Sprinklr, Inc. [CXM] Filings

10-Q 1 cxm-20231031.htm 10-Q cxm-20231031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40528

Sprinklr, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

(State or other Jurisdiction of

Incorporation or organization)

29 West 35th Street

New York, NY

(Address of principal executive offices)

47-4771485

(IRS Employer

Identification No.)

10001

(Zip Code)

Registrant’s telephone number, including area code: (917) 933-7800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00003 per share

CXM

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 30, 2023, the registrant had 151,605,805 shares of Class A common stock and 122,284,648 shares of Class B common stock, each with a par value of $0.00003 per share, outstanding.

TABLE OF CONTENTS


Special Note About Forward-Looking Statements
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
Signatures

WHERE YOU CAN FIND MORE INFORMATION

Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also use Sprinklr’s blog and the following social media channels as a means of disclosing information about the company, our products, our planned financials and other announcements and attendance at upcoming investor and industry conferences, and other matters. This is in compliance with our disclosure obligations under Regulation FD:

•Sprinklr Company Blog (http://sprinklr.com/blog)

•Sprinklr LinkedIn Page (http://www.linkedin.com/company/sprinklr)

•Sprinklr X (formerly known as Twitter) Account (https:/x.com/sprinklr)

•Sprinklr Facebook Page (https://www.facebook.com/sprinklr/)

•Sprinklr Instagram Page (https://www.instagram.com/sprinklr)

In addition, investors and others can view Sprinklr videos on YouTube (https://www.YouTube.com/c/sprinklr).

Information posted through these social media channels may be deemed material. Accordingly, in addition to reviewing our press releases, SEC filings, public conference calls and webcasts, investors should monitor Sprinklr’s blog and its other social media channels. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q. The channel list on how to connect with us may be updated from time to time and is available on https://www.sprinklr.com and our investor relations website.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations regarding our revenue, expenses and other operating results;

•our ability to acquire new customers and successfully engage new and existing customers;

•our ability to achieve and maintain our profitability;

•future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

•the costs and success of our marketing efforts and our ability to promote our brand;

•our growth strategies for our Unified-CXM platform;

•our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;

•our ability to effectively manage our growth, including any international expansion;

•our ability to obtain, maintain, protect, defend or enforce our intellectual property or other proprietary rights and any costs associated therewith;

•the effects of unstable market and economic conditions, including as a result of increases in inflation rates, higher interest rates, recent bank closures or instability, public health crises and geopolitical actions, such as war and terrorism or the perception that such hostilities may be imminent, on our business, financial condition and share price;

•our ability to compete effectively with existing competitors and new market entrants; and

•the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Form 10-Q. And, while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date of this Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Unless the context otherwise requires, the terms “Sprinklr,” “the Company,” “we,” “our,” “us” or similar references in this Form 10-Q refer to Sprinklr, Inc. and its subsidiaries.

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

SPRINKLR, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	October 31, 2023		January 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	172,462	$	188,387
Marketable securities	483,969		390,239
Accounts receivable, net of allowance of $4.9 million and $3.2 million, respectively	153,660		205,038
Prepaid expenses and other current assets	77,228		78,865
Total current assets	887,319		862,529
Property and equipment, net	30,597		22,885
Goodwill and other intangible assets	50,221		50,349
Operating lease right-of-use assets	27,576		15,725
Other non-current assets	92,001		73,503
Total assets	$	1,087,714	$	1,024,991

Liabilities and stockholders’ equity
Liabilities
Current liabilities:
Accounts payable	$	22,473	$	30,101
Accrued expenses and other current liabilities	72,781		97,524
Operating lease liabilities, current	6,208		7,134
Deferred revenue	297,130		324,140
Total current liabilities	398,592		458,899
Deferred revenue, non-current	1,155		1,371
Deferred tax liability, non-current	1,300		1,289
Operating lease liabilities, non-current	23,530		9,633
Other liabilities, non-current	4,933		4,467
Total liabilities	429,510		475,659
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock, $0.00003 par value, 2,000,000,000 shares authorized; 140,081,156 and 119,477,713 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively	4		3
Class B common stock, $0.00003 par value, 310,000,000 shares authorized; 132,492,722 and 144,263,658 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively	4		6
Treasury stock, at cost, 14,130,784 and 14,130,784 shares as of October 31, 2023 and January 31, 2023, respectively	(23,831)		(23,831)
Additional paid-in capital	1,153,761		1,074,149
Accumulated other comprehensive loss	(5,383)		(4,384)
Accumulated deficit	(466,351)		(496,611)
Total stockholders’ equity	658,204		549,332
Total liabilities and stockholders’ equity	$	1,087,714	$	1,024,991

See accompanying notes to the unaudited condensed consolidated financial statements

SPRINKLR, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue:
Subscription	$	170,464	$	139,906	$	491,581	$	400,301
Professional services	15,861		17,345		46,572		52,558
Total revenue	186,325		157,251		538,153		452,859
Costs of revenue:
Costs of subscription	29,877		26,249		85,136		76,759
Costs of professional services	16,571		14,271		46,716		47,641
Total costs of revenue	46,448		40,520		131,852		124,400
Gross profit	139,877		116,731		406,301		328,459
Operating expense:
Research and development	23,146		19,208		68,230		56,531
Sales and marketing	75,446		79,538		244,766		253,418
General and administrative	28,096		22,588		77,820		67,916
Total operating expense	126,688		121,334		390,816		377,865
Operating income (loss)	13,189		(4,603)		15,485		(49,406)
Other income, net	6,328		1,093		18,324		1,304
Income (loss) before provision for income taxes	19,517		(3,510)		33,809		(48,102)
Provision for income taxes	2,550		2,350		3,549		6,973
Net income (loss)	$	16,967	$	(5,860)	$	30,260	$	(55,075)
Net income (loss) per share, basic	$	0.06	$	(0.02)	$	0.11	$	(0.21)
Weighted average shares used in computing net income (loss) per share, basic	271,202		260,285		268,596		258,677
Net income (loss) per share, diluted	$	0.06	$	(0.02)	$	0.11	$	(0.21)
Weighted average shares used in computing net income (loss) per share, diluted	288,121		260,285		285,985		258,677

