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spk12: implementing these changes during what has become a more challenging gap operating income guidance.
spk07: Manish will provide more details in his remarks. As you've seen, we're taking decisive actions to address these challenges and remain confident in our long-term vision and our ability to execute again. our new leadership, and success. Sprinklr is built on a single code base and this platform. Our current focus remains on our go-to-market execution and enhancing stakeholder alignment across both selling and delivering our platform's extensive capabilities. We're making changes internally to elevate our sales and field expertise to focus on the C-suite within our customer base and to better align accounts with skill sets internally. We're also investing in more scalable and repeatable onboarding expediences for our customers.
spk11: This will require both operational rigor and platform capabilities What we expect will result in faster time to value for our customers and better retention and growth opportunity. We have highlighted the experience leaders we've brought on board from successful companies. Scott Harvey, who has had service for many years, and Amitabh Misra. With today's press release, we are excited to announce that TRACFAM has been appointed as the co-CEO sprinkler in the time track has been with leveraging his operation for our next phase of growth Track-to-Track has been an invaluable partner, drawing on its extensive expediency. Thanks, Raji.
spk05: I am deeply excited to partner with Raji as co-CEO. and lead sprinklers through the next phase of growth. Initially, I stepped into the leadership team on an interim basis due to my board exposure and to provide support to the team.
spk11: As the company conducted,
spk05: We are working through some major operational changes with new leaders at the helm, and what I've now experienced first-hand motivated me to join the company in a permanent capacity. Raj and I are aligned on how our co-CEO structure can drive our success. Our partnership is built on a strong foundation of complimentary skill sets, trust, and mutual respect. And together, we are committed to delivering the best outcomes for our customers, partners, and employees, and investors.
spk11: I look forward to working with you all. Let me hand it back to Rob. with our products and customers.
spk07: Recently, we hosted a scan to elevate customer experiences and productivity. Here are a few of the highlights.
spk11: First is the sprinkler digital twin, which is an AI version of your brand, your teams, and employees, that have access to all the same systems and information as you do with God rails, so that tasks can be done with privacy and governance.
spk07: We believe that this is the next evolution of AI for unified CXM. and we're excited by the definition partnerships that are already underway. Next is Sprinklr Surveys, which formally enters us into the customer feedback management market with a comprehensive voice of the customer platform. Sprinklr customers will now be able to leverage generative AI-powered surveys and available in real time. Another innovation we launched is Sprinklr Voice Connect, our vertically integrated CPAP solution, which is a powerful contact center connectivity layer that integrates sprinkler service and caliphony to deliver high quality voice connections.
spk11: This allows us
spk07: mission-critical contact centers for the defective industry analyst reports Forrester named
spk11: Sprinkler a strong performer in conversation with AI for customer service.
spk07: Per the report, and I quote, brands interested in managing their customer self-service as a part of the broader approach to customer experience to spring up and comprehensive marketing platform that offers a variety of tools and features to organize, optimize marketing efforts. This, end quote.
spk11: This validates our commitment to providing AI-powered capabilities to help marketing teams achieve improved results and operate in a unified way.
spk07: During IHG hotels and resorts, Lululemon and Vodafone across all our product suites.
spk11: I'm also happy to announce that we have signed a new partnership agreement with Reddit.
spk07: With its broad reach, extensive user base, and unique approach to community and conversation, leverage Reddit as a business critical channel for their digital strategies. In closing, FY25 is an enhanced execution capabilities. Critical elements in the sustained success of a company our ability to drive value for all our customers and stockholders.
spk11: We have deep conviction in our belief that the market needs three or four unified and consolidated platforms.
spk07: or the front office, not countless point solutions. And the foundational role that AI will play in the long run. We are confident that our vision is very aligned with this opportunity. Thank you to our customers, partners, our employees for the hard work, and thank you all to our investors for believing in our vision. I'll now hand the call over to Manish.
