Sprinklr, Inc.

Greetings and welcome to the Sprinkler fourth 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, Vice President of Finance. Thank you. You may begin.

Thank you, Camilla, and welcome everyone to Sprinkler's fourth quarter and full year fiscal 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 the supplementary investor presentation. 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 first fiscal quarter and full fiscal year of 2025. Actual results might differ materially. 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 Q4 was another strong quarter that exceeded guidance across all key metrics. Q4 total revenue grew 17% year-over-year to $194.2 million, and subscription revenue grew 19% year-over-year to $177 million. We generated a record $32.4 million in non-GAAP operating income which resulted in a 17% non-GAAP operating margin for the quarter. The end of a fiscal year is often a good time to reflect on how far we have come and where we are going. The opportunity we saw when we founded Sprinklr is coming to fruition in an accelerated fashion because of generative AI. After investing 14 years, of unifying the backend of customer-facing functions with our AI-powered platform, we're beginning to see customers bring our vision of unifying to life with generative AI and conversational AI. Generative AI has accelerated conversations happening at the brand's digital edge, where the customer buys, gives feedback, and engages for support and service. Anyone can use GenAI to build a chatbot. But unless the engine or the foundation behind it is unified to sell, to serve, and to gain actionable insights, siloed chatbots can't manifest significant value for a brand. In today's hyper-connected world, customers must experience a unified approach across all touchpoints with a brand. As you know, we're on a journey to create a new category of enterprise software that we call Unified Customer Experience Management. And we believe that will revolutionize the front office. And after continuous building and iteration across our core portfolio, CCaaS and AI, we have even more conviction today for our long-term vision and success and our platform strategy than we have ever had before. As many of you know, we've been committed to this vision for quite some time now. But to make this vision a reality, we must deliver consistent and repeatable results. As we shared in our prepared remarks on our Q3 call in December, we anticipated that the decline in our FY25 revenue growth rate will be driven by a combination of execution that needed to be improved, particularly on the go-to-market front as we over-rotated to CCAS, and a difficult macro and economic condition that drove elevated churn. We believe we now have the clarity on how to best position this company for our next phase of growth, and I've made several substantive changes across the organization. This includes investment in our leadership team and enhancements to our operational rigor. Let's begin with the investments in our executive leadership. We've recently brought on expedient leaders from high-growth companies that are known for their execution. They have expertise in helping companies scale revenue and profitability significantly beyond our current levels. As we have shared, TRACFAM, a member of our board of directors since June of 2023 has been appointed as the interim COO, where he's focused on organizational structure, getting our teams to better collaborate cross-functionally and bringing operational rigor to Sprinklr. Scott Harvey was promoted to the role of chief customer officer, a role that did not exist, where he leads a unified global customer facing organization, including all sales and delivery and service teams to accelerate go-to-market efficiencies and better serve customers. Scott has been actively onboarding several new leaders across the Americas, Europe, and APJI, as well as our partner team. And today, we are very, very pleased to announce that Amitabh Mishra has been appointed as our new Chief Technology Officer, effective April 1st. Amitabh joins us from Adobe, where he led a global R&D organization that was responsible for their Expedience cloud platform. Prior to that, he was the founder and CEO of gopro.com and the CTO Chief Architect and Head of Engineering at snapdeal.com. He has invaluable industry expedience, extensive expedience in scaling businesses, and a deep understanding of AI. We are excited to have him on board soon. We will continue working towards recruiting top-tier talent with proven track records of success and operational excellence as we build out a bench strength to help us drive this company and growth forward. In terms of a go-to-market strategy, progress is underway. We have established a more structured cross-functional and disciplined approach for fiscal year 2025 under this new leadership. We're now focused on emphasizing a more balanced strategy to pursue growth opportunities in both our core as well as service suite. There is work in process with renewals, customer engagement, and solution selling pretty much across the board. The results of this work will take some time to manifest through the P&L, but we feel very good that we have a clear plan and we've brought in the right people with the right experience and we are heads down focused on executing. As of January 31st, 2024, we had 1,735 customers, which is up 21% compared to the previous year. While we are pleased with this growth, it's important to note that we're only at a 4% penetration of our target market of 43,000 named companies, as we shared during our investor day last July. This indicates significant untapped potential for Sprinklr. Turning our focus to our technology platform, we're known for our blazing pace of innovation, and this year was no different. Our product and engineering teams' unwavering commitment to customers sets Sprinklr apart in the marketplace. In FY24 alone, we released over 2,000 features and platform enhancements to further advance our vision, a vision we believe that has the potential to