Sprout Social - Q1 2023
May 2, 2023
Transcript
Operator (participant)
Hello, my name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Sprout Social First Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press Star, then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Jason Rechel, Vice President of Investor Relations and Corporate Development. You may begin.
Jason Rechel (VP of Investor Relations and Corporate Development)
Thank you, operator. Welcome to Sprout Social's first quarter 2023 earnings call. We'll be discussing the results announced in our press release issued after market close today, and have also released an updated investor presentation, which can be found on our website. With me are Sprout Social 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.
Forward-looking statements include, among others, statements concerning financial, business, and customer trends, our expected future business, financial performance and financial condition, performance against our multi-year financial framework, our market size and opportunity, our plans, objectives and expected results from future operations, growth, products, investments, initiatives, pricing, partnerships or strategies, and our guidance for the second quarter of 2023 and the full year 2023, and can be identified by words such as expect, anticipate, intend, plan, believe, seek, or will. These statements reflect our views as of today only, 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 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, 2022, as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31st, 2023, each filed with the Securities and Exchange Commission, as well as any future quarterly and current 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. In particular, references to profitability and margins refer to non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share.
Definitions of these non-GAAP financial measures, along with reconciliation to the most directly comparable GAAP financial measures, are included in our earnings press release, which has been furnished to the SEC and is available on our website at investors.sproutsocial.com. With that, let me turn the call over to Justyn. Justyn.
Justyn Howard (CEO)
Thank you, Jason, and good afternoon, everyone. Thank you, as always, for joining us and for your time today. Late last year, we began making pricing changes that we believe will materially improve the long-term growth and margin trajectory of our business by better aligning around an incredibly strong core business while deprioritizing the long tail of low-value business that had begun to anchor our growth. Today, we're going to provide additional detail around our progress here and how those efforts have set us up to raise our forecast for accelerating ARR growth and margin expansion throughout 2023.
During Q1, we saw new business deal sizes more than double year-over-year, in addition to 46% year-over-year growth in customers paying us $50,000 or more in ARR, and 59% year-over-year growth in customers paying us $250,000 or more in ARR. Leading indicators like RPO and CRPO each meaningfully accelerated during Q1, which helped drive further acceleration in ACV growth alongside record margins and record free cash flow. We also made meaningful improvement to the quality and health of our customer base, with our non-core customers that spend below $2,000 in ARR now representing less than 5% of our total ARR, down from 12% of ARR and 50% of logos in 2021.
The healthiest 95% of our business delivered greater than 35% year-over-year ARR growth, nearly 600 basis points faster than total ARR growth as we continue to shift our resources away from the very low end of our market. These changes are also accelerating new business and expansion momentum within our highest ACV customers with better baseline pricing and focused energy across the team. By drawing a line in the sand around the entry point to Sprout and properly aligning our focus, we've begun to accelerate the growth in the healthiest parts of our business and expect improvements across key metrics as we replace lower quality revenue with fundamentally healthier unit economics. In Q1, we shifted customer success and growth teams away from our smallest ACV customers and at the same time changed prices, which we believe accelerated roughly $6 million in churn of low-quality revenue.
As I mentioned, our less than $2,000 customer cohort, as a proxy for non-core customers, is now less than 5% of total ARR. Until this quarter, these customers have been allocated a meaningful investment in sales and customer success resources, specifically accounting for more than 20% of our total customer success headcount, in spite of NDR just barely over 100%, significantly lower than the rest of our customer base. This was an investment with negative ROI. We believe removing this anchor and shifting resources will position our company for fundamental growth and margin acceleration. We've also made great progress on our top-of-funnel demand since making our pricing changes last November.
We anticipated and initially experienced a decline in our top-of-funnel trial volume while we de-emphasized high-volume, low-value leads. Through the marketing team's exceptional work on content, messaging, and SEO, we've seen our overall trial volume move to pre-price change volume levels beginning in March, with further acceleration in April. At far higher price points, we believe this underscores the size of our market and a far greater near-term revenue opportunity. We believe the shift away from our inefficient low-end business, consistent growth in the healthiest tiers of our business, and renewed top-of-funnel demand through March and April positively impacted net new ARR performance in April, with enterprise being a positive outlier. We expect that a healthy April performance will continue through Q2 and result in strong net new ARR growth in Q2 and an ongoing acceleration as we progress through the year.
In spite of accelerating $6 million in churn during Q1 from our lowest ACV customers, we're pleased to increase our 2023 ARR growth forecast as we further build on these initiatives. We're looking into Q2 with a healthier customer base, consistent new business and expansion execution, improving competitive dynamics, and healthy top-of-funnel demand. Our investments in enterprise also continue to deliver great results, with enterprise Q1 net new ARR growth of greater than 50% year-over-year. During Q1, our acquisition of Repustate accelerated several facets of our roadmap in social listening, and we are now quickly extending more sophisticated AI and machine learning across our platform to care, publishing, messaging, and employee engagement. Late in Q1, we further built on these advancements with a combination of OpenAI's GPT model.
We're going deeper into social customer care, routing, and workflow functionality and allowing impactful and intuitive AI to greatly build upon existing customer workflows. We're being thoughtful and intentional with our approach to AI to bring the most valuable aspects of these technologies to our customers to tailor unique solutions to social. Premium module attach rates were again strong this quarter, improving by 100 basis points sequentially to nearly 23% of our total customer base. We see ongoing success and opportunity with customers selecting our full suite of products as we continue to see meaningful expansion opportunities to drive each of these metrics higher over time as customers unlock social data to drive business decisions. We believe our roadmap in AI, social customer care, listening, and analytics will unlock even greater value with our premium capabilities in the quarters ahead.
We are also very excited today to announce an extension of our long-standing strategic partnership with Twitter. Global consumers continue to validate Twitter as one of the most valuable channels for businesses to find the voice of culture, to foster authentic relationships with customers, and to provide real-time engagement. Through the strength of our partnership, our customers will continue to have the tools they need to execute a holistic social strategy at scale. All said, our multiyear investments in the most productive parts of our market are coming into focus in 2023. We've meaningfully shed growth and efficiency anchors to fully benefit from our pricing evolution and momentum upmarket, which we believe will make Sprout the clear category winner.