spk11: Thank you, Rajeevi, and good afternoon, everyone. For the first quarter, total revenue was $196 million, up 13% year-over-year. This was driven by subscription revenue of $177.4 million
spk08: which grew 12% year-over-year. Services revenue for the first quarter came in at 18.6 million. As Raji noted, new business in Q1 was lower than expected, although we did see some good strength in our sprinkler service offering. However, the broader demand environment has softened with longer sales cycles and heightened budgetary scrutiny. In addition, we continue to experience higher churn in our core product suites, driven by reduced marketing spend, elimination of programs, and speed reductions.
spk11: As such, we now estimate this elevated level of churn to continue for the full year FY25.
spk08: Our subscription revenue-based net dollar expansion rate in the first quarter was 115%. As a reminder, we calculated NDE on a trailing 12-month subscription revenue basis, which makes it a lagging indicator. While we do not forecast NDE, we expect this number to come down over the next few quarters as the lower quantum of new business and heightened renewal pressure rolls through the revenue waterfall and works its way through the calculations. As of the end of the first quarter, we had 138 customers contributing $1 million or more in subscription revenue over the preceding 12 months, which is a 20% increase year-over-year.
spk11: was 82% and professional services gross margin was 2% equating to a total non-GAAP gross margin of 74%. Turning for the quarter, non-GAAP operating income was 20.4 million, or a 10% margin, which drove non-GAAP net income of $0.09 per diluted share.
spk08: Lastly, on the topic of profitability, we posted positive gap net income totaling $10.6 million or $0.04 per diluted share. In terms of free cash flow, we generated $36.2 million during the first quarter, which represents an 18% free cash flow margin compared to free cash flow of $14.3 million
spk11: in the same period last year. support functions to ensure our resources are best aligned with our priorities. As a result of this review, we structured our global workforce by approximately 3% in May.
spk08: Expenses related to this action were approximately $4 million and will be booked here in Q2 FY25. are included in the guidance figures for both Q2 and the full year FY25. For Q2, we expect total revenue to be in the range of 194 million to 195 million. representing 9% growth year-over-year at the midpoint. Within this, we expect subscription revenue to be in the range of $177.5 million to $178.5 million. Also, as we have signaled on prior earnings calls, we are continuing to invest in our CCAS delivery capabilities given the growth opportunities available to us in that market.
spk11: as such operating in the range of 16.5 million to 17.5 million. Non-GAAP net income per share of six cents to seven cents per share, assuming 277 million weighted average shares outstanding.
spk08: And as noted earlier, this non-GAAP operating income range is impacted by approximately $4 million in costs related to the workforce reduction taken here in Q2.
spk11: For the full year of 2025, we reaffirm our previous non-GAAP operating income to remain in the range of $104 million to $105 million equating to a non-GAAP net income
spk08: per diluted share of 40 cents to 41 cents, assuming 276 million weighted average shares outstanding. This implies a 13% non-operating margin at the midpoint. Recall the restructuring charge of approximately 4 million in Q2 is included in these numbers.
spk11: Considering the current operating environment, we have proactively taken steps to reduce our expense base and maintain our operating income, with $5 million of that to be earned here in Q2.
spk08: This estimated tax provision of $3.5 million here in Q2. we are tracking to be GAAP net income positive for the full year FY25, consistent with our comments on the Q4 earnings call. While billings grew 12% in Q1, we estimate billings for the full year FY25 to grow in line with the annual subscription revenue growth rate. And we expect that same growth rate for the first half second half of FY25. With respect to free cash flow, we now estimate to generate free cash flow of approximately $60 million for the full year.
spk11: Here we have everything we just discussed.
spk08: We are also withdrawing the employees for their dedication and passion for what we are building at Sprinklr.
spk03: And with that, let's... We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Raymond Lenschao with Barclays. Please proceed with your question.
