Sprout Social (NASDAQ:SPT) Reports Q3 In Line With Expectations

Adam Hejl /
2022/11/03 4:34 pm EDT

Social media management software company Sprout (NASDAQ:SPT) reported results in line with analyst expectations in Q3 FY2022 quarter, with revenue up 33% year on year to $65.3 million. The company expects that next quarter's revenue would be around $69.8 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Sprout Social made a GAAP loss of $13.9 million, down on its loss of $6.99 million, in the same quarter last year.

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Sprout Social (SPT) Q3 FY2022 Highlights:

  • Revenue: $65.3 million vs analyst estimates of $64.9 million (small beat)
  • EPS (non-GAAP): -$0.02 vs analyst estimates of -$0.04
  • Revenue guidance for Q4 2022 is $69.8 million at the midpoint, below analyst estimates of $70 million
  • Free cash flow of $533 thousand, down 20% from previous quarter
  • Customers: 34,258, up from 33,620 in previous quarter
  • Gross Margin (GAAP): 76.5%, up from 74.8% same quarter last year

“We’re in the fortunate position to again raise our annual growth and margin guidance,” 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 very strong over the last two years, growing from quarterly revenue of $33.6 million in Q3 FY2020, to $65.3 million.

Sprout Social Total Revenue

And unsurprisingly, this was another great quarter for Sprout Social with revenue up 33% year on year. Quarter on quarter the revenue increased by $3.87 million in Q3, which was in line with Q2 2022. 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 31.1% year on year to $69.8 million, slowing down from the 42.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 30.7% over the next twelve months.

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Customer Growth

You can see below that Sprout Social reported 34,258 customers at the end of the quarter, an increase of 638 on last quarter. That is a little 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 $2.57 billion Sprout Social is among smaller companies, but its more than $172.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Sprout Social deliver strong revenue growth this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see the slowdown in customer growth. The company is flat on the results and currently trades at $47.43 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.