Customer experience software provider Sprinklr (NYSE:CXM) reported results in line with analyst expectations in Q3 FY2023 quarter, with revenue up 23.7% year on year to $157.2 million. However, guidance for the next quarter was less impressive, coming in at $162.8 million at the midpoint, being 1.96% below analyst estimates. Sprinklr made a GAAP loss of $5.86 million, improving on its loss of $29.2 million, in the same quarter last year.
Is now the time to buy Sprinklr? Access our full analysis of the earnings results here, it's free.
Sprinklr (CXM) Q3 FY2023 Highlights:
- Revenue: $157.2 million vs analyst estimates of $156 million (small beat)
- EPS (non-GAAP): $0.02 vs analyst estimates of -$0.01 ($0.03 beat)
- Revenue guidance for Q4 2023 is $162.8 million at the midpoint, below analyst estimates of $166 million
- Free cash flow was negative $1.67 million, down from positive free cash flow of $1.44 million in previous quarter
- Customers: 107 customers paying more than $1m annually
- Gross Margin (GAAP): 74.2%, up from 69.5% same quarter last year
“We are very pleased with Sprinklr’s third quarter performance and beat expectations across all key metrics. We remain focused on our fundamentals during this challenging environment and generated profitable revenue growth and continued operating margin improvement. But we're most proud of the results the world's largest brands are achieving with our platform and proprietary AI including automation, faster response times, cost savings and deeper customer insights,” 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 two years, growing from quarterly revenue of $96.3 million in Q3 FY2021, to $157.2 million.
This quarter, Sprinklr's quarterly revenue was once again up a very solid 23.7% year on year. On top of that, revenue increased $6.62 million quarter on quarter, a solid improvement on the $5.65 million increase in Q2 2023. Happily, that's a slight acceleration of growth.
Guidance for the next quarter indicates Sprinklr is expecting revenue to grow 20% year on year to $162.8 million, slowing down from the 30.3% 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 21.1% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
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 74.2% in Q3.
That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is around the 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 Q3 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 $2.15 billion and more than $544.1 million in cash, the company has the capacity to continue to prioritise growth over profitability.
Sprinklr delivered solid revenue growth this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for both the next quarter and the full year slightly missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Sprinklr. The company is down 8.86% on the results and currently trades at $7.5 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.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.