: I’ll refer to Ryan to reiterate what he was talking about earlier.
Ryan Barretto: Yeah. I think the commentary is really more along the lines of the changes have been made in Q1 and just a flow-through through Q2 as folks ramp into the roles. And then also just the focus areas that we are talking about in terms of where we’re directing the go-to-market teams. But there’s – and this ties back to something that Justyn said earlier, there’s no pivotal shifts that we are making in Q2 that should impact any of the data that we’ve shared.
Jackson Ader: Got you. Okay. And then I’m just curious about the timeline, when in the first quarter did these changes go into effect? And then how soon after those – that time did you start to see the issues in deal closures and pipeline and things like that?
Ryan Barretto: Yeah. And I want to call out, there was a few things that we highlighted here that all contributed to just the Q1 performance. We’ve highlighted some of the things that we believe were self-induced from an execution perspective in terms of introducing some new teams and changing some of the account coverage and taking the team off the floor for enablement. Those are all things that impacted the amount of customer-facing time that we had in Q1. There are other things that we highlighted as well just in terms of where our focus was in Q4 with execution versus building pipeline for Q1. And just some of this is also just the natural shift in our business that we’ve highlighted around longer sales cycles and larger deals that are going to fall in the back half. So just highlight those all of those things contributed to the end result. And then clearly, the piece that we haven’t spent any time on but we’re aware of and we’ve generally not leaned into, but we know that it exists. It’s just the macro environment that we’re operating in, is challenging. And as I think about all of these things, and you’ve seen it from us over the last few years, this team has been able to navigate all of those headwinds and execute really well. And if we are operating in a different macro environment, I think these things probably wouldn’t have shown up in Q1. So just wanted to make sure that we’re properly framing all of those things. And I’d clarify that the self-induced changes or strategy shifts that we had made going into Q1 were really about sales focus and time in front of customers.
Jackson Ader: Okay. All right, thank you.
Operator: Your next question comes from the line of Elizabeth Porter with Morgan Stanley.
Ryan Bressner: Hi, thanks for taking my question. You have Ryan Bressner on for Elizabeth here. Just kind of curious if we could touch on Tagger here. Just how is progress on the platform? How ramped is the sales team with this and just how much work is there still have to do here?
Ryan Barretto: Yeah. We’ve seen a lot of great progress. We’ve been really excited about the things that the team has been shipping. From a sales team perspective, the maturity of the sales team, we did a lot of enablement in Q1 across our entire customer-facing or to make sure that we are up to speed with all of the elements of influencer and our Tagger platform. So we’re seeing really good progress from there. And that’s why we called it out as well just in the prepared remarks. Our customers really see value in this. We believe it is the best solution that is on the market. We’ve got this really exciting opportunity to educate customers on the value of influencer and how this can nicely fit into their social strategy. And then we’re bringing along this incredible technology that allows them to execute. And then when you think about the value of the return on investment, you put it against the rest of the things that we do in core Sprout, it provides customers with really great opportunities to increase their share of voice and their brand and their only generation in revenue. So lots of good progress. The team is ramping really well, and we expect to continue coming back to you sharing the progress we’re making with the team and with customers.
Ryan Bressner: Got it. Very helpful. Thank you.
Operator: Your next question comes from the line of Matt VanVliet with BTIG.
Matt VanVliet: Good afternoon. Thanks for taking the question. You guys talked about quite a bit of changing dynamics in the business going after a different customer set over the last couple of years, the product is expanding quite a bit. What gives you confidence that the go-to-market team, especially the sales reps you have in place are trained, have the right skills are the right folks to lead this different market motion and go after a different set of customers, especially as you’re making changes, and it doesn’t seem to be sticking right away.
Ryan Barretto: Yeah. Thanks for the question. I mean, I think the first thing that I’d highlight is, we’ve seen a lot of success in this customer base of market. If we look at the 50,000 being up 44%, the ACV being up 41%, and once the metrics in RPO being up 54% and cRPO being up 48%. There’s a lot of good signal in the execution that we’ve seen. And then you add in a bunch of the logos that we’ve talked about over 2023. And here in Q1, we’re seeing good execution from this team. A lot of this, when we think about Q1 is also, again, just the shape of the way that our years are going to go in this new model as we shift the business. We’ve also, over time, just continued to add really great talent to the team. When I look at the folks that we have on the squad today, they’re really, really excellent. We’ve taken the great people that have been at Sprout that have continued to own their skill set and prove that they can execute, and we’ve complemented them with great folks from across the SaaS industry that have joined our team. So I think it’s a combination of seeing it in the data today, and then feeling like we’ve been raising the bar and the talent we’re bringing in, and we’re confident that you’re going to see the fruit bared in future quarters here as we get into the back half.
