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What changed in Sprout Social, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sprout Social, Inc.'s 2023 and 2024 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 2024 report.

+518 added−454 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-23)

Top changes in Sprout Social, Inc.'s 2024 10-K

518 paragraphs added · 454 removed · 327 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+103 added−87 removed27 unchanged
Biggest changeSocial Listening: business intelligence at scale Every day, hundreds of millions of data points are created across social networks that contain information that can help businesses better understand their markets, their customers and their 16 competition. We provide affordable, powerful and approachable tools to access this rich data in order to make better business decisions.
Biggest changeData provided in our reporting suite can be delivered via API for integration with existing business intelligence tools. 14 Social Listening: power growth and set the industry standard with business intelligence at scale Social is an indispensable source of business intelligence, where billions of data points are created across social networks that contain information that can help businesses better understand their markets, their customers and their competition.
While not all of the information that we post to the Sprout Investors website or to social media profiles is of a material nature, some information could be deemed to be material.
While not all of the information that we post to the Sprout Social Investors website or to social media profiles is of a material nature, some information could be deemed to be material.
In general, our customer terms of service state that customers agree not to, nor authorize or permit any third parties to use our products to post, upload, link to, send, distribute, or store any content that is protected by copyright, trademark, or any other proprietary right without first having obtained all rights, permissions, and consents necessary to make such content available on or through our products.
In general, our customer terms of service state that customers agree not to, nor 21 authorize or permit any third parties to use our products to post, upload, link to, send, distribute, or store any content that is protected by copyright, trademark, or any other proprietary right without first having obtained all rights, permissions, and consents necessary to make such content available on or through our products.
For example, we sometimes cannot be certain which laws will be deemed applicable to us given the global nature of our business, including with respect to such topics as data privacy and security, pricing, credit card fraud, advertising, taxation, content regulation and intellectual property ownership and infringement.
For example, we sometimes cannot be certain which laws will be deemed applicable to us given the global nature of our business, including with respect to such topics as data privacy and security, pricing, 20 credit card fraud, advertising, taxation, content regulation and intellectual property ownership and infringement.
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.
Also, 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.
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.
We then used internal 16 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.
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.
We estimate that our SAM opportunity will exceed $120 billion by 2025, an annual market growth rate of greater than 25%. We calculated our current SAM estimate as follows: (i) utilized data from The U.S. Small Business Administration, The U.S.
We provide reporting and analytics on the performance of content and campaigns to help our customers better understand their performance and increase the effectiveness of their publishing efforts. 15 • Suggested content. We help customers identify compelling content to share with their audience based on global trends.
We provide reporting and analytics on the performance of content and campaigns to help our customers better understand their performance and increase the effectiveness of their publishing efforts. • Suggested content . We help customers identify compelling content to share with their audience based on global trends.
These obligations may include limiting personal data processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal data processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal data; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal data; mandating notice of certain personal data breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.
For example, these obligations include limiting personal data processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal data processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal data; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal data; mandating notice of certain personal data breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.
This helps them to keep ahead of their competition. • Consumer trends. We provide a cross-channel conversational analysis to help our customers uncover emerging trends and identify influencers to fine-tune campaigns to strengthen market positioning. • Product feedback. Social conversations often point to product related feedback.
This can help them to keep ahead of their competition. • Consumer trends . We provide a cross-channel conversational analysis to help our customers uncover emerging trends and identify influencers to fine-tune campaigns to strengthen market positioning. • Product feedback . Social conversations often point to product related feedback.
The CCPA and EU GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any actual or perceived noncompliance.
The CCPA and EU GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing that have, and may continue to, increase our compliance obligations and exposure for any actual or perceived noncompliance.
Users may automatically receive email alerts and other information about Sprout Social when enrolling an email address by visiting "Request Email Alerts" on the website at investors.sproutsocial.com. 24
Users may automatically receive email alerts and other information about Sprout Social when enrolling an email address by visiting "Request Email Alerts" on the website at investors.sproutsocial.com. 25
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 Statements of Operations. Research and Development We have a proven research and development team that rapidly delivers high-quality products, which has driven our customer growth.
While businesses have begun to adapt by establishing a presence on social media and incorporating social media into advertising strategies, we believe the adjustments necessary to remain competitive and relevant amidst this disruption are substantial and require new software solutions, business processes and approaches in every corner of the organization.
While businesses have begun to adapt by establishing a presence on social media and incorporating social media into advertising strategies, we believe the adjustments necessary to remain competitive and relevant amidst this disruption are substantial and require new software solutions, business processes and approaches.
We primarily face competition from other social media management companies such as Hootsuite, Khoros and Sprinklr, as well as a range of independent point solutions. In order to compete, we work tirelessly to innovate and improve our products, while at the same time, preserving our unique culture.
We believe we compete favorably on all of these factors. We primarily face competition from other social media management companies such as Hootsuite, Khoros and Sprinklr, as well as a range of independent point solutions. In order to compete, we work tirelessly to innovate and improve our products, while at the same time, preserving our unique culture.
See “Risk Factors—Risks Related to our Business and Industry—Any failure to protect our intellectual property rights could impair our business.” Government Regulation The legal environment of Internet-based businesses is evolving rapidly in the United States and elsewhere.
See “Risk Factors—Risks Related to Intellectual Property Matters—Inability or failure to protect our intellectual property rights could impair our business.” Government Regulation The legal environment of Internet-based businesses is evolving rapidly in the United States and elsewhere.
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.
Our strong culture, world-class management team, leading platform and efficient go-to market strategy have led to revenue of $405.9 million, $333.6 million and $253.8 million during the years ended December 31, 2024, 2023 and 2022, respectively, representing growth of 22% from 2023 to 2024 and representing growth of 31% from 2022 to 2023.
Organizations are forced to manage dozens to hundreds of social profiles, a multitude of public and private conversations and billions of data points in real time. Managing this complex landscape in an efficient, secure and scalable manner is not viable without a centralized platform. • It is difficult to gather intelligence .
Organizations are forced to manage dozens to hundreds of social profiles, a multitude of public and private conversations and billions of data points in real time. Managing this complex landscape in an efficient, secure and scalable manner while fueling growth is not viable without a comprehensive, AI-driven platform. • It is difficult to gather intelligence .
Social media is a new layer that will embed in the digital technology stack across an organization: • Consumer influence has expanded . The ubiquity and ease of social media has enabled a new, public form of casual opinion, observation, endorsement or criticism. Social media has given consumers a powerful, public voice that can reward or penalize organizations.
Social media is an invaluable layer that is embedded in the digital technology stack: • Consumer influence has expanded . The ubiquity and ease of social media has enabled a new, public form of casual opinion, observation, endorsement or criticism. Social media has 7 given consumers a powerful, public voice that can reward or penalize organizations.
A failure to solve the challenges posed by the shift to social communication would mean disconnecting from large and growing demographics. Organizations seeking to engage and connect with their audience without utilizing social tools and strategies are at a severe disadvantage. • The stakes are incredibly high for brands .
A failure to solve the challenges posed by the shift to social communication would mean disconnecting from large and growing demographics and losing 8 out on market share and business growth. Organizations seeking to engage and connect with their audience without utilizing social tools and strategies are at a severe disadvantage. • The stakes are incredibly high for brands .
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.
We invest substantial resources in research and development to drive our technology innovation and bring new products to the market. As of December 31, 2024, our research and development department had 302 employees. Our research and development expenses were $102.8 million, $79.6 million and $61.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
This strong employer brand allows us to attract and retain high-quality talent and deliver a premium experience for our customers. Glassdoor has recognized us as one of the “Best Places to Work” in 2017, 2018, 2020, 2021, 2022 and 2023.
This strong employer brand allows us to attract and retain high-quality talent and deliver a premium experience for our customers. In 2024, we were recognized as a Built In “Best Place to Work” for the sixth consecutive year. Glassdoor has recognized us as one of the “Best Places to Work” in 2017, 2018, 2020, 2021, 2022 and 2023.
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.
Item 1. Business Sprout Social — Driving Smarter, Faster Business Impact With more than 5.22 billion global users consuming and sharing billions of posts per day, social media has fundamentally changed the customer experience and the way the world communicates. Social media has become mission-critical to the way organizations reach, engage and understand their target audience and customers.
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.
Networks like X (formerly known as 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.
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.
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 motion. 18 As of December 31, 2024, our sales and marketing department had 700 employees.
We believe social media is simultaneously many things: • social media is a facilitator of shared human experiences; • social media is shaping our perception of the world around us; • social media is driving consumer trends and influencing purchases; 7 • social media is shifting power to consumers; • social media is holding brands to higher standards; • social media is replacing existing communication channels; and • social media is an unprecedented source of business intelligence.
We believe social media plays a central role across several key dimensions of consumer behavior and business dynamics: • social media is a facilitator of shared human experiences; • social media is shaping our perception of the world around us; • social media is driving consumer trends and influencing purchases; • social media is shifting power to consumers; • social media is holding brands to higher standards; • social media is replacing existing communication channels; and • social media is an unprecedented source of business intelligence.
