What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-26 · 329 added, 221 removed, 789 unchanged (41% of the section changed)

38 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Subscription Revenue

9 unchanged sentences

and (ii) testing a sample of outstanding customer invoice balances as of December 31, 2025 by obtaining and inspecting source documents, such as invoices, customer agreements, and subsequent cash receipts from customers, where applicable.

Acquisition of NewsWhip Group Holdings Limited - Valuation of Acquired Technology and Customer Relationships

As described in Notes 1 and 4 to the consolidated financial statements, on July 30, 2025, the Company completed the acquisition of NewsWhip Group Holdings Limited for total purchase consideration of $64.1 million.

Of the acquired intangible assets, $8.4 million of acquired technology and $15.2 million of customer relationships were recorded.

Fair value was estimated by management using a relief from royalty method for acquired technology and a multi-period excess earnings method for customer relationships.

When determining the fair value of the acquired technology and customer relationships acquired, management applied judgment which involved the use of the assumptions with respect to revenue growth rates, customer attrition rate, discount rate, royalty rate, obsolescence rate, and total operating expenses.

The principal considerations for our determination that performing procedures relating to the valuation of acquired technology and customer relationships acquired in the acquisition of NewsWhip Group Holdings Limited is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the acquired technology and customer relationships acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the royalty rate, total operating expenses, and customer attrition rate for customer relationships, and royalty rate and obsolescence rate for acquired technology;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the acquired technology and customer relationships acquired.

These procedures also included, among others (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the acquired technology and customer relationships acquired;

(iii) evaluating the appropriateness of the relief from royalty and multi-period excess earnings methods used by management;

(iv) testing the completeness and accuracy of the underlying data used in the relief from royalty and multi-period excess earnings methods;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the royalty rate, total operating expenses, and customer attrition rate for customer relationships and royalty rate and obsolescence rate for acquired technology.

Evaluating management's assumption related to total operating expenses for customer relationships involved considering (i) the current and past performance of NewsWhip Group Holdings Limited;

(ii) the consistency with external market and industry data;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief from royalty and multi-period excess earnings methods and (ii) the reasonableness of the royalty rate and obsolescence rate used in the valuation of the acquired technology and the royalty rate and customer attrition rate used in the valuation of the customer relationships.

/s/ PricewaterhouseCoopers LLP

74 unchanged sentences

Loss before income taxes ( 42,740 ) ( 61,301 ) ( 65,778 )

Income tax (benefit) expense 670 649 366

Income tax expense 587 670 649

Net loss $ ( 43,327 ) $ ( 61,971 ) $ ( 66,427 )

1 unchanged sentence

Weighted-average shares outstanding used to compute net loss per share, basic and diluted 58,625,925 56,935,910 55,664,404

56,935,910 55,664,404 54,611,616

See Notes to Consolidated Financial Statements.

13 unchanged sentences

Voting Common Stock Additional

Treasury Stock Accumulated Other Comprehensive Income Accumulated

Capital Treasury Stock Accumulated Other Comprehensive Income Accumulated

Deficit Total

Stockholders’ Equity

3 unchanged sentences

Stock-based compensation expense 68,002 68,002

47,906 47,906

Issuance of common stock from settlement of equity awards 1,122,902 — —

6 unchanged sentences

Stock-based compensation expense 84,617 84,617

68,002 68,002

Issuance of common stock from settlement of equity awards 1,427,291 — —

4 unchanged sentences

Balances at December 31, 2024 57,758,378 5 558,391 3,148,888 ( 37,422 ) 3 ( 354,383 ) 166,594

Exercise of stock options 27,010 — 29 29

Stock-based compensation expense 79,167 79,167

84,617 84,617

Issuance of common stock from settlement of equity awards 1,704,430 1 1

21 unchanged sentences

Provision for accounts receivable allowances 3,559 1,709 2,418

Gain on lease modification ( 1,570 ) — —

Loss/(gain) on lease termination and modification 1,175 ( 1,570 ) —

Accretion of contingent consideration 423 — —

Other ( 505 ) — —

Changes in operating assets and liabilities, excluding impact from business acquisition

12 unchanged sentences

Proceeds from sale of marketable securities — — 5,538

Net cash provided by (used in) investing activities 40,726 ( 86,635 ) ( 37,672 )

Net cash (used in) provided by investing activities ( 52,146 ) 40,726 ( 86,635 )

Cash flows from financing activities

6 unchanged sentences

Net cash provided by (used in) financing activities 15,504 ( 30,324 ) 53,957

Net increase (decrease) in cash, cash equivalents and restricted cash 36,723 ( 26,222 ) ( 27,197 )

Sprout Social, Inc.

1 unchanged sentence

(in thousands)

Net increase (decrease) in cash, cash equivalents and restricted cash 6,785 36,723 ( 26,222 )

Cash, cash equivalents, and restricted cash

7 unchanged sentences

Cash paid for interest $ 1,889 $ 3,635 $ 1,588

Cash paid for income taxes $ 759 $ 735 $ 211

Supplemental disclosure of noncash investing and financing activities

Fair value of contingent consideration in connection with business acquisition $ 8,450 $ — $ —

Deferred consideration in connection with business acquisition $ 1,908 $ — $ —

ROU asset obtained in exchange for operating lease liability $ — $ 629 $ 795

1 unchanged sentence

Capital expenditures incurred but not yet paid $ 92 $ 375 $ 137

Stock-based compensation expense capitalized in internal-use software $ 448 $ 314 $ 298

See Notes to Consolidated Financial Statements.

30 unchanged sentences

The Company has the following financial instruments:

cash, cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities.

cash, cash equivalents, accounts receivable, accounts payable, accrued liabilities and contingent consideration related to acquisitions.

In recent periods, the Company has also had marketable securities.

The carrying value of the Company’s cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value due to their short-term nature.

See Note 14, Fair Value Measurements, for additional information regarding the valuation methodology for contingent consideration liabilities.

Cash and Cash Equivalents

4 unchanged sentences

As of December 31, 2025 and 2024, the Company’s restricted cash balance was $ 1.9 million and $ 4.0 million, respectively.

Restricted cash represents cash that is held as collateral in relation to the Company’s letters of credit that are required as security for the Company’s office leases and reserves held by the Company’s credit card processor.

Restricted cash represents cash that is held as collateral in relation to the Company’s letters of credit that are required as security for certain office lease arrangements and reserves held by the Company’s credit card processor.

Restricted cash is included in Prepaid expenses and other current assets within the consolidated balance sheets.

4 unchanged sentences

All marketable securities are recorded at their estimated fair values.

The Company’s remaining marketable securities matured during 2025.

Unrealized gains and losses for the available-for-sale debt securities that are unrelated to credit loss factors are recorded in accumulated other comprehensive income (loss), or AOCI.

As of December 31, 2024 and 2023, the Company’s AOCI balance was insignificant.

The Company’s AOCI balance was zero as of December 31, 2025 and an immaterial balance as of December 31, 2024.

Unrealized losses determined to be credit-related are recorded as Other (expense) income, net in the consolidated statements of operations and comprehensive loss and as an allowance for credit losses on Marketable securities on the consolidated balance sheets.

As of December 31, 2024 and 2023, the gross unrealized gains and losses on available-for-sale debt securities were immaterial and there were no expected credit losses related to the Company's available-for-sale debt securities.

As of December 31, 2025 and 2024, The gross unrealized gains and losses on available-for-sale debt securities was zero as of December 31, 2025 and immaterial as of December 31, 2024, and there were no expected credit losses related to the Company's available-for-sale debt securities.

