Sprinklr Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
September 6, 2023

There are 12 speakers on the call.

Operator

And gentlemen, thank you for standing by. Welcome to Sprinklr's Second Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer session. Please limit your questions to 1 with 1 follow-up, so we'll have time to go through all the questions.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to Your first speaker today, Mr. Eric Skrow, Vice President, Finance, for introductory remarks. Please go ahead, Eric.

Speaker 1

Thank you, Doug, and welcome everyone to Sprinklr's 2nd quarter fiscal year 2024 financial results call. Joining us today are Raji Thomas, Sprinklr's Founder and CEO and Manish Sarin, Sprinklr's Chief Financial Officer. We issued our earnings release a short time ago, followed the related Form 8 ks with the And we've made them available on the Investor Relations section of our website along with the supplementary investor presentation. Please note that on today's call, Management will refer to certain non GAAP financial measures. While the company believes these non GAAP financial measures provide useful information for investors, The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Speaker 1

You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAAP. In addition, during today's call, we'll be making Forward looking statements about the business and about the financial results of Sprinklr that involve many assumptions, risks and uncertainties, including our guidance for the 3rd Full quarter of 2024 and full fiscal year 2024, our strategy, our product capabilities and our market opportunity. Our actual results might differ materially. Any forward looking statements that we make on this call are based on our beliefs and assumptions as of today, and We disclaim any obligation to update them. For more details on the risks associated with these forward looking statements, please refer to our filings with the SEC, which are also posted on our website.

Speaker 1

With that, I'll now turn it over to Raji.

Speaker 2

Thank you, Eric, and hello, everyone. Thank you for joining us today. We are very pleased that Q2 was another strong quarter that exceeded guidance across all key metrics. Q2 total revenue grew 18% year over year to 178,500,000 And subscription revenue grew 23% year over year to 163,500,000 With our continued focus on operational efficiency, we generated $21,300,000 In non GAAP operating income for the quarter. Our key focus areas continue to be creating a new category that we call Unified CXM, innovating faster than our competitors by harnessing the power of AI And improving our operational efficiencies while focusing on measurable value for our customers.

Speaker 2

We are pleased with how Unified CXM is continuing to evolve as a category and we are focused on mainstreaming Our core product suite across the broader front office. In my travels around the world last quarter, The best brands in the world are continuing to ask us to help consolidate front office technologies, reduce their operating costs, Help reduce risk all while bringing people and data together to create better customer experiences. For large and complex enterprise brands, seamless experiences are impossible to create across a multitude of channels, functions, business units and markets that are traditionally operating in silos. Unified CXM It's differentiated at its core with a single instance AI powered architecture that simplifies this complexity. It also gives brands access to publicly available conversational and mostly unstructured data in a safe And privacy compliant way that the current CRM and CDP relational databases cannot.

Speaker 2

The second topic on every customer's mind is AI on the heels of announcing our AI plus integration with OpenAI. We are now excited to announce the integration of the Sprinklr AI plus platform With Google Cloud's Vertex AI, this means that Sprinklr AI plus can now provide brands with even more Generative AI capabilities that are pre built for enterprise level governance, security and data privacy. More importantly, customers will now be able to bring along their own models from OpenAI, Vertex AI, create new ones or integrate them As appropriate with our proprietary AI. We believe that every company will embrace AI eventually. Our assertion is that companies that approach AI as a foundational strategy will win against AI adaptive and AI enabled companies in the long run.

Speaker 2

As we shared with you during our Investor Day, generative AI has given our proprietary AI wings and Sprinklr's AI is the fastest way for customers and prospects to deploy AI Across their entire front office. 3rd, as we all know the macro environment continues to be uncertain. However, we are diligently managing what's in our control with our go to market strategy, productivity improvements and execution. This past quarter, we made a few more key hires in the service specialist team to add expertise and depth to selling our contact center offerings. And we continue to provide verticalized solutions to enable quicker time to value and faster deployment.

Speaker 2

This now includes financial services, airlines, CPG, technology and retail. Regarding our partner ecosystem, we're also in great with some of our recent successes, including the launch of our new unified partners program. We have integrated several new types of partners, including independent consultants, referral partners and Technological solution brokers and business process outsourcing partners. Partners as you all probably know Are especially critical in the contact center space and we remain committed to training and onboarding them as rapidly as we can. 2 of our largest CCaaS deals in Q2 were both sourced by partners.

