Summary
Sprout Social closed fiscal 2023 with strong top-line momentum. Fourth-quarter revenue was $93.6 million, up 34.3% year over year. Full-year revenue was $333.6 million, up 31.4%. Gross profit was $72.6 million in the quarter, up 33.9%, and $257.4 million for the full year, up 32.7%. Gross margin was 77.6% in the quarter, down 0.3 percentage points year over year, while full-year gross margin was 77.1%, up 0.7 percentage points. The company ended the year with ARR of $385.2 million, up 30% from December 31, 2022.
Profitability remained the main tension in the model. GAAP operating loss was $18.2 million in the fourth quarter, and the loss widened from the prior-year quarter. Net loss was $20.1 million, and that loss widened as well. For the full year, GAAP operating loss was $69.3 million, with the loss widening, and net loss was $66.4 million, also a wider loss. Diluted EPS for the full year was -$1.19, and the loss widened. Operating margin was -19.5% in the quarter, down 0.6 percentage points year over year, and full-year operating margin was -20.8%, down 0.4 percentage points. Non-GAAP results were positive: non-GAAP operating income was $1.7 million in the quarter, compared with $0.6 million in the prior-year quarter, and non-GAAP net income was $1.0 million, compared with $1.8 million. Non-GAAP net income per share was $0.02, compared with $0.03. For the full year, non-GAAP operating income was $4.7 million, compared with a non-GAAP operating loss of $3.9 million.
Cash generation weakened in the fourth quarter. GAAP operating cash flow was negative $2.6 million in the quarter, down year over year, and full-year operating cash flow was $6.5 million, also down. Non-GAAP free cash flow was negative $0.3 million in the quarter, compared with $2.6 million in the prior-year quarter. Capital expenditures were $0.6 million in the quarter, up 58.4% year over year. Current deferred revenue was $140.5 million at December 31, 2023, up 46.8% year over year. The customer mix continued to shift upmarket. Customers contributing more than $10,000 in ARR rose 31% to 8,689, and customers contributing more than $50,000 in ARR rose 44% to 1,399. Total customers fell 9% to 31,320. Dollar-based net retention was 107% in 2023, compared with 109% in 2022, and net retention excluding SMB customers was 111%, compared with 116%.
Guidance points to continued growth with modest non-GAAP profitability. For the first quarter of 2024, the company guided revenue to $97.2 million to $97.3 million, or growth of greater than 29%, non-GAAP operating income of $0.6 million to $0.7 million, and non-GAAP net income per share of $0.00 to $0.01. For the full year 2024, it guided revenue to $425.3 million to $425.5 million, non-GAAP operating income of $15.0 million to $16.0 million, and non-GAAP net income per share of $0.22 to $0.23. The full-year guide implies year-over-year non-GAAP operating margin improvement of roughly 220 basis points.
