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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 July 31, 2021
OR
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 August 31, 2021, the registrant had 30,842,053 shares of Class A common stock and 224,191,721 shares of Class B common stock, each with a par value of $0.00003 per share, outstanding.
 





TABLE OF CONTENTS


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

PART I.FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2
Item 3
Item 4
Item 5.
Item 6.


i



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. All statements contained in this Quarterly Report on 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 sustain 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;
the estimated addressable market opportunity 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 the on-going COVID-19 pandemic or other public health crises;
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 Quarterly Report on 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 Quarterly Report on 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 Quarterly Report on 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 Quarterly Report on 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 Quarterly Report on 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 Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on 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 Quarterly Report on Form 10-Q refer to Sprinklr, Inc. and its subsidiaries.
ii

PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
SPRINKLR, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

July 31,
2021
January 31,
2021
Assets
Current assets
Cash and cash equivalents$433,990 $68,037 
Marketable securities114,806 212,652 
Accounts receivable, net of allowance for doubtful accounts of $2.7 million and
$3.2 million, respectively
104,898 116,278 
Prepaid expenses and other current assets94,170 95,819 
Total current assets747,864 492,786 
Property and equipment, net12,322 9,011 
Goodwill and other intangible assets47,287 47,427 
Other non-current assets44,005 36,669 
Total assets$851,478 $585,893 
Liabilities and stockholders’ equity
Liabilities
Current liabilities
Accounts payable$10,150 $16,955 
Accrued expenses and other current liabilities60,276 63,170 
Deferred revenue231,129 221,439 
Total current liabilities301,555 301,564 
Senior subordinated secured convertible notes  78,848 
Deferred revenue less current portion13,198 19,873 
Deferred tax liability, long-term870 869 
Other liabilities, long-term1,871 2,006 
Total liabilities317,494 403,160 
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.00003 par value, 20,000,000 shares authorized, 0 shares issued, and outstanding
  
Convertible preferred stock, par value $0.00003, 0 and 122,309,253 shares authorized, 0 and 120,902,273 issued and outstanding at July 31, 2021 and January 31, 2021, respectively
 424,992 
Class A common stock, $0.00003 par value, 2,000,000,000 and 0 shares authorized at July 31, 2021 and January 31, 2021, respectively, and 18,341,571 and 0 shares outstanding at July 31, 2021 and January 31, 2021
  
Class B common stock, $0.00003 par value, 310,000,000 and 0 shares authorized at July 31, 2021 and January 31, 2021, respectively, and 236,554,861 and 0 shares issued and outstanding at July 31, 2021 and January 31, 2021
8  
Common stock, $0.00003 par value, 0 and 299,000,000 shares authorized as of July 31, 2021 and January 31, 2021, respectively, 0 and 109,587,048 issued as of July 31, 2021 and January 31, 2021, respectively, 0 and 95,456,264 issued and outstanding as of July 31, 2021 and January 31, 2021, respectively
 4 
Treasury stock, at cost, 14,130,784 shares as of July 31, 2021 and January 31, 2021, respectively
(23,831)(23,831)
Additional paid-in capital947,041 122,061 
Accumulated other comprehensive (loss) income(10)787 
Accumulated deficit(389,224)(341,280)
Total stockholders’ equity533,984 182,733 
Total liabilities and stockholders’ equity$851,478 $585,893 
See accompanying notes to the unaudited condensed consolidated financial statements
1