Speaker 2

Furthermore, our Technology solution brokers model is showing great momentum, providing us with almost 50 Opportunities in the past 2 months in the contact center space. And finally, we continue to make progress with our self serve products. We've added dozens of new paying customers through this initiative in Q2. We believe that our investment And self-service products will help us expand access to Sprinklr products and enable companies of all sizes eventually to experience the power Even inside of large companies, a self-service product provides easy access to teams and practitioners We'll eventually end up recommending it to senior stakeholders within their organization. With respect to Sprinklr service, we've continued our momentum as a disruptor in the contact center as a service space.

Speaker 2

Our vision to help customers Is to help customers transform the contact center from a legacy voice focused cost center To a more efficient AI powered omnichannel revenue center by unifying it with marketing and sales. Sprinklr's AI first unified CCaaS provides its customers and prospects with 1, more Seamless consistent customer experience across channels 2, a lower agent attrition rate and 3, a lower total cost of ownership. During the Q2, we once again saw several meaningful CCAS deals close across all three of our primary theaters And the majority of our service deals won were with new logos. During the Q2, we continue to And expand with existing customers. This includes world class brands like Deutsche Telekom, LVMH, Novo Nordisk, Toyota and TransUnion.

Speaker 2

Here are some examples. In Q2, one of the largest technology companies Signed a multiyear $60,000,000 plus ELA agreement, expanding its partnership with Sprinklr across all 4 of our product suites as it drives tech consolidation across its company wide ecosystem. Sprinklr replaced 2 more competitors this time in the marketing and engagement space, onboarding hundreds of new users to the platform, enabling tighter collaboration between these teams and saving the company significant dollars by replacing point solutions. The company also added a 1000 new Sprinklr social seats and unlimited listening from Sprinklr Insight. This customer has served as Sprinklr's definition partner for our AI product and we look forward to a continued partnership with them.

Speaker 2

This past quarter, Deutsche Telekom expanded its partnership with Sprinklr further into the contact center. Europe's largest telco provider first partnered with us in 2022 when it implemented Sprinklr Marketing and Sprinklr's service to manage content marketing and social customer service in the German market. As a part of this latest expansion, Deutsche Telekom will move its entire European contact center operation across 11 countries onto Sprinklr's AI powered customer service platform. Until now, the company's contact centers have each been using its own set of legacy solutions. A transition to Sprinklr's cloud based solution will enable them to streamline operations and enhance efficiency While improving agent workflows and customers experiences, the flexible architecture of Sprinklr's CCaaS solution will enable Deutsche Telekom to integrate its contact center ecosystem across Europe and drive its consolidation and innovation strategy across the region.

Speaker 2

By the end of next year, the company will have more than 40,000 Customer service agents across 11 countries working from 1 unified platform. Another Sprinkler service win this past quarter is with the company of a different profile than our traditional Global 2,000 base. This North American delivery company facilitates same day delivery of groceries and household essentials via its app and website. The company will replace 6 point solutions with Sprinklr's unified platform and with help It's over 700 agents to drive a more frictionless experience with customers. Sprinklr service will power best in class customer service to company's members and shoppers across voice, Chat, email, SMS and social in more than 250 metropolitan areas Across the U.

Speaker 2

S, Sprinklr's platform will be integrated into the company's other backend systems including their Order management tool and will help to future proof their business by supporting new self-service features like chat and voice bots. Earlier this year, I told you about an exciting first of its kind win in the public center when Sprinklr was selected by the Civil Services and Government Development Bureau of Qatar as its technology partner to transform how the government provides services And engages with the public. Today, I have another exciting development in the public sector space. This time, the Emirate of Ajman, which is in the northern part of the United Arab Emirates. The Emirates leadership's futuristic vision Is to transform the experience of its citizens, residents and tourists.

Speaker 2

For this, the Digital Department of or DDA has been tasked with transforming the citizen and tourist experience across 17 Local government entities. DDA selected Sprinklr as its future unified citizen experience management platform, Offering government services seamlessly across social, digital and voice channels to more than 500 citizens and residents and more than 300,000 Tourists who visit the Emirates every year. Before wrapping up, I'd like to take a moment to celebrate our Incredible engineering team who make all of this possible. Their speed of innovation and dedication continues to differentiate Sprinklr in the marketplace. In closing, we are pretty pleased with our quarter's results and even more excited about what is to come.

Speaker 2

We are encouraged by the engagement and the momentum we see from customers and the broader ecosystem. And we believe that Industry leading AI and efficient execution will set us apart in helping customers unify their teams, Consolidate front office technology, increase productivity, lower cost and mitigate brand risk. We remain committed to our vision of becoming the most loved enterprise software company, innovating for our customers, Succeeding with our partners, delivering shareholder value and executing for growth and continued profitability. Thanks to our customers, partners and our employees for the hard work and results. And to all our investors, thank you for believing in the vision.

Speaker 2

I'll now hand over the call to Manish.

