Sprinklr Inc.

03/19/2026 | Press release | Distributed by Public on 03/19/2026 14:08

Annual Report for Fiscal Year Ending January 31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements" in this Form 10-K. You should review the disclosure under the heading "Risk Factors" in this Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
This section of our Form 10-K discusses our financial condition and results of operations for the fiscal years ended January 31, 2026, 2025, and 2024 and year-to-year comparisons between fiscal year 2026 and fiscal year 2025. Year-to-year comparisons between fiscal year 2025 and fiscal year 2024 that are not included in this Form 10-K can be found in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the fiscal year ended January 31, 2025, filed on March 21, 2025.
Certain prior quarterly and annual amounts have been reclassified to conform to the current period presentation.
Overview
Sprinklr provides a Unified Customer Experience Management ("Unified-CXM") platform designed to help organizations manage customer interactions across multiple channels and teams. Our AI-native platform enables customer-facing teams, from Customer Service to Marketing, to collaborate across internal silos, communicate with customers across digital and traditional channels and leverage AI to deliver improved customer experiences at scale.
Sprinklr has four main product suites: Sprinklr Social, Sprinklr Insights, Sprinklr Marketing and Sprinklr Service. We believe that these four suites enable large and leading brands to more effectively reach, engage and listen to their customers on the channel of their choice. We continue to invest in the unified platform and develop new features and enhancements to each suite in response to evolving customer needs.
Our Unified-CXM platform utilizes an architecture purpose-built for managing Customer Experience Management ("CXM") data and is powered by proprietary AI, collaborative workflow, automation, broad-based listening and customer-led governance. This architecture is designed to help enterprises analyze massive amounts of unstructured and structured data.
We generate revenue primarily from the sale of subscriptions to our Unified-CXM platform and related professional services. Our platform includes products that are licensed on a per-user basis as well as products that are licensed based on different tiers of volume.
Our customer base is diverse, spanning global enterprises across a broad array of industries and geographies, as well as marketing agencies, government departments, non-profit and educational institutions. As of January 31, 2026, we had 1,677 customers in more than 90 countries, with our platform supporting over 150 languages. This compares to 1,930 customers as of January 31, 2025. The decrease in total customers year-over-year was primarily due to a strategic refinement of our customer profile and an increased focus on top-tier enterprise customers. We define our large customers as those with at least $1.0 million in subscription revenue on a trailing 12-month basis. As of January 31, 2026, we had 141 large customers, compared to 149 as of January 31, 2025. While the number of large customers decreased, the average subscription revenue per customer in this cohort increased, reflecting our focus on higher-value relationships.
We primarily target large global enterprises, as we believe that our Unified-CXM platform's breadth and depth of capabilities are well-suited to address the complex needs of these organizations. Our customers include 59% of the Fortune 100 companies.
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
RPO and cRPO
Remaining Performance Obligation ("RPO") represents contracted revenue that has not yet been recognized and includes deferred revenue and amounts that will be invoiced and recognized in future periods. Current RPO ("cRPO") represents contracted revenue that has not yet been recognized and includes deferred revenue and amounts that will be invoiced and recognized in the next 12 months. As of January 31, 2026, our RPO was $986.5 million, andour cRPO was $618.8 million. As of January 31, 2025, our RPO was $987.7 million, and our cRPO was $612.5 million.
Net Dollar Expansion Rate
We believe that net dollar expansion rate ("NDE") is an indicator of the value that our platform delivers to customers. We calculate NDE to measure our ability to retain and expand subscription revenue from our existing customers. NDE compares our subscription revenue from the same set of customers across comparable periods and reflects customer renewals, expansion, contraction and churn. We calculate NDE by dividing (i) subscription revenue in the trailing 12-month period from those customers who were on our platform during the most recent prior 12-month period by (ii) subscription revenue from the same customers in the preceding prior 12-month period. This calculation is net of upsells, contraction, cancellation or expansion during the period but excludes subscription revenue from new customers. Our NDE, on a trailing 12-month basis, was 103.0% and 103.6% for the 12-month periods ended January 31, 2026 and 2025, respectively. NDE was stable year-over-year despite continued churn and down-selling of certain existing customers, which was partially driven by the current macroeconomic environment.
Macroeconomic and Geopolitical Considerations
Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic and geopolitical events, including fluctuations in inflation and interest rates, the imposition of tariffs in the United States and abroad, the Russia-Ukraine war and military conflicts in the Middle East and the 2025 U.S. government shutdown, have led to economic uncertainty both in the United States and globally. Historically, during periods of economic and geopolitical uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers' businesses.