Accounts Receivable and Allowance for Credit Losses

4 unchanged sentences

The Company performs evaluations of its customers’ financial positions and generally extends credit on account, without collateral.

The Company determines the need for an allowance for credit losses based upon various factors, including past collection experience, credit quality of the customer, age of the receivable balance and current economic conditions.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

The Company determines the need for an allowance for credit losses based upon various factors, including past

Sprout Social, Inc.

Notes to Consolidated Financial Statements

charged against the allowance for credit losses once collection efforts are unsuccessful.

collection experience, credit quality of the customer, age of the receivable balance and current economic conditions.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Amounts are charged against the allowance for credit losses once collection efforts are unsuccessful.

Credit losses on accounts receivable were $ 3.6 million, $ 1.7 million and $ 2.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.

18 unchanged sentences

As of December 31, 2025 and 2024, there were no individual customers that accounted for more than 10% of the Company’s total revenue or net accounts receivable.

The Company’s marketable securities consist of investment-grade corporate bonds, commercial paper, U.S.

The Company’s marketable securities, all of which matured during 2025, consisted of investment-grade corporate bonds, commercial paper, U.S.

Treasury securities, asset-backed securities, and agency securities.

The Company limits the amount of investments in any single issuer and believes that, as of December 31, 2024, its concentration of credit risk related to marketable securities was not significant.

In recent periods, the Company has limited the amount of investments in any single issuer to minimize credit risk exposure related to marketable securities.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Property and Equipment

5 unchanged sentences

Leasehold improvements Lesser of useful life or remaining lease term

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

18 unchanged sentences

The Company’s customers do not have the right to take possession of the online software solution.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The Company commences revenue recognition when control of these products is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for such products.

5 unchanged sentences

• recognize revenue when (or as) performance obligations are satisfied.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Identify the contract with a customer

14 unchanged sentences

If the contract contains a single performance obligation, the Company allocates the entire transaction price to the single performance obligation.

For contracts containing multiple performance obligations, the transaction price is allocated to each performance obligation based on the relative standalone selling price (“SSP”) of the services provided to the customer.

For contracts containing multiple performance

Sprout Social, Inc.

Notes to Consolidated Financial Statements

obligations, the transaction price is allocated to each performance obligation based on the relative standalone selling price (“SSP”) of the services provided to the customer.

The Company determines the SSP based upon the prices at which the Company separately sells subscription and various professional services, and based on the Company’s overall pricing objectives, taking into consideration market conditions, value of the Company’s contracts, the types of offerings sold, customer demographics and other factors.

3 unchanged sentences

The Company’s subscription service arrangements are generally non-cancellable and do not provide for refund of subscription fees.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Professional services are typically provided for a fixed fee, and revenue is generally recognized for these contracts at the time these services are provided to the customer.

15 unchanged sentences

Cost of revenues primarily consist of expenses related to hosting the Company’s service and providing support to customers, depreciation associated with computers and hardware and amortization expense related to acquired developed technologies that directly benefit sales.

These expenses are comprised of hosted data center global costs, fees paid to third-party data providers and personnel-related costs directly associated with cloud infrastructure and customer support, including salaries, benefits, bonuses and allocated overhead.

These expenses are comprised of hosted data center global costs, fees paid to third-party data providers and personnel-

Sprout Social, Inc.

Notes to Consolidated Financial Statements

related costs directly associated with cloud infrastructure and customer support, including salaries, benefits, bonuses and allocated overhead.

Overhead associated with facilities and information technology is allocated to cost of revenue and operating expenses based on headcount.

5 unchanged sentences

Research and development expenses include payroll, employee benefits and other expenses associated with product development.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Capitalized Internal-Use Software Costs

7 unchanged sentences

For equity awards with both service and performance conditions, compensation expense is recognized on a graded vesting basis over the requisite service period once the achievement of the performance condition is considered probable.

The grant-date fair value of RSUs that contain a market condition is determined using a Monte Carlo valuation model.

The Company recognizes forfeitures as they occur.

7 unchanged sentences

ROU assets also include any initial indirect costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received.

For short-term leases of 12 months or less, no ROU asset or lease liability is recorded.

For short-term leases of 12 months or less, no ROU asset or lease liability is

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The Company records rent expense in its consolidated statements of operations on a straight-line basis over the term of the lease and records variable lease payments as incurred.

5 unchanged sentences

The Company does not have any finance leases.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Commitments and Contingencies

15 unchanged sentences

Net loss attributable to common shareholders is net loss minus convertible preferred stock dividends declared, of which there were none during the periods presented.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The Company calculates diluted net loss per share using the treasury stock and if-converted methods, which consider the potential impacts of outstanding stock options and RSUs.

3 unchanged sentences

Business Combinations

The Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date.

Any excess or

Sprout Social, Inc.

Notes to Consolidated Financial Statements

deficiency of the purchase consideration when compared to the fair value of the net assets acquired, if any, is recorded as goodwill or gain from a bargain purchase.

Such valuations require that management make estimates and assumptions, especially with respect to the identifiable intangible assets.

The estimates in valuing intangible assets include, but are not limited to, the time and expense to recreate the assets, future expected cash flows from the asset, useful lives, customer churn rate, and discount rates.

The Company recognizes and measures the assets acquired, liabilities assumed and any contingent consideration in a business combination based on their estimated fair values at the acquisition date.

Any excess or deficiency of the purchase consideration, including the fair value of contingent consideration, when compared to the fair value of the net assets acquired, if any, is recorded as goodwill or gain from a bargain purchase.

Such valuations require that management make estimates and assumptions, especially with respect to the identifiable intangible assets and contingent consideration.

The estimates and assumptions in valuing intangible assets include, but are not limited to, the selection of valuation methodologies, estimates of future revenue and cash flows, the time and expense to recreate the intangible assets, useful lives, customer attrition rate, royalty rate, obsolescence rate and discount rates.

The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for an acquisition, which may last up to one year from the acquisition date.

1 unchanged sentence

After the conclusion of the measurement period or the final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to earnings.

Contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved.

Changes in the fair value of contingent consideration, other than measurement period adjustments, are recorded to earnings.

Restructuring

2 unchanged sentences

One-time termination benefits and other costs are generally recognized in the period in which the liability is incurred.

In November 2024, the Company initiated a restructuring plan to improve the efficiency and effectiveness of the research and development organization, which resulted in a reduction of approximately 50 roles.

The Company recorded $3.0 million of restructuring charges for the year ended December 31, 2024.

Cash payments totaling $2.7 million were made related to the restructuring during 2024.

The Company expects that it will pay all remaining restructuring costs during the first quarter of 2025.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update (“ASU”) No.

2021-08, Business Combinations:

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805).

The ASU requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 (Revenue from Contracts with Customers).

ASU 2021-08 is effective for the Company’s fiscal year beginning January 1, 2023, and interim periods within that fiscal year, and should be applied on a prospective basis.

Early adoption is permitted.

The Company adopted the ASU as of January 1, 2023, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures for significant segment expenses.

All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment.

The ASU is effective for the Company’s fiscal year beginning January 1, 2024, and interim periods thereafter, and should be applied on a retrospective basis to all periods presented.

Early adoption is permitted.

The Company adopted the ASU in the fourth quarter of 2024 and the adoption did not have a material impact on the Company’s consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In November 2024, the Company initiated a restructuring plan to improve the efficiency and effectiveness of the research and development organization.

In February 2025, the Company initiated a restructuring plan with a primary focus on its Sales and Customer Experience teams.