SPRINKLR, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended July 31, Six Months Ended July 31,
2021202020212020
Revenue:
  Subscription $103,307 $82,807 $200,079 $164,467 
  Professional services15,38510,69129,59322,019
Total revenue:118,692 93,498 229,672 186,486 
Costs of revenue:
  Costs of subscription 22,34116,31443,39236,253
  Costs of professional services 14,99710,98025,65522,503
Total costs of revenue37,338 27,294 69,047 58,756 
Gross profit81,354 66,204 160,625 127,730 
Operating expenses:
  Research and development 15,0878,15228,21516,480
  Sales and marketing 70,24942,273130,88791,832
  General and administrative 25,32310,92641,53122,467
Total operating expenses110,659 61,351 200,633 130,779 
Operating (loss) income(29,305)4,853 (40,008)(3,049)
Other expense, net(1,436)(1,468)(3,627)(3,361)
(Loss) income before provision for income taxes(30,741)3,385 (43,635)(6,410)
Provision for income taxes2,5063764,3091,788
Net (loss) income$(33,247)$3,009 $(47,944)$(8,198)
Net (loss) income per share attributable to Class A and Class B common stockholders, basic$(0.20)$0.02 $(0.36)$(0.09)
Weighted average shares used in computing net (loss) income per share attributable to Class A and Class B common stockholders, basic167,59087,196133,47986,787
Net (loss) income per share attributable to Class A and Class B common stockholders, diluted$(0.20)$0.01 $(0.36)$(0.09)
Weighted average shares used in computing net (loss) income per share attributable to Class A and Class B common stockholders, diluted167,590201,134133,47986,787
See accompanying notes to the unaudited condensed consolidated financial statements
2



SPRINKLR, INC.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
(unaudited)
Three months ended July 31, Six months ended July 31,
2021202020212020
Net (loss) income$(33,247)$3,009 $(47,944)$(8,198)
Foreign currency translation adjustments(386)572 (783)685 
Unrealized gains (losses) on investments(12) (14) 
Total comprehensive (loss) income$(33,645)$3,581 $(48,741)$(7,513)
See accompanying notes to the unaudited condensed consolidated financial statements

3


SPRINKLR, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(in thousands)
(unaudited)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
Convertible
Preferred Stock
Class A and Class B Common StockCommon StockTreasury StockAccumulated
Deficit
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at April 30, 2021120,903 $424,992  $ 115,279 $4 $138,724 (14,131)$(23,831)$387 $(355,977)$184,299 
Issuance of Class A common stock upon initial public offering, net of underwriting discounts and issuance costs— — 18,288 — — — 275,954 — — — — 275,954 
Conversion of convertible preferred stock to common stock upon initial public offering(120,903)(424,992)120,903 4 — — 424,988 — — — —  
Conversion of senior subordinated secured convertible notes— — 9,694 — — — 82,114 — — — — 82,114 
Stock-based compensation - equity classified awards— — — — — — 16,609 — — — — 16,609 
Reclassification of common stock to Class B common stock— — 117,176 4 (117,176)(4)— — — — —  
Exercise of stock options— — 968 — 1,897 — 8,652 — — — — 8,652 
Net exercise of common stock warrants— — 230 — — — — — — — — — 
Issuance of common stock under deferred stock compensation plan— — 1,770 — — — — — — — — — 
Other comprehensive loss— — — — — — — — — (397)— (397)
Net loss— — — — — — — — — — (33,247)(33,247)
Balance at July 31, 2021
 $ 269,029 $8  $ $947,041 (14,131)$(23,831)$(10)$(389,224)$533,984 
4


SPRINKLR, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(in thousands)
(unaudited)
Convertible
Preferred Stock
Class A and Class B Common StockCommon StockAdditional
Paid-in
Amount
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 31, 2021
120,903 $424,992  $ 109,587 $4 $122,061 (14,131)$(23,831)$787 $(341,280)$182,733 
Issuance of Class A common stock upon initial public offering, net of underwriting discounts and issuance costs— — 18,288 — — — 275,954 — — — — 275,954 
Conversion of convertible preferred stock to common stock upon initial public offering(120,903)(424,992)120,903 4 — — 424,988 — — — —  
Conversion of senior subordinated secured convertible notes— — 9,694 — — — 82,114 — — — — 82,114 
Stock-based compensation - equity classified awards— — — — — — 25,265 — — — — 25,265 
Reclassification of common stock to Class B common stock— — 117,176 4 (117,176)(4)— — — — —  
Exercise of stock options — — 968 — 7,589 — 16,659 — — — — 16,659 
Net exercise of common stock warrants— — 230 — — — — — — — — — 
Issuance of common stock under deferred stock compensation plan— — 1,770 — — — — — — — — — 
Other comprehensive loss— — — — — — — — — (797)— (797)
Net loss — — — — — — — — — — (47,944)(47,944)
Balance at July 31, 2021
 $ 269,029 $8  $ $947,041 (14,131)$(23,831)$(10)$(389,224)$533,984 
5