spk01: I have two quick questions. One is, if you think about the macro situation, we've been in a tough macro environment for the best part of two years now. What you're seeing out there at the moment, does it feel like it's getting worse because it's getting longer, and so now people making kind of renewed kind of decision about something else that they didn't do before, or is this a little bit of sales execution? And then more on the financial side, for the second half, if I do that in implied guidance for the second half, the second half looks a lot
spk11: more than on the first half. Is there anything that we should be aware of that is driving that extra second and a half headwind for you guys?
spk01: Okay, thank you.
spk07: Yeah. So, hey, Ramo, how are you? I'll take the first part of it, and Manish will probably jump on the second. I have to say that we're seeing a more pronounced squeeze on budgets, more so than we've seen in the last two years. And anecdotally, My suspicion is that companies like ours had a little spillover COVID effect where we got some budgets as companies were trying to go digital in a very, very strong way. And then the last year, while the budgets were tight, the controls hadn't forced people to go bounce it back up all the way every time. What we're seeing and what I'm anecdotally hearing is that the budget cycles, when they got refreshed for this new year, came with the operational controls of, hey, you're not allowed to spend, everyone's got to find 20, 30% back so that we can invest in AI and other things. And budgets weren't growing as much as they did or shrinking in some cases.
spk12: And I think as the new year rolled in, these controls,
spk07: force the mind behavior to change, which was not very obvious even going into Q4. I wouldn't say a lot, but it was pronounced enough for us to feel it.
spk08: Yeah, and let me address your question around the guide. I think you're correct in assessing, if you look at the first half of this year, just looking at subscription revenue, sort of implies an 11% growth year-over-year. And the second half, by definition, has slower for the full year to be around 7%.
spk11: And I think this is driven by two factors. One is, as Rajeev alluded to earlier,
spk03: Thank you. Our next question comes from the line of Arjun Bhatia with William Blair. Please proceed with your question.
spk09: Perfect. Thank you. Can you guys maybe just touch a little bit on things on the go-to-market being more stable? Like what should we look for? to see that you've kind of adjusted things or maybe starting to get better instead of still getting worse.
spk07: Right. Let me take that, Arjun. Look, there are three things that are super clear to us. One is, as we said, the macro is our go-to-market motion We are not there and it's taking us longer. And I'm not gonna go through all of it. I'm sure we can follow up in the actions. But with the kind of people that we have around us and inside the company, what needed to do was fairly clear. And what we realized as we went late last year and looked at our own progress, needless to say, no one, including myself, was happy with the pace of progress. And what we decided to do was to upgrade and make significant upgrades to the leadership, you know, starting at the very top, right?
spk11: investors in the boat rich experience at synopsis to be in years in a very hands-on operational role followed by Scott, who is a service now, who's the chief commercial officer, a new head of Europe, again, similar pedigree, head of America, similar pedigree, but it's going to take time that these leaders step in
spk07: But I'm very encouraged by what we're doing.
spk11: And it's safe to say, look, I think we had embarked on a four to six quarter transition at least. And we'll probably expect a little bit more contraction.
spk09: some cases, just the split between the CCAS and the care opportunity versus your core social.
spk07: I'll acknowledge that we're seeing increased pressure on the core, which is everything outside of the CCAS, the way we see it. And what we're finding is this board price compression. We're not seeing like a crazy amount of logo churn.
spk11: We're not seeing top spend and looking to find money. And that I see as the primary driver.
spk07: And a lot of these, as Arjun, I'm making, you know, more calls than you would ever expect someone like me to be doing to these customers. And I can tell you firsthand, a lot of it is our own execution, which in a little perverse way gives us confidence that once our GTM motion is during, we'll see some of that reverse.
spk11: All right. Thank you, guys.
spk03: Thank you. Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Please proceed with your question. Hi.