See accompanying notes to the unaudited condensed consolidated financial statements

SPRINKLR, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Net income (loss)	$	16,967	$	(5,860)	$	30,260	$	(55,075)
Foreign currency translation adjustments	(1,368)		(1,831)		(1,300)		(4,873)
Unrealized gains (losses) on investments, net of tax	247		(446)		301		(1,751)
Total comprehensive income (loss), net of tax	$	15,846	$	(8,137)	$	29,261	$	(61,699)

See accompanying notes to the unaudited condensed consolidated financial statements

SPRINKLR, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Class A and Class B Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance at July 31, 2023	270,318	$	8	$	1,128,689	14,131	$	(23,831)	$	(4,262)	$	(483,318)	$	617,286
Stock-based compensation - equity classified awards	—	—		14,091		—	—		—		—		14,091
Exercise of stock options and vesting of restricted stock units	2,256	—		10,981		—	—		—		—		10,981


Other comprehensive loss	—	—		—		—	—		(1,121)		—		(1,121)
Net income	—	—		—		—	—		—		16,967		16,967
Balance at October 31, 2023	272,574	$	8	$	1,153,761	14,131	$	(23,831)	$	(5,383)	$	(466,351)	$	658,204

Balance at July 31, 2022	259,713	$	9	$	1,027,849	14,131	$	(23,831)	$	(5,167)	$	(490,845)	$	508,015
Stock-based compensation - equity classified awards	—	—		11,982		—	—		—		—		11,982
Exercise of stock options and vesting of restricted stock units	1,197	—		5,568		—	—		—		—		5,568

Other comprehensive loss	—	—		—		—	—		(2,277)		—		(2,277)
Net loss	—	—		—		—	—		—		(5,860)		(5,860)
Balance at October 31, 2022	260,910	$	9	$	1,045,399	14,131	$	(23,831)	$	(7,444)	$	(496,705)	$	517,428

SPRINKLR, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Class A and Class B Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance at January 31, 2023	263,741	$	9	$	1,074,149	14,131	$	(23,831)	$	(4,384)	$	(496,611)	$	549,332
Stock-based compensation - equity classified awards	—	—		43,310		—	—		—		—		43,310
Exercise of stock options and vesting of restricted stock units	8,305	—		32,331		—	—		—		—		32,331
Issuance of common shares upon ESPP purchases	528	—		3,970		—	—		—		—		3,970
Other adjustment	—	(1)		1		—	—		—		—		—
Other comprehensive loss	—	—		—		—	—		(999)		—		(999)
Net income	—	—		—		—	—		—		30,260		30,260
Balance at October 31, 2023	272,574	$	8	$	1,153,761	14,131	$	(23,831)	$	(5,383)	$	(466,351)	$	658,204

Balance at January 31, 2022	256,481	$	8	$	982,122	14,131	$	(23,831)	$	(820)	$	(441,630)	$	515,849
Stock-based compensation - equity classified awards	—	—		41,068		—	—		—		—		41,068
Exercise of stock options and vesting of restricted stock units	3,712	—		15,997		—	—		—		—		15,997
Issuance of common shares upon ESPP purchases	717	1		6,212		—	—		—		—		6,213
Other comprehensive loss	—	—		—		—	—		(6,624)		—		(6,624)
Net loss	—	—		—		—	—		—		(55,075)		(55,075)
Balance at October 31, 2022	260,910	$	9	$	1,045,399	14,131	$	(23,831)	$	(7,444)	$	(496,705)	$	517,428

See accompanying notes to the unaudited condensed consolidated financial statements

SPRINKLR, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended October 31,
	2023		2022
Cash flow from operating activities:
Net income (loss)	$	30,260	$	(55,075)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	11,283		8,727
Bad debt expense	3,370		1,161
Stock-based compensation expense, net of amounts capitalized	42,105		39,920
Non-cash lease expense	6,102		4,759
Deferred income taxes	(3,205)		—
Net amortization/accretion on marketable securities	(12,379)		—
Other non-cash items, net	56		(549)
Changes in operating assets and liabilities:
Accounts receivable	47,876		29,358
Prepaid expenses and other current assets	2,246		27,246
Other non-current assets	(8,424)		(5,782)
Accounts payable	(8,878)		(1,243)
Operating lease liabilities	(6,098)		(5,448)
Accrued expenses and other current liabilities	(23,744)		(625)
Litigation settlement	—		(12,000)
Deferred revenue	(26,807)		(24,578)
Other liabilities	399		(1,285)
Net cash provided by operating activities	54,162		4,586
Cash flow from investing activities:
Purchases of marketable securities	(443,850)		(640,173)
Sales of marketable securities	5,375		2,838
Maturities of marketable securities	357,422		459,026
Purchases of property and equipment	(6,494)		(2,923)
Capitalized internal-use software	(8,791)		(7,733)
Net cash used in investing activities	(96,338)		(188,965)
Cash flow from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	32,331		15,997
Proceeds from issuance of common stock upon ESPP purchases	3,970		6,213
Net cash provided by financing activities	36,301		22,210
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash	(1,648)		(3,232)
Net change in cash, cash equivalents and restricted cash	(7,523)		(165,401)
Cash, cash equivalents and restricted cash at beginning of period	188,387		321,426
Cash, cash equivalents and restricted cash at end of period	$	180,864	$	156,025

Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds	$	5,039	$	5,137

Supplemental disclosure for non-cash investing and financing:
Right-of-use assets obtained in exchange for operating lease liabilities	$	18,121	$	5,222
Accrued purchases of property and equipment	$	2,192	$	92
Stock-based compensation expense capitalized in internal-use software	$	1,956	$	1,898
Accrued for asset retirement obligation	$	117	$	—

See accompanying notes to the unaudited condensed consolidated financial statements

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Description of Business

Founded in 2009, Sprinklr, Inc. (the “Company”) provides enterprise cloud software products that enable organizations to do marketing, advertising, research, care, sales and engagement across modern channels including social, messaging, chat and text through its unified Customer Experience Management (“CXM”) software platform.

