Sprinklr(CXM) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Sprinklr, Inc.'s unaudited condensed consolidated financial statements for the quarter ended July 31, 2025, covering balance sheets, income statements, cash flows, and detailed accounting notes Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a decrease in total assets and total liabilities from January 31, 2025, to July 31, 2025, primarily driven by changes in cash and cash equivalents, accounts receivable, and deferred revenue | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------ | | Total assets | $1,086,113 | $1,184,199 | | Total liabilities | $542,676 | $572,136 | | Total stockholders' equity | $543,437 | $612,063 | - Cash and cash equivalents decreased from $145.3 million on January 31, 2025, to $125.4 million on July 31, 2025[22] - Accounts receivable, net, decreased from $285.7 million to $202.5 million[22] - Deferred revenue (current and non-current) decreased from $409.8 million to $397.1 million[22] Condensed Consolidated Statements of Operations Sprinklr reported increased total revenue for both the three and six months ended July 31, 2025, compared to the prior year periods, with net income significantly increasing for the three-month period but slightly decreasing for the six-month period | Metric (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $212,040 | $197,208 | $417,540 | $393,166 | | Gross profit | $144,602 | $143,241 | $287,471 | $288,074 | | Operating income (loss) | $16,272 | $(87) | $14,517 | $5,622 | | Net income | $12,615 | $1,841 | $11,047 | $12,475 | | Net income per share, basic | $0.05 | $0.01 | $0.04 | $0.05 | | Net income per share, diluted | $0.05 | $0.01 | $0.04 | $0.04 | - Subscription revenue increased by 6% for the three months and by 5% for the six months ended July 31, 2025, compared to the prior year periods[24] - Professional services revenue increased by 22% for the three months and 18% for the six months ended July 31, 2025, year-over-year[24] Condensed Consolidated Statements of Comprehensive Income Total comprehensive income for the three months ended July 31, 2025, was $10.5 million, a significant increase from $2.8 million in the prior year, driven by higher net income and reduced foreign currency adjustments | Metric (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $12,615 | $1,841 | $11,047 | $12,475 | | Foreign currency translation adjustments | $(1,970) | $652 | $2,425 | $58 | | Unrealized (losses) gains on investments, net of tax | $(120) | $321 | $(198) | $(473) | | Total comprehensive income, net of tax | $10,525 | $2,814 | $13,274 | $12,060 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $612.1 million at January 31, 2025, to $543.4 million at July 31, 2025, primarily due to $141.4 million in common stock repurchases, partially offset by stock-based compensation and net income | Metric (in thousands) | July 31, 2025 | January 31, 2025 | | :-------------------- | :------------ | :--------------- | | Total Stockholders' Equity | $543,437 | $612,063 | | Common stock repurchased, including accrued excise tax (6 months) | $(141,429) | $(273,064) | | Stock-based compensation - equity classified awards (6 months) | $43,805 | $29,629 | | Net income (6 months) | $11,047 | $12,475 | - The Company repurchased 16,494,694 shares of Class A common stock for $140.4 million during the six months ended July 31, 2025, under the 2025 Share Repurchase Program[101] Condensed Consolidated Statements of Cash Flows For the six months ended July 31, 2025, net cash provided by operating activities significantly increased to $118.6 million, up from $63.0 million in the prior year, driven by a decrease in accounts receivable, while investing activities shifted to a $15.4 million use of cash and financing activities decreased to $125.1 million used | Metric (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $118,567 | $63,034 | | Net cash (used in) provided by investing activities | $(15,443) | $145,843 | | Net cash used in financing activities | $(125,121) | $(253,235) | | Net change in cash, cash equivalents and restricted cash | $(19,702) | $(45,605) | - Operating cash flow benefited from an $81.0 million decrease in accounts receivable due to collections outpacing billings in 2025[206] - Investing activities in 2025 included $269.7 million in purchases of marketable securities and $262.6 million from sales and maturities of marketable securities[208] - Financing activities in 2025 were primarily impacted by $140.8 million in share repurchases, lower than the $273.9 million in 2024[210][211] Notes to Unaudited Condensed Consolidated Financial Statements These notes detail Sprinklr's accounting policies, financial statement components, and significant events, covering revenue, marketable securities, leases, stock-based compensation, income taxes, and restructuring 1. Organization and Description of Business - Sprinklr, Inc. provides enterprise software products for unified customer experience management (Unified-CXM) using an AI-native platform[37] - The company was founded in 2009, incorporated in Delaware in 2011, and operates globally with 21 subsidiaries[37][38] 2. Basis of Presentation and Summary of Significant Accounting Policies - Financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, with certain footnotes condensed or