dramatically transform a brand's front office with AI. Here are a few highlights from Q4. For Sprinklr Social, we launched auto image and video optimization that reduces publishing failure and optimizes usability. For Sprinklr Insights, we have extensively deployed AI to reduce time to insights. For example, something that would normally take an average of more than four hours to read and understand in a graph and chart and data form, now is just simplified with a click of a button to generate insights in human readable form. In marketing and advertising, we have deepened our integrations with leading platforms such as Meta, Snap, and Reddit to enable advertisers to diversify media coverage and access these platforms' latest capabilities. And lastly, with Sprinklr service, we've expanded our channel offerings for Microsoft Teams and Slack and deployed AI in our conversational analytics module to do root cause analysis for top call drivers faster. These enhancements within our architecture, especially our GenAI solutions, are helping customers improve productivity in their front office across the board dramatically in some cases. A large electronics retailer that recently implemented our contact center solution reported a whopping 45% increase in customer service productivity because of our conversational self-service AI capability. During the fourth quarter, we continue to add new customers and expand with existing customers. This includes world-class brands like BT, British Telecom, where we were selected to be the strategic customer service technology partner. We also added and expanded with brands like AT&T, Canada Goose, Kia, Sephora, and UBS across all our product suites. Major global enterprises are seeking tangible evidence of AI's efficacy and its potential to drive measurable productivity gains. There's plenty of hype around AI and plenty of conversations around the theory and infrastructure, and it's time now to make it real in customer-facing functions. We like to share a few use cases where our customers are making it real by leveraging our platform. Our recent partnership with a major European telco company underscores a commitment to delivering next-generation CCAS solutions. This telecommunications leader aims to be the number one telco in their market and wants to replace more than 10 existing point solutions in the contact center with our comprehensive unified service suite that's enhanced by our AI. This includes over 30 plus integrations with their existing customer service support systems. The timing of this collaboration is pretty strategic. as it aligns with a new cloud strategy to optimize the CCaaS environment. This customer is now running Sprinklr to support 2,500 agents in eight countries across social, digital, and voice channels. This is all geared to improve efficiency, cost effectiveness, and overall customer experience for this telco leader. Next, we have a leading pharmaceutical company that recently had their weight loss drug approved for sale in the market. They are anticipating an obvious increase in customer interactions and needed a partner to scale their front office technology with AI. Discussions on updating the display technology quickly expanded to comprehensive migration to our social suite. where we displaced an incumbent legacy solution. They also invested in understanding millions of public data mentions across social, competitive, and digital conversations without adding additional people or resources. Our innovative approach, commitment to collaboration, and expertise in navigating complex legal requirements required for regulated industries to mitigate brand risk where key factors in the decision. By choosing Sprinklr, they gain a trusted partner committed to improving their customer experiences and generating ROI, better ROI for their business. Our third example is about one of the world's leading healthcare companies that embarked on a transformative journey with Sprinklr many years ago. Their continued expansion in leveraging a unified CXM platform now includes all our product suites. They have more than 450 users and consume more than 2 billion mentions to get competitive and product insights and to measure the effectiveness of their brand. This most recent expansion last quarter was to execute against their new marketing strategy that included better content orchestration and strategic collaboration. Sprinklr is now a strategic partner for this company across three of their key businesses. Through a definition partnership agreement, we're also collaborating with them to significantly enhance our marketing suite. We're introducing critical capabilities like budget and resource management in our marketing suite. I also want to remind all of you that we'll be hosting our first flagship customer event as a public company on May 7th through 9th. CX Unifiers, the edge of AI, will be in New Orleans, and we will have some of the world's most forward-thinking brands like Amazon, like L'Oreal, like Cartier, like Google, like Microsoft and Deutsche Telekom. talking about how AI is transforming their front office. We look forward to sharing these customer stories and their tangible results along with practical, usable advice with you. In closing, we delivered a strong year marked by an 18% growth in revenue, record profitability, and strong free cash flow. As we look to the future, we're strengthening our foundation this year with top-tier leadership, by fostering innovation, and by enhancing our execution capabilities. Critical elements that would fuel our sustained success and drive value for our customers and shareholders. Our confidence is grounded in the conviction that we have for our long-term vision. It's also grounded in the AI-powered, unified CXM platform we've developed, the global customers we serve, and with the substantial market opportunity that lies ahead of us. Thank you to our customers, partners, our employees for the hard work and their results. And thank you to all of you, our investors, for believing in our vision. Let me now hand over the call.