For the year ended December 31, 2025, the Company incurred $ 2.7 million in restructuring charges, of which $ 2.3 million and $ 0.4 million are recorded within sales and marketing expense and cost of revenue , respectively.

For the year ended December 31, 2024, the Company incurred $ 3.0 million of restructuring charges, of which $ 2.9 million and $ 0.1 million million are recorded within research and development expense and cost of revenue , respectively.

Cash payments totaling $ 2.9 million and $ 2.7 million were made related to the restructuring during the years ended December 31, 2025 and 2024, respectively.

All amounts incurred as of December 31, 2025 have been paid and no additional costs related to the restructuring plans are expected to be incurred.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures.

The ASU will be effective for the Company beginning with its annual report for the year ending December 31, 2025 and allows for adoption on a prospective basis, with a retrospective option.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

The ASU is effective for fiscal years beginning after December 31, 2024, with early adoption permitted.

Entities may apply the amendments prospectively or may elect retrospective application.

The Company adopted the ASU for the year ended December 31, 2025, and applied the new disclosure requirements on a prospective basis.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03.

The ASU requires the disclosure of more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the statement of operations.

2 unchanged sentences

The Company is currently evaluating the impact that this standard may have on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets.

ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers.

The ASU is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, on a prospective basis, with early adoption permitted.

The Company is currently evaluating the impact of electing the practical expedient and the impact it may have on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software.

The ASU amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40, including removing stage-based rules and replacing them with a principles-based framework to be more aligned with modern software development practices.

The ASU is effective for all entities for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

Revenue Recognition

1 unchanged sentence

The Company provides disaggregation of revenue based on geographic region in Note 12 and based on the subscription versus professional services and other classification on the consolidated statements of operations, as it believes these best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Deferred Revenue

Deferred revenue is recorded upon establishment of unconditional right to payment under non-cancellable contracts for subscription and professional services described above and is recognized as the revenue recognition criteria are met.

Deferred revenue is recorded upon establishment of unconditional right to payment under non-cancellable contracts and is recognized as the revenue recognition criteria are met.

The Company generally invoices customers in advance in monthly, quarterly, semi-annual and annual installments.

1 unchanged sentence

The balance of deferred revenue, including current and non-current balances, as of December 31, 2025 and 2024 were $ 206.4 million and $ 179.7 million, respectively.

For the year ended December 31, 2024, the additions to our deferred revenue balance were due to $ 444.1 million of additional invoicing, which was offset by $ 405.9 million of revenue recognized during the same period.

Deferred revenue during the year ended December 31, 2023, increased $ 45.2 million as a result of $ 375.6 million of additional invoicing and $ 3.2 million and $ 0.1 million of deferred revenue acquired from the Tagger and Repustate acquisitions, respectively, which was offset by $ 333.6 million of revenue recognized during the same period.

For the year ended December 31, 2025, the additions to our deferred revenue balance were due to $ 480.0 million of additional invoicing and $ 4.2 million of deferred revenue acquired from the NewsWhip acquisition, which was offset by $ 457.5 million of revenue recognized during the same period.

Deferred revenue during the year ended December 31, 2024, increased $ 38.2 million as a result of $ 444.1 million of additional invoicing, which was offset by $ 405.9 million of revenue recognized during the same period.

The amount of revenue recognized during the years ended December 31, 2025 and 2024 that was included in deferred revenue at the beginning of each period was $ 175.8 million and $ 137.9 million, respectively.

As of December 31, 2024, including amounts already invoiced and amounts contracted but not yet invoiced, $ 351.5 million of revenue is expected to be recognized from remaining performance obligations, of which 71 % is expected to be recognized in the next 12 months, 22 % is expected to be recognized in the subsequent 12 months and the remainder thereafter.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2025, including amounts already invoiced and amounts contracted but not yet invoiced, $ 404.0 million of revenue is expected to be recognized from remaining performance obligations, of which 70 % is expected to be recognized in the next 12 months, with the remainder thereafter.

Property and Equipment

10 unchanged sentences

Business Combinations

NewsWhip Group Holdings Limited

On July 30, 2025 , the Company completed its acquisition of all of the outstanding voting shares of NewsWhip, a company incorporated in Ireland that provides real-time social intelligence.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

proprietary real-time media monitoring and predictive analytics provide insights into emerging trends and narratives, enabling the Company to enter the public relations and crisis monitoring space.

Consideration for the acquisition of NewsWhip consisted of an upfront cash payment of $ 52.3 million , subject to adjustment for cash, indebtedness and working capital, deferred consideration of $ 3.2 million and up to $ 10.0 million of an earnout, which is contingent upon NewsWhip’s achievement of financial performance metrics through June 30, 2027.

The earnout is payable in cash in two installments, one in 2026 and the second in 2027.

The earnout is considered contingent consideration and is accounted for as a liability initially measured at fair value.

T he fair value of the contingent consideration as of the acquisition date was $ 8.5 million, of which $ 4.5 million was recorded within Accrued expenses and other and $ 4.0 million was recorded within Other noncurrent liabilities in the consolidated balance sheets.

See Note 14 for additional information regarding the fair value determination of the contingent consideration.

The deferred consideration includes $ 1.9 million of certain research and development tax credits that were generated by NewsWhip prior to the acquisition date, a dditional deferred consideration of $ 0.8 million and a $ 0.5 million holdback amount.

The net working capital adjustment for the acquisition was finalized in October 2025, resulting in an increase to the purchase price of $ 0.1 million , which was recorded to goodwill.

The purchase price holdback and additional deferred consideration were paid during the fourth quarter of 2025.

As of December 31, 2025, the remaining deferred consideration balance of $ 1.9 million is included in Other noncurrent liabilities in the consolidated balance sheets.

The Company funded the upfront cash payment with a combination of cash on hand and $ 32.0 million borrowed under the Facility further described in Note 8.

For the year ended December 31, 2025, the Company incurred $ 1.8 million of acquisition-related costs, which were primarily related to advisory and legal costs, and were recorded within General and administrative expense in the consolidated statements of operations.

The excess of purchase consideration over the fair value of net assets acquired was recorded as goodwill, and is primarily attributable to expanded market opportunities from integrating the acquired developed technologies with the Company’s offerings.

The goodwill is not deductible for income tax purposes.

The fair values of the tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions.

These estimates are based on preliminary information and may be subject to further revision as additional information is obtained during the measurement period, which may last up to 12 months from the date of the acquisition.

The primary area that remains preliminary as of December 31, 2025 relates to deferred taxes.

The Company expects to finalize the fair value measurements as soon as practicable, but not later than 12 months from the date of acquisition.

The following table summarizes the preliminary allocation of purchase price to the estimated fair values of assets acq uired and liabilities assumed as of the acquisition date (in thousands):

Sprout Social, Inc.

Notes to Consolidated Financial Statements

July 30, 2025

Consideration:

Cash $ 52,313

Contingent consideration at fair value 8,450

Deferred consideration 3,215

Additional payment for net working capital adjustment (1)

Total purchase consideration $ 64,128

Recognized amount of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents $ 1,980

Accounts receivable 2,255

Other current and noncurrent assets 2,335

Intangible assets 24,850

Accounts payable, accrued expenses and other liabilities ( 4,661 )

Deferred revenue ( 4,222 )

Deferred tax liabilities ( 4,216 )

Net assets acquired, excluding Goodwill 18,321

Goodwill 45,807

Total purchase price allocation $ 64,128

Cash and cash equivalents acquired ( 1,980 )

Total consideration, net of cash acquired $ 62,148

(1) Additional amount paid in the fourth quarter of 2025 upon completion of the review of the working capital assets acquired and liabilities assumed.