omitted[39] - No material changes in significant accounting policies since the fiscal year ended January 31, 2025[41] - The company operates in one operating segment, as the CEO evaluates performance on a consolidated basis[43] | (in thousands) | July 31, 2025 | January 31, 2025 | | :--------------- | :------------ | :--------------- | | Cash and cash equivalents | $125,365 | $145,270 | | Restricted cash included in prepaid expenses and other current assets | $923 | $1,705 | | Restricted cash included in other non-current assets | $7,543 | $6,558 | | Total cash, cash equivalents and restricted cash | $133,831 | $153,533 | | (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Allowance, beginning of period | $8,059 | $5,267 | | Write-offs of uncollectible accounts, net | $(1,446) | $(3,518) | | Provision for expected credit losses | $2,468 | $10,743 | | Allowance, end of period | $9,081 | $12,492 | - No single customer accounted for more than 10% of total revenue during the three and six months ended July 31, 2025 and 2024[50] 3. Revenue Recognition - Revenue is primarily derived from subscription fees for cloud-based software and professional services for configuration, optimization, and managed services[57] - Capitalized costs to obtain customer contracts were $149.7 million as of July 31, 2025, with $25.0 million amortized during the six months ended July 31, 2025[59][60] - Remaining Performance Obligation (RPO) was $923.8 million as of July 31, 2025, with approximately $597.1 million expected to be recognized as revenue over the next 12 months[63] | (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Americas | $110,207 | $115,377 | $227,794 | $230,645 | | EMEA | $81,651 | $67,194 | $153,687 | $133,105 | | Other | $20,182 | $14,637 | $36,059 | $29,416 | | Total revenue | $212,040 | $197,208 | $417,540 | $393,166 | - The United States accounted for $103.3 million (3 months) and $213.0 million (6 months) of revenue in 2025, representing more than 10% of total revenue[66] 4. Marketable Securities | (in thousands) | Amortized Cost (July 31, 2025) | Fair Value (July 31, 2025) | Amortized Cost (January 31, 2025) | Fair Value (January 31, 2025) | | :--------------- | :----------------------------- | :------------------------- | :-------------------------------- | :---------------------------- | | Corporate bonds | $100,690 | $100,648 | $106,632 | $106,654 | | Municipal bonds | $3,351 | $3,348 | $12,752 | $12,745 | | U.S. government and agency securities | $163,248 | $163,144 | $120,032 | $120,008 | | Certificates of deposit | $27,508 | $27,502 | $34,584 | $34,611 | | Commercial paper | $54,018 | $53,984 | $64,180 | $64,171 | | Total Marketable securities | $348,815 | $348,626 | $338,180 | $338,189 | - Marketable securities are classified as available-for-sale, with maturities not exceeding 12 months[67][74] - Interest income from cash and marketable securities decreased to $5.8 million (3 months) and $10.9 million (6 months) in 2025, from $7.0 million and $15.3 million in 2024, respectively[67] 5. Fair Value Measurements | (in thousands) | July 31, 2025 (Level 1) | July 31, 2025 (Level 2) | July 31, 2025 (Total) | January 31, 2025 (Level 1) | January 31, 2025 (Level 2) | January 31, 2025 (Total) | | :--------------- | :---------------------- | :---------------------- | :-------------------- | :------------------------- | :------------------------- | :----------------------- | | Money market funds | $23,419 | — | $23,419 | $57,158 | — | $57,158 | | Corporate bonds | — | $100,648 | $100,648 | — | $106,654 | $106,654 | | Municipal bonds | — | $3,348 | $3,348 | — | $12,745 | $12,745 | | U.S. government and agency securities | — | $163,144 | $163,144 | — | $120,008 | $120,008 | | Certificates of deposit | — | $27,502 | $27,502 | — | $34,611 | $34,611 | | Commercial paper | — | $53,984 | $53,984 | — | $64,171 | $64,171 | | Total financial assets | $23,419 | $348,626 | $372,045 | $57,158 | $338,189 | $395,347 | - Money market funds are classified as Level 1, while commercial paper, corporate and municipal debt securities, U.S. government and agency securities, and certificates of deposit are Level 2[73] 6. Balance Sheet Components | (in thousands) | July 31, 2025 | January 31, 2025 | | :--------------- | :------------ | :--------------- | | Prepaid expenses and other current assets | $90,712 | $84,982 | | Capitalized commissions costs, current portion | $48,959 | $39,353 | | Contract assets | $4,286 | $1,860 | | (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Depreciation and amortization expense | $1,156 | $1,501 | $2,414 | $3,106 | | Amortization expense for capitalized internal-use software | $3,512 | $3,109 | $6,934 | $6,012 | | Capitalized internal-use software costs | $5,100 | $4,000 | $8,800 | $7,500 | | (in thousands) | July 31, 2025 | January 31, 2025 | | :--------------- | :------------ | :--------------- | | Accrued expenses and other current liabilities | $62,210 | $79,285 | | Bonuses | $14,993 | $20,463 | | Commissions | $6,885 | $15,549 | | Accrued restructuring costs | $1,426 | — | 7. Leases - The Company leases corporate offices under non-cancelable operating leases, with no finance leases during the reported periods[83] | (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease cost | $3,522 | $3,772 | $6,970 | $7,105 | - The weighted average