Summary
Sprout Social closed fiscal 2021 with a strong top line but wider quarterly losses. Fourth-quarter revenue was $53.3 million, up 42.6% year over year. Full-year revenue reached $187.9 million, up 41.3%. Gross profit followed: $40.0 million in the quarter, up 44.2%, and $141.1 million for the full year, up 43.9%. Gross margin was 75.0% in the quarter, up 0.8 percentage points, and 75.1% for the full year, up 1.4 percentage points.
The profit picture was mixed. GAAP operating loss widened to $9.7 million in the fourth quarter, and GAAP net loss widened to $9.9 million. For the full year, GAAP operating loss narrowed to $28.1 million, and GAAP net loss narrowed to $28.7 million. Full-year diluted EPS improved to negative $0.53. Operating margin was negative 18.2% in the quarter, down 2.7 percentage points, but full-year operating margin was negative 15.0%, up 9.1 percentage points. The quarterly loss pressure reflects aggressive investment in research and development, sales and marketing, and general and administrative functions.
On a non-GAAP basis, the company reported a fourth-quarter operating loss of $2.6 million, compared with a non-GAAP operating loss of $3.3 million in the prior-year quarter. Non-GAAP net loss was $2.7 million, compared with $3.4 million. Non-GAAP net loss per share was $0.05, compared with $0.06. For the full year, non-GAAP operating loss was $6.4 million, compared with $20.9 million, and non-GAAP net loss per share was $0.13, compared with $0.40. Free cash flow was $2.2 million in the quarter and $13.9 million for the full year. GAAP operating cash flow was $2.5 million in the quarter and $14.8 million for the full year. Capital expenditures were $0.3 million in the quarter and $0.9 million for the full year, both down year over year. Deferred revenue was $69.2 million at December 31, 2021, up 59.5% from a year earlier.
Customer metrics show Sprout is moving upmarket. ARR ended 2021 at $224.2 million, up 42% year over year. Total customers rose 19% to 31,762. Customers contributing more than $10,000 in ARR grew 56% to 4,917, while customers contributing more than $50,000 in ARR grew 91% to 610. Dollar-based net retention was 112% for 2021, up from 110% in 2020. Excluding SMB customers, dollar-based net retention was 118%, up from 117%. The company added brands such as Square, Johnson & Johnson Medical Devices, Illumina, Marsh McLennan Agency, Archer-Daniels-Midland, The Container Store, and Rackspace during the quarter. It also expanded deals with Omnicom Media Group, Red Hat, YMCA of the USA, and others.
Management guided first-quarter 2022 total revenue growth to 38% year over year. That first-quarter outlook includes a non-GAAP operating loss of $2.2 million to $1.8 million and non-GAAP net loss per share of $0.05 to $0.04 on roughly 54.2 million weighted-average shares. For the full year 2022, the company guided total revenue growth of 33% year over year. Full-year non-GAAP operating loss is expected to be $7.4 million to $6.0 million, and non-GAAP net loss per share is expected to be $0.14 to $0.13 on roughly 54.5 million weighted-average shares. The full-year outlook implies roughly 40 basis points to 100 basis points of year-over-year operating margin improvement. Sprout does not provide GAAP guidance for operating loss or net loss per share because it cannot reconcile those measures without unreasonable effort.
