Sprout Social, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Sprout Social, Inc. Consolidated Financial Statements As of December 31, 2025 and 2024 and for the Years Ended December 31, 2025, 2024 and 2023 Page(s) Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 96 Consolidated Balance Sheets as of December 31, 202 5 and 202 4 99 Consolidated Statements of Operations for the Years Ended December 31, 202 5 , 202 4 and 202 3 100 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 202 5 , 202 4 and 202 3 101 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 202 5 , 202 4 and 202 3 102 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 5 , 202 4 and 202 3 103 Notes to Consolidated Financial Statements 105 95 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Sprout Social, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Sprout Social, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 96 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 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 As described in Note 1 to the consolidated financial statements, the Company generates revenues from subscriptions to the Company’s web-based social media management platform under a software-as-a-service model. The Company’s subscriptions can range from monthly to one-year or multi-year arrangements and are generally non-cancellable. The Company’s customers do not have the right to take possession of the online software solution. 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. The Company’s subscription revenue was $453.0 million for the year ended December 31, 2025. The principal considerations for our determination that performing procedures relating to revenue recognition – subscription revenue is a critical audit matter are the high degree of auditor effort in performing procedures and evaluating audit evidence related to the Company’s subscription revenue. 97 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 subscription revenue recognition process, including controls over the recording of subscription revenue when control is transferred to the customer. These procedures also included, among others, (i) testing, on a sample basis, the completeness, accuracy and occurrence of subscription revenue recognized by obtaining and inspecting source documents, such as invoices, customer agreements, and cash receipts from customers, where applicable; 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 Chicago, Illinois February 27, 2026 We have served as the Company’s auditor since 2018. 98 Sprout Social, Inc. Consolidated Balance Sheets (in thousands, except share data) December 31, 2025 2024 Assets Current assets Cash and cash equivalents $ 95,268 $ 86,437 Marketable securities — 3,745 Accounts receivable, net of allowances of $ 2,719 and $ 2,169 at December 31, 2025 and 2024, respectively 100,996 84,033 Deferred commissions 26,995 20,184 Prepaid expenses and other assets 13,945 15,816 Total current assets 237,204 210,215 Marketable securities, noncurrent — — Property and equipment, net 9,864 10,951 Deferred commissions, net of current portion 57,049 51,653 Operating lease, right-of-use asset 9,810 11,326 Goodwill 167,122 121,315 Intangible assets, net 39,733 21,914 Other assets, net 2,280 967 Total assets $ 523,062 $ 428,341 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 10,115 $ 6,984 Deferred revenue 205,639 178,585 Operating lease liability 2,664 3,747 Accrued wages and payroll related benefits 20,549 20,567 Accrued expenses and other 17,294 10,869 Total current liabilities 256,261 220,752 Revolving credit facility 40,000 25,000 Deferred revenue, net of current portion 752 1,101 Operating lease liability, net of current portion 12,055 14,543 Other noncurrent liabilities 10,572 351 Total liabilities 319,640 261,747 Commitments and contingencies (Note 11) Stockholders’ equity Class A common stock, par value $ 0.0001 per share; 1,000,000,000 shares authorized; 56,576,444 and 53,607,556 shares issued and outstanding, respectively, at December 31, 2025; 54,219,684 and 51,277,740 shares issued and outstanding, respectively, at December 31, 2024 5 4 Class B common stock, par value $ 0.0001 per share; 25,000,000 shares authorized; 6,156,301 and 5,949,357 shares issued and outstanding, respectively, at December 31, 2025; 6,687,582 and 6,480,638 shares issued and outstanding, respectively, at December 31, 2024 1 1 Additional paid-in capital 638,894 558,391 Treasury stock, at cost ( 37,768 ) ( 37,422 ) Accumulated other comprehensive loss — 3 Accumulated deficit ( 397,710 ) ( 354,383 ) Total stockholders’ equity 203,422 166,594 Total liabilities and stockholders’ equity $ 523,062 $ 428,341 See Notes to Consolidated Financial Statements. 99 Sprout Social, Inc. Consolidated Statements of Operations (in thousands, except share and per share data) Year Ended December 31, 2025 2024 2023 Revenue Subscription $ 453,014 $ 402,022 $ 330,458 Professional services and other 4,533 3,886 3,185 Total revenue 457,547 405,908 333,643 Cost of revenue Subscription 101,119 90,305 75,076 Professional services and other 1,576 1,170 1,192 Total cost of revenue 102,695 91,475 76,268 Gross profit 354,852 314,433 257,375 Operating expenses Research and development 101,279 102,794 79,550 Sales and marketing 190,559 184,122 168,091 General and administrative 106,467 87,873 79,011 Total operating expenses 398,305 374,789 326,652 Loss from operations ( 43,453 ) ( 60,356 ) ( 69,277 ) Interest expense ( 2,501 ) ( 3,525 ) ( 2,754 ) Interest income 3,418 3,973 7,021 Other expense, net ( 204 ) ( 1,393 ) ( 768 ) Loss before income taxes ( 42,740 ) ( 61,301 ) ( 65,778 ) Income tax expense 587 670 649 Net loss $ ( 43,327 ) $ ( 61,971 ) $ ( 66,427 ) Net loss per share attributable to common shareholders, basic and diluted $ ( 0.74 ) $ ( 1.09 ) $ ( 1.19 ) Weighted-average shares outstanding used to compute net loss per share, basic and diluted 58,625,925 56,935,910 55,664,404 See Notes to Consolidated Financial Statements. 100 Sprout Social, Inc. Consolidated Statements of Comprehensive Loss (in thousands) Year Ended December 31, 2025 2024 2023 Net loss $ ( 43,327 ) $ ( 61,971 ) $ ( 66,427 ) Other comprehensive loss: Net unrealized gain (loss) on available-for-sale securities, net of tax ( 3 ) 80 292 Comprehensive loss $ ( 43,330 ) $ ( 61,891 ) $ ( 66,135 ) See Notes to Consolidated Financial Statements. 