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What changed in Sprout Social, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sprout Social, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+398 added−366 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-22)

Top changes in Sprout Social, Inc.'s 2023 10-K

398 paragraphs added · 366 removed · 293 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

77 edited+6 added−7 removed114 unchanged
Biggest changeTo manage high volumes of customer messaging, we provide our customers with an intuitive interface to build and deploy chat experiences to help their audience get the information they need quickly and efficiently. 17 Pricing Following an initial 30-day free trial, our subscription-based model allows our customers to choose a core plan based on their needs and license the platform on a per user per month basis.
Biggest changeOur mobile applications give our customers access to our platform on any current Android or iOS device. 17 • Chat bot creation and management . To manage high volumes of customer messaging, we provide our customers with an intuitive interface to build and deploy chat experiences to help their audience get the information they need quickly and efficiently.
Our platform brings all of the 13 necessary tools together for organizations to expertly and efficiently manage this new channel and create compelling experiences for their audience. Our powerful, easy-to-use cloud platform allows organizations of all sizes to create stronger relationships through social media, create and publish effective content, measure and improve performance and better understand their markets and customers.
Our platform brings all of the necessary tools together for organizations to expertly and efficiently manage this new channel and create compelling experiences for their audience. 13 Our powerful, easy-to-use cloud platform allows organizations of all sizes to create stronger relationships through social media, create and publish effective content, measure and improve performance and better understand their markets and customers.
Security and privacy issues have dominated the discussion around social media in recent years, leading to increased complexity, risk and regulation. Conforming to these requirements and maintaining security across dozens to hundreds of social profiles on multiple social networks reinforces the need for centralized management. 9 • Brands need a centralized solution .
Data privacy and security issues have dominated the discussion around social media in recent years, leading to increased complexity, risk and regulation. Conforming to these requirements and maintaining security across dozens to hundreds of social profiles on multiple social networks reinforces the need for centralized management. 9 • Brands need a centralized solution .
The information on our website or our social media profiles is not incorporated by reference in this Annual Report. We make available on or through our website certain reports and amendments to those reports we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
The information on our website or our social media profiles is not incorporated by reference in this Annual Report. 23 We make available on or through our website certain reports and amendments to those reports we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
Due to the technical complexities on the back end of social media, required network relationships and rising customer emphasis on security, compliance and data privacy, we believe the barriers to entry in our market have risen materially over the past several years. • World-class culture .
Due to the technical complexities on the back end of social media, required network relationships and rising customer emphasis on data privacy and security, we believe the barriers to entry in our market have risen materially over the past several years. • World-class culture .
We estimate that less than 5% of the millions of businesses on social media have adopted software solutions to centrally manage their social media efforts, providing a large, nascent opportunity to drive significantly increased market adoption of our solution and continued growth across all customer segments. 6 We have a highly efficient, product-driven go-to-market strategy that has enabled us to scale rapidly, attracting more than 34,000 current customers from small businesses to global brands as well as marketing agencies and government, non-profit and educational institutions.
We estimate that less than 5% of the millions of businesses on social media have adopted software solutions to centrally manage their social media efforts, providing a large, nascent opportunity to drive significantly increased market adoption of our solution and continued growth across all customer segments. 6 We have a highly efficient, product-driven go-to-market strategy that has enabled us to scale rapidly, attracting more than 31,000 current customers from small businesses to global brands as well as marketing agencies and government, non-profit and educational institutions.
Our relentless focus on customer relationships and building the highest-quality products have made our platform the highest customer-rated product across all major categories and customer segments relative to our primary competitors according to G2. The key benefits of our solution include: • Comprehensive, all-in-one solution .
Our relentless focus on customer relationships and building the highest-quality products have made our platform the highest customer-rated product across all major categories and customer segments relative to our primary competitors according to G2. The key benefits of our platform include: • Comprehensive, all-in-one platform .
Without a centralized platform to provide visibility, workflow and coordination across business functions, the customer experience can become disjointed and inconsistent. Our Solution Our powerful, easy-to-use platform enables customers to manage the complexities of social media across their entire organization.
Without a centralized platform to provide visibility, workflow and coordination across business functions, the customer experience can become disjointed and inconsistent. Our Platform Our powerful, easy-to-use platform enables customers to manage the complexities of social media across their entire organization.
These tools serve a broad range of use-cases within our customers’ organizations including: • Social and Community Management; • Public Relations; • Marketing; • Customer Service and Care; • Commerce; • Sales and Customer Acquisition; • Recruiting and Hiring; • Product Development; and • Business Strategy.
These tools serve a broad range of use-cases within our customers’ organizations including: • Social and Community Management; • Public Relations; • Marketing; • Influencer Marketing; • Customer Service and Care; • Commerce; • Sales and Customer Acquisition; • Recruiting and Hiring; • Product Development; and • Business Strategy.
We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost-effective. We actively pursue registration of our trademarks, logos, service marks and domain names in the United States and in other key jurisdictions.
We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost-effective. 19 We actively pursue registration of our trademarks, logos, service marks and domain names in the United States and in other key jurisdictions.
We are the registered holder of a variety of domain names 19 that include the term “Sprout Social” and similar variations. We also own numerous trademarks, trade names, service marks, logos and design marks, including SPROUT SOCIAL and our leaf logo.
We are the registered holder of a variety of domain names that include the term “Sprout Social” and similar variations. We also own numerous trademarks, trade names, service marks, logos and design marks, including SPROUT SOCIAL and our leaf logo.
With our efficient go-to-market model and over 99% of our revenue in 2022 from software subscriptions, we have experienced strong unit economics across all customer segments as we continue to grow and refine our sales and marketing efforts. Our single code-base also creates a scalable and capital-efficient model that enables us to add new customers at little incremental cost.
With our efficient go-to-market model and over 99% of our revenue in 2023 from software subscriptions, we have experienced strong unit economics across all customer segments as we continue to grow and refine our sales and marketing efforts. Our single code-base also creates a scalable and capital-efficient model that enables us to add new customers at little incremental cost.
We can deploy a change in minutes for the benefit of our over 34,000 current customers to address changes in network functions, expanded capabilities and evolving compliance requirements. We remove this burden from our customers while continuing to drive innovation with constant enhancements across our platform. • Democratizing business intelligence. When businesses have access to better information, everyone benefits.
We can deploy a change in minutes for the benefit of our over 31,000 current customers to address changes in network functions, expanded capabilities and evolving compliance requirements. We remove this burden from our customers while continuing to drive innovation with constant enhancements across our platform. • Democratizing business intelligence. When businesses have access to better information, everyone benefits.
Our platform is easy-to-use and can be deployed rapidly by new customers without direct engagement from our sales or services teams. In 2022, the majority of our new customer revenue resulted from our trials and other inbound sources. Our 30-day free trial model allows prospective customers to set up and use our software within minutes and without assistance.
Our platform is easy-to-use and can be deployed rapidly by new customers without direct engagement from our sales or services teams. In 2023, the majority of our new customer revenue resulted from our trials and other inbound sources. Our 30-day free trial model allows prospective customers to set up and use our software within minutes and without assistance.
Our Industry Social media began as a way for individuals to connect and share experiences. Networks like Twitter, Facebook, LinkedIn and subsequent major networks allowed individuals to more easily communicate with friends, family, colleagues and those who shared common interests. As social media grew, savvy businesses recognized its power as a channel to market to consumers at scale.
Our Industry Social media began as a way for individuals to connect and share experiences. Networks like X, Facebook, LinkedIn and subsequent major networks allowed individuals to more easily communicate with friends, family, colleagues and those who shared common interests. As social media grew, savvy businesses recognized its power as a channel to market to consumers at scale.
Our solution enables seamless collaboration across departments and is consistently rated the easiest-to-use social media management software available amongst our primary competitors. • Purpose-built to handle the velocity of social. We have the ability to quickly adapt as the market changes because all of our customers are served from a single code-base.
Our platform enables seamless collaboration across departments and is consistently rated the easiest-to-use social media management software available amongst our primary competitors. • Purpose-built to handle the velocity of social. We have the ability to quickly adapt as the market changes because all of our customers are served from a single code-base.
We provide them the tools to measure their effectiveness and productivity, benchmark against peers, measure content performance and business impact, and gain insights on areas of improvement. • Comprehensive social media reporting. Our customers can measure and analyze their performance across Twitter, Facebook, Instagram, Pinterest and LinkedIn through rich experiences designed to extract actionable insights from data.
We provide them the tools to measure their effectiveness and productivity, benchmark against peers, measure content performance and business impact, and gain insights on areas of improvement. • Comprehensive social media reporting. Our customers can measure and analyze their performance across X, Facebook, Instagram, Pinterest and LinkedIn through rich experiences designed to extract actionable insights from data.
With over 34,000 current customers, our platform and architecture have the massive scale needed to deliver exceptional performance and reliability, as well as visibility into trends that can indicate where our market is headed. We have the robust security and compliance tools needed to be successful. Our Competitive Strengths The competitive strengths of our platform include: • Product-led platform .
With over 31,000 current customers, our platform and architecture have the massive scale needed to deliver exceptional performance and reliability, as well as visibility into trends that can indicate where our market is headed. We have the robust security and compliance tools needed to be successful. Our Competitive Strengths The competitive strengths of our platform include: • Product-led platform .
Currently, more than 34,000 customers across more than 100 countries rely on our platform. Overview Sprout Social empowers businesses to tap into the power and opportunity presented by the shift to social communication. Social media reaches almost half of the world’s population, influences buying behaviors and has changed the way the world communicates.
Currently, more than 31,000 customers across more than 100 countries rely on our platform. Overview Sprout Social empowers businesses to tap into the power and opportunity presented by the shift to social communication. Social media reaches almost half of the world’s population, influences buying behaviors and has changed the way the world communicates.
Item 1. Business Sprout Social — Powering the Evolution of Customer Experience With more than 4.5 billion global users consuming and sharing billions of posts per day, social media has fundamentally changed the customer experience. Social media has become mission-critical to the way organizations reach, engage and understand their target audience and customers.
Item 1. Business Sprout Social — Powering the Evolution of Customer Experience With more than 5.0 billion global users consuming and sharing billions of posts per day, social media has fundamentally changed the customer experience. Social media has become mission-critical to the way organizations reach, engage and understand their target audience and customers.
With over 34,000 current customers and billions of data points, we are able to harness massive amounts of feedback to optimize our products rapidly and in real-time, benefiting our platform by enabling us to understand the key features and products that are important to our customers and create compelling user experiences. • Network relationships.
With over 31,000 current customers and billions of data points, we are able to harness massive amounts of feedback to optimize our products rapidly and in real-time, benefiting our platform by enabling us to understand the key features and products that are important to our customers and create compelling user experiences. • Network relationships.
As a result of our strong brand and reputation for quality and service, we generated more than 80% of our revenue from new customers in 2022 from unpaid channels. • Diverse customer base with a highly efficient go-to-market strategy . We serve a large number of customers across industry and customer segments.
As a result of our strong brand and reputation for quality and service, we generated more than 80% of our revenue from new customers in 2023 from unpaid channels. • Diverse customer base with a highly efficient go-to-market strategy . We serve a large number of customers across industry and customer segments.
We have built strong relationships with major social media networks, including Twitter, Facebook, Instagram, TikTok, Pinterest, LinkedIn and Google, among others. We work together closely with these networks to address the evolving needs of our customers and to bring new ideas and innovation to market. • Superior customer service.
We have built strong relationships with major social media networks, including X, Facebook, Instagram, TikTok, Pinterest, LinkedIn and Google, among others. We work together closely with these networks to address the evolving needs of our customers and to bring new ideas and innovation to market. • Superior customer service.
Based on results from our internal employee survey, our employee engagement in 2022 remained above our industry benchmark. Our commitment to leadership development and developing careers at Sprout Social continues to be a key focus area. We continue to invest in leadership development at Sprout Social through our GOLD (Growth Oriented Leadership Development) program.
Based on results from our internal employee survey, our employee engagement in 2023 remained above our industry benchmark. Our commitment to leadership development and developing careers at Sprout Social continues to be a key focus area. We continue to invest in leadership development at Sprout Social through our GOLD (Growth Oriented Leadership Development) program.
In 2022, the strength of our brand, content marketing, and search engine optimization resulted in the majority of our inbound trials generated through unpaid marketing. The scale of these trials allows us to rapidly test, adapt and optimize our go-to-market approach for sustained, capital-efficient growth.
In 2023, the strength of our brand, content marketing, and search engine optimization resulted in the majority of our inbound trials generated through unpaid marketing. The scale of these trials allows us to rapidly test, adapt and optimize our go-to-market approach for sustained, capital-efficient growth.
As social becomes a critical channel for virtually all aspects of the customer experience, including brand awareness, customer acquisition, social customer care, commerce, advocacy and reputation management, we expect that our customers will increase adoption of our platform across departments.
As social becomes a critical channel for virtually all aspects of the customer experience, including brand awareness, influencer marketing, customer acquisition, social customer care, commerce, advocacy and reputation management, we expect that our customers will increase adoption of our platform across departments.
Social is one of the largest sources of business intelligence in the world and possesses the ability to answer critical questions and inform strategy. However, most organizations currently lack the tools necessary to access and analyze available data. • Significant security and compliance concerns exist .
Social is one of the largest sources of business intelligence in the world and possesses the ability to answer critical questions and inform strategy. However, most organizations currently lack the tools necessary to access and analyze available data. • Significant data privacy and security concerns exist .
We have ten Community Resource Groups (CRGs), which are volunteer led groups centered around common identities and life experiences that work to serve the unique needs of their community members, foster a sense of belonging through connection, support and empathy.
We have eleven Community Resource Groups (CRGs), which are volunteer-led groups centered around common identities and life experiences that work to serve the unique needs of their community members, foster a sense of belonging through connection, support and empathy.
We used internal estimates informed by research from the Harris Poll to determine the projected business presence on social media in 2025 that will require a social media management platform, multiplied by our internal projected average segment ACVs in 2025 for Sprout Social and its primary competitors in the applicable segment.
We then used internal estimates informed by research from the Harris Poll to determine the projected business presence on social media in 2025 that will require a social media management platform, multiplied by our internal projected average segment ACVs in 2025 for Sprout Social and its direct competitors in the applicable segment.
Glassdoor has recognized us as one of the “Best Places to Work” in 2017, 2019, 2020, 2021, 2022 and 2023. In 2022, we were also recognized by Great Place to Work and PEOPLE magazine on the 2022 PEOPLE Companies that Care list, which is based on data from companies representing more than 6.1 million U.S. employees.
Glassdoor has recognized us as one of the “Best Places to Work” in 2017, 2019, 2020, 2021, 2022 and 2023. In 2023, we were also recognized by Great Place to Work and PEOPLE magazine on the 2023 PEOPLE Companies that Care list, which is based on data from companies representing more than 7.5 million U.S. employees.
Last year, we donated approximately $500,000 to support these causes through various not-for-profits. Total Rewards We strive to evolve our reward programs to be market competitive and comprehensive to cover employees at every stage of their personal and professional path and are focused on keeping wellness as the foundation for all employees globally.
