Prepared remarks
Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprout Social Second Quarter 2025 Earnings Call. I would now like to turn the call over to Alex Kurtz, Vice President of Investor Relations, Corporate Development. Please go ahead.
Thank you, operator, and welcome to Sprout Social's Second Quarter 2025 Earnings Call. We will 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, Ryan Barretto; and CFO, Joe Del Preto. 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, including our Q3 and 2025 outlook 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 these risks and other important factors that could affect our actual results, please refer to our annual report on Form 10-K for the year ended December 31, 2024, as well as our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2025, to be filed with the SEC. During the call, we will 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 the reconciliations to the most directly comparable GAAP financial measures are included in our second quarter earnings 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 Ryan.
Thank you, Alex, and welcome to our second quarter earnings call for fiscal 2025. We reported second quarter results with revenue of $111.8 million, representing year-over-year growth of 12% and non-GAAP operating margin expansion of almost 400 basis points. Our current remaining performance obligations, which reached $251.6 million, represented 18% year-over-year growth. Our go-to-market delivered another solid quarter with 18% growth in the $50,000 and above ARR customer cohort. We landed strategic wins with global brands like Honda, Cigna, Kimberly-Clark, Authentic Brands Group, LaCroix, Smuckers, the U.S. Department of Transportation, and Texas Tech. These customers demonstrate our continued execution and strategic fit with the most socially sophisticated enterprise customers. During the quarter, Sprout continued to earn industry recognition. We secured 164 leader badges in G2's latest reports with top rankings in enterprise social media suites, analytics, and customer service across North America, EMEA, and APAC.
We also earned TrustRadius 2025 top-rated awards in 8 categories, including social media marketing, audience intelligence, and online reputation management, reinforcing the meaningful business outcomes our customers achieve with Sprout. Additionally, we received Silver for Best Influencer Marketing platform at the Global Influencer Marketing Awards and a Silver Shorty Award in the micro Influencer Strategy category for our own innovative influencer strategy that turned Sprout's listening data into thought leadership and helped shape industry conversations. Today, I'm excited to begin by discussing our recent acquisition of NewsWhip, a leader in AI-powered predictive media intelligence. Headquartered in Dublin, Ireland, NewsWhip was a privately held company with approximately 70 employees, and we couldn't be more excited to welcome the team to Sprout. NewsWhip has become a mission-critical tool for some of the largest global brands, media companies, and agencies for crisis management, real-time media monitoring, research, and strategy.
Strategic customers such as Nissan, The Associated Press, a Fortune 50 media company, 2 Fortune 50 technology companies, and a Fortune 100 consumer beverage company all rely on NewsWhip for real-time monitoring of news articles, social posts, and other media related to their brand, products, and their competitors. I want to outline our strategic rationale for acquiring NewsWhip and why we see this as a pivotal milestone that, combined with our existing product roadmap, will drive unique crisis management, trend detection, and AI offerings from Sprout over the next several years. First, NewsWhip's AI-powered predictive media intelligence can help identify which stories and narratives are about to go viral. This has become mission-critical for brands as news stories can quickly escalate across various social media platforms. NewsWhip provides 3 core values: real-time alerts and predictive analysis, key insights into emerging trends and conversations, and sophisticated AI alerting capabilities that are leveraged by crisis management teams and the C-suite.
Over time, we expect to enable early crisis detection from NewsWhip to seamlessly flow to customer care teams working in the Sprout platform, creating a truly differentiated end-to-end experience, which transforms insights into action. We also believe integrating NewsWhip's capabilities with Sprout's listening products and its extensive social interaction data will create a comprehensive 360-degree view of social and media ecosystems. Together, we will combine predictive media intelligence with agile social action to drive impactful earned, owned, and paid media strategies. This integrated approach will enable real-time trend detection, targeted engagement, and clear ROI reporting, delivering measurable outcomes for businesses. During the second quarter, NewsWhip launched its AI agents, which have garnered strong interest among NewsWhip's larger customers with over 70% of brand customers leveraging them in just over a month.
NewsWhip's AI agents proactively scan global news and social data, identifying stories and themes gaining momentum before they peak and giving brands the strategic edge to own the narrative. With the massive volumes these brands have to manage, these agents are designed to separate the signal from the noise and to drive clear efficiency for practitioners while also ensuring they never miss a critical moment. NewsWhip will enable Sprout to enter the mission-critical PR and crisis monitoring space with a new offering. These are potentially new buyers for Sprout, both new logos to Sprout as well as growth opportunities within our existing customers. In both cases, these are often groups with long-standing dedicated budgets. We're incredibly excited to discuss NewsWhip's capabilities with them in the coming weeks and months. While there is some minimal customer overlap, we believe Sprout's full go-to-market distribution will accelerate these opportunities.
