Sprout Social (SPT) Q2 FY26 earnings call: guidance and Q&A

How are early Trellis adoption trends and customer feedback, and how will it impact the growth of the 30K+ ARR customer segment?

Trellis adoption is encouraging, with healthy growth in monthly active users. Customers with active Trellis usage show higher retention rates across all segments. Positive customer feedback highlights its value in speeding up insights from social data. The paid tier, Trellis Plus, just launched in July, and early signs are positive for upgrades.

“The early trends have been encouraging. We've seen healthy growth in the monthly active users in Trellis. We've seen that in Q2, those customers were retaining at a higher rate than customers without active Trellis usage. That held true across all segments.”

asked by Rob Oliver · answered by Ryan Barretto

The implied Q4 revenue guidance is 3-4% growth. Is this due to continued pressure on the sub-30K customer cohort, or other factors like the Q4 enterprise buying cycle?

The Q4 guidance reflects a measured view, considering several factors: ongoing change management from restructuring, no assumed material improvement in the demand environment, lapping the NewsWhip acquisition, and continued headwinds from the sub-30K market. Strength is still seen in the 30K+ segment, Trellis/AI adoption, and new products.

“The guide reflects a thoughtful approach to how we're going execute the rest of the year, and it takes into account the demand environment and our areas of strength and some of those headwinds.”

asked by Rob Oliver · answered by Ryan Barretto

What specific customer feedback has been received on the new Trellis capabilities and what are customers building with Trellis Studio?

Feedback is positive, especially for natural language querying of data to gain insights faster, which is a "game changer." Trellis Studio allows customers to build templated skills for marketing campaigns, content gap analysis, and customer sentiment, increasing efficiency for understaffed practitioners.

“with Trellis now, natural language, our customers are going in and they're asking questions of the data and they're getting immediate responses back, which is really giving them insights. And so we think about this as taking that data and speeding up the insight to action.”

asked by Willow Miller · answered by Ryan Barretto

Given CRPO and revenue growth are converging, how reliable is CRPO as a revenue indicator, especially with potential contract length changes or down-market moves?

Management is pleased with CRPO progress, driven by the 30K+ customer segment (61% of business, 20% growth) and increased ACV (14.8% YoY). CRPO benefited from improved renewal rates and a mix of longer contract durations/fewer monthly deals in Q2. However, CRPO is expected to moderate in Q3.

“the CRPO metric accelerated for a couple of reasons in Q2. So renewals were a big piece of this. Not only did we see improved renewal rates in the quarter, but we did benefit from the timing of some renewals as well. Additionally, Q2 carried a mix of longer contract durations and fewer monthly deals, which aren't seen in R.B. So this reflects continued strong execution on larger and more strategic deals to Arby's point. That said, we do expect CRPO will moderate in Q3.”

asked by Lucas · answered by Unknown Speaker

Were the recent workforce reductions broad-based or focused on specific areas of the organization?

The reductions were across different parts of the organization, but the strategy was to remove layers, streamline decision-making, and ensure leaders are closer to the work. The goal was to optimize investments in the most productive areas of the business.

“it certainly was different parts of the organization, but it was really about removing layers, streamlining decision making, and making sure that we are getting our leaders and our people closer to the work, and ensuring that we had the right investments in our most productive areas of the business.”

asked by Lucas · answered by Ryan Barretto

How will Trellis Plus impact results, and how does Sprout envision AI impacting the business long-term from a value delivered standpoint, beyond just publishing and basic listening?

Trellis is expected to improve new business win rates, serve as an upsell opportunity from free to paid tiers, and enhance gross retention by increasing product value. Beyond listening, AI will optimize marketing campaigns, help with content creation, and improve customer care by analyzing sentiment and volume, ultimately adding tremendous value across the platform.

“Certainly from a new business perspective, we think that it really helps us from a competitive standpoint. It should ultimately impact win rates. We know that because it's available to all of our customers today, we see it as an upsell opportunity for customers that will go from the free tiers to paid as they become power users in it. And then from a retention standpoint, from a gross retention standpoint, we believe that it makes the product that much more valuable.”

asked by Matthew VanVliet · answered by Ryan Barretto

What factors contributed to the improved renewal rates seen in Q2?

Improved retention is attributed to the quality and value of the product, continuous innovation, and the efforts of go-to-market and customer experience teams. These teams ensure customers understand and adopt multiple solutions, especially in the 30K+ segment, where multi-product usage leads to higher stickiness. Gross retention improved for both sub-30K and 30K+ cohorts.

“we've seen our retention improve again in Q2, both on quarter-on-quarter and year-on-year, which we're really proud of. I think this speaks to a few things. One, it is certainly just the quality of the product and the value that we're delivering. delivering to customers every single day.”

asked by John McShane · answered by Ryan Barretto