Last year, we donated approximately $575,000 to support these causes through various not-for-profits. Total Rewards We continue to evolve our reward programs to be market competitive and comprehensive to cover employees at every stage of their personal and professional path and are focused on keeping wellness as the foundation for all employees globally.
A new form of advertising was born and brands rushed to establish a presence and following on social media as a powerful new way to connect with their customers. With more than 3.9 billion users and millions of businesses adopting social media, it has fundamentally changed communication and commerce, and we are just beginning to understand its implications and importance.
A new form of advertising was born and brands rushed to establish a presence and following on social media as a powerful new way to connect with their customers. With more than 5.0 billion users and millions of businesses adopting social media, it has fundamentally changed communication and commerce, and we are just beginning to understand its implications and importance.
For more information on how we define and calculate ARR, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—ARR.” We generated net losses of $50.2 million, $28.7 million and $31.7 million during the years ended December 31, 2022, 2021 and 2020, respectively.
For more information on how we define and calculate ARR, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—ARR.” We generated net losses of $66.4 million, $50.2 million and $28.7 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Our sales and marketing expenses were $123.7 million, $84.2 million and $59.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Customer Service Our global support team provides support to all of our customers, regardless of spend or segment, in the channel they prefer.
Our sales and marketing expenses were $168.1 million, $123.7 million and $84.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Customer Service Our global support team provides support to all of our customers, regardless of spend or segment, in the channel they prefer.
Operating across major networks, including Twitter, Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.
Operating across major networks, including X (formerly known as Twitter), Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.
We also believe our platform addresses this significant capability gap, serving what we refer to as the social media management market. We estimate that, based on our current average customer spending levels, the annual served addressable market (SAM) for our platform in 2021 exceeded $44 billion.
We also believe our platform addresses this significant capability gap, serving what we refer to as the social media management market. We estimate that, based on our current average customer spending levels, the annual served addressable market (SAM) for our platform in 2023 exceeded $55 billion.
We believe our ability to execute on our growth strategy is directly related to our award-winning culture with a reputation for caring deeply about our customers and our employees. This is evidenced by our top user rating on G2 and 4.3 rating and 92% CEO approval rating on Glassdoor.
We believe our ability to execute on our growth strategy is directly related to our award-winning culture with a reputation for caring deeply about our customers and our employees. This is evidenced by our top user rating on G2 and 4.2 rating and 89% CEO approval rating on Glassdoor.
We estimate that our SAM opportunity will exceed $100 billion by 2025, an annual market growth rate of greater than 20%. 12 We calculated our current SAM estimate as follows: (i) utilized data from The U.S. Small Business Administration, The U.S.
We estimate that our SAM opportunity will exceed $120 billion by 2025, an annual market growth rate of greater than 25%. 12 We calculated our current SAM estimate as follows: (i) utilized data from The U.S. Small Business Administration, The U.S.
The majority of inbound trials and demonstration requests are generated from unpaid marketing, allowing us to rapidly test, adapt and optimize our go-to-market for sustained growth. As of December 31, 2022, our sales and marketing department had 599 employees.
The majority of inbound trials and demonstration requests are generated from unpaid marketing, allowing us to rapidly test, adapt and optimize our go-to-market for sustained growth. As of December 31, 2023, our sales and marketing department had 711 employees.
Our relationships with Twitter, Facebook, Instagram, Pinterest, LinkedIn and Google, among others, allow us to build robust solutions that meet today’s business needs while maintaining our focus on innovation as the market evolves.
Our relationships with X (formerly known as Twitter), Facebook, Instagram, Pinterest, LinkedIn, Google and TikTok, among others, allow us to build robust solutions that meet today’s business needs while maintaining our focus on innovation as the market evolves.
The copyright infringement practices that we have implemented for our platform are intended to satisfy the DMCA safe harbor. Culture and Workforce Sprout Social was named a Best Place to Work in 2022 by the Glassdoor Employees' Choice award, marking the fifth time in six years that we have received this recognition.
The copyright infringement practices that we have implemented for our platform are intended to satisfy the DMCA safe harbor. Culture and Workforce Sprout Social was named a Best Place to Work in 2023 by the Glassdoor Employees' Choice award, marking the sixth time in seven years that we have received this recognition.
Brand reputations are being shaped by social media and customer review sites. We provide customers a seamless, integrated solution to manage their reputation across review sites and social media. • Employee advocacy . An organization’s employees are highly trusted by their followers and can extend a brand’s reach on social media.
We provide customers a seamless, integrated solution to manage their reputation across review sites and social media. • Employee advocacy . An organization’s employees are highly trusted by their followers and can extend a brand’s reach on social media.
Our strong culture, world-class management team, leading platform and efficient go-to market strategy have led to revenue of $253.8 million, $187.9 million and $132.9 million during the years ended December 31, 2022, 2021 and 2020, respectively, representing growth of 35% from 2021 to 2022 and representing growth of 41% from 2020 to 2021.
Our strong culture, world-class management team, leading platform and efficient go-to market strategy have led to revenue of $333.6 million, $253.8 million and $187.9 million during the years ended December 31, 2023, 2022 and 2021, respectively, representing growth of 31% from 2022 to 2023 and representing growth of 35% from 2021 to 2022.
We invest substantial resources in research and development to drive our technology innovation and bring new products to the market. As of December 31, 2022, our research and development department had 261 employees. Our research and development expenses were $61.4 million, $40.0 million and $30.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
We invest substantial resources in research and development to drive our technology innovation and bring new products to the market. As of December 31, 2023, our research and development department had 343 employees. Our research and development expenses were $79.6 million, $61.4 million and $40.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2022, our customer service department had 59 employees. Customer service costs are included in Cost of revenue within the Consolidated Statement of Operations and Comprehensive Loss. Research and Development We have a proven research and development team that rapidly delivers high-quality products, which has driven our customer growth.
Customer service costs are included in Cost of revenue within the Consolidated Statement of Operations and Comprehensive Loss. Research and Development We have a proven research and development team that rapidly delivers high-quality products, which has driven our customer growth.
In that survey, 96% of employees said Sprout Social is a great place to work, which is 68% higher than the average U.S. company. Sprout was also recognized as the #6 Best Workplace in Chicago and #9 Best Workplace for Parents by Great Place to Work.
In that survey, 91% of employees said Sprout Social is a great place to work, which is 60% higher than the average U.S. company. Sprout was also recognized as the #2 Best Workplace in Chicago and #18 Best Workplace for Parents by Great Place to Work.
Additionally, we generated over $296 million in annualized recurring revenue, or ARR, as of December 31, 2022.
Additionally, we generated over $385 million in annualized recurring revenue, or ARR, as of December 31, 2023.
A substantial number of our customers subscribe without any interaction from our sales team. This approach allows us to cost-effectively drive strong lead generation, upgrade free trials to paying subscription customers, drive strong conversion of demonstration requests and achieve growth of our platform.. As an organization realizes the strength of our platform, adoption of our products increases across the organization.
This approach allows us to cost-effectively drive strong lead generation, upgrade free trials to paying subscription customers, drive strong conversion of demonstration requests and achieve growth of our platform. As an organization realizes the strength of our platform, adoption of our products increases across the organization.
Our platform brings every aspect of the social experience together into a single, elegant and robust solution. From engagement, publishing, and reporting and analytics to reputation management, business intelligence, advocacy, and workflow and collaboration, our customers can manage their entire social experience seamlessly and more effectively through a single pane of glass. • Single platform for the entire organization .
From engagement, publishing, and reporting and analytics to reputation management, influencer marketing, business intelligence, advocacy, and workflow and collaboration, our customers can manage their entire social experience seamlessly and more effectively through a single pane of glass. • Single platform for the entire organization .
The program consists of ‘Ignite,’ which focuses on new leaders including those new to the role of leadership itself or to leadership at Sprout Social, ‘Evolve,’ which is tailored towards experienced managers and directors, and ‘Amplify’ (launched in 2022) which is designed for our most senior leaders.
The program consists of ‘Ignite,’ which focuses on new leaders including those new to the role of leadership itself or to leadership at Sprout Social, ‘Evolve,’ which is tailored towards experienced managers and directors, and ‘Amplify’ which is designed for our most senior leaders. In 2023 we also welcomed our second cohort of “Accelerate,” our DEI Leadership Accelerator Program.
Commerce transactions are shifting to social, which is a primary point of product discovery for consumers. We allow brands to easily link their commerce platforms, currently Shopify and Facebook Shops, for a unified view of product catalogs, SKU availability and purchase history, which help inform proactive marketing efforts and create seamless, unified customer service experiences. • Reputation management .
We allow brands to easily link their commerce platforms, currently Shopify and Facebook Shops, for a unified view of product catalogs, SKU availability and purchase history, which help inform proactive marketing efforts and create seamless, unified customer service experiences. • Reputation management . Brand reputations are being shaped by social media and customer review sites.
Scholarship recipients were also given the opportunity to interview for our Associate Software Engineering Program. We run a formal DEI learning curriculum to increase DEI awareness and ensure employees support and help drive our DEI efforts. This includes unconscious bias training for all new hires as part of their onboarding.
We run a formal DEI learning curriculum to increase DEI awareness and ensure employees support and help drive our DEI efforts. This includes unconscious bias training for all new hires as part of their onboarding.
We also offer stock-based compensation awards for every new employee, regardless of role, eligible to receive annual equity grants (in addition to new hire equity awards), and an Employee Stock Purchase Plan (currently United States only) to provide the opportunity to purchase Sprout Social stock at a discounted price to further benefit from the financial success and growth of the company. 23 Our Website and Availability of SEC Reports and Other Information We maintain a website at the following address: www.sproutsocial.com .
In addition, we provide an Employee Stock Purchase Plan (currently United States only) to provide the opportunity to purchase Sprout Social stock at a discounted price to further benefit from the financial success and growth of the Company. Our Website and Availability of SEC Reports and Other Information We maintain a website at the following address: www.sproutsocial.com .
We continue to provide a stipend to all new employees to ensure an optimal home setup and provide a Wi-Fi reimbursement to all employees to support them in our hybrid work environment.
In 2023 we introduced a Lifestyle Spending Account to support our employees' efforts to maintain a healthy and balanced lifestyle. We continue to provide a stipend to all new employees to ensure an optimal home setup and provide a Wi-Fi reimbursement to all employees to support them in our hybrid work environment.
Our advocacy solutions allow our customers to distribute pre-approved content to their team to facilitate sharing across the individual’s social network. • Mobile applications . Social media is 24/7 and extends well beyond the work day. Our mobile applications give our customers access to our platform on any current Android or iOS device. • Chat bot creation and management .
Our advocacy solutions allow our customers to distribute pre-approved content to their team to facilitate sharing across the individual’s social network. • Mobile applications . Social media is 24/7 and extends well beyond the work day.
Both in the United States and internationally, we must monitor and comply with a host of legal concerns regarding the data stored and processed on our platform as well as the operation of our business. These laws include, without limitation, the following: Data Privacy and Security Laws In the ordinary course of our business, we may process personal data.
Both in the United States and internationally, we must monitor and comply with a host of legal concerns regarding the data stored and processed on our platform as well as the operation of our business.
Customer success has always been deeply rooted in our DNA and we have been intentional with our focus on delivering an exceptional level of quality service to our customers.
Customer success has always been deeply rooted in our DNA and 18 we have been intentional with our focus on delivering an exceptional level of quality service to our customers. As a result, we have the highest-rated customer support according to G2 when compared to our primary competitors.
We default to digital collaboration and async communication norms to stay connected and work effectively to solve hard problems, and also taking great care in creating meaningful connections while physically apart.
Our employees choose where they perform best - whether that’s from home, the office, or a mix. We default to digital collaboration and async communication norms to stay connected and work effectively to solve hard problems, and also taking great care in creating meaningful connections while physically apart.
Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards governing data privacy, security, and protection.
These laws include, without limitation, the following: Data Privacy and Security Laws In the ordinary course of our business, we may collect and process personal data. Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards governing data privacy and security.
Sales and Marketing Our go-to-market approach is driven by the effectiveness and innovation of our platform and unpaid customer demand. Our model is focused on a product driven strategy, where potential customers are led to our website to sign up for a free trial or to request a demonstration of our products. A subscription is designed to be easily purchased.
Our model is focused on a product driven strategy, where potential customers are led to our website to sign up for a free trial or to request a demonstration of our products. A subscription is designed to be easily purchased. A substantial number of our customers subscribe without any interaction from our sales team.
Our most recent report was published in February 2023, and we intend to continue to report our progress against the initiatives identified on an ongoing basis. We established a company-wide workforce diversity vision focused on increasing the representation of women globally and BIPOC employees in the United States through targeted hiring and retention efforts.
We established a company-wide workforce diversity vision focused on increasing the representation of women globally and BIPOC employees in the United States through targeted hiring and retention efforts. We regularly track, report progress and identify targeted interventions to support this vision.
This year we also launched a DEI Leadership Accelerator Program, a four-month experience aimed at supporting the continued growth and retention of our United States-based BIPOC employees through a series of professional development, leadership and peer coaching, and networking opportunities.
This four-month experience is aimed at supporting the continued growth and retention of our United States-based BIPOC employees through a series of professional development, leadership and peer coaching, and networking opportunities. In addition to supporting our leaders, in late 2023 we celebrated the one-year anniversary of the launch of The Career Studio, our career development resource center for all employees.
As of December 31, 2022, we had a total of 1,141 full-time employees, including 206 employees located outside the United States. None of our employees are represented by a labor union.
As of December 31, 2023, we had a total of 1,383 full-time employees, including 308 employees located outside the United States. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
We have not experienced any work stoppages, and we consider our relations with our employees to be good. 21 Our commitment to our employees is to foster a culture that enables every member of the Sprout Social team to do their best work of their career and have fun along the way.
Our commitment to our employees is to foster a culture that enables every member of the Sprout Social team to do their best work of their career and have fun along the way. 21 Hybrid Work At Sprout Social, we aspire to create a world-class flexible-first hybrid experience that enables exceptional work, fosters belonging, and transcends location.
As a result, we have the highest-rated customer support according to G2 when compared to our primary competitors. 18 We provide 24/7 support through email, telephone, chat and social media and weekend support through email and social. We also offer support in English, Spanish, Portuguese and French to our global customer base.
We provide 24/7 support through email, telephone, chat and social media and weekend support through email and social. We also offer support in English, Spanish, Portuguese and French to our global customer base. As of December 31, 2023, our customer service department had 69 employees.
In addition to competitive salaries that are reviewed bi-annually against market-based data, we are committed to pay equity and perform a global pay equity analysis on an annual basis.
In addition to competitive salaries that are reviewed bi-annually against market-based data, we are committed to pay equity and perform a global pay equity analysis on an annual basis. In 2023, we offered stock-based compensation awards for every new employee, regardless of role, and all employees, subject to certain tenure and performance requirements, were eligible to receive annual equity grants.
Here is how it works: 1. Customers choose a core plan and license the platform per-user. 2. Customers add users, social profiles, and use-cases. 3. Customers add product modules (e.g., Listening) for an additional monthly rate depending on their needs.
Pricing Following an initial 30-day free trial, our subscription-based model allows our customers to choose a core plan based on their needs and license the platform on a per user per month basis. Here is how it works: 1. Customers choose a core plan and license the platform per-user. 2. Customers add users, social profiles, and use-cases. 3.
