Sprinklr IPO Filing: Cash Flow and Growth Analysis

Sprinklr's Entry into the Public Market

A new initial public offering (IPO) has arrived, with Sprinklr preparing to enter the public markets.

This New York City-based software firm operates within the customer experience sector. Having secured over $400 million in funding during its private phase, the company’s upcoming IPO is anticipated to deliver substantial returns to numerous venture capital firms.

This event further demonstrates the growing sophistication of New York’s startup ecosystem. (Further details can be found here.)

Funding and Investors

Sprinklr’s most recent funding round, totaling $200 million, occurred in September 2020 and resulted in a $2.7 billion valuation.

This investment included both secondary share sales and $150 million in convertible notes, bringing the company’s total raised capital to over $500 million.

Notable investors in Sprinklr include:

• Temasek Holdings
• Battery Ventures
• ICONIQ Capital
• Intel Capital

These firms contributed funding during Sprinklr’s formative years as a startup.

IPO Amidst Market Activity

While the anticipated Robinhood IPO filing didn’t materialize last week, Sprinklr’s debut provides a significant IPO to analyze beyond special purpose acquisition companies (SPACs).

Before delving further, it’s important to understand the core business of Sprinklr. The company’s primary function is to provide solutions related to managing and enhancing customer interactions.

Understanding Sprinklr’s Operations

The initial public offering (IPO) documentation and official website of Sprinklr employ somewhat ambiguous language, necessitating a clearer understanding of the company’s core functions. Let's analyze what Sprinklr actually provides.

The company’s self-description, as found in its filing, lacks immediate clarity. However, a more straightforward explanation is readily available.

• Content Creation Tools: Sprinklr offers software solutions for content marketing, enabling businesses to accelerate content production, organize digital resources, and monitor performance metrics.
• Social Media Management Platform: Perhaps its most recognized offering, Sprinklr provides tools for brands to efficiently manage their content distribution across diverse social media channels.
• Data Analysis with Artificial Intelligence: Sprinklr is developing an artificial intelligence (AI) engine to integrate its product suite and deliver what they term “actionable insights” to clients.

Essentially, Sprinklr specializes in marketing and communications software, enhanced with integrated machine learning capabilities. This is a relatively concise overview of their offerings.

A closer examination reveals a strong emphasis on serving enterprise-level clients. Out of a reported 1,179 customers, 69 contributed $1 million or more in revenue to the company within the past year.

These key accounts account for approximately 47% of Sprinklr’s total subscription revenue during that same period. This highlights the importance of large clients to their business model.

To gain a comprehensive understanding, it’s crucial to review the company’s overall financial performance across recent reporting periods. Let’s proceed with that analysis.

Sprinklr’s Financial Performance

During the fiscal years concluded on January 31, 2020, and 2021, Sprinklr achieved revenues totaling $324.3 million and $386.9 million, respectively. This represents a 19% increase in revenue between these two 12-month periods.

Examining more recent performance, the quarters ending April 30, 2020, and 2021 saw Sprinklr report revenues of $93 million and $111 million, also demonstrating a 19% year-over-year growth rate.

Profitability Concerns

Despite revenue gains, Sprinklr experienced net losses over both the fiscal years and the most recent fiscal quarters. Net income moved from a negative $39.1 million to a negative $41.2 million between the fiscal years ending January 31, 2020, and 2021.

Further losses were recorded in the quarters ending April 30, 2020, and 2021, amounting to $11.2 million and $14.7 million, respectively.

Non-GAAP Operating Income

However, focusing on the company’s preferred metric of non-GAAP operating income reveals a different trend. Sprinklr’s non-GAAP operating income reached $16.9 million in its most recent fiscal year.

Additionally, the company reported a reduced loss of $1.7 million in its latest fiscal quarter, indicating improved operational efficiency when assessed using this metric.

Cash Flow Analysis

While adjusted profits may improve investor confidence, Sprinklr’s cash flow situation presents a more complex picture.

The company transitioned to negative operating and free cash flow in its most recent reporting period. This is generally not a favorable trend for a company preparing for an initial public offering.

Strong Cash Position

Despite the recent negative cash flow, Sprinklr maintains a substantial cash reserve. According to its S-1 filing, the company possesses over $250 million in cash.

This indicates that Sprinklr is not pursuing an IPO due to financial necessity. The timing of the IPO appears to be strategically aligned with favorable market conditions.

IPO Timing and Market Conditions

The decision to go public can be interpreted as capitalizing on current market dynamics. With American stock indices near record highs, it may be an opportune time for software companies with moderate revenue growth to list.

Further details regarding pricing will be available as they are released.