We are continuing to hire incredibly talented people across our company that will uniquely position Sprout to flex all of our competitive advantages to maximize our potential in the years ahead. With that, I will turn the call over to Ryan.
Ryan Barretto (President)
Thanks, Justyn. I'm grateful for our customers who continue to see more value in our platform and for our teams who are consistently strengthening the foundation for the future. As Justyn highlighted, we expect that the durability of demand for our products and our strategic alignment around the most productive tiers of our market will position us to accelerate ARR growth through 2023. Our entire team is pointed at the fastest-growing tiers of our market. This is where we've already built considerable momentum, and we believe we have our strongest competitive differentiation. We believe this supports durable and even more efficient growth beyond 2023. Our competitive positioning in the mid-market and enterprise continue to strengthen, and our happy customer reviews are a key proof point. In February, Sprout was recognized by G2's annual Best Software Awards for the seventh consecutive year.
We are featured in seven categories, including Best Global Software Companies and as a top 20 software product for enterprise. We are the only social media management software recognized in the top enterprise software category and the only social media management software ranked across SMB, mid-market, and enterprise. We take great pride in this recognition because it's completely based on the voice of the customer. This type of customer feedback is grounded in delivering value and a strong return on investment. The Forrester Total Economic Impact Study recently found that Sprout enabled customers to achieve a return of investment of 233% and a net present value of $1.3 million over three years with a payback period of less than six months.
This commissioned study conducted by Forrester Consulting found that our product enabled customers to boost productivity, improve their organic reach on social by 85%, deliver faster response times, and save nearly $500,000 in legacy tech costs over a three-year period. We believe our distinct advantage in the market comes from a relentless focus on leadership in social, the refined elegance of our product, our unique architecture which enables faster innovation, and our highly efficient go-to-market motion. Together, these factors create a winning combination for our company. We are incredibly grateful for our customers who continue to vote Sprout as the industry-leading software, especially in the enterprise. Also unique is our opportunity to partner with Salesforce.
During Q1, we migrated 96 customers, a handful of which are leveraging our out-of-the-box Service Cloud integration. When we announced our partnership in March of last year, we shared an estimate of 3,000-4,000 Social Studio customers. We transitioned roughly 250 in 2022, and roughly 100 during Q1 of this year. We've also told you to expect positive seasonality from this relationship in each Q4, and looking ahead, we believe that Q1 will be the low watermark for migrations this year as contributions grow meaningfully and linearly over the course of 2023. Social has also been built into Service Cloud for thousands of customers, and this functionality is also unwinding over the next 18 months, which we believe has a potential opportunity that is multiple times larger than Social Studio alone.
Our data, conversations with customers, and work with Salesforce's typical multi-year contracts provides visibility into momentum as we work through the opportunity, a majority of which is still in front of us. Beyond just this transition, we are more excited for the medium to long-term opportunities presented by our product integrations that we believe have positioned Sprout as a social standard for all Salesforce customers. We'll have more to share on our work with Service Cloud later this year. We grew with an amazing list of customers this quarter, including Campbell Soup Company, Universal Pictures, Big Lots, Dave & Buster's, the Ohio Department of Health, Samsonite Europe, GE Power, EmblemHealth Services, Premera, Whirlpool U.K., and Pabst Brewing. Building on my conversations with customers, I'd like to share my perspective on our served addressable market and medium-term model framework, which we initially presented at our 2021 Investor Day.
We're planning a second Investor Day for September 27th this year in Chicago. We look forward to welcoming many of you there. As we look ahead to this event, I'd like to help refine your expectations. Since 2021, our market has evolved as growing social teams cemented their strategic importance to businesses. New social networks emerged to further fragment the complexity that we're solving for, and new use cases evolved to pull in new teams of users. We also believe we've accelerated our momentum upmarket and strengthened our competitive position while materially evolving our pricing strategy. We assessed our served addressable market at $44 billion in 2021, which was based on the addressable number of businesses on social and their segment-level ACVs.
From Q2 2021 through Q1 2023, our total ACVs have grown 43%, while our mid-market and enterprise ACVs grew at an even faster rate year-over-year in Q1. We anticipate stronger ACV growth ahead as the utility of social continues to grow. We continue to see primarily new greenfield opportunities in the mid-market and lower to mid-enterprise, with a mix of greenfield, legacy tool replacement, and point solution consolidation in the upper enterprise. While we're not prioritizing low ACV logos, these factors in aggregate create significant potential upside to our 2023 SAM forecast, as well as our 2025 TAM forecast. We also outlined plans to grow at least 30% annually through 2025 while expanding margins 100 to 300 basis points per year.
The changing quality of our customer base, broadening new business applications in the mid-market and enterprise, and expanding opportunity inside our install base each support ongoing confidence in our ability to outperform this growth target. Meanwhile, we expect that improving total unit economics and net dollar retention, as well as expanding total deal sizes over the remainder of 2023, will each contribute to anticipated upside on this margin expansion forecast. I'm proud of the way we're delivering through an uncertain time and believe we're on the path to unlock our full potential. Our partnerships have strong momentum. Our pricing changes are resonating with the market. New product enhancements are delivering tremendous value to our customers, and we believe our competitive positioning has never been stronger. We are recruiting and hiring amazing enterprise sales talent, and we're focused on the most successful tiers of our market.
We're excited for the work ahead as we continue to scale a category-defining company. With that, I'll turn it over to Joe to run through the financials. Joe?
Joe Del Preto (CFO)
Thanks, Ryan. I'll now walk you through our first quarter results in detail before moving on to guidance for the second quarter and full year 2023. We further aligned our playbook this quarter to our fastest-growing and most efficient segments. Our aim is to provide more detail into this shift with added customer metrics disclosures. Again, strong growth across our core customer base, we are pleased to raise our forecast for accelerating ARR growth with even greater efficiency this year. Revenue for the first quarter was $75.2 million, representing 31% year-over-year growth. Subscription revenue was $74.7 million, up 32% year-over-year. Services revenue was $0.5 billion, down nearly 30% year-over-year. ARR exiting Q1 was $309.9 million, up 30% year-over-year.