We provide tools to route and assign messages, and to measure the performance of our customer’s customer service efforts through social media. • Automation. We provide our customers the ability to automate alerts and categorization of messages, as well as a bot-builder technology that can automate high-volume customer conversations in private social channels.
We provide our customers the ability to automate alerts and categorization of messages, as well as a bot-builder technology that can automate high-volume customer conversations in private social channels.
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 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 are the registered holder of a variety of domain names that include the term “Sprout Social” and similar variations.
In addition to our presentation-ready reports, customers can customize reports to meet their needs, and export those reports in several formats to share with peers and stakeholders across their business. • Reporting API. Data provided in our reporting suite can be delivered via API for integration with existing business intelligence tools.
In addition to our presentation-ready reports, customers can customize reports to meet their needs, and export those reports in several formats to share with peers and stakeholders across their business. • Reporting API .
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.
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 collect and process personal data.
Competition There are a number of established and emerging competitors in the social media management software market. While the market remains fragmented, there has been increasing consolidation in recent years with rising barriers to entry.
Competition There are a number of established and emerging competitors in the social media management software market. While new companies join the market frequently, barriers to entry are high, with increased consolidation in recent years.
Investors and others should note that we routinely announce material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the Sprout Social Investors website. We also intend to use certain social media profiles (including www.twitter.com/SproutSocial, www.facebook.com/SproutSocialInc, www.linkedin.com/company/sprout-social-inc-/, www.instagram.com/sproutsocial/) as a means of disclosing information about us to our customers, investors and the public.
We also intend to use certain social media profiles (including www.twitter.com/SproutSocial, www.facebook.com/SproutSocialInc, www.linkedin.com/company/sprout-social-inc-/, www.instagram.com/sproutsocial/) as a means of disclosing information about us to our customers, investors and the public.
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.
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. 6 Our success and innovation are driven by an experienced leadership team and award-winning culture with a reputation for caring deeply about the success of our customers and employees.
Increased adoption of our platform across functions within an organization also represents a large growth opportunity within our existing customer base. Our platform is licensed on a per-user basis with numerous upsell opportunities through additional users and product modules.
The scale of these trials allows us to rapidly test, adapt and optimize our go-to-market approach for sustained, capital-efficient growth. Increased adoption of our platform across functions within an organization also represents a large growth opportunity within our existing customer base. Our platform is licensed on a per-user basis with numerous upsell opportunities through additional users and product modules.
Our 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.
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.
Consumers demand that brands be present and responsive across social networks, with more than 76% anticipating a response to a social media message within 24 hours and more than 90% expecting a response within 48 hours, according to The 2022 Sprout Social Index.
Consumers demand that brands be present and responsive across social networks, with nearly three-quarters of consumers expecting a response to a social media message within 24 hours or sooner, according to The 2025 Sprout Social Index™.
Our product is effective for nearly every part of an organization and the adoption of our platform spreads across departments through word of mouth. Our marketing team is focused on generating awareness of our social media management platform and on inbound marketing through our industry leading blog and other social content, including our own large social media following.
Our marketing team is focused on generating awareness of our social media management platform and on inbound marketing through our industry leading blog and other social content, including our own large social media following.
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.
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.
Social media gives consumers the power to put everything a brand does into the public eye and under a microscope. A misstep on social media is magnified and can lead to boycott or brand erosion overnight. The need for centralized tools with the necessary workflows, security and visibility across an organization has never been more critical.
Social media gives consumers the power to put everything a brand does into the public eye and under a microscope. A misstep on social media is magnified and can lead to boycott or brand erosion overnight.
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 .
Our platform is designed to bring every aspect of the social experience together into a single, elegant and robust solution. From social customer care, 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 more effectively through a single interface.
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.
Our sales and marketing expenses were $184.1 million, $168.1 million and $123.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. Customer Service Customer success is at the heart of our business, and our global support team is committed to providing exceptional service to all customers, regardless of size or segment.
We respond to these increasing demands by continuously enhancing our platform and expanding our offering. • Social Commerce . Commerce transactions are shifting to social, which is a primary point of product discovery for consumers.
Additional capabilities: As social media use expands throughout our customers’ organizations, their use cases and needs do too. We respond to these increasing demands by continuously enhancing our platform and expanding our offering. • Social Commerce . Commerce transactions are shifting to social, now a primary point of product discovery for consumers.
See the section titled “Risk Factors—Legal and Regulatory Risks” for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations. Copyright & Trademark U.S. and international copyright and trademark laws protect the rights of third parties from infringement of their intellectual property.
See the sections titled “Risk Factors—Risks Related to the Use of Technology” and “Risk Factors—Legal and Regulatory Risks” for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations.
In addition to messages sent to our customers, our platform also captures messages relating to our customers, for awareness and response when needed. We also provide an alerts engine to notify our customers when critical messages are received. • Customer service tools. Many of the messages received through social media are customer service related.
We also provide an alerts engine to notify our customers when critical messages are received. • Customer service tools . Many of the messages received through social media are customer service related. We provide tools to route and assign messages, and to measure the performance of our customer’s customer service efforts through social media. • Automation .
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.
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. Sprout Social was also recognized as the #2 Best Workplace in Chicago and #18 Best Workplace for Parents by Great Place to Work.
It touches the entire customer experience and impacts virtually every part of a business. • Managing social is highly complex . Social media communication and consumption are happening billions of times per day across multiple platforms and formats, requiring businesses to be every place at once.
It touches the entire customer experience and impacts virtually every part of a business. • Managing social is highly complex . Billions of social media interactions occur every day across various platforms, requiring businesses to engage across all channels simultaneously.
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.
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. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K.
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.
These solutions serve a broad range of use-cases for our customers, including but not limited to: social and community management, public relations, marketing, brand advocacy and management, customer service and care, commerce, sales and customer acquisition, recruiting and hiring, product development, and business strategy. Our Competitive Strengths Sprout Social’s market has significant barriers to entry.
We also require most employees to sign agreements, pursuant to which such they assign to us any inventions, developments and other technology generated by them on our behalf.
We seek to protect our trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees and third parties who may have access to our proprietary information. We also require most employees to sign agreements, pursuant to which such they assign to us any inventions, developments and other technology generated by them on our behalf.
We believe our product is the industry standard for product quality, design and user experience, taking the complexity of social and putting it in one simple platform so our customers can focus on growing their business. Moving at the Pace of Social Keeping pace with the evolution of social networks alongside our customers’ usage is a prerequisite for our success.
We believe our product is the industry standard for product quality, design and user experience, taking the complexity out of social and putting it in one, intuitive platform so our customers can focus on growing their business. We believe that when businesses have access to better information, everyone benefits.
Further, our proprietary single code-base allows us to adapt and update our products quickly as social platforms evolve. • Market leadership and premium brand . Our solution is highly regarded and recognized in the industry. Our robust content marketing engine delivers thought leadership to all decision makers in the buying process, from practitioners to executives.
Our solution is highly regarded and recognized in the industry. Our robust content marketing engine is designed to deliver thought leadership to all decision makers in the buying process, from practitioners to executives.
Social data is a real-time focus group at a global scale. • Market research. We provide dynamic visualizations of historical and real-time analysis of our customer’s social data so they can extract actionable insights and make better business decisions. • Brand health.
Sprout Social provides real-time insights that can turn social listening into a competitive edge, empowering customers to anticipate trends and drive growth before the competition can react. • Market research . We provide dynamic visualizations of historical and real-time analysis of our customer’s social data so they can extract actionable insights and make better business decisions. • Brand health .
We have been increasingly focused on the Mid-market and Enterprise segments, and we expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise. 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.
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.
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.
Our platform is licensed on a per-user, per-month basis, providing scalability to meet the needs of businesses of all sizes. 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.
Social Media’s Impact on Business Businesses must face the reality that social media is not simply a place to advertise. Social media has evolved to impact aspects of marketing, public relations, sales, customer relationships, customer service, product feedback, commerce, business intelligence and strategy.
Social Media’s Impact on Business Businesses must face the reality that social media is not simply another marketing channel. Social media now plays a crucial role across the entirety of an organization, from marketing and communications to sales, customer relationships, customer service, product feedback, and more.
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.
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.
Business systems that were built around telephone and email communication cannot adequately address this shift, requiring a new system of record. • Unprecedented business intelligence . We believe social media provides the largest source of business intelligence that has ever existed.
Customers are turning to social for customer service, sales inquiries, product feedback and virtually all aspects of the customer experience. Business systems that were built around telephone and email communication cannot adequately address this shift, requiring a new system of record. • Unprecedented business intelligence .
It requires recalibration and retooling on the same scale as were mandated by the historical shifts to email and telephone. There are several challenges facing businesses trying to adapt to this new reality: • Consumers are forcing adoption . Social media is becoming the default communication channel for consumers in coveted demographics.
There are several challenges facing businesses trying to adapt to this new reality: • Consumers are forcing adoption . Social media is becoming the default communication channel for consumers in coveted demographics. Consumers are expressing their opinions and talking to and about brands through billions of posts per day.