remaining lease term was 6.69 years as of July 31, 2025, with a weighted average discount rate of 8.51%[83] | (in thousands) | Total Minimum Lease Payments | | :--------------- | :--------------------------- | | Fiscal year ended January 31, 2026 (remaining six months) | $6,078 | | 2027 | $11,321 | | 2028 | $9,304 | | 2029 | $7,888 | | 2030 | $6,725 | | 2031 | $6,204 | | Thereafter | $16,490 | | Total minimum lease payments | $64,010 | 8. Commitments and Contingencies - The Company has cash collateral agreements totaling approximately $1.1 million with Silicon Valley Bank and $7.3 million with J.P. Morgan Bank as of July 31, 2025[87][88] - A putative securities class action was filed in August 2024, alleging misleading statements, and a derivative action was filed in March 2025, asserting similar claims[91][95] - Other contractual commitments include non-cancelable minimum guaranteed purchase commitments for data, hosting, and software services[96] 9. Stockholders' Equity - The Company completed its $300 million 2024 Share Repurchase Program during Q2 FY2025[97] - A new 2025 Share Repurchase Program was authorized on June 4, 2025, for up to $150 million of Class A common stock through June 30, 2026[98] - During the three and six months ended July 31, 2025, the Company repurchased 16,494,694 shares of Class A common stock for $140.4 million, including commissions, under the 2025 program[101] - As of August 7, 2025, the 2025 Share Repurchase Program was fully completed with an additional $9.9 million in repurchases[101] 10. Stock-Based Compensation - The Company has two equity incentive plans (2021 Plan and 2011 Plan) and an Employee Stock Purchase Plan (ESPP)[104][106] | Stock Option Activity (in thousands) | January 31, 2025 | July 31, 2025 | | :----------------------------------- | :--------------- | :------------ | | Outstanding | 18,572 | 14,757 | | Exercised | — | (2,753) | | Forfeited | — | (1,060) | | Weighted Average Exercise Price (Outstanding) | $6.60 | $6.64 | | Restricted Stock Unit Activity (in thousands) | January 31, 2025 | July 31, 2025 | | :-------------------------------------------- | :--------------- | :------------ | | Outstanding | 14,750 | 20,660 | | Granted | — | 11,408 | | Released | — | (2,989) | | Cancelled/forfeited | — | (2,509) | | Performance-Based Stock Units Activity (in thousands) | January 31, 2025 | July 31, 2025 | | :---------------------------------------------------- | :--------------- | :------------ | | Outstanding | 2,918 | 3,448 | | Granted | — | 810 | | Cancelled/forfeited | — | (280) | - As of July 31, 2025, 2,787,019 2024 and 2025 PSUs were outstanding, with 100% of performance conditions deemed probable to vest[113] | Stock-Based Compensation Expense (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation | $21,692 | $15,723 | $43,889 | $30,129 | 11. Net Income Per Share - Basic and diluted net income per share are the same for Class A and Class B common stock due to identical liquidation and dividend rights[117] | Net Income Per Share (in thousands, except per share data) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income per common share, basic | $0.05 | $0.01 | $0.04 | $0.05 | | Weighted-average shares outstanding used in computing net income per share, basic | 254,391 | 260,830 | 255,501 | 266,187 | | Net income per common share, diluted | $0.05 | $0.01 | $0.04 | $0.04 | | Weighted-average shares outstanding used in computing net income per share, diluted | 263,201 | 271,934 | 264,442 | 279,695 | | Potentially Dilutive Securities Excluded (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | 3,870 | 5,364 | 3,870 | 5,171 | | PSUs | 697 | 780 | 697 | 780 | | RSUs | 10,481 | 3,212 | 12,408 | 1,426 | | ESPP | 121 | 84 | 121 | 92 | | Warrants to purchase common stock | 2,500 | — | 2,500 | — | | Total shares excluded from net income per share | 17,669 | 9,440 | 19,596 | 7,469 | 12. Income Taxes - Income tax provision for the three months ended July 31, 2025, was $11.1 million, up from $4.5 million in 2024, and for the six months, it was $17.9 million, up from $7.1 million in 2024[122] - The increase in tax provision for 2025 is primarily due to including U.S. profit before tax in the annual effective tax rate computation, unlike 2024 when a full valuation allowance was in place[123] - The Company recorded discrete income tax expense related to non-deductible stock-based compensation ($1.5 million for 3 months, $4.5 million for 6 months) and withholding tax ($1.9 million for 3 months, $3.5 million for 6 months) in 2025[123] - The Inflation Reduction Act of 2022 (IRA) resulted in $1.9 million in excise taxes paid during both the three and six months ended July 31, 2025, with an accrued $1.0 million for the 2025 Share Repurchase Program[125] - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is being assessed for impact but is not expected to have a material effect on fiscal year 2026 tax provision[126] 13. Restructuring Charges - In February 2025, the Company implemented a global workforce restructuring, reducing headcount by approximately 12% to realign costs and free up capital for investments[130] - For the six months ended July 31, 2025, restructuring costs totaled $15.3 million, including $0.9 million in stock-based compensation expense[130] - A reversal of restructuring costs of $1.0 million