Speaker 3

Thank you, Raji, and good afternoon, everyone. As you heard from Raji, we're pleased with these quarter's solid results. For the Q2, total revenue was $178,500,000 Up 18% year over year and above the high end of our guidance range. This was driven by subscription revenue of 100 $3,500,000 which grew 23% year over year, also above the high end of our guidance range. Professional services revenue for the quarter came in at $15,000,000 above our guidance of 14,000,000 Our subscription revenue based net dollar expansion rate in the second quarter was 120%.

Speaker 3

As we have discussed in the past, the NDE statistic is not something we monitor as part of growing our business, but rather a byproduct. As macroeconomic conditions moderate renewal rates and customer upsells And as we focus more on new logo acquisition, we expect NDE to decline slightly in the coming quarters. In terms of new logos, we are very pleased with the number of new customers that joined the Sprinklr platform in Q2. This is particularly true with our Sprinklr service product suite as many of the deals in our service product suite over the last few quarters have been with new customers. Given our momentum in the CCaaS market and how early we are in targeting this opportunity, we're confident in our ability to add new logos at a healthy clip going forward.

Speaker 3

As of the end of the second quarter, we had 120 customers Contributing $1,000,000 or more in subscription revenue over the preceding 12 months, an increase of 5 customers sequentially And a 22% increase year over year. Turning to gross margins for the Q2. On a non GAAP basis, Our subscription gross margins came in at 83% as we continue to drive efficiencies on our cloud operations with total of 76%. Non GAAP gross margins for professional services was slightly negative coming in at minus 2%, But was positive 4% for the first half of the year and ahead of the breakeven estimate we shared last quarter. As we have discussed in the past, we continue to invest in CCaaS delivery capabilities and build out our expertise in that area.

Speaker 3

We also continue to generate efficiencies in sales and marketing and have shown consistent improvement in sales and marketing efficiency over the last several quarters. Non GAAP sales and marketing expense in the 2nd quarter now stands at 41% of revenues compared to 52% in Q2 of last year. Non GAAP R and D costs increased sequentially in the second As we onboard our annual cohort of new R and D engineers every summer from leading universities in India, But held steady at 11% of total revenue for the quarter. Turning to profitability for the quarter. Non GAAP Operating income was $21,300,000 resulting in non GAAP net income of $0.10 per basic share.

Speaker 3

This 12% non GAAP operating margin for the quarter was a result of revenue over performance, improved subscription gross margins, coupled with broad based expense discipline and is the 4th consecutive quarter of non GAAP profitability. Lastly, on the topic For the 2nd consecutive quarter, we posted positive GAAP net income totaling 10,500,000 or $0.04 per basic share. In terms of free cash flow, we generated $8,700,000 during the Q2 compared to Free cash flow generation of $1,400,000 in the same period last year. Recall on the On earnings call, we had alluded to a large annual payment to one of the public cloud vendors as the reason for expecting negative free cash flow in Q2. However, during the quarter, we were able to renegotiate a set of more favorable payment terms.

Speaker 3

With this result in Q2, Our free cash flow generation during the first half of this year now stands at $23,000,000 Higher than what we had generated during the entirety of last year. Our balance sheet remains healthy, now standing at $628,400,000 In cash and marketable securities with no debt outstanding. Calculated billings for the 2nd quarter were $179,200,000 An increase of 19% year over year. Q2 billings benefited from several $1,000,000 more of early renewals than we had anticipated. As of the end of Q2, total remaining performance obligations or RPO, which represents revenue from committed customer contracts That has not yet been recognized was $806,400,000 up 35% compared to the same period last year And CRPO was $510,400,000 up 22% year over year.

Speaker 3

The strength in RPO is Driven by multi year renewals at some of our largest customers that closed during the quarter as well as multi year sprinkler service deals. This is a testament to the commitment that some of the largest, most recognized brands around the world are making to Sprinklr. Moving now to our Q3 and full year FY 'twenty four non GAAP guidance and business outlook. As you heard today, Long term demand trends and engagement for Sprinklr remains strong. However, we recognize that the macroeconomic environment continues to be uncertain And our current assumption is that the broader macro trends from the last few quarters are likely to continue throughout FY 2024.

Speaker 3

For Q3 FY 'twenty four, we expect total revenues to be in the range of $179,000,000 to $181,000,000 Representing 14% growth year over year at the midpoint. Within this, we expect subscription to be in the range of $164,000,000 to $166,000,000 representing 18% growth year over year at the midpoint. We expect non GAAP operating income to be in the range of $15,000,000 to 17,000,000 And non GAAP net income per share of $0.06 to $0.07 per share, assuming 274,000,000 basic Shares outstanding. The slight decrease in non GAAP operating income sequentially can be attributed to the seasonal hiring in R and D, whose Full impact is felt in Q3 as well as our ongoing investments in Sprinklr service product delivery. For the full year FY 'twenty four, we are raising and tightening both our subscription and total revenue outlook for the year.