While we have experienced growing inflationary pressures on the cost of wages, rent and data, the net result of inflationary impacts and our efforts to mitigate these impacts have not been material to us during the periods included in this report. In addition, general economic weakness may lead to longer collection cycles for payments due from our customers and an increase in customer provision for credit losses, as well as restructuring initiatives and associated expenses, and customers and potential customers may require extended financial concessions, which could result in adjustments to revenue recognition.
Further, geopolitical events, such as Russia-Ukraine war, the 2026 Iran conflict and other military or security related events globally, may adversely affect our business. For example, our operations in the Middle East have been adversely impacted by the 2026 Iran conflict, including disruptions to our business activities in the region and inaccessibility, and potential loss, of certain customer data in connection with a third-party data center infrastructure in the United Arab Emirates on which we relied. Such events may result in a decrease in customer demand for our services, increased scrutiny from customers and regulators, and damage our reputation, which could adversely affect our business, financial condition and results of operations. Further, we may incur significant and unanticipated expenses to mitigate the possibility of further harm, including through emergency data transfers, temporary changes to data processing locations, increased infrastructure costs, or as through the relocation of our employees or data to other regions not affected by the conflict.
The effect of macroeconomic and geopolitical conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see "Part I. Item 1A. Risk Factors" in this Form 10-K.
Components of Results of Operations
Revenue
We generate revenue from the sale of subscriptions to our Unified-CXM cloud-based software platform and related professional services.
Subscription revenue consists primarily of fees for accessing our proprietary Unified-CXM platform, as well as related stand-ready services, and is generally recognized ratably over the committed subscription term. The majority of our subscription contracts have a term of two to three years. Historically, we have experienced seasonality in our sales cycle, as a large percentage of our customers make their purchases in the fourth quarter of a given fiscal year and pay us in the first quarter of the subsequent year. This seasonality may be reflected to a much lesser extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the term of the applicable subscription agreement.
Professional services revenue consists primarily of fixed-fee arrangements to provide implementation and managed services for our Unified-CXM Platform. For managed services, our consultants work alongside our customers' teams to help them realize their CXM goals, including platform configuration, ongoing education and ad-hoc support.
Costs of Revenue
Costs of Subscription Revenue
Costs of subscription revenue consist primarily of costs to host our software platform; data costs, including cost of third-party data utilized in our platform; personnel-related expenses for our subscription and support operations personnel, including salaries, benefits, bonuses and stock-based compensation; professional fees; software costs; travel expenses, the amortization of our capitalized internal-use software; and allocated overhead expenses, including facilities costs for our subscription and support operations. We expect that costs of subscription revenue will increase in absolute dollars as we expand our customer base and make continued investments in our cloud infrastructure and support organization. Furthermore, we estimate that data and hosting costs with various partners may rise in the near term.
Costs of Professional Services Revenue
Costs of professional services revenue consist primarily of personnel-related expenses for our professional services personnel, including salaries, benefits, bonuses and stock-based compensation; professional fees; software costs; subcontractor costs; travel expenses; and allocated overhead expenses, including facilities costs, for our professional services organization. We expect that our costs of professional services may vary from period to period based on the project-based nature of this work, our increased use of partners and additional headcount for the delivery of implementation services.
Gross Profit and Gross Margin
Gross profit is defined as total revenue less total costs of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors, including our pricing, our mix of revenues and the costs required to deliver those revenues.
Our gross margin on subscription revenue is significantly higher than our gross margin on professional services revenue, and as a result, our gross margin may vary from period to period if our mix of revenue or costs of revenue fluctuates. In addition, because personnel-related expenses represent the largest component of costs of professional services revenue, we may experience changes in our professional services gross margin due to the timing of delivery of those services. We expect that our gross margin will decline in the near term due to higher data and hosting costs, coupled with higher service delivery costs, and, in the long term, will vary from period to period.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, general and administrative and restructuring expenses.
Research and Development Expense
Research and development expense consists primarily of costs relating to the maintenance, continued development and enhancement of our cloud-based software platform and includes personnel-related expense for our research and development organization, including salaries, benefits, bonuses and stock-based compensation, professional fees, travel expenses and allocated overhead expenses, including facilities costs. Research and development expenses are expensed as incurred, except for internal-use software development costs that qualify for capitalization. We expect research and development expense to generally increase in absolute dollars as we continue to innovate and invest in enhancing and expanding the capabilities of our Unified-CXM platform.
Sales and Marketing Expense
Sales and marketing expense consists primarily of personnel-related expenses for our sales and marketing organization, including salaries, benefits, bonuses and stock-based compensation, professional fees, software costs, advertising, marketing, promotional and brand awareness activities, travel expenses and allocated overhead expense, including facilities costs. Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over the expected period of benefit. We expect sales and marketing expense to generally increase in absolute dollars as we continue to drive the growth of our business. We continue to optimize our sales and marketing expense and seek efficiencies in our investments.
