- Net Revenue: $9.4 million, representing 25% year-over-year growth.
- Subscription Revenue: $98.5 million, up 25% year-over-year.
- Services Revenue: $0.9 billion, up 44% year-over-year.
- Customers Contributing >$10,000 in ARR: Grew 21% from a year ago.
- Customers Contributing >$50,000 in ARR: Grew 38% from a year ago.
- Q2 ACV: $13,403, up 36% year-over-year.
- Non-GAAP Gross Profit: $78.6 million, representing a non-GAAP gross margin of 79.1%, up 100 basis points from a year ago.
- Non-GAAP Sales and Marketing Expenses: $38.0 million or 38% of revenue, down from 40% a year ago.
- Non-GAAP Research and Development Expenses: $19.1 million or 19% of revenue, up from 18% a year ago.
- Non-GAAP General and Administrative Expenses: $16.2 million or 16% of revenue, down from 17% a year ago.
- Non-GAAP Operating Income: $5.3 million or 5.3% non-GAAP operating margin.
- Non-GAAP Net Income: $4.9 million or $0.09 per share based on 56.7 million weighted average shares of common stock outstanding.
- Cash, Cash Equivalents, and Marketable Securities: $93.2 million, down from $95.2 million at the end of Q1.
- Deferred Revenue: $149.3 million.
- RPO (Remaining Performance Obligations): $295.1 million, up from $290.0 million in Q1 and 43% year-over-year.
- Operating Cash Flow: $2.1 million, down from $6.3 million a year ago.
- Non-GAAP Free Cash Flow: $2.5 million, down from $6.0 million a year ago.
- Q3 2024 Revenue Guidance: $101.9 million to $102.1 million.
- Q3 2024 Non-GAAP Operating Income Guidance: $6.5 million to $7.5 million.
- Q3 2024 Non-GAAP Net Income Per Share Guidance: $0.12 to $0.13.
- Full Year 2024 Revenue Guidance: $105.0 million to $406.0 million.
- Full Year 2024 Non-GAAP Operating Income Guidance: $28 million to $29 million.
- Full Year 2024 Non-GAAP Net Income Per Share Guidance: $0.45 to $0.46.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sprout Social Inc (SPT, Financial) reported a 25% year-over-year growth in net revenue for Q2 2024.
- Subscription revenue increased by 25% year-over-year, reaching $98.5 million.
- The company saw a 64% year-over-year increase in customers spending more than $150K in ACV.
- Sprout Social Inc (SPT) achieved a non-GAAP gross margin of 79.1%, up 100 basis points from the previous year.
- The company continues to be recognized as a leader in multiple categories by G2, including social customer service and social media analytics.
Negative Points
- The buying environment remains challenging, with longer sales cycles and new approval processes affecting decision-making.
- Operating cash flow in Q2 was $2.1 million, down from $6.3 million a year ago.
- Non-GAAP free cash flow decreased to $2.5 million from $6.0 million a year ago.
- Deferred revenue at the end of the quarter was $149.3 million, down from $290.0 million in Q1.
- The company is facing pressures on buyers, leading to lengthier evaluation cycles and increased steps in the decision-making process.
Q & A Highlights
Q: Can you provide an update on the macro environment and pipeline issues from last quarter?
A: The environment remains similar to Q1, with pressures on buyers leading to longer sales cycles. However, we have seen strong execution and pipeline growth, indicating healthy demand for our products. (Ryan Barretto, President)
Q: Is there any impact from Social Studio's shutdown on your second-half guidance?
A: We have not made any material changes to our guidance based on Social Studio. We continue to see strong momentum, especially with Service Cloud, and have good visibility into the Social Studio pipeline. (Joe Del Preto, Independent Director)
Q: How are pipeline coverage ratios heading into the back half of the year compared to the prior year?
A: Our pipeline ratios are the highest we've ever had, with more pipeline created this quarter than ever before. This gives us confidence in our back-half performance. (Ryan Barretto, President)
Q: What has been the customer feedback on the new pricing model introduced in late 2022?
A: The feedback has been positive, with gross revenue retention showing good trajectory. The annual price increases are typically single-digit and well-received by customers. (Ryan Barretto, President)
Q: How have the go-to-market changes, such as verticalization, impacted the business?
A: The changes have been beneficial, especially in understanding the nuances of different verticals. This has led to significant logo wins and pipeline growth. (Ryan Barretto, President)
Q: Are there any particular subsegments where pipeline build is the strongest?
A: Customer care has shown strong demand, driven by the need for brands to respond quickly to social interactions. This aligns well with our product's capabilities. (Ryan Barretto, President)
Q: How are customers prioritizing social media in their budgets?
A: Social media, especially customer care, remains a high priority. Marketing leaders are focusing on organic social media due to budget cuts in other areas. (Ryan Barretto, President)
Q: Are there any changes in which social networks are more active for your customers?
A: Activity varies by brand and industry. Networks like LinkedIn, Instagram, TikTok, and the newly introduced Threads are all seeing significant engagement. (Ryan Barretto, President)
Q: How are the elongated sales cycles affecting new logos versus expansion business?
A: New business sales cycles tend to be longer than expansion. Existing customers already see value in our products, making expansion quicker. (Ryan Barretto, President)
Q: What is the current state of the sales force productivity and capacity planning?
A: We expect increased productivity in the back half of the year. We continuously evaluate rep productivity and market opportunities to determine capacity investments. (Ryan Barretto, President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
