Sprinklr, Inc. — Q1 FY2025 Form 10-Q
Reporting period: Three months ended April 30, 2024; comparisons are with the three months ended April 30, 2023 unless noted. Sprinklr provides enterprise cloud software through its Unified Customer Experience Management platform. Figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions.
Financial performance and position
- Revenue: $196.0 million, up 13% from $173.4 million. Subscription revenue was $177.4 million, up 12%; professional services revenue was $18.6 million, up 18%.
- Profitability: Gross profit was $144.8 million, with a 73.9% gross margin (about 75.8% in the prior-year quarter). Operating income was $5.7 million versus an operating loss of $3.2 million; operating margin was 2.9% versus -1.8%. Net income was $10.6 million versus $2.8 million; diluted EPS was $0.04 versus $0.01.
- Margins: Subscription gross margin was 82%, down from 83%. Professional services gross margin was approximately 0%, versus 8%, reflecting greater CCaaS delivery investment.
- Cash flow: Operating cash flow was $41.7 million versus $18.6 million. Free cash flow, a company-defined non-GAAP measure, was $36.2 million versus $14.3 million, after $2.5 million of property and equipment purchases and $3.0 million of capitalized software costs.
- Liquidity: At April 30, cash and cash equivalents were $126.8 million and marketable securities were $483.3 million. Management said available cash, securities and operating cash flow should cover working capital, capital expenditures and financing needs for at least the next 12 months and over the long term.
- Debt and obligations: The filing reports termination of the SVB credit facility in 2023; it does not provide a clear total interest-bearing debt balance. Operating lease liabilities totaled $51.6 million. Data and service-provider minimum purchase commitments were $131.1 million as of January 31, 2024, including $69.5 million due within 12 months; the company reported no material change by April 30.
- Contracted revenue: Remaining performance obligations were $922.5 million, including $570.4 million expected to be recognized over the next 12 months.
Material changes versus the prior-year quarter
- Revenue growth came from add-on purchases and increased quantities from existing customers, as well as demand from new customers; professional services growth reflected more managed services and implementations.
- Operating results improved, including the move from an operating loss to operating income. Sales and marketing expense declined 2%, partly because the prior-year quarter included $5.0 million of restructuring costs. General and administrative expense rose 18%, mainly due to personnel costs and stock compensation.
- Subscription costs rose 19%, faster than subscription revenue, primarily due to higher cloud infrastructure and data costs. Professional services costs rose 28%, including higher subcontractor and personnel costs.
- Net dollar expansion rate decreased to 114.6% from 122.2%. Management attributed the decline to elevated churn, exacerbated by macroeconomic conditions. The company had 138 large customers, up from 115 a year earlier.
- Operating cash flow benefited from a $78.6 million decrease in accounts receivable, reflecting reduced billings and increased collections; this was partly offset by lower accrued liabilities and accounts payable, higher prepaid costs and lower deferred revenue.
Outlook, commentary, risks and notable items
- The filing provides no specific numerical revenue or earnings guidance. Management expects to continue investing in research and development, infrastructure, sales and marketing, and customer support; expenses and margins may vary with growth, revenue mix and delivery costs.
- Management said inflation-related cost pressures had not materially affected results in the periods reported, but warned that weaker economic conditions could reduce customer technology spending. Subscription renewal and expansion, competition, and the pace of market adoption remain important uncertainties.
- Key disclosed risks include customer churn and contraction, reliance on third-party cloud infrastructure and data providers, cybersecurity and privacy exposures, evolving AI regulation and product risks, and potential service disruptions. The company specifically noted that its agreement with X for data supporting its platform expires February 28, 2025.
- The company repurchased approximately 8.3 million Class A shares for $101.2 million, including commissions, during the quarter. It bought a further 3.3 million shares for $40.1 million from May 1 through May 31. The board approved an additional $100 million of repurchases on June 3; the program is authorized through January 31, 2025. Repurchases reduce cash available for other uses.
- A new 10-year New York headquarters lease commenced April 29, 2024, with payments beginning in December 2024. The lease contributed to a material increase in recorded right-of-use assets and lease liabilities.
- Management reported no provision for existing litigation and does not expect resolution of current matters to materially affect results, cash flows or financial position, while noting an unfavorable ruling could have a material effect in a particular period. Disclosure controls were deemed effective as of April 30, 2024.
Important facts for investors to verify
- Whether the lower net dollar expansion rate and elevated churn continue, and how they affect renewals, customer expansion and revenue growth.
- Whether subscription margin pressure from cloud and data costs persists, and whether CCaaS investment improves professional services economics.
- How cash generation develops after the quarter’s favorable collections, including the timing of billings, collections and deferred revenue.
- The scale and pace of further share repurchases, their effect on liquidity and share count, and the remaining authorization after subsequent purchases and approvals.
- Renewal terms and business impact of the X data agreement, as well as continuing reliance on other third-party data and cloud providers.
- Future costs and cash payments associated with the headquarters lease and contractual data and service-provider commitments.