spk11: Thanks so much for the question. In the prepared remarks, the lower seats were called out and just given the large concern with
spk03: AI is the impact to seat-based models. What are you picking up in your conversations that give us comfort that AI is not pressuring driving fewer seats or any sort of company expectations that fewer seats may be needed as AI expands? Thank you.
spk11: That's a great question, Elizabeth, and thank you. for that.
spk12: Look, we are believers that AI and the shift is to AI and more generative AI improving productivity.
spk07: Any pricing compression that we're gonna see on the seed side. We're very early in the transition And our strategy is to review our pricing and packaging to make sure that we can adapt to it gracefully. So we'll have some transitionary pressures, but I think we're pretty good in the medium and long term. In this quarter, or even last quarter, as we're looking at June, we're not seeing AI impact CD count
spk11: We're preparing our . However, what we're seeing is I would love to better understand the co-CEO structure.
spk03: Why is co-structure the right one for this time? Derek, any early thoughts on top priorities as the co-CEO?
spk12: I'll start and I'll let Jack pick it up.
spk11: Look, I think it was clear to me that we needed operational execution of focus at this I do. And so we had an open search for a president and COO, as we had disclosed before.
spk07: I convinced Jack to come and help on an interim basis. And working with him for four months, it was clear to me that this was our dream candidate. and we kept looking for people like track in our very good at all the things have not been good. And let me turn it over to him to add a little more color.
spk05: Certainly. Elizabeth, what we saw months with me here on an interim basis was just Rajesh and I actually work really well together, and we found a lot of leverage in terms of our complementary skills, as Rajesh mentioned.
spk11: And the partnership evolved very naturally.
spk05: We respected and appreciated the partnership and what we both brought to leading the company over the last five months. And to Raji's credit, the co-CEO appointment really reflects shortcomings and his commitment to making that change. And the structure is really a reflection of what is involved very naturally in terms of how well we work together. So from our perspective, we're I'm genuinely super excited about how we're going to proceed forward.
spk11: Thank you. Our next question is from the line of Matt VanVleet.
spk03: Please proceed with your questions.
spk11: Good afternoon.
spk00: Thanks for taking the questions. I guess I wanted to dig in a little bit on the contact center trends and the modern care solution, and you said you're still seeing solid traction there, so I'm curious on taking, are you still winning mostly the digital side and sort of bringing that expertise to existing contact centers, or how have you done in terms of actually ripping or replacing the voice component in existing CCAS deployments. Thanks.
spk07: All right, so let me start with the second one, Matt, and then I'll come back to the first. We are currently ripping and replacing pretty much the entire riprap of contact center point solutions. And so that's the value prop, the fact that you're replacing 5, 10, 15, 25. And if you have multiple contact centers and disparate stacks, different ones in each country, we're replacing that with one unified system that really works completely on single unified code base and architecture so that it completely knows every part works well together. And in the contact center, that's a big deal, right?
spk11: if your knowledge base is an independent provider, your learning system and your workforce management is an independent system that's not plugged in to routing, or if your knowledge base is an independent system that's not plugged in to agent assist with AI. It's just too much work.
spk07: And the work falls on modules that we're finishing up.
spk11: But we're seeing, we're seeing as a disruptor, we're going to impress the buyer with what the future can be.
spk07: comes from the power of unification and it comes from the power of AI. The power of unification shows brilliantly because we're not just approaching the context as it exists today.
spk11: We can launch our community. We do our chat. We advantage on traditional AI of understanding intent and routing and sentiment and emotions in lots and lots of languages, right, over 100.
spk12: And we have deployed it regionally for many, many years to fine-tune it
spk07: against the way people naturally speak on social media. And so those are very powerful advantages that we bring in.
spk11: So buyers look at that and go, man, I see the future, and this is where I want to go.
spk07: Because these contact-centered decisions are very long-term, and the difference is very apparent when you use traditional income versus a solution, although everyone's claiming AI now. We can prove it. We show it in POCs.
spk11: They test this out, and they buy it.