The Company engaged a third-party valuation expert to aid its analysis of the identifiable intangible assets acquired.

All estimates, key assumptions and forecasts were either provided by or reviewed by the Company.

While the Company chose to utilize a third-party valuation expert for assistance, the fair value analysis and related valuations reflect the conclusions of management and not those of any third party.

The fair values of the acquired technology and the trademark identified intangible assets were determined utilizing the relief from royalty method under the income approach.

The fair values of the customer relationships and contract backlog were valued using the multi-period excess-earnings method.

The Company applied judgment which involved the use of assumptions with respect to revenue growth rates, customer attrition rate, discount rate, royalty rate, obsolescence rate and total operating expenses.

The fair value of the contingent consideration was determined using a scenario-based approach.

This fair value measurement was based on unobservable inputs, including management estimates and assumptions about future revenues and a discount rate, and is, therefore, classified as Level 3 within the fair value hierarchy presented in Note 14.

The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved.

Changes in the fair value of contingent consideration, other than measurement period adjustments, are recorded within General and administrative expenses within the consolidated statements of operations.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis.

The following table summarizes the estimated preliminary fair values (in thousands) and estimated useful lives for the identifiable intangible assets acquired as of the acquisition date:

Fair Value Expected Useful Life

Customer Relationships $ 15,200 7 years

Acquired Technology 8,400 5 years

Trademark 800 5 years

Contract Backlog 450 1 year

The Company has included the financial results of NewsWhip in its consolidated financial statements from the date of acquisition.

Separate financial results and pro forma financial information for NewsWhip have not been presented as the effect of this acquisition was not material to the Company’s financial results.

Tagger Media, Inc.

4 unchanged sentences

The Company acquired Tagger for a total final purchase consideration of $ 144 million in cash, which incorporates the impact of various customary adjustments such as working capital, cash and indebtedness.

The Company funded the purchase consideration with a combination of cash on hand and $ 75 million borrowed under the revolving credit facility further described in Note 8.

The Company funded the purchase consideration with a combination of cash on hand and $ 75 million borrowed under the Facility further described in Note 8.

For the year ended December 31, 2023, the Company incurred $ 4.3 million acquisition-related costs, which primarily related to advisory and legal costs, and were recorded within General and administrative expense in the consolidated statements of operations.

33 unchanged sentences

Repustate, Inc.

On January 19, 2023 , the Company completed the acquisition of all the outstanding equity of Repustate, Inc.

The acquisition has increased the Company’s power, breadth and automation of social

Sprout Social, Inc.

Notes to Consolidated Financial Statements

On January 19, 2023, the Company completed the acquisition of all the outstanding equity of Repustate, Inc.

The acquisition has increased the Company’s power, breadth and automation of social listening, messaging, and customer care capabilities with added sentiment analysis, natural language processing (NLP) and artificial-intelligence (AI).

listening, messaging, and customer care capabilities with added sentiment analysis, natural language processing (NLP) and artificial-intelligence (AI).

The total final purchase consideration for the acquisition was $ 8.3 million, consisting of approximately $ 6.8 million in cash paid at the closing 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.

16 unchanged sentences

Cash paid for acquisition of business, net of cash acquired $ 6,432

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The following table summarizes the estimated fair values (in thousands) and estimated useful lives for the identifiable intangible assets acquired as of the acquisition date:

4 unchanged sentences

Separate financial results and pro forma financial information for Repustate have not been presented as the effect of this acquisition was not material to the Company’s financial results.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The changes in the carrying amount of goodwill during the year ended December 31, 2025 were as follows (in thousands):

Goodwill balance as of December 31, 2024

Purchase price allocation adjustment (Tagger) ( 89 )

Addition - NewsWhip acquisition 45,807

Goodwill balance as of December 31, 2025

5 unchanged sentences

Trademark 2,100 1,300

Contract backlog 450 —

61,750 36,900

3 unchanged sentences

Trademark ( 695 ) ( 368 )

Contract backlog ( 188 ) —

( 22,017 ) ( 14,986 )

Intangible assets, net $ 39,733 $ 21,914

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Intangible assets are all finite-lived and are being amortized on a straight-line basis over their expected useful lives.

3 unchanged sentences

Thereafter 3,438

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The following table sets forth the weighted-average amortization period, in total and by major intangible asset class:

3 unchanged sentences

Trademark 5.0

Contract backlog 1.0

All Intangible Assets 6.1

2 unchanged sentences

Seattle, Washington;

Santa Monica, California;

Dublin, Ireland;

and Kraków, Poland.

The Chicago lease expires in December 2032, the Seattle lease expires in January 2031, the Santa Monica lease expires in January 2025, the Dublin lease expires in June 2027, and the Kraków lease expires in December 2029.

The operating lease for an office in Santa Monica, California expired in January 2025.

The Chicago lease expires in December 2032, the Seattle lease expires in January 2031, the Dublin lease expires in June 2027, and the Kraków lease expires in December 2029.

These operating leases require monthly rental payments ranging from approximately $ 26,000 to $ 142,000 .

3 unchanged sentences

As such, it has recorded lease obligations only through the initial optional termination dates above.

In August 2024, the Company entered into a new lease agreement for an office in Kraków, Poland.

For accounting purposes under ASC 842, the lease commenced on August 30, 2024, resulting in the recording of a $0.6 million right-of-use operating lease asset and operating lease liability.

The lease has an expected expiration date of December 2029.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

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.

Following the early termination to one floor of leased space on December 31, 2025, the Company’s office space in Chicago will be reduced from approximately 128,000 square feet down to approximately 64,000 square feet.

The Company determined that the amendment would be treated as a lease modification.

The modification resulted in a remeasurement of the operating lease ROU asset and lease liability, with a net effect of an increase to the ROU asset and lease liability of $ 2.8 million and $ 1.2 million, respectively.

In addition, the Company recorded a non-cash gain on the lease modification of $ 1.6 million, which was included in general and administrative expenses in the consolidated statements of operations.

In November 2024, the Company entered into an agreement to extend the Dublin office lease through June 30, 2027.

This resulted in a remeasurement of the operating lease ROU asset and lease liability.

The impact of the remeasurement was a $1.0 million increase to both the operating lease ROU asset and lease liability.

In April 2025, the Company entered into an amendment to its Chicago office lease agreement providing for the early termination of one floor of the leased space.

Following the early termination, the Company’s office space was reduced from approximately 128,000 square feet to approximately 64,000 square feet.

The Company determined that the amendment will be treated as a lease termination.

As a result of the termination, the Company recorded a net loss of approximately $ 1.2 million, consisting of a gain of approximately $ 0.2 million associated with the write-off of the lease liability and a loss on disposal of leasehold improvements of approximately $ 1.4 million.

These amounts were recorded in General and administrative expenses in the consolidated statements of operations.

The following table provides a summary of operating lease assets and liabilities as of December 31, 2025 (in thousands):

3 unchanged sentences

Total operating lease liabilities $ 14,719

Operating lease expense for the year ended December 31, 2024, 2023, and 2022 was $ 2.8 million, $ 2.7 million and $ 2.3 million, respectively.

Variable lease costs for the year ended December 31, 2024, 2023 and 2022 was $ 3.5 million, $ 3.6 million and $ 3.5 million, respectively.

The following table provides information about leases in the consolidated statements of operations (in thousands):

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31,

2025 2024 2023

Operating lease expense $ 2,645 $ 2,806 $ 2,659

Variable lease expense 2,249 3,451 3,572

Within the consolidated statements of operations, operating and variable lease expense are recorded in General and administrative expenses.

