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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 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.
Total Revenue $219.1 million, up 9% year-over-year. The increase is attributed to the company's transformation efforts and operational improvements.
Subscription Revenue $190.3 million, up 5% year-over-year. Growth driven by progress on previously challenged accounts and increased consumption.
Non-GAAP Operating Income $33.5 million, resulting in a 15% non-GAAP operating margin for the quarter. This reflects operational discipline and cost management.
Free Cash Flow $15.5 million in Q3 and $126 million year-to-date. Excluding restructuring payments, free cash flow for the first 9 months was nearly $140 million. This indicates strong cash generation and operational efficiency.
Subscription Revenue-Based Net Dollar Expansion Rate 102%, flat sequentially, showing stabilization in subscription revenue.
Customers Contributing $1 Million+ in Subscription Revenue 145 customers, a decrease of 4 customers from Q2. However, revenue from this cohort was up 9% year-over-year, indicating stronger contributions from existing top-tier customers.
Non-GAAP Gross Margin 67%, with subscription gross margin at 77% and professional services gross margin at 5%. Higher data and hosting costs impacted margins.
Calculated Billings $158.4 million, an increase of 7% year-over-year. Reflects growth in customer engagements and project rollouts.
Total Remaining Performance Obligations (RPO) $857.6 million, down 5% year-over-year. Excluding outliers, RPO would be flat year-over-year, indicating stable long-term commitments.
AI-powered platform: Sprinklr's platform leverages first-party data to enable personalized omnichannel engagement, turning data into actionable insights for customer needs.
AI agent expansion: Expanded partnership with a leading Latin American bank, showcasing AI-powered automation that improved case deflection by 35%, handling times by 50%, and agent productivity by 500%.
Latin American market expansion: Sprinklr expanded its services with a leading Latin American bank, consolidating customer care and marketing intelligence across three regional markets.
Global contact center transformation: Partnered with a global streaming company to implement a contact center transformation across 210 countries, supporting 40+ languages and handling over 40 million contacts annually.
Project Bear Hug: Focused on deepening engagement with top 700 customers, representing over 80% of total revenue, leading to stronger C-suite relationships and improved renewal rates.
Operational improvements: Streamlined processes, modernized systems, and enhanced cross-functional alignment to drive durable growth.
Leadership changes: Welcomed Anthony Coletta as CFO and Karthik Suri as Chief Product and Corporate Strategy Officer to strengthen leadership and drive growth.
Transformation strategy: Entered the second phase of transformation, focusing on embedding operational changes and creating a foundation for scale and efficiency.
Renewal Pressure: There has been downward pressure from renewals for more than 2 years, which continues to impact subscription revenue growth. Driving consumption and securing renewals remain high on the agenda.
Operational Transformation Challenges: The company is undergoing a significant transformation, which is expected to take time and may create operational inefficiencies during the transition period. This includes embedding foundational changes into operations and culture.
Customer Retention: Retention rates are beginning to show improvement, but challenges remain in stabilizing and improving renewal rates, particularly for top-tier enterprise customers.
Data and Hosting Costs: Higher data and hosting costs are being incurred in response to business opportunities, especially in Sprinklr Service and expanded AI capabilities, which could pressure margins.
Professional Services Gross Margin: Professional services gross margin is expected to be slightly negative in Q4 due to continued investment in services delivery and capabilities, which may impact short-term profitability.
Customer Implementation Challenges: Initial challenges in implementing solutions for a major customer required personnel changes, process tightening, and quality control improvements, highlighting risks in execution and delivery.
Economic Uncertainty: The company acknowledges economic uncertainties that could impact customer spending and overall business performance.
Q4 Revenue Guidance: Total revenue is expected to be in the range of $216.5 million to $217.5 million, representing 7% growth year-over-year at the midpoint. Subscription revenue is projected to be between $191 million and $192 million, reflecting 5% growth year-over-year at the midpoint. Professional services revenue is anticipated to be $25.5 million, growing by 25% year-over-year.
Q4 Non-GAAP Operating Income: Non-GAAP operating income is expected to range between $29 million and $30 million, resulting in a 14% non-GAAP operating margin at the midpoint.
Full Year FY '26 Revenue Guidance: Total revenue is projected to be between $853 million and $854 million, representing 7% growth year-over-year at the midpoint. Subscription revenue is expected to range from $754 million to $755 million, reflecting 5% growth year-over-year at the midpoint.
Full Year FY '26 Non-GAAP Operating Income: Non-GAAP operating income is expected to range between $137.5 million and $138.5 million, driving a 16% non-GAAP operating margin. Non-GAAP net income per diluted share is projected to be between $0.43 and $0.44.
Full Year FY '26 Free Cash Flow: Free cash flow is estimated to be $125 million, excluding restructuring costs. On a reported basis, free cash flow is expected to be approximately $110 million, up over 80% year-over-year.
FY '27 Financial Outlook: A detailed financial outlook for FY '27 will be provided during the Q4 earnings call, expected to be scheduled for mid-March.
The selected topic was not discussed during the call.
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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