With our self-serve, inside and field sales strategies, we seek to efficiently provide each customer segment with an exceptional experience and efficient scalability. • Minimal time to value . Our unified code-base and efficient sales strategy allow us to deliver the product to each customer quickly and seamlessly.
We serve a large number of customers across industry and customer segments. With our self-serve, inside and field sales strategies, we seek to efficiently provide each customer segment with an exceptional experience and efficient scalability.
Our customers can leverage these consumer insights to upgrade their customer experiences and refine products and services. Influencer marketing: Tagger by Sprout Social Our influencer marketing product, Tagger by Sprout Social, allows brands and agencies to unlock the power of influencer marketing.
Our customers can leverage these consumer insights to upgrade their customer experiences and refine products and services. Influencer Marketing by Sprout Social: streamline end-to-end influencer campaign management Sprout Social’s Influencer Marketing platform is designed to help brands and agencies grow, reach new audiences, and build authentic connections with customers.
We provide robust and fully integrated tools across a variety of functions: • Social Engagement / Response; • Publishing; • Reporting and Analytics; • Social Listening and Business Intelligence; • Reputation Management; • Social Commerce; • Employee Advocacy; and • Automation and Workflows.
We offer a robust suite of AI-powered solutions: • Publishing and Scheduling • Social Customer Care • Reporting and Analytics • Social Listening and Business Intelligence • Reputation Management • Social Commerce • Influencer Marketing • Employee Advocacy, and 10 • Automation and Workflows.
This represents a real time pulse of consumer sentiment that is unbiased and includes a broad universe not only of current 8 customers, but of potential future customers. Real-time consumer opinions, market trends, competitive insights, product performance and market research can be measured and analyzed using social data.
We believe social media provides the largest source of business intelligence that has ever existed. This represents a real time pulse of consumer sentiment that is unbiased and includes a broad universe not only of current customers, but of potential future customers.
Our customers can use our platform to upload and present a wide variety of content.
Copyright & Trademark U.S. and international copyright and trademark laws protect the rights of third parties from infringement of their intellectual property. Our customers can use our platform to upload and present a wide variety of content.
These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. Investors and others should note that we routinely announce material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the Sprout Social Investors website.
Business decisions and strategy can be derived and validated more efficiently with data available at a larger scale than ever before. Challenges Facing Our Target Market The global adoption of social media requires a fundamental shift in business processes and practices across an organization.
Challenges Facing Our Target Market The global adoption of social media requires a fundamental shift in business processes and practices across an organization. It requires recalibration and retooling on the same scale as were mandated by the historical shifts to email and telephone.
Our Growth Strategies We intend to capitalize on our large market opportunity with the following key growth strategies: • Acquire new customers . We believe there is a substantial opportunity to increase adoption of our solution.
Our Growth Strategies We intend to capitalize on our large market opportunity with the following key growth strategies: • Win with Enterprise customers. We believe there is substantial opportunity to drive increased pipeline and strategic customer wins in accounts over $50,000 in annualized recurring revenue (ARR).
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.
We have an efficient, product-driven go-to-market strategy that has enabled us to scale rapidly, attracting customers from small businesses to global brands as well as marketing agencies and government, non-profit and educational institutions.
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.
The copyright infringement practices that we have implemented for our platform are intended to satisfy the DMCA safe harbor. Culture and Workforce At Sprout Social, we are proud to be recognized as a Built In “Best Place to Work” in 2024—a testament to the exceptional people who make up our team.
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.
With over 99% of our revenue in 2024 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. In 2024, the majority of our inbound trials were generated through unpaid marketing due to the strength of our brand, content marketing, and search engine optimization.
A significant number of purchasing decisions are originating from, influenced by or transacted through social media. According to our report, Social Shopping in 2022: Consumer Behaviors in the Social Shopping Cart, 40% of consumers find products via organic social posts from the brand and 34% of consumers research products using social media. • Consumer expectations are high .
A significant number of purchasing decisions are originating from, influenced by or transacted through social media. According to The 2025 Sprout Social Index™, 81% of consumers say social drives them to make impulse purchases and about one-third of all consumers anticipate making more purchases from social networks in 2025. • Consumer expectations are high .
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.
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 2024 from unpaid channels. • We foster a world-class culture . Our success is possible because of our award-winning culture, which allows us to attract and retain top talent.
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.
Customers We have a highly diverse base of approximately 30,000 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, and we expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise.
Our engagement tools allow our customers to efficiently and effectively receive and respond to messages across social platforms and provide the collaboration and visibility necessary to create seamless customer experiences across the organization. • Smart inbox. We bring public and private messages from across social networks and profiles into a single, unified inbox.
We bring public and private messages from across social networks and profiles into a single, unified inbox.
Consumers are expressing their opinions and talking to and about brands through billions of posts per day. Most organizations are not equipped for this new reality and must adjust their business processes and implement tools to manage this new communication channel. • The alternative is irrelevance .
Organizations may know they need to adapt to this new reality and adjust their business processes and implement tools to manage this new communication channel, but are unsure how to mine value from social. • The alternative is irrelevance .
Billions of conversations that were previously taking place via email or over the telephone are now occurring over social media. Customers are turning to social for customer service, sales inquiries, product feedback and virtually all aspects of the customer experience.
The same report also found that 73% of consumers say they’ll buy from a competitor if a brand doesn’t respond on social media. • All aspects of business communication are shifting to social . Billions of conversations that were previously taking place via email or over the telephone are now occurring over social media.
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.
We also own numerous trademarks, trade names, service marks, logos and design marks, including SPROUT SOCIAL and our leaf logo. In addition to our registered intellectual property, we rely on trade secrets and confidential information to develop and maintain our competitive position.
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.
We allow brands to easily link their commerce platforms, including Facebook Shops, Shopify, and WooCommerce, to Sprout Social to drive more sales opportunities and foster loyalty. This eliminates unnecessary steps and shortens response times with personalized offers, thanks to a unified view of product catalogs, SKU availability and purchase history. • Reputation and review management.
We have proven success in the SMB, Mid-market and Enterprise segments. Each of our segments is growing, but we expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise.
However, we expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise. We estimate that less than 5% of businesses have adopted social media management software, providing a large, nascent opportunity to drive significantly increased market adoption of our solution.
Our benefits include comprehensive healthcare, a global parental leave program with an equal length of time for all parents, a generous PTO policy, retirement programs and additional resources to support employees' overall mental health and well-being. We also offer a family planning benefit of $5,000 USD towards surrogacy and adoption.
In 2024, we continued to prioritize support for growing families, offering a $5,000 family planning benefit for surrogacy and adoption, as well as a global parental leave program that provides equal time off 23 for all parents.
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 .
The technical complexities of social media platforms, the need for established network relationships, and increasing customer demands for data privacy and security have made it more difficult for new competitors to enter the space. Over the past several years, these barriers have grown considerably.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe market price of our Class A common stock has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • rumors, announcements or articles regarding our or our competitors’ operations, management, organization, financial condition or financial statements; and • issuance of new or updated research or reports by securities analysts or the failure of a security analyst to continue covering our company.
Biggest changeThe market price of our Class A common stock has been, and may continue to be, volatile and could be subject to wide fluctuations in light of the many risk factors listed in this section, as well as others beyond our control, including: • variations in our financial results or those of our competitors; 47 • changes in earnings estimates, recommendations or coverage of our common stock by securities analysts; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • rumors, announcements or articles regarding our or our competitors’ operations, management, organization, products, acquisitions, strategic partnerships, capital commitments, financial condition or financial statements; • additions or departures of key personnel; • future sales of our common stock or other securities; • litigation or regulatory actions involving us, including Securities Actions; • general economic, industry, and market conditions; • political developments in the United States, including potential implications from the recent elections; and • other events or factors, including resulting from natural disasters, pandemics or responses to such events.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. We may expend significant resources or modify our business activities in an effort to further protect against security incidents.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. We expend significant resources or modify our business activities in an effort to further protect against security incidents.
In connection with such strategic transactions, we may: • issue additional equity securities that would dilute our existing stockholders; • use cash that we may need in the future to operate our business; 50 • incur large charges or substantial liabilities; • incur indebtedness on terms unfavorable to us or that we are unable to repay; • encounter hidden liabilities, defects, bugs, vulnerabilities, or past or future data breaches within any acquired company’s code or technical environment; • encounter additional legal and compliance risk and expenses; • encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and • become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
In connection with such strategic transactions, we may: • issue additional equity securities that would dilute our existing stockholders; • use cash that we may need in the future to operate our business; • incur large charges or substantial liabilities; • incur indebtedness on terms unfavorable to us or that we are unable to repay; • encounter hidden liabilities, defects, bugs, vulnerabilities, or past or future data breaches within any acquired company’s code or technical environment; • encounter additional legal and compliance risk and expenses; • encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and • become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
A successful assertion by one or more tax authorities requiring us to collect indirect taxes in jurisdictions in which we do not currently do so, to collect additional indirect taxes in a jurisdiction in which we currently collect such taxes, or to withhold additional employment taxes, could, among other things, result in substantial tax liabilities (including taxes on past sales, as well as penalties and interest), create significant administrative burdens for us, discourage users from utilizing our products or otherwise harm our business, financial condition and results of operations.