SPRINKLR, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(in thousands)
(unaudited)
Convertible
Preferred Stock
Class A and Class B Common StockCommon StockAdditional
Paid-in
Amount
Treasury StockAccumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
Total
Stockholders'
(Deficit)
Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at April 30, 2020120,408 $245,970  $ 100,096 $3 $58,732 (13,376)$(17,957)$(875)$(310,703)$(24,830)
Stock-based compensation - equity classified awards — — — — — — 5,596 — — — — 5,596 
Exercise of stock options — — — — 1,458 — 1,136 — — — — 1,136 
Other comprehensive income— — — — — — — — — 573 — 573 
Net income — — — — — — — — — — 3,009 3,009 
Balance at July 31, 2020
120,408 $245,970  $ 101,554 $3 $65,464 (13,376)$(17,957)$(302)$(307,694)$(14,516)
Convertible
Preferred Stock
Class A and Class B Common StockCommon StockAdditional
Paid-in
Amount
Treasury StockAccumulated
Other
Comprehensive
(Loss) Income
Accumulated
Deficit
Total
Stockholders'
(Deficit)
Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at January 31, 2020
120,408 $245,970  $ 99,002 $3 $50,117 (13,376)$(17,957)$(988)$(299,496)$(22,351)
Stock-based compensation - equity classified awards— — — — — — 8,990 — — — — 8,990 
Exercise of stock options— — — — 1,538 — 1,357 — — — — 1,357 
Issuance of common stock to a third party— — — — 1,014 — 5,000 — — — — 5,000 
Other comprehensive income— — — — — — — — — 686 — 686 
Net loss— — — — — — — — — — (8,198)(8,198)
Balance at July 31, 2020
120,408 $245,970  $ 101,554 $3 $65,464 (13,376)$(17,957)$(302)$(307,694)$(14,516)
See accompanying notes to the unaudited condensed consolidated financial statements

6



SPRINKLR, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended July 31,
20212020
Cash flow from operating activities:
Net loss$(47,944)$(8,198)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense3,451 2,877 
Bad debt expense(226)286 
Stock-based compensation expense, net of amounts capitalized25,532 9,407 
Non-cash interest paid in kind and discount amortization3,267 1,517 
Deferred income taxes1 87 
Other noncash items, net (999)(15)
Changes in operating assets and liabilities:
Accounts receivable11,810 29,661 
Prepaid expenses and other current assets1,673 18,243 
Other noncurrent assets(7,151)3,437 
Accounts payable(6,751)(2,173)
Accrued expenses and other current liabilities(2,326)(14,474)
Deferred revenue2,956 (17,240)
Other liabilities(154)34 
Net cash (used in) provided by operating activities(16,861)23,449 
Cash flow from investing activities:
Purchases of marketable securities(61,758) 
Sales of marketable securities56,652  
Maturities of marketable securities101,860  
Purchases of property and equipment(3,862)(1,586)
Capitalized internal-use software(2,481)(1,546)
Net cash provided by (used in) investing activities90,411 (3,132)
Cash flow from financing activities:
Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts, commissions and other offering costs276,001  
Proceeds from senior subordinated secured convertible notes  73,425 
Proceeds from short-term borrowings 49,973 
Repayments of short term borrowings (49,973)
Payments of debt and equity issuance costs (160)
Proceeds from issuance of common stock upon exercise of stock options16,659 1,357 
Net cash provided by financing activities292,660 74,622 
Effect of exchange rate fluctuations on cash and cash equivalents(257)(83)
Net change in cash and cash equivalents365,953 94,856 
Cash and cash equivalents at beginning of period68,037 10,470 
Cash and cash equivalents at end of period$433,990 $105,326 
7



SPRINKLR, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Supplemental disclosure of cash flow information
Cash paid for income taxes$1,564 $1,290 
Cash paid for interest 319 
Supplemental disclosure for noncash investing and financing
Conversion of redeemable preferred stock to Class B common stock424,992  
Conversion of senior subordinated secured convertible notes to Class B common stock82,114  
Net exercise of common stock warrants18  
Stock-based compensation expense capitalized in internal-use software233  
Accrued purchases of property and equipment181 149 
Common stock issued in exchange for other noncash assets 5,000 
Deferred offering costs included in accounts payable and accrued liabilities47  
See accompanying notes to the unaudited condensed consolidated financial statements

8

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business
Description of Business

Founded in 2009, Sprinklr, Inc. (Sprinklr, we, or 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 16 operating subsidiaries globally.