European data privacy and security laws (including the EU GDPR and UK GDPR) impose significant and complex compliance obligations on entities that are subject to those laws.
Also, 20 the CCPA provides for administrative fines and a private right of action for certain data breaches which may include an award of statutory damages. European data privacy and security laws (including the EU GDPR and UK GDPR) impose significant and complex compliance obligations on entities that are subject to those laws.
Aligning to this focus, we announced a price increase in November 2022, which values our software consistent with the expectations of these segments of the market. As a result, our total number of customers or the number of net new customers we add each quarter may decrease even if the average spend of each new customer increases over time.
As a result, our total number of customers or the number of net new customers we add each quarter may decrease even if the average spend of each new customer increases over time. Sales and Marketing Our go-to-market approach is driven by the effectiveness and innovation of our platform and unpaid customer demand.
We continue to invest in our Grow@ digital and on-demand platform, which provides education and development opportunities through internal programs and third party vendors. Diversity, Equity and Inclusion We continue to provide public transparency into where we stand, where we’ve progressed and where we need to improve in the areas of DEI through our DEI Demographic report.
Diversity, Equity and Inclusion We continue to provide public transparency into where we stand, where we’ve progressed and where we need to improve in the areas of DEI through our DEI Demographic report. Our most recent report was published in February 2024, and we intend to continue to report our progress against the initiatives identified on an ongoing basis.
We regularly track, report progress and identify targeted interventions to support this vision. 22 We focus our sourcing efforts on underrepresented backgrounds including investing in strategic partnerships such as re:work training and held our Recruitment Team accountable to prospective diverse talent.
We focus our sourcing efforts on underrepresented backgrounds including investing in strategic partnerships such as re:work training and hold our Recruitment Team accountable to prospective diverse 22 talent. We actively recruit from Historically Black Colleges and Universities and Hispanic Serving Institutions, including partnering with student organizations that serve traditionally underrepresented groups in tech.
We equally see the value of in-person, human connection and prioritize opportunities that bring our distributed teams together to strengthen the bonds within our global community, and will continue to create community and engagement around our offices. In 2022, we gathered our global team in Chicago for a ‘Midyear Meetup’ focused on building connection and rapport.
We equally see the value of in-person, human connection and prioritize opportunities that bring our distributed teams together to strengthen the bonds within our global community. A key component of our flexible first hybrid model is our in-person strategy which brings the team together throughout the year through Team and Regional Meet Ups.
In addition to supporting our leaders, in late 2022 we created and launched The Career Studio, our first ever career development resource center for all employees. This is an approachable virtual hub of career development tools designed to empower all employees to take ownership of their career journey at Sprout Social.
This is an approachable virtual hub of career development tools designed to empower all employees to take ownership of their career journey at Sprout Social. We continue to invest in our Grow@ digital and on-demand platform, which provides education and development opportunities through internal programs and third party vendors.
Customers We have a highly diverse base of over 34,000 current customers across SMBs, Mid-market companies, Enterprises and marketing agencies, as well as government, non-profit and educational institutions. We have been increasingly focused on the Mid-market and Enterprise segments. We expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise.
Customers add product modules (e.g., Listening) for an additional monthly rate depending on their needs. Customers We have a highly diverse base of over 31,000 current customers across SMBs, Mid-market companies, Enterprises and marketing agencies, as well as government, non-profit and educational institutions.
We actively recruit from Historically Black Colleges and Universities and Hispanic Serving Institutions, including partnering with student organizations that serve traditionally underrepresented groups in tech. In addition, we continued our scholarship program with the United Negro College Fund to provide scholarships for Black/African American students majoring in software engineering.
In 2023, we expanded our scholarship program to include the Hispanic Scholarship Fund (HSF), while continuing our scholarship program with the United Negro College Fund to provide scholarships for Black/African American students majoring in software engineering. Scholarship recipients were also given the opportunity to interview for our Associate Software Engineering Program.
We also hired a leader of distributed work to continue to develop these targeted investments and improve hybrid work operations, reinforce trust, and lay the groundwork for the future. Employee Engagement & Development We listen to our employees and use their feedback to shape our employee experience priorities.
Additionally, we will continue to create community and engagement for those employees that live within commuting distance of our Dublin, Chicago and Seattle offices. Employee Engagement & Development We listen to our employees and use their feedback to shape our employee experience priorities.
We also encourage employees to attend our company-wide DEI Guild meetings to discuss relevant topics such as faith inclusion in the workplace, the impact of COVID-19 on the disability community and the exploration of black hair history and culture. We avoid scheduling any other meetings during this time so employees could prioritize this experience.
We also encourage employees to attend our company-wide DEI Guild meetings to discuss relevant topics such as inclusive strategies to manage stress and burnout, demystifying microaggressions and understanding the spectrum of health and happiness.
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We calculated our greater than $100 billion 2025 SAM forecast using the methodology above.
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Our platform brings every aspect of the social experience together into a single, elegant and robust solution.
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Our customers can leverage these consumer insights to upgrade their customer experiences and refine products and services. Additional features: As social media use expands throughout our customers’ organizations, their use-cases and needs expand. We respond to these increasing demands by continuously enhancing our platform and expanding our offering. • Social Commerce .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary Risks Related to our Business Model and Other Operations Risks • If we fail to attract new customers and retain and increase the spending of existing customers, our revenue, business, results of operations, financial condition and growth prospects would be harmed. • Our platform and products are dependent on APIs built and owned by third parties, including social media networks, and, if we lose access to data provided by such APIs or the terms and conditions on which we obtain such access become less favorable, our business could suffer. • We have experienced rapid revenue growth in recent periods and our recent growth rates may not be indicative of our future growth. • If we are unable to attract potential customers through unpaid channels, convert this traffic to free trials and other leads or convert free trials and other leads to paid subscriptions, our business and results of operations may be adversely affected. • If we fail to adapt and respond effectively to rapidly changing technology, new social media platforms, evolving industry standards or changing customer needs, requirements, tastes or preferences, our products may become less competitive. • If we do not adequately fund our research and development efforts, or use research and development teams effectively, we may not be able to compete effectively, and our business and operating results may be harmed. • If we fail to offer high-quality customer support, or if the cost of such support is not consistent with corresponding levels of revenue, our business and reputation may be harmed. • Our rapid growth and limited history with key features of our platform make it difficult to evaluate our prospects and future operating results.
Biggest changeRisk Factors Summary Risks Related to our Business Model and Other Operations Risks • If we fail to attract new customers and retain and increase the spending of existing customers, our revenue, business, results of operations, financial condition and growth prospects would be harmed. • We have experienced rapid revenue growth in recent periods and our recent growth rates may not be indicative of our future growth. • Our platform and products are dependent on APIs built and owned by third parties, including social media networks, and if we lose access to data provided by such APIs or the terms and conditions on which we obtain such access become less favorable, our business could suffer. • If we are unable to attract potential customers through unpaid channels, convert this traffic to free trials and other leads or convert free trials and other leads to paid subscriptions, our business and results of operations may be adversely affected. • If we fail to adapt and respond effectively to rapidly changing technology, new social media platforms, evolving industry standards or changing customer needs, requirements, tastes or preferences, our products may become less competitive. • If we do not adequately fund our research and development efforts, or use research and development teams effectively, we may not be able to compete effectively, and our business and operating results may be harmed.
Our renewal rates may decline or fluctuate and our cancellation 27 rates may increase as a result of a number of factors, including customer satisfaction with our platform and products, our customer success and support experience, the price and functionality of our solutions relative to those of our competitors, mergers and acquisitions affecting our customer base, the effects of global economic conditions, or reductions in our customers’ spending levels.
Our renewal rates may decline or fluctuate and our cancellation rates may increase as a result of a number of factors, including customer satisfaction with our platform 27 and products, our customer success and support experience, the price and functionality of our solutions relative to those of our competitors, mergers and acquisitions affecting our customer base, the effects of global economic conditions, or reductions in our customers’ spending levels.
These provisions include: • providing for a classified board of directors with staggered, three-year terms; • authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control; • prohibiting cumulative voting in the election of directors; • providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibiting the adoption, amendment or repeal of our amended and restated bylaws or the repeal of the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors without the required approval of at least 66.67% of the shares entitled to vote at an election of directors; • prohibiting stockholder action by written consent; • limiting the persons who may call special meetings of stockholders; and • requiring advance notification of stockholder nominations and proposals.
These provisions include: • providing for a classified board of directors with staggered, three-year terms; • authorizing our board of directors to issue preferred stock with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control; • prohibiting cumulative voting in the election of directors; • providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • prohibiting the adoption, amendment or repeal of our amended and restated bylaws or the repeal of the provisions of our amended and restated certificate of incorporation regarding the election 45 and removal of directors without the required approval of at least 66.67% of the shares entitled to vote at an election of directors; • prohibiting stockholder action by written consent; • limiting the persons who may call special meetings of stockholders; and • requiring advance notification of stockholder nominations and proposals.
To remain competitive, we must deliver features and functionality that enhance the utility of our platform to our new and prospective customers, without the presence of software defects, adapt to changing functionality and APIs of the social media networks and other third party platforms, maintain and develop integrations with third parties that provide value to our customers, ensure our platform and products are easy to use and 36 deliver value to our customers, provide a superior customer success and support experience and demonstrate value to our current and prospective customers across multiple functions within their organizations.
To remain competitive, we must deliver features and functionality that enhance the utility of our platform to our new and prospective customers, without the presence of software defects, adapt to changing functionality and APIs of the social media networks and other third party platforms, maintain and develop integrations with third parties that provide value to our customers, ensure our platform and products are easy to use and deliver value to our customers, provide a superior customer success and support experience and demonstrate value to our current and prospective customers across multiple functions within their organizations.
Finally, changes in export control or economic sanctions laws and enforcement could also result in increased compliance requirements and related costs, which could materially adversely affect our business, results of operations, financial condition and/or cash flows. We are also subject to various U.S. and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K.
Finally, changes in export control or economic sanctions laws and enforcement could also result in increased compliance requirements and related costs, which could materially adversely affect our business, results of operations, financial condition and/or cash flows. 42 We are also subject to various U.S. and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions 41 in our operations (including availability of data); financial loss; and other similar harms.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers; and other adverse consequences.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and 40 penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers; and other adverse consequences.
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects 40 or bugs that could result in a breach of or disruption to our information technology systems (including our platform) or the third-party information technology systems that support us and our services.
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our platform) or the third-party information technology systems that support us and our services.
AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. If any of the AWS data centers become unavailable to us without sufficient advance notice, we would likely experience delays in delivering our platform and products until we could migrate to an alternate data center provider.
AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party. If any of the AWS data centers become unavailable to us without sufficient advance notice, we 35 would likely experience delays in delivering our platform and products until we could migrate to an alternate data center provider.
For example, after the U.S. Supreme Court decision in South Dakota v. Wayfair Inc., certain states have adopted, or started to enforce, laws that may require us to calculate, collect and remit taxes on sales in their jurisdictions, even if we do not have a physical presence in such jurisdictions.
For example, after the U.S. Supreme Court decision in South Dakota v. Wayfair Inc., certain states have adopted, or started to enforce, laws that may require us to 47 calculate, collect and remit taxes on sales in their jurisdictions, even if we do not have a physical presence in such jurisdictions.
We also may be unable to adjust our cost structure to reflect the changes in revenue, resulting in lower margins and 47 earnings. In addition, our subscription-based model also makes it difficult to rapidly increase our revenue through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement.
We also may be unable to adjust our cost structure to reflect the changes in revenue, resulting in lower margins and earnings. In addition, our subscription-based model also makes it difficult to rapidly increase our revenue through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement.
Many of our current and future competitors may benefit from competitive advantages over us, such as greater name recognition, longer operating histories, more varied products and services, larger sales and marketing or research and development budgets, more established relationships with social media networks and different or a greater number of third-party integrations.
Many of our current and future competitors may benefit from competitive advantages over us, such as greater name recognition, longer operating histories, more varied products and services, larger 37 sales and marketing or research and development budgets, more established relationships with social media networks and different or a greater number of third-party integrations.
Furthermore, as we grow as a business, including through 46 acquisitions, our internal controls may become more complex and require additional resources to implement and be effective. We have in the past, and may in the future, fail to maintain adequate internal controls. The existence of any material weakness or significant deficiency could result in errors in our financial statements.
Furthermore, as we grow as a business, including through acquisitions, our internal controls may become more complex and require additional resources to implement and be effective. We have in the past, and may in the future, fail to maintain adequate internal controls. The existence of any material weakness or significant deficiency could result in errors in our financial statements.
To the extent that we do not effectively address capacity constraints, either through our Hosting Provider or an alternative provider of cloud infrastructure, our business, results of operations and financial condition may be adversely affected. In addition, any changes in service levels from our Hosting Provider may adversely affect our ability to meet our customers’ requirements.
To the extent that we do not effectively address capacity constraints, either through our Hosting Providers or an alternative provider of cloud infrastructure, our business, results of operations and financial condition may be adversely affected. In addition, any changes in service levels from our Hosting Providers may adversely affect our ability to meet our customers’ requirements.
If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our Class A common stock.
If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and 53 privileges senior to those of holders of our Class A common stock.
As we continue to grow our operations and support our global user base, we need to continue to provide efficient and high-quality support that meets our customers’ needs globally at scale. Our sales process is highly dependent on the ease of use of our platform and products, our business reputation and positive recommendations from our existing 30 customers.
As we continue to grow our operations and support our global user base, we need to continue to provide efficient and high-quality support that meets our customers’ needs globally at scale. Our sales process is highly dependent on the ease of use of our platform and products, our business reputation and positive recommendations from our existing customers.
If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks and uncertainties successfully, our operating and financial results could differ materially from our expectations and our business could suffer. We have a history of losses and may not achieve profitability in the future.
If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks and uncertainties successfully, our operating and financial results could differ materially from our expectations and our business could suffer. 33 We have a history of losses and may not achieve profitability in the future.
Our exposure for violating these laws may increase as we continue to expand our international presence, and any failure to comply with such laws could harm our business. 41 Our use of “open source” software could negatively affect our ability to offer and sell access to our platform and products and subject us to possible litigation.
Our exposure for violating these laws may increase as we continue to expand our international presence, and any failure to comply with such laws could harm our business. Our use of “open source” software could negatively affect our ability to offer and sell access to our platform and products and subject us to possible litigation.
In addition, if either of these third-party vendors experience a cybersecurity breach affecting data related to services provided to us, we could experience reputational damage or incur liability. Although alternative providers may be available to us, we may incur significant expense and research and development efforts to deploy any alternative providers.
In addition, if any of these third-party vendors experience a cybersecurity breach affecting data related to services provided to us, we could experience reputational damage or incur liability. Although alternative providers may be available to us, we may incur significant expense and research and development efforts to deploy any alternative providers.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our 45 stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
To protect our trade secrets and other proprietary technology and information, we have entered into confidentiality agreements with most of our 48 employees and consultants. We cannot assure you that these agreements will provide meaningful protection against unauthorized use, misappropriation or unlawful disclosure of such trade secrets, know-how or other proprietary technology information.