Enterprise net new ARR was up more than 50% year-over-year to a record percentage of our mix. This in part informed the decision to shift customer success resources away from our lowest value customers, which we believe accelerated approximately $6 million of low-value logo churn that would have occurred over the course of 2023. This strategic change allows us to focus success, support, and growth resources around our healthiest customers while improving our total unit economics and overall profitability as we grow. We expect strong net new ARR growth in Q2 and accelerating total ARR growth over the course of 2023. The number of non-core customers contributing less than $2,000 in ARR declined in Q1 to 10,350 customers, down 31% year-over-year.
ARR from these customers was less than 5% of total ARR at the end of Q1. Just two years ago, the number of less than $2,000 ARR customers was nearly 16,000, which accounted for more than 50% of our total customer count, more than 12% of our ARR. Less than $2,000 customer logo count and ARR have each now declined sequentially each quarter for the past seven quarters as we focus our product and go-to-market strategies around mid-market and enterprise, a shift we've accelerated over the past 90 days. The ARR growth rate from customers that contribute more than $2,000 in ARR has exceeded our total ARR growth rate over the past seven quarters and was consistent with Q4 2022 at greater than 35% in Q1.
This focus cohort of more than 23,000 customers now represent more than 95% of our ARR. Given a healthy new business logo growth rate in this cohort, expansion from pricing changes this year, accelerating contribution from partnerships, and expanding use cases for our software, we believe that shedding this low-value growth anchor positions Sprout to optimize our growth potential. The number of customers contributing more than $10,000 in ARR grew 33% from a year ago. The number of customers contributing more than $50,000 in ARR grew 46% from a year ago. The number of customers contributing more than $250,000 in ARR grew 59% from a year ago. We also grew with an existing customer this quarter and now have two customers paying us more than $1 million in ARR.
Q1 ACV growth of 26% year-over-year accelerated from Q4 2022. New business deal sizes that more than doubled year-over-year, the exit from a number of low-value logos, and ongoing execution on our install base pricing changes each compounded the underlying expansion of seat counts and premium modules attach rate. We expect the ACV growth will further accelerate through Q3 before beginning to normalize to a year-over-year ACV growth rate more consistent with our prior trend. In Q1, non-GAAP gross profit was $58.8 million, representing a non-GAAP gross margin of 78.2%. This is up 180 basis points compared to a non-GAAP gross margin of 76.4% a year ago. Non-GAAP sales and marketing expenses for Q1 were $30.3 million, or 40% of revenue, up from 37% a year ago.
We're fortunate to hire well throughout the quarter and continue to make meaningful investments in our future, particularly in enterprise and customer growth roles. Non-GAAP research and development expenses for Q1 were $14.3 million or 19% of revenue, down from 20% a year ago. We continue to make transformative R&D investments to support the future evolution of our platform. Non-GAAP general and administrative expenses for Q1 were $12.5 million or 17% of revenue, down from 22% a year ago. We expect to deliver consistent GA leverage as a percentage of revenue moving forward. Non-GAAP operating income for Q1 was $1.7 million for a positive 2.3% non-GAAP operating margin, an improvement of 440 basis points year-over-year.
We are pleased to deliver record non-GAAP operating income and record non-GAAP operating margins even as we continue to invest across the business. Non-GAAP net income for Q1 was $3.4 million for net income of $0.06 per share based on 55.2 million weighted average shares of common stock outstanding, compared to a non-GAAP net loss of $1.4 million and $0.03 per share a year ago. Turning to the balance sheet and cash flow statement, we end Q1 with $187.2 million in cash equivalents, and marketable securities. This includes cash paid for our acquisition of Repustate and is up from $185.8 million at the end of Q4. Deferred revenue at the end of the quarter was $109.8 million.
Looking at both our billed and unbilled contracts, our RPO totaled approximately $187.8 million, up from $163.0 million exiting 2022 and up 62% year-over-year. We expect to recognize approximately 76% or $143 million of total RPO as revenue over the next 12 months. Last quarter, we talked about an invoice impact on Q4 billings. While our billings growth rate has historically and will continue to be lumpy from quarter to quarter based upon the mix of monthly and annual contracts, the difference this quarter between deferred revenue and RPO was again material. Without quantifying the impact, we continue to expect very strong billings and RPO growth. Operating cash flow in Q1 was positive $8.3 million compared to $5.4 million a year ago.
Free cash flow was positive $7.9 million for a record 11% free cash flow margin. In addition to strong efficiency, the ongoing shift to annual and multi-year contracts continues to have a positive impact on our free cash flow as we grow. Shifting to formal guidance. For the second quarter of fiscal 2023, we expect revenue in the range of $78.6 million-$78.7 million, or a growth rate of 28%. We've stripped a material amount of low-quality revenue from our model and expect it will accelerate through 2023 with a far healthier mix of business led by enterprise. We expect services revenue to decline year-over-year. We expect non-GAAP operating loss in the range of $1.8 million-$1.5 million. This represents an anticipated non-GAAP operating margin of -2% at the midpoint.
As a reminder, we execute a majority of our annual performance-based compensation in R&D hiring in Q2 each year. We expect a non-GAAP net loss per share of roughly $0.02, assuming approximately 55.7 million weighted average basic shares of common stock outstanding. In spite of accelerating our migration away from $6 million in low-end ARR during Q1, we are maintaining our full year 2022 revenue forecast to a range of $332.0 million-$333.0 million. This is an expected overall reported growth rate of 31%. We continue to expect services revenue will be lower than 2022 levels. For the full year fiscal 2023, we now expect total ARR to grow at least 225 basis points faster than reported revenue.
From our prior expectation of ARR growth to exceed revenue by 200 basis points and up greater than 33% year-over-year. For 2023, we now expect non-GAAP operating income in the range of $2.1 million-$2.4 million. This implies annual non-GAAP operating margin improvement of 225-235 basis points, up from our prior margin expansion forecast of 210-220 basis points. We're pleased to improve our rate of non-GAAP operating margin expansion and expect to deliver durable, profitable growth on a non-GAAP basis. We now expect non-GAAP net income per share of between $0.07 and $0.08, up from our prior range of $0.03 and $0.04, and assuming approximately 56.0 million weighted average basic shares of common stock outstanding.
In conclusion, we're very proud of the execution of our team, which underscores the resiliency of our business model and our value of our software. Social has never been more important or more valuable to our customers, and we believe we're in a unique position to pull away from our competitive set and emerge as a category-defining company in a $100 billion market. With that, Justyn, Ryan, and I are happy to take any of your questions. Operator?