Initial Public Offering

On June 25, 2021, we completed our initial public offering (“IPO”), in which we issued and sold 16,625,000 shares of our Class A common stock at a public offering price of $16.00 per share. On July 1, 2021, the underwriters' option to purchase 1,662,500 additional shares of Class A common stock was exercised in full. The Company received net proceeds of $276.0 million after deducting underwriting discounts, commissions and other offering expenses of $16.6 million.

In connection with the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into an aggregate of 120,902,273 shares of the Company's Class B common stock on a one-to-one basis, the senior subordinated secured convertible notes automatically converted into an aggregate of 9,694,004 shares of Class B common stock and all of the Company's outstanding common stock was reclassified into shares of Class B common stock on a one-to-one basis.

Prior to the IPO, deferred offering costs, which consisted primarily of accounting, legal and other fees related to the IPO, were capitalized within other assets, non-current in the condensed consolidated balance sheets. Upon the completion of the IPO, $3.3 million of deferred offering costs were reclassified into stockholders’ equity as an offset to IPO proceeds. As of January 31, 2021, no deferred offering costs were capitalized in the condensed consolidated balance sheet. As of July 31, 2021, deferred offering costs associated with the IPO that had not yet been paid were not material.
2.Basis of Presentation and Summary of Significant Accounting Policies
(a)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, ("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, 2021, 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 six months ended July 31, 2021 are not necessarily indicative of the results to be expected for the year ending January 31, 2022 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, 2021 included in the Company’s prospectus dated June 22, 2021 filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended.
There have been no material changes in our significant accounting policies as described in our consolidated financial statements for the fiscal year ended January 31, 2021 included in the Final Prospectus.
9

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(b)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, common stock valuations and stock-based compensation expense, 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.
(c)Fiscal Year
The Company's fiscal year ends on January 31. References to fiscal year 2022, for example, refer to the fiscal year ending January 31, 2022.
(d)Segments
The Company operates in one operating 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 evaluates the Company’s financial information and assesses the performance of the Company on a consolidated basis. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements.
(e)Concentration of Risk and Significant Customers
The Company has no significant off-balance sheet risks related to foreign currency exchange contracts, option contracts or other foreign currency hedging arrangements. 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. The Company’s accounts receivable are derived from invoiced customers located primarily in North America and Europe. The Company performs periodic credit evaluations of its customers and generally does not require collateral.
No single customer accounted for more than 10% of total revenue in the three or six months ended July 31, 2021.
In addition, we rely upon third-party hosted infrastructure partners globally to serve customers and operate certain aspects of our services, such as environments for development testing, training, sales demonstrations, and production usage. Given this, any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.
(f)Revenue Recognition
The Company accounts for revenue in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606). For further discussion of the Company’s accounting policies related to revenue see Note 3, Revenue Recognition.
(g)Stock-Based Compensation
The Company accounts for stock-based compensation as an expense in the statements of operations based on the awards' grant date fair values.
The Company estimates the fair value of service-based options granted using the Black-Scholes option pricing model. Stock options that include service, performance and market conditions are valued using the Monte-Carlo simulation model. The Black-Scholes option pricing model requires inputs based on certain assumptions, including (a) the fair value per share of our common stock (b) the expected stock price volatility, (c) the calculation of expected term of the award, (d) the risk-free interest rate and (e) expected dividends. A Monte-Carlo simulation is an analytical method used to estimate value by performing a large number of simulations or trial runs and determining a value based on the possible outcomes from these trial runs.
10

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements

The fair value of stock-based payments is recognized as compensation expense, net of expected forfeitures, over the requisite service period which is generally the vesting period, with the exception of the fair value of stock-based payments for awards that include service, performance and market conditions which is recognized as compensation expense over the requisite service period as achievement of the performance objective becomes probable.