To protect our trade secrets and other proprietary technology and information, we have entered into confidentiality agreements with most of our employees and consultants. We cannot assure you that these agreements will provide meaningful protection against unauthorized use, misappropriation or unlawful disclosure of such trade secrets, know-how or other proprietary technology information.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on collecting or processing personal data; and orders to destroy or not use personal data.
Moreover, our brand and reputation could be harmed if we were to experience significant negative publicity. • The market in which we operate is competitive, and if we do not compete effectively, our operating results could be harmed. • Our estimates of market opportunity, forecasts of market growth and our operating metrics may prove to be inaccurate.
Moreover, our brand and reputation could be harmed if we were to experience significant negative publicity. 25 • Our estimates of market opportunity, forecasts of market growth and our operating metrics may prove to be inaccurate. • The market in which we operate is competitive, and if we do not compete effectively, our operating results could be harmed.
Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our Class A common stock to decline. 44 We have never paid dividends on our capital stock and we do not intend to pay dividends for the foreseeable future.
Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our Class A common stock to decline. We have never paid dividends on our capital stock and we do not intend to pay dividends for the foreseeable future.
The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. We cannot predict the effect our dual class structure may have on the market of our Class A common stock.
The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. 44 We cannot predict the effect our dual class structure may have on the market of our Class A common stock.
If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. The trading market for our Class A common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business.
If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. 46 The trading market for our Class A common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business.
Any dispute with a customer with respect to such obligations could have adverse effects on our 42 relationship with that customer and other current and prospective customers, reduce demand for our platform or products, and harm our revenue, business and operating results.
Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our platform or products, and harm our revenue, business and operating results.
Any failure to maintain a high-quality customer support organization, or a market perception that we do not maintain such levels of support, could harm our reputation, our ability to sell to existing and prospective customers and our business.
Any failure to maintain a high-quality customer support organization, or a market perception 30 that we do not maintain such levels of support, could harm our reputation, our ability to sell to existing and prospective customers and our business.
Market and Competition Risk 25 • Our business depends on a strong brand, and if we are not able to maintain, develop, and enhance our brand, our business and operating results may be negatively impacted.
Market and Competition Risk • Our business depends on a strong brand, and if we are not able to maintain, develop, and enhance our brand, our business and operating results may be negatively impacted.
As a result of the rapid growth and evolution of our 32 business, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model future growth.
As a result of the rapid growth and evolution of our business, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model future growth.
Furthermore, it is not always possible to predict where our business will expand to adequately secure our intellectual property rights or obtain protection in countries where we do not currently do business.
Furthermore, it is not always possible to predict where our business will expand to adequately secure our intellectual property rights or obtain protection in countries where we do not currently do 48 business.
In addition, we rely primarily on a single third party for credit card payment processing services for the portion of our customers paying by credit card. If either of these third-party vendors were to experience an interruption, delay or outages in service and availability, we may be unable to process new and renewing subscriptions or credit card payments.
In addition, we rely primarily on a single third party for credit card payment processing services for the portion of our customers paying by credit card. If any of these third-party vendors were to experience an interruption, delay or outages in service and availability, we may be unable to process new and renewing subscriptions or credit card payments.
We note that our ability to conduct security audits on our Hosting Provider is limited and our contracts do not contain strong indemnification terms in our favor. In some instances, we may not be able to identify and/or remedy the cause or causes of these performance problems within a period of time acceptable to our customers.
We note that our ability to conduct security audits on our Hosting Providers is limited and our contracts do not contain strong indemnification terms in our favor. In some instances, we may not be able to identify and/or remedy the cause or causes of these performance problems within a period of time acceptable to our customers.
Any significant increases in inflation 49 and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition. We may make acquisitions of, or invest in, other businesses or technologies, which may divert our management’s attention and result in the incurrence of indebtedness or dilution to our stockholders.
Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition. We may make acquisitions of, or invest in, other businesses or technologies, which may divert our management’s attention and result in the incurrence of indebtedness or dilution to our stockholders.
We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability or errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim.
We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability, errors, or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage of any future claim.
Capacity constraints could be due 34 to a number of potential causes including technical failures, natural disasters, fraud or security attacks.
Capacity constraints could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks.
Any expansion in the markets in which we operate depend on a number of factors, including the cost, performance, and perceived value associated with our platforms and those of our competitors. Even if the markets in which we compete meet the size estimates, our business could fail to grow at similar rates.
Any expansion in the markets in which we operate depends on a number of factors, including the cost, performance, and perceived value associated with our platforms and those of our competitors. Even if the markets in which we compete meet the size estimates, our business could fail to grow at similar rates.
As our platform and products evolve and the ways we use personal data may change to meet the complex needs of our customer base, we may become subject to additional privacy and security obligations . Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions.
These obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. As our platform and products evolve and the ways we use personal data change to meet the complex needs of our customer base, we continue to become subject to additional privacy and security obligations.
In addition, if our security, or that of our Hosting Provider, is compromised, our platform or products are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.
In addition, if our security, or that of our Hosting Providers, is compromised, our platform or products are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.
In addition to competing with comprehensive social media management platforms with diverse capabilities, we compete with point solutions for sentiment monitoring, compliance, social listening, content management and distribution, employee advocacy, relationship management and social commerce, among others, as well as native use of individual social media networks.
In addition to competing with comprehensive social media management platforms with diverse capabilities, we compete with point solutions for sentiment monitoring, influencer marketing, compliance, social listening, content management and distribution, employee advocacy, relationship management and social commerce, among others, as well as native use of individual social media networks.
We believe that the importance of our brand will increase as our awareness and business continue to expand.
We believe that the importance of our brand will increase as our awareness and 36 business continue to expand.
Our data processing activities subject us to numerous data privacy and 37 security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.
Our data collection and processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of personal data by us and on our behalf.
Our operations rely on information technology systems for the use, storage and transmission of sensitive and confidential information with respect to our customers, our customers’ consumers or other social media audiences, the third-party technology platforms of other parties and our employees.
Our operations rely on information technology systems for the use, storage and transmission of sensitive and confidential information with respect to our customers, content creators, our customers’ consumers or other social media audiences, the third-party technology platforms of other parties and our employees.
The loss of service of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. In particular, we depend to a considerable degree on the vision, skills, experience and effort of our Co-Founder, Chairman and Chief Executive Officer, Justyn Howard, President, Ryan Barretto and Co-Founder and Chief Technology Officer, Aaron Rankin.
The loss of service of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. In particular, we depend to a considerable degree on the vision, skills, experience and effort of our Co-Founder, Chairman and Chief Executive Officer, Justyn Howard and President, Ryan Barretto.
Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on future indebtedness and meet our other business obligations. 51 Item 1B. Unresolved Staff Comments None.
Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on future indebtedness and meet our other business obligations. 54 Item 1B. Unresolved Staff Comments None.
As a result, in many cases, we are subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such integrations, and which are subject to change by such providers from time to time. In some cases, we rely on negotiated agreements with social media networks and other data providers.
As a result, we are often subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such integrations and which are subject to change by such providers from time to time. In other cases, we rely on negotiated agreements with social media networks and other data providers.
The substantial majority of the services we use from AWS are for cloud-based server capacity and, to a lesser extent, storage and certain other proprietary offerings. AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple availability zones and regions. We access AWS infrastructure through standard intellectual property, or IP, connectivity.
The substantial majority of the services we use from AWS are for cloud-based server capacity, storage, and, to a lesser extent, certain other proprietary offerings. AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple availability zones and regions. We access AWS infrastructure through standard internet protocol, or IP, connectivity.
Despite efforts to create security barriers to such 33 threats, it is not feasible, as a practical matter, for us to entirely mitigate these risks.
Despite efforts designed to create security barriers to such threats, it is not feasible, as a practical matter, for us to entirely mitigate these risks.
In the ordinary course of business, we process personal data, including proprietary and confidential business data, intellectual property, and other third-party data. For example, we process personal data about our customers’ consumers and other social media users that interact with our customers’ social media pages.
In the ordinary course of business, we collect and process personal data, including proprietary and confidential business data, intellectual property, and other third-party data. For example, we process personal data about our customers’ consumers, content creators, and other social media users that interact with our customers’ social media pages.
A malicious cybersecurity-related attack, intrusion or disruption by either an internal or external source or other breach of the systems on which our platform and products operate, and on which our employees conduct business, could lead to unauthorized access to, use of, loss of or unauthorized disclosure of sensitive and confidential information, disruption of our services, and resulting regulatory enforcement actions, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair sales and harm our business.
A cybersecurity-related attack, malicious internet-based activity, online and offline fraud, and intrusion or disruption by either an internal or external source or other breach of the systems on which our platform and products operate, and on which our employees conduct business, could lead to unauthorized access to, use of, loss of or unauthorized disclosure of sensitive and confidential information, disruption of our services, and resulting regulatory enforcement actions, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair sales and harm our business.
For example, absent appropriate safeguards or other circumstances, the EU GDPR, UK GDPR, and laws in Switzerland generally restrict the transfer of personal data to countries such as the United States that these jurisdictions consider to not provide an adequate level of personal data protection.
For example, absent appropriate safeguards or other circumstances, the EU GDPR, UK GDPR, and laws in Switzerland generally restrict the transfer of personal data to countries that these jurisdictions consider to not provide an adequate level of personal data protection.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high levels of inflation, high interest rates and uncertainty about economic stability.
To date, we have not relied on negotiated agreements to govern our relationships with most data providers and, in general, we rely on publicly available APIs.
To date, we have not relied on negotiated agreements to govern our relationships with most data providers and, in many cases, we rely on publicly available APIs.
Similar restrictions and transfer mechanisms exist under the UK GDPR. 38 In addition to European restrictions on cross-border transfers of personal data, other jurisdictions, such as China’s Personal Information Protection Law and Brazil’s LGPD, have enacted or are considering similar cross-border personal data transfer laws and local personal data residency laws, any of which could increase the cost and complexity of doing business in foreign jurisdictions.
In addition to European restrictions on cross-border transfers of personal data, other jurisdictions, such as China’s Personal Information Protection Law and Brazil’s LGPD, have enacted or are considering similar cross-border personal data transfer laws and local personal data residency laws, any of which could increase the cost and complexity of doing business in foreign jurisdictions.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Recently worsening macroeconomic conditions, including rising interest rates and volatility in the capital markets, exacerbate this risk.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Changing macroeconomic conditions, including high interest rates and volatility in the capital markets, exacerbate this risk.
Other states, like Virginia and Colorado, have also enacted or proposed data privacy laws that may differ from the CPRA.
Other states, like Virginia, Colorado, and Oregon, have also enacted or proposed data privacy laws that may differ from the CCPA.
Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, higher inflation also could increase our customers’ operating costs, which could result in reduced social media budgets for our customers and potentially less demand for our platform and products.
High levels of inflation can adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, high inflation also could increase our customers’ operating costs, which could result in reduced social media budgets for our customers and potentially less demand for our platform and products.
Our business, cash flows or results of operations may be harmed if any data provider: • changes, limits or discontinues our access to its APIs and data; • modifies its terms of service or other policies, including fees charged or restrictions on us or application developers; • changes or limits how customer information is accessed by us or our customers; • changes or limits how we can use customer information and other data collected through the APIs; • establishes more favorable relationships with one or more of our competitors; or • experiences disruptions of its technology, services or business generally. 28 We have experienced rapid revenue growth in recent periods and our recent growth rates may not be indicative of our future growth.
Our business, cash flows or results of operations may be harmed if any data provider: • changes, limits or discontinues our access to its APIs and data; • modifies its terms of service or other policies, including fees charged or restrictions on us or application developers; • changes or limits how customer information and other data is accessed by us or our customers; • changes or limits how we can use customer information and other data collected through the APIs; • establishes more favorable relationships with one or more of our competitors; or • experiences disruptions of its technology, services or business generally.
Our Hosting Provider runs its own platform upon which our platform and products depend, and we are, therefore, vulnerable to service interruptions at our Hosting Provider.
Our Hosting Providers runs their own platform upon which our platform and products depend, and we are, therefore, vulnerable to service interruptions at our Hosting Providers.
If we are or become subject to these laws and/or new or amended data privacy laws, the risk of enforcement actions against us could increase because we may be subject to additional obligations under applicable regulatory frameworks, and the number of individuals or entities that could initiate actions against us may increase, in addition to further complicating our compliance efforts.
If we are or become subject to these laws and/or new or amended data privacy laws, the risk of enforcement actions against us could increase because we may be subject to additional obligations under applicable regulatory frameworks, and the number of individuals or entities that could initiate actions against us may increase, in addition to further complicating our compliance efforts. 38 Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.
We have incurred net losses since inception and expect to incur net losses in the future. We incurred net losses of $50.2 million, $28.7 million and $31.7 million in 2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $226.0 million.
We have incurred net losses since inception and expect to incur net losses in the future. We incurred net losses of $66.4 million, $50.2 million and $28.7 million in 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $292.4 million.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of December 31, 2022, our outstanding Class B common stock represented approximately 61.1% of the voting power of our outstanding capital stock.
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of December 31, 2023, our outstanding Class B common stock represented approximately 58.7% of the voting power of our outstanding capital stock .
We have experienced rapid revenue growth in recent years. In 2022, our revenue was $253.8 million, an increase of 35% as compared to our revenue of $187.9 million in 2021, which was an increase of 41% as compared to our revenue of $132.9 million in 2020.
We have experienced rapid revenue growth in recent years. In 2023, our revenue was $333.6 million, an increase of 31% as compared to our revenue of $253.8 million in 2022, which was an increase of 35% as compared to our revenue of $187.9 million in 2021.
Our ability to utilize our net operating loss carryforwards may be limited. As of December 31, 2022, we had U.S. federal and state net operating loss carryforwards of approximately $56.8 million and $10.1 million, respectively.
Our ability to utilize our net operating loss carryforwards may be limited. As of December 31, 2023, we had U.S. federal and state net operating loss carryforwards of approximately $64.8 million and $12.5 million, respectively.
There can be no assurance that following any such termination, we would be able to maintain our platform’s current level of functionality in such circumstances, as a result of more limited access to APIs or otherwise, which could adversely affect our results of operations. For example, we are currently a member of the Twitter Official Partner Program (TOPP).
There can be no assurance that following any such modification or termination, we would be able to maintain our platform’s current level of functionality in such circumstances, as a result of more limited access to APIs or otherwise, which could adversely affect our results of operations.
These negotiated agreements may provide increased access to APIs and data that allow us to provide a more comprehensive solution for our customers.
These negotiated agreements may provide increased access to APIs and data that may allow us to provide a more comprehensive solution for our customers. These agreements are subject to termination and renewal according to their terms.
As a result, the dual class structure of our common stock may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure.
In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our common stock may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure.
To the extent there are disruptions in our or third-party subscription and payment processing systems, we could experience revenue loss, accounting issues and harm to our reputation and customer relationships, which would adversely affect our business and results of operations. 35 Real or perceived errors, failures or bugs in our platform or products could materially and adversely affect our operating results and growth prospects.
To the extent there are disruptions in our or third-party subscription and payment processing systems, we could experience revenue loss, accounting issues and harm to our reputation and customer relationships, which would adversely affect our business and results of operations.
Under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater.
For example, the EU GDPR and the equivalent law in the UK GDPR impose strict requirements for processing the personal data of individuals. Under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater.