spk07: So we stack really well against traditional competition. For the buyer who's willing to to look forward, right? But we will acknowledge that in other traditional advantages, no one ever got fired for buying IBM. It still exists in contact centers, but we're very bullish that with the reception that we're getting now, as we finish building out the rest of the capabilities, we should be in a good place by the end of the year.
spk11: We're really optimistic about what this can do for our business.
spk00: Okay, very helpful. And then I guess when you look at the overall penetration or saturation rate on the social side, Do you feel like there are net new opportunities out there, or is it a matter of consolidating the spend that's sort of already in the system over the next couple years and bringing more of it onto the sprinkler platform to sort of get the social side of the business back on the growth side?
spk11: publishing and engagement.
spk07: And that has morphed because people were opening up social accounts everywhere and trying to get their own following and that slowed down. They've consolidated and the strategy has changed because reach has gone down. Second is social listening and social listening is expensive. because the data sources are demanding a premium to access the data. And social advertising, with the consolidation of ad spend mostly under the meta roof, is changed as well. So social media, the way we build the category and the first set of capabilities, we're not betting our house on it. And the plan is not to recover the money that they're spending with others.
spk11: The plan is to build against where the future of that is. So when you look at social media for everyone is
spk07: Social customer service is here to stay. Social marketing and advertising will change the way marketing and advertising is done. And with AI, it's going to get personalized. It's going to be everywhere. So listening with AI and ad surveys on top of it is going to take on the CFM. the way we see the likes of Medallia and Qualtrics do. And social engagement is going to evolve as we add voice and messaging and email to it.
spk11: you know, social engagement becomes engagement and will evolve to socialize the problem. Right, the numbers we were reporting. Admittedly, we aren't proud of it either. We are pretty optimistic about where it can take us.
spk07: Long answer, but I know this is a question that was on everybody's mind. All right, great.
spk00: Thank you.
spk07: Thank you, Matt.
spk03: Thank you. Our next question comes from the line of Jackson Adder with KeyBank. Please proceed with your question.
spk11: Hi, this is Matt from the line of Jackson Adder. question here. You know, and we also have to acknowledge that
spk07: Traditionally, it's very seasonal for SaaS companies with budgets and flushing through the system. And so I'd say right from the beginning of the year is probably when we saw the impact being more pronounced.
spk06: Okay, and then you talked about the incremental controls being set around deal renewals.
spk11: Could you clarify what the customer was spending those incremental dollars on?
spk07: Because I know you've had numerous... In the CXO's mind, which we are... But again, it'll go back to, or go to market. The C-suite is something, that's something that we're trying to address.
spk06: Thank you very much. Thank you.
spk03: Thank you. Our next question comes from the line of Brett Nulnblock with Cantor Fitzgerald. Please proceed with your question.
spk10: Hi, guys. Thanks for taking my question. On the comments that you guys are getting squeezed, I guess, you know, what can you do to prevent that? And once some of your bigger customers start exerting that influence, does that have a trickle-down effect to other customers asking for the same thing? And how do you get out of that cycle?
spk07: Brett, it is – We have a very extensive platform between products and solutions, 58 of them, four suites, right? And we are confident that we can add a lot of value to every one of our customers, the biggest companies in the world, as you know. So when we get squeezed, our strategy, when executed properly, is to say, hey, we understand that the ad budget went down, or you just buy it.
spk11: 70% of your marketing team. Let me show you how our AI capabilities can help sort of multi
spk07: foundation in multi-product selling motion that's very strategic and we're not there and that's the shift we need to make so the strategy when there's progression is to offer more and the product payload exists and it's proven and when execution fails to deliver on that strategy we see chance And when you have leadership and new leadership and people transition, it's always exacerbated in these kind of situations.
spk11: Perfect.
