Matt Vanvliet

Matt VanVliet inquired about the monetization strategy for the new Trellis product, asking if it would be an add-on feature or embedded within existing products to drive demand for new and expansionary sales.

Answer

Ryan Barretto, CEO, explained that the monetization strategy for Trellis is a combination of both. The initial focus is on driving awareness, usage, and delivering value, with the product primarily residing in the most advanced plans. He also indicated that there would be a baseline of access, with usage-based monetization for increased consumption, and further details on pricing and packaging to be shared in May.

Matt VanVliet asked for a breakdown of Sprout Social's margin expansion plans for 2026 and the 2027 Rule of 40 target, specifically inquiring about the impact on gross margins and headcount expectations, suggesting it might involve more than just top-line growth leverage. He also asked about the monetization strategy for the new Trellis product, whether it would be a direct add-on, an embedded feature, or primarily a demand driver.

Answer

Ryan Barretto (CEO, Sprout Social) stated that gross margins would remain fairly consistent, with leverage primarily coming from OpEx through go-to-market efficiencies (self-serve), low-cost location hiring, and internal AI usage, requiring minimal headcount growth. For Trellis, Mr. Barretto explained the current focus is on driving awareness and value, with the product integrated into advanced plans. Monetization will involve a baseline of access with usage-based pricing for increased usage, with more details on packaging and pricing to be shared in May.

Matt Vanvliet from Cantor Fitzgerald asked how NewsWhip's technology complements the existing listening platform and what its impact would be on the second-half operating income guidance.

Answer

CEO Ryan Barretto positioned NewsWhip as a strategic complement, differentiating Sprout's offering. He described Sprout's core listening for deep analysis and NewsWhip as a 'command center for real-time action' and crisis management. CFO Joe DelPretto confirmed the guidance assumes NewsWhip will be breakeven for the remainder of the year, with no additional integration costs impacting the outlook.

Matt VanVliet asked about additional resources or investments SPS Commerce plans to deploy to revive growth to expected levels, and the company's strategy for continued investment in the revenue recovery business given Amazon's policy changes and its underperformance relative to expectations.

Answer

CEO Chad Collins outlined continued investment in retail enablement programs and a new Chief Marketing Officer to attract new customers and drive cross-selling opportunities across the product portfolio. He clarified that investment in revenue recovery would focus on 1P sellers, aligning with SPS's ideal customer profile, with less emphasis on 3P, and mentioned potential future shifts from a take-rate to a subscription model.

Matt VanVliet asked about additional resources or investments SPS Commerce plans to make to revive growth to expected levels, potentially pushing beyond community events, and what new initiatives are expected to drive top-line performance. He also questioned the approach to investing in the revenue recovery business, given Amazon's policy changes and its underperformance relative to expectations.

Answer

CEO Chad Collins highlighted continued investment in retail enablement programs and the advancement of marketing capabilities under a new CMO to attract new customers and drive cross-selling. He noted that 2025 was a tough year due to global trade challenges, expecting improvements in 2026. Regarding revenue recovery, Chad stated a continued focus on the 1P seller segment, which aligns with their ideal customer profile, and a potential shift from a take-rate to a subscription model over time, while managing the 3P side.

Matt Vanvliet from Cantor Fitzgerald inquired about the integration progress and go-to-market strategy for the recently acquired revenue recovery solutions, and asked about headcount plans in the context of the 200 basis points annual margin expansion goal.

Answer

CEO Chad Collins reported that the Supply Pike and Carbon6 go-to-market teams are being combined, with a lead-sharing program in place with the core fulfillment team. CFO Kim Nelson explained that headcount will be added efficiently to support growth, which contributes to the margin expansion goal, noting that gross margin is already improving due to leveraging past investments.

Matt VanVliet of Canaccord Genuity Group Inc. inquired about Q2's AI monetization strategies, including discrete charges versus platform value, and the role of Innovation Studio, as well as the inclusion of unreleased R&D components in the financial framework.

Answer

CEO Matt Flake highlighted Innovation Studio's existing revenue-sharing model as a gateway for AI products and features, emphasizing Q2's trusted partner role in a regulated environment. CFO Jonathan Price clarified that specific AI monetization opportunities would represent upside to the current financial framework, while internal AI efficiencies are already contributing to and are expected to have a meaningful impact on margin expansion beyond 2027.

Matt VanVliet questioned Q2's approach to AI monetization, specifically how discrete charges for AI features or Innovation Studio efforts balance against using AI to enhance platform value and win customers. He also asked if yet-to-be-released R&D components are factored into the outlined financial framework or represent potential upside.

