What changed in this filing

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Item 1. Business

2024-02-23 compared with 2023-02-22 · 45 added, 43 removed, 475 unchanged (16% of the section changed)

11 unchanged sentences

Introduced in 2011, our cloud software brings together social messaging, data and workflows in a unified system of record, intelligence and action.

Operating across major networks, including Twitter, Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.

Operating across major networks, including X (formerly known as Twitter), Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions.

Our platform is easy-to-use and can be deployed rapidly by new customers without direct engagement from our sales or services teams.

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Our platform is licensed on a per-user basis with numerous upsell opportunities through additional users and product modules.

As social becomes a critical channel for virtually all aspects of the customer experience, including brand awareness, customer acquisition, social customer care, commerce, advocacy and reputation management, we expect that our customers will increase adoption of our platform across departments.

As social becomes a critical channel for virtually all aspects of the customer experience, including brand awareness, influencer marketing, customer acquisition, social customer care, commerce, advocacy and reputation management, we expect that our customers will increase adoption of our platform across departments.

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.

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Social media began as a way for individuals to connect and share experiences.

Networks like Twitter, Facebook, LinkedIn and subsequent major networks allowed individuals to more easily communicate with friends, family, colleagues and those who shared common interests.

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.

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However, most organizations currently lack the tools necessary to access and analyze available data.

• Significant security and compliance concerns exist .

Security and privacy issues have dominated the discussion around social media in recent years, leading to increased complexity, risk and regulation.

• Significant data privacy and security concerns exist .

Data privacy and security issues have dominated the discussion around social media in recent years, leading to increased complexity, risk and regulation.

Conforming to these requirements and maintaining security across dozens to hundreds of social profiles on multiple social networks reinforces the need for centralized management.

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Our powerful, easy-to-use platform enables customers to manage the complexities of social media across their entire organization.

Our relationships with Twitter, Facebook, Instagram, Pinterest, LinkedIn and Google, among others, allow us to build robust solutions that meet today’s business needs while maintaining our focus on innovation as the market evolves.

Our relationships with X (formerly known as Twitter), Facebook, Instagram, Pinterest, LinkedIn, Google and TikTok, among others, allow us to build robust solutions that meet today’s business needs while maintaining our focus on innovation as the market evolves.

Our relentless focus on customer relationships and building the highest-quality products have made our platform the highest customer-rated product across all major categories and customer segments relative to our primary competitors according to G2.

The key benefits of our solution include:

• Comprehensive, all-in-one solution .

The key benefits of our platform include:

• Comprehensive, all-in-one platform .

Our platform brings every aspect of the social experience together into a single, elegant and robust solution.

From engagement, publishing, and reporting and analytics to reputation management, business intelligence, advocacy, and workflow and collaboration, our customers can manage their entire social experience seamlessly and more effectively through a single pane of glass.

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 .

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Our powerful platform is designed to be easy to use so that it can be rapidly adopted and leveraged by novice users while also having the robust capabilities needed by the most demanding Enterprise users.

Our solution enables seamless collaboration across departments and is consistently rated the easiest-to-use social media management software available amongst our primary competitors.

Our platform enables seamless collaboration across departments and is consistently rated the easiest-to-use social media management software available amongst our primary competitors.

• Purpose-built to handle the velocity of social.

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• Network relationships.

We have built strong relationships with major social media networks, including Twitter, Facebook, Instagram, TikTok, Pinterest, LinkedIn and Google, among others.

We have built strong relationships with major social media networks, including X, Facebook, Instagram, TikTok, Pinterest, LinkedIn and Google, among others.

We work together closely with these networks to address the evolving needs of our customers and to bring new ideas and innovation to market.

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• Large and growing barriers to entry.

Due to the technical complexities on the back end of social media, required network relationships and rising customer emphasis on security, compliance and data privacy, we believe the barriers to entry in our market have risen materially over the past several years.

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 .

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and (iv) multiplied the estimated average segment ACVs by the estimated number of Target Businesses in each segment.

We calculated our greater than $100 billion 2025 SAM forecast using the methodology above.

We used internal estimates informed by research from the Harris Poll to determine the projected business presence on social media in 2025 that will require a social media management platform, multiplied by our internal projected average segment ACVs in 2025 for Sprout Social and its primary competitors in the applicable segment.

We then used internal estimates informed by research from the Harris Poll to determine the projected business presence on social media in 2025 that will require a social media management platform, multiplied by our internal projected average segment ACVs in 2025 for Sprout Social and its direct competitors in the applicable segment.

Our Growth Strategies

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It has also introduced a high level of complexity and the need for a centralized platform to manage these efforts across the organization.

Our platform brings all of the

necessary tools together for organizations to expertly and efficiently manage this new channel and create compelling experiences for their audience.