We also believe that NewsWhip can further strengthen our gross retention goals among larger enterprise customers given its stickiness with crisis management teams. NewsWhip has built an impressive list of top-tier customers over the last 10 years with contract sizes often at the higher end of Sprout's customer TCV range. Finally, we are thrilled about the future impact we expect the NewsWhip team members will have at Sprout. This agile team has built a must-have tool for some of the biggest brands, and we've been really impressed with the NewsWhip engineering talent shaping the future of AI-driven real-time media monitoring. I'm also pleased to share that NewsWhip's Co-Founder and CEO, Paul Quigley, will step into the role of General Manager for our Listening business, overseeing both NewsWhip and Sprout's listening products. Paul is a great executive and will be a tremendous asset in leading this critical part of our business moving forward.
Before handing the call to Joe, let me briefly take you through some customer wins and our 4 key growth drivers that include: winning the enterprise, driving customer health and adoption, expanding our partnership and ecosystem, and driving improved account penetration. To win the enterprise, we intend to expand the pipeline, close more 50,000-plus deals, and accelerate adoption with a product roadmap built for enterprise needs. Let's start with the key product releases in the quarter. For influencer marketing, we reimagined our influencer marketing platform, now featuring a refreshed design and advanced AI-driven capabilities. As social media becomes central to brand discovery, influencer marketing is an increasingly important strategy to drive ROI. Key updates include: AI-powered natural language discovery for search, driving more authentic and impactful activations, a customizable brand safety solution to align creators with brand values, and a new creator vetting feature that drastically reduces time spent in discovery so brands can refocus on their more strategic creative tasks.
In Care, we introduced innovations for proactive customer engagement through enhanced efficiency and smarter workflows. With the introduction of Queues, Care teams can easily organize high volumes of inbound customer interactions by urgency, topic, or customer segment, significantly reducing response times and ensuring critical conversations receive immediate attention. Additionally, new bot integrations and AI enhancements automate routine interactions, proactively resolve customer issues, and free up care agents to focus on higher-value tasks. These innovations mean faster resolution times with increased agent productivity and more tailored and effective support for customers, ultimately cultivating greater customer satisfaction and loyalty. Social media has become central to product discovery and purchasing, which means brands must deliver fast, personalized social care across platforms or risk losing vital customer trust and business.
In fact, 73% of consumers say they will buy from a competitor if a brand doesn't reply to them on social. While reactive support is expected, the new innovations in care by Sprout empower brands to deliver proactive care, turning positive interactions into business assets that build loyalty and attract new customers. For governance, we enhanced brand safety and customer data handling with the launch of our new product, Guardian by Sprout Social. Guardian supercharges social customer care and social media management with innovative AI-driven tools that reduce brand risk, helping our customers securely and confidently handle their customer data. Guardian is a huge asset for security-conscious and highly regulated industries, providing features like blocked words, data masking, and secure forms. We're also pleased to share several strategic enterprise wins this quarter. The first win was a 7-figure new business deal with a global brand management company, consolidating their marketing, care, and customer experience under one tech stack.
With Premier Success, listening, and premium analytics, they can unify social strategy across 50-plus brands, ensuring consistent governance and workflows. They can also boost efficiency with powerful and intuitive reporting tools while reducing costs and complexity by consolidating their social management, publishing, and analytics into a single platform. The next story we want to highlight is an almost $900,000 expansion deal with a global health technology company that switched from a competitor due to its overly complex workflows. They were seeking a seamless care agent workflow with their Service Cloud integration. With Sprout, this company can amplify its brand messaging with over 60 publishers and 15,000 advocates, expanding reach and boosting brand awareness. Sprout also enables real-time insights for deep customer behavioral analysis. Our Service Cloud integration allows them to manage 90,000 customer support requests per month to increase customer satisfaction.
They can also safely host data in the EU in a compliant manner, which is critical in a highly regulated industry. This final customer story is a $360,000 expansion win, highlighting the growth opportunities that exist within our customer base. This Fortune 500 global healthcare company, already a 7-figure Sprout customer for marketing, care, and customer experience, expanded to include Listening, Premium Analytics, Influencer Marketing, and Employee Advocacy. They are now able to unify social efforts globally for consistent brand messaging worldwide and to elevate brand reputation by tracking sentiment and covering key drivers of perception and benchmarking against competitors in real time. Our second growth driver is a sharper focus on customer health, onboarding, and adoption to maximize long-term value. This quarter, we introduced 2 new support offerings, Accelerated Support and Accelerated Support Plus, while also enhancing our existing Premier Success Light offering.