Answer

CEO Matt Flake emphasized the revenue-sharing model within Innovation Studio as a gateway for AI products, leveraging Q2's trusted position and data. CFO Jonathan Price clarified that the current financial framework has conviction based on the existing operating paradigm, and specific monetization opportunities from future AI products would represent upside to the targets, though internal AI efficiencies are already contributing to the framework.

Matt Vanvliet from Cantor Fitzgerald inquired about the evolution of the Innovation Studio monetization strategy and its potential impact, and asked about growth opportunities for the Helix business given the changing regulatory stance on digital assets.

Answer

CFO Jonathan Price stated that Innovation Studio's high-margin revenue is growing with adoption, emphasizing the long runway for expansion within the 85% of customers using it. President Kirk Coleman noted that while early, there is opportunity in stablecoins for bank customers, and the Helix business is seeing encouraging 'green shoots' as the regulatory environment has settled.

Matt VanVliet asked about the current state of BlackLine's go-to-market process reengineering, the rigor within the sales organization, and the level of execution achieved, particularly in light of recent leadership changes. He sought to understand whether 2026 would primarily involve executing an established playbook or if further significant changes are anticipated.

Answer

Owen Ryan, CEO, noted that significant heavy lifting in go-to-market reengineering, technology improvements, and leadership changes (with almost 60% new BlackLiners) occurred over the past year. He expressed confidence in the current global leadership and upgrades across sales, BDRs, customer success, and pre-sales. While acknowledging that continuous improvement is always necessary, Owen Ryan feels good about the current state and the organization's ability to execute, with a focus on enabling teams to keep pace with product and technology innovation.

Matt VanVliet asked about Paylocity's sales capacity and overall market coverage for the remainder of the year and into fiscal 2027, especially with the addition of Paylocity for Finance and IT. He also inquired about resource allocation within the broker channel and whether win rates have increased due to competitor disruption.

Answer

Toby Williams, CEO and President, expressed confidence in current sales capacity and market coverage, noting a strong focus on driving productivity across sales teams, which contributed to Q2 performance and future guidance. He reiterated that the broker channel is a crucial part of the selling motion, with continued investment in field relationships, service, and product delivery (like Benefits-Guided Setup) to enhance value. While attribution is challenging, he believes Paylocity has benefited from market disruption, maintaining strong momentum.

Matt VanVliet from Cantor Fitzgerald asked about the drivers of Paylocity's growing revenue per customer, specifically how much is attributed to cross-selling finance or IT modules versus other product expansions or AI usage monetization. He also inquired about the composition of the updated $3 billion long-term revenue target, asking how much of the original $2 billion HCM business contributes and how much of the $1 billion increase is exclusively from finance and IT TAM expansion.

Answer

Steve Beauchamp, Executive Chairman, explained that differentiating revenue drivers is challenging due to bundled sales, but noted that current cross-sell is largely driven by the HCM suite, with early excitement for finance and IT modules contributing to higher average revenue per customer. Ryan Glenn, Chief Financial Officer, clarified that the $3 billion target is a continuation of their consistent growth formula, combining client growth and average revenue per user (ARPU) expansion, with opportunities across HCM, finance, and IT contributing to the overall TAM expansion.

Matt VanVliet inquired how much of the growing revenue per customer is driven by cross-selling finance/IT modules versus AI/usage monetization. He also asked for an update on how the original $2 billion HCM target fits into the new $3 billion revenue target, and how much of the $1 billion increase is from finance and IT.

Answer

Executive Chairman Steve Beauchamp explained that differentiating ARPU drivers is challenging due to bundled sales, but cross-sells (currently mostly HCM, with finance/IT in early innings) and product strategy extensions contribute to a mix of unit growth and ARPU expansion. CFO Ryan Glenn clarified that the $3 billion target is driven by a consistent formula of client growth and ARPU expansion, enabled by continuous innovation across HCM, finance, and IT, rather than a specific breakdown of the $1 billion increase.

Matt VanVliet asked for more details on the RPO change, specifically regarding contracts booked last year and their renewal cycle, and the key learnings from the initial Project Bear Hug rollout as it expands to a larger customer cohort.

Answer

Rory Read, President and CEO, explained that the RPO change was primarily due to timing issues and large telco deals pulled forward in Q3 FY25, expecting a positive shift in coming quarters. For Project Bear Hug, key learnings include building consistent account teams, proactive engagement ahead of renewals, and utilizing a 'utility belt' of programs like service skills and platform redos to drive value and upsell.

Matt Van Vliet requested more details on the RPO change, specifically regarding contracts booked last year, their renewal cycle, and how to reconcile the significant sequential decline in total RPO. He also asked about key learnings from the initial phase of Project Bear Hug as it expands to a larger cohort of customers.

