Social media management software company Sprout (NASDAQ:SPT) beat analysts' expectations in Q3 FY2023, with revenue up 31% year on year to $85.5 million. The company also expects next quarter's revenue to be around $90.6 million, in line with analysts' estimates. Turning to EPS, Sprout Social (NASDAQ:SPT) made a non-GAAP loss of $0.01 per share, improving from its loss of $0.25 per share in the same quarter last year.
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Sprout Social (SPT) Q3 FY2023 Highlights:
- Revenue: $85.5 million vs analyst estimates of $84.2 million (1.57% beat)
- EPS (non-GAAP): -$0.01 vs analyst estimates of -$0.05 ($0.04 beat)
- Revenue Guidance for Q4 2023 is $90.6 million at the midpoint, above analyst estimates of $89.9 million
- Free Cash Flow was -$3.41 million, down from $6.03 million in the previous quarter
- Customers: 32,383, down from 33,159 in the previous quarter
- Gross Margin (GAAP): 76.4%, in line with the same quarter last year
Founded by Justyn Howard and Aaron Rankin in 2010, Sprout Social (NASDAQ:SPT) provides a software as a service platform that companies can use to schedule and respond to posts on major social media networks like Twitter, Facebook (NASDAQ:META), Instagram, Youtube and LinkedIn.
Marketing SoftwareWhether or not companies market their products through social media, all businesses need to meet customers where they are; and increasingly, that is social media. As more and more people use a greater number of social media platforms, social media management software become more valuable to their customers.
Sales GrowthAs you can see below, Sprout Social's revenue growth has been very strong over the last two years, growing from $49.1 million in Q3 FY2021 to $85.5 million this quarter.
Unsurprisingly, this was another great quarter for Sprout Social with revenue up 31% year on year. On top of that, its revenue increased $6.22 million quarter on quarter, a very strong improvement from the $4.1 million increase in Q2 2023. This is a sign of acceleration of growth and great to see.
Next quarter's guidance suggests that Sprout Social is expecting revenue to grow 30% year on year to $90.6 million, in line with the 30.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 28.2% over the next 12 months before the earnings results announcement.
Customer Growth Sprout Social reported 32,383 customers at the end of the quarter, a decrease of 776 from the previous quarter. That's slower customer growth than what we've observed in past quarters, suggesting that the company's customer acquisition momentum is slowing.
Key Takeaways from Sprout Social's Q3 Results With a market capitalization of $2.38 billion, Sprout Social is among smaller companies, but its $113 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
It was encouraging to see Sprout Social narrowly top analysts' revenue expectations this quarter despite a slight miss on customers. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. For the full year, revenue and adjusted operating profit guidance were both ahead. Zooming out, we think this was still a solid showing that the company is staying on track. The stock is up 16.9% after reporting and currently trades at $49.75 per share.
The author has no position in any of the stocks mentioned in this report.
