Sprout Social (NASDAQ:SPT) Reports Strong Q2, Upgrades Full Year Guidance

Radek Strnad /
2021/08/03 4:25 pm EDT

Social media management software company Sprout (NASDAQ:SPT) reported Q2 FY2021 results beating Wall St's expectations, with revenue up 42.2% year on year to $44.6 million. Sprout Social made a GAAP loss of $5.44 million, improving on its loss of $8.3 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) Q2 FY2021 Highlights:

  • Revenue: $44.6 million vs analyst estimates of $42.8 million (4.36% beat)
  • EPS (non-GAAP): $0 vs analyst estimates of -$0.10 ($0.10 beat)
  • Revenue guidance for Q3 2021 is $47.3 million at the midpoint, above analyst estimates of $44.5 million
  • The company lifted revenue guidance for the full year, from $176.5 million to $182.3 million at the midpoint, a 3.28% increase
  • Free cash flow of $4.06 million, up 17.8% from previous quarter
  • Customers: 29,612, up from 28,122 in previous quarter
  • Gross Margin (GAAP): 75%, in line with previous quarter

“Our company is executing extraordinarily well, reinforcing confidence in our strategy and our rapidly expanding opportunity,” said Justyn Howard, Sprout Social’s CEO and co-founder.

Founded by Justyn Howard and Aaron Rankin in 2010, Sprout Social 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 $31.4 million, to $44.6 million.

Sprout Social Total Revenue

And unsurprisingly, this was another great quarter for Sprout Social with revenue up an absolutely stunning 42.2% year on year. On top of that, revenue increased $3.86 million quarter on quarter, a solid improvement on the $3.47 million increase in Q1 2021, and even a sign of slight acceleration of growth.

Analysts covering the company are expecting the revenues to grow 26.5% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. 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 29,612 customers at the end of the quarter, an increase of 1,490 on last quarter. That's about the same customer growth as what we seen last quarter and quite a bit above what we have typically seen over the last year, confirming the company is sustaining a good pace of sales.

Sprout Social Customers

Key Takeaways from Sprout Social's Q2 Results

With market capitalisation of $4.76 billion Sprout Social is among smaller companies, but its more than $171.4 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 very optimistic revenue guidance Sprout Social provided for the next quarter. And we were also excited to see the really strong revenue growth. Overall, we think this was still a really good quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $89.31 per share.

Sprout Social may have had a good quarter, so should you invest 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 full report which you can read here, it's free.

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