The Company was incorporated in Delaware in 2011 and is headquartered in New York, New York, USA with 19 operating subsidiaries globally.

2.Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, (“U.S. GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”), regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of January 31, 2023, and related disclosures, have been derived from the audited consolidated financial statements at that date but do not include all of the information required by U.S. GAAP for complete consolidated financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair presentation of the Company’s condensed consolidated financial information. The results of operations for the three and nine months ended October 31, 2023 are not necessarily indicative of the results to be expected for the year ending January 31, 2024 or for any other interim period or for any other future year.

The accompanying interim unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended January 31, 2023 in the Company’s Annual Report on Form 10-K (the “2023 10-K”) filed with the SEC on April 3, 2023.

There have been no material changes in the significant accounting policies as described in the Company’s consolidated financial statements for the fiscal year ended January 31, 2023 included in the 2023 10-K, with the exception of the addition of restricted cash, which is discussed below.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions made in the accompanying consolidated financial statements include, but are not limited to, fair value assumptions for stock-based compensation, software costs eligible for capitalization, recoverability of long-lived and intangible assets and the allowance for doubtful accounts. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and on assumptions that it believes are reasonable and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Segments

The Company operates in one segment because the Company’s offerings operate on its single Customer Experience Management Platform, the Company’s products are deployed in a similar way, and the Company’s chief operating decision maker (“CODM”), the chief executive officer, evaluates the Company’s financial information and assesses the performance of the Company on a consolidated basis. The CODM does not receive discrete financial information about asset allocation, expense allocation or profitability by product or geography. Because the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of cash flows:


(in thousands)	October 31, 2023		January 31, 2023
Cash and cash equivalents	$	172,462	$	188,387
Restricted cash included in prepaid expenses and other current assets(1)	1,491		—
Restricted cash included in other non-current assets(2)	6,911		—
Total cash, cash equivalents and restricted cash	$	180,864	$	188,387

(1)Consists primarily of cash that is restricted and is associated with certain credit card programs.

(2)Consists primarily of collateral for letters of credit issued in lieu of deposits on certain leases and customer contracts, as well as security deposits in lieu of letters of credit for customer contracts.

Concentration of Risk and Significant Customers

The Company’s financial instruments that are potentially subject to credit risk consist primarily of cash and cash equivalents and accounts receivable. Although the Company deposits its cash with multiple financial institutions, its deposits generally exceed federally insured limits.

To manage credit risk related to accounts receivable, the Company maintains an allowance for credit losses. The allowance is determined by applying a loss-rate method based on an aging schedule using the Company’s historical loss rate. The Company also considers reasonable and supportable current and forecasted information in determining its estimated loss rates, such as external forecasts, macroeconomic trends, or other factors, including customers’ credit risk and historical loss experience. The Company’s accounts receivable are derived from invoiced customers located primarily in North America and Europe.

No single customer accounted for more than 10% of total revenue during the three and nine months ended October 31, 2023 and 2022.

In addition, the Company relies upon third-party hosted infrastructure partners globally to serve customers and operate certain aspects of its services, such as environments for development testing, training, sales demonstrations, and production usage. Given this, any disruption of or interference at the Company’s hosted infrastructure partners would impact the Company’s operations and could adversely impact its business.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, with subsequent amendments, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”). The Company adopted Topic 326 on January 31, 2023, with an effective date of February 1, 2022, which amended the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The Company utilized the modified-retrospective approach at adoption, under which prior period comparable financial information was not adjusted. The adoption did not have a material impact on the consolidated financial statements and related disclosures.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

3. Revenue Recognition

The Company derives its revenues primarily from (i) subscription revenue, which consists of subscription fees from customers accessing the Company’s cloud-based software platform and applications, as well as related customer support services; and (ii) professional services revenue, which consists of fees associated with providing services that educate and assist the Company’s customers with the configuration and optimization of the Company’s software platform and applications. Professional services revenue also includes managed services fees where the Company’s consultants work as part of its customers’ teams to help leverage the subscription service to execute on their customer experience management goals.

Costs to Obtain Customer Contracts

Costs to obtain customer contracts, including commissions earned, that are considered incremental and recoverable are capitalized and amortized on a straight-line basis over the anticipated period of benefit. The Company determines the period of benefit by taking into consideration the length of its customer contracts, customer relationship period, technology lifecycle, and other factors. The Company currently estimates the period of benefit for which costs are amortized over to be five years. Sales commissions paid for renewals are not commensurate with commissions paid on the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Amortization expense is recorded in sales and marketing expense within the Company’s condensed consolidated statement of operations.

Capitalized costs to obtain customer contracts as of October 31, 2023 were $117.6 million, of which $40.8 million is included in prepaid expenses and other current assets and $76.8 million within other non-current assets. Capitalized costs to obtain customer contracts as of January 31, 2023 were $113.5 million, of which $44.1 million is included in prepaid expenses and other current assets and $69.4 million within other non-current assets.

During the three months ended October 31, 2023 and 2022, the Company amortized $12.2 million and $11.3 million, respectively, of costs to obtain customer contracts, included in sales and marketing expense. During the nine months ended October 31, 2023 and 2022, the Company amortized $36.4 million and $33.5 million, respectively, of costs to obtain customer contracts, included in sales and marketing expense.

Deferred Revenue

Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized. The Company recognized revenue of $149.5 million and $131.0 million for the three months ended October 31, 2023, and 2022, respectively, and $296.0 million and $250.6 million for the nine months ended October 31, 2023, and 2022, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.

The Company receives payments from customers based on billing schedules as established in its contracts. Contract assets represent amounts for which the Company has recognized revenue in excess of billings pursuant to the revenue recognition guidance. At October 31, 2023 and January 31, 2023, contract assets were $3.8 million and $4.8 million, respectively, and were included in prepaid expenses and other current assets.

