Sprout Social(SPT) - 2024 Q2 - Quarterly Results

Financial & Business Highlights Sprout Social exceeded Q2 2024 guidance with strong revenue growth, robust RPO expansion, and significant increases in high-value customer segments Second Quarter 2024 Financial Highlights Q2 2024 saw 25% year-over-year revenue growth to $99.4 million, alongside a wider GAAP operating loss but improved non-GAAP operating income and robust RPO growth Key Financial Metrics (Millions USD, %) | Metric | Q2 2024 (Millions USD) | Q2 2023 (Millions USD) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Revenue | $99.4M | $79.3M (implied) | 25% | | Total RPO | $295.1M | N/A | 43% | | Current RPO (cRPO) | $212.5M | N/A | 38% | Operating Income (Loss) (Millions USD) | Metric | Q2 2024 (Millions USD) | Q2 2023 (Millions USD) | | :--- | :--- | :--- | | GAAP Operating Loss | ($16.5)M | ($14.9)M | | Non-GAAP Operating Income | $5.3M | $1.9M | Net Income (Loss) and Per Share (Millions USD, Per Share USD) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | GAAP Net Loss | ($16.9)M | ($13.1)M | | Non-GAAP Net Income | $4.9M | $3.8M | | GAAP Net Loss Per Share | ($0.30) | ($0.24) | | Non-GAAP Net Income Per Share | $0.09 | $0.07 | - Cash and equivalents and marketable securities totaled $93.2 million as of June 30, 2024, with net cash generated by operating activities at $2.1 million and non-GAAP free cash flow at $2.5 million[3] Customer Metrics Sprout Social achieved significant year-over-year growth in its high-value customer segments, with strong traction among clients contributing over $10,000 and $50,000 in ARR - The number of customers with over $10,000 in ARR grew to 8,966, a 21% increase compared to June 30, 2023[4] - The number of customers with over $50,000 in ARR grew to 1,545, a 38% increase compared to June 30, 2023[4] Recent Business & Customer Highlights Sprout Social expanded key customer relationships, acquired new notable clients, received industry recognition, and launched AI-powered product enhancements in Q2 2024 - Expanded relationships with key existing customers including Salesforce, Honda, Applied Materials, and Cummins[6] - Acquired new customers such as Metropolitan Transportation Authority, American Outdoor Brands, Elanco Animal Health, and Washington State University[6] - Recent achievements include being recognized as a leader in 200 categories by G2, launching AI-powered product enhancements, and being named to the Fortune Best Workplaces in Chicago™ List[7] Financial Outlook Sprout Social provided a positive financial outlook for Q3 and reiterated full-year 2024 guidance, projecting continued revenue growth and significant non-GAAP operating income improvement Third Quarter 2024 Financial Outlook Q3 2024 guidance projects over 19% revenue growth, with total revenue between $101.9 million and $102.1 million, alongside non-GAAP operating income of $6.5 million to $7.5 million Q3 2024 Financial Guidance (Millions USD, Per Share USD) | Metric | Q3 2024 Guidance | | :--- | :--- | | Total Revenue | $101.9M - $102.1M (>19% growth) | | Non-GAAP Operating Income | $6.5M - $7.5M | | Non-GAAP Net Income Per Share | $0.12 - $0.13 | Full Year 2024 Financial Outlook Full-year 2024 guidance reiterates total revenue between $405.0 million and $406.0 million, with non-GAAP operating income of $28.0 million to $29.0 million, reflecting significant margin improvement Full Year 2024 Financial Guidance (Millions USD, Per Share USD) | Metric | Full Year 2024 Guidance | | :--- | :--- | | Total Revenue | $405.0M - $406.0M | | Non-GAAP Operating Income | $28.0M - $29.0M | | Non-GAAP Net Income Per Share | $0.45 - $0.46 | - The full-year guidance assumes over 20% organic Sprout revenue growth and accelerated Tagger subscription revenue growth[9] - The non-GAAP operating income guidance includes a benefit from a deferred commission accounting change; excluding this change, the guidance would be $15.0 million to $16.0 million, implying a margin improvement of roughly 240 basis points[9] Financial Statements Unaudited financial statements for Q2 2024 reveal consistent revenue growth, an increased GAAP net loss, a solid balance sheet, and positive but lower operating cash flows Consolidated Statements of Operations Q2 2024 saw total revenue increase to $99.4 million, but GAAP net loss widened to ($16.9) million, a trend consistent with the six-month period due