was incurred for the three months ended July 31, 2025[130] | (in thousands) | 2025 | 2024 | | :--------------- | :--- | :--- | | Accrual at January 1 | $— | $— | | Restructuring charges | $14,463 | $3,830 | | Cash Payments | $(13,037) | $(1,754) | | Accrual at July 31 | $1,426 | $2,076 | 14. Segment and Geographic Information - The Company operates as one operating and reportable segment, focusing on enterprise cloud software for Unified Customer Experience Management[132] - The CEO evaluates performance and allocates resources on a consolidated basis using net income[132] 15. Related Party Transactions - Sprinklr engaged Lyearn Inc., a company wholly owned by its Founder and Chairman, Ragy Thomas, for digital training services[133] - The Company paid approximately $0.1 million to Lyearn for customer digital training services during each of the three and six months ended July 31, 2025 and 2024[134] - No payments were made to Lyearn for employee training services during the three months ended July 31, 2025 and 2024, and nil for the six months ended July 31, 2025 (compared to $0.1 million in 2024)[133][134] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Sprinklr's financial condition and operational results, covering its Unified-CXM platform, key metrics, macroeconomic impacts, and capital resources Overview - Sprinklr's Unified Customer Experience Management (Unified-CXM) platform, powered by AI, enables customer-facing teams to collaborate across digital channels and deliver better customer experiences[139] - The platform includes four main product suites: Sprinklr Social, Sprinklr Insights, Sprinklr Marketing, and Sprinklr Service[139] - As of July 31, 2025, Sprinklr had 149 large customers (defined as >$1.0 million in subscription revenue on a trailing 12-month basis), up from 145 as of July 31, 2024[143] Key Business Metrics - Remaining Performance Obligation (RPO) was $923.8 million as of July 31, 2025, with Current RPO (cRPO) at $597.1 million[145] - Net Dollar Expansion (NDE) rate was 102.2% for the 12-month period ending July 31, 2025, a decrease from 110.8% in the prior year, driven by elevated churn and down-selling due to macroeconomic conditions[146] Macroeconomic Considerations - Unfavorable macroeconomic conditions, including inflation, interest rate fluctuations, and geopolitical conflicts, create global economic uncertainty[147] - Economic uncertainty may lead to slower IT spending, longer collection cycles, increased credit losses, and demands for financial concessions from customers[147] - While inflationary pressures on wages, rent, and data costs have been experienced, their net impact has not been material during the reporting periods[147] Components of Results of Operations - Revenue is generated from subscriptions to the Unified-CXM platform (recognized ratably over 1-3 year contract terms) and professional services (configuration, optimization, managed services)[149][150][151] - Costs of subscription revenue include hosting, data, personnel, and amortization of capitalized internal-use software, expected to increase with customer base expansion[152] - Costs of professional services revenue include personnel, subcontractor costs, and allocated overhead, expected to increase with partner use and headcount[153] - Gross margin on subscription revenue is significantly higher than professional services, and overall gross margin is expected to decline in the near term due to higher data, hosting, and service delivery costs[155] - Operating expenses include R&D (expected to increase with platform investment), Sales & Marketing (expected to decrease near-term due to restructuring, then increase long-term), General & Administrative (expected to decrease near-term due to cost savings, then increase long-term), and Restructuring expenses[157][158][159][160][161] Results of Operations Sprinklr's results of operations show an 8% increase in total revenue for the three months ended July 31, 2025, and a 6% increase for the six months, driven by subscription and professional services growth, with operating income significantly improving for both periods Comparison of the Three Months Ended July 31, 2025 and 2024 | Revenue (in thousands) | 2025 | 2024 | $ Change | % Change | | :--------------------- | :----------- | :----------- | :----------- | :------- | | Subscription | $188,473 | $177,859 | $10,614 | 6 % | | Professional services | $23,567 | $19,349 | $4,218 | 22 % | | Total revenue | $212,040 | $197,208 | $14,832 | 8 % | - Subscription revenue growth was driven by increased revenue from existing customers purchasing additional solutions and new customer demand, partially offset by down-selling and churn due to macroeconomic challenges[166] - Professional services revenue increased due to growth in implementations and managed services related to Contact Center as a Service (CCaaS) delivery capabilities[167] | Costs of Revenue (in thousands) | 2025 | 2024 | $ Change | % Change | | :------------------------------ | :----------- | :----------- | :----------- | :------- | | Costs of subscription revenue | $43,177 | $34,306 | $8,871 | 26 % | | Costs of professional services revenue | $24,261 | $19,661 | $4,600 | 23 % | | Total costs of revenue | $67,438 | $53,967 | $13,471 | 25 % | | Gross margin - subscription | 77 % | 81 % | | -4 pp |\ | Gross