Remaining Performance Obligation

Remaining Performance Obligation (“RPO”) represents contracted revenues that had not yet been recognized and includes deferred revenues and amounts that will be invoiced and recognized in future periods. As of October 31, 2023, the Company’s RPO was $774.5 million, approximately $491.4 million of which the Company expects to recognize as revenue over the next 12 months and the remaining balance will be recognized thereafter.

Disaggregation of Revenues

The Company disaggregates its revenue from contracts with customers by geographic location and market, as it believes it best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors.

The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use the cloud-based software platform:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Americas	$	110,096	$	104,932	$	321,013	$	295,288
EMEA	62,309		43,647		172,336		127,099
Other	13,920		8,672		44,804		30,472
	$	186,325	$	157,251	$	538,153	$	452,859

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The United States was the only country that represented more than 10% of the Company’s revenues. The following table represents the revenue in the United States for the three and nine months ended October 31, 2023 and 2022.


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
United States	$	101,848	$	99,844	$	301,253	$	278,352

4. Marketable Securities

The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets:


	October 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Corporate bonds	$	86,108	$	4	$	(90)	$	86,022
Municipal bonds	6,677		—		—		6,677
U.S. government and agency securities	164,259		22		(152)		164,129
Certificates of deposit	57,087		10		(18)		57,079
Commercial paper	170,224		2		(164)		170,062
Marketable securities	$	484,355	$	38	$	(424)	$	483,969


	January 31, 2023
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair value
Corporate bonds	$	39,922	$	8	$	(68)	$	39,862
Municipal bonds	12,429		22		—		12,451
U.S. government and agency securities	128,898		6		(367)		128,537
Certificates of deposit	59,546		28		(155)		59,419
Commercial paper	150,131		41		(202)		149,970
Marketable securities	$	390,926	$	105	$	(792)	$	390,239

As of October 31, 2023 and January 31, 2023, the maturities of available-for-sale marketable securities did not exceed 12 months. Interest income from cash and cash equivalents and marketable securities was $7.8 million and $21.7 million for the three and nine months ended October 31, 2023, respectively, and $2.5 million and $4.1 million for the three and nine months ended October 31, 2022, respectively.

The estimated fair value of debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $393.3 million and $220.9 million as of October 31, 2023 and January 31, 2023, respectively. There are no expected credit losses that have been recorded against the Company’s investment securities as of October 31, 2023 and January 31, 2023.

Unrealized losses on the Company’s debt securities are not considered to be credit-related based upon an analysis that considered the extent to which the fair value is less than the amortized basis of a security, adverse conditions specifically related to the security, changes to credit rating of the instrument subsequent to Company purchase, and the strength of the underlying collateral, if any.

Refer to Note 5, Fair Value Measurements, for information about the fair value of the Company’s fair value hierarchy for short-term marketable securities.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

5. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of October 31, 2023 and January 31, 2023, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:


	October 31, 2023				January 31, 2023
(in thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Financial Assets:
Cash Equivalents:
Money market funds	$	59,037	$	—	$	59,037	$	73,851	$	—	$	73,851

Marketable Securities:
Corporate bonds	—		86,022		86,022		—		39,862		39,862
Municipal bonds	—		6,677		6,677		—		12,451		12,451
U.S. government and agency securities	—		164,129		164,129		—		128,537		128,537
Certificates of deposit	—		57,079		57,079		—		59,419		59,419
Commercial paper	—		170,062		170,062		—		149,970		149,970
Total financial assets	$	59,037	$	483,969	$	543,006	$	73,851	$	390,239	$	464,090

The Company classifies its highly liquid money market funds within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its commercial paper, corporate and municipal debt securities, U.S. government and agency securities and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded.

The Company’s primary objective when investing excess cash is preservation of capital, hence the Company’s marketable securities consist primarily of U.S. government and agency securities, high credit quality corporate debt securities and commercial paper. The Company has classified and accounted for its marketable securities as available-for-sale securities, as it may sell these securities at any time for use in the Company’s current operations or for other purposes, even prior to maturity. As of October 31, 2023 and January 31, 2023, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of October 31, 2023, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities before maturity.

The Company regularly reviews the changes to the rating of its debt securities by rating agencies as well as reasonably monitors the surrounding economic conditions to assess the risk of expected credit losses. As discussed in Note 4, Marketable Securities, as of October 31, 2023 and January 31, 2023, there were no securities that were in an unrealized loss position for more than 12 months. The Company has not recorded any impairments in the periods presented.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

6. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


(in thousands)	October 31, 2023		January 31, 2023
Prepaid hosting and data costs	$	4,270	$	12,168
Prepaid software costs	8,296		6,079
Prepaid marketing	2,158		1,660
Capitalized commissions costs, current portion	40,780		44,051
Contract assets	3,831		4,785
Security deposits, short-term	3,105		3,136
Taxes recoverable	3,933		2,327
Restricted cash	1,491		—
Prepaid employee benefits	2,569		1,582
Other	6,795		3,077
Prepaid expenses and other current assets	$	77,228	$	78,865

Depreciation and Amortization Expense

Depreciation and amortization expense consisted of the following:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Depreciation and amortization expense	$	1,454	$	1,634	$	4,493	$	4,646
Amortization expense for capitalized internal-use software	$	2,500	$	1,591	$	6,790	$	4,081

The Company capitalized internal-use software costs, including stock-based compensation, of $3.4 million and $3.7 million for the three months ended October 31, 2023 and 2022, respectively, and $10.7 million and $9.6 million for the nine months ended October 31, 2023 and 2022, respectively.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


(in thousands)	October 31, 2023		January 31, 2023
Bonuses	$	18,224	$	25,057
Commissions	8,663		27,866
Employee liabilities (1)	17,354		16,374
Purchased media costs (2)	2,002		2,965
Accrued restructuring costs (3)	310		4
Accrued sales and use tax liability	7,025		7,336
Accrued income taxes	5,050		3,139
Accrued deferred contract credits	2,346		1,733
Vendor and travel costs payable	5,986		4,132
Professional services	659		784
Asset retirement obligation	881		1,011
Withholding taxes payable	681		2,702
Other	3,600		4,421
Accrued expenses and other current liabilities	$	72,781	$	97,524

(1) Includes $3.2 million and $1.4 million of accrued employee contributions under the Company’s 2021 Employee Stock Purchase Plan (“ESPP”) at October 31, 2023 and January 31, 2023, respectively.