A successful assertion by one or more tax authorities requiring us to collect indirect taxes in jurisdictions in which we do not currently do so, to collect additional indirect taxes in a jurisdiction in which we currently collect such taxes, or to withhold additional employment taxes, could, among other things, result in substantial tax liabilities (including taxes on past sales, as well as penalties and interest), create 51 significant administrative burdens for us, discourage users from utilizing our products or otherwise harm our business, financial condition and results of operations.
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.
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.
For example, we are currently a member of the X (formerly known as Twitter) Official Partner Program. There can be no assurance that X 28 will maintain this program in its current form or at all and any change to the program, our access or the terms of our membership, including pricing, may have a negative impact on our business.
For example, we are currently a member of the X (formerly known as Twitter) Official Partner Program. There can be no assurance that X will maintain this program in its current form or at all and any change to the program, our access or the terms of our membership, including pricing, may have a negative impact on our business.
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.
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.
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.
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 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.
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.
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.
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.
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 37 unable to process new and renewing subscriptions or credit card payments.
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.
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.
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.
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 31 through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement.
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.
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.
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.
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. 53 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.
The replacement of any of our senior management personnel would likely involve significant time and costs, and such loss could adversely affect our revenue, business, results of operations and financial condition. If we cannot attract and retain qualified personnel or maintain our culture as we grow, we may be unable to execute our business strategy.
The replacement of any of our senior management personnel would likely involve significant time and costs, and such loss could adversely affect our revenue, business, results of operations and financial condition. 54 If we cannot attract and retain qualified personnel or maintain our culture as we grow, we may be unable to execute our business strategy.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity or other adverse consequences. For example, 48 certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices.
Furthermore, AI is subject to data privacy and security laws, as well as increasing regulation and scrutiny. Several jurisdictions around the globe, including Europe and certain U.S. states, have proposed 32 enacted, or are considering laws governing AI, including the EU’s AI Act. We expect other jurisdictions will adopt similar laws.
Furthermore, AI is subject to data privacy and security laws, as well as increasing regulation and scrutiny. Several jurisdictions around the globe, including Europe and certain U.S. states, have proposed enacted, or are considering laws governing AI, including the EU’s AI Act. We expect other jurisdictions will adopt similar laws.
Additionally, although we rely on copyright laws to protect our works of authorship, including our software, we do not apply to register the copyrights in any of our works. We also rely on unpatented proprietary technology that is only protected to the extent that it is kept secret from and not independently developed by others.
Additionally, although we rely on copyright laws to protect our works of authorship, including our software, we do not apply to register the copyrights in any of our works. We also rely on unpatented proprietary technology that is only protected to the extent that it is copyrightable, and kept secret from and not independently developed by others.
The inability or failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. In order to protect our intellectual property, we may be required to spend significant resources to monitor and protect our rights.
The inability or failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. In order to protect our intellectual property, we may be required to spend resources to monitor and protect our rights.
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.
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 52 meaningful protection against unauthorized use, misappropriation or unlawful disclosure of such trade secrets, know-how or other proprietary technology information.
Some of our customers have elected not to renew their agreements with us and we may not be able to accurately predict renewal rates. Moreover, while our contracts are generally non-cancellable during the contractual subscription term, certain customers have the right to cancel their agreements prior to the expiration of the subscription term.
Some of our customers have elected not to renew their agreements with us and we may not be 28 able to accurately predict renewal rates. Moreover, while our contracts are generally non-cancellable during the contractual subscription term, certain customers have the right to cancel their agreements prior to the expiration of the subscription term.
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.
There can be no 29 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.
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.
Moreover, our brand and reputation could be harmed if we were to experience significant negative publicity. • 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.
Certain data privacy and security obligations may require us to implement and maintain specific security measures to protect our information technology systems, including our platform, and data. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Certain data privacy and security obligations require us to implement and maintain specific security measures to protect our information technology systems, including our platform, and data. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
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.
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.
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.
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.
These obligations may make it harder for us to conduct our business using AI technologies and machine learning, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI technologies and machine learning, or prevent or limit our use of AI technologies and machine learning. For example, the U.S.
These obligations may make it harder for us to conduct our business using AI technologies and machine learning, lead to regulatory fines or penalties, require us 33 to change our business practices, retrain our AI technologies and machine learning, or prevent or limit our use of AI technologies and machine learning. For example, the U.S.
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.
In the ordinary course of business, we collect and process personal data and other sensitive 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.
However, there are a variety of risks and costs associated with our international sales and operations, which include making investments prior to the proven adoption of our products, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.
There are a variety of risks and costs associated with our international sales and operations, which include making investments prior to the proven adoption of our products, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.
Additionally, we incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency for such locations. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in an increase to the U.S. dollar equivalent of such expenses.
Additionally, 34 we incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency for such locations. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in an increase to the U.S. dollar equivalent of such expenses.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
Our actual or perceived failure to comply with such laws and obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
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 dispute with a customer with respect to such obligations could 44 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 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.
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.
Our estimates of market opportunity, forecasts of market growth and our operating metrics may prove to be inaccurate. Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.
Our estimates of market opportunity, forecasts of market growth and our operating metrics may prove to be inaccurate. 38 Market opportunity estimates and growth forecasts, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.
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.
Future business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity 43 risks and vulnerabilities, as our systems (including our platform) could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Our ability to remain in compliance with the covenants under any future debt instruments, and to pay fees, interest and principal on our indebtedness will depend on, among other things, our operating performance and market conditions.
Our ability to remain in compliance with the covenants under any future debt instruments, and to pay fees, interest and principal on our indebtedness will depend on, 57 among other things, our operating performance and market conditions.
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.
Market and Competition Risk 26 • 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.
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.
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.
Demand for our platform and products is affected by a number of factors, many of which are beyond our control, such as: • continued market acceptance of our platform and products for existing and new use-cases; • the timing of development and release of new products and functionality introduced by us and our competitors; • our ability to develop functionality and integrations with third parties, including social media networks, based on customer demand; • the usability and time to value of our products; • the pricing of our products and the impact of any future price increases; • the level of customer service that we provide; • technological change; • growth or contraction in our addressable market; and • macroeconomic factors and their impacts on users of our platform and products.
Demand for our platform and products is affected by a number of factors, many of which are beyond our control, such as: • continued market acceptance of our platform and products for existing and new use-cases; • the timing of development and release of new products and functionality introduced by us and our competitors; • our ability to develop functionality and integrations with third parties, including social media networks, based on customer demand; • the usability and time to value of our products; • the pricing of our products and the impact of any future price increases; • the level of customer service that we provide; • technological change; • growth or contraction in our addressable market; and • macroeconomic factors and their impacts on our customers and their budgets for our platform and products.
Social media and the software industry are each subject to rapid technological change, evolving industry standards and practices and changing customer and user needs, requirements, tastes and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis.
Social media and the software industry are each subject to rapid technological change, evolving industry standards and practices, developing regulatory requirements and changing customer and user needs, requirements, tastes and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis.
We recognize subscription revenue ratably over the term of our customer contracts. Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern. We generally recognize subscription revenue from customers ratably over the terms of their contracts, which can range from monthly to one-year or multi-year arrangements.
Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern. We generally recognize subscription revenue from customers ratably over the terms of their contracts, which can range from monthly to one-year or multi-year arrangements.
Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Although there are currently various mechanisms that can be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
Our competitors may more effectively internally utilize AI, enabling their business to run more efficiently than Sprout, placing us at a competitive disadvantage, and they may better incorporate AI into their product offerings, negatively impacting demand for our products.
Our competitors may more effectively internally utilize AI, enabling their 32 business to run more efficiently than Sprout Social, placing us at a competitive disadvantage, and they may better incorporate AI into their product offerings, negatively impacting demand for our products.
Fair Trade Commission (“FTC”) has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI technologies and machine learning where they allege the company has violated privacy and consumer protection laws.
Federal Trade Commission (“FTC”) has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI technologies and machine learning where they allege the company has violated privacy and consumer protection laws.
We believe that the importance of our brand will increase as our awareness and 36 business continue to expand.
We believe that the importance of our brand will increase as our awareness and business continue to expand.
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 data collection and processing activities subject us to certain 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.
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.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Changing macroeconomic conditions, including fluctuations in interest rates and volatility in the capital markets, exacerbate this risk.
Legal and Regulatory Risks We are subject to stringent and changing obligations related to data privacy and security.
Legal and Regulatory Risks 39 We are subject to stringent and changing obligations related to data privacy and security.
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.
Some 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.
We have applied for and registered much of this intellectual property in the United States and also applied for trademark protection in certain foreign countries. We cannot assure you that our intellectual property applications will be approved.
We have applied for and registered parts of this intellectual property in the United States and also applied for trademark protection in certain foreign countries. We cannot assure you that our intellectual property applications will be approved.
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.
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 Chief Executive Officer, Ryan Barretto, and our Co-Founder and Executive Chair, Justyn Howard.
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.
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. 58 Item 1B. Unresolved Staff Comments None.