General and Administrative Expense
General and administrative expense includes personnel-related expenses associated with administrative services, such as legal, human resources, information technology, accounting, and finance functions, as well as professional fees, software costs, travel expenses, provision for credit losses and allocated overhead expense, including facilities costs and any corporate overhead expenses not allocated to other expense categories.
Restructuring Expense
Restructuring expense includes costs associated with the global workforce reductions implemented in fiscal years 2026 and 2025. The majority of these costs consist of severance, benefits and the acceleration of equity awards. We do not expect to incur any further restructuring expense with respect to the workforce reductions implemented in fiscal years 2026 and 2025.
Other Income, Net
Other income, net, consists of interest income on invested cash and cash equivalents and marketable securities, foreign currency transaction gains and losses and other expenses and gains.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes related to foreign and U.S. jurisdictions in which we conduct business. Our annual estimated effective tax rate differed from the U.S. federal statutory rate in fiscal year 2026 primarily due to the impact of non-deductible items, stock-based compensation expense and the foreign tax rate differential on non-U.S. income and withholding taxes, as well as changes in our uncertain tax positions.
Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
Year Ended January 31,
(in thousands) 2026 2025 2024
Revenue:
Subscription $ 756,339 $ 717,923 $ 668,541
Professional services 100,861 78,471 63,819
Total revenue 857,200 796,394 732,360
Costs of revenue:
Costs of subscription (1)
178,634 140,730 116,032
Costs of professional services (1)
100,783 81,026 63,369
Total costs of revenue 279,417 221,756 179,401
Gross profit 577,783 574,638 552,959
Operating expense:
Research and development (1)
96,001 91,621 91,292
Sales and marketing(1)
287,639 319,615 317,779
General and administrative (1)
137,119 136,611 105,673
Restructuring(1)
16,785 2,821 4,270
Total operating expense 537,544 550,668 519,014
Operating income 40,239 23,970 33,945
Other income, net
26,550 24,322 26,577
Income before provision (benefit) for income taxes 66,789 48,292 60,522
Provision (benefit) for income taxes 43,884 (73,317) 9,119
Net income $ 22,905 $ 121,609 $ 51,403
(1) Includes stock-based compensation expense, net of amounts capitalized, as follows:
Year Ended January 31,
(in thousands) 2026 2025 2024
Costs of subscription
$ 1,127 $ 1,323 $ 1,130
Costs of professional services
2,936 1,387 1,450
Research and development 16,843 11,404 11,566
Sales and marketing 24,536 21,331 24,477
General and administrative 38,126 24,072 17,134
Restructuring 866 - -
Stock-based compensation expense, net of amounts capitalized
$ 84,434 $ 59,517 $ 55,757
The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue(1):
Year Ended January 31,
2026 2025 2024
Revenue:
Subscription 88 % 90 % 91 %
Professional services 12 % 10 % 9 %
Total revenue 100 % 100 % 100 %
Costs of revenue:
Costs of subscription 21 % 18 % 16 %
Costs of professional services 12 % 10 % 9 %
Total costs of revenue 33 % 28 % 24 %
Operating expense:
Research and development 11 % 12 % 12 %
Sales and marketing 34 % 40 % 43 %
General and administrative 16 % 17 % 14 %
Restructuring 2 % 0 % 1 %
Total operating expense 63 % 69 % 71 %
Operating income 5 % 3 % 5 %
Other income, net
3 % 3 % 4 %
Income before provision (benefit) for income taxes 8 % 6 % 8 %
Provision (benefit) for income taxes 5 % (9) % 1 %
Net income 3 % 15 % 7 %
(1) Totals may not foot due to rounding.
Comparison of Fiscal Years Ended January 31, 2026 and 2025
Revenue
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Subscription $ 756,339 $ 717,923 $ 38,416 5 %
Professional services 100,861 78,471 22,390 29 %
Total revenue $ 857,200 $ 796,394 $ 60,806 8 %
The increase in subscription revenue was primarily due to increased revenue from existing customers driven by the purchase of additional quantities of current subscription solutions and additional add-on solutions within our platform, as well as demand for our solutions from new customers. Such growth was partially offset by certain existing customers purchasing fewer quantities of current subscription solutions within our platform, as well as certain customers no longer subscribing to our platform, partially driven by challenging macroeconomic conditions.
The increase in professional services revenue was primarily due to growth in both implementations and managed services related to Contact Center as a Service ("CCaaS") delivery capabilities.