Features include 2-hour response times and access to dedicated customer experience specialists. Since launch, these offerings have gained strong traction, driving new deals and significant interest across our Premier Support suite. Our third driver is our continued investment in our partnerships with strong global partners that bring Sprout into strategic accounts and expand our reach into some of the largest digital marketing budgets. We continue to ramp our partnership activities through the first half of 2025. As we mentioned last quarter, our social network, technical integrations, and go-to-market partnerships provide what we believe is a lasting competitive advantage in the market. As we move into the second half of the year, we'll be expanding our partnerships and capabilities across key networks, including publishing, reporting, and listening capabilities with Blue Sky, engagement and reporting with Reddit, listing with TikTok, and building out personal profile reporting with LinkedIn.
Our fourth growth driver focuses on deepening customer engagement through use case expansion and premium modules with our sales team seeking to drive greater value across both new and existing customers. Expanding our trust and compliance offerings at Sprout has been a key priority. As I mentioned earlier, this past quarter, we launched Guardian, a solution enabling our customers to securely manage their data while still personalizing interactions and enhancing brand safety. We've seen strong interest across highly regulated industries, especially healthcare and financial services, closing our first deal within just a couple of weeks of launch. We're even seeing demand from less regulated industries as organizations increasingly recognize the inherent value of having these capabilities readily available. The acquisition of NewsWhip will significantly enhance our AI, Listening, and Care capabilities, enabling us to expand use cases and elevate our premium module offerings.
We're excited to share more in Q3 as we begin introducing NewsWhip to our customers. In closing, I'd like to revisit our discussion last quarter of social search and the undeniable long-term trends we see playing out and how the NewsWhip acquisition ties into this theme. As traditional search continues to trend towards 0-click with AI, current content strategies face headwinds with traffic changing in real-time. We know nearly half of Gen Z starts product discovery on platforms like TikTok and Instagram and over 80% of consumers say social is the top channel for product discovery. Organic website traffic is declining, while paid search costs are rising. Social has become the new front door for discovery, but most brands are optimizing for it or they're not getting there first. Our ability to drive discovery on social platforms is critical and translates into AI search where platforms like Reddit increasingly contribute to source content and in traditional search, where both Reddit and Instagram index on the first page of Google search results.
Social media's authenticity, immediacy, and community-driven nature fill the gap as search behavior shift, offering businesses stronger ROI outcomes. Sprout helps brands win in the new era of discovery. Our publishing tools are designed to optimize every post for maximum visibility using keyword-rich titles, platform-specific formatting and built-in guidance for hashtags, all text and timing to help ensure nothing gets missed in social search and brands can reclaim lost organic traffic. Now NewsWhip, in our view, is the perfect addition to the strategy as Sprout will enable global brands with a greater ability to recognize real-time and predicted trends powered by AI agents. These innovations will help marketers know exactly what content they should be creating to benefit from social search momentum as well as issues before they arise with differentiated solutions for crisis management. We believe the future of this category will be defined by real-time data and intelligence, extensible platforms, and trusted AI. That's the foundation we're building at Sprout, and we're excited about where it's taking us. With that, I'll turn it over to Joe to run through the financials.
Thanks, Ryan. I'll now run through our financial results and guidance. Our second quarter results were highlighted by a quarterly non-GAAP operating margin of 9.2%, up nearly 400 basis points from the year-ago period. We generated $5.2 million in non-GAAP free cash flow during the quarter, up $2.7 million from our non-GAAP free cash flow in 2Q '24, an increase of 110% on a year-on-year basis. On a trailing 12-month basis, non-GAAP free cash flow is up 4x. We remain committed to growing operating leverage on a fiscal year basis. On to a summary of the quarter. Total revenue for the second quarter was $111.8 million, representing 12% year-over-year growth. Subscription revenue was $111.1 million, up 13% year-over-year. The number of customers contributing more than $10,000 in ARR grew 6% from a year ago. The number of customers contributing more than $50,000 in ARR grew 18% from a year ago.
Q2 ACV was $15,321, up 14% year-over-year. As Ryan discussed earlier, our strategy to drive ACV growth remains focused on shifting to a higher enterprise mix and strengthening premium module attach rates such as influencer marketing and customer care. RPO totaled $347.0 million, down from $360.2 million as in Q1 and up 18% year-over-year. We expect to recognize 72% or $251.6 million of total RPO as revenue over the next 12 months, implying a CRPO growth rate of 80% year-over-year. Non-GAAP operating income totaled $10.3 million, which was ahead of the high end of our outlook. This was up from $5.3 million a year ago and equates to a non-GAAP operating margin of 9.2%. We're pleased that our progress here demonstrates our focus on continued growth in our margin profile. Before moving on to guidance, a few quick comments about our acquisition of NewsWhip. We acquired NewsWhip for a cash consideration of $55 million with an additional $10 million in potential cash earn-outs that are structured over the next 2 years.