Our current and prospective customers are impacted by worsening macroeconomic conditions to varying degrees and as a result, in some cases we are experiencing slower growth of existing customers most impacted by these conditions.
Our current and prospective customers are impacted by volatile macroeconomic conditions to varying degrees and as a result, in some cases we are experiencing slower growth of existing customers most impacted by these conditions.
If we cannot obtain all necessary licenses on commercially reasonable terms or made such modifications to avoid a claim, our customers may be forced to stop using our platform or products.
If we cannot obtain all necessary licenses on commercially reasonable terms or make such modifications to avoid a claim, our customers may be forced to stop using our platform or products.
Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
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.
In addition to competing with comprehensive social media management platforms with diverse capabilities, we compete with point solutions for influencer marketing, 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.
For example, ongoing overseas conflict has created volatility in the global capital markets, including disruptions of the global supply chain and energy markets. In addition, high levels of inflation and other macroeconomic pressures in the United States and the global economy could exacerbate extreme volatility in the global capital markets and heighten unstable market conditions.
For example, ongoing overseas conflict has created volatility in the global capital markets, including disruptions of the global supply chain and energy markets. In addition, fluctuations in inflation and other macroeconomic pressures in the United States and the global economy could exacerbate extreme volatility in the global capital markets and heighten unstable market conditions.
As another example, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) may apply to our operations. The LGPD broadly regulates processing of personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.
As another example, Brazil’s General Data Protection 40 Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) applies to our operations. The LGPD broadly regulates processing of personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.
The dual class structure of our common stock and the existing ownership of capital stock by our Co-Founders have the effect of concentrating voting control with our Co-Founders for the foreseeable future, which will limit the ability of our other investors to influence corporate matters.
The dual class structure of our common stock and the existing ownership of capital stock by our Co-Founders have the effect of concentrating voting control with our Co-Founders for the foreseeable future, which limits the ability of our other investors to influence corporate matters.
We continue to reassess the sufficiency of finance personnel in response to these increasing demands and expectations. We have and expect to continue to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act.
We continue to reassess the sufficiency of finance personnel in response to these increasing demands and expectations. We have and expect to continue to deploy resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act.
Our actual or perceived failure to comply with such laws and obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business 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, 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.
Our actual or perceived failure to comply with such laws and obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences. • If our information technology systems or data, or those of third parties with whom we work, are or were compromised, we could experience adverse consequences, 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.
In addition, the technology industry has experienced, and may continue to experience, leadership changes, layoffs and other corporate changes that could have a negative impact on our ability to work effectively with the partner.
In addition, the technology industry has experienced, and may continue to experience, leadership changes, layoffs and other corporate changes that could have a negative impact on our ability to work effectively with these partners.
Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, adversely affect our reputation and result in the diversion of significant operational resources.
Any claims against us, whether meritorious or not, could result in costly litigation, require significant amounts of management and employee time, adversely affect our reputation and/or result in the diversion of significant operational resources.
Any widespread automation of our services could have a material adverse effect on our business, financial condition and results of operations. We use machine learning and AI technologies in our business, and we are making investments in expanding AI capabilities in our products, services and tools, including improving existing and developing new AI technologies.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. We use machine learning and AI technologies in our business, and we are making investments in expanding AI capabilities in our products, services and tools, including improving existing and developing new AI technologies.
For example, our employees and personnel may use AI technologies to perform their work, and the disclosure and use of personal data in AI technologies is subject to various privacy laws and other privacy obligations.
For example, our employees and personnel may use AI technologies to perform their work, and the disclosure and use of personal data in AI technologies is subject to various laws, including data privacy and security laws and AI-specific laws and other privacy obligations.
While we have primarily transacted with customers and vendors in U.S. dollars historically, we expect to continue to expand the number of transactions with our customers that are denominated in foreign currencies in the future. Fluctuations in the value of the U.S. dollar and foreign currencies may make our subscriptions more expensive for international customers, which could harm our business.
While we have primarily transacted with customers and vendors in U.S. dollars historically, we expect to conduct some transactions with our customers that are denominated in foreign currencies in the future. Fluctuations in the value of the U.S. dollar and foreign currencies may make our subscriptions more expensive for international customers, which could harm our business.
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.
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, fluctuations in inflation, interest rates and uncertainty about economic stability.
As more of our sales efforts target larger enterprise customers, our sales cycle may become longer and more expensive and we may encounter increased pricing pressure and compliance challenges.
As more of our sales efforts target larger enterprise customers, our sales cycle has and may continue to become longer and more expensive and we may encounter increased pricing pressure and compliance challenges.
For some of our larger customers, we sometimes negotiate additional indemnification for breaches of our obligations, representations or warranties in the subscription agreement, gross negligence or willful misconduct, breaches of confidentiality, losses related to security incidents, breach of the data processing addendum or violations of applicable law.
For some of our larger customers, we sometimes negotiate additional indemnity provisions which may include indemnification for breaches of our obligations, representations or warranties in the subscription agreement, gross negligence or willful misconduct, breaches of confidentiality, losses related to security incidents, breach of the data processing addendum or violations of applicable law.
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.
If our information technology systems or data, or those of third parties with whom we work, 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.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services.
During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services.
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.
Our revenue growth may slow or our revenue may decline for a number of other reasons, including declining customer count, the maturation of our company, 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 fluctuations in inflation and interest rates, ongoing overseas conflict, volatility in the capital markets and related market uncertainty.
General Risk Factors • Unstable market and economic conditions, including a global or domestic recession or the fear of a recession, may have serious adverse consequences on our business, financial condition and share price. • 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.
General Risk Factors • Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price. • 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 27 stockholders.
Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands. Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.
These practices may be subject to increased challenges by class action plaintiffs. Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands. Outside the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties with whom we work may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities including on a timely basis.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities on a timely basis.
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.
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. 49 These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.
To the extent we are unable to effectively engage with non-U.S. customers due to our limited international sales force capacity, we may be unable to grow in international markets effectively. As our international operations expand, our exposure to the effects of fluctuations in currency exchange rates grows.
To the extent we are unable to effectively engage with non-U.S. customers due to our limited international sales force capacity, we may be unable to grow in international markets effectively. Due to our international presence, we have some exposure to the effects of fluctuations in currency exchange rates.
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.
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. Our historical revenue growth rates may not be indicative of our future growth.
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 .
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, 2024, our outstanding Class B common stock represented approximately 55.8% of the voting power of our outstanding capital stock .

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThey also report on our risk management program, overall security posture, progress on maturing the security program, and new or emerging risks to senior management and the Board of Directors as applicable and on a regular basis. Our Board of Directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
Biggest changeThey also report on our risk management program, overall security posture, progress on maturing the security program, and new or emerging risks to senior management and the Board of Directors. Our Board of Directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
Also, the security team works with management to identify, discuss, and prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business.
Also, the security team works with management to help identify, discuss, and prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business.
Depending on the environment, as part of our security program, we have implemented and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example, a general information security policy, incident response plan and incident response policy, data classification, protection, retention, and destruction policy, server protection and logging standards, vulnerability management program, vendor selection and security standard, business continuity and disaster recovery plan, employee onboarding, offboarding, and access escalation policy, risk management and audit policy, regular penetration testing of certain networks, maintaining industry recognized certifications, cybersecurity insurance, and dedicated cybersecurity staff.
Depending on the environment, as part of our security program, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example, a general information security policy, incident response plan and incident response policy, data classification, protection, retention, and destruction policy, server protection and logging standards, vulnerability management program, vendor selection and security standard, business continuity and disaster recovery plan, employee onboarding, offboarding, and access escalation policy, risk management and audit policy, regular penetration testing of certain networks, maintaining industry recognized certifications, cybersecurity insurance, and dedicated cybersecurity staff.
Depending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process 55 may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider.
Depending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the identity of the provider, our vendor management process 59 may involve different levels of assessment designed to help identify cybersecurity risks associated with a provider and impose contractual obligations related to cybersecurity on the provider.
Risk Management and Strategy We have implemented and maintain various information security processes designed to identify, assess, and manage material risks from cybersecurity threats to our critical infrastructure, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and data related to our employees and customers (“Information Systems and Data”).
Risk Management and Strategy We implement and maintain various information security processes designed to identify, assess, and manage material risks from cybersecurity threats to our critical infrastructure, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and data related to our employees and customers (“Information Systems and Data”).
Sprout Social maintains an overarching security program comprised of several teams including (1) Security Operations, (2) Information Technology, (3) Application Security, (4) Infrastructure Security, and (5) Governance, Risk, and Compliance.
Sprout Social maintains an overarching security program comprising several teams including (1) Security Operations, (2) Information Technology, (3) Application Security, (4) Infrastructure Security, and (5) Governance, Risk, and Compliance.
Risk Factors in this Annual Report on Form 10-K, including the section of our risk factors titled, “Risks Related to the Use of Technology.” Governance Our overarching security program, enterprise-wide cybersecurity strategy, risk management program, and related security policies, standards, and processes are managed by the Vice President of Information Technology, Security, and Compliance and the Chief Technology Officer.