Our platform brings all of the necessary tools together for organizations to expertly and efficiently manage this new channel and create compelling experiences for their audience.

Our powerful, easy-to-use cloud platform allows organizations of all sizes to create stronger relationships through social media, create and publish effective content, measure and improve performance and better understand their markets and customers.

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• Public Relations;

• Influencer Marketing;

• Customer Service and Care;

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• Comprehensive social media reporting.

Our customers can measure and analyze their performance across Twitter, Facebook, Instagram, Pinterest and LinkedIn through rich experiences designed to extract actionable insights from data.

Our customers can measure and analyze their performance across X, Facebook, Instagram, Pinterest and LinkedIn through rich experiences designed to extract actionable insights from data.

Reporting can be done across networks, analyzing paid and organic performance compared to historic and peer or competitor performance.

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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.

Tagger allows customers to analyze influencer marketing trends, social content, posts and profile data to define an influencer strategy, discover the right influencers to align to brand values and audience;

and activate, scale, manage, measure and report on campaigns.

Additional features:

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We have a highly diverse base of over 31,000 current customers across SMBs, Mid-market companies, Enterprises and marketing agencies, as well as government, non-profit and educational institutions.

We have been increasingly focused on the Mid-market and Enterprise segments.

We expect that our current and future growth will likely be driven by outsized contributions from Mid-market and Enterprise.

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.

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Our global support team provides support to all of our customers, regardless of spend or segment, in the channel they prefer.

Customer success has always been deeply rooted in our DNA and we have been intentional with our focus on delivering an exceptional level of quality service to our customers.

Customer success has always been deeply rooted in our DNA and

we have been intentional with our focus on delivering an exceptional level of quality service to our customers.

As a result, we have the highest-rated customer support according to G2 when compared to our primary competitors.

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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.

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.

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Data Privacy and Security Laws

In the ordinary course of our business, we may 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, security, and protection.

In the ordinary course of our business, we may collect and process personal data.

Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CPRA”) (collectively, the “CCPA”), the Canadian Personal Information Protection and Electronic Documents Act, Canada’s Anti-Spam Legislation, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), and the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”).

In addition to the CCPA, several other states within the United States, such as Virginia and Colorado, have passed comprehensive privacy laws and similar laws are being considered in several other states, as well as at the federal and local levels.

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.

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the CCPA provides for administrative fines and a private right of action for certain data breaches which may include an award of statutory damages.

In addition, the CPRA’s recent amendments to the CCPA established a new regulatory agency to implement and enforce the law.

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.

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Culture and Workforce

Sprout Social was named a Best Place to Work in 2022 by the Glassdoor Employees' Choice award, marking the fifth time in six years that we have received this recognition.

In the third quarter of 2022, Great Place to Work and PEOPLE magazine named Sprout Social to the 2022 PEOPLE Companies that Care list, which is based on data from companies representing more than 6.1 million U.S.

In that survey, 96% of employees said Sprout Social is a great place to work, which is 68% higher than the average U.S.

Sprout Social was also recognized as the #6 Best Workplace in Chicago and #9 Best Workplace for Parents by Great Place to Work in 2022.

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.

In the third quarter of 2023, Sprout Social was named to the 2023 Fortune Best Workplaces in Technology List.

This is Sprout Social’s second time being named to the prestigious list, which follows additional 2023 recognitions including Best Workplace for Millennials in Chicago, Best Medium Workplace and to the PEOPLE Companies that Care list.

As of December 31, 2023, we had a total of 1,383 full-time employees, including 308 employees located outside the United States.

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We default to digital collaboration and async communication norms to stay connected and work effectively to solve hard problems, and also taking great care in creating meaningful connections while physically apart.

We equally see the value of in-person, human connection and prioritize opportunities that bring our distributed teams together to strengthen the bonds within our global community, and will continue to create community and engagement around our offices.

In 2022, we gathered our global team in Chicago for a ‘Midyear Meetup’ focused on building connection and rapport.

We also hired a leader of distributed work to continue to develop these targeted investments and improve hybrid work operations, reinforce trust, and lay the groundwork for the future.

We equally see the value of in-person, human connection and prioritize opportunities that bring our distributed teams together to strengthen the bonds within our global community.

A key component of our flexible first hybrid model is our in-person strategy which brings the team together throughout the year through Team and Regional Meet Ups.

Additionally, we will continue to create community and engagement for those employees that live within commuting distance of our Dublin, Chicago and Seattle offices.

Employee Engagement & Development

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We continue to invest in leadership development at Sprout Social through our GOLD (Growth Oriented Leadership Development) program.

