- Total Revenue: $196 million, up 13% year over year.
- Subscription Revenue: $177.4 million, up 12% year over year.
- Services Revenue: $18.6 million.
- Non-GAAP Operating Income: $20.4 million, resulting in a 10% non-GAAP operating margin.
- Subscription Revenue-Based Net Dollar Expansion Rate: 115%.
- Customers Contributing $1 Million+ in Subscription Revenue: 138 customers, a 20% increase year over year.
- Non-GAAP Gross Margin: 74% (Subscription Gross Margin: 82%, Professional Services Gross Margin: 2%).
- Non-GAAP Net Income: $0.09 per diluted share.
- GAAP Net Income: $10.6 million, or $0.04 per diluted share.
- Free Cash Flow: $36.2 million, representing an 18% free cash flow margin.
- Cash and Equivalents: $610.1 million with no debt outstanding.
- Share Buyback: Repurchased 8.3 million shares for $101.2 million; Board authorized an additional $100 million buyback.
- Calculated Billings: $191.8 million, up 12% year over year.
- Total Remaining Performance Obligations (RPO): $922.5 million, up 30% year over year.
- Current RPO (cRPO): $570.4 million, up 19% year over year.
- Q2 Revenue Guidance: $194 million to $195 million.
- Q2 Subscription Revenue Guidance: $177.5 million to $178.5 million.
- Q2 Non-GAAP Operating Income Guidance: $16.5 million to $17.5 million.
- Q2 Non-GAAP Net Income per Share Guidance: $0.06 to $0.07 per share.
- FY25 Subscription Revenue Guidance: $714 million to $716 million.
- FY25 Total Revenue Guidance: $779 million to $781 million.
- FY25 Non-GAAP Operating Income Guidance: $104 million to $105 million.
- FY25 Non-GAAP Net Income per Share Guidance: $0.40 to $0.41 per share.
- FY25 Free Cash Flow Guidance: Approximately $60 million.
Release Date: June 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q1 total revenue grew 13% year over year to $196 million, with subscription revenue increasing by 12% to $177.4 million.
- Generated $20.4 million in non-GAAP operating income, resulting in a 10% non-GAAP operating margin for the quarter.
- Positive developments in product innovation, including the launch of Sprinklr digital twin, Sprinklr surveys, and Sprinklr voice connect.
- Strong performance in industry analyst reports, being named a strong performer in conversational AI for customer service by Forrester and a leader in the Magic Quadrant for content marketing platforms by Gartner.
- New partnerships and customer expansions, including agreements with Alibaba, Audi, Lululemon, Vodafone, and a significant partnership with Reddit.
Negative Points
- Lower net bookings and increased customer churn due to longer sales cycles and heightened budget scrutiny.
- Lowered revenue guidance for FY25 due to a challenging macro environment and operational changes.
- Higher churn in core product suites driven by reduced marketing spend, elimination of programs, and seat reductions.
- Restructured global workforce by approximately 3% in May, incurring $4 million in related expenses.
- Withdrawal of FY27 financial targets due to the current operating environment and performance challenges.
Q & A Highlights
Q: Given the tough macro environment for the past two years, are conditions worsening, and what is driving the second-half headwind?
A: (Ragy Thomas, CEO) We are seeing a more pronounced squeeze on budgets, more so than in the last two years. Companies are now forced to find 20%-30% savings to invest in AI and other areas. (Manish Sarin, CFO) The second-half guidance reflects weaker demand and increased renewal pressure, leading to a more conservative outlook.
Q: What progress has been made on the go-to-market changes, and what should we look for to see improvements?
A: (Ragy Thomas, CEO) We have made significant leadership upgrades, including hiring experienced leaders from companies like Synopsys and ServiceNow. We are about one quarter into a four- to six-quarter transition to mature our go-to-market motion.
Q: How is AI impacting seat-based models, and what are the expectations for seat reductions due to AI?
A: (Ragy Thomas, CEO) AI is expected to improve productivity significantly. We are not yet seeing AI impact seat counts, but we are preparing for it with pricing shifts and AI products. Current seat reductions are more due to layoffs and reduced marketing spend.
Q: Can you explain the rationale behind the Co-CEO structure and Trac Pham's priorities?
A: (Ragy Thomas, CEO) The Co-CEO structure brings operational execution focus at the top. Trac Pham's operational expertise complements my strengths in product and innovation. (Trac Pham, Co-CEO) Our partnership has evolved naturally, and we are committed to improving operational execution.
Q: How is Sprinklr performing against traditional CCaaS competitors, and are you winning full contact center footprints?
A: (Ragy Thomas, CEO) We are replacing entire contact center stacks with our unified system, which integrates AI and various functionalities. We are seen as a disruptor and are optimistic about our future in the CCaaS market.
Q: What is the outlook for social media management, and how is Sprinklr adapting to changes in the social space?
A: (Ragy Thomas, CEO) Social media management is evolving. We are focusing on areas like social customer service, social marketing, and AI-driven social listening. Our strategy is to build against the future of social media, not just recover existing spend.
Q: When did you start seeing conditions deteriorate, and what are customers spending on instead of Sprinklr?
A: (Ragy Thomas, CEO) We saw a pronounced dip at the beginning of the year. Customers are focusing on generative AI and platform consolidation, which requires us to position ourselves as a consolidated platform.
Q: How are you addressing the pressure from larger customers asking for price reductions?
A: (Ragy Thomas, CEO) Our strategy is to offer more value through our extensive platform capabilities. We need to improve our multi-function, multi-product selling motion to better address customer needs and reduce price compression.
Q: Are you seeing similar seat reductions in CCaaS internationally, and how does your go-to-market strategy differ between the US and international markets?
A: (Ragy Thomas, CEO) In CCaaS, we are positioned well as our AI capabilities help reduce seat counts. Our go-to-market strategy is more dependent on theater-specific dynamics rather than macro or country-specific factors.
Q: How do you view the potential for Sprinklr to be part of a larger company versus continuing independently?
A: (Ragy Thomas, CEO) We are focused on building a long-term company but acknowledge that our platform could be valuable to larger companies. We will act in the best interest of our stakeholders and shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