Risk Factors in this Annual Report on Form 10-K, including the sections of our risk factors titled “Risks Related to the Use of Technology” and “Legal and Regulatory Risks.” Governance Our overarching security program, enterprise-wide cybersecurity strategy, risk management program, and related security policies, standards, and processes are managed by the Vice President of Information Technology, Security, and Compliance and the Chief Technology Officer.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeFollowing the early termination to one floor of leased space on December 31, 2025, our office space in Chicago will reduce down to approximately 64,000 square feet. We also have office locations in Seattle, Washington; Dublin, Ireland; Santa Monica, California; and Kraków, Poland. These offices are leased, and we do not own any real property.
Removed
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
Added
Item 2. Properties Our corporate headquarters are located in Chicago, Illinois, where we lease approximately 128,000 square feet of office space.
Added
In November 2024, the Company entered into an amendment to its Chicago office lease agreement, which will result in an early termination to one floor of the leased space effective December 31, 2025 and also extended the term for the remaining floor to December 31, 2032.
Added
We believe that our facilities are suitable to meet our current needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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 31, 2019.
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]
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. 61 62 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.
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.
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.
Holders of Record As of February 14, 2025, we had 5 holders of record of our Class A common stock and 14 holders of record of our Class B common stock .

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeYears Ended December 31, 2024 2023 2022 (in thousands) Revenue Subscription $ 402,022 $ 330,458 $ 251,213 Professional services and other 3,886 3,185 2,615 Total revenue 405,908 333,643 253,828 Cost of revenue (1) Subscription 90,305 75,076 58,767 Professional services and other 1,170 1,192 1,091 Total cost of revenue 91,475 76,268 59,858 Gross profit 314,433 257,375 193,970 Operating expenses Research and development (1) 102,794 79,550 61,436 Sales and marketing (1) 184,122 168,091 123,695 General and administrative (1) 87,873 79,011 60,515 Total operating expenses 374,789 326,652 245,646 Loss from operations (60,356) (69,277) (51,676) Interest expense (3,525) (2,754) (153) Interest income 3,973 7,021 2,535 Other expense, net (1,393) (768) (580) Loss before income taxes (61,301) (65,778) (49,874) Income tax (benefit) expense 670 649 366 Net loss $ (61,971) $ (66,427) $ (50,240) _______________ (1) Includes stock-based compensation expense as follows: Years Ended December 31, 2024 2023 2022 (in thousands) Cost of revenue $ 3,936 $ 3,224 $ 2,491 Research and development 25,619 18,478 11,280 Sales and marketing 31,544 30,116 23,066 General and administrative 23,204 15,886 10,901 Total stock-based compensation $ 84,303 $ 67,704 $ 47,738 69 Years Ended December 31, 2024 2023 2022 (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 22 % 23 % 23 % Professional services and other — % — % — % Total cost of revenue 23 % 23 % 24 % Gross profit 77 % 77 % 76 % Operating expenses Research and development 25 % 24 % 24 % Sales and marketing 45 % 50 % 49 % General and administrative 22 % 24 % 24 % Total operating expenses 92 % 98 % 97 % Loss from operations (15) % (21) % (21) % Interest expense (1) % (1) % — % Interest income 1 % 2 % 1 % Other expense, net — % — % — % Loss before income taxes (15) % (20) % (20) % Income tax (benefit) expense — % — % — % Net loss (15) % (20) % (20) % Note: Certain amounts may not sum due to rounding Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenue Years Ended December 31, Change 2024 2023 Amount % ( dollars in thousands ) Revenue Subscription $ 402,022 $ 330,458 $ 71,564 22 % Professional services and other 3,886 3,185 701 22 % Total revenue $ 405,908 $ 333,643 $ 72,265 22 % Percentage of Total Revenue Subscription 99 % 99 % Professional services and other 1 % 1 % 70 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, 2023 was $86.6 million, which was primarily due to $145.6 million paid for the acquisitions of Tagger and Repustate and $63.1 million in purchases of marketable securities, partially offset by $124.2 million in proceeds from the maturities and sale of marketable securities.
Net cash used in investing activities for the year ended December 31, 2023 was $86.6 million, which was primarily due to $145.6 million paid for the acquisitions of Tagger and Repustate and $63.1 million in purchases of marketable securities, partially offset by $124.2 million in proceeds from the maturities and sale of marketable securities.
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.
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.
On January 19, 2023, we completed the acquisition of Repustate, Inc. for a total final purchase consideration of approximately $8.3 million, consisting of approximately $6.8 million in cash paid at the closing time of the acquisition and a holdback of $1.5 million in cash to be paid as purchase consideration after the one-year anniversary of the closing of the acquisition, assuming no claims by the Company against the holdback amount for post-closing purchase price adjustments or indemnification matters.
On January 19, 2023, we completed the acquisition of Repustate, Inc. for a total purchase consideration of $8.3 million, consisting of approximately $6.8 million in cash paid at the closing time of the acquisition and a holdback of $1.5 million in cash to be paid as purchase consideration after the one-year anniversary of the closing of the acquisition, assuming no claims by the Company against the holdback amount for post-closing purchase price adjustments or indemnification matters.
In addition, the Credit Agreement contains financial covenants as to (i) minimum liquidity, requiring the maintenance, at all times and measured at the end of each fiscal quarter, of cash and cash equivalents of not less than the greater of (x) $30 million and (y) 30% of the total revolving commitments, and (ii) minimum recurring revenue growth, requiring recurring revenue growth for the trailing four fiscal quarter period, measured at the end of each fiscal quarter, of not less than 115% of the actual recurring revenue for the same period in the prior fiscal year.
In addition, the Credit Agreement contains financial covenants as to (i) minimum liquidity, requiring the maintenance, at all times and measured at the end of each fiscal quarter, of cash and cash equivalents of not less than the greater of (x) $30 million and (y) 30% of the total revolving commitments, and (ii) minimum recurring revenue growth, requiring recurring revenue growth for the trailing four fiscal quarter period, measured at the end of each fiscal quarter, of not 83 less than 115% of the actual recurring revenue for the same period in the prior fiscal year.
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.
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.
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.
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.
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.
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 that directly benefit sales.
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.
Professional services revenue is generally 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.
Subscription revenue is recognized ratably over the contract terms beginning on the date the product is made available to customers, which typically begins on the commencement date of each contract. We also generate revenue from professional services related to our platform provided to certain customers, which is recognized at the time these services are provided to the customer.
Subscription revenue is recognized ratably over the contract terms beginning on the date the product is made available to customers, which typically begins on the commencement date of each contract. We also generate revenue from professional services related to our platform provided to certain customers, which is generally recognized at the time these services are provided to the customer.
The Repustate acquisition has increased our power, breadth and automation of social listening, messaging, and customer care capabilities with added sentiment analysis, natural language processing (NLP) and artificial intelligence (AI). We have included the financial results of Repustate in our condensed consolidated financial statements from the date of acquisition.
The Repustate acquisition has increased our power, breadth and automation of social listening, messaging, and customer care capabilities with added sentiment analysis, natural language processing (NLP) and artificial intelligence (AI). We have included the financial results of Repustate in our consolidated financial statements from the date of acquisition.
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.
In our IPO, we received net proceeds of $134.3 million 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.
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.
The increase in stock-based compensation expense was primarily due to the increased headcount. 76 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.
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.
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 84 increase in gross accounts receivable and a $3.5 million decrease in operating lease liabilities.
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.
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 (defined below) in connection with the Tagger acquisition.
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.
Refer to Note 4 - Business Combinations of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion. 64 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.
Operating Expenses Research and Development Research and development expenses primarily consist of personnel costs, including salaries, benefits and allocated overhead. Research and development expenses also include depreciation expense and other expenses associated with product development.
Operating Expenses Research and Development Research and development expenses primarily consist of personnel costs, including salaries, benefits and allocated overhead. Research and development expenses also include depreciation 67 expense and other expenses associated with product development.
Expanding within our current customer base We believe that there is a substantial and largely untapped opportunity for organic growth within our existing customer base. Customers often begin by purchasing a small number of user subscriptions and then expand over time, increasing the number of users or social profiles, as well as purchasing additional product modules.
Expanding within our current customer base We believe that there is a substantial opportunity for organic growth within our existing customer base. Customers often begin by purchasing a small number of user subscriptions and then expand over time, increasing the number of users or social profiles, as well as purchasing additional product modules.
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.
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, amortization expense and restructuring charges, which are often unrelated to overall operating performance.
As of December 31, 2023, the borrowings under the Facility were designated as SOFR Loans. The Facility also includes a quarterly commitment fee on the unused portion of the Facility of 0.30% or 0.35% based on the Company’s liquidity. The Credit Agreement includes customary conditions to credit extensions, affirmative and negative covenants, and customary events of default.
As of December 31, 2024, the borrowings under the Facility were designated as SOFR Loans. The Facility also includes a quarterly commitment fee on the unused portion of the Facility of 0.30% or 0.35% based on the Company’s liquidity. The Credit Agreement includes customary conditions to credit extensions, affirmative and negative covenants, and customary events of default.