Answer

CEO Rory Read attributed the RPO change to timing issues with larger telco deals booked last year, expecting RPO to move positively in coming quarters, aligning with NAR and renewal rate progress, noting an 'apples-to-apples' comparison would show flat or slight increase. Regarding Bear Hug, Mr. Read identified poor execution, inconsistent support, and frequent organizational changes as past issues. Learnings for expansion include building consistent account teams, proactive engagement, focusing on value creation over renewals, and leveraging a 'utility belt' of programs to drive next-generation usage and platform improvements, with proof points expected by Q1/Q2 next year.

Matt VanVliet asked about Wix's vision for re-engineering the web for the AI era, specifically how the company plans to make small business websites 'agent-ready' for discovery by LLMs like Gemini and ChatGPT, and what new products or features are planned to support this over the next three to four years. He also inquired about Base44's cohort retention trends for monthly customer plans compared to Wix, specifically on one-month or monthly retention.

Answer

CEO Avishai Abrahami detailed that Wix is ensuring all websites are indexable by LLMs and continuously adding new e-commerce standards (like OpenAI's MCP) to enable functionality within or discovery by LLMs. He emphasized the platform's role in supporting new AI standards for business visibility. CFO Lior Shemesh stated that Base44's early cohort behavior is similar to Wix's early monthly plans, and potentially better, with expectations for improvement as brand visibility grows and retention efforts strengthen.

Matt VanVliet inquired about the continued international sales strength, seeking details on performance across Europe/EMEA versus APAC and whether the Marriott deal is creating a 'halo effect.' He also asked about the current capacity of the delivery team to manage backlog and if further significant headcount additions are anticipated that might impact margin structure.

Answer

Ramesh Srinivasan, President and CEO, stated that international strength is driven more by product improvements than a Marriott halo effect, though global wins will further contribute. EMEA, particularly the U.K., is seeing record levels. He confirmed that bulk capacity increases in the services team were completed earlier in the calendar year, and while steady expansion will continue, no further 'bulk growth' is needed to manage backlog, despite ongoing customer-side delays.

Matt Vanvliet of Cantor Fitzgerald asked about the progress of the new sales and marketing leadership's multiyear plan to enhance the go-to-market strategy. He also questioned how the Book4Time acquisition is contributing to new customer wins and cross-selling, and whether the company might invest more aggressively, potentially lowering the 20% EBITDA guidance.

Answer

CEO Ramesh Srinivasan stated that the sales structure and territory coverage plan are now well-established and yielding results, though they are in the early stages of seeing the full benefits. He mentioned that marketing investments will continue to increase presence and content quality. Regarding Book4Time, he acknowledged that cross-selling into its customer base is in the early stages but is beginning to happen. Srinivasan affirmed the company's commitment to the 20% adjusted EBITDA target for the year, stating they can fund necessary growth investments without sacrificing that profitability level.

Matt Vanvliet from Cantor Fitzgerald asked about the pipeline for on-premise to cloud flips, the impact of the Tyler Connect conference, and the expected progress and ARR magnitude of flips for the second half of the year.

Answer

President & CEO Lynn Moore stated that momentum from successful flips, like the first California court migration, continues to build interest. EVP & CFO Brian Miller added that flips are back-end weighted for the year and they still expect the number of flips to grow around 25% year-over-year. He reiterated that the peak for larger, high-value flips is anticipated in the 2027-2028 timeframe.

Matt Vanvliet asked about the cross-sell motion, specifically what programs are being implemented to drive EX sales into the CX customer base and, conversely, to increase CX penetration within the EX base.

Answer

CEO Dennis Woodside noted that while cross-sell is strong at the high end, with about half of the top 50 accounts using both CX and EX products, the key opportunity lies in the mid-tier and long tail. He mentioned that driving this broader cross-sell is an ongoing programmatic effort for the company.

Matt Vanvliet asked about the size of the OfferFit sales team, when Braze sellers would begin cross-selling the product, and whether the company is approaching a trough in net retention given upcoming renewal cohort sizes.

Answer

CEO Bill Magnuson said OfferFit adds 15 reps and that for the remainder of this year, Braze reps will partner with them to qualify leads before a fully combined sales motion begins next fiscal year. CFO Isabelle Winkels reiterated that revenue growth is expected to stabilize before dollar-based net retention, and she is not yet calling a trough for the DBNR trend.

Asked about the product attach rates within the embedded channel and how they compare to the overall average. Also inquired about the strategic focus of the 20% sales headcount growth across different market tiers.

Answer

The product suite sold through the embedded channel is broader than initially anticipated. While payroll is the primary driver, partners are also demanding workforce management, reporting, analytics, and talent modules. The sales headcount growth is strategically allocated, with about 70-75% of new hires going into Tier 1 markets (the 15 largest cities) and the remainder into Tier 2 and Tier 3 markets.