As we conclude the bulk of the Q2 earnings season, one of the key themes that investors need to grasp from the market's movements over the past month is the fact that the market has become even more top-heavy, as investors haveWith combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on ...

CHICAGO, Aug. 20, 2025 (GLOBE NEWSWIRE) -- New research from Sprout Social (NASDAQ: SPT), an industry-leading provider of cloud-based social media management software, reveals that marketing leaders are significantly shifting their budget priorities this year, reallocating funds from traditional channels to social media. The 2025 Impact of Social Media Report, which surveyed 1,200 marketing leaders worldwide, finds that leaders believe social media drives key outcomes like revenue, customer acquisition, and ...

"At United Way Worldwide, we're building a cohesive, social-first customer journey that starts with alignment across teams. Social is most powerful when it's connected, when every touchpoint from awareness to action to long-term engagement works together to tell one story. We've built an integrated approach that creates a clear, consistent thread across everything we do," said Megan Cottongim, Director of Social Media at United Way Worldwide. "Sprout helps us bring that strategy to life, making it easy to c ...

Group 1 - Sprout Social (SPT) has experienced significant selling pressure, resulting in a 30.9% decline over the past four weeks, but analysts anticipate better earnings than previously predicted [1] - The Relative Strength Index (RSI) for SPT is currently at 15.45, indicating that the stock may be oversold and could be poised for a rebound as selling pressure exhausts [5] - Over the last 30 days, the consensus EPS estimate for SPT has increased by 0.3%, suggesting a positive trend in earnings estimates that typically leads to price appreciation [7] Group 2 - SPT holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [8]

Core Viewpoint - Sprout Social (SPT) has experienced a significant downtrend, with a 26.1% decline over the past four weeks, but it is now in oversold territory, suggesting a potential turnaround due to improved earnings expectations from analysts [1] Group 1: Technical Analysis - The Relative Strength Index (RSI) is a key technical indicator used to identify oversold conditions, with a reading below 30 typically indicating that a stock is oversold [2] - SPT's current RSI reading is 16.23, indicating that heavy selling may be exhausting itself, which could lead to a price rebound as the stock seeks to return to its previous equilibrium of supply and demand [5] Group 2: Fundamental Analysis - There is strong consensus among sell-side analysts regarding SPT's earnings potential, with a 0.3% increase in the consensus EPS estimate over the last 30 days, suggesting that upward revisions in earnings estimates often correlate with price appreciation [6] - SPT holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a near-term turnaround [7]