Operator (participant)
Thank you. As a reminder, if you would like to ask a question, please press star then one on your telephone keypad. Our first question is from Raimo Lenschow with Barclays. Your line is open.
Raimo Lenschow (Managing Director)
Hey, thank you. Obviously a lot to digest here. Like, the main thing I think that the investors are struggling a little bit is like, ARR came in lower this quarter, you're actually raising the outlook for the year a little bit. Can you just kind of, you know, and you talked in the call already, like what are the factors that give you the most confidence here that that's turning around? It does kind of suggest some, you know, nice improvements in the back part of the year.
Ryan Barretto (President)
Hey, Raimo, this is Ryan. I'll start here. There's a few things that have given us a lot of confidence. One, as we tried to frame just the dynamics in the business and the differences between the sub $2,000 customers, which are now 5% of our customer base, versus the 95% in the greater than $2,000, which are growing really well at a 35% growth rate. On top of that, we're seeing just really great progress in our enterprise. From an enterprise net add perspective, we are seeing that group up 50% year-over-year. We have the benefit here also, given the timing of the call, of some data just coming out of April as well.
A lot of the churn dynamics that we saw in Q1 were very different than what we saw in April. From a top of funnel perspective, we saw a really nice comeback thanks to the great work of our marketing team and our inbound model from a top of funnel perspective, getting back to pre-pricing changes, volume levels, and then continuing to just see really great progress from a competitive standpoint in terms of the execution from the sales team. All those things are really putting us in a great position to have good predictability about the year and confidence in the team and the opportunity.
Raimo Lenschow (Managing Director)
One follow-up there. Like, obviously, you said you had 5% left in that lower cohort that we don't want. What's the confidence there? Like, could that be the one that kind of goes quicker than you at the moment think? What's the expectations for how that's kind of moving for the rest of the year? Thank you.
Ryan Barretto (President)
Yeah. Raimo, I think you're kind of at the remaining 5% in the sub $2,000 cohort, if I understood that correctly.
Raimo Lenschow (Managing Director)
Yeah. Yeah.
Ryan Barretto (President)
Yes. Great. Yeah. You know, I think as we look at that and what we saw in Q1, there was a bunch of things that were in play there that we mentioned in our prepared remarks in terms of, you know, those customers generally are pretty price sensitive. They're the folks that are the least mature in terms of usage of social media management and the importance of it for their business. If we think about those folks, they're also probably the most impacted by the macroeconomic. As we look at what we saw in the data, coming into and out of April, there have been a really good improvement there and progress made.
Our belief based on the data and what we see there is that the customers that remain in that bucket are stickier than the ones that left. We certainly think that over time, over the next few years, those will ultimately likely roll off within that pricing cohort. We also know that as we're adding new customers today, especially with the pricing changes and the opportunities we're seeing up market, that they're being replaced by much larger customers, much stickier customers with greater opportunity to expand.
Raimo Lenschow (Managing Director)
Okay, perfect. Thank you.
Ryan Barretto (President)
Thank you.
Operator (participant)
The next question is from DJ Hynes with Canaccord Genuity. Your line is open.
DJ Hynes (Managing Director and Software Lead Analyst)
Hey, guys. Ryan, of the Social Studio customers that have already made a migration decision, what's your sense in terms of where they fall on the spectrum of customer size or ARR contribution? I mean, I think there's a narrative out there that it's been the larger customers that have moved first, but would love to get your perspective on that and any thoughts on kind of the ARR opportunity that remains with Salesforce.
Ryan Barretto (President)
Yeah. Thanks, DJ. I actually think it is likely the opposite from what we've seen, both in terms of what we executed on so far and the visibility into the pipeline that we have in front of us. Obviously, we feel great about that partnership. You know, in terms of numbers, we talked about 250 last year. We've got close to 100 in the first quarter. We went live with the integrations in Service Cloud and Tableau in Q4, so we feel like we're just scratching the surface in that opportunity. We also know that Salesforce customers are typically on multi-year contracts. Probably, not many people remember this, but we certainly do.
We were still competing with Salesforce ending Q4 2021 right up into the first few months of our Q1 of 2022 and their end of Q4. In some cases, losing the customers that were going on ELAs. Obviously, we won a fair share of those companies, which is why Salesforce has decided to partner with us, but we see a tremendous amount of opportunity remaining within that base today. The deal sizes are gonna continue to impact our $10,000 and $50,000 and we believe $250,000 cohorts. From what I'm seeing in the pipeline, I would say that we're still pretty early on in the opportunity in front of us with a lot ahead of us, and those ACV opportunities still seem like they have a tremendous amount of potential.
The other piece I'd probably just highlight, which I think is important to note, we know that this opportunity and this relationship is strong. We've closed, you know, 350 over, call it the last year and a quarter. If you look at our $2,000 customer account growth over the last two years, there's been about 10,000 new logos added. It's certainly a good opportunity for us. We like the ACVs. We see a tremendous amount of opportunity at Salesforce and outside of Salesforce.
DJ Hynes (Managing Director and Software Lead Analyst)
Yep. Yep. Makes sense. As a follow-up, I'd love to kind of double-click on what's happening inside the Twitter ecosystem. I mean, obviously it was nice to see the announcement today. You know, the press release was kind of light on details. There's been lots of changes inside that organization, lots of headlines around the kind of their strategy. What is your relationship there today? You know, how do you think it might change, and, like, what are the risks we should be thinking about as it pertains to kind of how Sprout works with Twitter?
Justyn Howard (CEO)
Yeah. Yeah. Great question. This is Justyn. you know, there's definitely a lot of commentary around some of the ecosystem changes, some of the parts of the market that they may not be prioritizing the same way that they did before, and a lot of the plans that they have for the future. I think as it relates to Sprout, the key takeaway is that this is a very strategic relationship, obviously a long-standing one, that falls into a different bucket than where a lot of the commentary has been.
As far as where we are, both in that relationship and with that team, you know, upon the transition, we got to work early, making sure that we were collaborating closely with that team, making sure that we established the mutual value and strength of that relationship. As you saw in the announcement today, got off to a fast start, in continuing that strategic relationship. While there may be, you know, more change happening within the marketplace, it was important for us to set the foundation for the next several years, and work with that team tightly, as early as possible, to get that done. We're really happy about that progress.
