Summary
Sprout Social reported second quarter revenue of $44.7 million, up 42.3% from $31.4 million in the prior-year quarter. Revenue for the six months ended June 30, 2021 reached $85.5 million, up 38.0%. Subscription revenue was 99% of the total in the first half. Annual recurring revenue stood at $189.1 million, up 45% from a year earlier, and customers outside the United States generated about 29% of first-half revenue.
The margin picture improved across most of the income statement. Gross profit was $33.5 million for the quarter, up 45.3%, and gross margin rose to 75.0% from 73.5%, a gain of 1.5 percentage points. The operating loss narrowed 36.3% to $5.3 million, and operating margin improved to negative 11.9% from negative 26.6%, up 14.7 percentage points. Net loss narrowed 34.4% to $5.4 million. Diluted loss per share came in at $0.10 for the quarter and $0.22 for the six months.
Non-GAAP results crossed into profit for the first time. Non-GAAP operating income was $0.1 million, against a non-GAAP operating loss of $5.9 million a year earlier, and non-GAAP net income was $0.0 million versus a non-GAAP net loss of $5.8 million. Non-GAAP net income per share was $0.00, compared with a non-GAAP net loss per share of $0.11. Stock-based compensation, which the company strips out of these measures, is the main dividing line between the two sets of numbers.
Cash flow swung hard in the right direction. Net cash provided by operating activities was $4.4 million for the quarter, up from $4.0 million used a year earlier, and $8.0 million for the six months, up from $8.5 million used in the first half of 2020. Free cash flow, a separate non-GAAP measure defined as operating cash flow less purchases of property and equipment, was $4.1 million for the quarter and $7.5 million for the six months. Capital expenditures were $0.29 million for the quarter, down 40.8% from $0.50 million. Deferred revenue, current portion only, rose 54.2% to $54.4 million at June 30, 2021, and remaining performance obligations rose 59.5% to $81.2 million. Cash, cash equivalents and marketable securities totaled $171.5 million at June 30, 2021, up from $167.8 million at March 31, 2021.
Customer counts kept climbing. The company ended the quarter with 29,612 customers, up from 28,122 at March 31, 2021 and 24,356 at June 30, 2020. Customers contributing more than $10,000 in annual recurring revenue rose 55% to 3,936.
Guidance points higher on both horizons. For the third quarter of 2021, management guided to overall growth of 41%, a non-GAAP operating loss of $4.3 million to $3.9 million, and a non-GAAP net loss per share of $0.08 to $0.07 on roughly 53.9 million weighted average basic shares. For the full year 2021, the outlook was raised to overall growth of roughly 37%, a non-GAAP operating loss of $11.0 million to $10.6 million, and a non-GAAP net loss per share of $0.21 to $0.20 on about 53.8 million weighted average basic shares. At the midpoint of the full-year ranges, the company points to a negative 5.9% non-GAAP operating margin and nearly 1,000 basis points of year-over-year operating margin improvement.
Risks have not changed much. The company still expects net losses for the foreseeable future as it keeps investing in sales, marketing and product development. Headcount grew 22% in general and administrative, 12% in sales and marketing and 4% in research and development year over year. Management flags the uncertain duration of the COVID-19 pandemic, competition, dependence on major social media platforms, privacy and data protection regulation, and cybersecurity breaches among the factors that could disrupt results. Non-cancellable contractual obligations totaled $83.4 million at June 30, 2021, with $27.9 million due in less than a year, and no principal was outstanding under the SVB credit facility.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $44.7M | $40.8M | +9.5% | $31.4M | +42.3% |
| Gross profit | $33.5M | $30.8M | +8.8% | $23.1M | +45.3% |
| Gross margin | 75.0% | 75.5% | -0.5 pp | 73.5% | +1.5 pp |
| Research & development | $9.0M | $8.3M | +8.9% | $7.7M | +16.8% |
| Sales & marketing | $19.8M | $18.2M | +9.2% | $14.2M | +39.7% |
| General & administrative | $10.0M | $10.6M | -5.7% | $9.5M | +5.1% |
| Total operating expenses | $38.8M | $37.0M | +4.9% | $31.4M | +23.6% |
| Operating income (loss) | -$5.3M | -$6.2M | +14.6% | -$8.3M | +36.3% |
| Operating margin | -11.9% | -15.2% | +3.3 pp | -26.6% | +14.7 pp |
| Net income (loss) | -$5.4M | -$6.4M | +14.5% | -$8.3M | +34.4% |
| Net margin | -12.2% | -15.6% | +3.4 pp | -26.4% | +14.3 pp |
Risks
The duration and spread of COVID-19 and governmental responses remain uncertain and could impact customers' marketing or social media budgets or ability to pay for existing subscriptions, particularly in industries most impacted by COVID-19. MD&A states operational and financial performance were not materially impacted during the six months ended June 30, 2021 and 2020, but the extent of future impact is uncertain.
Sprout Social expects to continue to incur operating losses for the foreseeable future due to investments in the business and may be required to seek additional equity or debt financing. Additional financing may not be available on terms acceptable to the company, or at all. For the six months ended June 30, 2021, operating cash flow was $7.98 million, up 193.3% from the prior-year period, but the company still had an accumulated deficit.
As of June 30, 2021, the company had $52.96 million of other purchase obligations, consisting of minimum guaranteed purchase commitments for data and services, with $23.99 million due less than one year. These commitments could strain liquidity if revenue growth slows or customer demand declines.
MD&A attributes higher subscription cost of revenue primarily to increased fees paid to data providers due to revenue growth. If these third-party data costs continue to rise, gross margins could be pressured even though total gross margin was 75.0% for the quarter, up 1.5 percentage points year over year.
Headcount increased 4% in research and development, 12% in sales and marketing, and 22% in general and administrative as the company invests in growth. Continued headcount growth and reliance on equity awards could increase operating costs and dilute shareholders if not offset by revenue growth.
SaaS KPIs
All quarters →ARR
Free cash flow
Non-GAAP Operating Income
Number of customers
Summary, forecast, risks and KPIs are extracted from Sprout Social, Inc.'s SEC filings for Q2 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.