Sprinklr, Inc. — Form 10-Q Summary
Business context and period. Sprinklr sells cloud-based Unified Customer Experience Management (Unified-CXM) software and related professional services. This filing covers the fiscal second quarter and six months ended July 31, 2022; figures are compared with the corresponding 2021 periods unless noted. Amounts below are in millions except per-share data.
Financial performance and liquidity
| Metric | Q2 FY2023 | Q2 FY2022 | Six months FY2023 | Six months FY2022 |
|---|---|---|---|---|
| Revenue | $150.6 | $118.7 | $295.6 | $229.7 |
| Subscription revenue | $133.1 | $103.3 | $260.4 | $200.1 |
| Professional services revenue | $17.6 | $15.4 | $35.2 | $29.6 |
| Gross profit | $108.5 | $81.4 | $211.7 | $160.6 |
| GAAP operating loss | $(21.7) | $(28.4) | $(44.8) | $(38.9) |
| GAAP net loss | $(23.9) | $(32.4) | $(49.2) | $(46.8) |
| Net loss per share | $(0.09) | $(0.19) | $(0.19) | $(0.35) |
| Operating cash flow | Not provided separately | Not provided separately | $3.0 | $(16.9) |
- Q2 revenue increased 27% year over year; subscription revenue rose 29% and professional services revenue 14%. For the six-month period, revenue rose 29%.
- Q2 GAAP gross margin was 72%, versus 69%; subscription gross margin was 81%, versus 78%, and professional services gross margin was 5%, versus 3%. Six-month subscription gross margin was 81%, versus 78%; professional services gross margin was 5%, versus 13%.
- Operating expenses increased 19% in Q2 to $130.1 million. Sales and marketing rose 25% to $86.9 million; R&D rose 33% to $20.0 million. G&A declined 8% to $23.2 million, largely reflecting lower CEO stock-option compensation than in the prior-year quarter.
- At July 31, cash and cash equivalents were $154.2 million and marketable securities were $386.6 million, totaling $540.9 million. Current assets were $778.6 million and current liabilities $392.2 million. There were no borrowings under the $50 million SVB revolving facility. The filing states that the facility expired September 19, 2022; an August 18 amendment is listed among exhibits, but its terms are not provided in the filing text presented here.
- For the six months, investing cash outflow was $184.9 million, principally reflecting purchases of marketable securities; financing cash inflow was $16.6 million. Free cash flow was negative $4.4 million; adjusted free cash flow was positive $7.6 million after excluding the $12.0 million litigation settlement payment.
Changes, outlook, risks and unusual items
- Remaining performance obligations were $607.3 million, up from $457.4 million a year earlier; $429.2 million was expected to be recognized in the next 12 months, versus $332.1 million. Net dollar expansion rate was 125%, compared with 114%. Large customers—defined as at least $1 million in trailing-12-month subscription revenue—increased to 98 from 74.
- Management attributed subscription growth to new customers and expansion within existing customers. It expects investment in product development, sales and marketing, infrastructure, and customer support to continue; it expects losses to continue and does not provide specific numerical guidance in this filing. Management believes available cash, marketable securities and operating cash will fund needs for at least the next 12 months.
- Sales and marketing growth reflected added personnel, commissions and travel. Higher hosting costs contributed to subscription-cost growth. Management said professional-services margins can fluctuate with the timing of staffing investments and expects gross margin to vary by period, with modest long-term improvement.
- The company paid a $12.0 million settlement to Opal Labs in March 2022, resolving claims including alleged contract breach and trade-secret violations. Management reported no litigation liability provision at July 31 and did not expect current matters collectively to materially affect results, cash flows or financial position, while noting an unfavorable ruling could materially affect a particular period.
- A material weakness in controls over capitalization of customer-contract acquisition costs remained unremediated as of July 31. New review and completeness controls had been implemented but had not operated long enough to demonstrate remediation; management concluded disclosure controls were not effective at a reasonable assurance level. Comparative 2021 results were revised for immaterial corrections to those costs.
- Other notable items: the company adopted operating-lease accounting in February 2022, recording approximately $14 million of lease liabilities and corresponding right-of-use assets. It expects to become a large accelerated filer and cease being an emerging growth company as of January 31, 2023, bringing additional compliance costs, including auditor attestation requirements.
- Risks highlighted include continued losses and uncertain path to profitability; competition and customer renewal/expansion; cybersecurity, privacy and dependence on third-party cloud infrastructure and data providers; macroeconomic uncertainty, inflation and geopolitical events; and the control weakness. The filing also identifies a related-party arrangement with the CEO-owned Lyearn, to which Sprinklr paid approximately $0.4 million in the six months.
Key facts investors should verify
- Whether growth in subscription revenue, RPO and customer expansion continues, and how renewal and churn trends develop.
- Whether operating expenses, stock-based compensation and professional-services investment allow gross margins to improve while narrowing GAAP losses.
- Whether operating cash generation is sustainable after working-capital movements and the settlement-related adjustment; review the composition and liquidity of marketable securities.
- The current status and terms of the SVB credit facility following its stated September 19, 2022 expiration and the listed August amendment.
- Whether management’s remediation controls operate effectively and the material weakness is formally resolved.
- Potential effects of the Opal settlement, other legal matters, data privacy and security obligations, and third-party platform or data-provider dependencies.