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01/09 22:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: positive engagement in Project Bear Hug and AI integration, but concerns about deceleration in revenue guidance and higher cloud costs affecting margins. Management's unclear responses on some issues add uncertainty. The market cap suggests moderate sensitivity to news, leading to a neutral stock price prediction.
Total Revenue $212 million, up 8% year-over-year. The increase is attributed to growth in subscription revenue and professional services.
Subscription Revenue $188.5 million, up 6% year-over-year. Growth driven by customer adoption of AI products and improved customer satisfaction.
Non-GAAP Operating Income $38.2 million, resulting in an 18% non-GAAP operating margin. This is a record figure for the company, attributed to cost optimization and operational efficiency.
Professional Services Revenue $23.6 million. Growth due to large CCaaS implementations for customers.
Net Dollar Expansion Rate 102%, flat sequentially. Reflects ongoing elevated customer churn and downsell activity.
Customers Generating $1 Million+ in Annual Subscription Revenue 149 customers, an increase of 3 customers sequentially. Growth attributed to Project Bear Hug and focus on high-end market customers.
Non-GAAP Gross Margin 69%. Subscription gross margin was 78%, while professional services gross margin was breakeven. Higher data and hosting costs impacted margins.
Free Cash Flow $31 million after adjusting for restructuring charges. Reflects strong cash generation despite investments in AI and infrastructure.
Remaining Performance Obligations (RPO) $923.8 million, up 4% year-over-year. Current RPO was $597.1 million, up 7% year-over-year. Growth driven by committed customer contracts.
AI functionality in Marketing, Insights, and CCaaS products: Sprinklr is accelerating the deployment of AI features in these areas to enhance customer experience and operational efficiency.
Enhanced video capabilities and additional channels: Sprinklr is adding these features to its Core suite to improve customer engagement.
Agent Copilot and AI agents: Sprinklr introduced intelligent assistants powered by AI to streamline customer service and improve efficiency.
Customer Feedback Management (CFM) product: Enhancements allow AI to analyze structured and unstructured customer feedback from various sources on a unified platform.
Focus on enterprise customers: Sprinklr is targeting scaled global enterprises to leverage its AI-native unified platform.
Project Bear Hug: Aimed at engaging top 700 customers, representing over 80% of total revenue, to reduce churn and strengthen relationships.
Phase 1 of transformation: Completed business optimization, cost structure optimization, and realignment of go-to-market coverage model.
Phase 2 of transformation: Transition phase focusing on implementing strategic changes and improving execution consistency.
Leadership changes: Hired Scott Millard as Chief Revenue Officer and Bit Rambusch as Head of Global Services and Support to strengthen leadership.
New pricing and packaging model: Introduced a hybrid model combining seat-based pricing and consumption-based commitments for new customers.
Targeted investments in AI and infrastructure: Investments in AI, R&D talent, and implementation services to support growth and customer needs.
Churn and Customer Retention: Churn remains a significant challenge, with elevated customer churn and downsell activity impacting subscription revenue and renewal rates. The company is addressing this through initiatives like Project Bear Hug, but the issue persists.
Operational Execution: Inconsistent operational execution and lingering technical debt from past years are pressuring renewal cycles and customer satisfaction. These issues have necessitated cleanup efforts for previously challenged accounts.
Sales Cycle and Enterprise Spending: Longer sales cycles and heightened scrutiny of enterprise spending are creating challenges in closing deals and maintaining predictable revenue streams.
Implementation and Deployment Challenges: Historical challenges in implementations and deployments have led to customer dissatisfaction and increased churn. The company is working to improve these areas but acknowledges ongoing difficulties.
Cloud Costs and Infrastructure Investments: Higher data and hosting costs due to new cloud environments and expanded AI capabilities are impacting gross margins. These investments are necessary but add financial pressure.
Leadership Transition: The departure of the CFO and the interim assumption of financial responsibilities by the CEO could create uncertainty and impact financial management during the transition period.
Professional Services Margin: Professional services gross margin is under pressure, with expectations of negative margins in the near term due to investments in delivery and implementation capabilities.
Q3 Revenue Guidance: Total revenue expected to be in the range of $209 million to $210 million, representing 4% growth year-over-year at the midpoint. Subscription revenue expected to be in the range of $186 million to $187 million, representing 3% growth year-over-year at the midpoint.
Q3 Professional Services Revenue: Expected to be $23 million, growing by 15% year-over-year. Professional services' gross margin expected to be approximately negative 3%.
Q3 Billings: Estimated total billings of approximately $150 million, traditionally the weakest quarter for billings.
Q3 Non-GAAP Operating Income: Expected to be in the range of $28.5 million to $29.5 million, resulting in a 14% non-GAAP operating margin at the midpoint.
Full Year FY '26 Subscription Revenue: Raised expectations to $746 million to $748 million, representing 4% growth year-over-year at the midpoint.
Full Year FY '26 Total Revenue: Expected to be in the range of $837 million to $839 million, representing 5% growth year-over-year at the midpoint.
Full Year FY '26 Professional Services Revenue: Increased expectations to $91 million, with $23 million expected for both Q3 and Q4.
Full Year FY '26 Non-GAAP Operating Income: Raised expectations to $131 million to $133 million, implying a 16% non-GAAP operating margin at the midpoint.
Full Year FY '26 Free Cash Flow: Estimated to remain at $125 million, with Q3 expected to be slightly negative and the balance generated in Q4.
AI and R&D Investments: Incremental investments in AI and R&D talent, particularly in targeted regions to be closer to customers, as well as enabling additional go-to-market and implementation capabilities.
Stock Buyback Program: During the second quarter, pursuant to the company's stock buyback program, Sprinklr purchased 16.5 million shares of its Class A common stock for a total cost of $140.4 million. By the end of the first week of August, the company completed the full $150 million buyback authorized by the Board. A total of 17.6 million shares will be returned to the company's authorized but unissued share reserve.
The earnings call shows steady financial growth, with revenue and subscription increases. Positive developments include improved renewal predictability, successful pricing initiatives, and strategic AI investments. Leadership stability and positive market feedback further support sentiment. While some concerns exist, like the lack of detailed guidance and margin pressures, the overall outlook remains positive due to optimistic guidance and strategic initiatives.
The earnings call presents a mixed picture: positive engagement in Project Bear Hug and AI integration, but concerns about deceleration in revenue guidance and higher cloud costs affecting margins. Management's unclear responses on some issues add uncertainty. The market cap suggests moderate sensitivity to news, leading to a neutral stock price prediction.
The earnings call presents a mixed picture: while there is positive growth in revenue and a strong buyback program, concerns like elevated churn, operational execution issues, and macroeconomic uncertainties temper enthusiasm. The stock buyback program and record free cash flow are positives, but the lack of clear guidance on resolving FX headwinds and improving customer retention are negatives. Given the company's market cap, the stock price is likely to remain stable, resulting in a neutral sentiment.
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