to higher operating expenses Three Months Ended June 30 (Thousands USD) | Metric | 2024 (Thousands USD) | 2023 (Thousands USD) | | :--- | :--- | :--- | | Total Revenue | $99,396 | $79,315 | | Gross Profit | $76,994 | $61,081 | | Loss from Operations | ($16,513) | ($14,917) | | Net Loss | ($16,892) | ($13,085) | Six Months Ended June 30 (Thousands USD) | Metric | 2024 (Thousands USD) | 2023 (Thousands USD) | | :--- | :--- | :--- | | Total Revenue | $196,180 | $154,527 | | Gross Profit | $151,350 | $119,418 | | Loss from Operations | ($29,800) | ($26,850) | | Net Loss | ($30,467) | ($23,337) | Consolidated Balance Sheets As of June 30, 2024, total assets were $393.6 million, with increased cash and cash equivalents and decreased total liabilities, primarily due to a reduced revolving credit facility Balance Sheet Highlights (Thousands USD) | Metric | June 30, 2024 (Thousands USD) | Dec 31, 2023 (Thousands USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $80,873 | $49,760 | | Total Current Assets | $183,083 | $195,943 | | Total Assets | $393,601 | $396,585 | | Deferred Revenue (Current) | $148,323 | $140,536 | | Total Liabilities | $241,478 | $252,393 | | Total Stockholders' Equity | $152,123 | $144,192 | Consolidated Statements of Cash Flows For the six months ended June 30, 2024, operating cash flow decreased to $13.2 million, while investing activities provided $33.4 million, a significant shift, and financing activities used ($15.5) million Three Months Ended June 30 (Thousands USD) | Cash Flow Activity | 2024 (Thousands USD) | 2023 (Thousands USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,063 | $6,294 | | Net cash provided by (used in) investing activities | $13,337 | ($8,680) | | Net cash (used in) provided by financing activities | ($4,007) | $1,186 | Six Months Ended June 30 (Thousands USD) | Cash Flow Activity | 2024 (Thousands USD) | 2023 (Thousands USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,227 | $14,578 | | Net cash provided by (used in) investing activities | $33,391 | ($17,371) | | Net cash (used in) provided by financing activities | ($15,483) | $87 | Reconciliation of Non-GAAP Financial Measures This section reconciles Q2 2024 GAAP net loss of ($16.9) million to a non-GAAP net income of $4.9 million, primarily by adjusting for $20.6 million in stock-based compensation Q2 2024 GAAP to Non-GAAP Reconciliation (Thousands USD) | Metric | GAAP (Thousands USD) | Adjustments (Thousands USD) | Non-GAAP (Thousands USD) | | :--- | :--- | :--- | :--- | | Operating Income (Loss) | ($16,513) | $21,811 | $5,298 | | Net Income (Loss) | ($16,892) | $21,811 | $4,919 | Six Months 2024 GAAP to Non-GAAP Reconciliation (Thousands USD) | Metric | GAAP (Thousands USD) | Adjustments (Thousands USD) | Non-GAAP (Thousands USD) | | :--- | :--- | :--- | :--- | | Operating Income (Loss) | ($29,800) | $41,090 | $11,290 | | Net Income (Loss) | ($30,467) | $41,090 | $10,623 | Supplementary Information This section provides definitions for non-GAAP financial measures and key business metrics, alongside a disclaimer regarding forward-looking statements and associated risks Use of Non-GAAP Financial Measures & Key Business Metrics This section defines non-GAAP financial measures, including non-GAAP operating income and free cash flow, and key business metrics like Annual Recurring Revenue (ARR) and Remaining Performance Obligations (RPO) - Non-GAAP operating income is defined as GAAP loss from operations, excluding stock-based compensation expense, acquisition-related expenses, and amortization expense associated with acquired intangible assets[13] - Non-GAAP free cash flow is defined as net cash from operating activities less expenditures for property and equipment, acquisition-related costs, and interest[13] - Key business metrics are defined, including Annual Recurring Revenue (ARR), Remaining Performance Obligations (RPO), and specific customer counts based on ARR thresholds ($10k and $50k)[14][15][16] Forward-Looking Statements This section provides a legal disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements concerning financial outlooks (Q3 and full year 2024), growth strategies, and future operations[12] - These statements are subject to risks and uncertainties, including the inability to sustain revenue growth, negative impacts from price increases, service interruptions, and unstable market conditions[12]