Summary
Sprout Social began fiscal 2024 with revenue of $96.8 million for the quarter ended March 31, 2024, up 28.7% from $75.2 million a year earlier. Gross profit rose 27.5% to $74.4 million, while gross margin slipped to 76.8% from 77.6%. The bottom line moved the other way. GAAP operating loss widened to $13.3 million from $11.9 million, net loss widened to $13.6 million from $10.3 million, and diluted loss per share widened to $0.24 from $0.19. Operating margin was -13.7%, up from -15.9% in the prior-year quarter, so the loss widened in dollars even as it narrowed as a share of revenue.
The spread between GAAP and non-GAAP results still comes from stock-based compensation and Tagger-related amortization. Non-GAAP operating income was $6.0 million, compared with $1.7 million a year earlier. Non-GAAP net income was $5.7 million versus $3.4 million, and non-GAAP net income per share was $0.10 versus $0.06. Stock-based compensation expense reached $18.1 million in the quarter. A change in deferred commission amortization, from a three-year average customer life to five years, reduced first-quarter sales and marketing expense by $4.4 million, and management said it will affect all future periods.
Cash generation improved. Net cash provided by operating activities was $11.2 million, up from $8.3 million in the prior-year quarter. Capital expenditures were $1.1 million versus $0.4 million. Non-GAAP free cash flow, which the company defines as operating cash flow less property and equipment expenditures, acquisition-related costs and interest, was $11.3 million, compared with $7.9 million. Cash, cash equivalents and marketable securities totaled $95.2 million at March 31, 2024, down from $98.1 million at December 31, 2023. The company repaid $10.0 million on its revolving credit facility during the quarter and $45 million remained outstanding.
Backlog and large-customer counts both grew. Total remaining performance obligations were $290.0 million as of March 31, 2024, up 54% year over year. Current remaining performance obligations were $210.6 million, up 48%. Deferred revenue was $146.4 million, up 34.2% from a year earlier. Customers contributing more than $10,000 in ARR reached 8,823, up 24%, and customers contributing more than $50,000 in ARR reached 1,449, up 44%. Sprout stopped disclosing ARR and total customer count, arguing that RPO and the two large-customer cohorts are stronger indicators. One soft spot: net new ARR added in the first quarter of 2024 decreased relative to the first quarter of 2023.
Management tied the quarter's performance to enterprise seasonality and self-induced sales execution headwinds, and lowered the full-year 2024 revenue outlook to a range of $405.0 million to $406.0 million, assuming 20% organic Sprout revenue growth plus faster Tagger subscription revenue growth. Full-year non-GAAP operating income is guided to $28.0 million to $29.0 million including the deferred commission accounting benefit, or $15.0 million to $16.0 million excluding it. Full-year non-GAAP net income per share is guided to $0.45 to $0.46 on roughly 57.0 million weighted-average shares. For the second quarter of 2024, revenue is guided to $98.5 million to $98.6 million, growth of greater than 24%, with non-GAAP operating income of $4.6 million to $5.0 million and non-GAAP net income per share of $0.07 to $0.08.
Risks in the filing include price increases that have hurt and may continue to hurt demand, customer acquisition and retention. Macro conditions such as inflation, high interest rates and ongoing overseas conflict could reduce demand for the platform. The credit agreement requires minimum liquidity of at least the greater of $30 million and 30% of total revolving commitments, plus recurring revenue growth of at least 115% of the prior-year period. Sprout also carries $20.4 million of operating lease obligations and $15.9 million in purchase commitments. Leadership is changing as well: Justyn Howard moves to Executive Chair and Ryan Barretto becomes CEO.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $96.8M | $93.6M | +3.4% | $75.2M | +28.7% |
| Gross profit | $74.4M | $72.6M | +2.4% | $58.3M | +27.5% |
| Gross margin | 76.8% | 77.6% | -0.8 pp | 77.6% | -0.7 pp |
| Research & development | $23.8M | $22.7M | +4.9% | $17.9M | +33.0% |
| Sales & marketing | $44.5M | $47.4M | -6.0% | $36.9M | +20.7% |
| General & administrative | $19.3M | $20.8M | -7.1% | $15.5M | +24.8% |
| Total operating expenses | $87.6M | $90.8M | -3.5% | $70.3M | +24.7% |
| Operating income (loss) | -$13.3M | -$18.2M | +27.1% | -$11.9M | -11.3% |
| Operating margin | -13.7% | -19.5% | +5.7 pp | -15.9% | +2.1 pp |
| Net income (loss) | -$13.6M | -$20.1M | +32.4% | -$10.3M | -32.4% |
| Net margin | -14.0% | -21.4% | +7.4 pp | -13.6% | -0.4 pp |
| Diluted EPS | -$0.24 | -$0.36 | +$0.12 | -$0.19 | -$0.05 |
Risks
MD&A states success depends on the ability to sustain product and technology innovation and maintain the competitive advantage of proprietary technology, and the company continues to invest in R&D amid AI and social media platform competition. R&D expense rose 33% to $23.8 million for the quarter, reflecting this pressure.
MD&A flags exposure to high inflation, high interest rates, ongoing overseas conflict, capital market volatility and related market uncertainty, stating these factors introduce additional uncertainty even though they have not had a material adverse impact to date.
As of March 31, 2024, $45.0 million remained outstanding under a $100 million revolving credit facility that requires minimum liquidity and minimum recurring revenue growth of not less than 115% of prior-year recurring revenue. Interest expense was $1.0 million for the quarter and net interest income decreased 101% versus prior year due to higher interest expense and lower interest income.
Total number of customers decreased over the period while customers contributing over $10,000 in ARR grew 24% and those contributing over $50,000 in ARR grew 44% versus the prior year, as Sprout prioritized customer success and sales resources on the highest tiers. The company also stopped disclosing ARR and total customer count, which may reduce visibility into this shifting mix.
The $144 million Tagger acquisition closed August 2, 2023, and its preliminary purchase price allocation remains subject to revision for up to 12 months, creating potential adjustments. Integration and acquired technology amortization also affected cost of revenue and G&A in the quarter.
Operating expenses rose across R&D, sales and marketing, and G&A, and net loss widened to $13.6 million for the quarter from $10.3 million. MD&A expects the company to continue incurring net losses for the foreseeable future, and GAAP operating loss widened to $13.3 million from $11.9 million.
Cost of subscription revenue increased 33% for the quarter, driven by a $2.9 million increase in data provider fees, and total gross margin decreased 0.7 percentage points to 76.8%. Continued reliance on third-party data providers could pressure margins if costs rise.
MD&A says Sprout may need additional equity or debt financing and may not be able to raise capital on acceptable terms or at all. Although the company generated $11.2 million of operating cash flow in the quarter, it expects to continue incurring operating losses and may have negative operating cash flows for the foreseeable future.
SaaS KPIs
All quarters →Total Customers
Non-GAAP Operating Income
Total remaining performance obligations (RPO)
Current remaining performance obligations (cRPO)
Non-GAAP free cash flow
Number of customers contributing more than $10,000 in ARR
Number of customers contributing more than $50,000 in ARR
Summary, forecast, risks and KPIs are extracted from Sprout Social, Inc.'s SEC filings for Q1 FY2024 (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.