What happened
Enterprise software specialist Sprinkler (CXM 0.76%) trounced the market on Thursday, with shares rising 17% by 12:45 p.m. ET compared to a 0.5% drop in the S&P 500.
The spike wasn't enough to put shares back in positive territory for the year, but the stock has cut its fiscal 2022 losses significantly since late January. The rally was powered by a well-received earnings update.
Image source: Getty Images.
So what
Sprinkler revealed before the market opened that sales rose 30% to $136 million in the fiscal fourth quarter that runs through late January. That performance beat the high end of management's forecast, which called for revenue between $129 million and $131 million.
It also cemented faster growth in the second half of 2021 as compared to the previous six months. "We accelerated our growth [in fiscal 2022], went public, and created a new category called unified customer experience management for the world's leading enterprise brands," CEO Ragy Thomas said in a press release.
Now what
Sprinkler still isn't sustainably profitable. In fact, operating losses ballooned this past year to $100 million from $26 million. Yet cash flow should improve over time as the company sells more subscription-based products.
That pipeline is packed for the new fiscal year, giving management confidence to forecast sales of between $607 million and $615 million. Investors were looking for a weaker growth projection, meaning the excess growth Sprinkler achieved in Q4 wasn't simply a matter of pulling forward a few contracts from the start of the new year.
It's no surprise then that the stock rebounded on Thursday to erase some of its recent declines, given the high demand for its software platform. The path that shares take from here will depend mainly on selling conditions around the digital transformation trend, and Sprinkler's ability to capitalize on those by creating powerful software services.
