Sprinklr, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Sprinkler's fourth quarter fiscal 2023 earnings conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's remarks, there will be a question and answer session. Please put your questions to one with one follow-up so we'll have time to go through all the questions. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mr. Eric Scrove, Vice President of Finance, for introductory remarks. Please go ahead, Eric.

Thank you, Kevin, and welcome everyone to Sprinkler's fourth quarter and fiscal year 2023 financial results call. Joining us today are Raji Thomas, Sprinkler's founder and CEO, and Manish Saran, chief financial officer. We issued our earnings release a short time ago, filed the related form 8K with the SEC, 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. You are directed to our press release and supplementary investor presentation for 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 first fiscal quarter of 2024 and full fiscal year 2024, and 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, also posted on our website. With that, let me turn it over to Raji.

Thank you, Eric, and hello, everyone. I hope everyone's doing well, and thank you for joining us today. We're going to share quite a few exciting updates today, so let's get right to it. I'm very pleased that Q4 was another strong quarter that exceeded guidance across all key metrics. Q4 total revenue grew 22% year-over-year to $165.3 million, and subscription revenue grew 26% year-over-year to $148.8 million. With our continued commitment to operational efficiency, we generated a record $14.3 million in non-GAAP operating income for the quarter due to strong revenue growth and greater operational discipline company-wide. While we expect the sales cycles to remain elevated in 24, FY24, we did have a record number of new bookings due to strong expansion deals and exciting new logo growth. Our growth retention was on par with leading enterprise software companies, and we saw continued strong momentum in our sprinkler service suite, formerly known as Modern Care. Sprinkler service represented over 40% of our new bookings for the quarter. Let's start with the go-to-market. On the go-to-market front, we believe that spending environment was largely unchanged in Q4 compared to previous quarters, but we are increasingly confident that the changes we are making and its impact on our business and our ability to execute. Our focus, as you know, has been on making it easier to sell sprinklers. Here are a few examples of the work that is underway. We added dedicated sprinkler service specialists. We created a dedicated team of new logo sales reps. We're leveraging partners now to act more as deal sourcers rather than just deal influencers. We are in the process of developing a verticalized solution-based selling approach as opposed to a product-based approach. And we are moving to a productivity-driven sales model as opposed to just pure capacity-based sales model. I also want to share the progress that we've seen from our expanded partnerships with Salesforce and Accenture that we talked about last quarter. We continue to win enterprise deals with customers transitioning out of social studio. One of those deals, for example, in Q4 led to a seven-figure multi-year contract with a leading global CPG company. Our deep expertise in social combined with the new AI innovations and integrations are just a few reasons why we believe that Sprinklr will continue to remain the leader in enterprise social media management. There are several exciting announcements on the platform side to start with. We renamed our product suite this quarter to simplify them and to align them with our longer-term strategy to mainstream each one of them. We believe this provides better clarity for our customers and reflects the market categories they belong to more accurately to drive awareness and brand recognition in the marketplace. Modern care is now Sprintless service aligned with the CCAS market. Social engagement and sales is now specifically Sprintless social Modern marketing and advertising is now Sprinklr marketing, and modern research is now Sprinklr insight. And finally, our live portfolio, as we roll out more self-service capabilities, will now just be referred to as self-service. Next, let's take a deeper dive into Sprinklr service and why we're seeing success as a radical disruptor in the CCaaS space. Sprinklr Service is a comprehensive AI-powered contact center as a service platform. We are transforming the contact center from an old voice-based cost center to an omni-channel revenue center by unifying marketing and sales for more efficient service and growth for the business. And with Sprinklr Insights, as you know, we have the unique ability to harness publicly available digital data in addition to traditional call transcripts to quickly identify top service issues and reduce overall ticket volume coming in. Our pace of innovation in this phase continues as highlighted in our recent announcement of over 100 features that we have added to our service offering, notably predictive intelligence, AI-based quality management, and outbound voice data. According to a recent Gartner report, $800 billion is going to be spent annually on contact center labor costs, technology and labor. We all know that AI is going to optimize this fairly dramatically. Now, it might surprise you to know that today Sprinklr supports on our platform 75,000 call center agencies with 30 new deployments happening with large brands around the world as we speak. In FY23, we had 11, 1 million or more deals in our service suite alone. And just a few weeks ago, we were named a challenger in the Gartner Magic Quadrant for Enterprise Conversational AI Platforms. Let's switch gears to social now. We are very excited to announce the self-service version of our industry-leading social media management solution called Sprinter Social. Social media teams can now access Sprinter Social on a self-service basis for publishing, engagement, and reporting. It's also integrated with OpenAI's generative AI models to create better content faster and with fewer resources. This out-of-the-box product is simpler, smarter, and better than any other competing social media management tool available