Our principal uses of cash in recent periods have been to fund operations, pay for acquisitions, and invest in marketable securities and capital expenditures. 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.
Our principal uses of cash in recent periods have been to fund operations, pay for acquisitions, invest in marketable securities, pay down the Facility and invest in capital expenditures. 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.
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.
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, 2024, 2023 and 2022, we generated positive cash flows from operations.
Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. 84
Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. 88
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 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, interest and payments of restructuring charges, is available to be used for strategic initiatives.
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.
Interest Income (Expense), Net Interest income (expense), net consists primarily of interest expense related to the credit facility and is offset by interest income earned on our cash and investment balances. Other Expense, Net Other expense, net consists of foreign currency transaction gains and losses.
Cost of Revenue and Gross Margin Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Cost of revenue Subscription $ 75,076 $ 58,767 $ 16,309 28 % Professional services and other 1,192 1,091 101 9 % Total cost of revenue 76,268 59,858 16,410 27 % Gross profit $ 257,375 $ 193,970 $ 63,405 33 % Gross margin Total gross margin 77 % 76 % 68 The increase in cost of subscription revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change ( in thousands ) Data provider fees $ 11,016 Personnel costs 1,929 Stock-based compensation expense 733 Amortization of intangible assets 1,175 Other 1,456 Subscription cost of revenue $ 16,309 Fees paid to our data providers increased due to revenue growth.
Cost of Revenue and Gross Margin Years Ended December 31, Change 2023 2022 Amount % ( dollars in thousands ) Cost of revenue Subscription $ 75,076 $ 58,767 $ 16,309 28 % Professional services and other 1,192 1,091 101 9 % Total cost of revenue 76,268 59,858 16,410 27 % Gross profit $ 257,375 $ 193,970 $ 63,405 33 % Gross margin Total gross margin 77 % 76 % 75 The increase in cost of subscription revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the following: Change ( in thousands ) Data provider fees $ 11,016 Personnel costs 1,929 Stock-based compensation expense 733 Amortization of intangible assets 1,175 Other 1,456 Subscription cost of revenue $ 16,309 Fees paid to our data providers increased due to higher costs of third-party data utilized in our platform.
Non-GAAP Gross Profit We define non-GAAP gross profit as GAAP gross profit, excluding stock-based compensation expense and amortization expense associated with the acquired developed technology from the Tagger acquisition.
Non-GAAP Gross Profit We define non-GAAP gross profit as GAAP gross profit, excluding stock-based compensation expense, amortization expense associated with the acquired developed technology from the Tagger acquisition and restructuring charges.
The impact of Tagger’s financial results following the date of acquisition were not significant to Sprout’s consolidated financial statements. Refer to Note 4 - Business Combinations of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion. Acquisition of Repustate, Inc.
The impact of Tagger’s financial results following the date of acquisition were not significant to Sprout Social’s consolidated financial statements. Refer to Note 4 - Business Combinations of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion. Acquisition of Repustate, Inc.
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.
Currently, approximately 30,000 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.
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.
We expect to 82 continue to incur operating losses 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.
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.
Macroeconomic Conditions 63 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, fluctuations in inflation and interest rates, ongoing overseas conflict, volatility in the capital markets and related market uncertainty.
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.
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 2024 and 2023, we recognized $2.7 million and $5.2 million, respectively, of stock-based compensation expense in relation to these awards.
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.
As of December 31, 2024 2023 Number of customers contributing more than $50,000 in ARR 1,718 1,399 66 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.
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.
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 $405.9 million, $333.6 million and $253.8 million during the years ended December 31, 2024, 2023, and 2022, respectively, representing growth of 22% in 2024 and 31% in 2023.
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.
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 % 77 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 invest in our finance, legal and other administrative functions to support the company’s growth.
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 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, amortization expense, restructuring charges and non-cash gains from lease modifications, which are 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.
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, amortization expense, restructuring charges and non-cash gains from lease modifications, which are 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.
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, restructuring charges and non-cash gains from 81 lease modifications, which are often unrelated to overall operating performance.
The impact of Repustate’s financial results following the date of acquisition were not significant to Sprout’s consolidated financial statements.
The impact of Repustate’s financial results following the date of acquisition were not significant to Sprout Social’s consolidated financial statements.
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.
As of December 31, 2024 2023 Number of customers contributing more than $10,000 in ARR 9,327 8,689 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.
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.
In 2024, software subscriptions contributed 99% of our revenue. We generated net losses of $62.0 million, $66.4 million and $50.2 million during the years ended December 31, 2024, 2023, and 2022, respectiv ely. Our net losses include stock-based compensation expense of $84.3 million, $67.7 million and $47.7 million in the years ended December 31, 2024, 2023, and 2022, respectively.
The purchase price holdback was paid in full in January 2024. The fair values of the tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions.
The purchase price holdback was paid in full in January 2024. The fair values of the tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The allocation of fair value of purchase consideration was finalized in the fourth quarter of 2023.
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.
Historically, we have generated losses from operations as evidenced by our accumulated deficit and in previous years, we had negative cash flows from operations. However, during the years ended December 31, 2024, 2023 and 2022, we generated positive cash flows from operations.
Business Combinations We account for acquisitions using the acquisition method of accounting, which requires assigning the fair value of purchase consideration to the assets acquired and liabilities assumed at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill.
Business Combinations We account for acquisitions using the acquisition method of accounting, which requires assigning the fair value of purchase consideration to the assets acquired and liabilities assumed at the acquisition date.
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.
Financing Activities Net cash used in financing activities for the year ended December 31, 2024 was $30.3 million, primarily driven by $30.0 million in repayments of the Facility and $2.3 million in payments related to employee withholding taxes as a result of the net settlement of stock-based awards, partially offset by $2.0 million of proceeds under our employee stock purchase plan.
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.
Our dollar-based net retention rate for the years ended December 31, 2024 and 2023 was 104% and 107%, respectively. Our dollar-based net retention rate excluding our SMB customers for the years ended December 31, 2024 and 2023 was 108% and 111%, respectively.
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.
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 related to domestic operations and certain deferred tax assets related to foreign operations.
Sales commissions are earned and recorded at contract commencement for both new customer contracts and expansion of contracts with existing customers. Sales commissions are deferred and amortized on a straight-line basis over a period of benefit of three years.
Sales commissions are earned and recorded at contract commencement for both new customer contracts and expansion of contracts with existing customers. Sales commissions are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be five years.
Non-cash charges primarily consisted of $21.7 million of stock-based compensation expense, $4.0 million of depreciation and intangible asset amortization expense, $12.2 million for amortization of deferred contract acquisition costs, which were primarily commissions, $0.6 million for credit losses on accounts receivable and $0.7 million of amortization of right-of-use, or ROU, operating lease assets.
Non-cash charges primarily consisted of $84.3 million of stock-based compensation expense, $10.0 million of depreciation and intangible asset amortization expense, $16.3 million for amortization of deferred contract acquisition costs, which were primarily commissions, $1.7 million for credit losses on accounts receivable, $1.8 million of amortization of right-of-use, or ROU, operating lease assets and a $1.6 million gain on lease modification.
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.
Year Ended December 31, 2024 2023 2022 Reconciliation of Non-GAAP gross profit ( dollars in thousands ) Gross Profit $ 314,433 $ 257,375 $ 193,970 Stock-based compensation expense 3,936 3,224 2,491 Amortization of acquired developed technology 2,820 1,175 — Restructuring charges 62 — — Non-GAAP gross profit $ 321,251 $ 261,774 $ 196,461 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, restructuring charges and non-cash gains from lease modifications.
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.
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.
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.
We expect this trend to continue for the foreseeable future. 68 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.
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.
Year Ended December 31, 2024 2023 2022 Reconciliation of Non-GAAP net income (loss) per share Net loss per share attributable to common shareholders, basic and diluted $ (1.09) $ (1.19) $ (0.92) Stock-based compensation expense per share 1.48 1.22 0.87 Acquisition-related expenses — 0.08 — Amortization of acquired intangible assets 0.09 0.03 — Restructuring charges 0.05 — — Gain on lease modification (0.03) — — Non-GAAP net income (loss) per share $ 0.50 $ 0.14 $ (0.05) 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, interest and payments related to restructuring charges.
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.
Year Ended December 31, 2024 2023 2022 Reconciliation of non-GAAP free cash flow ( dollars in thousands ) Net cash provided by operating activities $ 26,321 $ 6,456 $ 10,668 Expenditures for property and equipment (2,950) (2,073) (1,824) Interest paid on credit facility 3,635 1,588 — Acquisition-related costs — 4,272 — Payments related to restructuring charges 2,682 — — Non-GAAP free cash flow $ 29,688 $ 10,243 $ 8,844 Liquidity and Capital Resources As of December 31, 2024, our principal sources of liquidity were cash and cash equivalents of $86.4 million, marketable securities of $3.7 million, and net accounts receivable of $84.0 million.
We continuously monitor the direct and indirect impacts, and the potential for future impacts, of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.
We continuously monitor the direct and indirect impacts, and the potential for future impacts, of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape. Our current and prospective customers are impacted by these macroeconomic conditions to varying degrees.