margin - professional services | (3)% | (2)% | | -1 pp | - Sales and marketing expense decreased by $6.9 million (9%) primarily due to a $5.5 million decrease in personnel costs from restructuring activities[173] - General and administrative expense decreased by $3.2 million (8%) due to lower provision for credit losses ($9.6 million decrease), partially offset by increased personnel costs ($7.0 million) from stock compensation[174] - Restructuring expense decreased by $4.8 million (126%) due to a reversal of charges in Q2 FY2026, compared to costs incurred in Q2 FY2025[175] - Other income, net, increased by $1.1 million (16%) due to a $2.4 million increase in net foreign currency gains, partially offset by a $1.2 million decrease in interest income[176] - Provision for income taxes increased by $6.6 million (148%) due to the inclusion of U.S. profit before tax in the effective tax rate computation for 2025, and a $1.5 million discrete tax charge for non-deductible stock-based compensation[177] Comparison of the Six Months Ended July 31, 2025 and 2024 | Revenue (in thousands) | 2025 | 2024 | $ Change | % Change | | :--------------------- | :----------- | :----------- | :----------- | :------- | | Subscription | $372,600 | $355,222 | $17,378 | 5 % | | Professional services | $44,940 | $37,944 | $6,996 | 18 % | | Total revenue | $417,540 | $393,166 | $24,374 | 6 % | - Subscription revenue growth was driven by increased revenue from existing customers purchasing additional solutions and new customer demand, partially offset by down-selling and churn due to challenging macroeconomic conditions[178] - Professional services revenue increased due to growth in implementations and managed services related to CCaaS delivery capabilities[179] | Costs of Revenue (in thousands) | 2025 | 2024 | $ Change | % Change | | :------------------------------ | :----------- | :----------- | :----------- | :------- | | Costs of subscription revenue | $85,363 | $66,876 | $18,487 | 28 % | | Costs of professional services revenue | $44,706 | $38,216 | $6,490 | 17 % | | Total costs of revenue | $130,069 | $105,092 | $24,977 | 24 % | | Gross margin - subscription | 77 % | 81 % | | -4 pp |\ | Gross margin - professional services | 1 % | (1)% | | +2 pp | - Sales and marketing expense decreased by $23.3 million (14%) primarily due to an $18.5 million decrease in personnel-related costs from restructuring activities[184] - General and administrative expense increased by $2.1 million (3%) due to a $12.3 million increase in personnel-related costs (stock compensation), partially offset by an $8.6 million decrease in provision for credit losses and a $1.6 million decrease in professional fees[185] - Restructuring expense increased by $11.5 million (300%) due to a larger workforce reduction (12%) in FY2026 compared to FY2025 (3%)[186] - Other income, net, increased by $0.5 million (3%) due to a $5.1 million increase in net foreign currency gains, partially offset by a $4.4 million decrease in interest income[187] - Provision for income taxes increased by $10.8 million (153%) due to the inclusion of U.S. profit before tax in the effective tax rate computation for 2025, and a $4.5 million discrete tax charge for non-deductible stock-based compensation[188] Non-GAAP Financial Measures - Non-GAAP financial measures (gross profit, operating income, net income, and free cash flow) exclude stock-based compensation, amortization of acquired intangibles, restructuring charges, and other one-time items to provide a clearer view of core business performance[189][190] | Non-GAAP Metric (in thousands) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-GAAP gross profit | $146,249 | $144,497 | $290,437 | $290,429 | | Non-GAAP gross margin | 69 % | 73 % | 70 % | 74 % | | Non-GAAP operating income | $38,246 | $19,575 | $74,986 | $40,450 | | Non-GAAP operating margin | 18 % | 10 % | 18 % | 10 % | | Non-GAAP net income | $33,829 | $21,503 | $66,145 | $47,303 | | Free Cash Flow (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $118,567 | $63,034 | | Purchase of property and equipment | $(654) | $(4,028) | | Capitalized internal-use software | $(7,459) | $(6,291) | | Free cash flow | $110,454 | $52,715 | Liquidity and Capital Resources Sprinklr maintains strong liquidity with $125.4 million in cash and cash equivalents and $348.6 million in marketable securities as of July 31, 2025, expecting these resources to be sufficient for its working capital, capital expenditures, and financing obligations for the foreseeable future Overview - As of July 31, 2025, principal liquidity sources were $125.4 million in cash and cash equivalents and $348.6 million in marketable securities[196] - Existing liquidity is believed to be sufficient for working capital, capital expenditures, and financing obligations for at least the next 12 months and long-term[196] Cash Collateral Agreements and Restricted Cash - Approximately $1.1 million in cash collateral agreements with Silicon Valley Bank and $7.3 million with J.P. Morgan Bank were outstanding as of July 31, 2025, classified as restricted cash[197][198] Material Cash Requirements - Contractually obligated expenditures include $324.8 million in minimum guaranteed purchase commitments through fiscal year 2030, with $107.1 million due within 12 months from January 31, 