101 Sprout Social, Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share data) Voting Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Amount Shares Amount Balances at December 31, 2022 55,023,343 $ 5 $ 401,419 3,057,448 $ ( 32,733 ) $ ( 369 ) $ ( 225,985 ) $ 142,337 Exercise of stock options 30,000 — 29 29 Stock-based compensation expense 68,002 68,002 Issuance of common stock from settlement of equity awards 1,122,902 — — Taxes paid related to net share settlement of equity awards 41,527 ( 2,380 ) ( 2,380 ) Issuance of common stock in connection with employee stock purchase plan 59,514 2,339 2,339 Other comprehensive loss, net of tax 292 292 Net loss ( 66,427 ) ( 66,427 ) Balances at December 31, 2023 56,235,759 5 471,789 3,098,975 ( 35,113 ) ( 77 ) ( 292,412 ) 144,192 Exercise of stock options 27,010 — 29 29 Stock-based compensation expense 84,617 84,617 Issuance of common stock from settlement of equity awards 1,427,291 — — Taxes paid related to net share settlement of equity awards 49,913 ( 2,309 ) ( 2,309 ) Issuance of common stock in connection with employee stock purchase plan 68,318 1,956 1,956 Other comprehensive gain, net of tax 80 80 Net loss ( 61,971 ) ( 61,971 ) Balances at December 31, 2024 57,758,378 5 558,391 3,148,888 ( 37,422 ) 3 ( 354,383 ) 166,594 Stock-based compensation expense 79,167 79,167 Issuance of common stock from settlement of equity awards 1,704,430 1 1 Taxes paid related to net share settlement of equity awards 26,944 ( 346 ) ( 346 ) Issuance of common stock in connection with employee stock purchase plan 94,105 1,336 1,336 Other comprehensive gain, net of tax ( 3 ) ( 3 ) Net loss ( 43,327 ) ( 43,327 ) Balances at December 31, 2025 59,556,913 $ 6 $ 638,894 3,175,832 $ ( 37,768 ) $ — $ ( 397,710 ) $ 203,422 See Notes to Consolidated Financial Statements. 102 Sprout Social, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities Net loss $ ( 43,327 ) $ ( 61,971 ) $ ( 66,427 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization of property, equipment and software 3,783 3,890 3,137 Amortization of line of credit issuance costs 229 206 86 Accretion of discount on marketable securities ( 7 ) ( 406 ) ( 3,203 ) Amortization of acquired intangible assets 7,030 6,151 3,541 Amortization of deferred commissions 24,077 16,347 26,582 Amortization of right-of-use operating lease asset 1,517 1,827 1,553 Stock-based compensation expense 78,719 84,303 67,704 Provision for accounts receivable allowances 3,559 1,709 2,418 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 Accounts receivable ( 18,267 ) ( 22,253 ) ( 26,982 ) Prepaid expenses and other current assets 1,514 ( 5,452 ) 444 Deferred commissions ( 36,284 ) ( 34,219 ) ( 40,540 ) Accounts payable and accrued expenses 626 3,124 ( 226 ) Deferred revenue 22,482 38,230 41,918 Lease liabilities ( 3,317 ) ( 3,595 ) ( 3,549 ) Net cash provided by operating activities 43,427 26,321 6,456 Cash flows from investing activities Expenditures for property and equipment ( 4,106 ) ( 2,950 ) ( 2,073 ) Payments for business acquisition, net of cash acquired ( 51,790 ) ( 1,409 ) ( 145,636 ) Purchases of marketable securities — — ( 63,085 ) Proceeds from maturity of marketable securities 3,750 45,085 118,621 Proceeds from sale of marketable securities — — 5,538 Net cash (used in) provided by investing activities ( 52,146 ) 40,726 ( 86,635 ) Cash flows from financing activities Borrowings from line of credit 32,000 — 75,000 Repayments of line of credit ( 17,000 ) ( 30,000 ) ( 20,000 ) Payments for line of credit issuance costs ( 486 ) — ( 1,031 ) Proceeds from exercise of stock options — 29 29 Proceeds from employee stock purchase plan 1,336 1,956 2,339 Employee taxes paid related to the net share settlement of stock-based awards ( 346 ) ( 2,309 ) ( 2,380 ) Net cash provided by (used in) financing activities 15,504 ( 30,324 ) 53,957 103 Sprout Social, Inc. Consolidated Statements of Cash Flows (in thousands) Net increase (decrease) in cash, cash equivalents and restricted cash 6,785 36,723 ( 26,222 ) Cash, cash equivalents, and restricted cash Beginning of year 90,418 53,695 79,917 End of year $ 97,203 $ 90,418 $ 53,695 Reconciliation of cash, cash equivalents, and restricted cash Cash and cash equivalents $ 95,268 $ 86,437 $ 49,760 Restricted cash, included in prepaid expenses and other assets 1,935 3,981 3,935 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 97,203 $ 90,418 $ 53,695 Supplemental cash flow information Cash paid for interest $ 1,889 $ 3,635 $ 1,588 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 Non-cash adjustment to operating lease right-of-use assets from lease modifications $ — $ 3,795 $ — 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. 104 Sprout Social, Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Sprout Social, Inc. (“Sprout Social” or the “Company”), a Delaware corporation, began operating on April 21, 2010 to design, develop and operate a web-based comprehensive social media management tool enabling companies to manage and measure their online presence. Customers access their accounts online via a web-based interface or a mobile application. Some customers also purchase the Company’s professional services, which primarily consist of consulting and training services. The Company’s fiscal year end is December 31. The Company’s customers are primarily located throughout the United States, and a portion of customers are located in foreign countries. The Company is headquartered in Chicago, Illinois. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company’s estimates and judgments include, but are not limited to, the estimated period of benefit for incremental costs of obtaining a contract with a customer, the incremental borrowing rate for operating leases, calculation of allowance for credit losses, valuation of assets and liabilities acquired as part of business combinations, useful lives of long-lived assets, stock-based compensation, income taxes, commitments and contingencies and litigation, among others. Segment Information The Company operates as one operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information for purposes of making operating decisions, assessing financial performance and allocating resources. The Company’s CODM evaluates financial information on a consolidated basis and considers Net Loss within the consolidated statements of operations to be a key measurement of profitability in evaluating financial performance, comparing budget to actuals, and making resource allocation decisions. Further, the CODM reviews and utilizes functional expenses (cost of revenues, sales and marketing, research and development, and general and administrative) at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net loss are interest expense, interest income, other expense, net, and the provision for (benefit from) income taxes, which are reflected in the consolidated statements of operations. As the Company operates as one operating segment, all required segment financial information is found in the consolidated financial statements. 