Speaker 3

We now expect subscription revenue to be in the range of 658,000,000 Representing 20% growth year over year at the midpoint. This is an increase of $8,000,000 at the midpoint, which is greater than the full magnitude of the Q2 beat and the subscription revenue guidance raised for Q3. As we discussed in prior earnings calls, we have been investing in making our products easier to implement and therefore Accelerating the time to value for customers. In addition, we have also been cultivating a partner ecosystem around delivering our product Such that we expect our service delivery partners to take on a larger proportion of the services revenue attached in delivering our products. These transitions have now picked up steam and are happening faster than what we had previously anticipated.

Speaker 3

As such, we now expect professional services revenue of approximately $30,000,000 for the second half of FY 'twenty four, Split evenly between Q3 and Q4, so approximately $15,000,000 per quarter. We also expect non GAAP gross margin for professional services to be approximately negative $2,500,000 in each of Q3 and Q4, driven by investments in Sprinklr service product delivery as we continue to scale that business. Given this, we expect total revenue to be in the range of $719,000,000 to $721,000,000 for the full year FY 'twenty four, representing 16% growth year over year at the midpoint. One way to internalize this guide is from the perspective of the 20% subscription revenue growth year over year, Which is being dragged down by the approximately 13% decline in professional services compared to the full year FY 'twenty 3. Similar to last quarter, we have included a bridge slide for our revenue guidance, which can be found on the investor presentation currently posted on our Investor Relations website.

Speaker 3

For the full year FY 'twenty four, we're raising and tightening our non GAAP operating income estimate To now be in the range of $65,000,000 to $67,000,000 equating to a non GAAP net income per share of $0.30 to $0.31 assuming 273,000,000 basic weighted average shares outstanding. This implies an approximately 9% non GAAP operating margin at the midpoint. Note the increase of $13,000,000 at the midpoint is Greater than the full beat for Q2 and the accompanying operating income raise for Q3. In deriving the net income per Share for modeling purposes, we estimate $24,000,000 in interest income for the full year with $6,000,000 of that to be earned here in Q3. Furthermore, a $6,000,000 total tax provision for the full year FY 'twenty four needs to be added to the non GAAP operating income range just provided.

Speaker 3

We estimate a tax provision of $2,500,000 here in Q3. And given the performance Through the first half of the year, we expect to be GAAP net income positive for every quarter as well as for the full year FY 'twenty four consistent with our comments on the past few earnings calls. As I alluded to earlier, we had several $1,000,000 worth So early renewals in Q2 than expected. This will impact Q3 billings, which is already our seasonally slowest billings quarter. As such, we estimate Q3 billings to be in the mid-one hundred and fifty million range.

Speaker 3

For the full year FY 'twenty four, however, We expect billings to grow approximately 18% year over year, which would equate to around $780,000,000 for the full year. And consistent with our prior commentary, we expect to be solidly free cash flow positive on a full year basis. Lastly, I would like to thank all our employees for their dedication and passion for what we are building in Sprinklr. I'm also grateful for the confidence that our customers have placed in us during these uncertain times. We remain focused on building a track record of Successful execution and operating discipline across the business.

Speaker 3

And with that, let's open it up for questions. Operator?

Operator

Thank you. Our first question comes from the line of Pinjalim Bora with JPMorgan. Please proceed with your question.

Speaker 4

Great. Thanks for taking the questions and congrats on a very strong quarter. Raji, it seems like you're starting to close some material CCaaS wins. I I want to ask you, if AI is becoming kind of a core decisioning factor for customers because you have been investing In AI for quite some time you have a very strong foundation, but is that becoming at this point the decisioning factor for customers, especially in the CCaaS market To Sprinklr versus others?

Speaker 2

Well, let me thank you, Quinta. There are 3 distinct reasons that we see when customers do a Pretty extensive process in PIK Sprinklr for their CCaaS solution. The first is the fact that we Give them a unified platform with 13 products in it that works seamlessly at the architecture level with each other As opposed to point solutions that they have to buy or acquisitions that other competitors offer, Not in a unified way. 2nd is the power of AI in everything we do. It's not just a smart on store as smart routing, pretty much every component in Sprinklr is built with AI And is brought together to create a better experience for the agent and a better experience For the customer.

