Core Insights - The original concept of Sprout remains relevant, emphasizing the transformative role of social media in brand-consumer interactions [1] Group 1 - Social media is viewed as a new communication channel that changes how brands and consumers engage with each other [1] - Consumers utilize social media to learn about brands, discover new products, and express their opinions, both positive and negative [1] - Brands will eventually need a platform to effectively interact with consumers on social media [1]

Summary of Sprout Social Conference Call Company Overview - **Company**: Sprout Social (NasdaqCM: SPT) - **Industry**: Social Media Management and Analytics Key Points and Arguments 1. **Company Vision**: Sprout Social aims to transform brand-consumer interactions through social media, which is now a primary communication channel for consumers to learn about and engage with brands [4][5][6] 2. **Growth Trajectory**: The company has grown from $50 million in revenue to over $400 million, indicating significant expansion and market opportunity [8][9] 3. **Market Opportunity**: There are approximately 200 million businesses on social media, but only around 200,000 are using platforms like Sprout, highlighting a vast untapped market [13][26] 4. **Shift in Marketing Leadership**: The transition of social media teams to leadership roles in organizations is expected to drive increased adoption of social media strategies [27][28] 5. **Consumer Behavior Changes**: There is a notable shift in consumer behavior towards social media for brand discovery, which is expected to continue influencing marketing strategies [29][30] 6. **AI Integration**: Sprout Social is leveraging AI to enhance its product offerings, utilizing data from social networks to provide real-time insights and automated responses to customer service issues [31][32][33] 7. **Acquisition of NewsWhip**: The acquisition aims to enhance real-time listening capabilities, allowing brands to respond quickly to emerging issues in social media and traditional media [36][38] 8. **Crisis Management**: NewsWhip enables proactive crisis management by identifying potential issues before they escalate, contrasting with traditional reactive approaches [43][45] 9. **Defensibility Against AI Competitors**: Sprout Social's access to extensive social media data and APIs creates a significant barrier for AI companies attempting to enter the market [49][51] 10. **Sales Strategy**: The company is focusing on enterprise sales, emphasizing the need for value-based selling and understanding the organizational structure of potential clients [66][70] 11. **Growth Drivers**: New customer acquisition is expected to be the primary growth driver in the near term, with a focus on expanding within existing accounts as the company matures [72][73] 12. **Competitive Landscape**: Sprout Social differentiates itself by offering a unified platform that integrates various social media networks, providing a seamless user experience [74][75] Additional Important Insights - **Influencer Marketing**: The Tagger product is gaining traction, allowing brands to identify and engage with micro-influencers, which is becoming increasingly important in marketing strategies [86][87] - **Macro Environment Impact**: The current macroeconomic conditions are affecting new business acquisition, particularly when budgets are not already allocated for social media solutions [94][95] - **Future Outlook**: There is optimism about the continued shift of consumer search behavior towards social media, which could further enhance Sprout Social's market position [98][99]

Group 1 - The market has become increasingly top-heavy as investors focus on a smaller number of large-cap technology companies during the Q2 earnings season [1] - The article highlights the importance of understanding the themes shaping the technology industry, as experienced by analysts with backgrounds in both Wall Street and Silicon Valley [1] Group 2 - The insights provided are based on the author's extensive experience and contributions to financial discussions, particularly in technology [1]

Core Insights - Marketing leaders are reallocating budgets from traditional channels to social media, recognizing its role in driving revenue, customer acquisition, and loyalty [1][2] - The 2025 Impact of Social Media Report indicates that 80% of marketing leaders plan to increase their social media budgets, with 87% intending to boost paid social spending [2][5] Budget Reallocation - 80% of marketing leaders globally are shifting funds to social media, with a significant focus on influencer marketing and organic social [2][4] - 81% of leaders are reallocating funds from traditional SEO to social tactics, reflecting a strategic pivot towards social media [4][5] Investment in Talent - Three-quarters of marketing leaders plan to expand their social media teams in the next year, highlighting the growing importance of social media expertise [2][5] - Social media search specialists are now the top recruitment priority for marketing leaders, indicating a shift in hiring strategies to align with consumer behavior [4][5] Measurement and ROI - There is a notable gap in confidence regarding the ability to measure social media's ROI, with only 44% of leaders rating their teams as "expert" in this area [3][5] - Most social teams focus on engagement and conversion rates, while leaders emphasize the need for revenue and efficiency metrics to assess ROI [3][6] Platform Effectiveness - The most impactful social media platforms for business are Facebook (70%), YouTube (68%), and TikTok (64%), with B2B brands favoring LinkedIn [6] - A disconnect exists between CMOs and social media managers regarding content volume, with CMOs believing more posts will increase impact, while managers do not share this view [6] Cross-Functional Insights - Marketing leaders desire social media insights to be utilized across various departments, yet less than half integrate social data into their CRM systems [7] - Companies are increasingly sophisticated in their social reporting, moving beyond vanity metrics to analyze community conversations for product development [7]

Core Insights - Sprout Social has introduced new features and partnerships aimed at enhancing brand engagement in the Social Intelligence era, focusing on platforms like TikTok and Bluesky for customer interaction and sentiment analysis [1][2][3] Group 1: New Features and Capabilities - The latest release includes TikTok Listening, expanded Bluesky publishing and reporting, and new creator collaboration tools, all designed to convert social interactions into actionable insights and measurable business impact [1][6] - New capabilities also encompass influencer marketing, publishing, listening, and analytics, providing brands with tools to deepen customer relationships and leverage social media as a revenue-driving channel [2][3] Group 2: Strategic Importance of Social Media - Social media has evolved into a critical platform for brand discovery, product research, and real-time decision-making, presenting significant opportunities for brands to enhance customer engagement and drive revenue [2][3] - The integration of social media into the customer journey is emphasized, with a focus on creating a cohesive experience that aligns various touchpoints from awareness to long-term engagement [3] Group 3: Partnerships and Integrations - Sprout Social has established partnerships with platforms like Adobe Express and Canva to streamline creative workflows, enabling brands to publish high-quality content more efficiently [6] - Upcoming integrations with Salesforce aim to enhance customer service across multiple digital channels, further solidifying Sprout's position in the social media management space [6] Group 4: Recognition and Market Position - Sprout Social is recognized as a leader in social media management and analytics, serving approximately 30,000 brands and providing tools that facilitate smarter, faster business impact [5][7] - The company has been awarded the 2024 Best Software Award, highlighting its comprehensive functionality across major social media networks and digital platforms [7]

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]