We also may enter into relationships with other businesses to expand our platform and products, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies. Any acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures or business liabilities.
We also may enter into relationships with other businesses to expand our platform and products, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.
As of December 31, 2022, we had 47,562,911 shares of Class A common stock outstanding and 7,460,432 shares of Class B common stock outstanding. We may issue our shares of common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, equity incentive plan awards or otherwise.
As of December 31, 2023, we had 49,241,563 shares of Class A common stock outstanding and 6,994,196 shares of Class B common stock outstanding. We may issue our shares of common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, equity incentive plan awards or otherwise.
Competition for executives, software developers, product managers, sales personnel and other key personnel in the software industry is intense. We have experienced and may in the future experience difficulty attracting and retaining qualified candidates to fill open positions.
Competition for executives, software developers, product managers, sales personnel and other key personnel in the software industry is intense. We have experienced and may in the future experience difficulty attracting and retaining qualified candidates to fill open positions. Many of the companies with which we compete for talent have greater resources than we have and may offer greater compensation packages.
In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing, employee theft or misuse, and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions).
In addition to traditional computer “hackers,” malicious code (such as viruses and worms), compromised accounts with elevated privileges (phishing), credential stuffing, credential harvesting, employee misconduct or error, theft or misuse, and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions) and attacks are now enhanced or facilitated by AI.
We rely upon third parties to operate our platform and any disruption of or interference with our use of such third party providers would adversely affect our business, results of operations and financial condition.
We rely upon third parties to operate our platform and any disruption of or interference with our use of such third party providers would adversely affect our business, results of operations and financial condition. We outsource the majority of our cloud infrastructure to Amazon Web Services, or AWS, which hosts our platform and products.
As such, any predictions about our future revenue and expenses may not be as accurate as they could be if we had a longer operating history with our current platform or products or operated in a more predictable market.
As such, any predictions about our future revenue and expenses may not be as accurate as they could be with longer operating history in the enterprise segment, with our current product set, due to our acquisition of Tagger or if we operated in a more predictable market.
Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our platform or products, increased competition, a decrease in the growth or reduction in size of our overall market, failure to capitalize on growth opportunities, and the impacts to our business from macroeconomic factors such as the Russia-Ukraine war, global geopolitical tension and more recently, rising inflation and interest rates, volatility in the capital markets and related market uncertainty the COVID-19 pandemic, or if we cannot capitalize on growth opportunities.
Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our products, increased competition, a decrease in the growth or reduction in size of our overall market, failure to capitalize on growth opportunities, and the impacts to our business from macroeconomic factors such as high levels of inflation, high interest rates, ongoing overseas conflict, volatility in the capital markets and related market uncertainty.
If we are unable to maintain the proprietary nature of our technologies and information, our business, financial condition and results of operations could be harmed. Third party intellectual property infringement claims could impair our business.
In addition, the rapid adoption of AI software has made it increasingly difficult to keep proprietary information secret. If we are unable to maintain the proprietary nature of our technologies and information, our business, financial condition and results of operations could be harmed. Third party intellectual property infringement claims could impair our business.
Future business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems (including our platform) could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. We may expend significant resources or modify our business activities in an effort to further protect against security incidents.
Future business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems (including our platform) could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
The software underlying our platform and products is highly technical and complex. Our software has previously contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities.
Real or perceived errors, failures or bugs in our platform or products could materially and adversely affect our operating results and growth prospects. The software underlying our platform and products is highly technical and complex. Our software has previously contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities.
If our customers cancel or do not renew their subscriptions, renew on less favorable terms, fail to add more users or products or fail to purchase additional products, our revenues and growth prospects may decline.
If our customers cancel or do not renew their subscriptions, renew on less favorable terms, fail to add more users or products or fail to purchase additional products, our revenues and growth prospects may decline. We have experienced rapid revenue growth in recent periods and our recent growth rates may not be indicative of our future growth.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We do not own any real property. Our corporate headquarters are located in Chicago, Illinois, where we lease approximately 128,000 square feet of office space pursuant to a lease that expires in 2028.
Biggest changeItem 2. Properties Our corporate headquarters are located in Chicago, Illinois, where we lease approximately 128,000 square feet of office space pursuant to a lease that expires in 2028. We also have office locations in Seattle, Washington; Dublin, Ireland; and Santa Monica, California. These offices are leased, and we do not own any real property.
Legal Proceedings From time to time, we are involved in various legal proceedings arising from the normal course of business. We are not currently a party to any material pending legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 52 PART II
We believe that our facilities are suitable to meet our current needs. Item 3. Legal Proceedings From time to time, we are involved in various legal proceedings arising from the normal course of business. We are not currently a party to any material pending legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 56 PART II
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In January 2020, we entered into a new lease agreement for an office in Seattle, Washington with a lease commencement date in September 2020 and an expiration date of January 31, 2031.
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We also entered into a new lease agreement for an office in Dublin, Ireland with a lease commencement date in July 2022 and an expiration date of June 30, 2024. We believe that our facilities are suitable to meet our current needs. Item 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes an initial investment of $100 in our Class A common stock at the market close on December 13, 2019, which was our initial trading day. Data for the S&P 500 Index and the Nasdaq Computer Index assume reinvestment of dividends.
Biggest changeThe graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the S&P 500 Index and the Nasdaq Computer Index. The graph assumes an initial investment of $100 in our Class A common stock at the market close on December 13, 2019, which was our initial trading day.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities and Use of Proceeds None. Issuer Purchases of Equity Securities None.
Holders of Record As of February 17, 2023, we had 8 holders of record of our Class A common stock and 14 holders of record of our Class B common stock.
Holders of Record As of February 16, 2024, we had 5 holders of record of our Class A common stock and 14 holders of record of our Class B common stock.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 54 Item 6. [Reserved]
Data for the S&P 500 Index and the Nasdaq Computer Index assume reinvestment of dividends. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 57 58 Item 6. [Reserved]
Performance Graph The following performance graph shall not be deemed soliciting material or to be filed with the SEC for Purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, nor shall such information be incorporated by reference into any of our other filings under the Exchange Act or the Securities Act. 53 The graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the S&P 500 Index and the Nasdaq Computer Index.
Performance Graph The following performance graph shall not be deemed soliciting material or to be filed with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, nor shall such information be incorporated by reference into any of our other filings under the Exchange Act or the Securities Act.
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Use of Proceeds from Initial Public Offering of Class A Common Stock On December 17, 2019, we closed our IPO at a price to the public of $17.00 per share.
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The offer and sale of the shares in our IPO were registered under the Securities Act pursuant to our Registration Statement on Form S-1 (Registration No. 333-234316), which was declared effective on December 12, 2019.
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There has been no material change in the planned use of IPO proceeds from that described in the final prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on December 13, 2019.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYears Ended December 31, 2022 2021 2020 (in thousands) Revenue Subscription $ 251,213 $ 185,726 $ 131,804 Professional services and other 2,615 2,133 1,145 Total revenue 253,828 187,859 132,949 Cost of revenue (1) Subscription 58,767 45,791 34,196 Professional services and other 1,091 997 721 Total cost of revenue 59,858 46,788 34,917 Gross profit 193,970 141,071 98,032 Operating expenses Research and development (1) 61,436 40,049 30,491 Sales and marketing (1) 123,695 84,182 59,137 General and administrative (1) 60,515 44,929 40,406 Total operating expenses 245,646 169,160 130,034 Loss from operations (51,676) (28,089) (32,002) Interest expense (153) (300) (366) Interest income 2,535 259 617 Other (expense) income, net (580) (361) 223 Loss before income taxes (49,874) (28,491) (31,528) Income tax expense 366 211 127 Net loss $ (50,240) $ (28,702) $ (31,655) _______________ (1) Includes stock-based compensation expense as follows: Years Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue $ 2,491 $ 1,062 $ 749 Research and development 11,280 4,039 1,935 Sales and marketing 23,066 10,636 2,464 General and administrative 10,901 5,993 5,931 Total stock-based compensation $ 47,738 $ 21,730 $ 11,079 62 Years Ended December 31, 2022 2021 2020 (as a percentage of total revenue) Revenue Subscription 99 % 99 % 99 % Professional services and other 1 % 1 % 1 % Total revenue 100 % 100 % 100 % Cost of revenue Subscription 23 % 24 % 26 % Professional services and other — % 1 % — % Total cost of revenue 24 % 25 % 26 % Gross profit 76 % 75 % 74 % Operating expenses Research and development 24 % 21 % 23 % Sales and marketing 49 % 45 % 45 % General and administrative 24 % 24 % 30 % Total operating expenses 97 % 90 % 98 % Loss from operations (21) % (15) % (24) % Interest expense — % — % — % Interest income 1 % — % — % Other (expense) income, net — % — % — % Loss before income taxes (20) % (15) % (24) % Income tax expense — % — % — % Net loss (20) % (15) % (24) % Note: Certain amounts may not sum due to rounding Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Revenue Subscription $ 251,213 $ 185,726 $ 65,487 35 % Professional services and other 2,615 2,133 482 23 % Total revenue $ 253,828 $ 187,859 $ 65,969 35 % Percentage of Total Revenue Subscription 99 % 99 % Professional services and other 1 % 1 % 63 The increase in subscription revenue was primarily driven by revenue from new customers and expansion within existing customers.
Biggest changeYears Ended December 31, 2023 2022 2021 (in thousands) Revenue Subscription $ 330,458 $ 251,213 $ 185,726 Professional services and other 3,185 2,615 2,133 Total revenue 333,643 253,828 187,859 Cost of revenue (1) Subscription 75,076 58,767 45,791 Professional services and other 1,192 1,091 997 Total cost of revenue 76,268 59,858 46,788 Gross profit 257,375 193,970 141,071 Operating expenses Research and development (1) 79,550 61,436 40,049 Sales and marketing (1) 168,091 123,695 84,182 General and administrative (1) 79,011 60,515 44,929 Total operating expenses 326,652 245,646 169,160 Loss from operations (69,277) (51,676) (28,089) Interest expense (2,754) (153) (300) Interest income 7,021 2,535 259 Other expense, net (768) (580) (361) Loss before income taxes (65,778) (49,874) (28,491) Income tax (benefit) expense 649 366 211 Net loss $ (66,427) $ (50,240) $ (28,702) 66 _______________ (1) Includes stock-based compensation expense as follows: Years Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue $ 3,224 $ 2,491 $ 1,062 Research and development 18,478 11,280 4,039 Sales and marketing 30,116 23,066 10,636 General and administrative 15,886 10,901 5,993 Total stock-based compensation $ 67,704 $ 47,738 $ 21,730 Years Ended December 31, 2023 2022 2021 (as a percentage of total revenue) Revenue Subscription 99 % 99 % 99 % Professional services and other 1 % 1 % 1 % Total revenue 100 % 100 % 100 % Cost of revenue Subscription 23 % 23 % 24 % Professional services and other — % — % 1 % Total cost of revenue 23 % 24 % 25 % Gross profit 77 % 76 % 75 % Operating expenses Research and development 24 % 24 % 21 % Sales and marketing 50 % 49 % 45 % General and administrative 24 % 24 % 24 % Total operating expenses 98 % 97 % 90 % Loss from operations (21) % (21) % (15) % Interest expense (1) % — % — % Interest income 2 % 1 % — % Other expense, net — % — % — % Loss before income taxes (20) % (20) % (15) % Income tax (benefit) expense — % — % — % Net loss (20) % (20) % (15) % Note: Certain amounts may not sum due to rounding 67 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Revenue Subscription $ 330,458 $ 251,213 $ 79,245 32 % Professional services and other 3,185 2,615 570 22 % Total revenue $ 333,643 $ 253,828 $ 79,815 31 % Percentage of Total Revenue Subscription 99 % 99 % Professional services and other 1 % 1 % The increase in subscription revenue was primarily driven by increased revenue from our highest tier customers.
Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $37.7 million, which was primarily due to $190.0 million in purchases of marketable securities, partially offset by $154.1 million in proceeds from maturities of marketable securities.
Net cash used in investing activities for the year ended December 31, 2022 was $37.7 million, which was primarily due to $190.0 million in purchases of marketable securities, partially offset by $154.1 million in proceeds from maturities of marketable securities.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $0.2 million, primarily driven by $1.9 million in payments related to employee withholding taxes as a result of the net settlement of stock-based awards, offset by $1.7 million of proceeds under our employee stock purchase plan.
Net cash used in financing activities for the year ended December 31, 2022 was $0.2 million, primarily driven by $1.9 million in payments related to employee withholding taxes as a result of the net settlement of stock-based awards, offset by $1.7 million of proceeds under our employee stock purchase plan.
Cost of Revenue and Gross Margin Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Cost of revenue Subscription $ 58,767 $ 45,791 $ 12,976 28 % Professional services and other 1,091 997 94 9 % Total cost of revenue 59,858 46,788 13,070 28 % Gross profit $ 193,970 $ 141,071 $ 52,899 37 % Gross margin Total gross margin 76 % 75 % The increase in cost of subscription revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Data provider fees $ 9,100 Personnel costs 2,546 Stock-based compensation expense 1,429 Other (99) Subscription cost of revenue $ 12,976 Fees paid to our data providers increased due to revenue growth.
Cost of Revenue and Gross Margin Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Cost of revenue Subscription $ 58,767 $ 45,791 $ 12,976 28 % Professional services and other 1,091 997 94 9 % Total cost of revenue 59,858 46,788 13,070 28 % Gross profit $ 193,970 $ 141,071 $ 52,899 37 % Gross margin Total gross margin 76 % 75 % 73 The increase in cost of subscription revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Data provider fees $ 9,100 Personnel costs 2,546 Stock-based compensation expense 1,429 Other (99) Subscription cost of revenue $ 12,976 Fees paid to our data providers increased due to revenue growth.
The increase in stock-based compensation expense was due to the increased headcount. 64 Operating Expenses Research and Development Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Research and development $ 61,436 $ 40,049 $ 21,387 53 % Percentage of total revenue 24 % 21 % The increase in research and development expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 13,470 Stock-based compensation expense 7,241 Other 676 Research and development $ 21,387 Personnel costs increased as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.
Operating Expenses Research and Development Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Research and development $ 61,436 $ 40,049 $ 21,387 53 % Percentage of total revenue 24 % 21 % The increase in research and development expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 13,470 Stock-based compensation expense 7,241 Other 676 Research and development $ 21,387 Personnel costs increased as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.
We view the number of customers that contribute more than $10,000 in ARR as a measure of our ability to scale with our customers and attract larger organizations. We believe this represents potential for future growth, including expanding within our current customer base. Over time, larger customers have constituted a greater share of our revenue.
We view the number of customers that contribute more than $10,000 in ARR as a measure of our ability to scale with our customers and attract larger organizations. We believe this represents potential 63 for future growth, including expanding within our current customer base. Over time, larger customers have constituted a greater share of our revenue.
Judgment is required to determine whether each product or service sold is a distinct performance obligation that should be accounted for separately. Stock-Based Compensation For equity awards with only service conditions, we recognize compensation expense based on the grant‐date fair value on a straight-line basis over the remaining requisite service period for the award.