2025[199] - The 2025 Share Repurchase Program for $150 million of Class A common stock was completed by August 7, 2025, with $140.4 million repurchased by July 31, 2025[200] Future Funding Requirements - Future capital requirements depend on growth rate, sales force expansion, strategic relationships, international operations, R&D investments, and market acceptance[202] - Acquisitions may be financed through cash, debt, or stock, with historical acquisitions primarily using cash and stock[202] - Inability to raise additional capital when needed could adversely affect operating activities, capital expenditures, business, operating results, and financial condition[203] Cash Flows | (in thousands) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $118,567 | $63,034 | | Net cash (used in) provided by investing activities | $(15,443) | $145,843 | | Net cash used in financing activities | $(125,121) | $(253,235) | - Operating cash flow for the six months ended July 31, 2025, was $118.6 million, driven by an $81.0 million decrease in accounts receivable[206] - Investing activities for the six months ended July 31, 2025, primarily involved $269.7 million in marketable securities purchases and $262.6 million in sales/maturities[208] - Financing activities for the six months ended July 31, 2025, included $140.8 million in share repurchases, offset by $12.9 million from stock option exercises and $2.8 million from ESPP purchases[210] Critical Accounting Estimates - Critical accounting estimates include revenue recognition and stock-based compensation expense, particularly historical common stock valuations and performance-based award valuations[213] - Estimates are evaluated continuously using historical experience and reasonable assumptions, with actual results potentially differing materially[213] Recent Accounting Pronouncements - ASU 2023-09 (Income Taxes) is effective for fiscal year 2026, requiring enhanced income tax disclosures[52] - ASU 2024-03 and ASU 2025-01 (Expense Disaggregation) are effective for fiscal years beginning after December 15, 2026, and 2027, respectively, requiring new disclosures for expense categories[53] - ASU 2025-05 (Credit Losses for Accounts Receivable) is effective for fiscal year 2027, introducing a practical expedient for estimating expected credit losses[56] Item 3. Quantitative and Qualitative Disclosures About Market Risk Sprinklr's market risk exposures primarily include foreign exchange risk from transactions and earnings in non-U.S. dollar currencies, and interest rate risk due to changes in interest rates on its assets - Primary market risk exposures are foreign exchange risk (non-U.S. dollar transactions) and interest rate risk (changes in asset interest rates)[216] - No material changes in market risks since January 31, 2025[216] Item 4. Controls and Procedures Sprinklr's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of July 31, 2025, and concluded they were effective, with no material changes in internal control over financial reporting during the three months ended July 31, 2025 - Disclosure controls and procedures were evaluated as effective by management, including the CEO and CFO, as of July 31, 2025[218] - No material changes in internal control over financial reporting occurred during the three months ended July 31, 2025[219] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 8, Commitments and Contingencies - Legal Matters, for a description of current legal proceedings, which include a putative securities class action and stockholder derivative actions - Current legal proceedings include a putative securities class action and stockholder derivative actions[91][95] - The securities class action alleges misleading statements and failure to disclose risks related to Sprinklr Service, while derivative actions assert similar claims of federal securities law violations and breaches of fiduciary duties[91][95] - The Company intends to vigorously defend against these lawsuits, and the ultimate outcome or potential loss cannot be predicted at this early stage[94] Item 1A. Risk Factors This section outlines various risks and uncertainties that could materially affect Sprinklr's business, financial condition, or results of operations, including growth, industry, IP, litigation, cybersecurity, tax, and public company risks Summary of Selected Risk Factors Associated with Our Business - Key risks include difficulty in sustaining growth and profitability, challenges in managing growth and organizational change, inability to develop platform enhancements or keep pace with technology, and volatility in operating results and stock price[224] - Risks also involve market acceptance of the Unified-CXM platform, competition in an evolving market, dependence on customer renewals and expansion, and operational/legal challenges from using AI in products[224] - Other risks include reliance on third-party strategic relationships and data, intellectual property protection, data privacy and security compliance, cybersecurity breaches, and the concentrated voting control of executive officers and directors[224] Risks Related to Our Growth - Past revenue growth may not indicate future performance, and the company's ability to sustain growth depends on attracting new customers, expanding platform functionality, effective implementations, international