Investor Presentation 4Q FY24 Disclaimers Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "explore," "future," "intend," "long-term operating model," "medium to long-term goals," "m ...

Sprout Social (SPT) Q4 2024 Earnings Call February 26, 2025 02:32 AM ET Company Participants Alex Kurtz - VP - IR & Corporate DevelopmentRyan Barretto - CEOJoe Del Preto - CFORaimo Lenschow - Managing DirectorParker Lane - Managing Director - Equity ResearchScott Berg - Managing DirectorPatrick Schulz - Vice President & Senior Research AssociateJackson Ader - Managing Director Conference Call Participants David Hynes Jr. - Managing Director, Software Lead AnalystArjun Bhatia - Partner, Co-Head Tech Equity R ...

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $107.1 million, representing a year-over-year growth of 14% [7] - Subscription revenue was $105.9 million, up 15% year-over-year [45] - Non-GAAP operating margin reached over 10% for the first time in operating history, with a non-GAAP operating income of $11.4 million [42][48] - The number of customers contributing more than $50,000 in ARR grew 23% year-over-year [46] - The dollar-based net retention rate for 2024 was 104%, down from 107% in 2023 [49] Business Line Data and Key Metrics Changes - The enterprise segment saw revenue growth of over 35% in FY 2024, indicating success in the upmarket strategy [10] - The company closed the largest new business ACV win in its history with a Fortune 500 financial services company [11][30] - The TAGR product, now rebranded as Influencer Marketing, had one of the strongest growth rates since its acquisition [43] Market Data and Key Metrics Changes - The current remaining performance obligations (RPO) reached $249.4 million, representing a 26% year-over-year growth [7] - The company experienced steady pipeline trends with healthy year-over-year growth across both inbound and outbound channels, particularly in the enterprise business [10] Company Strategy and Development Direction - The company aims to solidify its market position with enterprise-level care, AI functionality, and Influencer Marketing capabilities [11] - Key growth drivers include winning the enterprise, driving customer health and adoption, expanding partnerships, and improving account penetration [20][38] - The company is focused on expanding its footprint of technical and go-to-market integrations with other platforms and deepening international partner reach [17] Management's Comments on Operating Environment and Future Outlook - Management expects the demand environment in FY 2025 to track similarly to FY 2024, with cautious investments and prolonged sales cycles [9][50] - The company is optimistic about the quality of new customers, which are expected to drive higher dollar-based net retention rates going forward [96] Other Important Information - The company processed over 1 billion messages per day for nearly 30,000 customers, providing a unique understanding of content and workflows [18] - The company is enhancing its AI capabilities, with a 300% year-over-year increase in AI-generated content [22] Q&A Session Summary Question: What does the pipeline look like entering 2025? - Management indicated that the pipeline has grown year-on-year with good growth in Q4, particularly within the enterprise group [59] Question: How should we think about margin guidance for 2025? - Management stated that they want to maintain flexibility to invest in growth opportunities throughout the year, with expectations for incremental leverage if revenue overperforms [61][64] Question: What assumptions are being made regarding the economy in the guidance? - Management is taking a measured approach, assuming the demand environment in 2025 remains unchanged from 2024 [70] Question: Can you elaborate on the platform selling approach? - Management emphasized the importance of knowing the ideal customer profile and ensuring the right products are available to support those customers [80] Question: What portion of the customer base can adopt the new Influencer Marketing products? - Management believes every customer is a potential target, but sophistication in social media management will influence adoption [90] Question: How does the company view the competitive landscape? - Management noted that the competitive environment is becoming more favorable due to the strength of their products and the speed to value that they provide [126]

Core Viewpoint - Sprout Social reported quarterly earnings of $0.19 per share, exceeding the Zacks Consensus Estimate of $0.15 per share, and showing significant growth from $0.02 per share a year ago, indicating strong performance in the cloud software sector [1][2]. Financial Performance - The company achieved revenues of $107.09 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.35% and increasing from $93.58 million year-over-year [2]. - Over the last four quarters, Sprout Social has consistently surpassed consensus EPS estimates, achieving this four times [2]. Stock Performance and Outlook - Sprout Social shares have declined approximately 9.1% since the beginning of the year, contrasting with the S&P 500's gain of 1.7%, indicating underperformance in the market [3]. - The current consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $109.95 million, and for the current fiscal year, it is $0.69 on revenues of $465.17 million [7]. Industry Context - The Internet - Services industry, to which Sprout Social belongs, is currently ranked in the top 50% of over 250 Zacks industries, suggesting a favorable environment for companies within this sector [8].

