Summary
Sprinklr posted total revenue of $150.6 million for the second quarter of fiscal 2023, up 26.9% from $118.7 million in the prior-year quarter. Subscription revenue drove the quarter, at 88% of the total and up 29% year over year. Revenue for the six months ended July 31, 2022 was $295.6 million, up 28.7% from $229.7 million a year earlier, with subscription revenue up 30% over that stretch. Spending rose alongside the top line: sales and marketing expense was up 25% in the quarter and research and development expense was up 33%.
Profitability improved at the gross line and below it on a quarterly basis. Gross profit was $108.5 million, up 33.3%, and gross margin rose 3.5 percentage points to 72.0%. Operating loss narrowed to $21.7 million and operating margin improved 9.5 percentage points to negative 14.4%. Net loss was $23.9 million, or $0.09 per diluted share, both narrower than the prior-year quarter. Stock-based compensation explains part of the swing. General and administrative expense fell 8% in the quarter, largely because a $5.8 million charge on options granted to the CEO landed in the prior-year period and did not repeat.
The year-to-date picture is less tidy. Operating loss for the six months widened to $44.8 million and net loss widened to $49.2 million, even though diluted loss per share for the period narrowed to $0.19. Professional services gross margin dropped 8 percentage points year to date, which management attributes to personnel investments made ahead of expected growth.
Cash generation flipped positive. Operating cash flow was $5.9 million in the quarter, up from a use of cash a year earlier, and $3.0 million for the six months. Free cash flow, a non-GAAP measure that also subtracts purchases of property and equipment and capitalized internal-use software, was negative $4.4 million for the six months, against negative $23.2 million a year ago, and adjusted free cash flow was $7.6 million. Capital expenditures were $1.7 million in the quarter, down 36.5%, and $2.4 million year to date, down 39.1%. Cash, cash equivalents and marketable securities totaled $540.9 million as of July 31, 2022.
Backlog suggests demand held up. RPO was $607.3 million at quarter end, up 32.8% from $457.4 million a year earlier, and current RPO was $429.2 million against $332.1 million. Deferred revenue, current portion only, was $276.2 million, up 19.5% from $231.1 million. Sprinklr ended the quarter with 98 large customers, defined as those with more than $1.0 million in subscription revenue on a trailing 12-month basis, up from 74 a year earlier, and its net dollar expansion rate was 125% versus 114%.
Guidance covers the third quarter ending October 31, 2022 and the full fiscal year ending January 31, 2023, spanning subscription revenue, total revenue, non-GAAP operating results and non-GAAP net loss per share, with assumed weighted average share counts of 263 million for the coming quarter and 261 million for the year. The release states that the full-year fiscal 2023 operating margin is much better than prior guidance, and management ties the outlook to efficiency gains.
Two items outside the income statement matter. Luca Lazzaron will step down as Chief Revenue Officer on October 1, 2022, and Paul Ohls, currently EVP Worldwide Sales and Success, takes the role, with Lazzaron serving as an advisor through December 31, 2022. Sprinklr also carries $156.3 million of minimum purchase commitments with data and service providers through fiscal 2026 and $15.9 million of future minimum lease payments. Its $50.0 million SVB revolving credit facility expires on September 19, 2022 with nothing drawn. Management still lists COVID-19 as a risk to demand, sales cycles, renewals and collections, and the filing points to long and unpredictable enterprise sales cycles as well as dependence on a relatively small number of large customers.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $150.6M | $145.0M | +3.9% | $118.7M | +26.9% |
| Gross profit | $108.5M | $103.3M | +5.0% | $81.4M | +33.3% |
| Gross margin | 72.0% | 71.2% | +0.8 pp | 68.5% | +3.5 pp |
| Research & development | $20.0M | $17.3M | +15.3% | $15.1M | +32.5% |
| Sales & marketing | $86.9M | $86.9M | +0.0% | $70.2M | +23.8% |
| General & administrative | $23.2M | $22.1M | +5.0% | $25.3M | -8.3% |
| Total operating expenses | $130.1M | $126.4M | +3.0% | $110.7M | +17.6% |
| Operating income (loss) | -$21.7M | -$23.1M | +6.3% | -$29.3M | +26.0% |
| Operating margin | -14.4% | -15.9% | +1.6 pp | -24.7% | +10.3 pp |
| Net income (loss) | -$23.9M | -$25.3M | +5.4% | -$33.2M | +28.0% |
| Net margin | -15.9% | -17.4% | +1.6 pp | -28.0% | +12.1 pp |
| Diluted EPS | -$0.09 | -$0.10 | +$0.01 | -$0.20 | +$0.11 |
Risks
The company identified a material weakness in internal control over financial reporting related to ASC 606 revenue recognition and capitalization of costs to obtain customer contracts. New controls have not operated long enough to demonstrate remediation, and MD&A states historical results were retroactively revised for immaterial corrections related to capitalized costs.
The business relies on third-party data partners and APIs, including a Twitter agreement that expires on February 28, 2025. If that agreement or other data licenses lapse or are not renewed on favorable terms, the company may not provide the same level of Unified-CXM insights to customers.
The company depends on its management team, including Founder and CEO Ragy Thomas, and does not maintain key man insurance. It faces intense competition for software engineers and sales professionals and has experienced greater than usual employee turnover.
Artificial intelligence is key to many services, and emerging ethical issues or government regulation in AI could increase R&D costs and cause brand or reputational harm. The filing notes that failure to address AI ethics could slow adoption of AI in its products.
Unstable market and economic conditions, including higher inflation and interest rates, Russia's incursion into Ukraine, and COVID-19 disruptions, may reduce customer marketing budgets and demand. MD&A states COVID-19 has adversely affected or may adversely affect demand, spending, sales cycles, and renewals.
The top 10 customers accounted for 14% and 19% of subscription revenue in fiscal years ended January 31, 2022 and 2021, respectively. Because the majority of the customer base consists of large enterprises, the loss of any one large customer could disproportionately harm results.
Revenue growth rate has fluctuated and may decline again as the customer base matures; the company expects subscription revenue growth rates may be lower in the near term compared to comparable prior-year periods. Q2 FY2023 total revenue was up 26.9% versus the prior-year quarter.
Professional services gross margin decreased by 8 percentage points in the six months ended July 31, 2022, due to timing of investments in personnel ahead of expected growth. MD&A expects professional services gross margin to vary and generally increase modestly over the long term.
The Unified-CXM market is fragmented, rapidly evolving, and highly competitive. Many competitors have greater name recognition, longer operating histories, larger sales forces, and greater financial resources, and may bundle competing products.
The company will become a large accelerated filer and lose emerging growth company status as of January 31, 2023 because non-affiliate market value of Class A common stock exceeded $700 million as of July 31, 2022. This will require auditor attestation of internal controls and increase legal and financial compliance costs.
Results may fluctuate due to variability in the sales cycle, customer budgeting cycles, payment terms, and timing of large customer additions. MD&A notes COVID-19 has adversely affected or may adversely affect the length of sales cycles, sales productivity, and collections.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
RPO
cRPO
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from Sprinklr, Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.