105 Sprout Social, Inc. Notes to Consolidated Financial Statements Fair Value of Financial Instruments The Company has the following financial instruments: 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 The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. Interest earned on cash and cash equivalents is recorded as interest income in the consolidated statements of operations. Restricted Cash 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 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. Marketable Securities Marketable securities consist of corporate bonds, commercial paper, U.S. Treasury securities, asset-backed securities, and agency securities. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. 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. 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, 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 Accounts receivable primarily consist of amounts billed and currently due from customers, net of an allowance for credit losses. Subscription fees billed in advance of the related subscription term represent contract liabilities and are presented as accounts receivable and deferred revenues upon establishment of an unconditional right to payment under non-cancellable contracts. Our typical payment terms provide for customer payment within 30 days of the date of the contract. Accounts receivable are subject to collection risk. 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 106 Sprout Social, Inc. Notes to Consolidated Financial Statements 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. The allowance for credit losses was $ 2.7 million and $ 2.2 million as of December 31, 2025 and 2024, respectively. The activity related to the allowance for credit losses for the years ended December 31, 2025, 2024 and 2023 was as follows (in thousands): Balance at December 31, 2022 $ 1,789 Additions 2,418 Write-offs, net of recoveries ( 2,030 ) Balance at December 31, 2023 $ 2,177 Additions 1,709 Write-offs, net of recoveries ( 1,717 ) Balance at December 31, 2024 2,169 Additions 3,559 Write-offs, net of recoveries ( 3,009 ) Balance at December 31, 2025 $ 2,719 Concentration of Credit Risk Financial instruments that potentially expose the Company to concentrations of credit risk are primarily cash and cash equivalents, accounts receivable and marketable securities. The Company's cash and cash equivalents are generally held with large financial institutions. Although the Company's deposits may exceed federally insured limits, the financial institutions that the Company uses have high investment-grade credit ratings and, as a result, the Company believes that, as of December 31, 2025, its risk relating to deposits exceeding federally insured limits was not significant. The Company has credit risk regarding trade accounts receivable as the Company generally does not require collateral. Allowances are maintained for potential credit losses. 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, all of which matured during 2025, consisted of investment-grade corporate bonds, commercial paper, U.S. Treasury securities, asset-backed securities, and agency securities. In recent periods, the Company has limited the amount of investments in any single issuer to minimize credit risk exposure related to marketable securities. 107 Sprout Social, Inc. Notes to Consolidated Financial Statements Property and Equipment Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Computer equipment and hardware 3 - 5 years Furniture and fixtures 3 - 7 years Internal-use software 3 years Leasehold improvements Lesser of useful life or remaining lease term Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are written off, and any resulting gain or loss is credited or charged to income. Goodwill Goodwill consists of the excess purchase price over the fair value of net assets acquired in purchase business combinations. The Company conducts a test for the impairment of goodwill on at least an annual basis as of October 1 st or sooner if indicators of impairment arise. The Company first assesses qualitative factors to determine whether it is more likely than not that goodwill is impaired. As part of the qualitative assessment, the Company evaluates factors including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance of its reporting unit. The Company has a single reporting unit. If the Company concludes that it is more-likely-than-not that its single reporting unit is impaired or if the Company elects not to perform the optional qualitative assessment, a quantitative assessment is performed. For the quantitative assessment, the fair value of the Company’s reporting unit is compared with the carrying amount of net assets, including goodwill, related to the reporting unit. The Company recognizes an impairment charge for the amount, if any, by which the carrying amount of a reporting unit exceeds the fair value of the reporting unit. The Company did no t record any impairment loss during the years ended December 31, 2025, 2024 and 2023. Impairment of Long-Lived Assets The Company evaluates the recoverability of its long-lived assets, which includes property and equipment and intangible assets, whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability of an asset is measured by comparison of its carrying amount to the anticipated future undiscounted cash flows that the asset is expected to generate. If that comparison indicates that the carrying amount is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset exceeds its fair value. The Company did no t record any impairment loss during the years ended December 31, 2025, 2024 and 2023. Revenue Recognition The Company generates revenues from subscriptions to the Company’s web-based social media management platform under a software-as-a-service model. Our subscriptions can range from monthly to one-year or multi-year arrangements and are generally non-cancellable. The Company’s customers do not have the right to take possession of the online software solution. 108 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. The Company determines revenue recognition through the following steps: • identify the contract with a customer; • identify the performance obligations in a contract; • determination of the transaction price; • allocate the transaction price to the performance obligations identified in the contract; and • recognize revenue when (or as) performance obligations are satisfied. Identify the contract with a customer A customer contract is generally identified when the Company and a customer have executed an agreement or online acceptance that requires the Company to grant access to its online software products and provide professional services in exchange for consideration from the customer. Identify the performance obligations in a contract A performance obligation is a promise to provide a distinct service or a series of distinct services. A service that is promised to a customer is distinct if the customer can benefit from the service either on its own or together