The main risks are familiar for a high-growth SaaS company. Sprout expects to keep investing heavily and to generate net losses for the foreseeable future. The COVID-19 pandemic remains an uncertain factor for customer demand and marketing budgets. The company also flags risks around service interruptions or outages, reliance on API providers and social media platforms, conversion of unpaid traffic and free trials into paid subscriptions, cybersecurity and data breaches, and changing privacy and data protection regulations. Its rapid growth and limited operating history make future results harder to predict. Even with strong ARR growth and improving retention, the company has to sustain that momentum while spending to defend its market position.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $53.3M | $49.1M | +8.5% | $37.3M | +42.6% |
| Gross profit | $40.0M | $36.7M | +8.8% | $27.7M | +44.2% |
| Gross margin | 75.0% | 74.8% | +0.2 pp | 74.3% | +0.8 pp |
| Research & development | $12.2M | $10.6M | +15.8% | $7.8M | +56.5% |
| Sales & marketing | $24.8M | $21.4M | +16.1% | $16.3M | +52.4% |
| General & administrative | $12.7M | $11.6M | +8.6% | $9.4M | +34.1% |
| Total operating expenses | $49.7M | $43.6M | +14.0% | $33.5M | +48.2% |
| Operating income (loss) | -$9.7M | -$6.8M | -42.1% | -$5.8M | -67.7% |
| Operating margin | -18.3% | -13.9% | -4.3 pp | -15.5% | -2.7 pp |
| Net income (loss) | -$9.9M | -$7.0M | -41.6% | -$5.9M | -68.5% |
| Net margin | -18.6% | -14.2% | -4.3 pp | -15.7% | -2.9 pp |
| Customers | 31,000 | — | — | 10 | +309900.0% |
| Net retention rate | 110.0% | — | — | 110.0% | ±0.0 pp |
Risks
Sprout Social's platform depends on third-party APIs, especially social media network APIs. The filing states that providers may change, limit or discontinue API access, modify terms or fees, or terminate negotiated agreements, which could reduce platform functionality and harm results of operations.
The market for social media management is fragmented, rapidly evolving and competitive. Competitors may offer lower-priced or free products or bundle broader suites, which could force price reductions or higher sales and marketing spend.
Subject to stringent and changing data privacy laws, including CCPA fines up to $7,500 per violation, CPRA effective January 1, 2023, and EU GDPR fines up to 20 million euros or 4% of annual global revenue. Cross-border transfer restrictions and new regimes in Brazil, Canada and Asia add compliance cost and enforcement risk.
The vast majority of cloud infrastructure is outsourced to AWS. The filing notes limited ability to conduct security audits on AWS and contracts without strong indemnification, so an outage or termination could disrupt platform availability.
Primary go-to-market strategy relies on unpaid content marketing and free trial conversion. If unpaid channels attract less traffic or trials convert at lower rates, the company may need to increase marketing spend, harming results.
Expanding to more enterprise customers may lengthen and make sales cycles less predictable, and changes in customer mix could affect gross margins. Sales and marketing expense increased 42% year over year to $84.2 million for the year ended December 31, 2021 while revenue for FY2021 year to date rose 41.3%.
COVID-19 pandemic duration and variants could reduce customers' marketing or social media budgets or ability to pay. MD&A states operational and financial performance were not materially impacted by COVID-19 during the years ended December 31, 2021 and 2020, but uncertainty remains.
Cybersecurity attacks or data breaches could disrupt services and expose sensitive information. The filing notes an October 2019 internal bug that stored passwords unmasked in an internal log, though investigation showed no indication of external access or misuse.
Depends on senior management and key employees, including Co-Founder, Chairman and CEO Justyn Howard and Co-Founder and CTO Aaron Rankin. Loss of key personnel could delay development and strategic objectives.
Rapid growth and public-company reporting requirements strain accounting and finance functions. Failure to maintain effective internal control over financial reporting could result in inaccurate or untimely financial statements.
Subscription revenue is recognized ratably over contract terms, so a decline in new sales or renewals may not be immediately reflected in operating results and could adversely affect future periods.
For the year ended December 31, 2021, 28% of revenue came from non-U.S. customers. International expansion carries foreign currency, local law and hiring risks, and the company does not currently hedge transactional foreign currency exposure.
Reliance on a third-party subscription management platform and primarily a single third party for credit card processing. Disruption at either vendor could impair billing and payment processing and harm revenue.
As of December 31, 2021, U.S. federal and state net operating loss carryforwards were approximately $52.2 million and $9.0 million. Future ownership changes under Section 382 could limit the ability to use these carryforwards.
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 Q4 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.