spk10: And then just looking at your customer base, I know you have a couple of very large customers with Fortune 500 companies. who are in the Fortune 500, have you seen any outsized impact among those customers relative to trends being more focused at the lower end of your customer base, or is it just more broadly across the entire customer base?
spk07: I'd say it's more broadly across the customer base. And what we have to enable and train our field team on is how to deal with that. I mean, a lot of what we're seeing is, hey, you've got to come down on price, and this is the budget.
spk11: Perfect. Got it. If we don't do it, we're going to do an RFP.
spk07: And I do think we have had execution issues of people that have not needed that help, cry for help. And then they do the RFP and say, hey, we're going to just not worry about those sophisticated things you can do because I'm going to go find the money.
spk10: Understood. Thank you so much.
spk11: Thank you.
spk03: Thank you. Our next question comes from the line of Pat Walravens with Citizens JMP. Please proceed with your question.
spk06: Oh, great. Thank you. Congratulations. And, Raji, for you, I'm going to ask you to put your shareholder hat on for a second.
spk11: because you own a lot of this business. So, I mean, clearly public investors are lowering their assessment of the value of software companies. But the strategic acquirers seem to feel differently, right?
spk12: So the big boy is we weren't paying attention.
spk07: So that, as we've talked about before, there's a general understanding that we can be in the third or fourth large front office platform for large enterprise companies. So that makes us a very interesting complementary platform partner for many companies. I also believe that the infrastructure, the cloud giants, if you will, are going to have to move into the app layer. And 14 years of building this as a truly unified platform app layer down will have tremendous value for them. And most of these companies have very mature, very built-out, go-to-market, do it, that may be missing. Having said that, we're a fully competent board, and we will do the right things at the right time, all acting in the interest of all stakeholders and our shareholders.
spk11: Great. Thank you for that. Thank you, Beth.
spk03: Thank you. Our next question comes from the line of Catherine Dreivink with Rosenblatt. Please proceed with your question.
spk02: Yes, thank you for taking my question and squeezing me in. So on a CCAS perspective, I mean, are you seeing any of the similar downsell of seats internationally with your customers? You know, what could you put a finer point on what macros you're seeing on the CCAS side?
spk11: And then also discuss what you're seeing between your international and your U.S. Go-to-market strategy and U.S. change from international. Thanks.
spk12: The first question was seat count on the CCAS side.
spk07: Actually, interestingly, it's working in our favor because we have companies contracting us primarily for our AI capabilities with the view of bringing down the seat count, bringing down the employee count. which is what our technology can do. So we have many products that are not priced based on C. So in CCAS, I think we are positioned pretty well.
spk11: So that's the answer there. U.S. versus international.
spk07: Look, I think our go-to-market, there's a lot of foundational things we are working on. There are some theaters that are working better than others. And so there are some theaters that require a little more of the go-to-market reboot, if you will. And so it's more people and theater dependent, not macro or country dependent. So I can confirm that are the demand environment and the opportunity we see continues to be global. You know, we might see more opportunities for CCaaS in Europe today and more for marketing in the U.S.
spk11: maybe, but as a platform, we're very, very well positioned. Yes, and then as far as your larger deployments, I mean, sometimes I've found over the course of covering CCF providers that these larger deployments, like for example, like telecom, takes a lot longer to run.
spk02: and close a deal and it really ties up the organization and has any of these larger deals you've closed put a strain on the organization such that maybe you weren't able to tackle some other newer opportunities.
spk07: My friend, it's almost like you've been peeking over our shoulders here. But yes, you actually described something that's very important for investors to know. Our success in the CCAS world has put implementation strain on the organization, which we are working through. The good news is we have been landing planes consistently in each one of these, and we're developing the implementation muscle and building out the partnerships. But at this point, one of the things holding us back and seeing on the context
spk03: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Aggie Thomas for closing remarks.
spk11: Thank you, Alicia. Thank you all for joining us today. I'd like to thank our employees, our partners, and most importantly,
spk12: We look forward to updating all the
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