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q2 and H1 2025, showing revenue growth, narrowed net loss, and the NewsWhip acquisition [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to $422.9 million, liabilities reduced to $238.4 million, and stockholders' equity increased to $184.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $101,532 | $86,437 | | Total current assets | $207,774 | $210,215 | | Total assets | $422,934 | $428,341 | | **Liabilities & Stockholders' Equity** | | | | Deferred revenue (current) | $171,105 | $178,585 | | Revolving credit facility | $15,000 | $25,000 | | Total liabilities | $238,375 | $261,747 | | Total stockholders' equity | $184,559 | $166,594 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue grew 12.5% to $111.8 million, with net loss narrowing to $12.0 million; H1 revenue grew 12.7% to $221.1 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $111,778 | $99,396 | +12.5% | $221,067 | $196,180 | +12.7% | | Gross Profit | $86,844 | $76,994 | +12.8% | $171,295 | $151,350 | +13.2% | | Loss from Operations | $(12,315) | $(16,513) | +25.4% | $(23,517) | $(29,800) | +21.1% | | Net Loss | $(11,985) | $(16,892) | +29.1% | $(23,205) | $(30,467) | +23.8% | | Net Loss Per Share | $(0.21) | $(0.30) | +30.0% | $(0.40) | $(0.54) | +25.9% | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to $23.2 million, investing activities decreased to $1.5 million, and financing activities used $9.5 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,194 | $13,227 | | Net cash provided by investing activities | $1,485 | $33,391 | | Net cash used in financing activities | $(9,542) | $(15,483) | | **Net increase in cash** | **$15,137** | **$31,135** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies, revenue recognition, legal proceedings, and the $55 million NewsWhip acquisition - The company initiated restructuring plans in November 2024 and February 2025, resulting in **$2.7 million of charges** for the six months ended June 30, 2025, primarily impacting the R&D, Sales, and Customer Experience teams[34](index=34&type=chunk) - As of June 30, 2025, the company has **$347.0 million in remaining performance obligations (RPOs)**, with **72% expected to be recognized as revenue** within the next 12 months[39](index=39&type=chunk) - The company is defending against two putative securities fraud class action cases and two putative stockholder derivative lawsuits, alleging false or misleading statements regarding business operations, the Tagger acquisition, and its enterprise market strategy. The company intends to defend itself vigorously but cannot estimate potential costs[59](index=59&type=chunk)[66](index=66&type=chunk)[69](index=69&type=chunk) - On July 30, 2025, the company acquired NewsWhip for an upfront cash payment of **$55 million** and up to **$10 million in contingent consideration**. The acquisition was funded with cash on hand and **$32 million** from its credit facility[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses 13% H1 2025 revenue growth, macroeconomic impacts, customer metrics, and sufficient liquidity for 12 months - The company is experiencing more measured buying behavior and lengthening sales cycles from customers due to macroeconomic uncertainty, which has contributed to a slowdown in revenue growth compared to historical levels[90](index=90&type=chunk) - Growth is focused on acquiring new customers and expanding within the existing base, particularly with larger organizations. International expansion is also a key opportunity, with non-U.S. customers generating approximately **26% of total revenue** in H1 2025[92](index=92&type=chunk)[93](index=93&type=chunk)[96](index=96&type=chunk) Key Customer Metrics as of June 30 | Metric | 2025 | 2024 | Growth | | :--- | :--- | :--- | :--- | | Customers with >$10,000 in ARR | 9,517 | 8,966 | +6.1% | | Customers with >$50,000 in ARR | 1,826 | 1,545 | +18.2% | - The company believes its existing cash and cash equivalents of **$101.5 million** will be sufficient to meet its operating and capital needs for at least the next 12 months[156](index=156&type=chunk)[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces immaterial interest rate and foreign currency exchange risks, as sales are primarily USD-denominated - The company's exposure to interest rate risk is not considered material. A hypothetical **10% change in interest rates** would not have had a material impact on financial statements[181](index=181&type=chunk) - Foreign currency exchange risk is not significant because the vast majority of sales, both domestic and international, are denominated in U.S. dollars[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no material changes in internal controls - The CEO and CFO have concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective to ensure timely and accurate reporting[184](index=184&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[185](index=185&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 7 for details on ongoing legal matters, including securities fraud and stockholder derivative lawsuits - For information regarding legal proceedings, the report refers to Note 7 in Part I, Item 1, which discusses the ongoing securities and derivative lawsuits[188](index=188&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) Highlights risks from unstable market conditions and substantial debt, including restrictive covenants and potential default - Unstable global economic conditions, including inflation, interest rates, and geopolitical conflict, may reduce customer budgets and demand for the company's platform[190](index=190&type=chunk) - The company has a substantial amount of debt (**$15.0 million outstanding** at quarter-end, with an additional **$32 million borrowed subsequently**) which could make it difficult to satisfy obligations and limit its ability to fund future business opportunities[191](index=191&type=chunk)[192](index=192&type=chunk) - The Amended Credit Agreement contains restrictive financial covenants. A breach of these covenants could result in an event of default and acceleration of all outstanding debt[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported for the quarter ended June 30, 2025 - There were no unregistered sales of equity securities to report for the period[195](index=195&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) Discloses CFO Joe Del Preto adopted a Rule 10b5-1 trading plan to sell Class A Common Stock during the quarter - On May 27, 2025, CFO & Treasurer Joe Del Preto adopted a Rule 10b5-1 trading plan for the sale of up to **18,000 shares** of Class A Common Stock, expiring September 11, 2026[197](index=197&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) Provides an index of exhibits filed with Form 10-Q, including corporate governance documents and officer certifications

Core Insights - Sprout Social, Inc. reported better-than-expected second-quarter financial results, with earnings of 18 cents per share, surpassing the analyst consensus estimate of 15 cents per share, and quarterly sales of $111.110 million, exceeding the estimate of $110.920 million [1][2] - The company issued third-quarter sales guidance above estimates and raised its FY25 sales guidance above estimates [1] - CEO Ryan Barretto highlighted a 12% revenue growth and emphasized the commitment to strengthening enterprise presence through customer adoption and strategic partnerships [2] Financial Performance - Quarterly earnings: 18 cents per share, beating the consensus estimate of 15 cents per share [1] - Quarterly sales: $111.110 million, exceeding the consensus estimate of $110.920 million [1] - Revenue growth: 12% year-over-year [2] Analyst Ratings and Price Targets - Oppenheimer analyst Brian Schwartz maintained an Outperform rating but lowered the price target from $32 to $23 [8] - Goldman Sachs analyst Chris Merwin maintained a Neutral rating and lowered the price target from $24 to $21 [8] Strategic Initiatives - The company is focused on increasing customer adoption, expanding within existing accounts, and scaling growth through strategic partnerships [2] - Recent acquisition of NewsWhip is seen as a key investment to position the company as a leading social media management platform [2]