The Company issued certain performance stock units ("PSUs"), that vest upon the satisfaction of both time-based service, performance-based and market conditions. The Company estimates compensation cost based on the grant date fair value and recognize the expense on a graded vesting basis over the vesting period of the award. As the PSUs are subject to a market condition (stock price), the grant date fair value is measured using a Monte Carlo simulation approach, which estimates the fair value of awards based on randomly generated simulated stock-price paths through a lattice-type structure. The performance-based vesting condition is satisfied upon the occurrence of a qualifying event, which is generally defined as a change in control transaction or the effective date of a Qualified IPO. Upon closing of the IPO on June 25, 2021, the performance-based vesting condition was satisfied, and therefore, the Company commenced recognition of compensation expense using the accelerated attribution method over the requisite service period.

The Company estimates fair value of its restricted stock awards (RSU) based on the fair value of the underlying common stock, net of estimated forfeitures. Subsequent to the IPO, the Company determines the fair value using the closing price of its Class A common stock as reported on the date of grant.

(h) Recently Issued Accounting Pronouncements Not Yet Adopted
The JOBS Act allows the Company, as an EGC, to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), and additional changes, modifications, clarifications or interpretations related to this guidance thereafter (“ASU 2016-02”). ASU 2016-02 requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year, with early adoption permitted. The Company will record a right of use asset and liability, and is currently evaluating the impact of adoption on the consolidated financial statements. Although the Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption.
In June 2016, the FASB issued ASU 2016-13, with subsequent amendments, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires immediate recognition of management’s estimates of current expected credit losses. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, and interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of adoption on the consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. ASU 2020-06 is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU 2020-06 will be effective for annual reporting periods beginning after December 15, 2021. Early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
11

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements

3.Revenue Recognition
The Company derives its revenues primarily from two sources:
a.Subscription revenue consists of subscription fees from customers accessing the Company’s cloud based software platform and applications, as well as related customer support services; and
b.Professional services revenue 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.

We recognize revenue upon transfer of control of promised products and services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

We determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the performance obligation is satisfied

Subscription revenue is recognized ratably over the contract term beginning on the commencement date of each contract, which is the date the Company’s service is made available to customers. Subscription revenue includes customer support services, which together with the accessing of the Company’s cloud based software platform, generally constitute a single performance obligation comprised of a series of distinct services that are substantially the same and have the same pattern of revenue recognition.

Amounts that have been invoiced because they have the unconditional right to consideration are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met, with the majority being invoiced annually in advance of performance obligations. When determining the transaction price of a contract, an adjustment is made if payment from the customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in Topic 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. One of the Company’s contracts contained a significant financing component as of July 31, 2021 as a result of an advance payment from a large customer for a multi-year contract in the prior fiscal year. None of the Company’s other contracts contained a significant financing component at July 31, 2021.
Professional services revenues are recognized as the services are rendered for time and materials contracts or on a proportional performance basis for fixed price contracts. The majority of the Company’s professional services arrangements are fixed price contracts.

The Company enters into arrangements where they provide managed services associated with assisting its customers in publishing advertisements on social media channels. As part of those arrangements the Company is occasionally required to purchase advertising space from social media channels on behalf of its customers and invoice those costs back to its customer. Revenue from such arrangements is recognized on a net basis as the Company has determined it is acting as an agent in these transactions.

Some of the Company’s product offerings include service-level agreements warranting defined levels of uptime reliability and performance and permitting those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in the accompanying condensed consolidated financial statements as a result of these service-level agreements.

For contracts that are modified for changes in contract specification and requirements, the Company analyzes the modification to determine the accounting treatment of the contract modification as a separate contract, prospectively or through a cumulative catch-up adjustment.

12

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Contracts with Multiple Performance Obligations

The Company executes arrangements that include multiple performance obligations (consisting of subscription and professional services). Additionally, the Company is often party to multiple concurrent contracts or contracts pursuant to which a client may purchase a combination of services. At contract inception, the Company determines whether multiple contracts will be combined and accounted for as a single arrangement. Combination is generally required when the economics of the individual contracts cannot be understood without reference to the whole. While certain contracts may be combined, they are reviewed to determine if the contract has multiple distinct performance obligations. These situations require judgment to determine whether the multiple promises are separate performance obligations. Once the Company has determined the performance obligations, the Company determines the transaction price. The Company allocates the transaction price to each performance obligation on a relative standalone selling price ("SSP") basis. The Company then allocates the transaction price to each performance obligation in the contract based on a relative SSP and the corresponding revenues are recognized as the related performance obligations are satisfied.