expansion, and successful acquisitions[226][227] - The company has incurred significant net losses and an accumulated deficit ($756.4 million as of July 31, 2025) and may not achieve or maintain profitability due to substantial investments in R&D, infrastructure, sales, marketing, and international expansion[228][229][22] - Failure to effectively manage growth, organizational change, and increasing product complexity (e.g., CCaaS projects) could harm business and financial results, including customer dissatisfaction and revenue recognition delays[232][242] - Attracting new customers, especially governmental agencies, presents challenges such as high competition, long sales cycles, and compliance with specific contracting requirements[233][234] Risks Related to Our Business and Industry - Actual operating results may differ significantly from guidance, leading to stock price volatility, especially in periods of economic uncertainty[235][236][237] - Results of operations and financial metrics are difficult to predict due to factors like payment terms, implementation success, new product introductions, customer renewal rates, and macroeconomic conditions[238][239] - Failure of the Unified-CXM platform to meet customer demands, achieve market acceptance, or adapt to technological changes could adversely affect the business[241][242] - The rapidly evolving Unified-CXM market, intense competition, and potential for new disruptive technologies pose risks to demand and market position[243][245][246][247] - Business depends on customer renewals and expansion; any decline in these rates due to satisfaction issues, pricing, or economic conditions would harm financial results[248][249] - Revenue recognition over contract terms means sales fluctuations are not immediately reflected, making it difficult to rapidly increase revenue or adjust cost structures[250] - Failure to attract and retain qualified talent, especially in specialized areas like cloud software engineering, could hinder business strategy execution due to high competition and potential declines in equity award value[251] - Reliance on third-party data centers and cloud providers means service interruptions, data loss, or increased costs could impair platform delivery and harm the business[252][253][254] - Inability to effectively develop platform enhancements, introduce new products, or keep pace with technological developments (e.g., mobile usage) could adversely affect business and financial condition[255][256][257] - Use of AI in products and operations presents risks including operational challenges, legal liability (e.g., intellectual property infringement, biased outputs), reputational concerns, and competitive disadvantages, especially given evolving regulatory landscapes[258][259][260][261][262][263][264][265] - Dependence on strategic relationships with third-party technology companies and data providers means disruptions or changes in terms (e.g., with X/Twitter) could adversely affect service delivery and data access[266][267] - Significant R&D investments may not translate into successful new solutions or enhancements, harming business if not used efficiently or if market demand shifts[268] - Failure to develop and maintain successful channel partner relationships could adversely affect revenue growth, especially in developing markets, and lead to collection issues[269][270] - Inability to maintain and enhance brand reputation due to ineffective marketing, service quality issues, or negative publicity could adversely affect customer acquisition and retention[271][272] - Acquisitions or investments in other companies may divert management attention, result in integration difficulties, unforeseen expenditures, and potential dilution to stockholders[273][274] - International sales and operations face risks including increased costs, compliance with diverse laws (e.g., data privacy, anti-bribery), currency fluctuations, and difficulties in engaging non-U.S. customers[275][276][277][278][279][280] Risks Related to Our Intellectual Property - Use of open source software in the Unified-CXM platform may lead to litigation, requirements to disclose proprietary source code, or diversion of development resources due to ambiguous license terms or security risks[281][284][285] - Failure to obtain, maintain, protect, defend, or enforce intellectual property rights (patents, copyrights, trademarks, trade secrets) could impair the ability to protect proprietary technology and brand, especially in foreign countries with weaker protections[286][287][288][289][290] - The company may face claims from third parties alleging infringement, misappropriation, or other violations of their intellectual property rights, leading to significant expenses, damages, licensing fees, or re-engineering requirements[291][292][293][294] - Indemnity provisions in customer agreements and source code escrow arrangements could expose the company to substantial liability for intellectual property infringement or other losses, and risk unauthorized disclosure of source code[295][296][297] Risks Related to Litigation, Regulatory Compliance and Governmental Matters - Pending or future securities litigation or stockholder activism could result in substantial costs, divert management attention, damage reputation, and negatively