Judgment is required to determine whether each product or service sold is a distinct performance obligation that should be accounted for separately. 83 Stock-Based Compensation For equity awards with only service conditions, we recognize compensation expense based on the grant‐date fair value on a straight-line basis over the remaining requisite service period for the award.
Professional services revenue is recognized at the time these services are provided to the customer. This revenue has 59 historically represented less than 1% of our revenue and is expected to be immaterial for the foreseeable future. Cost of Revenue Subscription Cost of revenue primarily consists of expenses related to hosting our platform and providing support to our customers.
Professional services revenue is recognized at the time these services are provided to the customer. This revenue has historically represented less than 1% of our revenue and is expected to be immaterial for the foreseeable future. Cost of Revenue Subscription Cost of revenue primarily consists of expenses related to hosting our platform and providing support to our customers.
We estimate the probability and timing of achievement at the grant date and reassess each reporting period. 77 Restricted Stock Units At the end of 2015, we began issuing restricted stock units to certain of our employees. The general terms of the restricted stock units required both a service and performance condition to be satisfied prior to vesting.
We estimate the probability and timing of achievement at the grant date and reassess each reporting period. Restricted Stock Units At the end of 2015, we began issuing restricted stock units to certain of our employees. The general terms of the restricted stock units required both a service and performance condition to be satisfied prior to vesting.
Our primary uses of cash from operating activities are for personnel costs across the sales and marketing and research and development departments and hosting costs. Historically, we have generated negative cash flows from operating activities. However, for the years ended December 31, 2022 and 2021, we generated positive cash flows from operations.
Our primary uses of cash from operating activities are for personnel costs across the sales and marketing and research and development departments and hosting costs. Historically, we have generated negative cash flows from operating activities. However, for the years ended December 31, 2023, 2022 and 2021, we generated positive cash flows from operations.
We plan to increase the dollar amount of our investment in sales and marketing for the foreseeable future, primarily for increased headcount for our sales department. 60 General and Administrative General and administrative expenses primarily consist of personnel expenses associated with our finance, legal, human resources and other administrative employees.
We plan to increase the dollar amount of our investment in sales and marketing for the foreseeable future, primarily for increased headcount for our sales department. General and Administrative General and administrative expenses primarily consist of personnel expenses associated with our finance, legal, human resources and other administrative employees.
The net cash inflow from changes in operating assets and liabilities was primarily the result of a $25.6 million increase in deferred revenue, a $3.5 million decrease in prepaid expenses and an $8.5 million increase in accounts payable and other accrued liabilities.
The net cash inflow from changes in operating assets and liabilities was primarily the result of a $25.6 million increase in deferred revenue, 81 a $3.5 million decrease in prepaid expenses and an $8.5 million increase in accounts payable and other accrued liabilities.
Given the importance of our technology platform and heightened market awareness of social media as a strategic communications channel, these factors have not had a material adverse impact on our operational and financial performance to date.
Given the importance of our technology platform and heightened market awareness of social media as a strategic communications channel, these factors have not had a material 60 adverse impact on our operational and financial performance to date.
Historically, we have generated losses from operations and negative cash flows from operations, as evidenced by our accumulated deficit and statement of cash flows. However, during the years ended December 31, 2022 and 2021, we generated positive cash flows from operations.
Historically, we have generated losses from operations and negative cash flows from operations, as evidenced by our accumulated deficit and statement of cash flows. However, during the years ended December 31, 2023, 2022 and 2021, we generated positive cash flows from operations.
General and Administrative Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) General and administrative $ 60,515 $ 44,929 $ 15,586 35 % Percentage of total revenue 24 % 24 % The increase in general and administrative expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 8,087 Stock-based compensation expense 4,908 Credit losses on accounts receivable 585 Accounting fees 502 Other 1,504 General and administrative $ 15,586 Personnel costs increased primarily as a result of a 26% increase in headcount as we continue to grow our business and operate as a publicly traded company.
General and Administrative Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) General and administrative $ 60,515 $ 44,929 $ 15,586 35 % Percentage of total revenue 24 % 24 % The increase in general and administrative expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 8,087 Stock-based compensation expense 4,908 Credit losses on accounts receivable 585 Accounting fees 502 Other 1,504 General and administrative $ 15,586 75 Personnel costs increased primarily as a result of a 26% increase in headcount as we continued to grow our business and operate as a publicly traded company.
We continue to invest resources to enhance the capabilities of our platform by introducing new products, features and functionality of existing products. International expansion We see international expansion as a meaningful opportunity to grow our platform. Revenue generated from non-U.S. customers during the year ended December 31, 2022 was approximately 28% of our total revenue.
We continue to invest resources to enhance the capabilities of our platform by introducing new products, features and functionality of existing products. International expansion We see international expansion as a meaningful opportunity to grow our platform. Revenue generated from non-U.S. customers during the year ended December 31, 2023 was approximately 28% of our total revenue.
On this basis, we estimate that for each of 2022 and 2021, the calculated lifetime value of our customers has exceeded six times the associated cost of acquiring them. This calculation assumes the actual subscription renewal rate for the period will remain consistent in future years.
On this basis, we estimate that for each of 2023 and 2022, the calculated lifetime value of our customers has exceeded six times the associated cost of acquiring them. This calculation assumes the actual subscription renewal rate for the period will remain consistent in future years.
Sales and Marketing Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Sales and marketing $ 123,695 $ 84,182 $ 39,513 47 % Percentage of total revenue 49 % 45 % The increase in sales and marketing expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 26,652 Stock-based compensation expense 12,430 Other 431 Sales and marketing $ 39,513 65 Personnel costs increased primarily as a result of a 43% increase in headcount as we continue to expand our sales teams to grow our customer base, as well as additional sales commission expense due to the year over year sales growth, which increased the amortization of contract acquisition costs.
The increase in stock-based compensation expense was due to the increased headcount. 74 Sales and Marketing Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Sales and marketing $ 123,695 $ 84,182 $ 39,513 47 % Percentage of total revenue 49 % 45 % The increase in sales and marketing expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to the following: Change ( in thousands ) Personnel costs $ 26,652 Stock-based compensation expense 12,430 Other 431 Sales and marketing $ 39,513 Personnel costs increased primarily as a result of a 43% increase in headcount as we continued to expand our sales teams to grow our customer base, as well as additional sales commission expense due to the year over year sales growth, which increased the amortization of contract acquisition costs.
Our general and administrative expenses also include professional fees for external legal, accounting and other consulting services, depreciation and amortization expense, as well as allocated overhead. We expect to increase the size of our general and administrative functions to support the growth of our business.
Our general and administrative expenses also include professional fees for external legal, accounting and other consulting services, amortization of intangible assets, depreciation and amortization expense, as well as allocated overhead. We expect to increase the size of our general and administrative functions to support the growth of our business.
The increase in stock-based compensation expense was primarily due to the increased headcount and awards granted to our President.
The increase in stock-based compensation expense was due to the increased headcount and awards granted to our President.
For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow is that it does not reflect our future contractual obligations.
For example, if non-GAAP free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of non-GAAP free cash flow is that it does not reflect our future contractual obligations.
See “—Key Business Metrics—ARR” for more information on how we define and calculate ARR. 57 Sustaining product and technology innovation Our success is dependent on our ability to sustain product and technology innovation and maintain the competitive advantage of our proprietary technology.
See “—Key Business Metrics—ARR” for more information on how we define and calculate ARR. 62 Sustaining product and technology innovation Our success is dependent on our ability to sustain product and technology innovation and maintain the competitive advantage of our proprietary technology.
Currently, more than 34,000 customers across more than 100 countries rely on our platform. Introduced in 2011, our cloud software brings together social messaging, data and workflows in a unified system of record, intelligence and action.
Currently, more than 31,000 customers across more than 100 countries rely on our platform. Introduced in 2011, our cloud software brings together social messaging, data and workflows in a unified system of record, intelligence and action.
Personnel costs increased primarily as a result of a 10% increase in headcount as we continued to grow our customer support and customer success teams to support our customer growth. The increase in stock-based compensation expense was due to the increased headcount.
Personnel costs increased primarily as a result of a 5% increase in headcount as we continued to grow our customer support and customer success teams to support our customer growth. The increase in stock-based compensation expense was due to the increased headcount.
We have built local teams in Ireland, Canada, the United Kingdom, Singapore, India, Australia and the Philippines to support our growth internationally. We believe global demand for our platform and offerings will continue to increase as awareness of our platform in international markets grows.
We have teams in Ireland, Canada, the United Kingdom, Singapore, India, Australia, the Philippines and Poland to support our growth internationally. We believe global demand for our platform and offerings will continue to increase as awareness of our platform in international markets grows.
As of December 31, 2022 2021 Number of customers 34,390 31,762 ARR We define ARR as the annualized revenue run-rate of subscription agreements from all customers as of the last date of the specified period. We believe ARR is an indicator of the scale of our entire platform while mitigating fluctuations due to seasonality and contract term.
As of December 31, 2023 2022 Number of customers 31,320 34,390 ARR We define ARR as the annualized revenue run-rate of subscription agreements from all customers as of the last date of the specified period. We believe ARR is an indicator of the scale of our entire platform while mitigating fluctuations due to seasonality and contract term.
These expenses are comprised of fees paid to data providers, hosted data center costs and personnel costs directly associated with cloud infrastructure, customer success and customer support, including salaries, benefits, bonuses and allocated overhead. These costs also include depreciation expense and amortization expense related to acquired developed technologies.
These expenses are comprised of fees paid to data providers, hosted data center costs and personnel costs directly associated with cloud infrastructure, customer success and customer support, including salaries, benefits, bonuses and allocated overhead. These costs also include 64 depreciation expense and amortization expense related to acquired developed technologies that directly benefit sales.
Operating across major networks, including Twitter, Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.
Operating across major networks, including X (formerly known as Twitter), Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.
We believe non-GAAP gross profit provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance.
We believe non-GAAP gross profit provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation and amortization expense, which are often unrelated to overall operating performance.
Since our founding, we have achieved several key milestones: • 2010 — Founded Company, launched V1 beta and Lightbank became an investor; • 2011 — Launched our Sprout platform, surpassed 1,000 customers and entities affiliated with NEA became investors; • 2015/16 — Surpassed 15,000 customers, surpassed 250 employees and Goldman Sachs became an investor; • 2017 — Completed first business acquisition and awarded one of Glassdoor’s “Best Places to Work, companies under 1,000 employees, 2017” and one of the “Top CEOs, companies under 1,000 employees, 2017”; • 2018 — Surpassed 20,000 customers, opened EMEA office, reached 500 employees, launched first add-on module (Listening), Future Fund became an investor and awarded one of Glassdoor’s “Best Places to Work, companies under 1,000 employees, 2018” and one of the “Top CEOs, companies under 1,000 employees, 2018”; • 2019 — Completed our IPO resulting in $134.3 million of net proceeds (excluding $10.0 million of additional net proceeds from the underwriters’ exercise of their over-allotment option in January 2020), surpassed $100 million in ARR and awarded one of Glassdoor’s “Top CEOs, companies under 1,000 employees, 2019”; • 2020 — Completed our follow-on offering resulting in $42.1 million in net proceeds, awarded one of Glassdoor’s “Best Place to Work” in 2020, recognized as one of Fortune’s 100 Best Small and Medium Workplaces, one of Fortune’s 25 Best Small and Medium Workplaces for 55 Women, and selected as a recipient of the 2020 Tech Cares Award from TrustRadius, awarded to tech companies that went above and beyond to support their clients and communities during the COVID-19 Pandemic; • 2021 — Surpassed 31,000 customers and $220 million in Annualized Recurring Revenue (ARR), awarded one of Glassdoor’s “Best Place to Work” in 2022, ranked #3 on Battery Venture’s 25 Highest Rated Public Cloud Computing Companies to Work For, added a new level of transparency to its Environmental, Social and Governance (ESG) commitments, announced a first-of-its kind social commerce solution, and recognized by G2 as one of the 2021 Best Software Companies; and • 2022 — Surpassed 34,000 customers and $296 million in ARR, awarded one of Glassdoor’s “Best Place to Work” in 2023, named to the 2022 PEOPLE Companies that Care list, recognized by G2 as one of the 2022 Best Software Companies, integrated with TikTok and announced a new partnership with Salesforce making it easy for Salesforce customers to manage their social media presence through Sprout Social.
Since our founding, we have achieved several key milestones: • 2010 — Founded Company, launched V1 beta and Lightbank became an investor; • 2011 — Launched our Sprout platform, surpassed 1,000 customers and entities affiliated with NEA became investors; • 2015/16 — Surpassed 15,000 customers, surpassed 250 employees and Goldman Sachs became an investor; • 2017 — Completed first business acquisition and awarded one of Glassdoor’s “Best Places to Work, companies under 1,000 employees, 2017” and one of the “Top CEOs, companies under 1,000 employees, 2017”; • 2018 — Surpassed 20,000 customers, opened EMEA office, reached 500 employees, launched first add-on module (Listening), Future Fund became an investor and awarded one of Glassdoor’s “Best Places to Work, companies under 1,000 employees, 2018” and one of the “Top CEOs, companies under 1,000 employees, 2018”; • 2019 — Completed our IPO resulting in $134.3 million of net proceeds (excluding $10.0 million of additional net proceeds from the underwriters’ exercise of their over-allotment option in January 2020), surpassed $100 million in ARR and awarded one of Glassdoor’s “Top CEOs, companies under 1,000 employees, 2019”; • 2020 — Completed our follow-on offering resulting in $42.1 million in net proceeds, awarded one of Glassdoor’s “Best Place to Work” in 2020, recognized as one of Fortune’s 100 Best Small and Medium Workplaces, one of Fortune’s 25 Best Small and Medium Workplaces for 59 Women, and selected as a recipient of the 2020 Tech Cares Award from TrustRadius, awarded to tech companies that went above and beyond to support their clients and communities during the COVID-19 Pandemic; • 2021 — Surpassed 31,000 customers and $220 million in Annualized Recurring Revenue (ARR), awarded one of Glassdoor’s “Best Place to Work” in 2022, ranked #3 on Battery Venture’s 25 Highest Rated Public Cloud Computing Companies to Work For, added a new level of transparency to its Environmental, Social and Governance (ESG) commitments, announced a first-of-its kind social commerce solution, and recognized by G2 as one of the 2021 Best Software Companies; and • 2022 — Surpassed 34,000 customers and $296 million in ARR, awarded one of Glassdoor’s “Best Place to Work” in 2023, named to the 2022 PEOPLE Companies that Care list, recognized by G2 as one of the 2022 Best Software Companies, integrated with TikTok and announced a new partnership with Salesforce making it easy for Salesforce customers to manage their social media presence through Sprout Social. • 2023 — Acquired influencer marketing leader Tagger Media for $140 million, named to the 2023 Fortune Best Workplaces in Technology List, recognized by G2 as a leader across 138 companies and as the 3rd highest rated software by G2, recognized by Great Place to Work as a Best Workplace in Chicago and Best Workplace for Millennials and announced a continued strategic partnership with X (formerly known as Twitter).
Additional product modules, which offer increased functionality depending on a customer’s needs, can be purchased by the customer on a per user per month basis. We generated revenue of $253.8 million, $187.9 million and $132.9 million during the years ended December 31, 2022, 2021, and 2020, respectively, representing growth of 35% in 2022 and 41% in 2021.