Revenue Performance - Revenue for Q4 2024 was $107.1 million, representing a 14% increase compared to Q4 2023[6] - Total revenue for Q4 2024 was $107.09 million, an increase of 14.4% compared to $93.58 million in Q4 2023[35] - Subscription revenue reached $105.92 million in Q4 2024, up from $92.22 million in Q4 2023, reflecting a growth of 14.8%[35] - For Q1 2025, the company expects total revenue between $107.2 million and $108.0 million[11] - For the full year 2025, total revenue is projected to be between $448.1 million and $453.1 million[11] Customer Metrics - The number of customers contributing over $10,000 in ARR grew to 9,327, a 7% increase year-over-year[11] - The dollar-based net retention rate was 104% in 2024, down from 107% in 2023[11] - The dollar-based net retention rate was not explicitly stated, but the company emphasizes its importance in evaluating long-term customer relationships[30] - The number of customers contributing more than $10,000 in ARR is a key metric for future growth potential, although specific figures were not provided[28] Financial Performance - Non-GAAP operating income for Q4 2024 was $11.4 million, compared to $1.7 million in Q4 2023[6] - The net loss for Q4 2024 was $14.42 million, a decrease from a net loss of $20.08 million in Q4 2023, representing a 28.4% improvement[35] - Net loss for the three months ended December 31, 2024, was $14,417 thousand, an improvement from a net loss of $20,077 thousand in the same period of 2023, indicating a reduction of approximately 28%[43] - Non-GAAP net income for the three months ended December 31, 2024, was $10,698 thousand, compared to $980 thousand in 2023, representing a substantial increase[49] Cash and Liquidity - Cash and equivalents totaled $90.2 million as of December 31, 2024, slightly down from $91.5 million as of September 30, 2024[6] - Cash and cash equivalents increased to $86.44 million as of December 31, 2024, up from $49.76 million a year earlier, showing a growth of 73.5%[40] - Net cash provided by operating activities for the twelve months ended December 31, 2024, was $26,321 thousand, significantly higher than $6,456 thousand in 2023, showing an increase of over 300%[46] - The company reported a net increase in cash of $36,723 thousand for the twelve months ended December 31, 2024, compared to a decrease of $26,222 thousand in 2023[48] Operating Expenses and Liabilities - Total operating expenses for Q4 2024 were $97.35 million, compared to $90.85 million in Q4 2023, indicating an increase of 7.1%[36] - Total liabilities increased to $261,747 thousand in 2024 from $252,393 thousand in 2023, reflecting a growth of approximately 3%[41] Stockholder Equity and Compensation - Stockholders' equity rose to $166,594 thousand in 2024, up from $144,192 thousand in 2023, representing an increase of about 15.6%[41] - The total stock-based compensation expense for the twelve months ended December 31, 2024, was $84.30 million, an increase from $67.70 million in 2023[38] - Stock-based compensation expense for the three months ended December 31, 2024, was $22,453 thousand, up from $18,659 thousand in 2023, an increase of about 20%[48] Deferred Revenue and Performance Obligations - Current remaining performance obligations (cRPO) reached $249.4 million, up 26% year-over-year[6] - Deferred revenue for the three months ended December 31, 2024, was $29,475 thousand, compared to $18,051 thousand in 2023, indicating a growth of approximately 63%[44] Company Updates and Recognition - The company launched updates to its suite of AI solutions to enhance competitiveness[11] - Sprout Social was recognized as a leader in worldwide social media marketing software for large enterprises by IDC Marketscape[11]

Core Insights - Sprout Social reported a solid fourth quarter with a 14% revenue growth and a 26% growth in current remaining performance obligations (cRPO), indicating a strong foundation for future growth in 2025 and beyond [2][6][10] Financial Performance - Total revenue for Q4 2024 was $107.1 million, up 14% from Q4 2023 [6] - GAAP operating loss improved to ($13.7) million from ($18.2) million in Q4 2023, while non-GAAP operating income was $11.4 million compared to $1.7 million in the same period [6] - GAAP net loss was ($14.4) million, an improvement from ($20.1) million in Q4 2023, with non-GAAP net income at $10.7 million compared to $1.0 million in Q4 2023 [6] - Cash and equivalents totaled $90.2 million as of December 31, 2024, slightly down from $91.5 million as of September 30, 2024 [6] Customer Metrics - The number of customers contributing over $10,000 in annual recurring revenue (ARR) grew to 9,327, a 7% increase year-over-year [7] - The number of customers contributing over $50,000 in ARR increased to 1,718, representing a 23% growth compared to the previous year [7] - The dollar-based net retention rate was 104% in 2024, down from 107% in 2023, while the rate excluding small-and-medium-sized business (SMB) customers was 108%, down from 111% [7][8] Business Highlights - Sprout Social launched a new Total Economic Impact study showing a 268% return on investment for customers [13] - The company was recognized by G2's Best Software Awards across seven categories and named a leader in worldwide social media marketing software for large enterprises by IDC Marketscape [13] - Recent customer additions included notable brands such as Under Armour, ESPN, and Rocket Mortgage [9] Financial Outlook - For Q1 2025, the company expects total revenue between $107.2 million and $108.0 million, with non-GAAP operating income projected between $8.5 million and $9.5 million [10] - For the full year 2025, total revenue is expected to be between $448.1 million and $453.1 million, with non-GAAP operating income between $38.2 million and $43.2 million [10]