in the market today. The self-service and enterprise versions of Sprinklr Social, like with Sprinklr Service before, are both on the same backend code base, which means that teams can start with the self-service version and seamlessly opt for the enterprise offering as their needs grow. Let's talk about AI, which I know is quite a popular topic these days. Five years ago, back in 2018, we issued a press release describing how Sprinklr was the only enterprise software provider in the front office that gives brands the capabilities to reach, engage, and listen to their customers across a growing number of digital channels. So it's not a new buzzword for us. our entire unified CXM platform, and every one of our four robust product suites was built from the ground up with our proprietary AI capabilities. I want to make it clear that in building Sprinklr, we took an operating system approach to our platform, which makes it very easy for us to integrate with any existing or new software product when and where it upgrades our own capabilities. This is one of the reasons we are so excited about our integration with open AI. There's a massive potential and a big market transition happening with generative AI, and we see the potential of how we can work together to truly revolutionize front office for our mutual customers. AI and machine learning will continue to be a cornerstone and a competitive advantage for Sprigman. And we will play our part to help mainstream AI across all customer-facing functions of large companies. We look forward to further integrating OpenAI across our entire platform and in all our product suites. Turn to some customer stories. During the fourth quarter, we continue to add new customers and expand with existing customers. This includes world-class brands like AT&T, Activision, IKEA, Mars, Prudential, and Telefonica. Here are some examples of how customers are currently using Sprinklr. Let's start with Sprinklr Service, our omni-channel customer service solution. Last year, we were chosen to support the large-scale CCaaS transformation of one of the largest banks in the world, HDFC. We've replaced more than 10 point solutions and onboarded over 10,000 agents, including inbound and outbound voice, text, social, and messaging. Our platform now supports more than 5 million interactions on text-based channels every month and more than 12 million voice calls. With a strong focus on AI and unification across channels, And Teams, we've also launched the bank's first voice bot and conversational chatbots. Our AI is able to resolve 70% of customer inquiries and has reduced the average case handling times across all channels by 15%. HDFC has reduced the first response time by more than 50%, 5-0. And Sprinklr is now integrated with eight of the bank's back-end systems across 100 customer journeys, making Sprinklr the single screen for most users and enabling them to provide a consistent and seamless experience to its 71 million customers. Last quarter, we shared a big win in the CCaaS space with one of the world's leading global streaming media companies. This quarter, I'm pleased to announce that they have expanded their partnership with Sprinklr Marketing, The company is consolidating 15 disparate solutions and its entire global marketing team of more than 700 users in 30 countries opt to sprinkler marketing. With a clear real-time view of paid, owned, and earned media performance, the company's marketing team can make faster, more collaborative, and data-driven creative and media investment decisions. Sprinkler's AI-powered insights will enable them to increase their reach, optimize their creative assets, and drive excitement in the market around their title releases. The next example is my favorite, and it demonstrates the true transformational power of a unified customer-facing front office platform. In the very first of its kind for any country that we know of, The Civil Services and Government Development Bureau of Qatar selected Sprinklr as its technology partner to transform how the government provides services to and engages with the public. Qatar national vision for 2020 is focused on building a competitive government with the ability to measure, monitor, and improve its public services. The government aims to meet the demands of Qatari citizens and residents for fast, personalized interactions with government agencies on any communication channel. With Sprinklr, Qatar will now eliminate several fragmented technology solutions and unify approximately 40 public service agencies onto one unified citizen experience management platform. This enables, obviously, this seamless delivery of omni-channel experiences to its citizens, residents, and visitors. I'd like to take a moment to celebrate our incredible engineering team who makes all of this possible. They continue to innovate at a breakneck pace that differentiates us in a big way in the market. In closing, I'd like for you to have three clear takeaways. Number one, we're going to be a disruptive player in CCaaS. That's a 30, 40-year-old industry. We are a digital native company who has created a modern omnichannel approach to integrating 30-plus digital channels that now includes voice. And we're challenging some of the well-known legacy players with an entirely different approach, omnichannel and AI-based for customer service. Number two. We will continue to innovate and win in social. It's where we started as a company, and that foundation has enabled us to build disruptive new opportunities like we are doing in CCaaS. And lastly, number three, we are well-positioned to begin mainstreaming our solutions and AI for customer-facing functions. We have a five-year head start and advantage in building proprietary AI that's integrated into all products across our entire platform, a platform that's built on a highly open, scalable, and flexible architecture. This is a great competitive advantage because it offers our customers a way to connect to any homegrown or in-house systems they build or any other industry solution in the marketplace. I want to thank our customers, partners, and most importantly today, our employees for their incredible hard work and results. I also want to thank all of you and our investors for believing in the vision. Let me hand the call over to Manish.