We financed the acquisition with our credit revolver and cash and believe this was an efficient use of capital as our products address the needs of our customers, and we believe the combined solution is a highly differentiated offering. Looking ahead, we're increasing our full-year revenue guidance, primarily reflecting the early contribution from NewsWhip. We see strong early interest from new and existing enterprise customers, including new conversations with globally recognized brands that underscore the strategic value of this acquisition. We believe this early traction is a strong signal for the opportunity ahead and reinforces the differentiation we believe Sprout is building. That said, we're early in the integration. While the core Sprout business continues to perform in line with the expectations we set at the start of the year, we face some near-term pressure on rep productivity as we train teams, align our go-to-market motion, and support customers through a more expansive conversation around Listening and NewsWhip.
Only 5 months of revenue contribution remaining this year since we're just starting to operate the NewsWhip business given the closing last week, we've taken a measured approach to modeling the impact. Lastly, while prior to the acquisition, NewsWhip was expected to be an approximately breakeven business in the back half of the year on a standalone basis. We're pleased that we were still able to raise our non-GAAP operating income outlook while absorbing the associated costs. Now on to guidance. For the third quarter of fiscal 2025, we expect revenue in the range of $114.4 million to $115.2 million. We expect non-GAAP operating income in the range of $9.3 million to $10.3 million. We expect a non-GAAP net income per share of between $0.15 and $0.16. This assumes approximately 59.0 million weighted-average basic shares of common stock outstanding. For the full-year 2025, we are raising our guidance from the prior quarter and now expect revenue in the range of $452.9 million to $455.9 million.
We are also raising our non-GAAP operating income guidance and expected to be in the range of $43.1 million to $45.1 million. We expect non-GAAP net income per share between $0.71 and $0.75, assuming approximately 58.7 million weighted-average basic shares of common stock outstanding. We look forward to continuing to innovate and create more opportunities for our customers to grow with us. We appreciate your interest in Sprout Social. With that, Ryan, Alex, and I are happy to take any of your questions.
Questions and answers
Your first question comes from the line of Arjun Bhatia with William Blair.
Maybe to start out with, just if you can zoom out and just take a step back for a second, I'd be very curious to hear just how you would characterize the core business as it stands today? Then I have a follow-up after that.
Arjun, it's Ryan. I'll start. Thanks for the question. Yes, just in terms of the business, we've been really pleased with the progress that we've been seeing and incredibly proud of the effort from the team. The business has been performing really well and tracking the plan that we laid out to all of you at the beginning of the year. We've had some great wins this quarter, Cigna, Authentic Brands, Honda, Smuckers, and the Department of Transportation were a few that we had shared in the prepared remarks. We grew both the 10,000 and 50,000 customer accounts quarter-over-quarter. On top of that, our 50,000 trailing 12-month revenue cohort is growing greater than 30%, which just shows the enterprise execution. On the retention and renewal side, the performance has been really strong, and we've seen steady improvement in gross revenue retention year-over-year. We're seeing continued momentum with our teams in closing more annual and multi-year deals, which will contribute to retention and certainly gives us better visibility in the business. Then finally, from a non-GAAP operating margin, we're up nearly 400 basis points, which I think really speaks to the execution and the operating discipline that we have in the business. Everything considered, we're feeling really good about where the business is as we head into the back half.
Then just as a follow-up, as I'm looking at the guidance, can you just give us a sense of what the impact of NewsWhip is and what you've incorporated into the guidance here?
Yes. Thanks, Arjun. This is Joe. I'll jump in on this one, and thanks for the question. Maybe let me walk you through how we approach the guidance in total, and I think that will be most helpful to address the question you're asking. I think first, our core business came in slightly ahead in Q2 and continues to track to the plan we laid out to you at the start of the year. We haven't assumed a change in the broader demand environment, and we flowed through a modest portion of the Q2 beat into our updated full-year guide to reflect that. For the NewsWhip business, we're projecting that to contribute approximately $2.5 million over the final 5 months of the year. You got to remember, with any small tuck-in acquisition, we want to take a prudent approach looking ahead. We just closed the acquisition last week. There are still natural unknowns around renewal rates, pipeline conversion, and other business fundamentals we need to consider. As a result, we are taking a very measured approach with our guidance. We're still early, but we believe this really sets us up to lead in an area that's becoming increasingly important to our customers and to the market, and we're really excited about this acquisition.
Your next question comes from the line of Scott Berg with Needham.
This is Rob Morelli on for Scott Berg. Just to double click on the NewsWhip acquisition. Can you just touch on the timeline to integration of the teams and products? You noted some positive momentum with enterprise conversations so far. Any other feedback from customers just regarding this acquisition and the capability being added to the suite?