Cash payments related to operating leases for the year ended December 31, 2025, 2024 and 2023 were $ 6.0 million, $ 8.3 million and $ 8.2 million, respectively.

2 unchanged sentences

Remaining maturities of operating lease liabilities as of December 31, 2025 are as follows (in thousands):

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Years ending December 31,

9 unchanged sentences

Loss before income taxes $ ( 42,740 ) $ ( 61,301 ) $ ( 65,778 )

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The components of income tax expense (benefit) are as follows (in thousands):

2 unchanged sentences

Current taxes

Federal $ 28 $ — $ —

State 262 13 —

Foreign 888 657 820

Current tax expense (benefit) 1,178 670 820

Deferred taxes

( 86 ) ( 171 ) —

Federal 115 86 —

State ( 12 ) — —

Foreign ( 694 ) ( 86 ) ( 171 )

Deferred tax expense (benefit) ( 591 ) — ( 171 )

Income tax expense (benefit) $ 587 $ 670 $ 649

$ 670 $ 649 $ 366

Sprout Social, Inc.

Notes to Consolidated Financial Statements

A reconciliation of the difference between the federal statutory rate and the effective income tax rate as a percentage of income before taxes for the years ended December 31, 2024, 2023, and 2022 is as follows (in thousands):

A reconciliation of the difference between the federal statutory rate and the effective income tax rate as a percentage of income before taxes after the adoption of ASU 2023-09 is as follows (in thousands):

Year Ended December 31,

2024 2023 2022

Amount Tax Rate Amount Tax Rate Amount Tax Rate

Amount Tax Rate

Federal statutory income tax $ ( 8,975 ) 21.00 %

State and local income taxes (1)

Foreign tax effects

Changes in valuation allowance ( 521 ) 1.22

Other 60 ( 0.14 )

Other foreign jurisdictions 530 ( 1.24 )

Effects of cross-border tax laws:

Global intangible low-taxed income 463 ( 1.08 )

Other 175 ( 0.41 )

Research and development credits ( 1,524 ) 3.56

Changes in valuation allowance ( 2,800 ) 6.55

Nontaxable and Nondeductible items

Stock-based compensation 12,172 ( 28.48 )

Section 162(m) limitation 608 ( 1.42 )

Other 417 ( 0.98 )

Other adjustments ( 268 ) 0.64

Effective income tax rate $ 587 ( 1.4 ) %

(1) The majority of the tax effect within the state and local income tax category relates to California.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

A reconciliation of the difference between the federal statutory rate and the effective income tax rate as a percentage of income before taxes for years prior to the adoption of ASU 2023-09 is as follows (in thousands):

Year Ended December 31,

Amount Tax Rate Amount Tax Rate

Federal statutory income tax $ ( 12,873 ) 21.00 % $ ( 13,813 ) 21.00 %

State income tax, net of federal tax benefit ( 329 ) 0.54 ( 2,423 ) 3.68

11 unchanged sentences

Notes to Consolidated Financial Statements

Significant components of the Company’s deferred taxes at December 31, 2024 and 2023 are as follows (in thousands):

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):

As of December 31,

8 unchanged sentences

Deferred tax liabilities

( 1,747 ) ( 1,671 )

Fixed assets ( 754 ) ( 1,747 )

Intangible assets ( 7,680 ) ( 4,939 )

( 4,939 ) ( 6,056 )

Deferred commissions and bonus ( 21,734 ) ( 18,634 )

7 unchanged sentences

The weight given to positive and negative evidence is commensurate with the extent such evidence may be objectively verified.

Given the weight of objectively verifiable historical losses from operations, the Company has recorded a full valuation allowance on its deferred tax assets related to domestic operations and certain deferred tax assets related to foreign operations.

The Company may be able to reverse the valuation allowance when sufficient positive evidence exists to support the reversal of the valuation allowance.

The net change in the valuation allowance for deferred tax assets was approximately $ 5.4 million increase for the year ended December 31, 2024, $ 19.4 million increase for the year ended December 31, 2023, and $ 12.1 million increase for the year ended December 31, 2022.

The net change in the valuation allowance was primarily due to an increase in capitalized research and development (R&D) costs and tax credits and an increase in the net operating loss deferred tax asset, offset by an increase in the deferred tax liabilities with known reversal periods that will generate future sources of taxable income.

The Company elected to account for Global Intangible Low-Taxed Income (“GILTI”) as a current-period expense when incurred.

Therefore, the Company has not recorded deferred taxes for basis differences expected to reverse in the future periods.

Unremitted earnings of foreign subsidiaries were immaterial at December 31, 2024.

Given the weight of objectively verifiable historical losses from operations, the Company has recorded a full valuation allowance on its domestic deferred tax assets except for those from the Company’s NewsWhip acquisition in 2025, which do not have a valuation allowance.

Due to the Company’s cost-plus intercompany transactions, no valuation allowance is recorded on the Company’s foreign deferred tax assets except for its Ireland net operating loss deferred tax asset that resulted from the Company’s NewsWhip acquisition in 2025.

The Company may be able to reverse the valuation allowance on its domestic deferred tax assets when sufficient positive evidence exists to support the reversal of the valuation allowance.

The net change in the valuation allowance for deferred tax assets was approximately $ 0.2 million decrease for the year ended December 31, 2025, $ 5.4 million increase for the year ended December 31, 2024, and $ 19.4 million increase for the year ended December 31, 2023.

The net change during 2025 was primarily due to a decrease in capitalized research and development (R&D) costs and stock-based compensation deferred tax assets, as well as an increase in the deferred tax liabilities with known reversal periods that will generate future sources of taxable income.

The net change during 2025 also included a $ 3.8 million increase related to acquired Ireland net operating losses that were brought into NewsWhip purchase accounting with a full valuation allowance.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The Company elected to account for Global Intangible Low-Taxed Income (“GILTI”) as a current-period expense when incurred.

As of December 31, 2025, the Company does not expect to incur material additional income taxes upon the distribution of earnings from its foreign subsidiaries.

While the Company intends to repatriate these foreign earnings, there may be local withholding taxes due to various foreign countries and/or U.S.

state taxes payable upon distribution of certain lower-tier earnings.

The estimated impact of these taxes is currently immaterial to the Company’s consolidated financial statements.

As of December 31, 2025, the Company has gross federal net operating losses of $ 316.2 million which begin to expire in 2030, state net operating losses of $ 217.8 million which begin to expire in 2027, and foreign net operating losses of $ 33.1 million which begin to expire in 2026.

The operating loss carryforwards may be limited due to a change in control in the Company’s ownership as defined by the Internal Revenue Code Sections 382.

The increase in foreign net operating losses was primarily driven by acquired Ireland net operating losses from the NewsWhip acquisition.

Net operating loss carryforwards may be limited due to a change in control in the Company’s ownership as defined by the Internal Revenue Code Section 382.

Any future changes in the Company’s ownership may limit the use of such carryforward benefits.

3 unchanged sentences

As of December 31,

2025 2024 2023

Beginning balance 3,354 2,456 —

12 unchanged sentences

The resolutions of any examinations are not expected to be material to these financial statements.

The amounts of cash income taxes paid (net of refunds) by the Company were as follows (in thousands):

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Year Ended December 31,

Other jurisdictions (1)

Income taxes, net of amounts refunded $ 1,371

(1) Income taxes paid to other jurisdictions are individually immaterial.

The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $ 0.8 million and $ 0.7 million, respectively.

Enactment of the One Big Beautiful Bill Act of 2025

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, deductions for domestic research and development expenditures.

For the year ended December 31, 2025, the impact of the OBBBA on our consolidated financial statements was not material.