Core Insights - The Total Economic Impact study by Forrester Consulting indicates that Sprout Social customers achieved a return on investment (ROI) of 268% and a net present value (NPV) of $1.3 million over three years, with a payback period of less than six months [1][2] Group 1: Productivity and Efficiency - Prior to using Sprout Social, customers' social teams spent 70% of their time on scheduling, publishing, and planning campaigns, which has been streamlined to achieve a 60% productivity lift [2][4] - Customers reported an 80% reduction in employee time spent on social media reporting, leading to significant time savings [6] Group 2: Financial Benefits - Time savings from using Sprout Social are valued at $1.1 million, specifically in scheduling, publishing, social listening, and planning campaigns [6] - Customers leveraging Employee Advocacy through Sprout Social experienced an increase in organic traffic and an additional revenue of $130,000 [6] Group 3: Customer Testimonials - Customers expressed that Sprout Social allows them to focus on high-quality content strategy, leading to a 600% increase in engagement year-over-year across social media channels [5] - One customer noted that without Sprout, they would need to triple their team size to manage social media effectively [5]

Core Insights - Sprout Social has been recognized for the ninth consecutive year in G2's 2025 Best Software Awards, highlighting its strong position in the social media management software industry [1][2] - The company is featured across seven award categories, reflecting its commitment to innovation and customer satisfaction [1][2] Company Overview - Sprout Social is a global leader in social media management and analytics software, serving approximately 30,000 brands [4] - The platform offers comprehensive functionalities including publishing, engagement, customer care, influencer marketing, and AI-powered business intelligence [4] Recent Innovations - In the past year, Sprout Social has enhanced its platform with AI-powered solutions, a rebranded influencer platform, and deeper integrations with organizations like Salesforce [2] - New strategic partnerships across various sectors have been established to deliver ongoing value to customers [2] Customer Feedback - Customers have praised Sprout Social for its detailed analytics that provide actionable insights and demonstrate clear ROI [3] - Users have noted the platform's continuous improvement and its ability to keep up with social media trends without excessive costs [3] - The suite of tools has enabled organizations to operationalize social media programs and make strategic decisions based on detailed analytics [3]

Core Insights - Sprout Social has been recognized for the ninth consecutive year in G2's 2025 Best Software Awards, highlighting its strong position in the social media management software industry [1][2] - The company is featured across seven award categories, reflecting its commitment to innovation and customer satisfaction [1][2] Company Performance - Sprout Social's platform has been enhanced with AI-powered solutions, a rebranded influencer marketing platform, and deeper integrations with organizations like Salesforce [2] - The company serves approximately 30,000 brands, providing tools for publishing, engagement, customer care, influencer marketing, and analytics [4] Customer Feedback - Users have praised Sprout Social for its detailed analytics that provide actionable insights and demonstrate clear ROI [3] - The platform is recognized for its continuous improvement and ability to keep up with social media trends without excessive costs [3] - Customers have successfully operationalized their social media programs using Sprout's suite of tools, establishing efficient workflows and making strategic decisions based on analytics [3]

Core Insights - Sprout Social has launched its rebranded influencer marketing platform, Sprout Social Influencer Marketing, which aims to enhance how brands discover and manage influencer partnerships [1][2] - The platform leverages AI-powered insights and advanced analytics to help marketers identify suitable influencers and maximize campaign ROI [1][3] - Influencer marketing is projected to grow into a $199 billion industry by 2032, highlighting its increasing importance in consumer purchasing decisions [3] Company Overview - Sprout Social is recognized as a global leader in social media management and analytics software, serving approximately 30,000 brands [4] - The company has been awarded the 1 Best Software Product by G2's 2024 Best Software Award, indicating its strong market position [4] Platform Features - The Sprout Social Influencer Marketing platform is designed to streamline the process of discovering influencers and executing campaigns, providing actionable insights and centralized campaign management [2] - A Forrester Consulting study found that users of the platform experienced an average time savings of 25% in managing influencer relationships [3] Market Trends - There is a growing consumer trust in influencers over traditional brands, prompting companies to focus on authentic, relationship-driven marketing strategies [3] - Businesses reportedly earn an average of $6.50 for every $1 spent on influencer marketing, with top campaigns yielding even higher returns [3]