Sprinklr's (NYSE:CXM) Q4 Sales Top Estimates, Gross Margin Improves

Anthony Lee /
2023/03/29 4:09 pm EDT

Customer experience software provider Sprinklr (NYSE:CXM) announced better-than-expected results in the Q4 FY2023 quarter, with revenue up 21.9% year on year to $165.3 million. The company expects that next quarter's revenue would be around $169 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Sprinklr made a GAAP loss of $666 thousand, improving on its loss of $34.3 million, in the same quarter last year.

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Sprinklr (CXM) Q4 FY2023 Highlights:

  • Revenue: $165.3 million vs analyst estimates of $162.8 million (1.57% beat)
  • EPS (non-GAAP): $0.06 vs analyst estimates of $0.02 ($0.04 beat)
  • Revenue guidance for Q1 2024 is $169 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2024 is $712 million at the midpoint, in line with analyst expectations and predicting 15.2% growth (vs 25.8% in FY2023)
  • Free cash flow of $16.3 million, up from negative free cash flow of $1.68 million in previous quarter
  • Customers: 108 customers paying more than $1m annually
  • Gross Margin (GAAP): 76.2%, up from 70.7% same quarter last year

“We are very pleased with Sprinklr’s fourth quarter performance, and overall strong results in FY23. Our Q4 non-GAAP profitability, and free cash flow are a result of efficient execution, and creating business value for customers with our Unified-CXM platform. We are well positioned to be a disruptor in the contact center space with our AI powered Sprinklr Service offering. We are also excited by our pace of innovation, notably the launch of self-serve Sprinklr Social, which extends our leadership in a category we created,” 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 $104.1 million in Q4 FY2021, to $165.3 million.

Sprinklr Total Revenue

This quarter, Sprinklr's quarterly revenue was once again up a very solid 21.9% year on year. On top of that, revenue increased $8.08 million quarter on quarter, a very strong improvement on the $6.62 million increase in Q3 2023, which shows re-acceleration of growth, and is great to see.

Guidance for the next quarter indicates Sprinklr is expecting revenue to grow 16.6% year on year to $169 million, slowing down from the 30.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $712 million at the midpoint, growing 15.2% compared to 25.5% increase in FY2023.

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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 76.2% in Q4.

Sprinklr Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a good gross margin that allows companies like Sprinklr to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Sprinklr's Q4 Results

With a market capitalization of $2.78 billion Sprinklr is among smaller companies, but its more than $578.6 million in cash and positive free cash flow over the last twelve months give us confidence that Sprinklr has the resources it needs to pursue a high growth business strategy.

It was good to see Sprinklr improve their gross margin this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. Additionally, RPO (remaining performance obligations) and subscription revenue also beat. On the other hand, the revenue guidance for next year indicates a slowdown and there was a slowdown in new contract wins. Overall, this quarter's results were fine but could have been better. The company is flat on the results and currently trades at $10.88 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.