CHICAGO - Sprout Social, Inc. (SPT), a prepackaged software services company with a market capitalization of $1.15 billion and impressive revenue growth of 22% over the last twelve months, has amended its credit agreement, extending the maturity date and revising the interest rate determination method, according to a recent SEC filing. According to InvestingPro analysis, the company maintains strong gross profit margins of 77.5%, though it’s currently operating at a loss.

On Monday, Sprout Social entered into a First Amendment to Credit Agreement with its lenders and MUFG BANK, LTD., as the administrative and collateral agent. This amendment adjusts the original agreement dated August 1, 2023, pushing the maturity date of the senior secured revolving credit facility from August 1, 2028, to April 4, 2030. InvestingPro data shows the company operates with a moderate debt level, with a debt-to-equity ratio of 0.26, suggesting prudent financial management. For deeper insights into Sprout Social’s financial health and detailed metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The amended terms also transition the interest rate from a liquidity-based to a leverage-based determination. Interest rates for borrowings will now be either SOFR plus a margin or ABR plus a margin, both contingent on the company’s Consolidated Senior Net Leverage Ratio. Additionally, the facility includes a quarterly commitment fee on the unused portion based on the same leverage ratio.

The company’s obligations under the new agreement are secured by liens on most of its tangible and intangible property and by pledges of equity interests in its subsidiaries, with certain exclusions, particularly concerning foreign subsidiaries. Material domestic subsidiaries are also required to guarantee these obligations.

The amended agreement retains customary conditions for credit extensions and imposes covenants that limit Sprout Social’s ability to engage in certain activities, such as incurring debt or disposing of assets, without meeting specific conditions. The amendment has removed the minimum liquidity and annual recurring revenue covenants present in the original agreement.

In case of default, lenders have the right to terminate commitments and accelerate due payments. The details of the amendment are provided in the full text attached as Exhibit 10.1 to the SEC filing.

This financial restructuring reflects Sprout Social’s strategic financial planning and provides the company with an extended timeline to manage its credit facilities effectively. The information is based on the company’s SEC filing. While the stock currently trades near its 52-week low, InvestingPro’s Fair Value analysis suggests the stock may be undervalued, and analysts project profitability for the company this year.

In other recent news, Sprout Social Inc (NASDAQ:SPT). has reported its fourth-quarter earnings, revealing a deceleration in revenue growth to about 14% year-over-year, compared to over 20% in the previous quarter. The company’s fiscal year 2025 revenue guidance suggests an 11% growth, which falls short of the anticipated 14% consensus. Despite these challenges, Sprout Social achieved a notable milestone by securing the largest new business deal in its history with a Fortune 500 financial services company. Analyst firms have adjusted their price targets for Sprout Social, reflecting varied outlooks on its future performance. Scotiabank (TSX:BNS) reduced its price target to $25 while maintaining a Sector Perform rating, citing slower growth in bookings. Stifel lowered its price target to $34 but upheld a Buy rating, expressing confidence in the company’s strategic investments. Cantor Fitzgerald also cut its price target to $38, maintaining an Overweight rating, while KeyBanc kept its Underweight rating with a $23 price target, expressing caution about the company’s near-term prospects. Goldman Sachs adjusted its price target to $29, maintaining a Neutral rating due to slower growth and cautious revenue guidance for 2025. These developments highlight the mixed analyst sentiment surrounding Sprout Social’s financial outlook and strategic direction.

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