Sprinklr (NYSE:CXM) Surprises With Q2 Sales But Contract Wins Slow Down

Customer experience software provider Sprinklr (NYSE:CXM) reported Q2 FY2024 results beating Wall Street analysts' expectations, with revenue up 18.5% year on year to $178.5 million. The company also expects next quarter's revenue to be around $180 million, in line with analysts' estimates. Turning to EPS, Sprinklr made a GAAP profit of $0.04 per share, improving from its loss of $0.09 per share in the same quarter last year.

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“We had another solid quarter across the board with strength in Sprinklr Service product suite and a record level of profitability. Our teams continue to innovate across our unified-CXM platform with new features and enhancements to our AI+ strategy. We’re encouraged by customers’ growing demand to unify their front-office teams and technology leading to better customer experiences,” said Ragy Thomas, Founder and CEO at Sprinklr.

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 $118.7 million in Q2 FY2022 to $178.5 million this quarter.

This quarter, Sprinklr's quarterly revenue was once again up 18.5% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $5.1 million in Q2 compared to $8.03 million in Q1 2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Sprinklr is expecting revenue to grow 14.5% year on year to $180 million, slowing down from the 23.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13.9% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. 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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 75.6% in Q2.

That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, sales and marketing, and general administrative overhead. Sprinklr's impressive gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity. It's also comforting to see its gross margin remain stable, indicating that Sprinklr is controlling its costs and not under pressure from its competitors to lower prices.

Key Takeaways from Sprinklr's Q2 Results

Sporting a market capitalization of $4.23 billion, Sprinklr is among smaller companies, but its more than $628.4 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

This was a nice "beat and raise" quarter. It was good to see Sprinklr beat analysts' revenue and profit expectations this quarter. We were also glad that its full-year revenue and profit guidance was raised and came in higher than Wall Street's estimates. On the other hand, its new large contract wins slowed. Zooming out, we think this was still a solid quarter, showing that the company is staying on track. The stock is flat after reporting and currently trades at $15.75 per share.

So should you invest in Sprinklr right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.