You know, as I mentioned, a lot of the news and headlines that we're seeing out of the kind of ecosystem more broadly, fall into a different category of partners than where we sit.
DJ Hynes (Managing Director and Software Lead Analyst)
Great. Thank you guys.
Justyn Howard (CEO)
Got it.
Ryan Barretto (President)
The next question is from Arjun Bhatia with William Blair. Your line is open.
Arjun Bhatia (Co-Group Head of Technology, Media, and Communications)
Hey, guys. Thanks for taking the question. Just following up on some of the non-core customer trends. If we look at it, if we look at kind of what drove the churn, would you attribute that more to the pricing changes or the reallocation of the kind of customer success resources that maybe were dedicated to those customers in the past? You know, maybe I would. The flip side of that, I would love to hear a little bit about what that customer success reallocation might do in the core customer base in the upmarket that might get a little bit more, you know, attention, from the sales team.
Justyn Howard (CEO)
Yeah. Yeah. Great question. This is Justyn. I'll start us off there. Ryan may have more to add. It's a combination of things that we think went into that, the impact that we saw in Q1. I think to start, that has historically been an unhealthy and declining part of the business for the past several years. It was one of the sort of primary catalysts for some of the changes that we made. It's a part of the market that is, as we mentioned earlier, less far along with their journey, less sticky in general, less inclined to grow. NDR from that group was, as I think we mentioned, right around 100%.
Certainly very different from the bulk of our business. The 95% that we've shared is growing very differently. When you layer that on top of some of the macro conditions, the pricing change, and the shifts we made internally in terms of resources, all of those things together contributed to some of that acceleration. I think when we think about what that reallocation internally does, we touched on a few of these things.
We really think that there's an opportunity here to see better growth, better new business, et cetera, as we align the entirety of the company around what we view as higher value, higher potential customers. Not only improving sort of some of the fundamental financial mechanics of the business by cycling out some of this lower quality revenue, but also giving us upside because we're paying more attention, we've got more resources pointed at opportunity elsewhere in the market in that 95% of our, of our revenue base, where we felt like we had a lot of headroom, and we wanted the talented people that work across our organization all pointed there.
I think we saw some of that, you know, we referenced the 50% year-over-year ARR growth in enterprise as well as some of the other performance, solid performance that we saw across the rest of the business, all contributing to that. In the backdrop, not just the shift of resources that we made, but also just the focus of additional resources in the future, whether it be product roadmap, sales, and marketing talent, et cetera, all pointed in the same direction is gonna be really valuable for us as a company.
Arjun Bhatia (Co-Group Head of Technology, Media, and Communications)
Perfect. Thanks, Justyn, that's helpful. You, you announced this partnership with OpenAI, and you're starting to, it seems like think about, you know, integrating some generative AI capabilities into the platform. How do you think the advent of generative AI might actually change the role of a social media management or a marketing department? How do you position Sprout kind of to be aligned with some of those trends longer term?
Justyn Howard (CEO)
Yeah. Yeah. Great question. I think, you know, our role in this is to make sure that we're using generative AI, ML, any of the adjacent capabilities to give our customers superpowers that allows them to be more effective and more efficient in the things that they do. Where we can improve their optimization, where we can improve their content creation, where we can just make, we think over time, dramatic improvements to the efficacy to the output, et cetera, of our customers and allow them to do have much greater reach, much greater bandwidth essentially across social channels. Our job is to build the tools that allow them to do that and build them in ways that are unique to social, that are unique to Sprout.
That's where we're focused. Some of that we've talked about already, introduced already. A lot of the more exciting parts of that are yet to come. You'll hear more about those from us as we begin to roll more of that out. Ultimately, we expect that we should be a multiplier for our customers' efforts. We should be eliminating some of the redundant tasks and allow them to focus on the parts of the work that are more centered around engaging with our customers, building healthy relationships, really expanding their marketing messages, et cetera, and let some of the rest fall in the background and let Sprout take care of that.
Arjun Bhatia (Co-Group Head of Technology, Media, and Communications)
Perfect. Thanks for taking my questions.
Operator (participant)
The next question is from Parker Lane with Stifel. Your line is open.
Parker Lane (Director)
Hi, guys. Thanks for taking the questions. Ryan, some really nice traction in the Salesforce partnership in 4Q and then again this quarter. Curious if you could double back to your comment on the confidence you have in the linearity of that relationship through the year and the number of migrations. Is that driven by, you know, things actively in the pipeline to visibility into contract durations there? Can you just dig into that a little bit more, please?
Ryan Barretto (President)
Happy to, Parker. It is a combination of those things, certainly from a visibility into the pipeline that we're seeing now and the amount of opportunity, we feel really good about the customers that we're working with. I think I've mentioned this in the past, but we have a joint Slack channel between ourselves and the Salesforce team, and it might be one of the most active channels we have at Sprout with leads going in both directions and collaboration happening in both directions. We're really excited about that. We're being pulled into more conversations, both from a customer perspective, but also an enablement perspective with the sales teams over at Salesforce. What started as the marketing cloud sales teams has quickly evolved into other teams, including Service Cloud, with that integration we released in Q4.
On top of that, we've got a bunch of events coming up that we're really excited about. We'll be at the World Tour next week with our head of solution engineering, Colleen, having a speaking opportunity there, and then we're gonna be at Connections later this year as well. Combination of visibility into the current pipeline as well as just ongoing traction on a daily basis in terms of lead pass and collaboration on the open opportunities.
Parker Lane (Director)
Got it. Understood. Then shifting gears there to the agency channel, I was curious to hear a little bit more about resource allocation there. You know, you talked about the prioritization of customer success and growth resources behind the highest tier customers, but just curious if you could give us a sense of how that is impacting the agency partner channel and what sort of traction you're seeing there at the start of the year here.
Ryan Barretto (President)
Yeah. The agency opportunity is one we're really excited about. you know, I think in the past we've shared in certain parts of that, especially in more of the SMB side of the house, those folks have probably had more macroeconomic pressure on them as well as more price sensitivity. The way that we're approaching that channel today is similar to what we've done in the past in terms of investing in those businesses to really have them becoming our best referral source, our best pipeline source. We've continued to see that opportunity from a referral perspective, where a lot of these agencies today have great brand partnerships and brand relationships, and they're bringing them to Sprout and then contracting directly with us.
