Sprout Social, Inc. Q1 FY2025 earnings

Sprout Social's fiscal 2025 first quarter, ended March 31, 2025, showed a company growing in the low teens while its losses narrowed. Revenue was $109.3 million, up 12.9% from the prior-year quarter. Gross profit was $84.5 million, up 13.6%, and gross margin was 77.3%, up 0.4 percentage points. The GAAP operating loss narrowed to $11.2 million, and the net loss narrowed to $11.2 million. Diluted loss per share narrowed to $0.19 from $0.24. Operating margin was minus 10.2%, an improvement of 3.5 percentage points.

The non-GAAP picture is far brighter, and that is where management points attention. Non-GAAP operating income was $12.5 million, compared with $6.0 million in the prior-year quarter, and non-GAAP net income was $12.5 million, compared with $5.7 million. Non-GAAP net income per share was $0.22, up from $0.10. The gap comes from stock-based compensation, amortization tied to the Tagger acquisition and restructuring charges. Cash generation also improved. Operating cash flow was $18.1 million, up 62.2%. Capital expenditures were $1.36 million, up 24.3%, and they are a cash outflow. Non-GAAP free cash flow, which the company defines as operating cash flow less those purchases, credit facility interest and restructuring payments, was $19.5 million, compared with $11.3 million a year earlier.

Backlog and customer mix carried the growth story. Total remaining performance obligations were $360.2 million as of March 31, 2025, up 24% year over year, and current remaining performance obligations were $255.8 million, up 21%. Deferred revenue was $173.95 million, up 18.9% from the prior-year quarter. Customers contributing more than $10,000 in annual recurring revenue reached 9,381, up 6%, while those contributing more than $50,000 reached 1,766, up 22%. Total customers, about 30,000, declined, and management no longer treats total customer count or ARR as a key performance indicator. Revenue from non-U.S. customers was about 26% of the total.

Costs are being reshaped by restructuring rather than by natural operating leverage. A plan launched in February 2025, focused on the sales and customer experience teams, drove restructuring charges in the quarter. It followed a November 2024 plan aimed at research and development, where headcount fell 13%. Research and development expense slipped 2%, sales and marketing expense rose 7%, and general and administrative expense rose 29%, lifted by stock compensation, personnel costs and bad debt expense. Data provider fees rose $2.3 million year over year.

Guidance points to continued growth with wider non-GAAP profitability. For the second quarter of 2025, the top line is guided to $110.4 million to $111.2 million, non-GAAP operating income to $8.4 million to $9.4 million, and non-GAAP net income per share to $0.14 to $0.16 on roughly 58.8 million weighted-average shares. For the full year 2025, top line guidance is $448.9 million to $453.9 million, non-GAAP operating income guidance is $40.7 million to $45.7 million, and non-GAAP net income per share guidance is $0.69 to $0.77 on about 59.1 million shares. The company does not provide guidance for GAAP operating loss or GAAP net loss per share.

Risks read as familiar but real. Management cites macroeconomic uncertainty, more measured buying behavior, longer average sales cycles, pricing pressure as the enterprise mix grows, tariffs and trade tensions, and swings in inflation and interest rates. Platform and API outages, cybersecurity and data privacy regulation, and credit agreement covenants sit on the list too. Liquidity looks adequate. Cash, cash equivalents and marketable securities increased from the December 31, 2024 level, and an April 2025 amendment to the credit facility extended its maturity to April 4, 2030 and replaced liquidity and annual recurring revenue covenants with leverage and interest coverage tests.