Matt VanVliet: All right, great. Thank you.
Ryan Barretto: Thanks for the question.
Operator: Your next question comes from – apologies, your next question comes from the line of Clarke Jeffries with Piper Sandler.
Clarke Jeffries: Hello. Thank you for taking the question. Ryan, I think we’ve touched on it a lot, but what comes to mind is sort of endogenous, exogenous. And I think the biggest framework that we’ve always appreciated with the guidance is, it seems like the guidance is really set by the ARR that you exit at the prior quarter at. And so, when we think about that time spent away from customers aspect, was there anything surprising in terms of retention characteristics? Or was there just that lack of time in front of customers that may have contributed to something that you’d characterize as worse retention metrics? And then I have sort of one follow-up for Joe.
Ryan Barretto: Yeah. Thanks for the question. I wouldn’t characterize retention metrics within my commentary. In fact, our gross retention performed nicely above plan within the quarter. I think a lot of that is the moving upmarket and the dynamic of these larger customers that are going to have a greater lifetime value and be growing faster with us. I think a lot of that is also the strategic shifts that we had made last year and changing the dynamic of our customer base and the folks that we were proactively targeting and going after. And if I think about it, for us, it was really this combination of not enough customer-facing time from an execution perspective within the quarter. I feel good about the work that the team did to create future opportunity. Our pipeline was up 37% within the quarter. But we just didn’t get the number of deals we want to get done in the quarter. And for me, that’s – this combination of we didn’t cultivate enough of it in Q4, and then we didn’t have enough time executing on deals in Q1 and then the shifting in that business model into the back half, had some natural pressures behind it as well.
Clarke Jeffries: Thank you for the color. And then, Joe, just before we put ARR to bed, I was hoping you could maybe frame maybe the exit growth rate of the business in any way you would choose. Just as we think about maybe a seasonality of the business that puts less time for ARR booked to be recognized as revenue. Just any way to frame maybe gross in net new ARR. Do you expect that to be higher in the second half year-over-year versus the Q1 commentary that being down year-over-year? Thank you.
Joe Del Preto: Yeah, Clarke. I think one of the things that you said definitely makes sense, which is – and Ryan talked about this, our years are becoming more Q3, Q4 loaded. And then within the quarters even in the third month in the quarter now becoming really heavily weighted. And so if you think about where our ARR is going to be, I think it’s definitely going to be higher, for example, than what our implied revenue growth rate is. And so, I think from that perspective, you’re definitely going to see way more ARR come from the back half of the year, Clarke. I think that’s a fair assumption as we move up into the enterprise business.
Clarke Jeffries: Thank you very much.
Operator: Your next question comes from the line of Surinder Thind with Jefferies.
Surinder Thind: Thank you. When I kind of think about all of the changes that were made on the quarter, how should we actually think about the impact on the opportunity pipeline here? Has it effectively been reset at this point? Do we need a couple of quarters to rebuild it? Also giving more focus on enterprise, which even has a longer sales cycle. So, is there perhaps a larger than anticipated air pocket here that we should be thinking about?
Ryan Barretto: Yeah. Thanks for the question. First off, all of those things are being contemplated and factored into the guide. I also want to highlight, we – my commentary was walking into Q1, we didn’t have enough pipeline built to close in Q1 that we needed to cover. And if I think about that combination and so much of that was tied to the back-end being so much more loaded than years past. And you can see it in the numbers that we delivered in Q3 and Q4. And so a lot of that time was focused in on execution, meaning that we walked in, in Q1 with not as much as we would want to be ready to close in Q1. And then, you add in some of the changes that we implemented there with meaning that we just didn’t have enough time, customer-facing time to go execute. I feel really good about the pipeline that we’ve created. We’re up 37% within Q1. We also have a bunch of pipeline that we walked into the year with that wasn’t ready to close in Q1 that is very much alive and active for this year. We’ve also been in more longer-type sales cycles, RFPs, for example, from larger companies that are going to be back-end loaded. So, we feel really good about the opportunity in front of us. You take all of that and you add in that our ramps – our reps are continuing to ramp and the maturity of the team continues to get better, and we feel really good about the opportunity that we have in front of us.
Surinder Thind: Got it. And then kind of just shifting back to the decision to no longer report ARR. Is there perhaps a structural change in the business maybe that you’re feeling that there’s more churn in the business that makes it less predictable over a 12-month period? More – perhaps you’re going down the path of more transactional types of revenues. How should – I like – I’m a little puzzled by the decision there, because by definition, right, it’s the revenue over the next 12 months. But you – that’s on the books, right?