Additional product modules, which offer increased functionality depending on a customer’s needs, can be purchased by the customer on a per user per month basis. We generated revenue of $333.6 million, $253.8 million and $187.9 million during the years ended December 31, 2023, 2022, and 2021, respectively, representing growth of 31% in 2023 and 35% in 2022.
As of December 31, 2022 2021 Number of customers contributing more than $50,000 in ARR 972 610 Components of our Results of Operations Revenue Subscription We generate revenue primarily from subscriptions to our social media management platform under a software-as-a-service model.
As of December 31, 2023 2022 Number of customers contributing more than $50,000 in ARR 1,399 972 Components of our Results of Operations Revenue Subscription We generate revenue primarily from subscriptions to our social media management platform under a software-as-a-service model.
Non-cash charges primarily consisted of $11.1 million of stock-based compensation expense, $4.2 million of depreciation and intangible asset amortization expense, $7.7 million for amortization of deferred contract acquisition costs, which were primarily commissions, $2.0 million for credit losses on accounts receivable and $1.1 75 million of amortization of right-of-use, or ROU, operating lease assets.
Non-cash charges primarily consisted of $67.7 million of stock-based compensation expense, $6.7 million of depreciation and intangible asset amortization expense, $26.6 million for amortization of deferred contract acquisition costs, which were primarily commissions, $2.4 million for credit losses on accounts receivable and $1.6 million of amortization of right-of-use, or ROU, operating lease assets.
For each of these awards, the performance condition was considered probable at the grant date and the awards have been recognized as compensation expense over their respective requisite service periods. In 2022 and 2021, we recognized $6.4 million and $3.1 million, respectively, of stock-based compensation expense in relation to these awards.
For each of these awards, the performance condition was considered probable at the grant date and the awards have been recognized as compensation expense over their respective requisite service periods. In 2023 and 2022, we recognized $5.2 million and $6.4 million, respectively, of stock-based compensation expense in relation to these awards.
Sales and Marketing Sales and marketing expenses primarily consist of personnel costs directly associated with our sales and marketing department, online advertising expenses, as well as allocated overhead, including depreciation expense and amortization related to acquired developed technologies. Sales force commissions and bonuses are considered incremental costs of obtaining a contract with a customer.
Sales and Marketing Sales and marketing expenses primarily consist of personnel costs directly associated with our sales and marketing department, online advertising expenses, as well as allocated overhead, including depreciation expense. Sales force commissions and bonuses are considered incremental costs of obtaining a contract with a customer.
Income Tax Expense Years Ended December 31, Change 2021 2020 Amount % ( dollars in thousands ) Income tax expense $ 211 $ 127 $ 84 66 % Percentage of total revenue — % — % The increase in income tax expense is due to higher earnings in foreign jurisdictions. 71 Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance.
Income Tax Expense Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Income tax expense $ 366 $ 211 $ 155 73 % Percentage of total revenue — % — % The increase in income tax expense is due to higher earnings in foreign jurisdictions. 76 Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance.
In 2022, software subscriptions contributed 99% of our revenue. We generated net losses of $50.2 million, $28.7 million, and $31.7 million during the years ended December 31, 2022, 2021, and 2020, respectiv ely. Our net losses include stock-based compensation expense of $47.7 million, $21.7 million and $11.1 million in the years ended December 31, 2022, 2021, and 2020, respectively.
In 2023, software subscriptions contributed 99% of our revenue. We generated net losses of $66.4 million, $50.2 million, and $28.7 million during the years ended December 31, 2023, 2022, and 2021, respectiv ely. Our net losses include stock-based compensation expense of $67.7 million, $47.7 million and $21.7 million in the years ended December 31, 2023, 2022, and 2021, respectively.
We believe that free cash flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash used in our core operations that, after the expenditures for property and equipment, is not available to be used for strategic initiatives.
We believe that non-GAAP free cash flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash used in our core operations that, after the expenditures for property and equipment, acquisition-related costs and interest, is available to be used for strategic initiatives.
We believe non-GAAP net loss per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance.
We believe non-GAAP net income (loss) per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, acquisition-related expenses and amortization expense, which are often unrelated to overall operating performance.
As of December 31, 2022 2021 Number of customers contributing more than $10,000 in ARR 6,652 4,917 Number of customers contributing more than $50,000 in ARR We define customers contributing more than $50,000 in ARR as those on a paid subscription plan that had more than $50,000 in ARR as of a period end.
As of December 31, 2023 2022 Number of customers contributing more than $10,000 in ARR 8,689 6,652 Number of customers contributing more than $50,000 in ARR We define customers contributing more than $50,000 in ARR as those on a paid subscription plan that had more than $50,000 in ARR as of a period end.
We believe non-GAAP net loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance.
We believe non-GAAP net income (loss) provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, acquisition-related expenses and amortization expense, which are often unrelated to overall operating performance.
We believe non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance.
We believe non-GAAP operating income (loss) provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, acquisition-related expenses and amortization expense, which are often unrelated to overall operating performance.
As of December 31, 2022 2021 (in thousands) ARR $ 296,601 $ 224,158 58 Number of customers contributing more than $10,000 in ARR We define customers contributing more than $10,000 in ARR as those on a paid subscription plan that had more than $10,000 in ARR as of a period end.
As of December 31, 2023 2022 (in thousands) ARR $ 385,219 $ 296,601 Number of customers contributing more than $10,000 in ARR We define customers contributing more than $10,000 in ARR as those on a paid subscription plan that had more than $10,000 in ARR as of a period end.
During the year ended December 31, 2021, we increased headcount within our engineering team by 28%.
During the year ended December 31, 2023, we increased headcount within our engineering team by 19%.
Recent Accounting Pronouncements Refer to section titled “Recently Adopted Accounting Pronouncements” in Note 1 to our audited consolidated financial statements for more information. 76 Critical Accounting Policies and Estimates Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
Recent Accounting Pronouncements Refer to section titled “Recently Adopted Accounting Pronouncements” in Note 1 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for more information. Critical Accounting Policies and Estimates Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.
By their nature, these judgments and estimates are subject to an inherent degree of uncertainty. Although we believe our use of estimates and underlying accounting assumptions conforms to GAAP and is consistently applied, actual results could differ from our estimates. Deferred Sales Commissions Sales force commissions are considered incremental costs of obtaining a contract with a customer.
Although we believe our use of estimates and underlying accounting assumptions conforms to GAAP and is consistently applied, actual results could differ from our estimates. Deferred Sales Commissions Sales force commissions are considered incremental costs of obtaining a contract with a customer.
Net cash provided by operating activities during the year ended December 31, 2022 was $10.7 million, which resulted from a net loss of $50.2 million adjusted for non-cash charges of $71.9 million and net cash outflow of $11.0 million from changes in operating assets and liabilities.
These outflows were partially offset by a $41.9 million increase in deferred revenue. Net cash provided by operating activities du ring the year ended December 31, 2022 was $10.7 million, which resulted from a net loss of $50.2 million adjusted for non-cash charges of $71.9 million and net cash outflow of $11.0 million from changes in operating assets and liabilities.
The increase in interest income (expense), net was primarily driven by the increased investment in marketable securities and higher interest rates. 66 Other (Expense) Income, Net Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Other (expense) income, net $ (580) $ (361) $ (219) n/m Percentage of total revenue — % — % The decrease in other (expense) income, net was primarily driven by foreign exchange transaction losses.
Other Expense, Net Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Other expense, net $ (580) $ (361) $ (219) n/m Percentage of total revenue — % — % The decrease in other expense, net was primarily driven by foreign exchange transaction losses.
We have invested, and expect to continue to invest, heavily in expanding our sales force and marketing efforts to acquire new customers. Currently, we have more than 34,000 customers.
We have invested, and expect to continue to invest, heavily in expanding our sales force and marketing efforts to acquire new customers. Currently, we have more than 31,000 customers. In November 2022, we announced a price increase.
Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business. Non-GAAP Gross Profit We define non-GAAP gross profit as GAAP gross profit, excluding stock-based compensation expense.
Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
The net cash outflow from changes in operating assets and liabilities was primarily the result of a $14.0 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $8.1 million increase in gross accounts receivable, a $4.7 million increase in prepaid expenses and a $0.2 million decrease in operating lease liabilities.
The net cash outflow from changes in operating assets and liabilities was primarily the result of a $40.5 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $27.0 million increase in gross accounts receivable and a $3.5 million decrease in operating lease liabilities.
We expect this trend to continue for the foreseeable future. 61 Results of Operations The following tables set forth information comparing the components of our results of operations in dollars and as a percentage of total revenue for the periods presented.
Results of Operations The following tables set forth information comparing the components of our results of operations in dollars and as a percentage of total revenue for the periods presented.
Personnel costs increased primarily as a result of a 5% increase in headcount as we continue to grow our customer support and customer success teams to support our customer growth.
Personnel costs increased primarily as a result of a 9% increase in headcount as we continue to grow our customer support and customer success teams to support our customer growth. The increase in stock-based compensation expense was primarily due to the increased headcount.
The increase in stock-based compensation expense was due to the increased headcount and awards granted to our President. The increase in other was driven by an increase in general marketing costs.
The increase in stock-based compensation expense was primarily due to the increased headcount. The increase in other expense was driven by internal training costs and other general marketing costs.
Net cash used in operating activities during the year ended December 31, 2020 was $11.4 million, which resulted from a net loss of $31.7 million adjusted for non-cash charges of $26.7 million and net cash outflow of $6.4 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended December 31, 2023 was $6.5 million, which resulted from a net loss of $66.4 million adjusted for non-cash charges of $101.8 million and net cash outflow of $28.9 million from changes in operating assets and liabilities.
Macroeconomic Conditions As a company with a global footprint, we are subject to risks and exposures caused by significant events and their macroeconomic impacts, including, but not limited to, the COVID-19 pandemic, the Russia-Ukraine war, global geopolitical tension and more recently, rising inflation and interest rates, volatility in the capital markets and related market uncertainty.
Macroeconomic Conditions As a company with a global footprint, we are subject to risks and exposures caused by significant events and their macroeconomic impacts, including, but not limited to, high levels of inflation, high interest rates, ongoing overseas conflict, volatility in the capital markets and related market uncertainty.
However, the potential implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, introduce additional uncertainty. 56 Our current and prospective customers are impacted by worsening macroeconomic conditions to varying degrees and as a result, in some cases we are observing slower expansion by existing customers.
However, the potential implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, introduce additional uncertainty. Our current and prospective customers are impacted by worsening macroeconomic conditions to varying degrees. We are continuing to monitor for potential future direct and indirect impacts on our business and results of operations.
Number of customers We define a customer as a unique account, multiple accounts containing a common non-personal email domain, or multiple accounts governed by a single agreement.
Number of customers We define a customer as a unique account, multiple accounts containing a common non-personal email domain, or multiple accounts governed by a single agreement. We believe that the number of customers using our platform is an indicator of our market penetration.
Our dollar-based net retention rate for the years ended December 31, 2022 and 2021 was 108% and 112%, respectively. Our dollar-based net retention rate excluding our SMB customers for the years ended December 31, 2022 and 2021 was 115% and 118%, respectively.
Our dollar-based net retention rate for the years ended December 31, 2023 and 2022 was 107% and 109%, respectively. Our dollar-based net retention rate excluding our SMB customers for the years ended December 31, 2023 and 2022 was 111% and 116%, respectively.
We believe our existing cash and cash equivalents will be sufficient to meet our operating and capital needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash and investment balances and potential future equity or debt transactions.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash and investment balances and potential future equity or debt transactions.
Year Ended December 31, 2022 2021 2020 Reconciliation of Non-GAAP net loss per share Net loss per share attributable to common shareholders, basic and diluted $ (0.92) $ (0.53) $ (0.62) Stock-based compensation expense per share 0.87 0.40 0.22 Non-GAAP net loss per share $ (0.05) $ (0.13) $ (0.40) Free Cash Flow Free cash flow is a non-GAAP financial measure that we define as net cash used in operating activities less expenditures for property and equipment.
In 2023, we revised our definition of non-GAAP net income (loss) per share to exclude acquisition-related expenses in connection with our acquisition of Tagger and amortization expense associated with the acquired intangible assets from the Tagger acquisition. 78 Year Ended December 31, 2023 2022 2021 Reconciliation of Non-GAAP net income (loss) per share Net loss per share attributable to common shareholders, basic and diluted $ (1.19) $ (0.92) $ (0.53) Stock-based compensation expense per share 1.22 0.87 0.40 Acquisition-related expenses 0.08 — — Amortization of acquired intangible assets 0.03 — — Non-GAAP net income (loss) per share $ 0.14 $ (0.05) $ (0.13) Non-GAAP Free Cash Flow Non-GAAP free cash flow is a non-GAAP financial measure that we define as net cash used in operating activities less expenditures for property and equipment, acquisition-related costs and interest.
During the year ended December 31, 2022, we increased headcount within our engineering team by 30%. The increase in stock-based compensation expense was due to the increased headcount.
During the year ended December 31, 2022, we increased headcount within our engineering team by 30%.
Interest Income (Expense), Net Interest income (expense), net consists primarily of interest expense related to our line of credit and is offset by interest income earned on our cash and investment balances.
Interest Income (Expense), Net Interest income (expense), net consists primarily of interest expense related to the Facility and is offset by interest income earned on our cash and investment balances. 65 Other Expense, Net Other expense, net consists of foreign currency transaction gains and losses.
See Note 1 of our audited consolidated financial statements for more information regarding these transactions. We subsequently received an additional $10.0 million of net proceeds after deducting underwriting discounts and commissions in January 2020 as a result of the over-allotment option exercise by the underwriters of our IPO.
In our IPO, we received net proceeds of $134.3 million 79 after deducting underwriting discounts and commissions of $10.5 million and offering expenses of $5.2 million. We subsequently received an additional $10.0 million of net proceeds after deducting underwriting discounts and commissions in January 2020 as a result of the over-allotment option exercise by the underwriters of our IPO.
Year Ended December 31, 2022 2021 2020 Reconciliation of Non-GAAP net loss ( dollars in thousands ) Net loss $ (50,240) $ (28,702) $ (31,655) Stock-based compensation expense 47,738 21,730 11,079 Non-GAAP net loss $ (2,502) $ (6,972) $ (20,576) Non-GAAP Net Loss per Share We define non-GAAP net loss per share as GAAP net loss per share attributable to common shareholders, basic and diluted, excluding stock-based compensation expense.
Year Ended December 31, 2023 2022 2021 Reconciliation of Non-GAAP net income (loss) ( dollars in thousands ) Net loss $ (66,427) $ (50,240) $ (28,702) Stock-based compensation expense 67,704 47,738 21,730 Acquisition-related expenses 4,272 — — Amortization of acquired intangible assets 2,022 — — Non-GAAP net income (loss) $ 7,571 $ (2,502) $ (6,972) Non-GAAP Net Income (Loss) per Share We define non-GAAP net income (loss) per share as GAAP net loss per share attributable to common shareholders, basic and diluted, excluding stock-based compensation expense, acquisition-related expenses and amortization expense associated with the acquired intangible assets from the Tagger acquisition.