(2) Purchased media costs consist of amounts owed to the Company’s vendors for the purchase of advertising space on behalf of its customers.

(3) In February 2023, the Company implemented an approved plan for restructuring its global workforce by approximately 4% to reduce operating costs and better align its workforce with the needs of its business. The majority of the associated costs, including severance and benefits, were incurred in the first half of fiscal 2024. For the nine months ended October 31, 2023, the Company incurred a total of $4.4 million in restructuring costs of which $4.2 million and $0.2 million are recorded within sales and marketing expense and general and administrative expense, respectively, on the Company’s condensed consolidated statements of operations. As of October 31, 2023, $4.1 million had been paid and the remaining $0.3 million is recorded within accrued restructuring costs.

7. Leases

The Company has leases for corporate offices under non-cancelable operating leases with various expiration dates. The Company did not have any finance leases during the three and nine months ended October 31, 2023 and 2022.

On August 2, 2023, the Company entered into a 10-year operating lease agreement for a new corporate headquarters located in New York, NY. The Company has the option to extend the term for 60 months. The Company cannot take possession of the leased premises until the design and construction period ends, which is not anticipated to end until fiscal 2025. The annual lease payments will be approximately $2.6 million once the lease commences.

The components of lease expense were as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Operating lease cost	$	2,877	$	2,107	$	8,160	$	5,902
Variable lease cost	328		277		937		849
Short-term lease cost	145		181		534		564
Total lease cost	$	3,350	$	2,565	$	9,631	$	7,315

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The weighted average remaining lease term and discount rate were as follows:


	October 31, 2023
Weighted average remaining lease term (years)	6.42
Weighted average discount rate	10.81	%

The maturities of lease liabilities under non-cancelable operating leases, net of lease incentives, was as follows:


(in thousands)	October 31, 2023
Fiscal year ended January 31, 2024 (remaining three months)	$	3,441
2025	7,410
2026	6,029
2027	5,471
2028	3,881
2029	3,372
Thereafter	12,759
Total minimum lease payments (1)	42,363
Less: imputed interest	(12,625)
Total	$	29,738

(1) Excludes future payments related to the New York operating lease, which has been signed but not yet commenced as of October 31, 2023.

8. Commitments and Contingencies

Letters of Credit

In April 2023, the Company terminated its credit facility with Silicon Valley Bank (“SVB”), while keeping its existing letters of credit in lieu of deposits on certain leases. As the Company no longer has a credit facility with SVB, it was required to collateralize these letters of credit with cash, totaling approximately $1.3 million, which the Company has therefore classified within restricted cash. Due to its long-term nature, this restricted cash is recorded within other non-current assets on the condensed consolidated balance sheets.

During 2023, the Company entered into cash collateral agreements with J.P. Morgan Bank in lieu of a letter of credit facility, through which approximately $5.4 million is outstanding as of October 31, 2023. Due to its long-term nature, this restricted cash is recorded within other non-current assets on the condensed consolidated balance sheets.

Legal Matters

From time to time, the Company, various subsidiaries, and certain current and former officers may be named as defendants in various lawsuits, claims, investigations and proceedings arising from the normal course of business. The Company also may become involved with contract issues and disputes with customers. With respect to litigation in general, based on the Company’s experience, management believes that the amount of damages claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases. The Company believes that it has valid defenses with respect to the legal matters pending against the Company and intends to vigorously contest each of them.

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. In management’s opinion, resolution of all current matters is not expected to have a material adverse impact on the Company’s condensed consolidated results of operations, cash flows or financial position. However, if an unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact on the results of operations for that period. At October 31, 2023, the Company had no provision for liability under existing litigation.

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Other Contractual Commitments

Other contractual commitments consist primarily of non-cancelable purchase commitments to support the Company’s data and hosting services. During the nine months ended October 31, 2023, the Company entered into new operating leases that would impact its cash requirements. See Note 7 for additional information. There were no other significant changes in the Company’s material cash requirements as compared to the material cash requirements from known contractual and other obligations described in the 2023 10-K.

9. Stock-Based Compensation

Equity Award Plans

The Company has two equity incentive plans, the Sprinklr, Inc. 2021 Equity Incentive Plan (the “2021 Plan”) and the Sprinklr, Inc. 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan was terminated as to future awards in June 2021 upon the adoption of the 2021 Plan, although it continues to govern the terms of any equity grants that remain outstanding under the 2011 Plan.

The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance-based stock units (“PSUs”), and other forms of awards to employees, directors and consultants, including employees and consultants of the Company’s affiliates, as permitted by law.

In June 2021, the Company also adopted its ESPP, under which employees can purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the Class A common stock on (i) the first trading day of each offering period and (ii) the last trading day of each related offering period.

Summary of Stock Option Activity

A summary of the Company’s stock option activity for the nine months ended October 31, 2023 is as follows:


	Number of stock options	Weighted average exercise price		Weighted average remaining contractual life
	(in thousands)			(in years)
Outstanding as of January 31, 2023	33,049	$	6.11	6.6
Granted	1,512	12.85
Exercised	(5,505)	5.86
Cancelled/forfeited(1)	(3,602)	5.81
Expired	(5)	0.25
Outstanding as of October 31, 2023	25,449	$	6.61	5.9
Exercisable as of October 31, 2023	20,864	$	5.69	5.4
Vested and expected to vest as of October 31, 2023	24,844	$	6.52	5.8

(1) 2,318,632 options tied to market conditions were cancelled during the second quarter as the applicable market conditions were not met by May 1, 2023.