Speaker 2

3rd is very simple on proof of concepts. Demonstrably, we're able to show Value for the business, we're able to bring the cost of technology down. We're able to improve the Average handling time, we're able to improve the time to resolve an issue and we're able to improve NPS scores. So it's like a triple win. Customers are happier, your agents are happier And your company is happier because it's making more money and saving more money.

Speaker 4

Yes, understood. One question for Manish. The strength in RPO is obviously palpable. You talked about some early or some renewals as well and some large deals. But is there I want to ask you if there's a meaningful expansion in the contract durations, which is kind of inflating the year over year growth rate.

Speaker 4

Any way to think about that?

Speaker 3

Yes. And I think we did call out the fact that, look, our growth in our view is because several large customers renew Multiyear basis. But those are the ones you'd remember from even a few years ago, we had them do multiyear billings. So that hasn't happened this time. We are sticking to annual billings.

Speaker 3

When I called out on the billing side that there were select customers that renewed early, That was only to make sure that as you think about your Q3 billings, you do take that into account. But I think macro, if you just step back, We're seeing strength in renewal activity as shown in the multi year RPO renewals, RPO numbers as well as our Sense around overall billings for the year.

Speaker 4

Got it. Thank you.

Operator

Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Speaker 5

Hey, this is Frank on for Raimo. Congrats on another strong quarter here. I just want to double click on the new customer addition trends that you mentioned. Have we really started to see the investments made into speeding up the time to value for new customers start to pay dividends? Or is CCaaS really the major driver here in the new customer strength?

Speaker 5

I

Speaker 2

would both. CCaaS is definitely is a growth driver for us. But we I've been investing consistently in making the technology more accessible and more approachable and easier to use for practitioners. So as you may recall, we've created an entire new UX design paradigm that we call Hyperspace, we've rolled it out across the entire platform. Number 2, we've introduced the concept of Persona apps.

Speaker 2

So you just only see the stuff that's relevant to you regardless of all the other powerful things the platform can do. And 3, You know that we've been systematically rolling out our offerings in a self-service mode so that a practitioner can go get a hands on keyboard and experience it And then come back and buy the enterprise product to continue using it. So I would say it's both. And I think It's pretty refreshing for the practitioner to get a next generation UI on their hands.

Speaker 5

Great. Thank you.

Operator

Our next question comes from the line of Arun Batya with William Blair. Please proceed with your question.

Speaker 6

Yes. Thank you. And congrats on the good quarter here guys. Maybe I want to pick up on that last point around self-service and ease of use. It seems like you are making quite a bit of progress there, Raju, to the Points that you just called out, but what is that enabling from a business perspective?

Speaker 6

Can you just talk about obviously, we see the new customer strength, but is it Allowing you to go after a different type of customer, allowing you to do more deals in a shorter period of time. Help us maybe And a little bit more of the business ramifications and benefits that you're seeing now that's self or ease of use has gotten and implementation has gotten better.

Speaker 2

Sorry, let me just understand the question clearly, Arjun. Are you asking what's supporting our growth or And if it's incremental benefits we're bringing to the

Speaker 6

customer? No, sorry, more about what's supporting your growth And how you're able to manage and run the business, drive growth differently now that Implementation is easier and time to value is quicker. What does that enable from a growth perspective incrementally?

Speaker 2

Sure. So there are two factors that are helping us. 1 is, obviously, strategy To add voice and get into the broader CCAP space, which as you know is a huge market, right, dollars 800,000,000,000 market, which Technology is not going to just replace technology. I think it's going to replace and scale the human labor. So I think for the first time a bigger chunk of that $800,000,000,000 which includes human labor is also applied.

Speaker 2

So that's obviously I think As we disrupt that market that puts us in a good place to grow. 2 is we've been very Consistent in articulating that we have a focus on our go to market side, just fixing the fundamentals and making it easier for our sales People in the field to understand us and sell the solution better. And that's going to take a few more quarters to completely roll out, but we're pretty pleased with The results that we're seeing so far.

Speaker 6

Okay. That's helpful. Perfect. And then, Manish, Can you touch on the go to market leverage that you saw this quarter because we saw a pretty significant improvement in sales and marketing spend? I think the dollars actually went down from Q1.

Speaker 6

Can you help us understand what's driving that and should we view that as sustainable or is there Are there some one time factors in there?

Speaker 3

So, Martin, you'd notice If you looked at a 4 quarter trend, it's sort of been headed in the right direction. There isn't anything unusual to call out in Q1. All the factors I think we've discussed in the past. We actually have been really aligning the sales team around The core focus areas, Raji has mentioned before about making it easier to sell. We're obviously engaging with partners In a different fashion as well.

Speaker 3

So I think all of this is as we try to look at incremental cost that we probably had in the plan, We've been more judicious about spending money than what we have been doing in the past. So nothing unusual to call out, but I think you should assume The savings you're seeing sequentially to sort of sustain.

