Social media management software company Sprout (NASDAQ:SPT) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 30.8% year on year to $69.7 million. The company expects that next quarter's revenue would be around $75.1 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Sprout Social made a GAAP loss of $11.9 million, down on its loss of $9.9 million, in the same quarter last year.
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Sprout Social (SPT) Q4 FY2022 Highlights:
- Revenue: $69.7 million vs analyst estimates of $69.9 million (small miss)
- EPS (non-GAAP): $0.03 vs analyst estimates of -$0.02 ($0.05 beat)
- Revenue guidance for Q1 2023 is $75.1 million at the midpoint, roughly in line with what analysts were expecting
- Management's revenue guidance for upcoming financial year 2023 is $332.5 million at the midpoint, beating analyst estimates by 1.35% and predicting 31% growth (vs 35.5% in FY2022)
- Free cash flow of $2.56 million, up from $533 thousand in previous quarter
- Customers: 34,390, up from 34,258 in previous quarter
- Gross Margin (GAAP): 77.9%, up from 75% same quarter last year
“We are pleased with another exceptional quarter, anchored by record net new ARR, which we believe sets the foundation for accelerating ARR growth in 2023,” 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 $37.3 million in Q4 FY2020, to $69.7 million.
In line with analyst estimates of revenue, this was another quarter of strong revenue growth for Sprout Social with revenue up 30.8% year on year. On top of that, revenue increased $4.35 million quarter on quarter, a solid improvement on the $3.88 million increase in Q3 2022, and even a sign of slight acceleration of growth.
Guidance for the next quarter indicates Sprout Social is expecting revenue to grow 30.7% year on year to $75.1 million, slowing down from the 40.7% 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 $332.5 million at the midpoint, growing 31% compared to 35.1% increase in FY2022.
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Customer Growth
You can see below that Sprout Social reported 34,390 customers at the end of the quarter, an increase of 132 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.
Key Takeaways from Sprout Social's Q4 Results
With a market capitalization of $3.34 billion Sprout Social is among smaller companies, but its more than $172.8 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 and somewhat optimistic revenue guidance. On the other hand, it was unfortunate to see the slowdown in customer growth. Overall, this quarter's results were decent. The company is up 7.4% on the results and currently trades at $63 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.