Yes. Thanks, Rob. I appreciate it. We're digging in, as Joe said, we're about a week in. The teams are chugging along already. We've been working on a bunch of all hands with the teams and actually just had an all-hands with the NewsWhip team yesterday and a company all-hands last week. We've been getting the CRMs together and aligning everything and working really closely on the go-to-market strategies. We've also just seen a number of conversations already in the first week, so lots of progress being made on the integration. In terms of product integration pieces, those will develop over the next probably few quarters or so, but the teams are working in the background. Obviously, as we mentioned on the call, Paul, the Co-Founder is now the GM of our Listing business, and we'll be really working closely with the rest of the team there. Then from a customer perspective, I would just say the teams are internally incredibly excited about the opportunity to share the value of the NewsWhip product with our customers.
We've seen this as a mission-critical solution for PR communications professionals, and the ability to take the insights from NewsWhip and have them drive actions in the Sprout platform is really, really exciting. Initial feedback, and again, it's only been a week, has been strong. I encourage all of you to take a look at the NewsWhip website and go to the customer stories; you get a great sense of the quality of the customers there and the types of problems that they're solving.
Then last quarter, there was a reference to the launch of a multiproduct campaign. I understand it might still be early days, but have you seen any benefit from this effort resulting in expansions with existing customers or larger lands with new customers and a jump in new customer ARPU since this was launched?
Yes. Thanks, Rob. Yes. I mean I will say it's been a massive focus for our team across both the product organization and go-to-market. We've been seeing healthy pipeline being created there. Clearly, NewsWhip has been a big contributor to that and will be as we go forward. I mentioned Guardian on the call as well, another great example of a product that we launched in the quarter. I think lots of progress happening right now, but nothing else to add, and we'll certainly come back and share the progress along the way. Thanks for the question.
Your next question comes from the line of Adam Hotchkiss with Goldman Sachs.
I guess I think we've heard from some of your peers, and I think you had mentioned that the growing cost of advertising, particularly, if you're a smaller business. I'd be curious if that is resonating with your customers when you talk to them about the value of social as a channel and if you're seeing any mix shift in the way that brands are thinking about their advertising strategies. It really feels like that, that's really ticked up in the last couple of quarters. I'm just curious if that's impacted you and your deals at all.
Yes. I appreciate the question, Adam. It ties a lot to the final piece of my prepared remarks as I got into the idea of social search. We are certainly seeing customers talking a lot about the fact that they've seen pretty significant disruption to the things that they counted on in the past, specifically around search engine optimization and search engine marketing. Certainly, we're in this world right now where the cost per click on a lot of these things have increased significantly, and people are clicking less. Our customers are definitely looking for more help in how do they show up in the right places where discovery is happening. We're seeing more and more of that happening on social. A lot of the conversations we're having with customers is about how they reclaim some of the lost traffic and performance in places like social. If you think about what our platform does, it really helps customers figure out the right type of content to produce, the right time to post it to their audience, and give you analytics on both your paid and organic so that you can really double down on the things that are working.
Clearly, in this environment, that's something that's really critical. I'd say that it's been a material part of the conversations that we're having with customers. I'd say most of our customers are having that conversation right now with the disruption in the market for their funnels.
Then just on the RPO and the CRPO dynamic, I noticed that stepped down sequentially. I think you mentioned it. RPO, I think, was even below Q4 levels. Is that just churn at the low end of the market? Or anything else to call out there, seasonality would be helpful.
Yes, Adam, I think really what is attributed to the last thing you said there, which is the seasonality part of the business. As we move more upmarket over the last couple of years, a lot of our bigger renewals and the larger deals we're signing in Q3 and Q4. What you'll see is in the back half of this year, you'll see those dollars start to tick up in the next couple of quarters. We feel pretty good about how we'll exit the year in 2025 as it relates to those metrics. We feel good about the momentum there. It's the seasonality that you called out.
Your next question comes from the line of Parker Lane with Stifel.
This is Jack McShane on for Parker. I wanted to touch on the macro. Obviously, there's been a lot of geopolitical headlines this quarter. I'd be curious to hear how both the pipeline was impacted by the noisy macro and how renewal conversations have been impacted as well?
Thanks, Jack. Appreciate the question. I'll start off on the pipeline side of it. Yes, clearly, we're still in the same demand environment. I wouldn't call out anything that's materially changed for us this quarter from the last previous quarters. For us, it's definitely leaning into the value prop. Similar to my feedback on the last question to Adam, a lot of this for our customers right now is this is an important part of the work that they're doing, whether it's discovery and making sure that they're getting their customers in the front door or thinking about how they respond to their customers from a Care perspective. We're certainly leaning in more, as I've shared in previous quarters, on just the customer value and the ROI story, but I feel really good about what I'm seeing from the teams and the type of rigor that Mike and the team has created around pipe creation and pipe acceleration. Nothing to call out that's different from previous quarters there. On the renewal side, we feel really good about that. We've seen a lot of progress year-on-year in terms of our retention and renewal rates. I think this also speaks to the value of the product for our customers and the fact that they're spending hours a day in our products, and this is how they execute on their social strategy, but we've seen that as a strength for us.
