Sprinklr, Inc.

Greetings and welcome to Sprinkler's third quarter fiscal year 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Skro, SVP Finance. Thank you, Eric. You may begin.

Thank you, Alicia, and welcome, everyone, to Sprinkler's third quarter fiscal year 2024 results financial call. Joining us today are Raji Thomas, Sprinkler's founder and CEO, and Manish Sareen, 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 supplementary investor presentations. 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 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 some 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 fourth fiscal quarter and full fiscal year 2024 and our initial framework for fiscal year 2025, 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. Thank you for joining us today. We're pleased that Q3 was another strong quarter that exceeded guidance across all key metrics. Q3 total revenue grew 18% year-over-year to $186.3 million, and subscription revenue grew 22% year-over-year to $170.5 million. With our continued focus on operational efficiency, we generated $27.4 million in non-GAAP operating income, which resulted in a record 15% non-GAAP operating margin for the quarter. We are going through what I believe is the most exciting time in recent history for the modern front office. Many AI experts agree that AI is going to boost human productivity significantly over the next few years. For many industries, customer facing functions are the most labor intensive. And we believe that 20 to 40% productivity improvements are a real possibility in the next five years. We also believe that the data to train the AI models and the unification of siloed teams, technology, and processes are required to unlock the power of predictive and generative AI. I'd like to share more details on these three key areas, given the benefits customers are experiencing in terms of their operating costs, risk management, and improved customer experiences. Let's start with everyone's favorite topic, AI. We continue to believe that we are at the forefront of a very long-term, durable growth opportunity, given our deep investments in AI more than five years ago. Today, I'm sure no one is debating the fact that we have an early mover AI advantage, given our decision to design Sprinklr on a single architectural code base, where AI has been infused across all product suites. Sprinkler Service, Sprinkler Social, Sprinkler Marketing, Sprinkler Insights, our self-service offerings, and our entire platform. During the third quarter, customers executed over 170 AI deployments in Sprinkler Service alone. These include auto speech recognition, advanced intent detection, and speech-to-text models, along with agent-assist features like smart responses and other generative AI enablement. I met with more than 70 customers around the world this quarter, and while everyone is universally excited about the possibilities of AI, the customers I spoke with wanted more than AI in theory. They wanted practical, actionable, real-world AI that works safely and reliably and produces measurable business results now. This is what Sprinklr is doing for them. For example, one of our leading telecom customers using Sprinklr's conversational AI bots and AI routing achieved over 90% improvement in their response time. and more than 60% reduction in average case handling time after enabling our chatbot. One of our luxury goods customers has seen a 25% improvement in their CSAT score, along with a 50% reduction in their average handling time using Sprinklr's conversational analytics product. As you know, we've taken a very open approach to AI. This is why you've seen us announce our integrations with Google Cloud's Vertex AI and OpenAI, in addition to our proprietary Sprinklr AI+. We offer customers the greatest choice in how to utilize generative AI with accuracy, privacy, and security in just a few clicks. We maintain that Sprinklr is the fastest and the most effective ways for many enterprise customers and prospects to get actionable and practical AI across a global brand's front office today. The breadth of the Sprinklr platform enables us to bring practical, actionable AI-powered insights to a brand's front office. This can only be achieved with AI that is pre-trained with bound, real-world data. and is secure for use in enterprises given their compliance and risk profile. We've been working for over five years across a dozen industries to pre-train AI for brand insights, product insights, location insights, crisis insights, and competitive insights. Given the enormous amount of data that Sprinklr has access to, outside of the traditional CRM and CDP data, and our industry-leading AI, we can generate and provide actionable insights out of the box right after implementation. Let's talk about unification. Since our inception in 2009, we've been talking about unifying the front office. If you aren't able to make AI and insights actionable in customer-facing functions, you really aren't moving the needle. How do you take a negative customer review or a comment and automatically convert it into a customer service ticket if your product feedback isn't unified with customer service? How do you take a competitive or a content insight and translate that to a marketing campaign that works if your inside product isn't unified or integrated with your marketing stacks? This makes unifying the front office one of the most critically important and strategic things any brand can do today to improve customer experiences. Those who don't unify have numerous point solutions, which creates inconsistencies in interpretation and reporting. And trying to infuse these point solutions independently with siloed AI models that aren't coming off the same training data makes it even worse. The result is just AI point solution chaos. To create better experiences for the customer and to improve everything from marketing and sales and service and compliance and growth opportunities, brands of the future must unify their digital edge where their customers meet a customer-facing employee and have their different customer-facing teams, markets, and geographies work together. As many of you know, we've been on a multi-year journey to transition each one of our product suites into a large mainstream replacement market. Over the past few quarters, you have heard us talk about how we are taking our service product suite and successfully transitioning it from a social-slash-digital solution to a complete CCAP solution by adding voice as a channel. That's telephone lines. The second is our insights product suite, where we have started transitioning that from a social-digital listening product to a full-blown customer feedback management, or a voice of the customer suite, as some call it. by adding surveys. The power of unifying unstructured, unsolicited feedback with structured and