The team / Photo credit: Sprout

Sprout Solutions, a Philippine HR tech firm, narrowed its losses before tax to about US$23,500 in 2022, according to a filing acquired from VentureCap Insights. This is a drop from roughly US$48,600 in 2021.

Both numbers are drastically down from 2020, when the company generated US$1.8 million in losses.

However, the company told Tech in Asia that it expects to keep generating EBIT losses as it continues to invest in growth initiatives, and revenue from these will still take time to materialize.

Founded in 2016, Sprout is a software-as-a-service firm that offers services like compliance management, accounting management, and recruitment and onboarding solutions to small, medium-sized, and large enterprises in the Philippines.

The company said that this year, it has been investing more in initiatives to boost product awareness and client sign-ups. Sprout has also started exploring AI integrations, which it expects will “generate greater revenues and increased competitive advantage.”

Meanwhile, revenue grew 39% year on year to US$7.2 million in 2022. The company listed service fees as its only source of revenue in the financial statement.

Sprout said services fees are broken down into its core services, integrations with other platforms, fintech, and professional services. The company makes 88% of its revenue from its core services, which it identifies as products it has developed in-house.

Sprout also said that as of end-September this year, its monthly recurring revenue ended at US$791,000, up from the US$626,000 it reported at the end of 2022.

“Our growth has been driven by a continuous investment in sales and marketing as well as ensuring market-leading retention rates via investment in customer service,” the company said.

According to its LinkedIn page, the firm has over 1,000 clients, with notable ones including Lalamove, Foodpanda, and Canva.

Although Sprout logged US$270,800 in net cash from operating activities in 2022, it was an 80% reduction from the previous year. A large factor is a reversal in deferred revenue, which went from US$478,500 in 2021 to negative US$830,800 the next year.

Deferred revenue – which is also known as unearned revenue – is typically defined as payment from customers for services or products not provided to them yet. This is common for SaaS startups: A customer may pay for an annual subscription upfront, but the amount is recognized as revenue proportionally over 12 months.

As of December 31, 2022, Sprout had US$2.2 million in cash and cash equivalents. This does not take into account its latest fundraise – a US$10.7 million from investors like SoftBank Ventures Asia, AFG Partners, and GSR Ventures – which happened earlier this year.