impact stock price[298][299][300][301] - Compliance with governmental export and import controls and economic sanctions laws is critical; violations could lead to substantial fines, penalties, reputational harm, and loss of market access[302][303] - Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws (e.g., FCPA, U.K. Bribery Act) could result in severe criminal or civil sanctions, reputational damage, and financial penalties[304] - Changes in laws and regulations related to the Internet (e.g., network neutrality) or telecommunications industry could adversely impact business by requiring platform modifications, increasing costs, or limiting service offerings[305][306][307][308] Risks Related to Privacy, Information Technology and Cybersecurity - Interruptions or suboptimal performance of technology and infrastructure (e.g., service disruptions, outages, capacity constraints) could adversely affect business, brand, and customer retention, potentially leading to financial penalties or litigation[309][310][311] - Stringent and changing data privacy and security obligations (e.g., CCPA, GDPR, HIPAA, PCI DSS) expose the company to regulatory investigations, litigation, fines, and reputational harm if not complied with[312][313][315][316][317] - Cross-border data transfer restrictions (e.g., GDPR, U.S. Department of Justice rules) and data localization requirements could lead to operational disruptions, significant expenses, and regulatory actions[318] - Reliance on third-party data suppliers and the increased scrutiny on data sales pose compliance risks and potential limitations on data availability or increased costs[321] - Cybersecurity breaches or other security incidents (e.g., cyberattacks, ransomware, human error, supply-chain attacks) could compromise confidential information, disrupt operations, harm reputation, and incur significant liabilities[328][329][330][331][332][333][334][335][336][337][338][339] Risks Related to Tax and Accounting Matters - The company may be required to collect sales, VAT, GST, or similar taxes in new jurisdictions, potentially leading to substantial tax liabilities, penalties, and interest if tax authorities assert additional obligations[343][344][345] - International operations subject the company to adverse tax consequences due to complex transfer pricing regulations and potential disagreements with taxing authorities, leading to additional taxes, interest, and penalties[346] - Uncertainties in tax laws and regulations (e.g., IRA, OECD's Two-Pillar framework) could materially affect tax obligations and effective tax rates, potentially increasing tax liability and compliance costs[347][348] - Tax examinations by the IRS and other authorities could result in adverse outcomes, impacting results of operations and financial condition[349] - The ability to use net operating losses (NOLs) and other tax assets may be limited by expiration dates or ownership changes under Section 382 of the Internal Revenue Code, adversely affecting future profitability[350][351][352] Risks Related to Being a Public Company, Ownership of Our Class A Common Stock and Other General Risks - The market price of Class A common stock may be volatile due to various factors, including market fluctuations, company announcements, personnel changes, litigation, regulatory actions, and macroeconomic conditions[353][354] - The dual-class common stock structure concentrates voting control with executive officers, directors, and their affiliates (87.6% of voting power as of July 31, 2025), limiting other stockholders' influence on corporate matters[355][357] - Failure to maintain an effective system of disclosure controls and internal control over financial reporting could impair the ability to produce timely and accurate financial statements, leading to restatements, loss of investor confidence, and potential delisting[359][360][361] - Unstable market and economic conditions, catastrophic events (e.g., natural disasters, wars, cybersecurity issues), and trade disputes could seriously impact business, financial condition, and share price by reducing demand, increasing costs, or disrupting operations[362][363][364][365] - Delaware law and provisions in charter documents (e.g., classified board, restrictions on stockholder actions) could make mergers, tender offers, or proxy contests difficult, potentially depressing the market price of Class A common stock[366][367] - Charter documents designate Delaware state or federal courts as the exclusive forum for most disputes, and federal district courts for Securities Act claims, potentially limiting stockholders' choice of judicial forum[368][369][370] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the Company's equity security activities, specifically detailing issuer purchases of Class A common stock under the 2025 Share Repurchase Program Recent Sales of Unregistered Equity Securities - No unregistered sales of equity securities were reported during the period[372] Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased (thousands) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (thousands) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (millions) | | :------------------------- | :-------------------------------------------- | :--------------------------- | :-----------------------------------------