Summary
Sprout Social closed the June 2022 quarter with revenue of $61.4 million, up 37.5% from the prior-year quarter, and first-half revenue of $118.9 million, up 39.0%. Annual recurring revenue reached $256.1 million, up 35% year over year. The customer base stood at 33,620 as of June 30, 2022, up 14%, but growth is concentrated upmarket. Customers contributing more than $10,000 in ARR rose 47% to 5,800, and those contributing more than $50,000 rose 88% to 755. Recent product work included a new TikTok integration and entry into the TikTok Marketing Partner Program, and the company named BT Group, Hertz, Afterpay, HP and AthenaHealth among new customers.
Gross profit was $46.3 million, up 38.1%, and gross margin edged up 0.3 percentage points to 75.4%. Everything below the gross line moved the other way. The GAAP operating loss widened to $14.5 million, and operating margin fell 11.8 percentage points to negative 23.7%. Net loss widened to $14.6 million, and diluted loss per share widened to $0.27. The spending behind that swing is broad. Headcount rose 49% in research and development, 39% in sales and marketing, 47% in general and administrative, and 40% in customer support and success. Data provider fees climbed with revenue, credit losses on accounts receivable increased, and foreign exchange transaction losses weighed on other expense.
Cash generation thinned out. Operating cash flow was $1.3 million for the quarter, down 70.9% from the prior-year quarter. Free cash flow, which the company defines as net cash provided by operating activities less purchases of property and equipment, was $0.7 million, compared with $4.1 million a year earlier. Capital expenditures rose to $0.6 million, up 104.8%. Contracted business kept building. Deferred revenue was $80.1 million, up 47.2%, and remaining performance obligations were $127.6 million, up 57.1%. Both measures grew faster than revenue did in the quarter, which points to a healthy committed pipeline even as reported profit slipped.
The gap between GAAP and non-GAAP results stayed wide. Non-GAAP operating loss was $1.9 million, compared with non-GAAP operating income of $0.1 million a year earlier, and non-GAAP net loss per share was $0.04, compared with $0.00. Those measures exclude stock-based compensation, which is the main reconciling item. Guidance for the third quarter of 2022 calls for growth of more than 32% year over year, a non-GAAP operating loss between $2.4 million and $2.0 million, and a non-GAAP net loss per share between $0.04 and $0.03. For the full year 2022, management raised its outlook and expects growth of more than 35%, a non-GAAP operating loss between $5.9 million and $5.7 million, and a non-GAAP net loss per share between $0.11 and $0.10. The company said the full-year plan implies 110 to 120 basis points of year-over-year operating margin improvement.
Management's risk list is long and mostly external. Inflation, recession risk, higher interest rates, labor shortages, supply chain issues and the fallout from Russia's invasion of Ukraine could all dampen demand from existing and prospective customers. The company also depends on social media platforms and API providers, where an outage or a change in terms would hurt. Privacy and data security rules could raise costs or limit how personal information is collected and used, and COVID-19 remains an open variable. Operating lease obligations of $27.7 million and purchase commitments of $33.1 million, $30.7 million of which fall due within twelve months, are the main contractual claims on cash. Losses are widening while revenue grows, and management expects to keep investing and to report net losses for the foreseeable future.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $61.4M | $57.4M | +7.0% | $44.7M | +37.5% |
| Gross profit | $46.3M | $43.4M | +6.6% | $33.5M | +38.1% |
| Gross margin | 75.3% | 75.6% | -0.3 pp | 75.0% | +0.3 pp |
| Research & development | $15.4M | $13.1M | +17.7% | $9.0M | +70.7% |
| Sales & marketing | $30.4M | $25.6M | +18.5% | $19.8M | +53.1% |
| General & administrative | $15.1M | $14.4M | +5.1% | $10.0M | +50.8% |
| Total operating expenses | $60.8M | $53.0M | +14.7% | $38.8M | +56.6% |
| Operating income (loss) | -$14.5M | -$9.6M | -51.2% | -$5.3M | -173.6% |
| Operating margin | -23.7% | -16.7% | -6.9 pp | -11.9% | -11.8 pp |
| Net income (loss) | -$14.6M | -$9.8M | -49.8% | -$5.4M | -168.5% |
| Net margin | -23.8% | -17.0% | -6.8 pp | -12.2% | -11.6 pp |
| Diluted EPS | -$0.27 | -$0.18 | -$0.09 | — | — |
Risks
Net loss widened to $14.6 million in the three months ended June 30, 2022 from $5.4 million in the prior-year quarter, and to $24.4 million for the six months ended June 30, 2022 from $11.8 million. Operating margin declined to -23.7% in the quarter from -11.9%, and the company expects to continue generating net losses for the foreseeable future.
Stock-based compensation expense increased to $12.7 million in the three months ended June 30, 2022 from $5.4 million a year earlier, and to $21.1 million for the six months ended June 30, 2022 from $9.4 million. The increase was driven by higher headcount and awards granted to the President, contributing significantly to net losses and potential shareholder dilution.
Operating cash flow decreased 70.9% to $1.27 million in the three months ended June 30, 2022 from $4.36 million in the prior-year quarter, and decreased 16.4% to $6.67 million for the six months ended June 30, 2022 from $7.98 million. Free cash flow also declined to $0.667 million from $4.062 million in the quarter.
The company relies on third-party data providers, with data provider fees increasing by $2.2 million in the three months ended June 30, 2022 compared to the prior-year quarter. As of June 30, 2022, purchase commitments for primarily data and services totaled $33.1 million, of which $30.7 million is due within the next twelve months, representing a fixed obligation regardless of demand.
Credit losses on accounts receivable increased by $0.6 million in the three months ended June 30, 2022 compared to the prior-year quarter, and by $0.5 million for the six months ended June 30, 2022, driven by higher accounts receivable balances. This could signal deteriorating customer payment behavior.
Other expense, net increased 427% to $0.29 million in the three months ended June 30, 2022 from $0.055 million, and increased 129% to $0.398 million for the six months ended June 30, 2022, primarily due to foreign currency transaction losses. With approximately 28% of revenue from non-U.S. customers in the six months ended June 30, 2022, currency fluctuations pose a growing risk.
Headcount grew significantly year over year, with a 49% increase in research and development, 39% in sales and marketing, 47% in general and administrative, and 40% in customer support. Personnel costs were the largest driver of operating expense increases, and competition for talent could further escalate costs or lead to attrition.
The SVB Credit Facility, which provided a $40.0 million revolver, expired by its terms on January 31, 2022, and no replacement facility is mentioned. This reduces financial flexibility as the company continues to incur operating losses and invest in growth.
SaaS KPIs
All quarters →ARR
Free cash flow
Number of customers contributing more than $10,000 in ARR
Number of customers contributing more than $50,000 in ARR
Non-GAAP operating loss
Number of customers
Summary, forecast, risks and KPIs are extracted from Sprout Social, Inc.'s SEC filings for Q2 FY2022 (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.