Operating Expenses Research and Development Years Ended December 31, Change 2021 2020 Amount % ( dollars in thousands ) Research and development $ 40,049 $ 30,491 $ 9,558 31 % Percentage of total revenue 21 % 23 % The increase in research and development expense for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the following: Change ( in thousands ) Personnel costs $ 7,269 Stock-based compensation expense 2,104 Other 185 Research and development $ 9,558 Personnel costs increased as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.
Operating Expenses Research and Development Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Research and development $ 79,550 $ 61,436 $ 18,114 29 % Percentage of total revenue 24 % 24 % The increase in research and development expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change ( in thousands ) Personnel costs $ 10,461 Stock-based compensation expense 7,198 Other 455 Research and development $ 18,114 Personnel costs increased primarily as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development and maintenance of our platform.
The significant accounting policies used in the preparation of our audited financial statements are discussed in Note 1 under Item 8, “Financial Statements and Supplementary Data.” The accounting assumptions and estimates discussed in the section below are those that we consider most critical to an understanding of our financial statements because they inherently involve a greater degree of judgment and complexity.
The accounting assumptions and estimates discussed in the section below are those that we consider most critical to an understanding of our financial statements because they inherently involve a greater degree of judgment and complexity. By their nature, these judgments and estimates are subject to an inherent degree of uncertainty.
We have historically reported a taxable loss in our most significant jurisdiction, the United States, and have a full valuation allowance against our deferred tax assets.
Income Tax Provision The income tax provision consists of current and deferred taxes for our United States and foreign jurisdictions. We have historically reported a taxable loss in our most significant jurisdiction, the United States, and have a full valuation allowance against our deferred tax assets. We expect this trend to continue for the foreseeable future.
Year Ended December 31, 2022 2021 2020 Reconciliation of Free cash flow ( dollars in thousands ) Net cash provided by (used in) operating activities $ 10,668 $ 14,817 $ (11,352) Expenditures for property and equipment (1,824) (926) (4,015) Free cash flow $ 8,844 $ 13,891 $ (15,367) 73 Liquidity and Capital Resources As of December 31, 2022, our principal sources of liquidity were cash and cash equivalents of $79.9 million, marketable securities of $105.9 million, and net accounts receivable of $35.8 million.
Year Ended December 31, 2023 2022 2021 Reconciliation of non-GAAP free cash flow ( dollars in thousands ) Net cash provided by operating activities $ 6,456 $ 10,668 $ 14,817 Expenditures for property and equipment (2,073) (1,824) (926) Acquisition-related costs 4,272 — — Interest paid on credit facility 1,588 — — Non-GAAP free cash flow $ 10,243 $ 8,844 $ 13,891 Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents of $49.8 million, marketable securities of $48.3 million, and net accounts receivable of $63.5 million.
The increase in stock-based compensation expense was due to the increased headcount. 69 Sales and Marketing Years Ended December 31, Change 2021 2020 Amount % ( dollars in thousands ) Sales and marketing $ 84,182 $ 59,137 $ 25,045 42 % Percentage of total revenue 45 % 45 % The increase in sales and marketing expense for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the following: Change ( in thousands ) Personnel costs $ 14,134 Stock-based compensation expense 8,172 Advertising 1,371 Other 1,368 Sales and marketing $ 25,045 Personnel costs increased primarily as a result of an 18% increase in headcount as we continued to expand our sales teams to grow our customer base, as well as additional sales commission expense due to the year over year sales growth, which increased the amortization of contract acquisition costs.
The increase in stock-based compensation expense was primarily due to the increased headcount. 69 Sales and Marketing Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Sales and marketing $ 168,091 $ 123,695 $ 44,396 36 % Percentage of total revenue 50 % 49 % The increase in sales and marketing expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change ( in thousands ) Personnel costs $ 34,237 Stock-based compensation expense 7,050 Advertising 597 Other 2,512 Sales and marketing $ 44,396 Personnel costs increased primarily as a result of a 15% increase in headcount as we continue to expand our sales teams to grow our customer base, as well as additional sales commission expense due to the year-over-year sales growth, which increased the amortization of contract acquisition costs.
Year Ended December 31, 2022 2021 2020 Reconciliation of Non-GAAP gross profit ( dollars in thousands ) Gross Profit $ 193,970 $ 141,071 $ 98,032 Stock-based compensation expense $ 2,491 $ 1,062 $ 749 Non-GAAP gross profit $ 196,461 $ 142,133 $ 98,781 Non-GAAP Operating Loss We define non-GAAP operating loss as GAAP loss from operations, excluding stock-based compensation expense.
Year Ended December 31, 2023 2022 2021 Reconciliation of Non-GAAP gross profit ( dollars in thousands ) Gross Profit $ 257,375 $ 193,970 $ 141,071 Stock-based compensation expense 3,224 2,491 1,062 Amortization of acquired developed technology 1,175 — — Non-GAAP gross profit $ 261,774 $ 196,461 $ 142,133 Non-GAAP Operating Income (Loss) We define non-GAAP operating income (loss) as GAAP loss from operations, excluding stock-based compensation expense, acquisition-related expenses and amortization expense associated with the acquired intangible assets from the Tagger acquisition.
We may experience greater than anticipated operating losses in the short- and long-term due to macroeconomic, financial and other factors that are beyond our control, such as rising inflation rates and a potential recession. The impact of these factors on our customers and our operations going forward remains uncertain, and we continue to proactively monitor our liquidity position.
We expect to continue to incur operating losses and may have negative operating cash flows for the foreseeable future as we continue to grow the business. We may experience greater than anticipated operating losses in the short- and long-term due to macroeconomic, financial and other factors that are beyond our control, such as rising inflation rates and a potential recession.
The SVB Credit Facility expired by its terms on January 31, 2022. 74 The following table summarizes our cash flows for the periods presented: Years Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by (used in) operating activities $ 10,668 $ 14,817 $ (11,352) Net cash (used in) investing activities (37,672) (22,118) (53,802) Net cash (used in) provided by financing activities (193) (100) 44,359 Net decrease in cash and cash equivalents $ (27,197) $ (7,401) $ (20,795) Operating Activities Our largest source of operating cash is cash collections from our customers for subscription services.
Refer to Note 8 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion. 80 The following table summarizes our cash flows for the periods presented: Years Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 6,456 $ 10,668 $ 14,817 Net cash used in investing activities (86,635) (37,672) (22,118) Net cash provided by (used in) financing activities 53,957 (193) (100) Net decrease in cash, cash equivalents and restricted cash $ (26,222) $ (27,197) $ (7,401) Operating Activities Our largest source of operating cash is cash collections from our customers for subscription services.
Income Tax Expense Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Income tax expense $ 366 $ 211 $ 155 73 % Percentage of total revenue — % — % The increase in income tax expense is due to higher earnings in foreign jurisdictions. 67 Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Revenue Years Ended December 31, Change 2021 2020 Amount % ( dollars in thousands ) Revenue Subscription $ 185,726 $ 131,804 $ 53,922 41 % Professional services and other 2,133 1,145 988 86 % Total revenue $ 187,859 $ 132,949 $ 54,910 41 % Percentage of Total Revenue Subscription 99 % 99 % Professional services and other 1 % 1 % The increase in subscription revenue was primarily driven by revenue from new customers and expansion within existing customers.
Other Expense, Net Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Other expense, net $ (768) $ (580) $ (188) 32 % Percentage of total revenue — % — % The change in other expense, net was primarily driven by foreign exchange transaction losses. 71 Income Tax (Benefit) Expense Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Income tax (benefit) expense $ 649 $ 366 $ 283 77 % Percentage of total revenue — % — % The change in income tax (benefit) expense was due to higher earnings in foreign jurisdictions. 72 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Years Ended December 31, Change 2022 2021 Amount % ( dollars in thousands ) Revenue Subscription $ 251,213 $ 185,726 $ 65,487 35 % Professional services and other 2,615 2,133 482 23 % Total revenue $ 253,828 $ 187,859 $ 65,969 35 % Percentage of Total Revenue Subscription 99 % 99 % Professional services and other 1 % 1 % The increase in subscription revenue was primarily driven by revenue from new customers and expansion within existing customers.
We are continuing to evaluate this and other potential future direct and indirect impacts on our business and results of operations. Key Factors Affecting Our Performance Acquiring new customers We are focused on continuing to organically grow our customer base by increasing demand for our platform and penetrating our addressable market.
Refer to Note 4 - Business Combinations of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion. 61 Key Factors Affecting Our Performance Acquiring new customers We are focused on continuing to organically grow our customer base by increasing demand for our platform and penetrating our addressable market.
As of December 31, 2022, the total obligation for operating leases was $25.5 million of which $4.6 million is expected in the next twelve months. As of December 31, 2022, our purchase commitment for primarily data and services was $21.2 million, of which $18.1 million is expected in the next twelve months.
As of December 31, 2023, we have non-cancellable contractual obligations related primarily to operating leases and minimum guaranteed purchase commitments for data and services. As of December 31, 2023, the total obligation for operating leases was $21.7 million, of which $4.9 million is expected in the next twelve months.
Net cash provided by financing activities for the year ended December 31, 2020 was $44.4 million, which was primarily the result of $42.1 million of net proceeds from our equity follow-on offering, $10.0 million of net proceeds from our sale of over-allotment shares to the underwriters of our IPO, offset by $8.6 million in payments related to the employee withholding taxes as a result of the net settlement of stock-based awards.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $54.0 million, primarily driven by $75.0 million in borrowings under the Facility and $2.3 million of proceeds under our employee stock purchase plan, partially offset by $20.0 million in repayments of the Facility, $2.4 million in payments related to employee withholding taxes as a result of the net settlement of stock-based awards and $1.0 million in issuance costs related to the Facility.
Year Ended December 31, 2022 2021 2020 Reconciliation of Non-GAAP operating loss ( dollars in thousands ) Loss from operations $ (51,676) $ (28,089) $ (32,002) Stock-based compensation expense $ 47,738 $ 21,730 $ 11,079 Non-GAAP operating loss $ (3,938) $ (6,359) $ (20,923) 72 Non-GAAP Net Loss We define non-GAAP net loss as GAAP net loss, excluding stock-based compensation expense.
In 2023, we revised our definition of non-GAAP operating income (loss) to exclude acquisition-related expenses in connection with our acquisition of Tagger and amortization expense associated with the acquired intangible assets from the Tagger acquisition. 77 Year Ended December 31, 2023 2022 2021 Reconciliation of Non-GAAP operating income (loss) ( dollars in thousands ) Loss from operations $ (69,277) $ (51,676) $ (28,089) Stock-based compensation expense 67,704 47,738 21,730 Acquisition-related expenses $ 4,272 — — Amortization of acquired intangible assets $ 2,022 — — Non-GAAP operating income (loss) $ 4,721 $ (3,938) $ (6,359) Non-GAAP Net Income (Loss) We define non-GAAP net income (loss) as GAAP net loss, excluding stock-based compensation expense, acquisition-related expenses and amortization expense associated with the acquired intangible assets from the Tagger acquisition.
General and Administrative Years Ended December 31, Change 2021 2020 Amount % ( dollars in thousands ) General and administrative $ 44,929 $ 40,406 $ 4,523 11 % Percentage of total revenue 24 % 30 % The increase in general and administrative expense for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the following: Change ( in thousands ) Personnel costs $ 4,386 Charitable contributions 288 Credit losses on accounts receivable (1,390) Other 1,239 General and administrative $ 4,523 70 Personnel costs increased primarily as a result of a 33% increase in headcount as we continued to grow our business and operate as a publicly traded company.
General and Administrative Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) General and administrative $ 79,011 $ 60,515 $ 18,496 31 % Percentage of total revenue 24 % 24 % 70 The increase in general and administrative expense for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change ( in thousands ) Personnel costs $ 5,194 Stock-based compensation expense 4,985 Acquisition-related costs 4,272 Amortization of intangible assets 1,327 Credit losses on accounts receivable 1,219 Accounting fees 771 Other 728 General and administrative $ 18,496 Personnel costs and stock-based compensation expense increased primarily as a result of an 18% increase in headcount as we continue to grow our business.
In August 2020, we received $42.1 million of net proceeds from our equity follow-on offering after deducting underwriting discounts and commissions. Our principal uses of cash in recent periods have been to fund operations and invest in capital expenditures.
In August 2020, we received $42.1 million of net proceeds from our equity follow-on offering after deducting underwriting discounts and commissions. As described below, in August 2023, we borrowed $75 million under the Facility in connection with the Tagger acquisition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures of Market Risk Interest Rate Risk We had cash and cash equivalents totaling $79.9 million as of December 31, 2022, the majority of which was invested in money market accounts. We also had marketable securities of $105.9 million which were invested in investment-grade corporate bonds, commercial paper, asset-backed securities, U.S.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures of Market Risk Interest Rate Risk We had cash and cash equivalents totaling $49.8 million as of December 31, 2023, the majority of which was invested in money market accounts and money market funds. We also had marketable securities of $48.3 million which were invested in investment-grade corporate bonds, commercial paper, U.S.
Decreases in the relative value of the U.S. dollar to the Canadian dollar may negatively affect revenue and other operating results as expressed in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to the Canadian dollars would have a material effect on operating results.
Decreases in the relative value of the U.S. dollar to the Canadian dollar may negatively affect revenue and other operating results as expressed in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to the Canadian dollar would have a material effect on operating results.
Treasury securities, and agency securities. Such interest-earning instruments carry a degree of interest rate risk with respect to the interest income generated. Additionally, certain of these cash investments are maintained at balances beyond Federal Deposit Insurance Corporation, or FDIC, coverage limits or are not insured by the FDIC.
Treasury securities, agency securities and asset-backed securities. Such interest-earning instruments carry a degree of interest rate risk with respect to the interest income generated. Additionally, certain of these cash investments are maintained at balances beyond Federal Deposit Insurance Corporation, or FDIC, coverage limits or are not insured by the FDIC.
We have not engaged in the hedging of foreign currency transactions to date. However, as our international operations expand, our foreign currency exchange risk may increase. If our foreign currency exchange risk increases in the future, we may evaluate the costs and benefits of initiating a foreign currency hedge program in connection with non-U.S. dollar denominated transactions. 80
We have not engaged in the hedging of foreign currency transactions to date. However, as our international operations expand, our foreign currency exchange risk may increase. If our foreign currency exchange risk increases in the future, we may evaluate the costs and benefits of initiating a foreign currency hedge program in connection with non-U.S. dollar denominated transactions. 85
Removed
We do not enter into investments for trading or speculative purposes. We did not have any outstanding debt during any of the periods presented under our $40.0 million revolving credit line which expired on January 31, 2022. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Added
We do not enter into investments for trading or speculative purposes. As of December 31, 2023, we had $55 million in secured indebtedness outstanding under the Credit Agreement.
Added
The revolving line of credit bears interest at a rate of either (i) SOFR (subject to a 1.0% floor), plus 0.10%, plus a margin ranging from 2.75% to 3.25% based on the Company’s liquidity or (ii) ABR (subject to a 2.0% floor) plus a margin ranging from 1.75% to 2.25% based on the Company’s liquidity.
Added
Refer to Note 8 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report). We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

Other SPT 10-K year-over-year comparisons