I think a little bit of a dynamic change in terms of the way that business is getting done in the agency world. I think it'll be more referral versus direct as we move forward. We've set the team up from an org structure and strategy perspective in that way, both from a direct sales and a customer success perspective.
Parker Lane (Director)
Got it. Appreciate the feedback. Thanks again.
Ryan Barretto (President)
Yeah, thank you.
Operator (participant)
The next question is from Elizabeth Porter with Morgan Stanley. Your line is open.
Elizabeth Porter (Executive Director and Equity Research Analyst)
Great. Thank you so much. I wanted to ask again on the $50,000 kind of customer ads. If we just look at the absolute kind of volume of ads, it, you know, looks like it was the lowest level since 1Q 2021, and about half the rate of ads that you had in 1Q 2022. You know, I understand the macro is tougher, but, you know, just with the incremental resources you're putting behind large customers, can you help us unpack some of the softness from the absolute logo ad perspective? Did customers drop below that $50,000 threshold? Could we see some re-acceleration later or any competition at the high end to call out? Thank you.
Ryan Barretto (President)
Yeah, I think it's a. Thanks, Elizabeth. I think it's a combination of things there. I do think that there's opportunities from a re-acceleration standpoint. You know, I think some of this is that just the linearity of the quarters for us as we think about, you know, the shape of a fiscal year, Q4 being our highest coming off of that. I think that there's a healthy building of pipeline that's happening across the enterprise. I do wanna point back to, you know, just the comment that we shared before around our net ARR being up over 50% from the enterprise perspective. We feel really good about the opportunity in front of us here, the way that the teams are both building pipeline as well as executing on the deals.
you know, part of the reason we just disclosed a little bit more about things like the $250,000 opportunities in front of us as well in terms of the relative size of those opportunities that are coming in.
Elizabeth Porter (Executive Director and Equity Research Analyst)
Got it. Then just as a follow-up, I recognize it's early to be thinking about 2024, but can you shed some incremental light on the drivers that you expect to provide that durable growth against potentially a harder comp just as pricing changes in Social Studio benefited 2023 growth? You know, I know you highlighted some factors like a bigger TAM, but just how quickly can those play out as it relates to 2024 growth? What are some more specific drivers of your confidence? Thank you.
Joe Del Preto (CFO)
Yeah, this is Joe, Elizabeth. Happy to answer that. I think what gives us the confidence here is really what we've kind of been talking about is our move up into the mid-market enterprise and the investments we're making. If you think about it, we've just started making those investments over the last, like, 12 months or so, and it's probably the area where we're hiring and focusing the most. If you look at, for example, the, you know, the 50% increase in net new ARR from enterprise, if you look at the fact that our, that our new, you know, new ACVs across the organization doubled on a year-over-year basis. We just feel like the deals we're getting into now are much larger, and we believe we're just scratching the surface of that part of our business and those investments.
As we get into the back half of this year and we get into 2024, and then we also think about, for example, some of the investments we're making on the R&D side as the momentum we have in customer care and social listening and some of the other things that we've talked about. We just feel like the growth that we're seeing in the most healthy part of our customers, and then we also look at the NDR that we're driving, the expansion of those customer base. I think all of those give us a lot of confidence going into 2024.
Elizabeth Porter (Executive Director and Equity Research Analyst)
Thank you.
Operator (participant)
The next question is from Michael Turits with KeyBanc. Your line is open.
Michael Turits (Managing Director and Senior Analyst)
Hey. Hey, guys. Thanks very much. Thanks for giving some of the color both on, obviously, on the Salesforce ads and then on the linear growth and net adds from here. I was wondering if you could help us, you said that you think there's quite a big opportunity ahead of you, how long do you see this opportunity as lasting? In other words, do you see that it's mostly a 2023 opportunity or do you see the Salesforce migrations as continuing into 2024, what might be the magnitude of that impact in 2024 versus 2023?
Ryan Barretto (President)
Thanks, Michael. This is Ryan. I do see it going through 2024. I mean, the public announcement on that date is the end of 2024. From what we know of Salesforce contracts, they're usually multi-year contracts from what we've seen in terms of conversations with customers. They are spread out over the next, you know, 18 months to two years. If we just think about the Social Studio opportunity, I do think that we're, you know, we're gonna see it through 2023, and we're gonna see it through 2024. I would also just highlight, and we shared this a little bit before as well in terms of our perspective around the overall Salesforce ecosystem.
You know, the low-hanging fruit is the Social Studio customers, but, you know, we're building this partnership and our integration strategy and our product strategy to be one where if you're a Salesforce customer, Sprout Social is the very best solution for you. We know that there's a couple hundred thousand customers in Salesforce. Yeah, the Social Studio one's, you know, end of 2024, the Salesforce opportunity itself and the ecosystem opportunity itself is much larger and goes well beyond 2024.
Michael Turits (Managing Director and Senior Analyst)
Great. I wonder if you could comment on the competitive landscape a bit. You're moving upmarket. Sprinklr's moving... I wouldn't say they're necessarily moving downmarket, as Adam said, but they have a lower-priced offering now. Are you encountering them more, and do you feel like that's a headwind in any way?
Ryan Barretto (President)
Yeah. From from a competitive perspective, we have not seen anything in the data. As I look ahead in Q2 and beyond, we have not seen any change to the customers Feedback from that product. We're seeing them certainly a lot more in our enterprise space. We're in more deals than ever before from a large enterprise and an enterprise perspective. We feel really great about the win rates that we've seen within that space. So many of the customers that we have the opportunity to share details on are customers that are moving over to the Sprout platform. I think probably the only other thing I'd say there is it'll be interesting to watch over the next little while how that materializes.
We feel really great, obviously, about the go-to-market motion that we've built and we've honed over, you know, 13+ years. Our 30-day free trial continues to be the best weapon in the space, and we've built the foundation of our business there, where the majority of our customers actually get their hands on the keyboard and are in the product. We get excited about the opportunity to have others do the same so they can do an apples to apples comparison with Sprout. No, not seeing any material change or difference in the market. Certainly under enterprise and in enterprise, we're in more deals against upmarket competitors like Sprinklr than ever before.