Costs of Revenue and Gross Margin
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Costs of subscription revenue $ 178,634 $ 140,730 $ 37,904 27 %
Costs of professional services revenue 100,783 81,026 19,757 24 %
Total costs of revenue $ 279,417 $ 221,756 $ 57,661 26 %
Gross margin - subscription 76 % 80 %
Gross margin - professional services 0 % (3) %
The increase in costs of subscription revenue was primarily due to an increase of $33.3 million in third-party data, cloud and network infrastructure costs, partially attributable to increased customer demand as well as higher rates from our third-party providers.
The increase in costs of professional services revenue was primarily due to (i) an $11.0 million increase in subcontractor costs as a result of higher partner delivery costs and (ii) higher personnel-related costs of $7.7 million, partially driven by increased bonus expense compared to prior year.
Gross margin for subscription decreased by four percentage points, primarily driven by increased costs associated with third-party data, cloud and network infrastructure. Gross margin for professional services increased by three percentage points, largely driven by the timing of project initiation and the completion of delivery milestones, including the implementation of CCaaS projects.
Research and Development Expense
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Research and development $ 96,001 $ 91,621 $ 4,380 5 %
% of revenue 11 % 12 %
The increase in research and development expense was primarily due to (i) a $3.0 million increase in personnel costs, resulting from higher stock compensation, which was primarily driven by new grants during fiscal year 2026, (ii) a $2.7 million increase in subcontractor and consulting costs, as a result of quality improvement projects implemented in the current fiscal year, and (iii) a $2.1 million increase in software subscription costs. These increases were partially offset by a $3.5 million decrease as a result of an increase in capitalized research and development costs.
Sales and Marketing Expense
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Sales and marketing $ 287,639 $ 319,615 $ (31,976) (10) %
% of revenue 34 % 40 %
The decrease in sales and marketing expense was primarily due to (i) a decrease in personnel costs of $25.2 million, primarily due to lower sales headcount as a result of the restructuring activities we implemented in the first quarter of fiscal year 2026, partially offset by an increase in commissions expense of $4.2 million, and (ii) a decrease in other marketing-related costs of $5.9 million.
General and Administrative Expense
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
General and administrative $ 137,119 $ 136,611 $ 508 - %
% of revenue 16 % 17 %
The increase in general and administrative expense was primarily due to (i) a $19.2 million increase in personnel-related costs driven by increased stock compensation expense, primarily related to new grants during fiscal year 2026 and (ii) an increase in professional and related fees of $1.9 million. These increases were partially offset by (i) lower consulting costs of $11.3 million and (ii) lower provision for expected credit losses of $9.3 million as a result of increased reserves for certain customers that we deemed to be uncollectible accounts during the second quarter of fiscal year 2025.
Restructuring Expense
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Restructuring $ 16,785 $ 2,821 $ 13,964 495 %
% of revenue 2 % - %
The increase in restructuring expense was due to the reduction in global workforce implemented in the first quarter of fiscal year 2026 impacting 12% of our workforce versus a 3% impact to the workforce as a result of the reduction in global workforce implemented in the second quarter of fiscal year 2025. Refer to Note 14, Restructuring Charges, included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K for additional information.
Other Income, Net
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Other income, net
$ 26,550 $ 24,322 $ 2,228 9 %
% of revenue 3 % 3 %
The increase in other income, net was primarily attributable to an $8.2 million increase in net foreign currency gains, partially offset by a $5.8 million decrease in interest income from our money market and short-term investment accounts as a result of lower interest rates and lower average balances in these accounts.
Provision (Benefit) for Income Taxes
Year Ended January 31,
(in thousands) 2026 2025 $ Change % Change
Provision (benefit) for income taxes $ 43,884 $ (73,317) $ 117,201 160 %
% of revenue
5 % (9) %
The increase in provision (benefit) for income taxes was primarily due to the impact of including U.S. profit before tax in the annual effective tax rate computation for the year ended January 31, 2026. For the year ended January 31, 2025, we recorded a net reduction of $96.3 million in our valuation allowance, primarily reflecting the release of our valuation allowance associated with our U.S. federal and state deferred tax assets, and recorded a tax benefit of $2.0 million for non-deductible stock-based compensation. The provision for income tax for the year ended January 31, 2026 also includes (i) a $7.0 million income tax charge for changes to our uncertain tax positions related to our non-U.S. entities and (ii) a $5.1 million income tax charge for non-deductible stock-based compensation.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. GAAP, we believe that the following non-GAAP financial measures associated with our consolidated statements of operations are useful in evaluating our operating performance:
•Non-GAAP gross profit and non-GAAP gross margin
•Non-GAAP operating income and non-GAAP operating margin; and
•Non-GAAP net income and non-GAAP net income per share
We define these non-GAAP financial measures as the respective U.S. GAAP measures, excluding, as applicable, stock-based compensation expense and related charges, amortization of stock-based compensation expense associated with capitalized internal-use software, amortization of acquired intangible assets, release of U.S. federal and state valuation allowances, and the estimated tax effect related to the non-GAAP items, as well as other one-time charges, such as restructuring charges, costs associated with acquisitions, non-recurring litigation costs and facility exit costs. We believe that it is useful to exclude these items in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies over multiple periods.