As a follow-up, I'd be curious to touch on the customer care use case and more specifically, how Salesforce's emphasis on Agentforce has impacted the demand in this segment?
Yes. No, I appreciate it. Care continues to be a really important use case for our customers. We shared a few stories today just highlighting with really large customers how they're leveraging Care. One specifically was an example of a customer that moved over to us, a global health tech company that moved over to use the Service Cloud integration. I mean this customer is literally managing 90,000 customer support requests every single month, and they're able to execute on that with that speed and customer satisfaction because of the integration that we've built with Salesforce. It's continued to be a really important part of the strategy. Clearly, our customers are doing it directly in our product, or they get the benefit of leveraging integrations like the Service Cloud, but more and more, we're seeing customers showing up on social as a place that they want to be served. Their expectations when they show up on social are higher than any other channel. The way that our platform is set up to support customers matters significantly. Yes, on the Agentforce side of things, we're excited about the work that we're doing there. We're coming off of connections and getting geared up for Dreamforce. I believe this will continue to be kind of the next chapter in the value that we're adding to customers that are joint Sprout and Service Cloud and Salesforce customers.
Your next question comes from the line of Surinder Thind with Jefferies.
Can you maybe talk a little bit about just the sales of some of the premium modules and the attach rates that you referenced as part of the strategy? Does the environment like this make it a little bit more difficult? I mean it feels like things haven't really changed a lot in the last few quarters, but there just seems to be a lot of noise out there, and we're hearing different things from different channels.
Yes. I appreciate the question. Yes, I alluded to it a little bit before, but I've been proud of what I'm seeing from the team in terms of creating this multiproduct pipeline, but the product teams have been working hard in the background here. We've talked through a few of the use cases that we have. We've added Guardian, our Trust and compliance products this past quarter. Obviously, NewsWhip is another addition there. I think this is just really important for us because what it means is it allows our sales team to show up to customers with a variety of different product problems that we can solve for our customer base. Clearly, the demand environment hasn't, to your point, changed over the last number of quarters, but that's why it's even more important for us to be able to really serve customers depending on where they are. We've got customers coming in where they've got high volumes passing on social from a Care perspective, which we can handle, and we've got other customers where we're seeing significant disruption at the top of the funnel from a marketing perspective, and social ends up being a really important thing for them.
These are some of the examples. I think the last piece I'd leave you with is that from an attach rate perspective, we continue to see a lot of headroom and opportunity for us to sell our products both from a new business perspective to land bigger as well as from a current customer perspective to be able to attach more products to our current base of almost 30,000 customers.
When considering the international business, particularly with international clients, it is a smaller segment of our operations. Can you provide any insights on the trends in that area? EMEA has been trailing behind the U.S. for some time, and I have not yet seen the Queue. Any information you can share regarding those numbers and trends would be appreciated.
Yes, I appreciate it. You're right. International is still a smaller part of our business, but we feel really strongly about the market opportunity there and the teams that we have on the ground. Our distribution teams are still relatively small compared to the U.S. We're seeing good progress in terms of the pipeline and the opportunity. We're also with a lot of the multiproducts that we're bringing to bear and the types of companies we're selling to, we're getting more of these global type opportunities where the footprint in the U.S. will open up opportunities for our teams in EMEA or in APAC. I think the main takeaway is that we're still early on that journey, but there's quite a bit of room there. Over time, we'll be continuing to invest in our distribution. Thind, just to answer the last part of your question, as far as the mix for international, Q1 to Q2, it hasn't changed materially. When you see the Queue come out, the ratio of international revenue versus the rest is pretty consistent, so no major shift there as of yet.
Your next question comes from the line of Matt VanVliet with Cantor.
I guess when you look at where the NewsWhip technology fits in, in the current product platform, curious if this was sort of a discovered either gap or just a greater extension of the listening platform where you getting into situations where people are trying to push Listening into other use cases and you just needed more functionality. Just curious, I guess, if you could elaborate a little more on where it overlaps or complements the Listening platform?
Yes. I appreciate the question, Matt. It is an excellent complement for us. One of the things that we really appreciated about the NewsWhip team is what they do is really, really tied to a lot of our future product roadmap. Maybe the best way to think about this is we see it as really strengthening our overall approach to the market and really differentiating us against our closest competitors. If you think about the Sprout Listening, Sprout Listening is really about deep analysis and longer-term understanding of social conversations, share of voice, and brand sentiment. It's ideal for brands when they're trying to understand the why behind historical trends and insights. NewsWhip’s full angle is consuming all the news and media and publications out there, identifying articles that are being created, and then figuring out where there's gravity around those articles and what's trending. This matters a lot for our customers because these articles, as we've seen news breaking in many different places over the last few weeks and months and years, these things can turn into real viral moments that can either be good or bad.