Thank you, Raji, and good afternoon, everyone. As you heard from Raji, FY23 was a stellar year for Sprinklr. which we capped off with a strong Q4 that once again exceeded expectations. In fact, during the fourth quarter, we achieved quarterly records in gross new bookings, total billings, total revenue, gross margin, and non-GAAP operating income. Many of the tailwinds that Raji mentioned, coupled with Sprinkler's leading artificial intelligence and product development capabilities, really excited me about the company when I joined a year ago. But we also uncovered several areas in need of structural improvements, and we have been executing on these initiatives for the last several quarters. During FY23, we pivoted towards a productively led model, eliminated projects that were not yielding an attractive ROI, and as Raji discussed, we made a deliberate effort to make it easier to sell Sprinklr. You saw the fruits of our efforts play out throughout the year as demonstrated by sequential growth in subscription revenue, the stability in absolute non-GAAP operating expenses, our ability to generate free cash flow, and our reported non-GAAP operating income in both Q3 and Q4. These results were driven by a conscious effort to be more efficient and develop a culture of good corporate hygiene and financial prudence. In line with this, we recently concluded an internal review across product areas, regions, and support functions to help us grow and scale the business and to ensure our resources are best aligned with Sprinklr's priorities moving forward. As a result of this review, we restructured our global workforce by approximately 4% back in February. Expenses related to this action were approximately $4 million, and will be booked here in Q1 FY24. These expenses are included in the guidance I will discuss in greater detail later in my prepared remarks. Turning now to our Q4 financial results. Total revenue was 165.3 million, up 22% year over year, and above the high end of our guidance range. This was driven by subscription revenue of 148.3 million, which grew 26% year over year, also above the high end of our guidance range. Our subscription revenue continues to accelerate in terms of both absolute dollars and growth rate. In the fourth quarter, the sequential increase in subscription revenue was $8.4 million, a meaningful uptick when compared to the increases in Q2 and Q3. Services revenue for the quarter came in at $17 million. As noted on the third quarter earnings call, This was driven by a focus on margins for our services business, as we have been thoughtful about not taking on lower margin services business. We will continue to actively manage our professional services margins, which will impact the absolute level of our professional services revenue going forward, something that I will cover in detail later in my prepared remarks. Our subscription revenue-based net dollar expansion rate in the fourth quarter was 124%. Our gross renewal rate in Q4 was again on par with leading enterprise software companies. We believe this high renewal rate, coupled with the expansions in our installed customer base, is a testament to how important Sprinklr is to our customers' daily workflows and how our customers view Sprinklr as a platform to standardize on. As of the end of the fourth quarter, we had 108 customers contributing $1 million or more in subscription revenue over the preceding 12 months, which is a 32% increase year over year. As a reminder, we calculate this customer count using $1 million in recognized revenue from these customers on a trailing 12-month basis as opposed to ARR. Regarding our total customer count, We ended the fiscal year with 1,428 customers, which is a 22% increase in new customers for the year. Turning to gross margins for the fourth quarter. On a non-GAAP basis, our subscription gross margin was a record 83%, as we continue to drive efficiencies in our cloud operations, leading to a total non-GAAP gross margin of 77%, another record for us here at Sprinklr. We have posted steady and consistent improvement in our non-GAAP subscription and total gross margin every quarter in FY23. We also reported continued steady improvement in our professional services non-GAAP gross margin in the fourth quarter, which came in at approximately 22%. We continue to generate efficiencies in sales and marketing, and have shown consistent improvement in S&M spend throughout the year. Sales and marketing expenses in the fourth quarter are now 45% of revenues compared to 56% this time last year. This is a 1,100 basis point decrease year over year. We also realized operating leverage from G&A, which decreased by 60 basis points year over year. Turning to profitability for the quarter, non-GAAP operating income was a record 14.3 million, equating to a non-GAAP net income of six cents per share. This 9% operating margin for the quarter was a result of revenue over performance, improved gross margins, coupled with operating expense discipline across every department. This quarter's non-GAAP operating margin compares very favorable favorably to the negative 8% operating margin in the fourth quarter of last year. To that end, in terms of free cash flow, we generated $16.3 million during the fourth quarter compared to a burn of $18 million in the same period last year. Calculated billings for the fourth quarter were $232.2 million, an increase of 25% year-over-year, and a billings record for Sprinklr. And just as a quick reminder, Our fourth quarter billings have historically been the largest for us, given the timing of our renewals. Turning to a quick summary of financial results for the full year FY23, a year in which we posted material improvements and strong growth across the board, including total revenue, gross margins, non-GAAP operating income, free cash flow, and our key performance indicators. Total revenue was $618.2 million, up 26% year over year, and subscription revenue was $548.6 million, up 28% versus the prior year. Calculated billings for the full year were $659.3 million, up 23% year over year. I'm happy to say that we posted non-GAAP operating income for the full year of $6 million, equating to a non-GAAP net income per share of $0.01 and a non-GAAP operating margin of 1%. Our non-GAAP operating income improved by $41.5 million over FY22, which coupled with the incremental $125.8 million in revenue demonstrates the inherent operating leverage in our business and computes to an incremental operating margin of approximately 33%. In terms of free cash flow, we generated $22.2 million in adjusted free cash flow for the year compared to a burn of $45.3 million in FY22. This is a $67 million improvement in free cash flow generation in just one year. This cash flow generation contributed to our very healthy balance sheet including $579 million in cash and investments and no debt. A quick side note on Silicon Valley Bank SVB, our exposure to SVB is immaterial and our cash balances are held at other large, well-capitalized financial institutions. We have a $50 million credit facility with SVB that we are currently in the process of terminating. As of the end of FY23, total remaining performance obligations, or RPO, which represents revenue from committed customer contracts that has not yet been recognized, was 719.5 million, up 26% compared to the same period last year, and CRPO was 485.2 million, up 23% year-over-year. We continue to believe that subscription revenue, subscription revenue growth, RPO and RPO growth represent the best metrics to evaluate the underlying health of the business. Our billings can fluctuate significantly relative to revenue based on the timing of invoicing, cadence of renewals, and the duration of customer contracts. Moving now to our Q1 and full-year FY24 guidance and business outlook. As you heard today, long-term demand trends and engagement for Sprinklr remain strong. We are encouraged by the leading indicators coming out of the fourth quarter and the momentum we have across our business, especially sprinkler service. We recognize that the macroeconomic environment continues to be uncertain and volatile, and our current assumption is that the broader macro trends from the last few quarters are likely to continue through FY24. For Q1 FY24, we expect total revenue to be in the range of $168 million, to 170 million, representing 17% growth year over year at the midpoint. Within this, we expect subscription revenue to be in the range of 153 million to 155 million, representing 21% growth year over year at the midpoint. We expect non-GAAP operating income to be in the range of 3 million to 5 million, and non-GAAP net income per share of breakeven to one cent per share, assuming 268 million weighted average shares outstanding. Recall, as part of the restructuring exercise concluded here in Q1, we spent approximately $4 million, which is included in the above numbers. Said differently, excluding this charge, non-GAAP operating income would have been in the range of $7 million to $9 million. For the full year FY24, we expect subscription revenue to be in the range of $644 million to $648 million, representing 18% growth year over year at the midpoint. We expect total revenue to be in the range of $710 million to $714 million, representing 15% growth year over year at the midpoint. For modeling purposes, assume the quarterly revenue numbers follow the same distribution as FY23. These guidance ranges imply a services revenue of 15 million for Q1 and 66 million for full year FY24. For modeling purposes, assume 30 million in services revenue for the first half and 36 million in the second half. we expect services revenue to decline marginally in both Q1 and fully at FY24 for all the reasons we have been discussing over the last few quarters. In addition, we expect the services mix to migrate more towards managed services, which carries a higher margin. As a result of this migration, we will be hiring more managed services consultants in the first half of FY24 which will depress services margins in the first half to break even before picking back up to approximately 15% for the second half of the year. For projecting billings for both Q1 and full year FY24, it would be prudent to assume that billings growth tracks revenue growth for the full year. This implies total billings for FY24 of 759 million. For modeling purposes, this total billings number should be spread across the arc of the four quarters, largely following the same trend as FY23. As I had stated earlier, we have been working on migrating customer billings to an annual billing cycle and have begun to see the early results of that effort, improving billings growth and narrowing the historical 5% gap between revenue growth and billings growth. For full year FY23, 24, we estimate non-GAAP operating income to be in the range of 41 million to 45 million, equating to a non-GAAP net income per share of 13 cents to 15 cents, assuming 273 million weighted average shares outstanding. This implies a 6% non-GAAP operating margin at the midpoint. in deriving the net income per share for modeling purposes and $11 million total tax provision for full year FY24 needs to be added to the non-GAAP operating income range just provided. We estimate a tax provision of 2.5 million here in Q1. We also expect to be solidly free cash flow positive on a full year basis and to generate positive net income for the full year on a GAAP basis which would be the first time ever. Lastly, I would like to thank all our employees for their dedication, delivering a record quarter for Sprinklr and for closing the year strong. During an uncertain macro environment and continued volatility in the financial markets, I'm also grateful for the confidence that our customers have placed in us. We remain focused on building a track record of successful execution and operating discipline across the business. And with that, let's open it up for questions. Operator.