Core Viewpoint - Sprout Social reported quarterly earnings of $0.18 per share, exceeding the Zacks Consensus Estimate of $0.15 per share, and showing an increase from $0.09 per share a year ago, indicating a positive earnings surprise of +20.00% [1][2] Financial Performance - The company achieved revenues of $111.78 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.68% and up from $99.4 million year-over-year [2] - Over the last four quarters, Sprout Social has consistently exceeded consensus EPS estimates [2] Stock Performance - Sprout Social shares have declined approximately 47.2% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The current Zacks Rank for Sprout Social is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.17 on revenues of $113.95 million, and for the current fiscal year, it is $0.73 on revenues of $451.89 million [7] - The trend of earnings estimate revisions prior to the earnings release was mixed, which may influence future stock performance [6] Industry Context - The Internet - Services industry, to which Sprout Social belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

Financial Data and Key Metrics Changes - The company reported Q2 2025 revenue of $111.8 million, representing a year-over-year growth of 12% [5][28] - Non-GAAP operating margin expanded by almost 400 basis points to 9.2% [5][27] - Non-GAAP free cash flow for the quarter was $5.2 million, an increase of 110% year-over-year [27][28] - Remaining performance obligations (RPO) totaled $347 million, up 18% year-over-year [29] Business Line Data and Key Metrics Changes - Subscription revenue was $111.1 million, reflecting a 13% year-over-year increase [28] - The number of customers contributing more than $50,000 in annual recurring revenue (ARR) grew by 18% year-over-year [28] - The average contract value (ACV) for Q2 was $15,321, up 14% year-over-year [28] Market Data and Key Metrics Changes - The company secured strategic wins with global brands such as Honda, Cigna, and the U.S. Department of Transportation, indicating strong market presence [6][38] - The company earned 164 Leader Badges in G2's reports, showcasing its competitive positioning in the market [6] Company Strategy and Development Direction - The acquisition of Newswhip is seen as a pivotal milestone to enhance AI-powered predictive media intelligence capabilities [8][9] - The company aims to deepen customer engagement through use case expansion and premium modules [21][23] - The strategy focuses on winning enterprise customers, improving customer health and adoption, and expanding partnerships [13][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the core business performance and noted strong retention and renewal rates [38][71] - The company anticipates some near-term pressure on rep productivity due to the integration of Newswhip [33] - Management highlighted the importance of social media as a channel for product discovery, especially among Gen Z consumers [25][102] Other Important Information - The company launched several product innovations, including enhancements in influencer marketing and customer care [14][16] - The company is expanding partnerships with key networks to enhance its capabilities [21] Q&A Session Summary Question: How would you characterize the core business today? - Management noted strong performance and progress, with significant wins and growth in the enterprise customer segment [38] Question: What is the impact of Newswhip on guidance? - Management projected Newswhip to contribute approximately $2.5 million over the final five months of the year, taking a cautious approach to guidance [41] Question: What is the timeline for integrating Newswhip? - Management indicated that integration efforts are underway, with positive initial feedback from customers [48] Question: How are rising advertising costs affecting customer strategies? - Management noted that customers are increasingly looking to social media for discovery due to disruptions in traditional search [60] Question: What are the trends in the international market? - Management acknowledged that while international business is smaller, there is strong potential for growth and pipeline development [85]

Financial Performance - Total revenue for Q2 FY2025 reached $111.8 million, compared to $99.4 million in Q2 FY2024[10] - The company achieved revenue growth of 12% year-over-year[7] - Average Contract Value (ACV) increased to $15,321 in Q2 FY2025, up from $13,403 in Q2 FY2024, representing 14% growth[7, 10] - Remaining Performance Obligation (RPO) grew to $347.0 million, compared to $295.1 million[10] - Current Remaining Performance Obligation (cRPO) increased to $251.6 million, compared to $212.5 million[10] - Non-GAAP Gross Margin remained consistent at 79%[10, 57] - Non-GAAP Operating Margin improved to 9%, compared to 5%[10, 57] - Non-GAAP Free Cash Flow (FCF) Margin increased to 5%, compared to 3%[10, 57] Customer Metrics - The company has approximately 30,000 customers across 100+ countries[7] - The number of customers contributing >=$10k in ARR increased to 9,517 from 8,966[10] - The number of customers contributing >=$50k in ARR increased to 1,826 from 1,545[10] Acquisition and Guidance - Sprout Social acquired NewsWhip for $55 million in cash, with up to $10 million in performance-based cash earnouts over two years[39] - The company projects total revenue for Q3 FY2025 to be between $114.4 million and $115.2 million, and for the full year FY2025 between $452.9 million and $455.9 million[45] - The company projects Non-GAAP Operating Income for Q3 FY2025 to be between $9.3 million and $10.3 million, and for the full year FY2025 between $43.1 million and $45.1 million[45]