On the good side, it could end up creating a lot of demand if you're a product company. On the bad side, it can create a lot of crisis management. They're looking at those media articles and then figuring out where there's gravity around them in places like social to allow those PR and comms teams to figure out where they should be leaning in.
Then, Joe, you mentioned NewsWhip was on pace to be breakeven for the second half. Is that still incorporated in the guidance? Or is there some additional expenses related to integration, maybe speeding up anything they had in the works? I guess what's the second half impact or the next 5 months impact of NewsWhip on the operating income guidance?
Yes. No, good question, Matt. The guidance contemplated that they would be breakeven for the rest of the year. There shouldn't be any incremental expense or any other expenses that we're incurring. That's kind of an all-in when it comes to guidance. Then I think over the longer term, we definitely believe there's a lot of leverage that can come out of that business. We think about putting that product in our sales team and the distribution we get over the more fixed costs that they have right now, I think we feel good about the ability to drive more leverage for Sprout overall coming out of '25.
Your next question comes from the line of Jackson Ader with KeyBanc Capital Markets.
The first one is in the core business. Ryan, you've frequently talked about taking advantage of the challenges in organic and paid search by shifting focus to social media. I'm curious, especially with the new sales leadership, are you implementing any specific sales strategies or incentives to fully leverage this significant shift?
Yes. Thanks for the question. I think the biggest thing to highlight is we've definitely been enabling the team on the value proposition behind this and the things that we can do to help customers in social search, but also in AI search and traditional search. A lot of this has just been reps enablement and then obviously, customer communication. If we think about it, and I mentioned some of this in the prepared remarks, we're seeing more and more, especially in Gen Z, consumers showing up on social, searching in places like TikTok and YouTube and Reddit before they're going to traditional search. Showing up in the right place matters a ton, which our customers need to do. We also know that performing really well on social ties into how content is being presented in AI search. The better you do in social means that you will perform better in AI search. Then finally, we're seeing more and more of these relationships happening between social and traditional search where things like Reddit and Instagram are indexing on the first page. Again, if you're performing really well in social, you will have a byproduct sales stream impact that performs better on traditional search as well. For us, all of these things are things that we're enabling the team to be able to have those conversations with customers.
I have a quick follow-up. Joe, I believe you mentioned in your prepared remarks that with any acquisition, there is always a potential for some disruption as new responsibilities are added for the salespeople. However, from an outsider's perspective, NewsWhip's capabilities seem quite similar to what the salespeople were already offering in terms of value proposition. I'm curious if there is something specific that will be added to their workload, or if this is just the nature of acquisitions where things can get a bit chaotic during integration.
Yes. Well, first, I'll say we're one week in. The biggest thing I would highlight is related to your question. It's about ensuring we can clearly explain the differences between Listening, our core product, and NewsWhip, and how they work together for our internal team and for our customers. There is a lot to enable here, especially with the integration, but we’re making good progress. We had an all-hands meeting last Friday, and the revenue team started on Monday. We are already deep into it. To your point, these products are very similar and complementary. Additionally, many of our customer accounts include people from PR, media, and communications teams who are part of our core platform. These are contacts we typically know well within the organization, and we now have the opportunity to share more about this new solution that can greatly benefit us.
Your next question comes from the line of Rob Oliver with Baird.
I had 2. Ryan, first for you. I just wanted to ask about the influencer marketing portion of the business. It seems like still a lot of interest in the market around it, a lot of buzz around the potential impact of agentic AI or AI there? You guys obviously made a pretty strong tuck-in acquisition a couple of years ago, and you're not breaking that out anymore, but I just wanted to get a sense for how that's doing and how when you come in for those renewals for perhaps customers that don't have and how those negotiations are going? Then I had a quick follow-up for Joe.
Yes, thank you, Rob. We are very optimistic about the potential for influencer marketing, previously known as Tiger. The team has made significant advancements. There have been impressive AI improvements in how we approach creator discovery for our customers. We have also put considerable effort into brand safety. As large brands engage with us to find suitable creators, it is essential that these creators align perfectly with their brand and pose no risks. We have incorporated this aspect into our platform, adding significant value. Additionally, we have streamlined creator vetting to simplify how our customers develop their strategies and choose the right creators. We have built in a lot of automation, workflow, and tools. This continues to open doors for us to engage with accounts that may already be managed for social media, allowing us to introduce a differentiated product and later offer more to those customers. We are making steady progress and feel positive about the opportunities ahead. Regarding earlier questions about disruptions in traditional SEM, SEO, and paid advertising, we have observed that influencer marketing yields a return of 5x to 6x on invested dollars. This presents a valuable opportunity for our customers to achieve a favorable return on ad spend in areas where they may currently not be investing.