Speaker 6

Okay, got it. Thank you, guys. Appreciate the color.

Operator

Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Please proceed with your

Speaker 3

question. Great.

Speaker 7

Thank you. This is Fiona on for Elizabeth Porter. Thank you for taking the question. I wanted to ask on the dynamics that you're seeing with large customers. We saw $1,000,000 Subscription revenue customers grew 22% year over year.

Speaker 7

And so my question is, what are you seeing at the enterprise end of the market in terms of willingness to take on strategic projects? How are conversations around expansion at this end going as we start to look ahead into enterprise budget planning season in the second half of this year? Thank you.

Speaker 2

Thanks for the question, Elizabeth. We as we've articulated before, we're seeing a very consistent theme and trend, especially in large Among our larger customers, of consolidating cross point solutions into platforms. And this theme of the marketing team or the customer service team not being able to run 10, 15, 20 RFPs and then go hire a system integration vendor and then create data lakes and it's just too archaic. And so there's a pronounced shift To having and wanting, let's say, 3 to 4 companies to work together to provide a more complete Front office capability set. And so I think we are enjoying the benefits of being that One of the options to consolidate on to.

Speaker 2

So when we go and replace anywhere from sometimes 5, sometimes 15 20 over the years, Different point solutions in different markets. So we're positioning ourselves at the 3rd or 4th vendor and benefiting from that consolidation.

Speaker 7

Thank you. And one follow-up to that. As you make this transition and start to benefit from these consolidation trends that you're talking about, Are you seeing any changes in the persona that you're selling to? So when I think about the traditional Sprinkler, the buyer of the carrier solutions, not The same as the CCaaS solution. And so I'm curious how that's changing the end conversations that you have with the ultimate buyer for who you're selling to?

Speaker 7

Thank you.

Speaker 2

Great question. So we have been steadily seeing that shift. Our traditional buyer was the CMO's organization and the CMO With our expansion into CCAP that's expanded to include the CIO, CTIO Organization. So we are more broadly penetrating the C suite, everybody from So as CMO to a CDO to now the CIO.

Speaker 7

Very helpful. Thank you.

Operator

Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please proceed with your question.

Speaker 8

The multi year $60,000,000 contract,

Speaker 9

could Could you maybe provide

Speaker 8

a bit more color on that? I guess, how many years, how much bigger of an annualized value is the new contract relative to the old one? And then more generally just on the expansion motion, are you seeing your customers expand more so with Additional seats from AB Social or is it more driven by new product expansion with maybe your CCaaS solution? Thank you.

Speaker 2

Thank you. So in this case, I can confirm that was there was a material upsell in it. So this is again, as you would guess, one of our larger Customers who, at the end of the term, again, had more to buy and wanted to buy more. So that's the answer to question number 1. Question number 2, are they buying more seeds and more products?

Speaker 2

They are buying both. So in this particular case, We continue to believe that we have a list price of $25,000,000 to $30,000,000 of A product payload that a large company can buy if you want to deploy us across business units and across markets. In this case, they've already Bought all 4 product suites and most of our products. So, somewhere in ELA mode. So like we pointed out this time, Listening is unlimited for the Insights product suite.

Speaker 2

And so what we're seeing is where the products are not Unlimited in the ELA, they're expanding more seats. We talked about 1,000 more seats in social, but it's not restricted to social. It's more seats, more consumption, an Expanded license and at some point we expect these to end in unlimited use for most of our products.

Speaker 8

Perfect. And maybe if I could just follow-up with one question. I guess, how frequently do you guys I guess, do customers do an ELA with you guys? Or is this Yes, one of the first ELA deployments you guys have done or do you see this trend kind of continuing as we go forward? Thank you.

Speaker 2

It's infrequent. That's something that we want to get to eventually. So this is a customer who's been with us for over 10 years. Brett, as you know, we our sales approach is traditionally and currently being bottoms up. So we like to get in with in a market for the product suite, one of our offerings and then build Credibility and go bottom up.

Speaker 2

So it's typically a multiyear journey and it builds momentum as bottom up success It's embraced by an executive who sees the overarching ability to unify and get better business outcomes.

Speaker 8

Perfect. Thank you, guys. Congrats on the quarter.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Bill Turez with KeyBanc. Please proceed with your question.

Speaker 10

Hey, good evening, Raji and Manish and everyone. Solid quarter. Want to ask some more questions about self-service. So first a couple. The self-service deals that you've done or where you've taken self-service, Is that primarily in land or expand?

Speaker 10

And what customers what have been the customer sizes 1st, relative to your typical customer sizes. And then I have 2 more details around that same question.

