Sprout Social (NASDAQ:SPT) Posts Better-Than-Expected Sales In Q4, Guides For 27.5% Growth Next Year

Jabin Bastian /
2024/02/20 4:09 pm EST

Social media management software company Sprout (NASDAQ:SPT) beat analysts' expectations in Q4 FY2023, with revenue up 34.3% year on year to $93.58 million. The company expects next quarter's revenue to be around $97.25 million, in line with analysts' estimates. It made a non-GAAP profit of $0.02 per share, down from its profit of $0.03 per share in the same quarter last year.

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Sprout Social (SPT) Q4 FY2023 Highlights:

  • Revenue: $93.58 million vs analyst estimates of $90.69 million (3.2% beat)
  • EPS (non-GAAP): $0.02 vs analyst estimates of $0 ($0.02 beat)
  • Revenue Guidance for Q1 2024 is $97.25 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for the upcoming financial year 2024 is $425.4 million at the midpoint, in line with analyst expectations and implying 27.5% growth (vs 31.3% in FY2023)
  • Free Cash Flow was -$279,000 compared to -$6.32 million in the previous quarter
  • Customers: 31,320, down from 32,383 in the previous quarter
  • Gross Margin (GAAP): 77.6%, in line with the same quarter last year
  • Market Capitalization: $3.62 billion

“We’re pleased to share incredibly strong fourth quarter results,” 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.

Marketing Software

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 very strong over the last two years, growing from $53.27 million in Q4 FY2021 to $93.58 million this quarter.

Sprout Social Total Revenue

Unsurprisingly, this was another great quarter for Sprout Social with revenue up 34.3% year on year. On top of that, its revenue increased $8.05 million quarter on quarter, a very strong improvement from the $6.22 million increase in Q3 2023. This is a sign of re-acceleration of growth and great to see.

Next quarter's guidance suggests that Sprout Social is expecting revenue to grow 29.3% year on year to $97.25 million, in line with the 31% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $425.4 million at the midpoint, growing 27.5% year on year compared to the 31.4% increase in FY2023.

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Customer Growth

Sprout Social reported 31,320 customers at the end of the quarter, a decrease of 1,063 from the previous quarter, suggesting that the company's customer acquisition momentum is slowing.

Sprout Social Customers

Key Takeaways from Sprout Social's Q4 Results

This was a mostly in-line quarter for Sprout, showing the company is staying on target. Revenue outperformed Wall Street's estimates and outlook shows growth is staying steady. On the other hand, decline in customer numbers could be a warning sign. Overall, this quarter's results seemed fairly positive but investors were likely expecting more, however, and the stock is down 4.7% after reporting, trading at $61.5 per share.

So should you invest in Sprout Social right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.