with other readily available resources, and a company’s promise to transfer the service to the customer is separately identifiable from other promises in the contract. The Company has determined that subscriptions for its online software products are a distinct performance obligation, because no implementation work is required and the online software product is fully functional once a customer has access. In addition, the Company sells professional services consisting of, but not limited to, implementation fees, specialized training, one-time reporting services and recurring periodic reporting services. Professional services are distinct, as they are sold separately, and the customer can benefit from the services to make better use of the online product purchased. Determination of the transaction price The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company estimates any variable consideration it will be entitled at contract inception and will reassess as circumstances change, when determining the transaction price. The transaction price for subscription and professional services is generally fixed at contract inception; therefore, the Company’s contracts do not contain a significant amount of variable consideration. As a result, the amount of revenue recognized in the periods presented from performance obligations satisfied (or partially satisfied) in previous periods due to changes in the transaction price was not material. Allocate the transaction price to the performance obligations identified in the contract 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 109 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. Recognize revenue when (or as) performance obligations are satisfied Subscription revenues are recognized ratably over the contract terms beginning on the date the Company’s service is made available to customers, which typically begins on the commencement date of each contract as no implementation work is required. The Company’s customers do not have the right to take possession of the online software solution. The Company’s subscription service arrangements are generally non-cancellable and do not provide for refund of subscription fees. 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. Professional services revenue represents less than 1% of revenue for the periods presented. Sales Commissions Sales commissions earned by our sales force are considered incremental costs of obtaining a contract with a customer. Sales commissions are paid on initial contracts with new customers and for expansion of contracts with existing customers. Commissions are not paid on customer renewals. Sales commissions are deferred and amortized on a straight-line basis over a period of benefit that the Company has determined to be five years. On an annual basis and whenever events or changes in circumstances occur that could impact the recoverability of these assets, the Company assesses the expected period of benefit by taking into consideration the products sold, mix of customers, expected customer life, expected contract renewals, technology life cycle and other factors. Based on the assessment performed during the first quarter of 2024, the Company updated the period of benefit from three years to five years . This change in accounting estimate was effective January 1, 2024 and is being accounted for prospectively in the consolidated financial statements. For the year ended December 31, 2024, the change in amortization period resulted in a $ 14.3 million reduction to sales and marketing expense, or an increase of $ 0.25 per share, basic and diluted. The effects of this change in estimate were calculated based on the carrying value of deferred commissions as of December 31, 2023. Deferred commissions during the year ended December 31, 2025 increased $ 12.2 million as a result of deferring incremental costs of obtaining contracts with customers of $ 36.3 million, which was offset by $ 24.1 million of amortization. Deferred commissions during the year ended December 31, 2024 increased $ 17.9 million as a result of deferring incremental costs of obtaining contracts with customers of $ 34.2 million, which was offset by $ 16.3 million of amortization. The Company periodically reviews the deferred sales commissions for impairment and noted no impairment loss for the years ended December 31, 2025, 2024 and 2023. Cost of Revenues 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- 110 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. Advertising Costs Advertising costs primarily include online advertising on search engines. Advertising costs are expensed as incurred and included as a component of sales and marketing expenses. The Company incurred approximately $ 7.9 million, $ 6.1 million and $ 5.1 million in advertising costs during the years ended December 31, 2025, 2024 and 2023, respectively. Research and Development Costs Research and development expenses include payroll, employee benefits and other expenses associated with product development. Capitalized Internal-Use Software Costs Certain payroll and stock compensation costs incurred to develop functionality for the Company’s platform, as well as certain upgrades and enhancements that are expected to result in enhanced functionality are capitalized during the development stage. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, direct and incremental costs are capitalized until the software is substantially complete and ready for its intended use. Capitalized internal-use software costs are included within property and equipment, net on the consolidated balance sheets, and are amortized over the estimated useful life of the software, which is typically three years . Stock-Based Compensation The Company recognizes compensation expense for equity awards based on the grant‐date fair value over the remaining requisite service period for the award. For equity awards with only service conditions, the Company recognizes compensation expense on a straight-line basis over the remaining requisite service period for the award. 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 Company recognizes forfeitures as they occur. Foreign Currency The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Accordingly, monetary balance sheet accounts are remeasured using exchange rates in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Expenses are generally remeasured at the average exchange rates for the period. Foreign currency related gains and losses have been immaterial during the periods presented. Leases The Company determines if an arrangement is a lease at inception, and all significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use, or ROU, assets and operating lease liabilities are recognized at commencement based on the present value of fixed payments not yet paid over the remaining lease term. 