The program consists of ‘Ignite,’ which focuses on new leaders including those new to the role of leadership itself or to leadership at Sprout Social, ‘Evolve,’ which is tailored towards experienced managers and directors, and ‘Amplify’ (launched in 2022) which is designed for our most senior leaders.

This year we also launched a DEI Leadership Accelerator Program, a four-month experience aimed at supporting the continued growth and retention of our United States-based BIPOC employees through a series of professional development, leadership and peer coaching, and networking opportunities.

In addition to supporting our leaders, in late 2022 we created and launched The Career Studio, our first ever career development resource center for all employees.

In 2023 we also welcomed our second cohort of “Accelerate,” our DEI Leadership Accelerator Program.

This four-month experience is aimed at supporting the continued growth and retention of our United States-based BIPOC employees through a series of professional development, leadership and peer coaching, and networking opportunities.

In addition to supporting our leaders, in late 2023 we celebrated the one-year anniversary of the launch of The Career Studio, our career development resource center for all employees.

This is an approachable virtual hub of career development tools designed to empower all employees to take ownership of their career journey at Sprout Social.

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We regularly track, report progress and identify targeted interventions to support this vision.

We focus our sourcing efforts on underrepresented backgrounds including investing in strategic partnerships such as re:work training and held our Recruitment Team accountable to prospective diverse talent.

We focus our sourcing efforts on underrepresented backgrounds including investing in strategic partnerships such as re:work training and hold our Recruitment Team accountable to prospective diverse

We actively recruit from Historically Black Colleges and Universities and Hispanic Serving Institutions, including partnering with student organizations that serve traditionally underrepresented groups in tech.

In addition, we continued our scholarship program with the United Negro College Fund to provide scholarships for Black/African American students majoring in software engineering.

In 2023, we expanded our scholarship program to include the Hispanic Scholarship Fund (HSF), while continuing our scholarship program with the United Negro College Fund to provide scholarships for Black/African American students majoring in software engineering.

Scholarship recipients were also given the opportunity to interview for our Associate Software Engineering Program.

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This includes unconscious bias training for all new hires as part of their onboarding.

We also encourage employees to attend our company-wide DEI Guild meetings to discuss relevant topics such as faith inclusion in the workplace, the impact of COVID-19 on the disability community and the exploration of black hair history and culture.

We avoid scheduling any other meetings during this time so employees could prioritize this experience.

We have ten Community Resource Groups (CRGs), which are volunteer led groups centered around common identities and life experiences that work to serve the unique needs of their community members, foster a sense of belonging through connection, support and empathy.

We also encourage employees to attend our company-wide DEI Guild meetings to discuss relevant topics such as inclusive strategies to manage stress and burnout, demystifying microaggressions and understanding the spectrum of health and happiness.

We have eleven Community Resource Groups (CRGs), which are volunteer-led groups centered around common identities and life experiences that work to serve the unique needs of their community members, foster a sense of belonging through connection, support and empathy.

Each group works with an executive sponsor and receives an annual budget to support their initiatives and our CRG co-leads are compensated for their efforts.

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Total Rewards

We strive to evolve our reward programs to be market competitive and comprehensive to cover employees at every stage of their personal and professional path and are focused on keeping wellness as the foundation for all employees globally.

We continue to evolve our reward programs to be market competitive and comprehensive to cover employees at every stage of their personal and professional path and are focused on keeping wellness as the foundation for all employees globally.

To recruit and retain the best talent in the marketplace, we routinely review and refresh our total rewards program and we rely on employee feedback to shape and evolve our offerings.

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We also offer a family planning benefit of $5,000 USD towards surrogacy and adoption.

In 2023 we introduced a Lifestyle Spending Account to support our employees' efforts to maintain a healthy and balanced lifestyle.

We continue to provide a stipend to all new employees to ensure an optimal home setup and provide a Wi-Fi reimbursement to all employees to support them in our hybrid work environment.

In addition to competitive salaries that are reviewed bi-annually against market-based data, we are committed to pay equity and perform a global pay equity analysis on an annual basis.

We also offer stock-based compensation awards for every new employee, regardless of role, eligible to receive annual equity grants (in addition to new hire equity awards), and an Employee Stock Purchase Plan (currently United States only) to provide the opportunity to purchase Sprout Social stock at a discounted price to further benefit from the financial success and growth of the company.

In 2023, we offered stock-based compensation awards for every new employee, regardless of role, and all employees, subject to certain tenure and performance requirements, were eligible to receive annual equity grants.

In addition, we provide an Employee Stock Purchase Plan (currently United States only) to provide the opportunity to purchase Sprout Social stock at a discounted price to further benefit from the financial success and growth of the Company.

Our Website and Availability of SEC Reports and Other Information

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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 1. Business