Thank you, and I'll be giving up your question and answer session. As a reminder, please ask one question and one follow-up, then return to the queue. If you'd like to be placed into question queue, please press star one at this time. One moment, please, while we poll for questions. Our first question today is coming from Ramo Lenshaw from Barclays. Your line is now live.

Hi, this is Isaac on for Ramo. Thanks for taking the question. I wanted to talk a little bit about NRR and the moving pieces there. When thinking about the drivers of this, how should we think about seats versus more modules and functionality? And as we look to FY24, are there any considerations we should note between these two drivers? Thank you.

Hi there. This is Manish. Thank you for the question. What we have said before is two-thirds of our new business comes from existing accounts through upsells. And that can be a mix of whether it's more seats, more modules, more product suites, and it's a combination of all three. There isn't any discernible difference. And as we look at bolting on more ARR into the business, from our perspective, all those things add more revenue and more opportunity set into the account base. And I think those trends ought to continue, which is part of the reason you would notice total customer count increased only 22%. going from $11.66 last year to $14.28 at the end of FY23, but our accounts with more than a million dollars in revenue increased 32%. So I think that trend probably will continue through FY24. We're obviously making several initiatives, as Raji mentioned earlier, around increasing more logos into the business. But for right now, I think that would be a safe place to start.

Great. Thank you.

Thank you. Next question is coming from Brett Knobloch from Cancer Fish Challenge. Your line is now live.

