Customer experience software provider Sprinklr (NYSE:CXM) beat analyst expectations in Q2 FY2023 quarter, with revenue up 26.9% year on year to $150.6 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $156 million, 0.16% below analyst estimates. Sprinklr made a GAAP loss of $23.9 million, improving on its loss of $33.2 million, in the same quarter last year.
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Sprinklr (CXM) Q2 FY2023 Highlights:
- Revenue: $150.6 million vs analyst estimates of $147.4 million (2.15% beat)
- EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.06
- Revenue guidance for Q3 2023 is $156 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed revenue guidance for the full year, at $618 million at the midpoint
- Free cash flow of $1.44 million, up from negative free cash flow of $5.83 million in previous quarter
- Customers: 98 customers paying more than $1m annually
- Gross Margin (GAAP): 72%, up from 68.5% same quarter last year
“We are very pleased with Sprinklr’s performance in the second quarter, as we beat expectations across all key metrics. In today’s fast changing world, brands are looking for ways to stay close to their customers and we couldn't be more pleased that our platform is helping them deliver better customer experiences by unifying customer-facing functions and teams,” said Ragy Thomas, Sprinklr Founder and CEO.
Initially focused only on social media management, Sprinklr (NYSE: CXM) is a leading provider of unified customer experience management software.
The Internet has given customers more choice on whom to conduct business with and has also given them the power to easily share their experiences with other customers. These twin dynamics effectively have increased pressure on companies to both improve their customer service and also monitor their brand reputation online, driving the need for customer experience software offerings.
Sales Growth
As you can see below, Sprinklr's revenue growth has been strong over the last year, growing from quarterly revenue of $118.6 million, to $150.6 million.
This quarter, Sprinklr's quarterly revenue was once again up a very solid 26.9% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $5.65 million in Q2, compared to $9.31 million in Q1 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates Sprinklr is expecting revenue to grow 22.7% year on year to $156 million, slowing down from the 31.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 21.2% over the next twelve months.
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Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Sprinklr's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 72% in Q2.
That means that for every $1 in revenue the company had $0.72 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.
Key Takeaways from Sprinklr's Q2 Results
Since it has still been burning cash over the last twelve months it is worth keeping an eye on Sprinklr’s balance sheet, but we note that with a market capitalization of $2.96 billion and more than $540.8 million in cash, the company has the capacity to continue to prioritise growth over profitability.
Sprinklr delivered solid revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $11.56 per share.
Sprinklr may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.