The Company will continue to monitor any forthcoming guidance or interpretations of the Act that could affect its financial position, results of operations, and cash flows.

Revolving Line of Credit

1 unchanged sentence

as administrative agent and collateral agent.

The Credit Agreement provides for a $ 100 million senior secured revolving credit facility (the “Facility”), maturing on August 1, 2028.

The Credit Agreement provides for a $ 100 million senior secured revolving credit facility (the “Facility”).

Borrowings under the Facility may be used to finance acquisitions and other investments permitted under the terms of the Credit Agreement, to pay related fees and expenses and for general corporate purposes.

At December 31, 2024, the Company had an outstanding balance of $ 25 million under the Facility.

Borrowings under the Facility may be designated as SOFR Loans or ABR Loans (each as defined in the Credit Agreement), subject to certain terms and conditions under the Credit Agreement, and bear interest at a rate of either (i) SOFR (subject to a 1.0 % floor), plus 0.10 %, plus a margin ranging from 2.75 % to 3.25 % based on the Company’s liquidity or (ii) ABR (subject to a 2.0 % floor) plus a margin

On April 4, 2025, the Company entered into the First Amendment to Credit Agreement (the “Amendment”, and the Credit Agreement as amended thereby, the “Amended Credit Agreement”) which, among other things, extended the maturity date of the Facility from August 1, 2028 to April 4, 2030 and revised the manner in which the applicable interest rate is determined from a liquidity based determination to a leverage based determination.

In addition, the Amendment removed the minimum liquidity and annual recurring revenue covenants contained in the Credit Agreement and replaced them with financial covenants as to (i) maximum Consolidated Senior Net Leverage Ratio and (ii) minimum Consolidated Interest Coverage Ratio (each as defined in the Amended Credit Agreement).

As of December 31, 2025, the Company was in compliance with such financial covenants in the Amended Credit Agreement.

Pursuant to the Amended Credit Agreement, borrowings under the Facility may be designated as SOFR Loans or ABR Loans (each as defined in the Amended Credit Agreement), subject to certain terms and conditions under the Amended Credit Agreement, and bear interest at a rate of either (i) SOFR (subject to a 1.0 % floor), plus 0.10 %, plus a margin ranging from 2.25 % to 2.75 % based on the Company’s Consolidated Senior Net Leverage Ratio or (ii) ABR (subject to a 2.0 % floor) plus a margin ranging from 1.25 % to 1.75 % based on the Company’s Consolidated Senior Net Leverage Ratio.

For the twelve months ended December 31, 2025, the borrowings under the Facility were designated as SOFR Loans and the weighted average interest rate in effect for the outstanding balance was approximately

Sprout Social, Inc.

Notes to Consolidated Financial Statements

ranging from 1.75 % to 2.25 % based on the Company’s liquidity.

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.

For the twelve months ended December 31, 2024, the borrowings under the Facility were designated as SOFR Loans and the interest rate in effect for the outstanding balance was approximately 8.08 %.

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 Consolidated Senior Net Leverage Ratio.

The Amended Credit Agreement includes customary conditions to credit extensions, covenants and customary events of default, including restrictions on the Company’s ability to incur liens, incur indebtedness, make or hold investments, execute certain change of control transactions, business combinations or other fundamental changes to its business, dispose of assets, make certain types of restricted payments, including dividends and other distributions to stockholders, enter into certain related party transactions or amend or terminate certain contracts, subject to customary exceptions.

As of December 31, 2025, the Company had an outstanding balance of $ 40 million under the Amended Credit Agreement.

Debt issuance costs associated with the Facility were recorded to Other assets, net within the consolidated balance sheets and are being amortized as interest expense on a straight-line basis over the term of the Facility.

The Credit Agreement includes customary conditions to credit extensions, affirmative and negative covenants, and customary events of default.

The customary conditions also include restrictions on the Company’s ability to incur liens, incur indebtedness, make or hold investments, execute certain change of control transactions, business combinations or other fundamental changes to its business, dispose of assets, make certain types of restricted payments or enter into certain related party transactions, subject to customary exceptions.

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.

As of December 31, 2024, the Company was in compliance with the covenants in the Credit Agreement.

The Company is contingently liable under two standby letters of credit which are required as security for the Company’s current office leases (refer to Note 6).

At December 31, 2024 and 2023, the Company had $ 2.7 million in secured letters of credit outstanding.

The agreements allow the Company to elect to secure the letters of credit with restricted cash or by reducing the revolving credit facility borrowing capacity under the Facility.

As of December 31, 2025 and 2024, the Company had $ 2.7 million in secured letters of credit outstanding, respectively.

At December 31, 2025, $ 2.0 million of the outstanding letters of credit were secured through a reduction in the Facility’s borrowing capacity, with the remaining amount secured by restricted cash.

Stockholders’ Equity

5 unchanged sentences

Incentive Stock Plan

On April 27, 2016, the Company established the Sprout Social, Inc.

2016 Stock Plan (the “2016 Plan”) as an amendment and restatement of the Sprout Social, Inc.

2010 Amended and Restated Stock Incentive Plan, under which awards, including options, restricted stock purchases rights, restricted stock

Effective October 17, 2019, the Company established the Sprout Social, Inc.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

bonus or restricted stock unit awards, for up to 5,467,862 shares of common stock may, at the discretion of the Board of Directors, be issued to employees, consultants, and directors of the Company.

Under the 2016 Plan, any shares withheld upon settlement of RSUs, as elected by the employee to cover withholding taxes, will again be available for future grants under the plan.

There were no changes to existing stock options outstanding as a result of the amendment and restatement.

The exercise price for each award is determined by the Board of Directors.

However, each option must have an exercise price of at least the fair market value of the option and no less than 110 % of fair market value for options granted to a 10 % owner optionee.

The Company continues to maintain the 2016 Plan, although no further grants are authorized under the 2016 Plan following the effectiveness of the 2019 Incentive Award Plan.

Effective October 17, 2019, the Company established the Sprout Social, Inc.

2019 Incentive Award Plan (the “2019 Plan”), under which awards, including options, stock appreciation rights, restricted stock awards, restricted stock unit awards, other stock or cash based awards and dividend equivalent awards, for up to 5,293,497 shares of Class A common stock may, at the discretion of the Board of Directors, be issued to employees, consultants, and directors of the Company.

awards, for up to 5,293,497 shares of Class A common stock may, at the discretion of the Board of Directors, be issued to employees, consultants, and directors of the Company.

Effective December 12, 2019, the Company established the Sprout Social, Inc.

11 unchanged sentences

Total stock-based compensation expense $ 78,719 $ 84,303 $ 67,704

$ 84,303 $ 67,704 $ 47,738

For the periods presented, stock-based compensation expense consisted of expense from restricted stock units.

1 unchanged sentence

Restricted Stock Units

At the end of 2015, the Company began issuing restricted stock units.

The general terms of the restricted stock units issued under the 2016 Plan require both a service and performance condition to be satisfied prior to vesting.

The service condition is satisfied upon the participant’s completion of a required

Sprout Social, Inc.

Notes to Consolidated Financial Statements

period of continuous service from the vesting start date.

The performance condition was satisfied upon the completion of the IPO.

The Company issues restricted stock units to executives and employees.

The general terms of the restricted stock units issued under the 2019 Plan require only a service condition to be satisfied prior to vesting.

1 unchanged sentence

The table below summarizes the activity regarding unvested restricted stock units for the year ended December 31, 2025:

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Stock Units Weighted

Average Grant

7 unchanged sentences

The total unrecognized stock-based compensation expense relating to these awards as of December 31, 2025 was $ 164.8 million, which is expected to be recognized over a weighted-average period of 2.8 years.