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 111 Sprout Social, Inc. Notes to Consolidated Financial Statements recorded. 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. Additionally, the Company has elected to combine lease and non-lease components and account for them as a single component. ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent its obligations to make lease payments arising from the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise the option. The Company uses its incremental borrowing rate in determining the lease liabilities, as its leases generally do not provide an implicit rate. The incremental borrowing rate is an estimate of the collateralized borrowing rate the Company would incur on future lease payments over a similar term based on the information available at the commencement date. The Company does not have any finance leases. Commitments and Contingencies The Company evaluates all pending or threatened commitments and contingencies, if any, that are reasonably likely to have a material effect on its operations or financial position. The Company assesses the probability of an adverse outcome and records a provision for a liability when management believes that it is probable that a liability has been incurred and the amount can be reasonably estimated. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that these assets are believed to be more likely than not to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. To be recognized in the financial statements, a tax benefit must be at least more-likely-than-not of being sustained based on technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more-likely-than-not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of provision for income taxes. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheets, as applicable. Net Loss per Share The Company calculates basic net loss per share by dividing net loss attributable to common shareholders by the weighted-average number of the Company’s common stock shares outstanding during the respective period. Net loss attributable to common shareholders is net loss minus convertible preferred stock dividends declared, of which there were none during the periods presented. 112 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. Under these methods, the numerator and denominator of the net loss per share calculation are adjusted for these securities if the impact of doing so increases net loss per share. During the periods presented, the impact is to decrease net loss per share and therefore the Company is precluded from adjusting its calculation for these securities. As a result, diluted net loss per share is calculating using the same formula as basic net loss per share. Business Combinations 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. During the measurement period, the Company may record adjustments to the fair value of tangible and intangible assets acquired and liabilities assumed, with a corresponding offset to goodwill. 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 Restructuring charges consist primarily of employee severance, one-time termination benefits related to the reduction of the Company’s workforce, and other costs. The Company accounts for one-time employment benefit arrangements in accordance with ASC Topic 420, Exit or Disposal Cost Obligations . 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. 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. 113 Sprout Social, Inc. Notes to Consolidated Financial Statements 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 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. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. 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. 2. Revenue Recognition Disaggregation of Revenue 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. 114 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 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. The deferred revenue balance is influenced by several factors, including the compounding effects of renewals, invoice duration, timing and size. 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, 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, 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. 3. Property and Equipment As of the dates specified below, property and equipment consisted of the following (in thousands): As of December 31, 2025 2024 Leasehold improvements $ 11,625 $ 18,733 Furniture and fixtures 4,333 4,201 Computer equipment and hardware 6,062 5,144 Internal-use software 6,210 3,865 Total property and equipment 28,230 31,943 Less: Accumulated depreciation and amortization ( 18,366 ) ( 20,992 ) Total property and equipment, net $ 9,864 $ 10,951 The Company recognized depreciation and amortization expense on property and equipment of $ 3.8 million, $ 3.9 million and $ 3.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. 4. 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. NewsWhip’s 115 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): 116 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) 150 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. 117 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 $ 24,850 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. On August 2, 2023 , the Company completed its acquisition of all the outstanding equity of Tagger Media, Inc. (“Tagger”), an influencer marketing and social intelligence platform. The Company acquired Tagger in order to expand into the influencer marketing category. Tagger’s platform enables marketers to discover influencers, plan and manage campaigns, analyze competitor strategies, report on trends and measure return on investment. 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 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. 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. The allocation of fair value of purchase consideration was finalized in the second quarter of 2024. 118 Sprout Social, Inc. Notes to Consolidated Financial Statements The following table summarizes the fair values of assets acq uired and liabilities assumed as of the date of acquisition (in thousands): August 2, 2023 Cash and cash equivalents $ 4,648 Accounts receivable 2,979 Other current and noncurrent assets 932 Intangible assets 27,800 Accounts payable, accrued expenses and other liabilities ( 1,758 ) Deferred revenue ( 3,243 ) Net assets acquired, excluding Goodwill 31,358 Goodwill 112,405 Total consideration $ 143,763 Cash and cash equivalents acquired ( 4,648 ) Cash paid for acquisition of business, net of cash acquired $ 139,115 The Company engaged a third-party valuation expert to aid its analysis of the acquired identifiable intangible assets. 