Sprout Social(SPT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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 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 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] - 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] - 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][66][69] - 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][79][80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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][93][96] 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][158] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - Foreign currency exchange risk is not significant because the vast majority of sales, both domestic and international, are denominated in U.S. dollars[182] Item 4. Controls and Procedures 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] - 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] PART II - OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - 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][192] - 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][194] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 5. Other Information 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] Item 6. Exhibits Provides an index of exhibits filed with Form 10-Q, including corporate governance documents and officer certifications