In addition, we believe that free cash flow is also a useful non-GAAP financial measure. Free cash flow is defined as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software. We believe that free cash flow is a useful indicator of liquidity as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments. We expect our free cash flow to fluctuate in future periods with changes in our operating expenses and as we continue to invest in our growth. We typically experience higher billings in the fourth quarter compared to other quarters and experience higher collections of accounts receivable in the first half of the year, which results in a decrease in accounts receivable in the first half of the year.
However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by U.S. GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As a result, our non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for our consolidated financial statements presented in accordance with U.S. GAAP.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP:
Year Ended January 31,
(in thousands) 2026 2025 2024
Non-GAAP gross profit and gross margin:
U.S. GAAP gross profit
$ 577,783 $ 574,638 $ 552,959
Stock-based compensation expense and related charges(1)
4,115 2,750 2,625
Amortization of stock-based compensation expense - capitalized internal-use software 2,596 2,216 1,488
Non-GAAP gross profit $ 584,494 $ 579,604 $ 557,072
Gross margin 67 % 72 % 76 %
Non-GAAP gross margin 68 % 73 % 76 %
Non-GAAP operating income and operating margin:
U.S. GAAP operating income $ 40,239 $ 23,970 $ 33,945
Stock-based compensation expense and related charges(2)
84,539 60,663 57,902
Amortization of acquired intangible assets - 118 200
Amortization of stock-based compensation expense - capitalized internal-use software 2,596 2,216 1,488
Non-recurring litigation costs(3)
2,076 - -
Restructuring costs(4)
16,785 2,821 4,270
Non-GAAP operating income
$ 146,235 $ 89,788 $ 97,805
Operating margin 5 % 3 % 5 %
Non-GAAP operating margin 17 % 11 % 13 %
(1) Employer payroll tax related to stock-based compensation for the years ended January 31, 2026, 2025, and 2024 was immaterial as to the impact to gross profit.
(2)Includes employer payroll tax related to stock-based compensation expense of $1.0 million,$1.1 million and $2.1 million for the years ended January 31, 2026, 2025 and 2024, respectively.
(3) Relates to costs associated with litigation that arise outside of the ordinary course of business.
(4) Includes employer payroll tax related to restructuring expense of $0.8 million, $0.4 million and $0.4 million for the years ended January 31, 2026, 2025 and 2024, respectively. Refer to Note 14, Restructuring Charges, included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K for additional information.
Year Ended January 31,
2026 2025 2024
(in thousands) Per Share-Basic Per Share-Diluted (in thousands) Per Share-Basic Per Share-Diluted (in thousands) Per Share-Basic Per Share-Diluted
Non-GAAP net income and earnings per share:
U.S. GAAP net income $ 22,905 $ 0.09 $ 0.09 $ 121,609 $ 0.47 $ 0.44 $ 51,403 $ 0.19 $ 0.18
Stock-based compensation expense and related charges(1)
84,539 0.34 0.33 60,663 0.23 0.22 57,902 0.21 0.20
Amortization of acquired intangible assets - - - 118 - - 200 - -
Amortization of stock-based compensation expense - capitalized internal-use software 2,596 0.01 0.01 2,216 0.01 0.01 1,488 0.01 0.01
Income tax expense(2)
(1,731) (0.01) (0.01) - - - - - -
Non-recurring litigation costs(3)
2,076 0.01 0.01 - - - - - -
Restructuring costs(4)
16,785 0.07 0.06 2,821 0.01 0.01 4,270 0.02 0.01
Release of U.S. federal and state valuation allowances - - - (87,058) (0.33) (0.31) - - -
Non-GAAP net income $ 127,170 $ 0.51 $ 0.49 $ 100,369 $ 0.39 $ 0.37 $ 115,263 $ 0.43 $ 0.40
Weighted-average shares outstanding 250,834 257,965 260,241 274,773 269,974 287,093
(1)Includes employer payroll tax related to stock-based compensation expense of $1.0 million,$1.1 million and $2.1 million of for the years ended January 31, 2026, 2025 and 2024, respectively.
(2) Represents the Company's current and deferred income tax expense commensurate with the non-GAAP measure of profitability using a non-GAAP tax rate of 26.4%for the year ended January 31, 2026. The Company uses an annual tax rate in its computation of the non-GAAP income tax provision and excludes the direct impact of stock-based compensation expense, employer tax costs related to stock-based compensation, intangible amortization expense, amortization of stock-based compensation expense associated with capitalized internal-use software, non-recurring litigation costs, restructuring costs and settlement of prior year tax provisions.