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 were valued using the multi-period excess-earnings method. The Company 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. Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis. 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: Fair Value Expected Useful Life Customer Relationships $ 12,400 7 years Acquired Technology 14,100 5 years Trademark 1,300 5 years $ 27,800 The Company has included the financial results of Tagger in its consolidated financial statements from the date of acquisition. Separate financial results and pro forma financial information for Tagger have not been presented as the effect of this acquisition was not material to the Company’s financial results. 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 119 Sprout Social, Inc. Notes to Consolidated Financial Statements 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. The purchase price holdback was paid in full in January 2024. The excess of purchase consideration over the fair value of net assets acquired was recorded as goodwill, and is primarily attributable to expected post-acquisition synergies from integrating the technology into Sprout Social’s platform. 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. The allocation of fair value of purchase consideration was finalized in the fourth quarter of 2023. The following table summarizes the fair values of assets acq uired and liabilities assumed as of the date of acquisition (in thousands): January 19, 2023 Cash and cash equivalents $ 366 Intangible assets 1,800 Deferred tax liability ( 477 ) Other net tangible assets and liabilities assumed ( 4 ) Net assets acquired, excluding Goodwill 1,685 Goodwill 6,611 Total consideration $ 8,296 Deferred consideration related to holdback ( 1,498 ) Cash and cash equivalents acquired ( 366 ) Cash paid for acquisition of business, net of cash acquired $ 6,432 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: Fair Value Expected Useful Life Customer Relationships $ 200 1 year Acquired Technology 1,600 5 years $ 1,800 The Company has included the financial results of Repustate in its consolidated financial statements from the date of acquisition. 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. 120 Sprout Social, Inc. Notes to Consolidated Financial Statements Goodwill 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 $ 121,315 Addition - NewsWhip acquisition 45,807 Goodwill balance as of December 31, 2025 $ 167,122 5. Intangible Assets As of the dates specified below, intangible assets, net consisted of the following (in thousands): As of December 31, 2025 2024 Customer relationships 35,100 19,900 Acquired Technology 24,100 15,700 Trademark 2,100 1,300 Contract backlog 450 — 61,750 36,900 Less: Accumulated amortization Customer relationships ( 12,685 ) ( 10,010 ) Acquired Technology ( 8,449 ) ( 4,608 ) Trademark ( 695 ) ( 368 ) Contract backlog ( 188 ) — ( 22,017 ) ( 14,986 ) Intangible assets, net $ 39,733 $ 21,914 Intangible assets are all finite-lived and are being amortized on a straight-line basis over their expected useful lives. Amortization of intangible assets totaled $ 7.0 million, $ 6.2 million, and $ 3.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. The expected future amortization of intangible assets as of December 31, 2025 is summarized as follows (in thousands): Years Ending December 31, Amortization Expense 2026 9,445 2027 9,183 2028 7,606 2029 5,783 2030 4,278 Thereafter 3,438 $ 39,733 121 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: Asset Class Weighted-Average Amortization Period (in years) Customer relationships 7.0 Acquired Technology 5.0 Trademark 5.0 Contract backlog 1.0 All Intangible Assets 6.1 6. Operating Leases The Company has operating lease agreements for offices in Chicago, Illinois; Seattle, Washington; Dublin, Ireland; and Kraków, Poland. 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 . Under the terms of the lease agreements, the Company is also responsible for its proportionate share of taxes and operating costs, which are treated as variable lease costs. The Company’s operating leases typically contain options to extend or terminate the term of the lease. The Company currently does not include any options to extend leases in its lease terms as it is not reasonably certain to exercise them. As such, it has recorded lease obligations only through the initial optional termination dates above. 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): Assets Operating lease right-of-use assets $ 9,810 Liabilities Operating lease liabilities 2,664 Operating lease liabilities, non-current 12,055 Total operating lease liabilities $ 14,719 The following table provides information about leases in the consolidated statements of operations (in thousands): 122 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. There was no sublease rental income recognized for any of the periods presented. As of December 31, 2025, the weighted-average remaining lease term is 5.8 years and the weighted-average discount rate is 7.0 %. Remaining maturities of operating lease liabilities as of December 31, 2025 are as follows (in thousands): Years ending December 31, 2026 $ 3,586 2027 3,364 2028 2,708 2029 2,757 2030 2,508 Thereafter 2,926 Total future minimum lease payments $ 17,849 Less: imputed interest ( 3,130 ) Total operating lease liabilities $ 14,719 7. Income Taxes The components of loss before income taxes are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Domestic $ ( 44,078 ) $ ( 63,221 ) $ ( 64,497 ) Foreign 1,338 1,920 ( 1,281 ) Loss before income taxes $ ( 42,740 ) $ ( 61,301 ) $ ( 65,778 ) 123 Sprout Social, Inc. Notes to Consolidated Financial Statements The components of income tax expense (benefit) are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Current taxes Federal $ 28 $ — $ — State 262 13 — Foreign 888 657 820 Current tax expense (benefit) 1,178 670 820 Deferred taxes Federal 115 86 — State ( 12 ) — — Foreign ( 694 ) ( 86 ) ( 171 ) Deferred tax expense (benefit) ( 591 ) — ( 171 ) Income tax expense (benefit) $ 587 $ 670 $ 649 124 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 after the adoption of ASU 2023-09 is as follows (in thousands): Year Ended December 31, 2025 Amount Tax Rate Federal statutory income tax $ ( 8,975 ) 21.00 % State and local income taxes (1) 250 ( 0.59 ) Foreign tax effects Philippines 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 ) Tax credits 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. 