Summary of Restricted Stock Unit Activity

A summary of the Company’s RSU activity for the nine months ended October 31, 2023 is as follows:


	Number of restricted shares	Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding as of January 31, 2023	9,400	$	12.23
Granted	6,056	13.02
Released	(2,800)	12.63
Cancelled/forfeited	(2,152)	12.44
Outstanding as of October 31, 2023	10,504	$	12.54

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Performance-Based Stock Units

As of October 31, 2023, the Company had 780,000 PSUs outstanding. These awards vest over a five-year period if certain performance and market conditions are met. The performance condition was met in June 2021 and the market conditions have not yet been met as of October 31, 2023. If the market conditions are not met on or prior to January 28, 2026, the associated awards will not vest and will be subsequently cancelled.

Stock-Based Compensation Expense

Stock-based compensation expense included in operating results was allocated as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Costs of subscription	$	268	$	282	$	858	$	1,079
Costs of professional services	331		368		1,139		1,770
Research and development	2,128		2,204		9,092		7,700
Sales and marketing	6,132		5,071		18,398		18,736
General and administrative	5,071		3,284		12,618		10,635
Stock-based compensation, net of amounts capitalized	13,930		11,209		42,105		39,920
Capitalized stock-based compensation	412		1,023		1,956		1,898
Total stock-based compensation	$	14,342	$	12,232	$	44,061	$	41,818

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

10. Net Income (Loss) Per Share

The Company has two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion and transfer rights. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net income (loss) per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both an individual and combined basis.

Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted net income (loss) per share is calculated by giving effect to all potential dilutive common stock equivalents, which includes stock options, restricted stock units and other awards. In periods of net loss, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands, except per share amounts)	2023		2022		2023		2022
Net income (loss) per share – basic:
Numerator:
Net income (loss)	$	16,967	$	(5,860)	$	30,260	$	(55,075)
Denominator:
Weighted-average shares outstanding used in computing net income (loss) per share, basic	271,202		260,285		268,596		258,677
Net income (loss) per common share, basic	$	0.06	$	(0.02)	$	0.11	$	(0.21)
Net income (loss) per share – diluted:
Numerator:
Net income (loss)	$	16,967	$	(5,860)	$	30,260	$	(55,075)
Denominator:
Weighted-average shares outstanding used in computing net income (loss) per share, basic	271,202		260,285		268,596		258,677
Weighted-average effect of diluted securities:
Stock options	12,059		—		12,067		—
RSUs	4,072		—		4,743		—
Common stock warrants	742		—		579		—
ESPP	46		—		—		—
Weighted-average shares outstanding used in computing net income (loss) per share, diluted	288,121		260,285		285,985		258,677
Net income (loss) per common share, diluted	$	0.06	$	(0.02)	$	0.11	$	(0.21)

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	Three Months Ended October 31,		Nine Months Ended October 31,
(in thousands)	2023	2022	2023	2022
Stock options	2,544	36,033	2,832	36,033
PSUs and other performance-based awards	780	2,295	780	2,295
RSUs	19	9,202	466	9,202
ESPP	—	409	493	409
Warrants to purchase common stock	—	2,500	—	2,500
Total shares excluded from net income (loss) per share	3,343	50,439	4,571	50,439

SPRINKLR, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

11. Income Taxes

The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. During the three months ended October 31, 2023 and 2022, the Company recorded an income tax provision of $2.6 million and $2.4 million, respectively. During the nine months ended October 31, 2023 and 2022, the Company recorded an income tax provision of $3.5 million and $7.0 million, respectively.

The Company’s effective tax rate generally differs from the U.S. federal statutory tax rate primarily due to a full valuation allowance related to the Company’s U.S. deferred tax assets, partially offset by state taxes and the foreign tax rate differential on non-U.S. income. Additionally, following an assessment of the realizability of our deferred tax assets in Brazil and Japan, the Company released its previously established valuation allowances on these assets, resulting in a $3.3 million tax benefit being recorded during the three months ended April 30, 2023.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence. As of October 31, 2023, the Company continues to maintain a full valuation allowance against the deferred tax assets of the U.S. entity only.

The Inflation Reduction Act of 2022 (“IRA”) was signed into law on August 16, 2022. The bill was meant to address the high inflation rate in the U.S. through various climate, energy, healthcare, and other incentives. These incentives are meant to be paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a new 1 percent excise tax on stock buybacks, additional IRS funding to improve taxpayer compliance, and other items. At this time, none of the IRA tax provisions are expected to have a material impact to the Company’s fiscal 2024 tax provision. The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the IRA to determine whether any adjustments are needed to the Company’s tax provision in future periods.

12. Related Party Transactions

The Company engaged Lyearn Inc. (“Lyearn”), a learning management system company that is wholly owned by Ragy Thomas, our Founder, Chairman and Chief Executive Officer, in connection with the provision of digital training services to the Company’s employees and certain Sprinklr customers. The Company paid approximately $0.2 million to Lyearn in connection with the digital training services provided to employees for the nine months ended October 31, 2023. There were no payments under this arrangement during each of the three months ended October 31, 2023 and 2022 and nine months ended October 31, 2022. The Company paid approximately $0.1 million to Lyearn in connection with the digital training services provided to a customer during each of the nine months ended October 31, 2023 and 2022. There were no payments under this arrangement during the three months ended October 31, 2023 and 2022.

The Company recognized expenses of $0.1 million during the three months ended October 31, 2023 and no expenses during the three months ended October 31, 2022 related to the arrangements. During each of the nine months ended October 31, 2023 and 2022, the Company recognized expenses of $0.2 million related to the arrangements. As of October 31, 2023 and January 31, 2023, the Company had outstanding payables of $0.2 million and $0.4 million, respectively, related to the arrangements.