Speaker 2

Sure, sure. Michael, so self-service for us has been a strategy to make sure that we have our defenses lined up, right, To make sure that no one's attacking us from downstream in the long run. In the short run, our focus has been Trying to give the practitioner more exposure to the power of Sprinklr get hands on keyboard. And You know that we're very, very solidly focused our target ICP, ideal customer profile On our ICP and we've identified 43,000 companies as fitting that profile in our target market. So our strategy has been making these products available for everyone, you can go sign up, but directing our marketing and advertising and outreach Only to those 43,000 companies.

Speaker 2

And so we only follow-up and encourage when a customer is Our target profile. And one of 2 things happen as they come in. Usually, sometimes it's like a small team that wants to try it Forbid and they can do so. And many times, which we're seeing what we're hoping to see and what we're seeing is They try it and they realize that, okay, this is powerful and easy to use and they talk to our sales team and buy the enterprise version. We are beginning to see now again this is as most things strategic like this is going to take a several quarters, but every quarter we're seeing increasing green shoots Come from this approach.

Speaker 2

And we're very encouraged by how it's progressing.

Speaker 10

So just two follow ups on that, Raji and Manish. Is it possible to tell you if this is actually reducing your average customer acquisition costs And it was actually reducing the time to deployment for analogous types of build.

Speaker 2

Yes, it's too early. Now we've got a few trends kind of going back and forth here. One is as we get into CCaaS as you know Deal cycles take longer because it's a very thorough process. It's CCaaS transitions are very hard and They are very customer service teams are very risk averse. So it's a much more longer thought out deliberate RFP, RFI kind of process that takes time.

Speaker 2

So on the self-service side, we're able to kind of gain some of those momentum have a deal open and close within the quarter to offset it. But again, these customers are coming to us in the self-service trying it out tend to be at least on an average smaller In the first deal side.

Speaker 10

Okay, great. Got it. Thanks so much.

Speaker 2

Absolutely, Michael.

Operator

Our next question comes from the line of Michael Berg with Wells Fargo. Please proceed with your question.

Speaker 9

Hi, congrats on the quarter and thanks for taking my question. I just wanted to have more of a philosophical view on your guidance. You You obviously had a very strong quarter and being raised by more than the beat like you said and more than the Q3 rate. So maybe what's providing that confidence? Is there anything outside of the Strong renewal activity and large deals you saw in the quarter.

Speaker 9

Maybe just help us parse through what's giving you the confidence in the guidance? Thank you.

Speaker 3

Yes. Thank you for the question. So I don't think it's any more complex than what you articulate. At the end of the day, if you leave Line item aside, subscription business, it's all driven by the strength in the renewal business. When we do have multi year renewals, we call it out and that shows up in RPO like it did this time.

Speaker 3

And it's all driven by the linearity within the quarter. So we have been seeing stronger linearity for the last couple of quarters than what we had modeled, Which is part of the reason you're seeing strength in the beats in the quarter, and that's giving us more confidence as we look out over the next two quarters. And I think that's captured in the guide.

Speaker 9

Helpful. Thank you. Our

Operator

next question comes from the line of Tyler Radke with Citi. Please proceed with your question.

Speaker 9

Yes. Hi. Thanks for taking the question. Wanted to just hear how you're seeing things trend So far in Q3, it sounded like some really good execution in the quarter on the renewals and Yes, the large 8 figure transaction, but have things kind of been consistent in Q3 versus Q2? What are you just kind of expecting in terms of the large deal potential in the second half?

Speaker 9

Thank you.

Speaker 2

Well, I'll take the first part of it and maybe Manish can talk about the next quarter. Look, the macro environment is Just about as uncertain as it was and it has been. So we're not seeing any different behavior this quarter or last quarter We've talked before, budgets are tight. There's more CFO scrutiny and all the good things that come with people being Not very sure where the market is going, right, and interest rates are going to be. But I think what you're seeing is, like a consistent Trickling impact of our better execution and focus on go to market.

Speaker 3

Yes. And Just to make sure I understand, was your question, Tyler, are we seeing anything different in the month or so of Q3 that we've been in compared to Q2, was that what you were trying to ask?

Speaker 9

Yes. Sorry. So I guess I'll rephrase the question slightly to make it more specific and apologies for the background noise. But Really the question was just you saw some really good large deal activity in Q2. I know there's been a lot of Noise around RPO and current RPO because of the multiyear renewal cycle.

Speaker 9

So I'm just curious if there's any things to call out in terms of RPO volatility and just how your overall large deals you're expecting those to land in Q3, Just anything that would be noteworthy to call out as we're building our models? Thank you.