125 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, 2024 2023 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 Foreign tax 79 ( 0.13 ) ( 75 ) 0.11 Section 162(m) limitation 845 ( 1.38 ) 1,693 ( 2.57 ) Other 337 ( 0.54 ) 304 ( 0.46 ) Valuation allowance net of deferred tax assets 5,367 ( 8.76 ) 18,389 ( 27.96 ) Stock-based compensation 10,817 ( 17.65 ) 2,051 ( 3.12 ) R&D Credit ( 2,696 ) 4.40 ( 6,100 ) 9.27 Acquisitions — — 603 ( 0.92 ) Return to provision ( 877 ) 1.43 20 ( 0.03 ) Effective income tax rate $ 670 ( 1.1 ) % $ 649 ( 1.0 ) % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax 126 Sprout Social, Inc. Notes to Consolidated Financial Statements purposes. 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, 2025 2024 Deferred tax assets Net operating loss carryforwards $ 84,758 $ 79,172 Research & Development Costs 17,947 22,629 Operating lease liability 3,539 4,487 Stock-based compensation 3,080 4,555 Research & Development Credits 11,285 9,753 Other 3,178 2,543 Total deferred tax assets 123,787 123,139 Deferred tax liabilities Fixed assets ( 754 ) ( 1,747 ) Intangible assets ( 7,680 ) ( 4,939 ) Deferred commissions and bonus ( 21,734 ) ( 18,634 ) Operating lease right-of-use asset ( 2,407 ) ( 2,785 ) Other ( 1,367 ) ( 1,303 ) Total deferred tax liabilities ( 33,942 ) ( 29,408 ) Less: Valuation allowance ( 93,861 ) ( 94,037 ) Net deferred tax asset (liability) $ ( 4,016 ) $ ( 306 ) The Company assesses all available positive and negative evidence to evaluate the realizability of its deferred tax assets and whether or not a valuation allowance is necessary. The Company’s three-year cumulative loss position was significant negative evidence in assessing the need for a valuation allowance. 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 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. 127 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 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. The Company recognizes tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained by the tax authority upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. If a tax position meets the more-likely-than-not threshold, the Company measures the tax position as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. The reconciliation of uncertain tax positions at the beginning and end of the years below is as follows (in thousands): As of December 31, 2025 2024 2023 Beginning balance 3,354 2,456 — Gross increase (decrease) related to prior year positions ( 100 ) — — Gross decrease related to settlements — — — Gross increase related to current year positions 508 898 2,456 Ending balance 3,762 3,354 2,456 At December 31, 2025, approximately $ 3.8 million would reduce the Company’s annual effective tax rate, if recognized. The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties related to uncertain tax positions are recorded as a component of income tax expense. In the years ended December 31, 2025, 2024, and 2023, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Due to its operating loss carryforwards, the U.S. federal statute of limitations remains open for tax year 2010 and onward and the Company continues to be subject to examination by the Internal Revenue Service for tax years 2010 and later. 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): 128 Sprout Social, Inc. Notes to Consolidated Financial Statements Year Ended December 31, 2025 Canada $ 648 Other jurisdictions (1) 723 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. 8. Revolving Line of Credit On August 1, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the banks and other financial institutions or entities party thereto as lenders and MUFG Bank, LTD. as administrative agent and collateral agent. 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. 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 129 Sprout Social, Inc. Notes to Consolidated Financial Statements 6.71 %. 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 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). 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. 9. Stockholders’ Equity Common Stock As of December 31, 2025, the Company has authorized 1,000,000,000 shares of Class A common stock with a par value of $ 0.0001 per share and 25,000,000 shares of Class B common stock with a par value of $ 0.0001 per share. Each holder of Class A and Class B common stock shall be entitled to one and ten votes, respectively, for each share held as of the record date and shall be entitled to receive dividends, when, as and if declared by the Board of Directors. Each share of Class B common stock is convertible into one share of Class A common stock at any time and will convert automatically upon certain transfers and upon the earlier of (i) the first date on which the voting power of all then outstanding shares of Class B common stock represents less than 10 % of the combined voting power of all then outstanding shares of Class A common stock and Class B common stock, (ii) the date that is seven ( 7 ) years from the closing of the IPO on December 17, 2019 and (iii) the date specified by a vote of the holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding shares of common stock will be identical. The total Class A and Class B common stock outstanding as of December 31, 2025 is 53,607,556 and 5,949,357 shares, respectively. 10. Incentive Stock 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 130 Sprout Social, Inc. Notes to Consolidated Financial Statements 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. 2019 Class B Incentive Award Plan (the “Class B Plan”), under which cash and equity incentive awards, for up to 550,000 shares of Class B common stock were, at the discretion of the Board of Directors, issued to employees, consultants, and directors of the Company, with the expectation that shares would only be issued to the Company’s CEO depending on the valuation of the Company in connection with the IPO and the achievement of market capitalization thresholds thereafter. There are no further grants authorized under the Class B Plan. The only awards granted as of December 31, 2025 are restricted stock units. Stock-based Compensation Expense Stock-based compensation expense is included in the consolidated statements of operations as follows (in thousands): Years Ended December 31, 2025 2024 2023 Cost of revenue $ 2,802 $ 3,936 $ 3,224 Research and development 25,162 25,619 18,478 Sales and marketing 22,783 31,544 30,116 General and administrative 27,972 23,204 15,886 Total stock-based compensation expense $ 78,719 $ 84,303 $ 67,704 For the periods presented, stock-based compensation expense consisted of expense from restricted stock units. There was no expense related to stock options. Restricted Stock Units 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. However, certain executive grants issued under the 2019 Plan require both the satisfaction of a service condition and a performance condition which includes the achievement of subscription revenue targets, prior to vesting. The table below summarizes the activity regarding unvested restricted stock units for the year ended December 31, 2025: 131 Sprout Social, Inc. Notes to Consolidated Financial Statements Restricted Stock Units Weighted Average Grant Date Fair Value Unvested at December 31, 2024 4,661,191 $ 47.34 Granted 6,355,991 16.18 Vested ( 1,731,374 ) 51.15 Forfeited ( 1,375,264 ) 36.90 Unvested at December 31, 2025 7,910,544 $ 23.28 The weighted-average grant date fair value per share for restricted stock units granted during the years ended December 31, 2025, 2024 and 2023 was $ 16.18 , $ 40.79 and $ 50.75 , respectively. 