(3) Relates to costs associated with litigation that arise outside of the ordinary course of business.
(4) Includes employer payroll tax related to restructuring expense of $0.8 million, $0.4 million and $0.4 million for the years ended January 31, 2026, 2025 and 2024, respectively. Refer to Note 14, Restructuring Charges, included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K for additional information.
Year Ended January 31,
(in thousands) 2026 2025 2024
Free cash flow:
Net cash provided by operating activities
$ 159,193 $ 77,590 $ 71,465
Purchases of property and equipment (1,379) (5,802) (8,548)
Capitalized internal-use software (15,911) (12,631) (11,777)
Free cash flow $ 141,903 $ 59,157 $ 51,140
Liquidity and Capital Resources
Overview
As of January 31, 2026, our principal sources of liquidity were $163.0 million of cash and cash equivalents and $339.5 million of highly liquid marketable securities. We believe that our existing cash and cash equivalents, marketable securities and cash from operations will be sufficient to meet our working capital needs, capital expenditures and financing obligations for at least the next 12 months and over the long-term. The majority of our cash is held in the United States and we do not anticipate a need to repatriate cash held outside of the United States. Further, it is our intent to indefinitely reinvest these funds outside the United States, and, therefore, we have not provided for any United States income taxes.
Cash Collateral Agreements and Restricted Cash
In April 2023, we entered into cash collateral agreements with Silicon Valley Bank in lieu of a letter of credit facility, which are associated with certain leases. Approximately $1.1 million is outstanding on these cash collateral agreements as of January 31, 2026, which we have therefore classified within restricted cash. As of January 31, 2026, $0.7 million and $0.4 million of this restricted cash is recorded within prepaid expenses and other current assets and within non-current assets, respectively, on the consolidated balance sheets.
Starting in 2023, we entered into cash collateral agreements with J.P. Morgan Bank in lieu of a credit facility, through which approximately $7.4 million is outstanding as of January 31, 2026. As of January 31, 2026, $1.4 million and $6.0 million of this restricted cash is recorded within prepaid expenses and other current assets and within non-current assets, respectively, on the consolidated balance sheets.
Share Repurchase Programs
On June 4, 2025, we announced that our board of directors had authorized and approved a share repurchase plan (the "2025 Share Repurchase Program"), whereby we were authorized to repurchase up to $150 million of Class A common stock. During the year ended January 31, 2026, we repurchased 17,616,548 shares of our Class A common stock for an aggregate cost of $150.4 million. All of the shares repurchased have been returned to our authorized but unissued share reserve. During the third quarter of fiscal year 2026, we completed the full purchase authorization of $150 million under the 2025 Share Repurchase Program.
On March 11, 2026, we announced that our board of directors had authorized and approved a share repurchase plan (the "2026 Share Repurchase Program"), whereby we were authorized to periodically repurchase up to $200 million of Class A common stock through March 15, 2027. On March 13, 2026, the Company entered into an accelerated share repurchase transaction for $125 million under the 2026 Share Repurchase Program, with the remaining authorization to be utilized at the Company's discretion over the next year, subject to market conditions and other factors. Repurchases under the program are expected to be funded using cash on hand, cash equivalents, and marketable securities.
For additional information regarding our share repurchase programs, see Note 10, Stockholders' Equity,included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K.
Material Cash Requirements
Our expected material cash requirements include obligations under data and service provider agreements, operating leases and the 2026 Share Repurchase Program. We have agreements in place with data and service providers that require us to make certain minimum guaranteed purchase commitments through fiscal year 2029, which totaled $117.2 million as of January 31, 2026, of which $70.9 million is due within twelve months from January 31, 2026. In the normal course of business we may renew existing contracts throughout the year. In addition, we lease certain office facilities under operating lease arrangements that expire on various dates through fiscal year 2036. Refer to Note 8, Leases, to our Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K for a discussion of our leases. For additional information regarding the 2026 Share Repurchase Program and its expected funding sources, see "Share Repurchase Programs" above. There were no other significant changes in our material cash requirements during fiscal year 2026.