The determination of SSP for each distinct performance obligation requires judgement. The Company rarely sells its enterprise cloud software products and services as readily observable standalone sales, so the Company is required to estimate the SSP for each performance obligation. In the determination of the SSP, the Company uses information that includes contractually stated prices, market conditions, costs, renewal contacts, list prices, internal discounting tables and other observable inputs. In making these judgments, the Company analyzes various factors, including the Company’s pricing methodology and consistency, size of the arrangement, length of term, customer demographics and overall market and economic conditions. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers.

Costs to Obtain Customer Contracts

Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have estimated to be three years. We determined the period of benefit by taking into consideration the length of our customer contracts, customer relationship period, our technology lifecycle, and other factors. 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 our condensed consolidated statement of operations.

Capitalized costs to obtain customer contracts as of July 31, 2021 were $51.9 million, of which $26.6 million is included in prepaid expenses and other current assets and $25.3 million within other non-current assets. During the three and six months ended July 31, 2021, the Company amortized $7.1 million and $13.7 million, respectively, of costs to obtain customer contracts, included in sales and marketing expense.

Capitalized costs to obtain customer contracts as of July 31, 2020 were $37.3 million, of which $20.0 million is included in prepaid expenses and other current assets and $17.3 million within other non-current assets. During the three and six months ended July 31, 2020, the Company amortized $5.0 million and $9.8 million, respectively, of costs to obtain customer contracts, included in sales and marketing expense.

Deferred Revenue

The Company invoices customers for subscriptions to our products in varying billing cycles with the majority being invoiced annually in advance of performance obligations, and accounts receivable are recorded when the right to consideration becomes unconditional. Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized.

The term between invoicing and when payment is due is not significant and the Company generally does not provide financing arrangements to customers. Deferred revenue associated with performance obligations that are anticipated to be satisfied, and thus to be revenue recognized, during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.


13

SPRINKLR, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
The Company recognized revenue of $96.9 million and $153.5 million for three and six months ended July 31, 2021, respectively, and $78.7 million and $124.6 million for the three and six months ended July 31, 2020, 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 July 31, 2021 and January 31, 2021, contract assets were $1.6 million and $0.8 million, respectively, and were included in prepaid expenses and other current assets.

Remaining performance obligations represent contracted revenues that had not yet been recognized, and include deferred revenues and amounts that will be invoiced and recognized in future periods.

As of July 31, 2021, our remaining performance obligations were $457.4 million, approximately $332.1 million of which we expect 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. Refer to Note 14, Geographic Information, for revenue by geographic location.

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 (in thousands):
July 31, 2021
Amortized CostUnrealized GainUnrealized LossesFair value
Corporate bonds$24,335 $ $(1)$24,334 
U.S. government and agency securities65,476 5  65,481 
Commercial paper24,991   24,991 
Marketable securities$114,802 $5 $(1)$114,806 
January 31, 2021
Amortized CostUnrealized GainUnrealized LossesFair value
Corporate bonds$26,894 $ $(2)$26,892 
U.S. government and agency securities125,804 20  125,824 
Commercial paper59,936   59,936 
Marketable securities$212,634 $20 $(2)$212,652 
As of July 31, 2021 and January 31, 2021, the maturities of available-for-sale marketable securities did not exceed 12 months.

14

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 July 31, 2021, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
Level 1Level 2Level 3Total
Financial Assets:
Cash Equivalents:
Money market funds$407,406 $ $ $407,406 
Marketable Securities:
Corporate bonds 24,334  24,334 
U.S. government and agency securities 65,481  65,481 
Commercial paper 24,991  24,991 
Total financial assets$407,406 $114,806 $ $522,212 
The following table represents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of January 31, 2021 (in thousands):
Level 1Level 2