Sprout Social (NASDAQ:SPT) Beats Q3 Sales Targets, Next Quarter Sales Guidance Is Optimistic

Kayode Omotosho /
2021/11/02 4:12 pm EDT

Social media management software company Sprout (NASDAQ:SPT) announced better-than-expected results in the Q3 FY2021 quarter, with revenue up 45.8% year on year to $49 million. Guidance for next quarter's revenue was surprisingly good, being $51.2 million at the midpoint, 3.38% above what analysts were expecting. Sprout Social made a GAAP loss of $6.99 million, improving on its loss of $6.99 million, in the same quarter last year.

Is now the time to buy Sprout Social? Access our full analysis of the earnings results here, it's free.

Sprout Social (SPT) Q3 FY2021 Highlights:

  • Revenue: $49 million vs analyst estimates of $47.3 million (3.62% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.08 ($0.05 beat)
  • Revenue guidance for Q4 2021 is $51.2 million at the midpoint, above analyst estimates of $49.5 million
  • Free cash flow of $4.16 million, roughly flat from previous quarter
  • Customers: 30,705, up from 29,612 in previous quarter
  • Gross Margin (GAAP): 74.8%, up from 73.9% same quarter last year

“We’re excited to report our fastest quarterly revenue growth rate as a public company,” said Justyn Howard, Sprout Social’s CEO and co-founder.

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, Instagram, Youtube and LinkedIn.

Whether 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 like Sprout Social, become more valuable to their customers.

Sales Growth

As you can see below, Sprout Social's revenue growth has been very strong over the last year, growing from quarterly revenue of $33.6 million, to $49 million.

Sprout Social Total Revenue

And unsurprisingly, this was another great quarter for Sprout Social with revenue up an absolutely stunning 45.8% year on year. On top of that, revenue increased $4.4 million quarter on quarter, a solid improvement on the $3.86 million increase in Q2 2021, and even a sign of slight re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 29.6% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Sprout Social. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Sprout Social reported 30,705 customers at the end of the quarter, an increase of 1,093 on last quarter. That is a bit slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Sprout Social Customers

Key Takeaways from Sprout Social's Q3 Results

With a market capitalization of $6.94 billion Sprout Social is among smaller companies, but its more than $175 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth Sprout Social delivered this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was unfortunate to see the slowdown in customer growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 3.29% on the results and currently trades at $125.25 per share.

Should you invest in Sprout Social right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.