Michael Turits (Managing Director and Senior Analyst)
Thanks, Ryan. Thanks, everybody.
Operator (participant)
The next question is from Matthew VanVliet with BTIG. Your line is open.
Matthew VanVliet (Vice President and Equity Research Analyst)
Yeah, good afternoon, guys. Thanks for taking the question. Maybe Ryan, a follow-up on the last one from a little maybe different viewpoint. You know, I guess what mix of your deals, go to a more formal sort of RFP process, or at least a multi-vendor evaluation from best that you can sort of surmise from the data? Maybe more importantly there, how have win rates tracked, since prices were raised? Are you seeing any major changes in that, albeit only a few months, but, curious what you're seeing on sort of both of those fronts?
Ryan Barretto (President)
Yeah. Thanks, Matt. From an RFP perspective, certainly more common in the enterprise. We definitely are more RFPs over the last little while than we'd historically been in, you know, if I rewind a few years ago, and that just goes into the motion of the enterprise. We feel really great about that opportunity. Certainly over the last couple of years, we've added resources from a solution engineering and a legal perspective to enable us to be able to respond well to those RFPs and win those deals. We feel really good about that. We're also, in many ways, asking those customers to go outside of their RFP process and besides checking the box to actually get into the product.
We really get excited when customers go beyond that process and actually use the technology to inform their decision versus just checking boxes on a spreadsheet. A lot in the enterprise. I would say that underneath the enterprise, it's definitely more rare. Those mid-market companies, certainly in the SMB and the agency are not really doing RFPs. From a competitive standpoint, you know, certainly in the RFPs, you'll see multiple competitors. It's usually in the neighborhood of three, might be more than that, but it's usually three-four that are the main competitors that end up in that space.
Even in the underneath the enterprise and the mid-market and SMBs, it tends to be more than just us that are competing for the opportunity, unless it is a customer or a company that's used our product before. That again, I think is a differentiator for Sprout. That free trial and the volume of customers that we've had use the product and come in and use the trial over time enables us to have really good word of mouth. Oftentimes we'll see that, we'll see it in the trial surveys that the customer just evaluated us because they've used us before. I think just to round out the question, we feel really great about the competitive win rates. Q1 was another strong quarter in terms of our ability to compete with everyone else.
We're feeling great about the future here.
Matthew VanVliet (Vice President and Equity Research Analyst)
All right, very helpful. Then, Joe, on the margin and free cash flow side, you know, a couple of good quarters here, especially since the prices were raised. How should we think about sort of that on an incremental basis flowing through the model versus using some of that upside to continue to push the accelerator on growth and hiring, you know, understanding that there's a little bit dropping out of the bottom of the bucket here. What's sort of the overall viewpoint on the upside that you're gaining from the price increases?
Joe Del Preto (CFO)
Yeah, Matt. I think you saw a little bit this in Q1. We overperformed on our Q1 guidance, we didn't raise the full year on the operating income as much because we wanted to reinvest some of that back in the business. I think you're gonna continue to see that throughout the year. I think we have a high level of confidence to continue to outperform and reinvest that money 'cause we just see the opportunity. I think to the extent that we continue to do that, you'll see us reinvest a majority of that money into the business, but not to the extent that we have to not stay within that 100 to 300 basis points. I don't think you'll see us go backwards from the guidance we've given.
We expect upside to the guidance, we expect to the extent that we overperform, but you'll see us still, you know, invest a majority of that back into the business right now, just given the opportunity in front of us.
Matthew VanVliet (Vice President and Equity Research Analyst)
All right, great. Thank you.
Operator (participant)
The next question is from Clarke Jeffries with Piper Sandler. Your line is open.
Clarke Jeffries (VP and Senior Research Analyst)
Hello. Thank you for taking the question. I just wanted to clarify that your current framework on a dollar basis for those non-core customers is that, maybe exiting the year ARR contribution from that segment would be flat to down or sort of where guidance, kind of implies that ARR number goes. I think as a part of that, could you help us understand on a relative basis how much of those non-core customers are monthly versus annual customers, in terms of when they churned or were they at renewal, just to understand the pricing effect?
Ryan Barretto (President)
Yeah. So Clarke, a couple things there. We don't necessarily break out on the second part of your question, the percentage of that, of the, of that 5% that's monthly to annual. They obviously skew more towards monthly, but without giving out, you know, a direct percentage, you can definitely make the assumption of that. As far as how that flows through the rest of year and end of ARR, I expect, like we talked about this, we think it's gonna be a multi-year, you know, process where we talked about this on the earnings release or on the prepared remarks, where those customers kind of cycle out of the business. We don't think it has a material impact, you know, to this year's ending ARR.
I think you'll see it slightly down from the 5%, but it's not gonna be a huge impact on 2023.
Clarke Jeffries (VP and Senior Research Analyst)
Perfect. Just a clarifying question on, you know, you've mentioned a couple times enterprise ARR up over 50%. How are you defining that? Is it fair to call, you know, maybe the business into three segments, enterprise, mid-market, and SMB?
Ryan Barretto (President)
Yeah. The way we split out those segments is, you know, SMB is below 50 employee businesses. You know, 50 employees to, 1,000 employees is mid-market, and then over 1,000 employees is enterprise.
Clarke Jeffries (VP and Senior Research Analyst)
Perfect. Thank you very much.
Justyn Howard (CEO)
This is Justyn. I think a distinction there to make is just that our organization of that, of the customer base is a little more nuanced in that we see there is part of, for example, the SMB market that is more socially sophisticated, that is spending more like a mid-market. That is still a very attractive part of the market for us if they've advanced beyond those very low price points that we're beginning to shed. Similarly with mid-market, there are mid-market companies that outspend some enterprises, et cetera. When we think about the total opportunity and kind of where we're focusing our resources, I wanna make sure not to conflate that less than $2,000 bucket with the entirety of the SMB. We don't quite view it that way. Does that make sense?
Clarke Jeffries (VP and Senior Research Analyst)
Yes, absolutely. Perfect.
Ryan Barretto (President)
Maybe one last data point on that that we're excited about, if I think about one of the recent deals that we closed in the SMB space is a $100,000 ACV deal. To Justyn's point, it, those sophisticated customers can exist in these spaces in SMB and agency as well. We're certainly winning those businesses and supporting those customers.