Hi, guys. Thanks for taking my question on the quarter. It seems like you guys saw very good momentum on the new customer addition front in the year. I guess as we look at next year, should we expect maybe the contribution to maybe subscription revenue or billings or however you want to look at it from new customers added to be a bit greater than maybe what we saw this year? And maybe on a total new customer ad perspective, should we expect something similar this year? Do you expect that metric to kind of continue to increase given what you guys are doing on the self-service side? Thank you.

Yeah, Brett, this is Raji. Let me take a crack at it. We don't anticipate a big shift in the mix. As we outlined before, our strategy with self-service is to to just go after our target account list, which is about 43,000 companies, and just give them a way to get started to try our product before they have to contact sales and get a feed for what the platform does. So we don't, while we're going to have a little more renewed and dedicated focus, that's something we've been trying to do. So there's really not a big focus on customer logos as much as There's a focus on growth and ARR.

Perfect. Thank you. And then maybe just one clarification question on RPO or total RPO and current RPO growth. I guess the year-over-year growth numbers I have were total of 22.7 and current of 18.6. And I believe that's on a 409.2 for current and 586.4 for last year. which was in your press release last year. So I guess, am I using the wrong numbers there for the compare period?

Yeah, this is Manish. So I think you'll see this detailed in the 10K that's going to be filed on Monday. The numbers that we are using for RPO and CRPO now are slightly different from what was released in the prior year results. And as part of our SOX compliance this year as a first year public company, we've gone ahead and really looked at contracts all the way back to 2013. And we found that there were a handful of contracts from 2014 that had a term for convenience. The customers have obviously been with us since 2014, but accounting rules would prevent us from including that in the RPO. So we've had to make a small adjustment. So you should go with the numbers that are now placed in the press release versus the numbers in the prior earnings releases. Does that make sense? Yes, it does. Appreciate the color there.

Thanks, guys.

Thank you. Next question today is coming from Punjab Mambora from J.P. Morgan. Your line is now live.

Hey, thank you so much, and congrats on the quarter. Raji, obviously, AI is kind of the topic du jour, and you talked a little bit about it, and we all know that Sprinklr has been investing in AI for quite some time. But I wanted to ask you – How do you kind of think about, as you even double down on AI with OpenAI connections, how do you think about the productivity improvements that AI provides, which might end up resulting in reducing the opportunity in terms of number of seats versus any opportunity from Sprinklr to kind of drive price increases to monetize the value that customers get?

Yeah, Pratelam, great question. So we are big believers in AI, as you said. We are very thrilled with the new development and progress on the generative AI front. As you know, we have AI models in every part of the platform. So this picture of we're going to make your dollar work harder is the reason why we are growing. It doesn't change the story for us. So we make the ad dollars work harder and marketing resources get you farther. And on the contact center side, as you heard the story from HDFC, we make things significantly better. Now, as a disruptor in the marketplace, we do have pricing models for AI-based services that are not seat-dependent. And as you know, a part of the disruption also is that we bring self-services. You know, we have a product called Sprinkler Community that we deploy alongside your contact center and apply a lot of the learnings that we have in the contact center and make it available to consumers from the outside in a subset model. And that's an ongoing, real-time optimized way of just making sure that, you know, your customers are getting better experience. So on the whole, our approach to contact center has been, hey, best care is no care. The second best is you can solve it yourself. And third best is, you know, you call and get the issue resolved in the first call. And our pricing models and our approach as a platform has always been around that. And increasingly, you know, as you buy more and more, you end up with an ELA that would just kind of give you a lot more and not worry about seed-based or resource-based pricing. Okay.

Got it. Understood. And one follow-up. It seems like you're already seeing some success in the Salesforce ecosystem with the social studio side. Maybe help us understand or map out the opportunity there. How are some of those conversations been? And if you can provide any fidelity in terms of how your relationship with Salesforce is different from some of the partnerships of some of your competitors, that would be helpful.

Look, what's consistent about what we're seeing is that when it's a target customer that fits what looks like an ideal customer profile for us, we have been winning very, very consistently for a long time, and we still are. So I don't know where the noise is coming from, but for us, we encourage customers to move to the best solution for themselves. And our approach to the marketplace has been that. Hey, we provide a better solution, provide better service, and we want you to take advantage of what's best in the marketplace. Our partnership with Salesforce has been strong. They have been a great partner. And honestly, we're in a world of such open and transparent access to information that it's very hard for you know, what used to work 20 years ago in terms of marketing gimmicks to sway a customer. So we know we have a better product for our customer profiles that are suited for us, and we stand behind it, and we've been seeing consistent success. And there's a lot of noise in the down market, which, you know, frankly, that's not of interest to us.

Understood. I'll get back and pick you. Thank you.

Thank you. Next question is coming from Arjun Bhatia from William Blair. Your line is now live.

Perfect. Thank you, guys, and congrats on the quarter. I wanted to maybe start off on just the go-to-market changes. It seems like you're putting into place a lot of efforts to actually make that motion more efficient. Can you just give us a high-level view of how your reps are ramping and what you think some of these go-to-market changes can do from a productivity perspective in the organization?

