Summary
Sprout Social began fiscal 2021 with faster revenue growth and a smaller bottom-line loss. First quarter revenue was $40.8 million, up 33.7% from the prior-year quarter. Gross profit rose to $30.8 million, up 38.0%, and gross margin reached 75.5%, up 2.4 percentage points. The company's operating loss narrowed to $6.2 million, a 43.2% improvement, while operating margin was -15.2%, up 20.6 percentage points. The net loss narrowed to $6.4 million, a 39.2% improvement. Diluted EPS was -$0.12.
Cash generation turned positive in the quarter. Operating cash flow was $3.6 million, up 180.4% from the prior-year quarter, and free cash flow was $3.4 million. Capital expenditures were $0.17 million, down 44.7%. Current deferred revenue was $50.8 million, up 50.3%, and remaining performance obligations were $74.9 million, up 57.7%. Those figures suggest customers are committing to longer or larger contracts and that cash collections improved.
Customer metrics also strengthened. Sprout Social ended March 31, 2021 with 28,122 customers, up from 26,718 at December 31, 2020 and 24,083 at March 31, 2020. Customers contributing more than $10,000 in ARR rose to 3,514, up 46% from the prior-year period. Total ARR was $172.0 million, up 38%, and organic ARR was $171.0 million, up 39%. The legacy Simply Measured impact should be immaterial to revenue and ARR moving forward, according to management. The company added a record number of net-new customers in the quarter, said CEO Justyn Howard, and Harris Poll research found that 91% of business executives expect their company's social media budget to increase over the next three years.
Guidance points to more growth but continued non-GAAP losses. For the second quarter of 2021, management guided overall revenue growth of 37%, a non-GAAP operating loss of $5.4 million to $5.0 million, and non-GAAP net loss per share of $0.10 to $0.09 based on approximately 53.6 million weighted average basic shares. For the full year 2021, management raised its annual forecast to overall revenue growth of 32% to 33%, with a non-GAAP operating loss of $18.5 million to $18.0 million and non-GAAP net loss per share of $0.35 to $0.34 based on approximately 53.8 million shares. At the midpoint of the full-year ranges, the implied operating margin is -10.3%, more than 500 basis points better than the prior year.
Risks remain tied to the pandemic and the company's investment plans. Sprout Social expects to keep incurring net losses for the foreseeable future as it spends on sales, marketing, and product development. Headcount rose 6% in research and development, 16% in sales and marketing, and 20% in general and administrative. The outlook assumes COVID-19 will not materially disrupt customer demand, but the duration and spread of the pandemic could still pressure customer marketing budgets or their ability to pay. Other named risks include competition, dependence on major social media platforms, privacy and data protection regulation, and cybersecurity or data breach incidents. Management also said it cannot provide GAAP guidance for operating loss or net loss per share without unreasonable effort because certain items sit outside its control. Positive free cash flow in the quarter was a first for the company, yet the outlook still calls for non-GAAP operating losses through 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $40.8M | $37.3M | +9.3% | $30.5M | +33.7% |
| Gross profit | $30.8M | $27.7M | +11.1% | $22.3M | +38.0% |
| Gross margin | 75.5% | 74.3% | +1.3 pp | 73.1% | +2.4 pp |
| Research & development | $8.3M | $7.8M | +6.0% | $7.3M | +13.6% |
| Sales & marketing | $18.2M | $16.3M | +11.5% | $13.9M | +30.7% |
| General & administrative | $10.6M | $9.4M | +12.5% | $12.1M | -12.2% |
| Total operating expenses | $37.0M | $33.5M | +10.5% | $33.3M | +11.3% |
| Operating income (loss) | -$6.2M | -$5.8M | -7.3% | -$10.9M | +43.2% |
| Operating margin | -15.2% | -15.5% | +0.3 pp | -35.8% | +20.6 pp |
| Net income (loss) | -$6.4M | -$5.9M | -8.4% | -$10.5M | +39.2% |
| Net margin | -15.6% | -15.7% | +0.1 pp | -34.3% | +18.7 pp |
Risks
Sprout Social states that the duration and spread of COVID-19, including any re-emergence and governmental responses, could impact customers' marketing or social media budgets or ability to pay for existing subscriptions, particularly in the most affected industries. While operational and financial performance were not materially impacted during the three months ended March 31, 2021, management says the extent of any future impact on financial condition or results of operations remains uncertain, and it may experience greater than anticipated operating losses if the pandemic persists.
The platform operates across third-party networks including Twitter, Facebook, Instagram, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and cost of subscription revenue rose with data provider fees increasing $2.1 million in the three months ended March 31, 2021 versus the prior-year quarter. Dependence on these external platforms for data and distribution creates exposure to their pricing, policy or access changes.
Growth depends on acquiring new customers and expanding within the existing base, with the customer count rising from 24,083 as of March 31, 2020 to 28,122 as of March 31, 2021 and customers contributing more than $10,000 in ARR rising from 2,404 to 3,514. The company expects to continue investing heavily in expanding its sales force and marketing, and sales and marketing expense rose 31% in the three months ended March 31, 2021, so any slowdown in demand or sales productivity would weigh on results.
Net loss was $6.4 million in the three months ended March 31, 2021 and the company expects to continue generating net losses for the foreseeable future as it invests in growth. GAAP operating loss was $6.2 million and total operating expenses were $37.0 million for the quarter, so continued losses or a need to raise additional equity or debt financing on unfavorable terms could adversely affect the business and financial condition.
Rapid headcount growth drove compensation costs, with research and development headcount up 6%, sales and marketing headcount up 16% and general and administrative headcount up 20% year over year, and stock-based compensation expense rose to $3.9 million in the three months ended March 31, 2021 from $3.5 million in the prior-year quarter. Continued reliance on equity awards to attract and retain personnel exposes the company to retention and compensation-cost risk.
Revenue from non-U.S. customers was approximately 29% of total revenue in the three months ended March 31, 2021, and the company plans to keep adding local sales, support and customer success teams in markets such as Ireland, Canada, the United Kingdom, Singapore, India, Australia and the Philippines. Execution risk in these markets, including competition for local talent, could slow the international growth it views as a meaningful opportunity.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating loss
Number of customers
Summary, forecast, risks and KPIs are extracted from Sprout Social, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.