Speaker 3

Yes. Thank you for that There's nothing that I would call out at this stage. We as I look at the quantum of business that we are booking, it sort of Seems in line with what we would expect. It's like any enterprise software company, we are pretty back end loaded. So I wouldn't make any broad assumptions around how Q3 and Q4 would land, but there is nothing that we are seeing today that would give us any cause for concern.

Speaker 3

It's Sort of along the lines of what that we would expect. So steady is what I would say. Thank

Speaker 9

you.

Operator

Our next question comes from the line of Austin Choe with JMP Securities. Please proceed with your question.

Speaker 8

Great, thanks. Raji, so I'm wondering if And just kind of look back on this more recent AI wave we've seen over the last 6 months or so, and you say that generative AI has given your Proprietary AI Wings. Do you think that the kind of more recent excitement around AI has accelerated and boosted Sprinklr's AI efforts are or put more pressure on Sprinklr kind of competitively overall. And then over the long term, I mean, do you see some of this To what degree is this going to be table stakes and then how is Sprinklr thinking about being really differentiated over the long term? Thanks.

Speaker 2

Thank you, Austin. To answer your question, look, I think there's a lot of hype and excitement. And We've all seen this movie many times. Usually, the hype wave settles and then the real deal starts. Well, we're finding ourselves is having This blessed opportunity of being able to now talk about AI and have people appreciate it.

Speaker 2

And the awareness that Our customers and the buyers have buyer personas now have of the power of what AI can do. And that makes Articulation of our capabilities and our differentiator is much easier than it used to be. So net net, we're seeing Positive impact on deals with the excitement around AI. Our strategy has not I've been to introduce a new AI product or to have a new AI feature because for the last 5 years, we've bet the farm on the idea that We are the purveyors of unstructured conversational data and there is no way to read and understand and Speak back in over 100 languages to billions of people without using AI. So, we think it is table stakes.

Speaker 2

We think there are Different approaches to jumping on the AI wave. And one approach is to say, look, it's going to change everything. We're going to go into our DNA and make sure that it's AI powered and that's how we think. The other one is to say, there's an

Speaker 9

opportunity for some incremental

Speaker 2

dollars or a new product. We've taken the former, We've taken the former. We stand by it.

Speaker 3

Great. Thank you.

Operator

Our next question comes from the line of Matt VanVliet with BTIG. Please proceed with your question.

Speaker 11

Yes. Thanks for I guess as you look at the contact center opportunity and really broadening it to obviously all of service, how much Is that still being driven by high demand from the social media side and that's sort of the entryway in and the knowledge of Sprinklr and all that you can handle versus seeing sort of net new landing opportunities that are more of a pure play like for like replacement of an existing contact center out there?

Speaker 2

Matt, excellent question. I'm glad you asked it. We are doing more Of real contact center RFPs and proving ourselves to be complete unified replacement solutions for legacy players, More so in the last two quarters than we have ever done before. So we're kind of coming into our own as a disruptor With the ability to kind of show value out of the gate, that was not true, I'd say, maybe 2 quarters ago that was Kind of sort of beginning to play out a quarter ago and last quarter many of our deals which is independent, voice solutions doing an RFP comparing us to the Top 5 players in that space in choosing us. So increasingly so, they are seeing us as a pure CCaaS unified solution as opposed to somebody with social and who can expand to do other things.

Speaker 11

Very helpful. And then just quickly on some of the growing SI partnerships you Pat out there, as they look at this broader portfolio of products that they can go in and help Customers really make true digital transformations. Anything you're doing on your end to even, I guess, Place a greater emphasis on those partners really leaning into the entire sort of go to market there That you'd call out for us or maybe is on the horizon that could accelerate that business even more?

Speaker 2

We have been investing in our partnerships generally and specifically a lot more on the Yes, hi. So companies like Accenture, like Tech Mahindra, who are established players in the contact center space see this as an Opportunity to take the partnership to the next level. I got to admit though, it's very early for us, right? We're a disruptive. We're building a different kind of Different we're taking a different approach of unifying it.

Speaker 2

So there's a lot of innovation and a lot of sort of velocity in that change that's happening. So it is going to take us a few more quarters to really even get to documenting everything and enabling the It's very much underway, but I wouldn't count on any other results.

Speaker 11

Great. Thank you.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Speaker 2

Well, thank you, Doug, and thank you all for joining us today. Again, I'd like to thank our employees, our partners and most importantly, our customers for their trust And continued business. We look forward to updating you all again soon as we continue this exciting journey of creating a new category that we Unified Customer Experience Management and Building an Enterprise Software Company we hope our customers love. Thank you very much and have a good evening. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a

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Earnings Conference Call
Sprinklr Q2 2024
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