solicited feedback is endless. It makes the feedback real-time, actionable, and one that can be validated. This quarter, we started definition partnership for our customer feedback management suite with a select few brands. and have been demonstrating our early success to industry analysts. We're pleased to announce that Sprinklr was recently named by IDC's research director, Lou Reinman, in the major players category in the 2023 IDC MarketScape assessment for worldwide voice of the customer applications. IDC noted, and I quote, Sprinklr, has grown its capabilities to have a fully featured voc platform for listening analyzing and acting on customer feedback sprinkler aims to bridge functional silos sales marketing support etc to seamlessly manage whole customer journey experiences we're very pleased with the momentum and the progress we've made in our service suite Our vision is to help customers transform the contact center from a reactive voice-first cost center to a more efficient AI-powered proactive omni-channel revenue center by unifying it with marketing and sales. We are excited to share the launch of conversational AI plus in the sprinkler service suite. We can now empower our enterprise customers to deploy and scale generative AI-powered bots for human-like text and voice conversations in as little as three easy steps. This is a leading and innovative way for customers to train a bot in their brand's voice, automate and deflect call volume, and provide a natural conversational experience to their customers. We also announced a partnership with Infinite.cx in Germany to help customers in the DAC region facilitate a seamless migration to cloud-based unified customer service in the contact center. Together with Infinite.cx, we will help the most innovative companies in the region harness AI to its full extent and be able to act on insights and unify the front-off functions. During the third quarter, we continue to add new customers and expand with existing customers. This includes world-class brands like Alaska Airlines, AstraZeneca, Ford, Mercedes-Benz, and Shine. Here are some examples. In Q3, one of the world's top five cosmetics companies expanded its long-standing partnership with Sprinklr to now include conversational commerce. With over 65 brands working on over 20 channels, the company has integrated Sprinklr's conversational AI and conversational commerce to enhance customer interactions, support care agents, and transform conversations into sales and long-term value. Sprinklr is helping the company to achieve its goal of generating more than 50% of its revenue through digital sales by 2025. In Q3, a top three North American home improvements retailer selected Sprinklr's AI-first CCAP solution to provide customers with a unified, seamless customer experience across channels. The retailer will consolidate all digital channels onto the Sprinklr platform to provide a more consistent customer experience while simplifying the lives of its customer service agents. Sprinklr's AI-powered agent assist capabilities will enable the company to reduce the number of open applications and screens at the agent level and provide the proactive support needed to resolve customer needs faster. Integrations with the company's knowledge base and order management systems ensure that agents have all the data and information at their fingertips compared to their previous set of solutions. Another example of unification and transformation powered by AI comes from a top three global food and beverage company, a Sprinklr customer for over 10 years. Last year, the company began to globally transition their social teams to Sprinklr's service suite to empower a closer, more meaningful brand experience for all its customers. To understand and build brand love further, in Q1 this year, they made They decision to move all their social insights, just the listening part, more than 1.5 billion brand mentions over to Sprinklr. This includes social listening, benchmarking, and product insights. This past quarter, they doubled their competitive insight scope and now monitor over 2,000 digital accounts. As a partner in our AI plus beta program this year, the company has also harnessed the power of Sprinklr's generative AI reply assistance. By unifying these solutions onto a single powerful platform, the company now has access to deep actionable insights and gen AI capabilities that enable it to provide personalized experiences to each of their many brands that they sell around the world. Before wrapping up, I'd like to take a moment to celebrate our incredible product and engineering teams, as always, who make this possible. Their speed of innovation and dedication to serving customers continues to differentiate Sprinklr in the marketplace. In closing, we had two primary goals this year. The first was to build and establish a foundation to scale in the exciting CCaaS market. And second was to meaningfully improve the operational efficiency and margins of our business. There's no question that we've been very successful in achieving both of these goals. And we're on track to deliver a solid year with 18% revenue growth, record profitability, and strong free cash flow generation. We believe that the product suites we've built, the customers we serve, and the size of the market opportunity ahead of us put us in a great position to become a multi-billion dollar revenue company in the years ahead. Since our IPO in the June of 2021, we've continued to expand our product portfolio and market focus from social to digital and transitioning to unified CXM. The investments we've been making over the last 18 months are enabling us to mainstream our product suites into large obvious replacement markets, starting with establishing ourselves as a disruptor in CCAS. As we've diversified the business and focused on scaling our CCAS business, we'd like to acknowledge that we have made slower progress on some of our other go-to-market initiatives focused on our core product suites. We expect this will have a near-term impact on growth, which Manish will review in more detail in his remarks as he shares an initial framework for FY25. We maintain our conviction for the long-term vision of what we are building. And like so many companies that have successfully built billion-dollar businesses, we are navigating through the normal course of resource allocation and investment cycles required to balance short-term success metrics with long-term growth objectives. We're committed to innovating and developing a new category of software that we call Unified Customer Experience Management and executing for growth and profitability to deliver for our customers and our shareholders. Thank you to our customers, partners, and our employees for the hard work and results. And thank you to our investors for believing in our long-term vision. Let me now hand over the call to Manish.