Yeah. Arjun, so I can confirm that for the last, I'd say, about nine months, we identified four priorities for the company, and making it easier to sell was at the top of it. And it's a first principles-based approach. You look at customers who come in who year after year, quarter after quarter, buy more, and they are happy. You know, I talked to 310 customers last year. And, you know, I found them to be pretty happy and growing and satisfied. And so the premise was, you know, there's, we got to remove friction for the people who are out there trying to find a new customer and make it easier for them to expedience Sprinklr. So these signatures are deep go-to-market changes. And we've been open that about the fact that, you know, that's not an area that we focused on in our earlier part of our life stage. We've been focused on the platform, we focused on success, retention, and I think the times come for us to focus on go-to-market. And those changes that we're doing aren't revolutionary, you know, productivity-based models and growth and deciding what markets to enter and get out of based on productivity, verticalizing our solutions and going to market with the solution approach. They're all very consistent, and these are plays that large-perspective enterprise software giants have done forever. So we consider this to be a long game. We think it's appropriate time for us with the scale that we have now to focus on go-to-market and get some of those best practices in the field. These changes, I would say, to your expectations, take time. And our own internal plan is to get this Most of it executed this year, and hopefully starting next year, we'll begin to see some impact from our streamlined operations.

Got it. That's helpful, Raji. And actually, another one for you, back to the generative AI topic. It seems like, I think from what I picked up in your prepared remarks, you've integrated generative AI capabilities into social networks. maybe care, but can you just broadly speak on the roadmap in terms of adding generative AI capabilities to the rest of the product suite? Where is that in terms of a priority for you, and what should we expect from a timeline perspective on that integration?

Absolutely, Arjun. So we have signed a contract with OpenAI, and we have started rolling out a bunch of changes, as you rightly pointed out, with social and self-service first. We are committed to rolling it out across all product suites and everywhere it can possibly help. Now, remember that, you know, in some cases, predictability and brand consistency is super important for our customers, you know, the kind of companies we deal with. So it's very important that we train these models on bound data sets. and make the responses very predictable. You know, it's cute if you're doing an online search and something comes back that's not true and funny. It will be a cute story, but, you know, that's not what you expect from, you know, the top banks or a travel company or any brand that's been, you know, sometimes decades and, you know, scores of years building their brand. So we're going to go all in, but we're going to take a very thoughtful, cautious approach to where to use it and how to use it, but very bullish on generative AI and what it can do to expand our own AI.

Perfect. Sounds very exciting. Looking forward to it. Thanks, guys. Thank you.

Thank you. Next question is coming from Michael Terz from KeyBank. Your line is now live.

Hey, Rajeev Mesh. Congrats on Strong performance all around, both top line and bottom line. First question, I think, is around the services chain. So maybe whether it's Manisha or Raji, can you talk a little bit more about exactly where those low-margin services are that you can cut and maybe move to partners? And whether or not, you know, and how you can, you know, it seems like where you're going is towards an even more sophisticated, integrated type of an omni-channel offering. How can you do that with less services? Some of them suggest that you need more.

Yeah, Michael, great question, and thank you for asking it. Now, the approach we took in building the platform was to make it extremely powerful and extremely configurable, right? So we spent 10 years doing that. And so pretty much everything in Sprinklr can be configured. Now, that added a lot of complexity in our early years. In the last three years, We significantly redid. We created our own UI models and paradigms and frameworks and simplified everything. And we made some pretty significant architectural and technology changes and created persona-based apps that allow each person to come and just see what they need to see. The last big one was verticalizing it, verticalizing the platform configuration. As a result... we're able to load up configurations that get people a long way there as opposed to doing discoveries and doing it one by one. And this is something that we've been doing steadily. So I'd say standardizing on the solutions, vertical markets, having our pre-built configuration kits, right? Sprinkler for financial services, Sprinkler for CPG companies with standardized use cases and productizing more implementation is something that significantly helped us simplify. And it's been a big part of our make it easier to sell and get value from that I think we've made the most progress on.

Yeah, and if I could add one other piece to it. So when we talk about lower margin, you've heard us talk about we're building an ecosystem of service delivery partners around our products. And I think our hope here is as we enable the likes of Accenture to do more service delivery, we can rededicate our employee base to a higher margin business as I was referring to as managed services. And as we sell more CCAS, what we are finding is these sophisticated customers are looking for a white glove service that we can provide to our own managed services consultants. So this is more around reconfiguring our own existing service delivery teams and actually enabling the service delivery partners to do a lot of the other implementation work that historically we've been focused on.

Got it. And then in terms of the outlook, so you got it, you know, it's early in the year, good to be conservative, but you got it essentially back to mid-teens growth again, and yet you had 20s plus RPO growth, you're Net expansion rate, granted, it's trailing 12 months, so at 124, maybe it goes down further from here. And you said that you had record bookings. So what's the difference between what looks like 20% plus in many categories versus the 15% guide?