With regard to the development of certain human productivity features for the Company, the Company is leveraging its collaborative relationship with Lyearn to serve Company imperatives in the areas of employee assessment, goal-setting, and activity measurement against goals, and other employee feedback and assessment, to assist and accelerate the Company’s efforts to identify the optimal tools and processes that will be deployed long-term to meet these business imperatives. These collaborative services are provided to the Company, by Lyearn, at no cost.

This related party transaction has been reviewed and approved by the audit committee of the Company’s board of directors.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), and our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 (the “2023 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on April 3, 2023. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Overview

Sprinklr empowers the world’s largest and most loved brands to make their customers happier.

We do this with a new category of enterprise software – Unified Customer Experience Management (“Unified-CXM”) – that enables every customer-facing function across the front office, from Customer Service to Marketing, to collaborate across internal silos, communicate across digital channels, and leverage a complete suite of capabilities to deliver better, more human customer experiences at scale – all on one unified, AI-powered platform.

Our Unified-CXM platform utilizes an architecture purpose-built for managing CXM data and is powered by proprietary AI, collaborative workflow, seamless automation, broad-based listening and customer-led governance to help enterprises analyze massive amounts of unstructured and structured data.

We generate revenue from the sale of subscriptions to our Unified-CXM platform and related professional services. Our platform includes products that are licensed on a per-user basis as well as products that are licensed based on different tiers of volume.

We believe that our Unified-CXM platform is highly effective for organizations of all sizes, and we have a highly diverse group of customers across a broad array of industries and geographies. We focus primarily on selling our platform to large global enterprises, as we believe that we have significant competitive advantages attracting and serving such organizations given their complex needs and the broad capabilities our platform offers.

Our customers include global enterprises across a broad array of industries and geographies, as well as marketing agencies and government departments along with non-profit and educational institutions. Our customers are located in over 80 countries, and our AI powered CXM platform recognizes over 150 languages. We define our large customers as customers with greater than or equal to $1.0 million in subscription revenue on a trailing 12-month basis, as of the period presented. As of October 31, 2023, we had 123 large customers, compared to 107 as of October 31, 2022.

Key Business Metrics

We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decision.

RPO and cRPO

Remaining Performance Obligation (“RPO”) represents contracted revenue that have not yet been recognized and includes deferred revenue and amounts that will be invoiced and recognized in future periods. Current RPO (“cRPO”) represents contracted revenue that have not yet been recognized and includes deferred revenue and amounts that will be invoiced and recognized in the next 12 months. The aggregate transaction price of RPO expected to be recognized as revenue was $774.5 million and $576.7 million as of October 31, 2023 and 2022, respectively. The aggregate transaction price of cRPO expected to be recognized as revenue in the next 12 months was $491.4 million and $412.7 million as of October 31, 2023 and 2022, respectively.

RPO and cRPO as of October 31, 2022 have been reduced from $586.1 million and $420.2 million previously reported, respectively, to $576.7 million and $412.7 million, respectively, in order to correct the treatment of an immaterial number of contracts previously included in the calculations of RPO and cRPO.

Net Dollar Expansion Rate

We believe that net dollar expansion rate (“NDE”) is an indicator of the value that our platform delivers to customers. We calculate NDE to measure our ability to retain and expand subscription revenue from our existing customers. NDE compares our subscription revenue from the same set of customers across comparable periods and reflects customer renewals, expansion, contraction and churn. We calculate NDE by dividing (i) subscription revenue in the trailing 12-month period from those customers who were on our platform during the most recent prior 12-month period by (ii) subscription revenue from the same customers in the preceding prior 12-month period. This calculation is net of upsells, contraction, cancellation or expansion during the period but excludes subscription revenue from new customers. Our net dollar expansion rate, on a trailing 12-month basis, was 117.7% and 124.5% for the 12-month periods ending October 31, 2023 and 2022, respectively.

Macroeconomic Considerations

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including the COVID-19 pandemic, rising inflation, the U.S. Federal Reserve raising interest rates, recent bank closures, the Russia-Ukraine war and the Israel-Hamas war, have led to economic uncertainty globally. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses. While we have experienced growing inflationary pressures on the cost of wages, rent and data, the net result of the inflationary impacts and our efforts to mitigate these impacts have not been material to us during the periods included in this report.

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this Form 10-Q and Part I, Item 1A of the 2023 10-K.

Components of Results of Operations

Revenue

We generate revenue from the sale of subscriptions to our Unified-CXM cloud-based software platform and related professional services.

Subscription revenue consists primarily of fees from customers accessing our proprietary Unified-CXM platform, as well as related support services. Subscription revenue is generally recognized ratably over the related contract term beginning on the commencement date of each contract, which is generally the date our service is made available to customers. Our subscriptions typically have a term of one to three years. Historically, we have experienced seasonality in our sales cycle, as a large percentage of our customers make their purchases in the fourth quarter of a given fiscal year and pay us in the first quarter of the subsequent year. This seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the term of the applicable subscription agreement.

Professional services revenue consists of fees associated with providing services that assist our customers with the configuration and optimization of our Unified-CXM software. These fees also include managed services fees where our consultants work as part of our customers’ teams to help leverage the subscription services to execute on their customer experience management goals and enablement services which consist of initial design, configuration and education services.

Costs of Revenue

Costs of Subscription Revenue

Costs of subscription revenue consists primarily of costs to host our software platform, data costs, including cost of third-party data utilized in our platform, personnel-related expenses for our subscription and support operations personnel, including salaries, benefits, bonuses, stock-based compensation, professional fees, software costs, travel expenses, the amortization of our capitalized internal-use software and allocated overhead expenses, including facilities costs for our subscription and support operations. We expect that costs of subscription revenue will increase in absolute dollars as we expand our customer base and make continued investments in our cloud infrastructure and support organization.

Costs of Professional Services Revenue

Costs of professional services revenue consists primarily of personnel-related expenses for our professional services personnel, professional fees, software costs, subcontractor costs, travel expenses and allocated overhead expenses, including facilities costs, for our professional services organization. We expect that our costs of professional services revenue will increase in absolute dollars as we expand our customer base.