Justyn Howard: Yeah, this is Justyn. I’ll jump in. What I think the spirit of the question is here, we actually see it the other way. I think that if you look at how pronounced the move over the last couple of years has been towards the back of period, whether it be a quarter or a month or the full year, it has created a lot of noise in the ARR numbers in the ARR comparison. We have a business that is shifting toward the end of the year. The weigh and this is different than where our company was when we came out where it was highly predictable. It was smooth across months. It was smooth across quarters, it smooth across the year. And so as we go through this transition, as a publicly-traded company sharing metrics like this, we’re going through this in real-time using a metric that is challenging at scale in an enterprise at a business. And it’s not, we think the best indicator for the health of the business. It is going to be – it is going to have big differences between the first half of the year and the second half of the year. And it’s – we don’t think the best way or the most productive way for us to be measuring the business or for us to be thinking about our internal decisions that we’re making executing on our long-term strategy to build the best value for this company.
Ryan Barretto: The only other thing I’ll add there is, we commented on this in our prepared remarks, is that, retention outperformed plan for Q1, and we anticipate that we’re going to continue to have strength there. And also just highlight the RPO and cRPO, I think, are really great indicators of the health of the business and where the business is going.
Surinder Thind: Thank you.
Ryan Barretto: Thanks for the question.
Operator: Your next question comes from the line of Brian Schwartz with Oppenheimer.
Brian Schwartz: Yeah. Hi, thanks for taking my question. Ryan, thank you so much. Lots of transparency on what’s going on with the business. And you talked a little bit about the macro. Can I just touch upon that? Do you feel that the macro had changed at all had deteriorated at all since you last reported Q1, because it’s been pretty tough for a while now and just wondering if you feel like it was the same or had deteriorated somewhat in the first quarter?
Ryan Barretto: Sorry, just to clarify, compared to what, timeframe?
Brian Schwartz: The last time you updated us? So your – last time you updated us in February.
Ryan Barretto: Got you. Yeah. Yeah. I mean, I think the first thing that I’ll highlight, and I want to say it again, for those that have been following the story and alongside of us, I don’t think we’ve really ever leaned into the macro. We certainly acknowledge that this is a more challenging environment to execute within. But we’ve always just really been focused in on controlling the things that we can control and making sure that we are highly accountable to our own execution. But like all of you, we listen to the calls from our peers, and we network within the industry, and we see the things that we see within our own business as well. And so, I would highlight that the things that we have seen within the business is, you’re seeing more scrutiny on budgets, you’re seeing more decision-makers involved in making decisions. I think in some cases, it’s probably elongating some of the sales cycles. Those are all things that are happening. And for us, the way we think about it is, how do we make sure that we absolutely show up at our best for our customers? How do we make sure that we are really clear on the value that we can deliver for them? How do we make sure that we’re differentiating against the competition in every conversation and making sure that our customers see just how Sprout can help them with their share of voice, with their pipeline, with their NPS, with their customers? So I would say, I think for most folks it exists in the environment today. We’re really just focusing on controlling what we can control and delivering on our goals.
Brian Schwartz: Thank you. And then my follow-up question for Joe. Thank you very much for the color on the seasonality that we should expect for cRPO and RPO. But what can you share for us in terms of your growth expectations for cRPO this year? Thanks.
Joe Del Preto: Yeah. So we still see Q1 as kind of like the low watermark in the way that you should look at those metrics, and you could expect those to be steady and continue to increase throughout the year with Q4 being the high watermark part of the year just given the way the curve of our business. So, low watermark in Q1 and then high watermark in Q4.
Brian Schwartz: Thank you for taking my questions today.
Justyn Howard: Thank you.
Operator: That concludes our Q&A session. I will now turn the conference back over to Justyn Howard for closing remarks.
Justyn Howard: All right. Thank you. No one’s got a busy schedule tonight. I’ll keep this quick. But really appreciate the opportunity to talk to you about what’s going on in the business, some of the things that we’re excited about. I think that kind of contrary to the backdrop of Q1, the excitement that Ryan and I have, we’ve been jamming in a way that feels that energy and opportunity in front of us feels something it came to four or five years ago. The plans that we have, the strategy changes that we’ve got in motion, the foundation that we’ve built on top of making the adjustments that we need to make in expectations with all of you to be able to all deliver is something that has us incredibly energized. You’ll see that play out from us across the year. I appreciate the chance to check a bit more with some of your folks later on and over the next several weeks. So, I appreciate your time and look forward to catching up with you all soon.
Operator: Ladies and gentlemen that concludes today’s call. Thank you all for joining. You may now disconnect.
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