Then Joe, just one for you. A lot of questions, obviously, on NewsWhip, but I guess, more broadly speaking, you guys are doing some product investments. I know you've been working on the go-to-market on the enterprise and sales side, pace of innovation. Just not asking you to guide to next year or anything, but just wanted to think about how you're thinking about balancing all of those and the potential for more tuck-in acquisitions onto your platform with potential continued margin expansion?
Yes, Rob, thanks for the question. I think consistent with what we've shown over the last couple of years and what we've guided to this year, which is now you can expect a couple of hundred basis points of margin improvement year-over-year, and I don't see that changing in the near term. That's regardless of what our growth rate is and what we're doing. I think we've got this commitment that, hey, we believe that we can manage this business in a very responsible manner in any type of condition, and we want to make sure we're continuing to drive that margin in the business. We're not moving off of that commitment to drive margin on a year-over-year basis.
Your next question comes from the line of Raimo Lenschow with Barclays.
Ryan, I have a question for you. With all the changes in the industry, where customers are thinking about search, social, and the role of LLMs, how does the conversation pipeline change for you as you engage with customers? Specifically, what is the impact on both the number of conversations and the size of potential deals?
Thanks, Raimo. Appreciate it. Yes, there's certainly a lot that our customers have to be thinking about. I mean, I think the biggest thing here just goes back to making sure that we are perfectly tuned into the biggest problems for these customers. That is so dependent, obviously, on the key stakeholders we're getting in front of. If you're in front of a marketing audience, they're absolutely thinking about how AI is impacting search, how their SEO and SEM may not be working as well, how their website traffic may not be working as well. We're thinking a lot about social as the front door and trying to figure out how can we help them show up in the right places, drive awareness, and get a better return on ad spend. Other customers might be seeing just a significant amount of demand changing channels from their call center or website into social from a care perspective. They've got to figure out how to manage that demand like that example of the 90,000 cases that we're managing.
A lot of this just comes down to making sure that our teams are really doing a lot of discovery to understand where the biggest problem sets are and that we're leaning into those solutions and then tying that with real return on investment feedback on the places in which we think that we can help our customers. There's a lot in there for our teams in terms of just investing in the right places and understanding the right problems, but I feel like we've been making a lot of progress there and have been really proud of how the team is showing up in front of customers.
I have a follow-up for Joe. Considering the increased use of AI at NewsWhip, is there anything we should be aware of regarding gross margin implications, especially since I assume they utilize GPUs?
No, Raimo, we feel pretty good about the work we did during our evaluation of the technology to understand the scalability of their platform. One of the main positives for our CTO was how they constructed the back-end infrastructure and its scalability considering AI. We are confident that there won't be any significant changes in the cost structure of that business as it grows.
Your final question comes from the line of David Hynes with Canaccord Genuity.
Ryan, 2 questions on NewsWhip. I get your positioning as command center for real-time action that makes a lot of sense. I didn't hear you say, does NewsWhip give you access to media sources that previously weren't being captured by the Listening offering?
Yes, DJ, it does.
Can you elaborate like, what are those?
Yes, when you consider various media sources that we consume and analyze, the value proposition of their platforms takes a different approach than our Listening. Our Listening focuses more on in-depth brand sentiment, and our clients utilize it for research, examining trends over time. NewsWhip's perspective is centered on aggregating all news, media, and publications, identifying the creation of articles, and understanding the traction those articles gain and what is trending. This is crucial for our clients because, as we've witnessed with news breaking in many locations over the past few weeks, months, and years, these events can lead to significant viral moments that can be either beneficial or detrimental. On the positive side, it may generate substantial demand for product companies, while on the negative side, it may necessitate extensive crisis management. Clients analyze these media articles and assess their influence on social media to help public relations and communications teams determine the best ways to engage.
Then the second, follow-up to that, like what's the price point for NewsWhip? I know it's an enterprise product, but like how much are people spending on it?
Yes, it's an enterprise product. It's multiples bigger than our average deal size. If you go to their customer case studies, you'll see a lot of the large enterprises that are working with them fitting really nicely into our enterprise segment, but we think that we'll see some opportunities there, certainly with agencies and mid-market as well.
I will now turn the call back over to Ryan Barretto for closing remarks.
Great. Thank you very much, operator. Thanks for joining us tonight and for the thoughtful questions. I want to end by thanking our team for their continued dedication and effort. I'm really grateful for all you do for our customers and for our business. We look forward to spending more time with the rest of you later over the next quarter, and we will talk to you soon. Have a great night.
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.