Gross Profit and Gross Margin

Gross profit is total revenue less total costs of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors, including our pricing, our mix of revenues and the costs required to deliver those revenues.

Our gross margin on subscription revenue is significantly higher than our gross margin on professional services revenue, and as a result our gross margin may vary from period to period if our mix of revenue or costs of revenue fluctuates. In addition, because personnel-related expenses represent the largest component in costs of professional services revenue, we may experience changes in our professional services gross margin due to the timing of delivery of those services. We expect that our gross margin may vary from period to period and increase modestly in the long term.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing and general and administrative expenses.

Research and Development Expense

Research and development expense consists primarily of costs relating to the maintenance, continued development and enhancement of our cloud-based software platform and includes personnel-related expense for our research and development organization, professional fees, travel expenses and allocated overhead expenses, including facilities costs. Research and development expenses are expensed as incurred, except for internal-use software development costs that qualify for capitalization. We expect research and development expense to increase in absolute dollars as we continue to invest in enhancing and expanding the capabilities of our Unified-CXM platform.

Sales and Marketing Expense

Sales and marketing expense consists primarily of personnel-related expenses for our sales and marketing organization, professional fees, software costs, advertising, marketing, promotional and brand awareness activities, travel expenses and allocated overhead expense, including facilities costs. Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over the expected period of benefit. We intend to continue to invest in sales and marketing to help drive the growth of our business. We continue to optimize our sales and marketing expense and seek efficiencies in our investments.

General and Administrative Expense

General and administrative expense includes personnel costs associated with administrative services, such as legal, human resources, information technology, accounting, and finance functions, as well as professional fees, software costs, travel expenses and allocated overhead expense, including facilities costs and any corporate overhead expenses not allocated to other expense categories.

We expect our general and administrative expense to increase in absolute dollars as we continue to grow our business. We also anticipate that we will incur additional costs for employees and third-party consulting services, which may cause our general and administrative expense to fluctuate as a percentage of revenue from period to period.

Other Income (Expense), Net

Other income (expense), net, consists of interest income on invested cash and cash equivalents and marketable securities, interest expense, foreign currency transaction gains and losses and other expenses and gains.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes related to foreign and U.S. jurisdictions in which we conduct business. Our annual estimated effective tax rate differed from the U.S. federal statutory rate primarily due to a full valuation allowance related to our U.S. deferred tax assets, partially offset by U.S. current state taxes and foreign tax rate differential on non-U.S. income and discrete items relating to releases of valuation allowances in certain foreign jurisdictions.

Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods indicated:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Revenue:
Subscription	$	170,464	$	139,906	$	491,581	$	400,301
Professional services	15,861		17,345		46,572		52,558
Total revenue	186,325		157,251		538,153		452,859
Costs of revenue:
Costs of subscription (1)	29,877		26,249		85,136		76,759
Costs of professional services (1)	16,571		14,271		46,716		47,641
Total costs of revenue	46,448		40,520		131,852		124,400
Gross profit	139,877		116,731		406,301		328,459
Operating expense:
Research and development (1)	23,146		19,208		68,230		56,531
Sales and marketing (1)	75,446		79,538		244,766		253,418
General and administrative (1)	28,096		22,588		77,820		67,916
Total operating expense	126,688		121,334		390,816		377,865
Operating income (loss)	13,189		(4,603)		15,485		(49,406)
Other income, net	6,328		1,093		18,324		1,304
Income (loss) before provision for income taxes	19,517		(3,510)		33,809		(48,102)
Provision for income taxes	2,550		2,350		3,549		6,973
Net income (loss)	$	16,967	$	(5,860)	$	30,260	$	(55,075)

(1) Includes stock-based compensation expense, net of amounts capitalized, as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
(in thousands)	2023		2022		2023		2022
Costs of subscription	$	268	$	282	$	858	$	1,079
Costs of professional services	331		368		1,139		1,770
Research and development	2,128		2,204		9,092		7,700
Sales and marketing	6,132		5,071		18,398		18,736
General and administrative	5,071		3,284		12,618		10,635
Stock-based compensation expense, net of amounts capitalized	$	13,930	$	11,209	$	42,105	$	39,920

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of total revenue:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue:
Subscription	91	%	89	%	91	%	88	%
Professional services	9	%	11	%	9	%	12	%
Total revenue	100	%	100	%	100	%	100	%
Costs of revenue:
Costs of subscription	16	%	17	%	16	%	17	%
Costs of professional services	9	%	9	%	9	%	11	%
Total costs of revenue	25	%	26	%	25	%	28	%
Operating expense:
Research and development	12	%	12	%	13	%	12	%
Sales and marketing	41	%	51	%	45	%	56	%
General and administrative	15	%	14	%	14	%	15	%
Total operating expense	68	%	77	%	72	%	83	%
Operating income (loss)	7	%	(3)	%	3	%	(11)	%
Other income, net	3	%	1	%	3	%	0	%
Income (loss) before provision for income taxes	10	%	(2)	%	6	%	(11)	%
Provision for income taxes	1	%	1	%	0	%	2	%
Net income (loss)	9	%	(3)	%	6	%	(13)	%

Comparison of the Three Months Ended October 31, 2023 and 2022

Revenue


	Three Months Ended October 31,
(in thousands)	2023		2022		$ Change		% Change
Subscription	$	170,464	$	139,906	$	30,558	22	%
Professional services	15,861		17,345		(1,484)		(9)	%
Total revenue	$	186,325	$	157,251

Sprinklr, Inc. [CXM] Filings
10-Q	[2023-12-06]
10-Q	[2023-09-06]
10-Q	[2023-06-05]
10-K	[2023-04-03]
10-Q	[2022-12-06]
10-Q	[2022-09-08]
10-Q	[2022-06-14]
10-K	[2022-04-11]
10-Q	[2021-12-10]
10-Q	[2021-09-10]
S-1	[2021-05-28]