Future Funding Requirements
Our future capital requirements will depend on many factors, including our growth rate, the expansion of our direct sales force, strategic relationships and international operations, the timing and extent of spending to support research and development efforts and the continuing market acceptance of our solutions. We historically have expanded our business in part by investing in strategic growth initiatives, including acquisitions of products, technologies and businesses. We may finance such acquisitions using cash, debt, stock or a combination of the foregoing; however, we have used cash and stock as consideration for substantially all of our historical business acquisitions. We continually examine our options with respect to terms and sources of existing and future short-term and long-term capital resources to enhance our operating results and to ensure that we retain financial flexibility, and may from time to time elect to raise capital through the issuance of additional equity or the incurrence of debt. Sales of additional equity could result in dilution to our stockholders. If we raise funds by borrowing from third parties, the terms of those financing arrangements would require us to incur interest expense and may include negative covenants or other restrictions on our business that could impair our operating flexibility. We can provide no assurance that financing will be available at all or, if available, that we would be able to obtain financing on terms favorable to us. If we are unable to raise additional capital when needed, we would be required to curtail our operating activities and capital expenditures, and our business operating results and financial condition would be adversely affected.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Year Ended January 31,
(in thousands) 2026 2025 2024
Net cash provided by operating activities $ 159,193 $ 77,590 $ 71,465
Net cash (used in) provided by investing activities $ (12,470) $ 154,126 $ (110,570)
Net cash (used in) provided by financing activities $ (131,847) $ (248,158) $ 24,086
Our net income and cash flows provided by operating activities are influenced significantly by our investments in headcount to support growth and in costs of revenue to deliver our services. Non-cash charges primarily include depreciation and amortization, provision for credit losses, stock-based compensation, non-cash lease expense, deferred income taxes and accretion on marketable securities. Our largest source of operating cash is cash collections from customers using our Unified-CXM platform and related services. Our primary uses of cash from operating activities are for employee-related costs, costs to deliver our revenue and marketing expenses.
We expect our free cash flow to fluctuate in future periods with changes in our operating expenses and as we continue to invest in our growth. We typically experience higher billings in the fourth quarter compared to other quarters, primarily due to higher renewal activity, and experience higher collections of accounts receivable in the first half of the year, which results in a decrease in accounts receivable in the first half of the year.
Operating Activities
For the fiscal year 2026, cash provided by operating activities was $159.2 million, which consisted of net income of $22.9 million, adjusted for non-cash expenses of $127.6 million and $8.7 million of net cash flows provided as a result of changes in operating assets and liabilities. The $8.7 million of net cash flows provided as a result of changes in our operating assets and liabilities reflected (i) a $22.7 million increase in deferred revenue as a result of billings exceeding recognized revenue, (ii) an $11.1 million increase in accrued expenses and other current liabilities primarily due to higher bonus and withholding tax accruals, (iii) a $5.9 million increase in accounts payable due to timing of payments made, and (iv) a $5.7 million decrease in accounts receivable due to collections outpacing billings. These increases to cash flows from operations were partially offset by (i) a $21.6 million increase in prepaid expenses and other current assets due to higher capitalized commissions, (ii) an $8.4 million decrease in operating lease liabilities due to ongoing payments for leased properties, and (iii) a $6.4 million increase in other non-current assets due to higher capitalized commissions.
For the fiscal year 2025, cash provided by operating activities was $77.6 million, which consisted of net income of $121.6 million, adjusted for non-cash expenses of $2.5 million and $41.6 million of net cash flows used as a result of changes in operating assets and liabilities. The $41.6 million of net cash flows used as a result of changes in our operating assets and liabilities reflected (i) a $30.0 million increase in accounts receivable due to billings outpacing collections, (ii) a $15.5 million increase in prepaid expenses and other current assets due to higher prepaid hosting and data costs, (iii) a $12.5 million decrease in accrued expenses and other current liabilities primarily due to lower bonus and commission accruals, (iv) a $9.6 million increase in other non-current assets due to higher capitalized commissions, and (v) a $7.0 million decrease in accounts payable due to timing of payments made. These decreases to cash flows from operations were partially offset by a $37.5 million increase in deferred revenue as a result of billings exceeding recognized revenue.
For the fiscal year 2024, cash provided by operating activities was $71.5 million, which consisted of net income of $51.4 million, adjusted for non-cash expenses of $65.9 million and $45.8 million net cash flows used as a result of changes in operating assets and liabilities. The $45.8 million of net cash flows used as a result of changes in operating assets and liabilities reflected (i) a $68.7 million increase in accounts receivable due to increased billings and the timing of invoices billed, (ii) a $25.6 million increase in other non-current assets driven by an increase in capitalized commissions, and (iii) an $8.0 million decrease in operating lease liabilities due to ongoing payments for leased properties. These decreases to cash flows from operations were partially offset by (i) a $49.8 million increase in deferred revenue resulting primarily from increased billings for subscriptions, (ii) an $8.7 million decrease in prepaid expenses and other current assets driven by larger prepaid contracts in the prior fiscal year and (iii) a $3.3 million increase in accounts payable largely due to an overall increase in spend and the timing of payments due.
Investing Activities
For the fiscal year 2026, net cash used in investing activities was $12.5 million and primarily consisted of $516.8 million of purchases of marketable securities and $15.9 million in capitalized internal-use software costs. These decreases in cash flows from investing activities was partially offset by $521.9 million of sales and maturities of marketable securities.
