Sprinklr, Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2023 (fiscal 2024 first quarter), compared with the three months ended April 30, 2022. Sprinklr provides cloud software for unified customer experience management (CXM); subscription revenue is recognized primarily over customer contract terms.
Financial performance and liquidity
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Revenue | $173.4 million | $145.0 million |
| Subscription revenue | $157.7 million | $127.3 million |
| Professional services revenue | $15.7 million | $17.7 million |
| Gross profit / gross margin | $131.4 million / 75.8% | $103.3 million / 71.2% |
| Operating loss | $3.2 million | $23.1 million |
| Net income (loss) | $2.8 million | $(25.3) million |
| Operating cash flow | $18.6 million | $(2.9) million |
| Free cash flow (non-GAAP) | $14.3 million | $(5.8) million |
- Subscription revenue rose 24% year over year, while professional services revenue declined 11%; total revenue increased 20%.
- GAAP operating margin improved to approximately negative 2% from negative 16%. Non-GAAP operating income was $11.0 million, versus a $10.3 million loss a year earlier. Non-GAAP measures exclude specified items, principally stock-based compensation and acquired-intangible amortization.
- Cash and cash equivalents were $186.2 million and marketable securities were $418.2 million at April 30, 2023. Together they totaled approximately $604.4 million. Current assets were $851.4 million and current liabilities were $428.6 million.
- Investing cash outflow was $28.6 million, mainly reflecting purchases and maturities of marketable securities. Financing cash inflow of $12.7 million came from stock-option exercises.
- The balance sheet reports lease liabilities but does not present a borrowing balance. Sprinklr terminated its SVB credit facility in April 2023.
Changes and operating indicators
- Subscription growth reflected expansion and add-on purchases by existing customers and demand from new customers. Management attributed lower services revenue to reduced implementation and managed-services activity.
- Subscription gross margin increased to 83% from 80%; professional-services gross margin increased to 8% from 6%. Management cited subscription growth and lower professional-services personnel and subcontractor costs.
- Remaining performance obligations were $708.1 million, including $478.8 million expected to be recognized over the next 12 months. Both were higher than the comparable prior-year figures of $574.2 million and $402.9 million, respectively. The filing notes that prior-year RPO figures were revised to correct the treatment of an immaterial number of contracts.
- Trailing-12-month net dollar expansion rate was 122.2%, down from 123.4%. Sprinklr had 115 customers with at least $1 million in trailing-12-month subscription revenue, compared with 90 a year earlier.
Outlook, risks and unusual items
- No specific quarterly or annual revenue or earnings guidance is provided in the filing. Management stated that cash, marketable securities and operating cash flows should cover working capital, capital expenditures and financing needs for at least the next 12 months and over the long term.
- Management expects investment-related costs, including research and development and sales and marketing, to continue; it expects gross margin to vary by period and increase modestly over the long term. Cash flow may fluctuate with expenses, growth investment, billing and collections seasonality.
- In February 2023, Sprinklr began a plan to reduce its global workforce by approximately 4%. It recorded $5.2 million of restructuring costs in the quarter; $2.9 million remained accrued and was expected to be paid in the first half of fiscal 2024.
- A $3.3 million tax benefit arose from releasing valuation allowances on deferred tax assets in Brazil and Japan. The quarter’s total income-tax benefit was $1.2 million.
- Disclosure controls were deemed ineffective because of a material weakness in controls over commission calculations and related input data. Management described remediation steps, but had not yet established that the controls had operated effectively for a sufficient period.
- Management identified macroeconomic uncertainty, customer retention and expansion, competition, cybersecurity and privacy, third-party infrastructure and data-provider reliance, and the ability to achieve sustained profitability as important risks. It reported no litigation accrual at April 30 and did not expect current matters collectively to have a material adverse effect, while noting an unfavorable ruling in a particular period could be material.
- Approximately $220.9 million of minimum data and service-provider purchase commitments was reported as of January 31, 2023, including $86.9 million due within 12 months; the filing reported no significant change to these commitments by April 30.
Investor verification priorities
- Track subscription growth, RPO and cRPO conversion, and the direction of net dollar expansion.
- Assess whether operating cash flow and non-GAAP free cash flow remain sustainable after working-capital timing effects and ongoing investment.
- Monitor completion and testing of the commission-control remediation and any subsequent changes in control effectiveness.
- Review restructuring execution, remaining costs and the effect on operating expenses and workforce capacity.
- Confirm the terms and collateral requirements following termination of the SVB facility, and monitor cash availability, purchase commitments and lease obligations.
- Evaluate the sustainability of reported GAAP profitability, including the effects of interest income, foreign-exchange losses and the foreign tax valuation-allowance release.