Stock Options

The options become fully vested at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board of Directors and set forth in each stock option notice;

provided, however, that no exercise period shall exceed ten years from the grant date.

The fair value of each option is estimated on the date of grant based on the Black-Scholes option pricing model.

The annual rate of dividends is expressed as a dividend yield which is a constant percentage of the stock price, which is determined by the board of directors with input from a third-party valuation specialist.

The expected life of an option represents the period of time that an option is expected to be outstanding.

The risk‐free interest rate is based on the rate of U.S.

Treasury securities with maturities consistent with the estimated expected term of the awards.

The Company has not paid dividends and does not anticipate paying a cash dividend on common stock in the foreseeable future and, accordingly, uses an expected dividend yield of zero .

As the Company was privately held during the life of the options, there is no historical basis of the stock volatility.

Accordingly, the expected volatility is based primarily on the historical volatilities of similar entities’ common stock over the most recent period commensurate with the estimated expected term of the awards.

The expected term of an award is determined using the simplified method for plain vanilla options, consistent with applicable accounting guidance.

At the end of 2015, the Company ceased issuing stock options.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The table below summarizes the stock option activity for the year ended December 31, 2024:

(in years) (in thousands)

Outstanding at beginning of period 27,010 $ 1.08 1.05 $ 1,630

Granted at fair value — —

Exercised ( 27,010 ) 1.08

Forfeited — —

Outstanding at end of period — —

Options exercisable at December 31, 2024 — —

The Company has computed the aggregate intrinsic value of amounts disclosed in the above table based on the difference between the original exercise price of the options and the estimated fair value of the Company’s common stock as of December 31, 2024.

The intrinsic value of options exercised for the years ended December 31, 2024, 2023 and 2022 was $ 0.8 million, $ 1.8 million and $ 2.3 million, respectively.

There were no options outstanding as of December 31, 2024.

Commitments and Contingencies

3 unchanged sentences

Years ending December 31,

2026 $ 86,842

Total contractual obligations $ 115,661

1 unchanged sentence

From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Beginning on May 13, 2024, the Company and certain of its executives were named in two putative securities fraud class action cases filed in the United States District Court for the Northern District of Illinois asserting claims under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5.

1 unchanged sentence

Sprout Social, Inc., et al.

was filed on May 13, 2024 and alleges that the defendants made false or misleading statements and omissions of fact relating to the Company’s business, operations and prospects, including (i) purported integration challenges arising from the Company’s August 2023 acquisition of Tagger, (ii) the Company’s ability to service (and the viability of its strategic plan to focus on) the enterprise market, and (iii) as a result, the Company’s 2024 financial guidance was required to be adjusted downward.

The Munch complaint seeks damages and costs on behalf of a putative class of Company stockholders from November 3, 2023 through and including May 2, 2024.

The second case, captioned City of Hollywood Police Officers’ Retirement System v.

was filed on May 13, 2024 and alleged that the defendants made false or misleading statements and omissions of fact relating to the Company’s business, operations and prospects, including (i) purported integration challenges arising from the Company’s August 2023 acquisition of Tagger Media, Inc.

(“Tagger”), (ii) the Company’s ability to service (and the viability of its strategic plan to focus on) the enterprise market, and (iii) as a result, the Company’s 2024 financial guidance was required to be adjusted downward.

The Munch complaint sought damages and costs on behalf of a putative class of Company stockholders from November 3, 2023 through and including May 2, 2024.

The second case, captioned City of Hollywood Police Officers’

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Retirement System v.

Sprout Social, Inc., et al (the “City of Hollywood Action”), was filed in the United States District Court for the Northern District of Illinois on July 2, 2024.

It asserts claims under the same statutory provisions based on substantially similar allegations of misconduct as its predecessor, but alleges a class period beginning on November 3, 2021 and ending on May 2, 2024.

It asserted claims under the same statutory provisions based on substantially similar allegations of misconduct as its predecessor, but alleged a class period beginning on November 3, 2021 and ending on May 2, 2024.

On November 12, 2024, the court appointed the Employees’ Retirement System for the City of Baltimore (the “City of Baltimore”), who had been substituted as the named plaintiff in the City of Hollywood action, as the Lead Plaintiff under the Private Securities Litigation Reform Act of 1995 (“PSLRA”).

The court subsequently consolidated the two cases (the “Consolidated Securities Action”) on December 13, 2024.

On January 24, 2025, the City of Baltimore filed a Consolidated Amended Complaint (the “CAC”).

The CAC retains the original defendants, but adds Jason Rechel, Sprout Social’s former head of Investor Relations, as an individual defendant.

The CAC makes similar allegations to those asserted in the City of Hollywood Action and adds additional allegations, including purported statements attributed to 15 anonymous confidential witnesses.

Most of these individuals are described in the CAC as former Sprout Social sales representatives.

On January 24, 2025, the City of Baltimore filed an amended Consolidated Class Action Complaint (the “AC”).

The AC retains the original defendants, but adds Jason Rechel, Sprout Social’s former head of Investor Relations, as an individual defendant.

The AC makes similar allegations to those asserted in the City of Hollywood Action and adds additional allegations, including purported statements attributed to 15 anonymous confidential witnesses.

Most of these individuals are described in the AC as former Sprout Social sales representatives.

It claims that the defendants failed to disclose that the Company lacked the infrastructure to successfully implement its strategic shift to the enterprise business market, which purportedly rendered positive statements about enterprise business generation and prospects, and Sprout Social’s financials, misleading.

More specifically, the CAC alleges that (1) Sprout Social’s “inbound” sales strategy model, which it also applied to enterprise sales efforts, was not effective for generating enterprise business;

More specifically, the AC alleges that (1) Sprout Social’s “inbound” sales strategy model, which it also applied to enterprise sales efforts, was not effective for generating enterprise business;

(2) Sprout Social’s platform lacked certain features valued by large clients;

1 unchanged sentence

and (4) Sprout Social’s emphasis on ARR as a key metric for financial performance was misleading, given Sprout Social’s own abandonment of the metric as a viable performance indicator.

The CAC alleges a slightly longer class period than that alleged in the City of Hollywood Action, beginning on September 22, 2021, and ending on May 2, 2024 (the City of Hollywood Action alleged class period that began on November 3, 2021 and ended on May 2, 2024).

Defendants’ response to the CAC is due by March 25, 2025.

Under the PSLRA, discovery and other proceedings in the Consolidated Securities Action are automatically stayed pending the resolution of any motion to dismiss filed by defendants.

The AC alleges a slightly longer class period than that alleged in the City of Hollywood Action, beginning on September 22, 2021, and ending on May 2, 2024 (the City of Hollywood Action alleged class period that began on November 3, 2021 and ended on May 2, 2024).

On March 25, 2025, defendants filed a Motion to Dismiss (the “Motion”) the AC in its entirety.

On May 23, 2025, Lead Plaintiff filed a brief in opposition to this Motion.

Defendants filed a reply brief in further support of the Motion on July 17, 2025.

The court has yet to issue any ruling on the Motion.

Under the PSLRA, discovery and other proceedings in the Consolidated Securities Action are automatically stayed pending such a ruling.

On September 3, 2024, a putative stockholder derivative lawsuit captioned Hannaway v.

1 unchanged sentence

(the “Hannaway Derivative Action”) was filed in the United States District Court for the Northern District of Illinois against the Company’s directors and certain officers.