Yeah, and so thank you, as always, for parsing through the numbers. If you look at the subscription guide, you would see that that is almost 10 million higher than consensus. Part of the reason that might be hidden is because of the services number that is down in our guide year over year. So the overall revenue number seems like it's not moving up very much, but I would subject that as a subscription company, investors are to focus more on our subscription revenue And our B tier in Q4 is translating to a higher subscription number, both in Q1 and for the full year FY24.

Okay. Thank you very much.

Thank you. Next question is coming from Matt VanVleet from BTIG. Your line is now live.

Yeah, good afternoon. Thanks for taking the question. I guess looking at the sprinkler service offering, you're talking a lot about modernizing the contact center and recently added voice, but curious in terms of what mix some of those deals are coming in of actually including voice from there, or are you being brought in first to bring in the digital services, create a more omni-channel environment, and then go back and either try to win the voice or kind of deal with that later on?

Matt, thank you for the question. It used to be that we would be brought in for, you know, messaging, social, digital, and then expanded the voice. But increasingly, the people are looking at the platform and including us in a competitive RFP process. They're comfortable just starting with Sprinklr for everything. So that's, again, remember this is with the new kid on the block with CCAS, and we're very angry about what we're seeing.

Okay, helpful. And then with the shift to more of a productivity model on the sales side, How should we think about headcount growth from quota-carrying reps or maybe even the whole go-to-market organization for fiscal 24, understanding that you just did a little bit of a reduction and you're looking to drive productivity, but how should we think about total headcount growth in that group looking ahead?

Yes, I think from our perspective, we anticipate to drive a lot of incremental revenue from existing headcounts. So at a very high level, you should probably assume sales headcount growth would be lower than overall revenue growth, which would make sense because as we get to our longer-term model, which I know we probably will detail in great detail as we talk about our analyst day, you'll see us show a steady improvement in our spend across the board. And sales and marketing obviously would be a big piece of it.

And as we mentioned last quarter, you know, we're We're committed to efficient growth, and the rule of 40 is something that is a goal for us.

Very helpful. Thank you.

Thank you. Next question is coming from Parker Lane from Steeple. Your line is now live.

Hi, this is Matthew Kickert for Parker. Thanks for taking my questions. You mentioned Accenture briefly, and I wanted to double-click on that a little bit. What impact has that partnership with Accenture had on any new business generation so far, and what excites you most about that opportunity?

That's been a longstanding partnership, Matthew. So Accenture has been a great partner for us, and it's pretty steady. The shift that we are trying to bring about with Accenture and our other partners is they've been great deal influencers. And what I'm excited is to really begin to transform the partners that we have and the partners we are now adding to the roster and transform them into deal sources, especially in the contact center space. That's a big deal. So we're bullish on all the partnership. I think the market is beginning to take shape. You see this concept of bringing marketing and care and sales and advertising all together. That's It's just very new. I mean, we've done it with CRM companies, but that was mostly through acquisition and mostly focused on data and backend. Bringing together the marketing employee and the contact center agent and the person running ads and all of that is just very new, you know, at the edge of the brand, as we call it. So I think the partner ecosystem will continue to evolve, and we're very excited about how it can do it.

Okay, got it. And then secondly, touching on the macro quickly, you have a great guide, but is there any one particular business that you've seen maybe some deal scrutiny or elongation of sales cycles?

Look, not getting worse, not getting better is the way I would characterize it. What we saw in third quarter is what we saw in fourth quarter, and that's how we're generally feeling. Many of the macro... situations haven't improved or deteriorated substantially. So it's kind of more of the same.

Okay, terrific. Thank you very much.

Thank you. Thank you. Next question is coming from Elizabeth Porter from Morgan Stanley. Your line is now live.

Great. Thank you. I wanted to double-click on some of the changes to making it easier to sell Sprinklr. And a lot of the ones that you highlighted were more around the outbound sales motion. But I was hoping to get some color on the changes that you've seen to the inbound demand as a result of having light and self-service. And should we expect the change of outbound and inbound, the mix of those two to change over time? And is there a longer-term implication to margin just from growing the inbound channel? Thank you.

Elizabeth, long-term, yes. in the short term, that's not baked into any of our guidance. We're not, you know, these changes take time and we're kind of doing everything inside out for better or worse. So the marketing team has been very productive and very busy. And our self-service products, again, like we said, is not really an attempt, not yet, an attempt to expand our target pool, right? So this is just again, designed around eliminating friction. So I wouldn't model anything in, you know, the next one, two, three quarters. And then once we have more visibility, we'll articulate how we think that's going to impact margins.

Great. And then just as a follow-up on the macro, you know, it's great to hear that there's some stabilization from Q3 into Q4. Is it a similar trend that you're seeing, you know, thus far into Q1 now that it's largely behind us? And does having – I just wanted to kind of give you a perspective, but do customers having, you know, a better visibility on 2023 budgets, is that an opportunity to help shorten some of the sales cycles, which really started to elongate at the end of 2022? Thanks.

Yeah, Elizabeth, I would say, like, Q1 always kind of – back and loaded, right? As you can imagine, people coming back from holidays. As a company, we do our sales kickoff and a lot of internal planning, budgeting, gets finalized, territories assigned, and all of that. So I'd say I don't have enough data to give you any meaningful color, but we're not seeing any indications of things changing that much from Q4. Got it.