Clarke Jeffries (VP and Senior Research Analyst)
Very helpful color. Thank you, Ryan.
Operator (participant)
The next question is from Rob Oliver with Baird. Your line is open.
Rob Oliver (Senior Research Analyst)
Great, guys. Thanks for taking my question. Ryan, you guys talked about this a little bit, but my first question would be for you just around, you know, some of those increased dollars that are gonna be moving up to sales and marketing focus more on, I think, high-end and mid-market and enterprise. You know, what's your thought around, you know, kinda use of those dollars, support incremental enterprise salespeople? Talk about, you know, how your sales motion has evolved. I mean, I know you said you've been honing it for quite some time, but, you know, certainly this quarter would point to, you know, you guys are even accelerating that move even more towards upper mid-market enterprise.
Just get a sense for, you know, where you are with enterprise sales reps and how that motion has evolved, and then a quick follow-up. Thanks.
Ryan Barretto (President)
Yeah. Yeah, absolutely. Yeah, you're spot on there. We see a tremendous amount of opportunity in the enterprise. We've been investing in the enterprise, predominantly in enterprise AEs and enterprise leadership, as well as some solution engineers to come alongside of them and some outbound BDR reps to support the pipeline generation. From a customer success perspective, you know, we shifted some of those resources that were on the non-core business up into, you know, the strategic customers in mid-market and enterprise. We're doing much better job there as well, helping those customers, improving the ratios, enabling us to not just improve that gross retention, but also to give us a lot more of a foundation to expand from. Investment's going through all of those today.
In terms of the dynamics of what's changed on the sales motion, you know, it's a lot of the same things that we've historically been doing. We've been adding more talent that's been used to selling into the enterprise. The key for us is folks that have the sophistication and the capabilities to close six-figure and seven-figure transactions, but also have velocity in the way that they approach the business. This is still not one of those businesses where a rep's gonna close, you know, one or two deals a year. They're gonna be closing, you know, multiple accounts in a quarterly basis, probably more of those on a monthly basis. It's a velocity play for us as well as sophistication upmarket. The other thing I think is probably different that had shared just in Matt's question before you is just RFPs.
We are doing more of those, you know, over the last 12 months than we've ever done before. We're refining our approach to how do we differentiate in an RFP process. The thing that is underlying all this that we really get excited about is getting the customers in the product, making sure that they're in there before they sign a contract with us, proving that the product works. You know, one of the things that has really stood out in competitive differentiation is our speed to value and our usability and the sophistication of the platform. For us, we want our customers in there running reports. We want them connecting all of their social profiles. We want them doing social listening. We want them not just experiencing our technology, but our people, so that they're really mitigating risk.
We found that, especially in a time like this, customers appreciate having that certainty before they make a decision. They also appreciate the confidence that we have in leading with the product. Those are some of the things that have evolved that we've added to over the last little while.
Rob Oliver (Senior Research Analyst)
Great. That's helpful. Thanks, Ryan. Just a general question for any of you guys. I know DJ asked a little bit earlier about ChatGPT, we saw the press release you guys put out. Just thoughts, I know we're gonna get more details on this, but, you know. Clearly, some of what you guys talk about in the press release are enhancements to things that we already hear in our checks you guys are doing, which have already saved a lot of time for social media people. It's just got me thinking about, you know, a question I think we're all trying to figure out right now about, you know, kind of seat-based versus, you know, other types of pricing.
You know, to the extent that, you know, there is a tremendous amount of automation from ChatGPT-driven and more value driven through, you know, the Sprout platform, how do you think about that, you know, relative to is it a just, you know, factored in when you buy Sprout? Is it something you pay an add-on price for? Is it something that would be an additional module? Is it too early to think about that? Thank you.
Justyn Howard (CEO)
Yeah. Not too early to think about, but probably a little too early to indicate where we think that goes. I think some of the ideas that we're excited about that we're working on internally would probably fall into something that would be monetized. But I think importantly, you know, when we think about the average social media manager today, the average person that's in our platform is has more to do than they can possibly manage. Sprout certainly makes that better, but they're going to continue to be looking to expand those teams, not shrink them, even as the work gets easier. I think a lot of that has to do with the engagement, the organic conversations that are happening through social, the publishing of content, et cetera.
For all of the potential that we see with ChatGPT and others, I think that the inclination is going to be to offload more of the routine work that is keeping them from having that time to engage with their customers, to put that time into their campaigns and the content that they publish, et cetera. I think over time, it's gonna meter out that we're still gonna have larger teams two years from now than we do today. I think that we're still gonna see seat growth. I think they're gonna be able to tackle more of what's on their plate and do a better job of it with a lot of the things that we're gonna build.
Certainly, there are going to be opportunities for us to monetize that differently than we've thought about in the past.
Ryan Barretto (President)
The maybe one other thing I'll just add there, that I think we all get really excited about is obviously we're sitting on a really important, valuable set of data. All of the work that we're doing with ChatGPT and AI in general, you think about the value of that data, and you think about speeding up the discovery of insights, and you think about making those insights more usable and able to have wider reach in an organization to make better business decisions.
If we think about that listening product today, we know that when customers are leveraging this appropriately, they get these data points and these insights that allow them to make great business decisions on products they might create or innovate on, competitive positioning, markets they wanna go into. When we think about some of the opportunities in front of us, we believe that we can really speed up the manner in which they get those insights so that they get even more utility out of these things, and that social data becomes an even more important part of their business. A lot of the work that we're doing here will impact all that.
Rob Oliver (Senior Research Analyst)
Great. Helpful. Thank you guys very much.
Operator (participant)
There are no further questions at this time. I'll turn it over to Justyn Howard for any closing remarks.
Justyn Howard (CEO)
Great. Yeah. Just wanna thank everyone again for the time today, and specifically for the opportunity to get a little more nuanced around, you know, this duality that exists in our business with the 95% of our revenue performing incredibly well, and where we saw the opportunity and kind of the impetus around the realignment and the pricing changes, to really focus and accelerate there, and how that's been playing out so far. Certainly more to come over the next several quarters as that continues to accelerate and as we continue to drive the performance that this was all meant to drive. Appreciate your time and energy, and we'll look forward to chatting with a lot of you more over the next couple of weeks. Thanks, everyone.
Operator (participant)
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.