Stock Story -
Social media management software company Sprout (NASDAQ:SPT) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 25.3% year on year to $99.4 million. The company expects next quarter's revenue to be around $102 million, in line with analysts' estimates. It made a non-GAAP profit of $0.09 per share, improving from its profit of $0.07 per share in the same quarter last year.
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Sprout Social (NASDAQ:SPT) Q2 CY2024 Highlights:
- Revenue: $99.4 million vs analyst estimates of $98.69 million (small beat)
- Adjusted Operating Income: $5.30 million vs analyst estimates of $4.91 million (7.8% beat)
- EPS (non-GAAP): $0.09 vs analyst estimates of $0.08 (15% beat)
- Revenue Guidance for Q3 CY2024 is $102 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed its revenue guidance for the full year of $405.5 million at the midpoint
- Gross Margin (GAAP): 77.5%, in line with the same quarter last year
- Free Cash Flow of $2.49 million, down 75.3% from the previous quarter
- Billings: $101.6 million at quarter end, up 17.9% year on year
- Market Capitalization: $2.21 billion
Founded by Justyn Howard and Aaron Rankin in 2010, Sprout Social (NASDAQ:SPT) provides a software as a service platform that companies can use to schedule and respond to posts on major social media networks like Twitter, Facebook (NASDAQ:META), Instagram, Youtube and LinkedIn.
Marketing SoftwareWhether or not companies market their products through social media, all businesses need to meet customers where they are; and increasingly, that is social media. As more and more people use a greater number of social media platforms, social media management software become more valuable to their customers.
Sales GrowthAs you can see below, Sprout Social's revenue growth has been excellent over the last three years, growing from $44.69 million in Q2 2021 to $99.4 million this quarter.
This quarter, Sprout Social's quarterly revenue was once again up a very solid 25.3% year on year. However, its growth did slow down a little compared to last quarter as the company increased revenue by $2.61 million in Q2 compared to $3.2 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter's guidance suggests that Sprout Social is expecting revenue to grow 19.3% year on year to $102 million, slowing down from the 31% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 17.1% over the next 12 months before the earnings results announcement.
Large Customers Growth This quarter, Sprout Social reported 8,966 enterprise customers paying more than $10,000 annually, an increase of 143 from the previous quarter. That's in line with the number of contracts wins in the last quarter but quite a bit below what we've typically observed over the last year, suggesting that the sales slowdown we observed in the last quarter could continue.
Key Takeaways from Sprout Social's Q2 Results We were impressed by how strongly Sprout Social blew past analysts' adjusted operating income and EPS expectations this quarter. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The market was likely expecting a larger top-line beat, however, and the stock traded down 3.7% to $36 immediately after reporting.