The complaint alleges that the defendants failed to disclose (or misrepresented) facts about the Company’s business, operations

The complaint alleges that the defendants failed to disclose (or misrepresented) facts about the Company’s business, operations and prospects, including that (i) the Company’s sales and revenue results were not indicative of its growth as it transitioned to an enterprise sales cycle, (ii) the Company was unable to sell to enterprise customers and thus overpaid for, and faced integration challenges with respect to, Tagger, and (iii) as a result, the Company faced longer sales cycles and a slowing pipeline, requiring a downward revision of its 2024 guidance.

Based on these allegations, the complaint asserts federal claims under Sections 10(b), 14(a) and 21D of the Exchange Act and Rules 10b-5 and 14a-9, and state law claims for breach of fiduciary duties, unjust enrichment, corporate waste, aiding and abetting and insider selling, and seeks damages in an unspecified amount on the Company’s behalf.

On October 23, 2024, the court entered a stipulation and order staying the action until the earliest of (i) entry of a final, non-appealable

Sprout Social, Inc.

Notes to Consolidated Financial Statements

and prospects, including that (i) the Company’s sales and revenue results were not indicative of its growth as it transitioned to an enterprise sales cycle, (ii) the Company was unable to sell to enterprise customers and thus overpaid for, and faced integration challenges with respect to, Tagger, and (iii) as a result, the Company faced longer sales cycles and a slowing pipeline, requiring a downward revision of its 2024 guidance.

On October 23, 2024, the court entered a stipulation and order staying the action until the earliest of (i) entry of a final, non-appealable order on any summary judgment motions in the Consolidated Securities Action;

order on any summary judgment motions in the Consolidated Securities Action;

(ii) a settlement or other mediated resolution in the Consolidated Securities Action;

2 unchanged sentences

On December 17, 2024, a second putative derivative action captioned Munch v.

Sprout Social, Inc.

was filed in the United States District Court for the Northern District of Illinois against the same defendants.

This complaint alleges that, beginning in November of 2021, the defendants failed to disclose (or misrepresented) facts about the Company’s business, operations and prospects, including that (i) the Company was neither well-equipped to grow enterprise sales nor executing on its go to market strategy to grow enterprise business;

Howard et al.

(the “Munch Derivative Action”) was filed in the United States District Court for the Northern District of Illinois against the same defendants.

This complaint alleges that, beginning in November 2021, the defendants failed to disclose (or misrepresented) facts about the Company’s business, operations and prospects, including that (i) the Company was neither well-equipped to grow enterprise sales nor executing on its go to market strategy to grow enterprise business;

(ii) marketing to enterprise customers would elongate the Company’s sales cycles, and (iii) as a result, the Company was required to adjust its 2024 financial guidance downward.

Based on these allegations, plaintiff asserts federal claims under Section 14(a) of the Exchange Act and a state law claim for breach of fiduciary duty, and seeks damages in an unspecified amount on the Company’s behalf.

In accordance with the Stay Order, this case should be consolidated with the Hannaway Derivative Action and subject to the same terms.

On February 14, 2025, the court consolidated the Munch Derivative Action with the Hannaway Derivative Action (the “Consolidated Derivative Action”) and stayed the Consolidated Derivative Action under the terms of the Stay Order.

The Company intends to vigorously defend against the claims asserted in the foregoing actions.

3 unchanged sentences

Such amounts could be material to the Company’s financial statements.

The Company has not established any reserve for any potential liability relating to these actions.

The Company has not established any accrual for any potential liability relating to these actions.

It is possible that the Company could, in the future, incur a judgment for monetary damages and/or enter into a settlement(s) in connection therewith, which could be material to the Company’s results of operations, financial position and cash flows.

4 unchanged sentences

Historically, the Company has not incurred any significant costs as a result of such indemnification.

Sprout Social, Inc.

Notes to Consolidated Financial Statements

Geographic Data

3 unchanged sentences

Revenue by geographical region is determined by location of the Company’s customers.

Revenue from customers outside of the United States was approximately 27 %, 28 % and 28 % for each of the years ended December 31, 2024, 2023 and 2022, respectively.

Revenue from customers outside of the United States was approximately 26 %, 27 % and 28 % for each of

Sprout Social, Inc.

Notes to Consolidated Financial Statements

the years ended December 31, 2025, 2024 and 2023, respectively.

Revenue by geographical region is as follows (in thousands):

16 unchanged sentences

Net loss per share, basic and diluted $ ( 0.74 ) $ ( 1.09 ) $ ( 1.19 )

Sprout Social, Inc.

Notes to Consolidated Financial Statements

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net los s per share for each period, as the impact of including them would have been anti-dilutive.

7 unchanged sentences

Fair Value Measurements

The Company measures certain financial assets at fair value.

The Company measures certain financial assets and liabilities at fair value.

Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market.

3 unchanged sentences

Unobservable inputs that are supported by little or no market activity.

The following tables present information about the Company’s financial assets that are measured at fair value and indicate the fair value hierarchy of the valuation inputs used (in thousands):

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value and indicate the fair value hierarchy of the valuation inputs used (in thousands):

December 31, 2025

Level 1 Level 2 Level 3 Total

Marketable Securities:

Corporate bonds — 3,745 — 3,745

Total assets $ — $ 3,745 $ — $ 3,745

Contingent consideration — — 8,873 8,873

Total liabilities $ — $ — $ 8,873 $ 8,873

December 31, 2024

1 unchanged sentence

Marketable Securities:

Commercial paper $ — $ 33,287 $ — $ 33,287

Corporate bonds — 3,745 — 3,745

Treasury securities — 495 — 495

agency securities — 4,289 — 4,289

Asset-backed securities — 367 — 367

Total assets $ — $ 3,745 $ — $ 3,745

Marketable securities are classified within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market.

The carrying amounts of certain financial instruments, including cash held in banks, cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their short-term maturities and are excluded from the fair value tables above.

As of December 31, 2024 and December 31, 2023, the Company held investment-grade marketable securities which were accounted for as available-for-sale securities.

There was not a

There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.

The contingent consideration as presented in the fair value table above relates to the NewsWhip acquisition , and represents the future potential earnout payments based on the achievement of specified financial performance metrics through June 30, 2027.

R efer to Note 4 for further discussion of the acquisition.

The fair value of the contingent consideration was determined using a scenario-based approach.

The model includes significant unobservable inputs including the discount rate and projected revenues

Sprout Social, Inc.

Notes to Consolidated Financial Statements

significant difference between the amortized cost and fair value of these securities.

The gross unrealized gains and losses associated with these securities were immaterial in the periods presented

The following table classifies our marketable securities by contractual maturity (in thousands):

December 31, 2024 December 31, 2023

Due in one year or less $ 3,745 $ 44,645

Due after one year and within two years — 3,699

Total $ 3,745 $ 48,344

over the earn-out period.

The contingent consideration was classified as Level 3 within the fair value hierarchy.

The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved.

The current and non-current portions of contingent consideration are recorded to Accrued expenses and other and Other noncurrent liabilities, respectively, within the consolidated balance sheets.

The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):

Contingent consideration liability as of NewsWhip acquisition date $ 8,450

Change due to accretion 423

Contingent consideration liability as of December 31, 2025

Marketable securities are classified within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market.

The Company’s marketable securities, which were accounted for as available-for-sale securities, matured as of June 30, 2025.

There was not a significant difference between the amortized cost and fair value of these securities in the periods presented, and the gross unrealized gains and losses associated with these securities were immaterial.

There were no available-for-sale securities as of December 31, 2025.

Employee Benefit Plan

3 unchanged sentences

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 8. Financial Statements and Supplementary Data