Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our Class A common stock has been listed on the Nasdaq Capital Market under the symbol “SPT” since December 13, 2019. Prior to that date, there was no public trading market for our Class A common stock.
Our Class B common stock is not listed or traded on any stock exchange.
Holders of Record
As of February 22, 2021, we had 16 holders of record of our Class A common stock and 14 holders of record of our Class B common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of beneficial owners of our Class A common stock represented by these holders.
Dividend Policy
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay future indebtedness, if any, and therefore we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors, subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, industry trends and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
Use of Proceeds from Initial Public Offering of Class A Common Stock
On December 17, 2019, we closed our IPO, in which we sold 8,823,530 shares of Class A common stock at a price to the public of $17.00 per share. The offer and sale of the shares in our IPO were registered under the Securities Act pursuant to our Registration Statement on Form S-1 (Registration No. 333-234316), which was declared effective on December 12, 2019. Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC acted as lead book-running managers for the offering.
The shares issued and sold in our IPO resulted in an aggregate gross offering price of $150.0 million. 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. Of the $10.5 million of underwriting discounts and commissions, we paid $4.2 million to Goldman Sachs & Co. LLC, of which an employee serves on our board of directors and which is an investor in our Class A common stock (See Note 15 of “Notes to Consolidated Financial Statements”). No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates), or persons owning more than 10% or more of any class of our equity securities, or to any other affiliates.
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On January 15, 2020, we issued and sold an additional 629,603 shares of Class A common stock to the underwriters pursuant to the underwriters’ exercise of their option to purchase additional shares of our Class A common stock to cover sales by the underwriters in excess of the number of shares set forth on the cover page of our IPO prospectus. The gross proceeds of this issuance were $10.7 million, and we received net proceeds of $10.0 million after deducting underwriting discounts and commissions.
There has been no material change in the planned use of IPO proceeds from that described in the final prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on December 13, 2019.
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.
The graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the S&P 500 Index and the Nasdaq Computer Index. 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. 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.
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Item 6. Selected Consolidated Financial and Other Data
The following tables present the selected consolidated financial and other data for Sprout Social, Inc. and its subsidiaries. We have derived the selected consolidated statement of operations data for the years ended December 31, 2020, 2019 and 2018 from our audited consolidated financial statements included elsewhere in this Annual Report. You should read the following selected consolidated financial data in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report. The selected consolidated financial data in this section is not intended to replace the consolidated financial statements and is qualified in its entirety by the consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report. Our historical results for any prior period are not necessarily indicative of our future results, and our operating results for the year ended December 31, 2020 are not necessarily indicative of the results that may be expected for any future year or period.
Years Ended December 31,
2020 2019 2018
( in thousands, except share and per share data )
Consolidated Statement of Operations Data:
Revenue:
Subscription $ 131,804 $ 102,243 $ 78,392
Professional services and other 1,145 464 421
Total revenue 132,949 102,707 78,813
Cost of revenue (1) :
Subscription 34,196 27,862 20,726
Professional services and other 721 292 268
Total cost of revenue 34,917 28,154 20,994
Gross profit 98,032 74,553 57,819
Operating expenses:
Research and development (1)
30,491 28,059 25,426
Sales and marketing (1)
59,137 55,584 35,980
General and administrative (1)
40,406 38,178 17,185
Total operating expenses 130,034 121,821 78,591
Loss from operations (32,002) (47,268) (20,772)
Interest expense (366) (270) (617)
Interest income 617 307 35
Other income 223 490 442
Loss before income taxes (31,528) (46,741) (20,912)
Income tax expense 127 66 22
Net loss and comprehensive loss $ (31,655) $ (46,807) $ (20,934)
Net loss per share attributable to common shareholders, basic and diluted (2)
$ (0.62) $ (2.54) $ (1.26)
Weighted-average shares outstanding used to compute net loss per share, basic and diluted (2)
51,368,737 18,438,695 16,593,258
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(1) Includes stock-based compensation expense as follows (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Year Ended December 31, 2020 Compared to Year Ended December 31, 2019—Operating Expenses” for more information):
Years Ended December 31,
2020 2019 2018
( in thousands )
Cost of revenue $ 749 $ 1,126 $ 9
Research and development 1,935 2,290 28
Sales and marketing 2,464 8,697 15
General and administrative 5,931 13,220 1
Total stock-based compensation expense
$ 11,079 $ 25,333 $ 53
(2) See Note 1 and Note 12 to our audited consolidated financial statements for more information regarding net loss per share.
As of December 31,
2020 2019
( in thousands )
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 114,515 $ 135,310
Working capital (1)
135,753 113,977
Total assets 239,669 189,591
Deferred revenue 43,762 29,775
Total stockholders’ equity
152,099 128,130
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(1) Working capital is defined as total current assets minus total current liabilities.
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.
Our total number of customers, total ARR, organic ARR and number of customers contributing more than $10,000 in ARR as of the periods presented were as follows:
As of December 31,
2020 2019
( dollars in thousands )
Number of customers 26,718 23,693
Total ARR $ 158,268 $ 117,846
Organic ARR $ 157,182 $ 115,185
Number of customers contributing more than $10,000 in ARR
3,149 2,185
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For additional information about our key business metrics, please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics.”
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. We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance.
Year Ended December 31,
2020 2019 2018
( dollars in thousands, except per share data )
Non-GAAP operating loss $ (20,923) $ (21,935) $ (20,719)
Non-GAAP net loss (20,576) (21,474) (20,881)
Non-GAAP net loss per share (0.40) (1.16) (1.26)
Free cash flow $ (15,367) $ (15,174) $ (19,335)
For additional information and reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.