Sprout Social (NASDAQ:SPT) Beats Q4 Sales Targets, Provides Optimistic Full Year Guidance

Kayode Omotosho /
2022/02/22 4:13 pm EST

Social media management software company Sprout (NASDAQ:SPT) reported Q4 FY2021 results that beat analyst expectations, with revenue up 42.6% year on year to $53.2 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $56.1 million at the midpoint, 3.15% above what analysts were expecting. Sprout Social made a GAAP loss of $9.9 million, down on its loss of $5.87 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) Q4 FY2021 Highlights:

  • Revenue: $53.2 million vs analyst estimates of $51.2 million (3.87% beat)
  • EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.07
  • Revenue guidance for Q1 2022 is $56.1 million at the midpoint, above analyst estimates of $54.4 million
  • Management's revenue guidance for upcoming financial year 2022 is $249.5 million at the midpoint, beating analyst estimates by 2.25% and predicting 32.8% growth (vs 39.4% in FY2021)
  • Free cash flow of $2.21 million, down 46.9% from previous quarter
  • Customers: 31,762, up from 30,705 in previous quarter
  • Gross Margin (GAAP): 75%, up from 74.2% same quarter last year

“We put emphatic finishing touches on a fantastic year for Sprout, as social remains mission critical to successful outcomes in the next evolution of business,” 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 become more valuable to their customers.

Sales Growth

As you can see below, Sprout Social's revenue growth has been impressive over the last year, growing from quarterly revenue of $37.3 million, to $53.2 million.

Sprout Social Total Revenue

And unsurprisingly, this was another great quarter for Sprout Social with revenue up 42.6% year on year. Quarter on quarter the revenue increased by $4.17 million in Q4, which was in line with Q3 2021. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates Sprout Social is expecting revenue to grow 37.5% year on year to $56.1 million, improving on the 33.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $249.5 million at the midpoint, growing 32.8% compared to 39.4% increase in FY2021.

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 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Sprout Social reported 31,762 customers at the end of the quarter, an increase of 1,057 on last quarter. That's in line with the customer growth we have seen last quarter but a bit below what we have typically seen over the last year, suggesting that sales momentum may be slowing a little.

Sprout Social Customers

Key Takeaways from Sprout Social's Q4 Results

With a market capitalization of $2.84 billion Sprout Social is among smaller companies, but its more than $176.9 million in cash and positive free cash flow over the last twelve months give us confidence that Sprout Social has the resources it needs to pursue a high growth business strategy.

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. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 4.58% on the results and currently trades at $55.47 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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