For the fiscal year 2025, net cash provided by investing activities was $154.1 million and primarily consisted of $568.7 million of sales and maturities of marketable securities, partially offset by $396.2 million of purchases of marketable securities.
For the fiscal year 2024, net cash used in investing activities was $110.6 million and primarily consisted of $604.6 million of purchases of marketable securities, partially offset by $514.4 million of sales and maturities of marketable securities.
Financing Activities
For the fiscal year 2026, net cash used in financing activities was $131.8 million, which consisted of payments for the 2025 Share Repurchase Program of $152.3 million, offset by $15.3 million of proceeds from the exercise of stock options and $5.1 million of proceeds from the purchase of stock under our 2021 Employee Stock Purchase Plan ("ESPP").
For the fiscal year 2025, net cash used in financing activities was $248.2 million, which consisted of payments for the 2024 Share Repurchase Program of $273.9 million, offset by $19.9 million of proceeds from the exercise of stock options and $5.8 million of proceeds from the purchase of stock under our 2021 Employee Stock Purchase Plan ("ESPP").
For the fiscal year 2024, cash provided by financing activities was $24.1 million, which consisted of proceeds from the exercise of stock options of $43.3 million and proceeds from the purchase of stock under our ESPP of $7.4 million, partially offset by payments for the repurchase of Class A common shares of $26.7 million.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. 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.
Critical accounting estimates are those estimates that, in accordance with U.S. GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial statements. Management has determined that our most critical accounting estimates are those relating to revenue recognition and stock-based compensation expense, including historical common stock valuations and performance-based award valuations. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.
Our significant accounting policies are more fully described in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K.
Revenue Recognition
At times, revenue recognition requires judgment, especially for our arrangements that include multiple performance obligations, or deliverables, such as arrangements that include promises to transfer multiple subscription services, premium support, professional services and managed services. A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require judgment.
Subscription services are distinct as such offerings are often sold separately. In determining whether professional services are distinct, we consider the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services, the timing of when the professional services contract was signed in comparison to the subscription start date and the contractual dependence of the service on the customer's satisfaction with the professional services work. To date, we have concluded that professional services included in contracts with multiple performance obligations are generally distinct.
The determination of standalone selling price ("SSP") for each distinct performance obligation requires judgment. We rarely sell our enterprise cloud software products and services as readily observable standalone sales, so we are required to estimate the SSP for each performance obligation. In the determination of the SSP, we may use information that includes contractually stated prices, size of the arrangement, list prices and other observable inputs. Based on these results, the estimated SSP is set for each distinct product or service delivered to customers. As our go-to-market strategies evolve, we may modify our pricing strategies in the future, which could result in changes to SSP.
There were no material changes in the estimates or assumptions used to recognize revenue during the year ended January 31, 2026.
Stock-Based Compensation
We measure and record the expense related to stock-based awards based upon the fair value at the date of grant. We estimate the grant date fair value of each common stock option using the Black-Scholes Merton method, which requires the input of subjective assumptions and management's best estimates. The assumptions used, including (i) fair value of the underlying common stock, (ii) expected volatility, (iii) expected term, (iv) risk-free interest rate and (v) dividend yield, and how they are estimated is detailed within Note 11, Stock-Based Compensation, to our Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K.
Performance and Market-Based Award Valuations
For awards granted that vest upon the achievement of market conditions, we estimate the grant date fair value of these units using a Monte Carlo Simulation. The simulation models multiple stock price paths in order to estimate the grant date fair value of those with market conditions. For those awards with market conditions, stock-based compensation is recognized regardless of whether the market targets were achieved. However, if the grantee does not continue their employment through the derived service period, all related stock-based compensation for that individual is reversed in the period of termination.
For awards granted that vest upon the achievement of certain performance conditions, we estimate the fair value of these units using the Company's share price on the date of grant. Once the performance conditions are deemed probable, stock-based compensation recognition begins and is recognized over the service period. If at any point the performance conditions are deemed not probable, any expense recognized to date is reversed.
Income Taxes
We determined that it is more likely than not that our U.S. federal and state deferred tax assets were realizable as of January 31, 2025, and we reaffirmed this conclusion as of January 31, 2026. In determining the need, or continued need, for a valuation allowance, we considered the weighting of the positive and negative evidence, which includes, among other things, recent historical income and losses, future growth, forecasted earnings and future taxable income. As of January 31, 2025, we achieved three years of cumulative U.S. income when considering pre-tax income adjusted for permanent differences and other comprehensive losses. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets are realizable. See Note 13, Income Taxes, to our Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K for additional information.
Recent Accounting Pronouncements
Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K for more information regarding recently issued accounting pronouncements.
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