Sprout Social Inc.

05/08/2026 | Press release | Distributed by Public on 05/08/2026 14:02

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I-Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, and in other parts of this Quarterly Report. See "Cautionary Note Regarding Forward-Looking Statements."
Overview
Sprout Social is a powerful, centralized platform that provides the critical business layer to unlock the massive commercial value of social media. We have made it increasingly easy to standardize on Sprout Social as the centralized system of record for social and to help customers maximize the value of this mission critical channel. Currently, tens of thousands of customers across more than 100 countries rely on our platform.
Introduced in 2011, our cloud software brings together social messaging, data and workflows in a unified system of record, intelligence and action. Operating across major networks, including X (formerly known as Twitter), Facebook, Instagram, TikTok, Pinterest, LinkedIn, Google, Reddit, Glassdoor and YouTube, and commerce platforms Facebook Shops, Shopify and WooCommerce, we provide organizations with a centralized platform to manage their social media efforts across stakeholders and business functions. Virtually every aspect of business has been impacted by social media, from marketing, sales, commerce and public relations to customer service, product and strategy, creating a need for an entirely new category of software. We offer our customers a centralized, secure and powerful platform to manage this broad, complex channel effectively across their organization.
We generate revenue primarily from subscriptions to our 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 during the contractual subscription term. Subscription revenue is recognized ratably over the contract terms beginning on the date the product is made available to customers, which typically begins on the commencement date of each contract. We also generate revenue from professional services related to our platform provided to certain customers, which is generally recognized at the time these services are provided to the customer. This revenue has historically represented less than 1% of our revenue and is expected to be immaterial for the foreseeable future.
Our tiered subscription-based model allows our customers to choose among four core plans to meet their needs. Each plan is licensed on a per user per month basis at prices dependent on the level of features offered. Additional product modules, which offer increased functionality depending on a customer's needs, can be purchased by the customer on a per user per month basis.
We generated revenue of $121.5 million and $109.3 million during the three months ended March 31, 2026 and 2025, respectively, representing growth of 11%. In the three months ended March 31, 2026, software subscriptions contributed 99% of our revenue.
We generated net losses of $6.3 million and $11.2 million during the three months ended March 31, 2026 and 2025, respectively, which included stock-based compensation expense of $18.1 million and $19.8 million, respectively. We expect to continue investing in the growth of our business and, as a result, generate net losses for the foreseeable future.
Macroeconomic and Geopolitical Conditions
As a company with a global footprint, we are subject to risks and exposures caused by significant events and their macroeconomic impacts, including, but not limited to, geopolitical instability and uncertainty, fluctuations in inflation, interest rates and currency exchange rates, volatility in the capital markets, tariffs and trade tensions, and related market uncertainty. We continuously monitor the direct and indirect impacts, and the potential for future impacts, of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.
Our current and prospective customers are impacted by these macroeconomic conditions to varying degrees. Potentially as a result of these various macroeconomic impacts on our current and prospective customers, we periodically have experienced more measured buying behavior by current and prospective customers and lengthening of the average sales cycle for certain types of customers and sales (including sales to prospective customers and expansion sales to current customers), which have contributed to a slowdown in our revenue growth as compared to historical levels. We believe macroeconomic uncertainty could persist, and as a result, we expect that some or all of these negative trends may emerge or recur during future quarters.
Acquisition of NewsWhip Group Holdings Limited
On July 30, 2025, we completed the acquisition of all of the outstanding voting shares of NewsWhip Group Holdings Limited ("NewsWhip"). NewsWhip's proprietary real-time media monitoring and predictive analytics provide insights into emerging trends and narratives, and allowed us 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. We funded the upfront cash payment with cash on hand and $32 million of borrowings under the Facility (as defined below). Refer to Note 11 - "Business Combinations" of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion.
The purchase price allocation as of the date of acquisition was based on a preliminary valuation and is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed become available. We expect to finalize the allocation of the purchase consideration as soon as practicable, pending any other adjustments to acquired assets or liabilities, but no later than 12 months from the acquisition date. We have included the financial results of NewsWhip in our unaudited condensed consolidated financial statements from the date of acquisition. The impact of NewsWhip's financial results following the date of acquisition were not significant to our consolidated financial statements.
Key Factors Affecting Our Performance
Acquiring new customers
We are focused on continuing to organically grow our customer base by increasing demand for our platform and penetrating our addressable market. Our growth strategy includes an increased focus on the larger enterprise market. For the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, while our total number of customers decreased, our number of customers contributing $30,000 or more in annualized recurring revenue ("ARR") and $50,000 or more in ARR increased. In addition, as we continue to focus on expanding our enterprise customer base, we have experienced and expect to continue to experience longer and more expansive average sale cycles and increased pricing pressure, which may be exacerbated by the macroeconomic and geopolitical factors described above. We expect these trends to continue as we remain focused on our most sophisticated prospects and customers.
Expanding within our current customer base
We believe that there is a substantial opportunity for organic growth within our existing customer base. Customers often begin by purchasing a small number of user subscriptions and then expand over time, increasing the number of users or social profiles, as well as purchasing additional product modules. Customers may then expand use-cases between various departments to drive collaboration across their organizations. Our sales and customer success efforts include encouraging organizations to expand use-cases to more fully realize the value from the broader adoption of our platform throughout an organization. We intend to continue to invest in enhancing awareness of our brand, creating additional uses for our products and developing more products, features and functionality of existing products, which we believe are vital to achieving increased adoption of our platform. In recent years, we have increased our focus on expanding our customers' use of our platform over time.
Sustaining product and technology innovation
Our success is dependent on our ability to sustain product and technology innovation and maintain the competitive advantage of our proprietary technology. We continue to invest resources to enhance the capabilities of our platform by introducing new products, features and functionality of existing products, either through acquisition or internal development.
International expansion
We see international expansion as a meaningful opportunity to grow our platform. Revenue generated from non-U.S. customers during the three months ended March 31, 2026 was approximately 26% of our total revenue. We have teams in Ireland, Canada, the United Kingdom, Singapore, Australia, the Philippines and Poland to support our growth internationally. We believe global demand for our platform and offerings will continue to increase as awareness of our platform in international markets grows. We will continue supporting our international operations and will evaluate opportunities to invest in local sales, customer support and customer success resources in select markets as appropriate.
Key Business Metrics
We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
For purposes of the below metrics, we define ARR as the annualized revenue run-rate of subscription agreements from all customers as of the last date of the specified period, and we define a customer as a unique account, multiple accounts containing a common non-personal email domain, or multiple accounts governed by a single agreement or entity. Beginning in the third quarter of 2025, the metrics below include NewsWhip customers.
Number of customers contributing $30,000 or more in ARR
We define number of customers contributing $30,000 or more in ARR as those on a paid subscription plan that had $30,000 or more in ARR as of a period end.
We view the number of customers that contribute $30,000 or more in ARR as a measure of our ability to scale with our customers and attract larger organizations. We believe this represents potential for future growth, including expanding within our current customer base. Over time, larger customers have constituted a greater share of our revenue.
As of March 31,
2026 2025
Number of customers contributing $30,000 or more in ARR 3,875 3,451
Number of customers contributing $50,000 or more in ARR
We define number of customers contributing $50,000 or more in ARR as those on a paid subscription plan that had $50,000 or more in ARR as of a period end.
We view the number of customers that contribute $50,000 or more in ARR as a measure of our ability to scale with our largest customers and attract more sophisticated organizations. We believe this represents potential for future growth, including expanding within our current customer base. Over time, our largest customers have constituted a greater share of our revenue.
As of March 31,
2026 2025
Number of customers contributing $50,000 or more in ARR 2,085 1,766
Components of our Results of Operations
Revenue
Subscription
We generate revenue primarily from subscriptions to our 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 during the contractual subscription term. Subscription revenue is recognized ratably over the contract terms beginning on the date our product is made available to customers, which typically begins on the commencement date of each contract. Our customers do not have the right to take possession of the online software solution. We also generate a small portion of our subscription revenue from third-party resellers.
Professional Services
We sell professional services consisting of, but not limited to, implementation fees, specialized training, one-time reporting services and recurring periodic reporting services. Professional services revenue is generally recognized at the time these services are provided to the customer. This revenue has historically represented less than 1% of our revenue and is expected to be immaterial for the foreseeable future.
Cost of Revenue
Subscription
Cost of revenue primarily consists of expenses related to hosting our platform and providing support to our customers. These expenses comprise fees paid to data providers, hosted data center costs and personnel costs directly associated with cloud infrastructure, customer success and customer support, including salaries, benefits, bonuses and allocated overhead. These costs also include depreciation expense and amortization expense related to acquired developed technologies that directly benefit sales. Overhead associated with facilities and information technology is allocated to cost of revenue and operating expenses based on headcount. Although we expect our cost of revenue to increase in absolute dollars as our business and revenue grows, we expect it to decrease as a percentage of our revenue over time.
Professional Services and Other
Cost of professional services primarily consists of expenses related to our professional services organization and comprise personnel costs, including salaries, benefits, bonuses and allocated overhead.
Gross Profit and Gross Margin
Gross margin is calculated as gross profit as a percentage of total revenue. Our gross margin may fluctuate from period to period based on revenue earned, the timing and amount of investments made to expand our hosting capacity, our customer support and professional services teams and in hiring additional personnel, and the impact of acquisitions. We expect our gross profit and gross margin to increase as our business grows over time.
Operating Expenses
Research and Development
Research and development expenses primarily consist of personnel costs, including salaries, benefits and allocated overhead. Research and development expenses also include depreciation expense and other expenses associated with product development. We plan to increase the dollar amount of our investment in research and development for the foreseeable future as we focus on developing new features and enhancements to our plan offerings.
Sales and Marketing
Sales and marketing expenses primarily consist of personnel costs directly associated with our sales and marketing department, online advertising expenses, as well as allocated overhead, including depreciation expense. Sales force commissions and bonuses are considered incremental costs of obtaining a contract with a customer. Sales commissions are earned and recorded at contract commencement for both new customer contracts and expansion of contracts with existing customers. Sales commissions are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be five years. We expect that our sales and marketing expenses will decrease as a percentage of total revenue over time as we continue to scale our business and drive operating efficiencies.
General and Administrative
General and administrative expenses primarily consist of personnel expenses associated with our finance, legal, human resources and other administrative employees. Our general and administrative expenses also include professional fees for external legal, accounting and other consulting services, amortization of intangible assets, depreciation and amortization expense, as well as allocated overhead. We expect that our general and administrative expenses will decrease as a percentage of revenue over time as we benefit from greater operational scale and efficiency.
Interest Income (Expense), Net
Interest income (expense), net consists primarily of interest expense related to the Facility (as defined below) and is offset by interest income earned on our cash and investment balances.
Other Expense, Net
Other expense, net consists of foreign currency transaction gains and losses.
Income Tax Provision
The income tax provision consists of current and deferred taxes for our United States and foreign jurisdictions. We have historically reported a taxable loss in our most significant jurisdiction, the United States, and have a full valuation allowance against our deferred tax assets related to domestic operations, except for those from our acquisition of NewsWhip in 2025, which do not have a valuation allowance, and certain deferred tax assets related to foreign operations. We expect this trend to continue for the foreseeable future.
Results of Operations
The following tables set forth information comparing the components of our results of operations in dollars and as a percentage of total revenue for the periods presented.
Three Months Ended March 31,
2026 2025
(in thousands)
Revenue
Subscription $ 120,020 $ 108,680
Professional services and other 1,477 609
Total revenue 121,497 109,289
Cost of revenue(1)
Subscription 27,435 24,473
Professional services and other 556 365
Total cost of revenue 27,991 24,838
Gross profit 93,506 84,451
Operating expenses
Research and development(1)
26,947 23,229
Sales and marketing(1)
48,546 47,452
General and administrative(1)
23,859 24,972
Total operating expenses 99,352 95,653
Loss from operations (5,846) (11,202)
Interest expense (667) (514)
Interest income 751 895
Other expense, net (163) (168)
Loss before income taxes (5,925) (10,989)
Income tax expense 411 231
Net loss $ (6,336) $ (11,220)
_______________
(1)Includes stock-based compensation expense as follows:
Three Months Ended March 31,
2026 2025
(in thousands)
Cost of revenue $ 574 $ 746
Research and development 5,925 6,206
Sales and marketing 5,010 5,936
General and administrative 6,638 6,907
Total stock-based compensation $ 18,147 $ 19,795
Three Months Ended March 31,
2026 2025
(as a percentage of total revenue)
Revenue
Subscription 99 % 99 %
Professional services and other 1 % 1 %
Total revenue 100 % 100 %
Cost of revenue
Subscription 23 % 22 %
Professional services and other - % - %
Total cost of revenue 23 % 23 %
Gross profit 77 % 77 %
Operating expenses
Research and development 22 % 21 %
Sales and marketing 40 % 43 %
General and administrative 20 % 23 %
Total operating expenses 82 % 88 %
Loss from operations (5) % (10) %
Interest expense (1) % - %
Interest income 1 % 1 %
Other expense, net - % - %
Loss before income taxes (5) % (10) %
Income tax expense - % - %
Net loss (5) % (10) %
Note: Certain amounts may not sum due to rounding
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Revenue
Three Months Ended March 31,
Change
2026 2025
Amount
%
(dollars in thousands)
Revenue
Subscription $ 120,020 $ 108,680 $ 11,340 10 %
Professional services and other 1,477 609 868 143 %
Total revenue $ 121,497 $ 109,289 $ 12,208 11 %
Percentage of Total Revenue
Subscription 99 % 99 %
Professional services and other 1 % 1 %
The increase in subscription revenue was primarily driven by increased revenue from our highest tier customers. The number of customers contributing $30,000 or more in ARR grew 12% versus the prior year and the number of customers contributing $50,000 or more in ARR grew 18% versus the prior year. The increase in new customers within the highest tiers was primarily driven by prioritizing our customer success and growth resources towards these customers.
Cost of Revenue and Gross Margin
Three Months Ended March 31,
Change
2026 2025
Amount
%
(dollars in thousands)
Cost of revenue
Subscription $ 27,435 $ 24,473 $ 2,962 12 %
Professional services and other 556 365 191 52 %
Total cost of revenue 27,991 24,838 3,153 13 %
Gross profit $ 93,506 $ 84,451 $ 9,055 11 %
Gross margin
Total gross margin 77 % 77 %
The increase in cost of subscription revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to the following:
Change
(in thousands)
Data provider fees $ 1,875
Hosting fees 641
Personnel costs 703
Amortization of intangible assets 420
Restructuring costs (416)
Other (261)
Subscription cost of revenue $ 2,962
Fees paid to our data providers increased due to higher costs of third-party data utilized in our platform. Hosting fees increased due to additional costs associated with the expansion of our highest tier customers and increased utilization of computing and storage needs. The increase in personnel costs was partially driven by additional headcount resulting from the NewsWhip acquisition in July 2025. The increase in the amortization expense of intangible assets was driven by the acquired developed technology recognized as part of the NewsWhip acquisition. Refer to Note 11 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion. In February 2025, we initiated a restructuring plan with the primary focus on our Sales and Customer Experience teams, which resulted in restructuring costs during the three months ended March 31, 2025.
Operating Expenses
Research and Development
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
Research and development $ 26,947 $ 23,229 $ 3,718 16 %
Percentage of total revenue 22 % 21 %
The increase in research and development expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to the following:
Change
(in thousands)
Personnel costs $ 3,295
Other 423
Research and development $ 3,718
Personnel costs increased primarily as a result of an increase in headcount as we continued to grow our research and development teams to drive our technology innovation through the development and maintenance of our platform. Headcount in the research and development organization increased 17% compared to the same period in the prior year.
Sales and Marketing
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
Sales and marketing $ 48,546 $ 47,452 $ 1,094 2 %
Percentage of total revenue 40 % 43 %
The increase in sales and marketing expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to the following:
Change
(in thousands)
Personnel costs $ 1,904
Sales commission expense 1,737
Restructuring costs (2,285)
Other (262)
Sales and marketing $ 1,094
Personnel costs increased primarily as a result of an increase in headcount as we continued to expand our sales teams to grow our customer base. Headcount in the sales and marketing organization increased 9% compared to the same period in the prior year. Sales commission expense increased due to year-over-year sales growth. In February 2025, we initiated a restructuring plan with the primary focus on our Sales and Customer Experience teams, which resulted in restructuring costs during the three months ended March 31, 2025.
General and Administrative
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
General and administrative $ 23,859 $ 24,972 $ (1,113) (4) %
Percentage of total revenue 20 % 23 %
The decrease in general and administrative expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to the following:
Change
(in thousands)
Bad debt expense $ (850)
Change in fair value of contingent consideration (493)
Amortization of leasehold improvements (476)
Stock-based compensation expense (269)
Personnel costs 1,519
Amortization of intangible assets 695
Other (1,239)
General and administrative $ (1,113)
Changes in fair value of contingent consideration were driven by revised revenue estimates utilized in estimating the NewsWhip earnout liability. Refer to Note 10 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion. The decrease in amortization of leasehold improvements was driven by a decrease in leasehold improvements subject to amortization, resulting from the April 2025 early termination of one floor of the Company's leased office space in Chicago. Personnel costs increased as we continued to invest in our finance, legal and other administrative functions to support the Company's growth. The increase in the amortization expense of intangible assets was primarily driven by the intangible assets recognized as part of the NewsWhip acquisition. The decrease in other was partially driven by lower overhead costs and other expenses due to the April 2025 early partial lease termination.
Interest Income, Net
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
Interest income (expense), net $ 84 $ 381 $ (297)
n/m(1)
Percentage of total revenue - % - %
_________________
(1)Calculated metric is not meaningful.
The decrease in interest income, net was driven by higher interest expense as a result of a higher balance on the Facility as compared to the same period in 2025.
Other Expense, Net
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
Other expense, net $ (163) $ (168) $ 5
n/m(1)
Percentage of total revenue - % - %
_________________
(1)Calculated metric is not meaningful.
The change in other expense, net was primarily driven by foreign exchange transaction losses.
Income Tax Expense
Three Months Ended March 31, Change
2026 2025 Amount %
(dollars in thousands)
Income tax expense $ 411 $ 231 $ 180 78 %
Percentage of total revenue - % - %
The change in income tax expense was driven by an increase in state income tax expense.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles, or GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the below non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance by excluding certain items that may not be indicative of our business, operating results or future outlook.
However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP Gross Profit
We define non-GAAP gross profit as GAAP gross profit, excluding stock-based compensation expense, amortization expense associated with the acquired developed technology from the Tagger Media, Inc. ("Tagger") and NewsWhip acquisitions, and restructuring charges. We believe non-GAAP gross profit provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as it eliminates the effect of
stock-based compensation, amortization expense and restructuring charges, which are often unrelated to overall operating performance.
Three Months Ended March 31,
2026 2025
Reconciliation of Non-GAAP gross profit
(dollars in thousands)
Gross profit $ 93,506 $ 84,451
Stock-based compensation expense 574 746
Amortization of acquired developed technology 1,125 705
Restructuring charges - 416
Non-GAAP gross profit $ 95,205 $ 86,318
Non-GAAP Operating Income
We define non-GAAP operating income as GAAP loss from operations, excluding stock-based compensation expense, amortization expense associated with the acquired intangible assets from the Tagger and NewsWhip acquisitions, restructuring charges and changes in the fair value of contingent consideration. We believe non-GAAP operating income provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as it eliminates the effect of stock-based compensation, amortization expense, restructuring charges and changes in the fair value of contingent consideration, which are often unrelated to overall operating performance.
Three Months Ended March 31,
2026 2025
Reconciliation of Non-GAAP operating income
(dollars in thousands)
Loss from operations $ (5,846) $ (11,202)
Stock-based compensation expense 18,147 19,795
Amortization of acquired intangible assets 2,328 1,213
Restructuring charges - 2,731
Change in fair value of contingent consideration (493) -
Non-GAAP operating income $ 14,136 $ 12,537
Non-GAAP Net Income
We define non-GAAP net income as GAAP net loss, excluding stock-based compensation expense, amortization expense associated with the acquired intangible assets from the Tagger and NewsWhip acquisitions, restructuring charges and changes in the fair value of contingent consideration. We believe non-GAAP net income provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, amortization expense, restructuring charges and changes in the fair value of contingent consideration, which are often unrelated to overall operating performance.
Three Months Ended March 31,
2026 2025
Reconciliation of Non-GAAP net income
(dollars in thousands)
Net loss $ (6,336) $ (11,220)
Stock-based compensation expense 18,147 19,795
Amortization of acquired intangible assets 2,328 1,213
Restructuring charges - 2,731
Change in fair value of contingent consideration (493) -
Non-GAAP net income $ 13,646 $ 12,519
Non-GAAP Net Income per Share
We define non-GAAP net income per share as GAAP net loss per share attributable to common shareholders, basic and diluted, excluding stock-based compensation expense, amortization expense associated with the acquired intangible assets from the Tagger and NewsWhip acquisitions, restructuring charges and changes in the fair value of contingent consideration. We believe non-GAAP net income per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, amortization expense, restructuring charges and changes in the fair value of contingent consideration, which are often unrelated to overall operating performance.
Three Months Ended March 31,
2026 2025
Reconciliation of Non-GAAP net income per share
Net loss per share attributable to common shareholders, basic and diluted $ (0.11) $ (0.19)
Stock-based compensation expense per share 0.31 0.34
Amortization of acquired intangible assets 0.04 0.02
Restructuring charges - 0.05
Change in fair value of contingent consideration (0.01) -
Non-GAAP net income per share $ 0.23 $ 0.22
Liquidity and Capital Resources
As of March 31, 2026, our principal sources of liquidity were cash and cash equivalents of $111.6 million and net accounts receivable of $69.4 million. Historically, we have generated losses from operations as evidenced by our accumulated deficit. However, we have generated positive cash flows
from operations for the last five fiscal years, from 2021 to 2025. For the three months ended March 31, 2026 and 2025, we also generated positive cash flows from operations. We expect to continue to incur operating losses for the foreseeable future as we continue to grow the business. We may experience greater than anticipated operating losses in the short- and long-term due to macroeconomic, financial, geopolitical and other factors that are beyond our control. The impact of these factors on our customers and our operations going forward remains uncertain, and we continue to proactively monitor our liquidity position.
We primarily finance our operations through cash flows from operating activities, available cash and line of credit borrowings. In August 2023, we borrowed $75 million under the Facility in connection with the Tagger acquisition, and in July 2025, we borrowed $32 million under the Facility in connection with the NewsWhip acquisition. Our principal uses of cash in recent periods have been to fund operations, pay for acquisitions, pay down our Facility and invest in capital expenditures.
We believe our existing cash and cash equivalents will be sufficient to meet our operating and capital needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash and investment balances and potential future equity or debt transactions. Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the impact of macroeconomic and geopolitical conditions on our customers and our operations, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market acceptance of our product. We have in the past, and may in the future, enter into arrangements to acquire or invest in complementary businesses, products and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations, our business, results of operations and financial condition could be adversely affected.
Credit Agreement
On August 1, 2023, we 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"), maturing on August 1, 2028. 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, we 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 March 31, 2026, we were in compliance with such financial covenants in the Amended Credit Agreement and expect to be in compliance with such financial covenants for the next 12 months.
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 our 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 our Consolidated Senior Net Leverage Ratio. For the three months ended March 31, 2026, the borrowings under the Facility were designated as SOFR Loans. The Facility also includes a quarterly commitment fee on the unused portion of the Facility of 0.30% or 0.35% based on our Consolidated Senior Net Leverage Ratio.
The Amended Credit Agreement includes customary conditions to credit extensions, covenants, and customary events of default, including restrictions on our 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 March 31, 2026, we had an outstanding balance of $32.5 million under the Amended Credit Agreement. Refer to Note 5 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended March 31,
2026 2025
(in thousands)
Net cash provided by operating activities $ 25,216 $ 18,104
Net cash (used in) provided by investing activities (1,099) 1,393
Net cash used in financing activities (7,763) (5,000)
Net increase in cash, cash equivalents and restricted cash $ 16,354 $ 14,497
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscription services. Our primary uses of cash from operating activities are for personnel costs across the sales and marketing and research and development departments and hosting costs. We have generated positive cash flows from operating activities for each fiscal year since 2021. For the three months ended March 31, 2026 and 2025, we also generated positive cash flows from operating activities.
Net cash provided by operating activities during the three months ended March 31, 2026 was $25.2 million, which resulted from a net loss of $6.3 million adjusted for non-cash charges of $28.7 million and net cash inflow of $2.9 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $18.1 million of stock-based compensation expense, $7.0 million for amortization of deferred contract acquisition costs, which were primarily commissions, $3.3 million of depreciation and intangible asset amortization expense, a $0.5 million change in the fair value of contingent consideration and $0.4 million of amortization of right-of-use, or ROU, operating lease assets. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $31.3 million decrease in accounts receivable, primarily offset by an $11.0 million decrease in deferred revenue, a $7.0 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $6.3 million decrease in accounts payable and accrued expenses, a $3.6 million increase in prepaid expenses and other assets and a $0.7 million decrease in operating lease liabilities.
Net cash provided by operating activities during the three months ended March 31, 2025 was $18.1 million, which resulted from a net loss of $11.2 million adjusted for non-cash charges of $29.1 million and net cash inflow of $0.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $19.8 million of stock-based compensation expense, $5.3 million for
amortization of deferred contract acquisition costs, which were primarily commissions, $2.5 million of depreciation and intangible asset amortization expense and $0.3 million of amortization of ROU operating lease assets. The net cash inflow from changes in operating assets and liabilities was primarily the result of an $18.1 million decrease in accounts receivable, primarily offset by a $7.6 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $4.8 million decrease in deferred revenue, a $3.2 million increase in prepaid expenses and other assets, a $1.5 million decrease in accounts payable and accrued expenses, and a $0.8 million decrease in operating lease liabilities.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 was $1.1 million, which consisted of $1.1 million in purchases of computer equipment and hardware.
Net cash provided by investing activities for the three months ended March 31, 2025 was $1.4 million, which was primarily due to $2.8 million in proceeds from the maturities of marketable securities, partially offset by $1.4 million in purchases of computer equipment and hardware.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2026 was $7.8 million, driven by $7.5 million in repayments of the Facility.
Net cash used in financing activities for the three months ended March 31, 2025 was $5.0 million, reflecting $5.0 million in repayments of the Facility.
Contractual Obligations
As of March 31, 2026, we have $32.5 million outstanding under the Amended Credit Agreement, which matures on April 4, 2030. Refer to Note 5 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion.
In connection with our acquisition of NewsWhip in July 2025, we are required to make post-closing earnout payments, which are contingent upon NewsWhip's achievement of financial performance metrics through June 30, 2027. As of March 31, 2026, the total estimated liability associated with the contingent consideration was $8.4 million. Refer to Note 10 and 11 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for further discussion.
As of March 31, 2026, we have non-cancellable contractual obligations related primarily to operating leases and minimum guaranteed purchase commitments for data and services. As of March 31, 2026, the total obligation for operating leases was $16.9 million, of which $3.6 million is expected to be paid in the next twelve months. As of March 31, 2026, our purchase commitment for primarily data and services was $96.9 million, of which $70.6 million is expected to be paid in the next twelve months. Refer to Note 3 and 7 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for more information regarding these obligations.
Recent Accounting Pronouncements
Refer to Note 1 of the Notes to the Financial Statements (Part I, Item 1 of this Quarterly Report) for more information.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited
condensed consolidated 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 revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates.
Our significant accounting policies are discussed in Note 1 in the Notes to Consolidated Financial Statements as of and for the year ended December 31, 2025 included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 27, 2026. There have been no significant changes to these policies during the three months ended March 31, 2026.
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