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.
Year Ended December 31, 2024 2023 2022 Reconciliation of Non-GAAP net income (loss) ( dollars in thousands ) Net loss $ (61,971) $ (66,427) $ (50,240) Stock-based compensation expense 84,303 67,704 47,738 Acquisition-related expenses — 4,272 — Amortization of acquired intangible assets 4,851 2,022 — Restructuring charges 3,020 — — Gain on lease modification (1,570) — — Non-GAAP net income (loss) $ 28,633 $ 7,571 $ (2,502) 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, restructuring charges and non-cash gains from lease modifications.
As of December 31, 2023, we were in compliance with the covenants in the Credit Agreement. On August 1, 2023, we borrowed $75 million under the Credit Agreement in connection with the Tagger acquisition. As of December 31, 2023, $55 million remains outstanding under the Credit Agreement.
As of December 31, 2024, we were in compliance with the covenants in the Credit Agreement and expect to be in compliance with the covenants for the next 12 months. On August 1, 2023, we borrowed $75 million under the Credit Agreement in connection with the Tagger acquisition.
Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of revenue growth rates, customer attrition rate, discount rate, royalty rate, obsolescence rate and total operating expenses.
Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of revenue growth rates, customer attrition rate, discount rate, royalty rate, obsolescence rate and total operating expenses.
Net cash provided by operating activities during the year ended December 31, 2021 was $14.8 million, which resulted from a net loss of $28.7 million adjusted for non-cash charges of $40.2 million and net cash inflow of $3.4 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended December 31, 2024 was $26.3 million, which resulted from a net loss of $62.0 million adjusted for non-cash charges of $112.5 million and net cash outflow of $24.2 million from changes in operating assets and liabilities.
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.
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 approximately 30,000 customers.
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.
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. 78 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. 79 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.
Tagger’s platform enables marketers to discover influencers, plan and manage campaigns, analyze competitor strategies, report on trends and measure return on investment.
We acquired Tagger in order to expand into the influencer marketing category. Tagger’s platform enables marketers to discover influencers, plan and manage campaigns, analyze competitor strategies, report on trends and measure return on investment.
For the year ended December 31, 2023, as compared to the year ended December 31, 2022, this price increase contributed to an increase in our average revenue per customer. While our total number of customers decreased over this same period, our number of customers contributing over $10,000 in ARR and $50,000 in ARR increased.
For the year ended December 31, 2024, as compared to the year ended December 31, 2023, while our total number of customers decreased, our number of customers contributing over $10,000 in annualized recurring revenue (“ARR”) and $50,000 in ARR increased.
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.
The following table summarizes our cash flows for the periods presented: Years Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 26,321 $ 6,456 $ 10,668 Net cash provided by (used in) investing activities 40,726 (86,635) (37,672) Net cash provided by (used in) financing activities (30,324) 53,957 (193) Net increase (decrease) in cash, cash equivalents and restricted cash $ 36,723 $ (26,222) $ (27,197) Operating Activities Our largest source of operating cash is cash collections from our customers for subscription services.
Additionally, non-GAAP free cash flow does not represent the total increase or decrease in our cash balance for a given period. In 2023, we revised our definition of non-GAAP free cash flow to exclude payments related to acquisition-related costs associated with our acquisition of Tagger and cash paid for interest on our revolving line of credit.
Additionally, non-GAAP free cash flow does not represent the total increase or decrease in our cash balance for a given period. During the fourth quarter of 2024, we revised our definition of non-GAAP free cash flow to exclude payments related to restructuring charges associated with a workforce reorganization.
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.
Year Ended December 31, 2024 2023 2022 Reconciliation of Non-GAAP operating income (loss) ( dollars in thousands ) Loss from operations $ (60,356) $ (69,277) $ (51,676) Stock-based compensation expense 84,303 67,704 47,738 Acquisition-related expenses — 4,272 — Amortization of acquired intangible assets 4,851 2,022 — Restructuring charges 3,020 — — Gain on lease modification (1,570) — — Non-GAAP operating income (loss) $ 30,248 $ 4,721 $ (3,938) 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, restructuring charges and non-cash gains from lease modifications.
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.
Other Expense, Net Years Ended December 31, Change 2024 2023 Amount % ( dollars in thousands ) Other expense, net $ (1,393) $ (768) $ (625) 81 % Percentage of total revenue — % — % The change in other expense, net was primarily driven by higher foreign exchange transaction losses.
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.
As of December 31, 2024, the total obligation for operating leases was $22.5 million, of which $4.9 million is expected in the next twelve months. As of December 31, 2024, our purchase commitment for primarily data and services was $11.7 million, of which $7.4 million is expected in the next twelve months.
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.
See Note 6 and Note 11 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for more information regarding these obligations. 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.
We plan to continue adding to our local sales, customer support and customer success teams in select international markets over time. Key Business Metrics We review the following key business metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions.
Key Business Metrics We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Subscription revenue is recognized ratably over the contract terms beginning on the date our product is made available to customers, which typically begins on the commencement date of each contract. We have determined that subscriptions for our online software products are a distinct performance obligation, because the online software product is fully functional once a customer has access.
We have determined that subscriptions for our online software products are a distinct performance obligation, because the online software product is fully functional once a customer has access.
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.
The net cash outflow from changes in operating assets and liabilities was primarily the result of a $34.2 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $22.3 million increase in gross accounts receivable, a $5.5 million increase in prepaid expenses and other assets and a $3.6 million decrease in operating lease liabilities.
Net cash used in investing activities for the year ended December 31, 2021 was $22.1 million, which was primarily due to $109.6 million in purchases of marketable securities, partially offset by $88.4 million in proceeds from maturities of marketable securities.
Investing Activities Net cash provided by investing activities for the year ended December 31, 2024 was $40.7 million, which was primarily due to $45.1 million in proceeds from the maturities of marketable securities, partially offset by $3.0 million in purchases of computer equipment and hardware and the $1.5 million payout of the Repustate acquisition purchase price holdback.
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.
Income Tax Expense Years Ended December 31, Change 2024 2023 Amount % ( dollars in thousands ) Income tax expense $ 670 $ 649 $ 21 3 % Percentage of total revenue — % — % The change in income tax expense was due to higher earnings in foreign jurisdictions. 74 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.
See Note 16 to our audited consolidated financial statements for more information regarding the disgorgement. Contractual Obligations As of December 31, 2023, we have $55 million outstanding under the Credit Agreement, which matures on August 1, 2028. Refer to Note 8 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion.
As of December 31, 2024, $25 million remains outstanding under the Credit Agreement. Refer to Note 8 of the Notes to the Financial Statements (Part I, Item 8 of this Annual Report) for further discussion.
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.
Sales and Marketing Years Ended December 31, Change 2024 2023 Amount % ( dollars in thousands ) Sales and marketing $ 184,122 $ 168,091 $ 16,031 10 % Percentage of total revenue 45 % 50 % 72 The increase in sales and marketing expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the following: Change ( in thousands ) Personnel costs $ 22,219 Stock-based compensation expense 1,428 Advertising 1,074 Other 1,545 Sales commission expense (10,235) Sales and marketing $ 16,031 Personnel costs increased primarily as a result of an increase in headcount as we continue to expand our sales teams to grow our customer base.
Net cash used in financing activities for the year ended December 31, 2021 was $0.1 million, primarily driven by $1.6 million in payments related to employee withholding taxes as a result of the net settlement of stock-based awards and other financing related costs, offset by $1.7 million in proceeds from the disgorgement of stockholder short-swing profits under Section 16(b) of the Exchange Act.
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. 85 Contractual Obligations As of December 31, 2024, we have $25 million outstanding under the Credit Agreement, which matures on August 1, 2028.
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.
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, 2024 was approximately 27% of our total revenue. We have teams in Ireland, Canada, the United Kingdom, Singapore, India, Australia, the Philippines and Poland to support our growth internationally.
Sales commissions earned for initial contracts and for expansion of contracts with existing customers are deferred and amortized on a straight-line basis over a period of benefit of three years. Determining the period of benefit of requires judgment for which we take into consideration products sold, expected customer life, expected contract renewals, technology life cycle and other factors.
Sales commissions earned for initial contracts and for expansion of contracts with existing customers are deferred and amortized on a straight-line basis over a period of benefit that we have determined to be five years.
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.
We believe global demand for our 65 platform and offerings will continue to increase as awareness of our platform in international markets grows. We plan to continue adding to our local sales, customer support and customer success teams in select international markets over time.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed6 unchanged
Biggest changeTreasury 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.
Biggest changeSuch 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. 85
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. 89
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.
We do not enter into investments for trading or speculative purposes. As of December 31, 2024, we had $25 million in secured indebtedness outstanding under the Credit Agreement.
Item 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.
Item 7A. Quantitative and Qualitative Disclosures of Market Risk Interest Rate Risk We had cash and cash equivalents totaling $86.4 million as of December 31, 2024, the majority of which was invested in money market accounts and money market funds. We also had marketable securities of $3.7 million which were invested in investment-grade corporate bonds.

Other SPT 10-K year-over-year comparisons