Thank you.

Thank you. Thank you. Next question is coming from Tyler Radke from City of Atlanta. Is that live?

Yes, thank you. Hi, Raji. I wanted to ask you about just contact center. You talked about some interesting milestones on the seat count and the recognition in some of the Gartner Magic Quadrants, which is great to see. Wondering if you could just kind of contextualize that a bit more specifically you know, just in terms of how big of a mix of that in your business it is today and what you're seeing in the pipeline and, you know, is that an area, um, that you're really leaning into in terms of hiring, you know, specialists, uh, just given that that's a bit of a different market than, you know, where, where traditionally sprinklers focus. Thank you.

Yeah. So I can confirm that, um, It is a big focus for the company. In fact, internally, we said this is the year of our contact center business. I can confirm that this is something that was very intentional, and we have been doing steadily for the last several quarters. I'd say for the last probably even 18 months. So we have been hiring people from traditional contact center companies. We have We're building out and have built out a team of dedicated specialists. So it's very important to have that domain knowledge and vocabulary in addition to the technology. So we have staffed everything from the product organization to the sales organization and support organization, people who have been doing it in some cases for like 20, 25 years, who are also equally elated to see a very modern approach to this whole space.

And how big is it?

The percentage of revenue? We did talk about that being 40% of our bookings for last quarter. I can confirm that it's a material part and increasingly becoming more and more material. I think Manish is planning to break out. We'll probably start talking about the product suite in our analyst day. But it is a big part and a pretty high growth part of our business.

Great. And just to follow up on, you know, as you think about just the opportunity in the, you know, I guess generative AI, you talked about the contact center product in terms of integrations there. Could you just help us understand like how much of the success you're seeing in contact centers? Are you leading with that product more, or is this kind of a traditional replacement of CCaaS, and then you're layering in generative AI on top of that? Thank you.

So I want to make a difference between generative AI and AI. So the reason we have been disrupting the market is primarily threefold. One is the traditional contact center vendors are voice-first companies. The bulk of them, their R&D and their legacy is in that voice endpoint management, which now is sadly being commoditized. Origin founding story is truly omni-channel. So ability to hot switch between channels while you're on a case resolution, right? That's just a very powerful thing. So truly omni-channel, number one. Number two is actually AI everywhere. Now, this is the sudden rise of ChatGPT. Every part of Sprinklr, especially the contact center product, is AI-based from routing to skill assessment to, you know, smart assist where we're suggesting responses there's a lot of AI, and that's how we can clearly demonstrate, you know, called resolution, time reduction, push response, and all of that. So AI has been a big differentiator. Now, we're going to obviously add ChatGPT and open AI products and make it even better, but the reason people score is very high is because AI is not an afterthought and you don't have to go buy another AI vendor to do AI inside the contact center. It's all part of this integrated suite. And lastly, it's our ability to bring service alongside and marketing and sales alongside service, right? That HDFC, the beauty of the model is the outbound tele sales teams is on the same platform as in inbound voice response team. So you could be a customer calling in with a problem with your credit card And seamlessly now somebody can just come in and talk to you about a different card. You know, it's not no longer a secondary peripheral thought for a contact center agent, but it's something that they can work together seamlessly on to grow revenue.

Great. Thank you.

Thank you. Our next question is coming from Michael Turn from Wells Fargo. Your line is now live.

Hi, you got Michael Berg on for Michael Turn. Congrats on the quarter. I just had a quick one on the consolidation theme. It's something we hear about a lot in this macro environment as CFOs and decision makers look to consolidate their spend on certain vendors. Would you, anything to point to in your customer conversations or just general activity if you're seeing an increasing amount of consolidation and subsequently seeing meaningful benefit to Sprinklr adoption. Thank you.

Massively. In fact, that's been a part of our strategy and that is why Sprinklr is growing in existing customer implementations and installs. An average customer, an average good implementation for Sprinklr typically consolidate somewhere between five and some cases 30, 40 different point solutions in every product suite. And what people don't realize is in the kind of stuff we do, we're literally rolling out 50, 70, sometimes 100 market implementation. In every market, you've got a point solution that sometimes nobody else knew about. So this consolidation theme is becoming a huge deal and it makes so much sense, right? a marketer, a CMO, a CIO, it should not be in the systems integration business. It should be in the run the business business. And that's where it comes in handy. And we are evidently becoming the third or fourth platform. So you know the other obvious ones that you can think of in the front office. And we're becoming the de facto third or fourth. And we're heavily investing in integrations with the other three and expanding and making it super easy to even integrate with code that they may have written themselves.

Great. Thank you. That's it for me.

Thank you. We return to our question and answer session. I'd like to turn the floor back over to management for any further or closing comments.

Well, thank you, Kevin, and thank you all for joining us today. I'd like to thank first our employees and then our partners and and most importantly, our customers for their trust and continued business. We look forward to updating you all again as we continue on this exciting journey of creating a new category that we call Unified Customer Experience Management. Thank you very much, and have a good evening.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.