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. 11. Commitments and Contingencies Contractual Obligations The Company has non-cancellable minimum guaranteed purchase commitments for data and services. Material contractual commitments as of December 31, 2025 that are not disclosed elsewhere are as follows (in thousands): Years ending December 31, 2026 $ 86,842 2027 16,207 2028 12,612 2029 — 2030 — Thereafter — Total contractual obligations $ 115,661 Legal Matters 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. 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. The first action, captioned Munch v. Sprout Social, Inc., et al. 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’ 132 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 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 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 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; (3) Sprout Social’s partnership with Salesforce would not necessarily increase Sprout Social’s enterprise business; 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 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. Sprout Social, Inc. et al. (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 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 133 Sprout Social, Inc. Notes to Consolidated Financial Statements order on any summary judgment motions in the Consolidated Securities Action; (ii) a settlement or other mediated resolution in the Consolidated Securities Action; or (iii) as otherwise agreed to by the Parties (the “Stay Order”). Under the Stay Order, any supplemental derivative action filed in the same court will be consolidated with the Hannaway Derivative Action and subject to the terms of the Stay Order. On December 17, 2024, a second putative derivative action captioned Munch v. 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. 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. The outcomes of these actions are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The Company could be forced to expend significant resources in the defense of these actions and may not prevail. The Company currently is not able to estimate the possible cost from these matters, which are at an early stage, and the Company cannot be certain how long it may take to resolve these actions or the possible amount of any damages that the Company may be required to pay. Such amounts could be material to the Company’s financial statements. 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. Indemnification In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with third parties, including vendors, customers, investors and the Company’s directors and officers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. Historically, the Company has not incurred any significant costs as a result of such indemnification. 12. Geographic Data As described in the Summary of Significant Accounting Policies, the Company operates as one operating segment. Long-lived assets by geographical region are based on the location of the legal entity that owns the assets. As of December 31, 2025 and 2024, there were no significant long-lived assets held by entities outside of the United States. Revenue by geographical region is determined by location of the Company’s customers. Revenue from customers outside of the United States was approximately 26 %, 27 % and 28 % for each of 134 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): Year Ended December 31, 2025 2024 2023 Americas $ 365,417 $ 322,209 $ 262,290 EMEA 69,996 63,527 54,753 Asia Pacific 22,134 20,172 16,600 Total $ 457,547 $ 405,908 $ 333,643 13. Net Loss per Share Basic net loss per share is calculated by dividing the net loss by the weighted average number of outstanding shares of common stock each period. Diluted net loss per share is calculated by giving effect to all potential dilutive common stock equivalents, which includes stock options and restricted stock units. Because the Company incurred net losses each period, the basic and diluted calculations are the same. Basic and diluted net loss per share are the same for each class of common stock, as both Class A and Class B stockholders are entitled to the same liquidation and dividend rights. The following table presents the calculation for basic and diluted net loss per share (in thousands, except share and per share data): Year Ended December 31, 2025 2024 2023 Net loss attributable to common shareholders $ ( 43,327 ) $ ( 61,971 ) $ ( 66,427 ) Weighted average common shares outstanding 58,625,925 56,935,910 55,664,404 Net loss per share, basic and diluted $ ( 0.74 ) $ ( 1.09 ) $ ( 1.19 ) 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. As of December 31, 2025 2024 2023 Stock options outstanding — — 27,010 RSUs outstanding 7,910,544 4,661,191 3,724,707 Total potentially dilutive shares 7,910,544 4,661,191 3,751,717 135 Sprout Social, Inc. Notes to Consolidated Financial Statements 14. Fair Value Measurements 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. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows: • Level 1: Quoted prices in active markets for identical assets or liabilities. • Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs that are supported by little or no market activity. 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 Liabilities: Contingent consideration — — 8,873 8,873 Total liabilities $ — $ — $ 8,873 $ 8,873 December 31, 2024 Level 1 Level 2 Level 3 Total Assets: Marketable Securities: Corporate bonds — 3,745 — 3,745 Total assets $ — $ 3,745 $ — $ 3,745 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 136 Sprout Social, Inc. Notes to Consolidated Financial Statements 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. 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. 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 $ 8,873 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. 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. 15. Employee Benefit Plan The Company sponsors a qualified 401(k) defined contribution plan for the benefit of its employees. The Company made matching contributions to the plan totaling $ 3.6 million, $ 4.2 million and $ 3.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. 137 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.