Risks remain substantial. The company flagged worsening macroeconomic conditions, including inflation, high interest rates, overseas conflict and capital market volatility, as potential drags on customer demand. It also cited platform and API interruptions, privacy and data protection rules, cybersecurity attacks, acquisition integration, and price increases that could reduce demand, customer acquisition or retention. On the credit side, the revolving facility carries covenants tied to minimum liquidity and minimum recurring revenue growth, and the company said it was in compliance as of December 31, 2023. Sprout also completed the Tagger Media acquisition in August 2023 to expand into influencer marketing, adding integration work and amortization to the story. The upmarket customer gains are encouraging, but the falling total customer count and lower net retention show that growth still depends on selling more to larger accounts.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $93.6M | $85.5M | +9.4% | $69.7M | +34.3% |
| Gross profit | $72.6M | $65.3M | +11.2% | $54.2M | +33.9% |
| Gross margin | 77.6% | 76.4% | +1.2 pp | 77.9% | -0.3 pp |
| Research & development | $22.7M | $20.1M | +13.0% | $16.7M | +35.5% |
| Sales & marketing | $47.4M | $44.5M | +6.5% | $35.3M | +34.1% |
| General & administrative | $20.8M | $25.0M | -16.7% | $15.4M | +35.5% |
| Total operating expenses | $90.8M | $89.5M | +1.5% | $67.4M | +34.8% |
| Operating income (loss) | -$18.2M | -$24.2M | +24.7% | -$13.1M | -38.6% |
| Operating margin | -19.5% | -28.3% | +8.8 pp | -18.9% | -0.6 pp |
| Net income (loss) | -$20.1M | -$23.0M | +12.8% | -$11.9M | -68.1% |
| Net margin | -21.4% | -26.9% | +5.5 pp | -17.1% | -4.3 pp |
| Diluted EPS | -$0.36 | -$0.41 | +$0.05 | -$0.22 | -$0.14 |
| Customers | 31,000 | — | — | 34,000 | -8.8% |
| Net retention rate | 109.0% | — | — | 112.0% | -3.0 pp |
Risks
GAAP net loss widened to $66.4 million for FY2023 year to date from $50.2 million for FY2022 year to date, and operating cash flow declined to $6.5 million year to date from $10.7 million year to date. The company expects to continue incurring net losses for the foreseeable future.
Total customers decreased from 34,390 as of December 31, 2022 to 31,320 as of December 31, 2023 after the November 2022 price increase. MD&A states the total number of customers may continue to decrease even when average spend per customer increases.
Dollar-based net retention rate was 107% for the year ended December 31, 2023, down from 109% for the year ended December 31, 2022. Excluding SMB customers, it was 111%, down from 116%, which may pressure future revenue growth if expansion slows further.
Risk factors newly and extensively highlight that AI advances may disrupt social media, enable competitors to run more efficiently, or let customers reduce seats and bypass services. Failure to invest in AI in a timely, compliant manner may reduce demand and place Sprout at a competitive disadvantage.
The platform depends on third-party APIs, especially social media networks, and membership in the X Official Partner Program may change or terminate. Loss of API access or less favorable terms could impair platform functionality and adversely affect results of operations.
In August 2023 the company entered a $100 million senior secured credit facility with $55 million outstanding as of December 31, 2023, secured by substantially all assets. Covenants include minimum liquidity and minimum recurring revenue growth of 115% of prior-year recurring revenue, and a breach could cause default and acceleration.
Revenue grew 31% for FY2023 year to date to $333.6 million from $253.8 million for FY2022 year to date, down from 35% growth in 2022. Risk factors state recent growth rates may not be indicative of future growth and revenue growth may slow or decline.
The company acquired Tagger Media for about $144 million in August 2023 and Repustate for about $8.3 million in January 2023. Integration may divert management attention, fail to achieve expected benefits, or expose the company to unknown liabilities and additional compliance costs.
Risk factors cite high inflation, high interest rates, ongoing overseas conflict, and market volatility. MD&A states customers are impacted to varying degrees and some existing customers most impacted by these conditions are experiencing slower growth.
As sales efforts target larger enterprise customers, the sales cycle may become longer and more expensive, with greater competition and pricing pressure. Large customer decisions may require multiple sign-offs and data privacy compliance reviews.
The company depends on continued service of senior management, including Co-Founder and CEO Justyn Howard and President Ryan Barretto. Competition for software industry talent is intense, and loss of key personnel could delay strategic objectives.
The company is subject to stringent and changing data privacy laws, including CCPA, GDPR, UK GDPR, LGPD, and emerging AI laws such as the EU AI Act. Noncompliance could lead to fines, litigation, and restrictions on the use of AI technologies.
The company outsources the majority of cloud infrastructure to AWS, relies primarily on a single third party for credit card payment processing, and uses a third-party subscription management platform. Disruption or breach at these providers could interrupt operations or cause revenue loss.
SaaS KPIs
All quarters →ARR
Total remaining performance obligations (RPO)
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 Q4 FY2023 (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.