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Item 5. Market for Registrant’s Common Equity

2022-02-23 compared with 2021-02-24 · 1 added, 96 removed, 23 unchanged (81% of the section changed)

13 unchanged sentences

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.

On December 17, 2019, we closed our IPO 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.

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.

5 unchanged sentences

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.

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:

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

_________________

(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,

( 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

________________

(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,

( 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

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.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity