The numbers are good. 23,693 customers. 99% of revenue is software. revenue of $44.8 million, $78.8 million, and $102.7 million during the years ended December 31, 2017, 2018 and 2019. $131 million in ARR as of June 30, 2020. 4.9 rating and 99% CEO approval rating on Glassdoor. Annual contract values have grown 187% over the past four years through December 31, 2019. 29% of revenue come from outside the US.
For example…“Managing the complexity of social media and providing a positive customer experience require that all parts of an organization share a single system of record, intelligence and action. For example, a social media message from a customer may require collaborative input and action from multiple departments at once. Without a centralized platform to provide visibility, workflow and coordination across business functions, the customer experience can become disjointed and inconsistent.”
Largely SMB customer base. The company ended 2019 with 23,693 customers of which only 2,185 contributed more than $10k of ARR.
Pricing. “We price our services on a tiered subscription-based model that allows our customers to choose a core plan based on their needs and license the platform on a per user per month basis. Customers can then add users and modules for additional monthly rates depending on their individual needs.”
Easy trials are critical. “In 2019, the majority of our new customer revenue resulted from our trials and other inbound sources. Our trial allows prospective customers to set up and use our software within minutes and without assistance. The strength of our brand and content marketing resulted in the majority of our inbound trials generated through unpaid marketing. We have experienced strong organic new customer growth due to low-friction, self-serve onboarding that allows us to acquire customers with relatively low sales and marketing investment. Many new customers adopt our solution during their first engagement with us.” Free trials are initially 30 days.
SPT serves all segments. “We have proven success in the SMB, Mid-market and Enterprise segments, with balanced revenue and substantial growth in each.”
Voting power is concentrated. “Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of June 30, 2020, our outstanding Class B common stock represented approximately 70.8% of the voting power of our outstanding capital stock. as a result of our dual class stock, the holders of Class B common stock, our Co-Founders, collectively control all matters submitted to our stockholders for approval.”
Growth was mostly organic. The company didn’t complete it’s first acquisition until 2017. “Excluding the impact of the 2017 acquisition of Simply Measured, Inc., or Simply Measured, our organic growth rate in 2018 and 2019 was 54% and 44%, respectively.” Simply Measured represented $16mm of the company’s $70mm of ARR in 2017. In 2019 however, Simply Measured represents $3mm of the company’s ARR. The purchase price was only $13mm; in all likelihood they were highly distressed since they sold for ~1x revenue.
Pricing is simple. “Our tiered subscription-based model allows our customers to choose among three 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.”
Enterprise net dollar retention is strong. “Our dollar-based net retention rate for the years ended December 31, 2018 and 2019 was 106% and 110%, respectively. Our dollar-based net retention rate excluding our SMB customers for the years ended December 31, 2018 and 2019 was 115% and 120%, respectively.”
Single code base allows for responsiveness. “We operate a single code-base without the need for customizations or professional services, allowing us to efficiently scale our platform and quickly react to changes in the market. Relative to our primary competitors, our platform is the top user-rated social media management software across all categories and customer segments according to G2, reinforcing our leading market position and brand.”
Co-founder is CEO and he owns a big chunk of the business. “Mr. Howard co-founded Sprout Social and has served as our President and Chief Executive Officer and as a member of our board of directors since April 2010.” The CTO is also a cofounder. The CEO had a salary of $316k in 2019. The CEO owned 39% of the business before IPO and the CTO owned 41%. NEA is the company’s primary venture investor.