Q2 2022 Sprinklr Inc Earnings Call

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Yeah.

Ladies and gentlemen, thank you for standing by and welcome to Sprinklers second quarter of fiscal 2022 earnings Conference call.

Joining us today are sprinklers founder and CEO Rajiv Thomas did that Contra Chief operating officer, and Chris Lynch Chief Financial Officer. At this time, all participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session. Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Mr. Chris Lynch for introductory remarks. Please go ahead Chris.

Thank you and thanks to everyone joining us today for sprinkler second quarter of fiscal year 'twenty two earnings call. Our first as a public company.

We issued our earnings release, a short time ago filing the associated 8-K with the SEC and we've also made that available on the Investor Relations section of our website.

As a reminder, during today's call, we'll be making forward looking statements about the business and about the financial results of sprinkler that involve many assumptions risks and uncertainties.

Actual results might differ materially.

Any forward looking statements that we make on this call are based on our beliefs and assumptions as of today and we disclaim any obligation to update them.

For more details on the risks associated with these forward looking statements. Please refer to the text in the Companys press release issued today and to our periodic reports filed with the SEC, including our prospectus filed on June 24th in our quarterly report on Form 10-Q for the quarter ended July 31, 2021 that will be filed with the.

C C.

With that let me turn the call over to our founder and CEO, Mr. Rajeev Thomas Rajiv.

Thanks, Chris and Hello, everyone. It's a wonderful to speak with you all today during our first earnings call as a publicly traded company.

Our IPO was an important milestone.

But it was just one step in what we believe will be an exciting multi decade journey.

We've always believed that this is a marathon not a sprint and today I'm pleased to share that our first quarter as a public company was a strong one.

With Q2 total revenue rising to $125.0 million up 27% year over year.

This is the third consecutive quarter that we have accelerated our revenue growth rate, which reflects continued valid validation from the world's largest enterprises that there's a massive need to deliver a unified customer experience across digital channels and customer facing functions and that.

Our unified CX and platform is the solution.

At sprinkler everything we do centers around delivering value for our customers.

Building, the world's best product and creating an amazing culture and when I look at the momentum we built this quarter, it's clear that focus is paying off.

Through Q2, we now have 74 customers with more than a million.

Trailing 12 months subscription revenue. These are the world's largest and most iconic brands, who continue to grow with us quarter after quarter and year after year spending a million $5 million and in some cases over $10 million annually. We know how mission critical we've become to these.

Global companies and if it's something that we're truly humbled by its why we are so obsessed with creating transformational enterprise value, whether it's increasing revenue reducing cost while mitigating risk for these brands and delighting them at every touch point from product to marketing and.

From sales to success.

This quarter. We were also named a leader in the most recent Forrester wave social suites, Rip out which is a definitive ranking of tech providers in the social media management space.

The foundation that started in social back in 2009, SMS is a category that we've been at the top of for more than a decade, and it's driven by three things.

Unmatched depth and breadth of our platform.

Our laser focus on the largest companies in the world.

And a broad vision that always so social as a part of a much larger customer experience management thesis.

From the beginning we knew that every customer facing function from marketing to cure would need to listen to engage and reach customers across an ever growing number of channels not just social.

And that secular shift of connected and empowered customers would require those function to adopt dozens of new capabilities from advocacy and Influencer management and marketing to live chat and communities and customer care.

He knew too as has happened in the evolution of every major software industry category throughout the year, it's like ERP and human capital management that.

That the point solutions with cropping up to address these areas would eventually be replaced by a select few platforms designed to solve the whole problem.

Which is why we pursued that architectural vision relentlessly from the start building 31 products within our four product suites on one unified code base.

One unified platform and putting a decade's worth of engineering between us and everyone else in the industry and their process.

It's great to see that the analyst community is continuing to validate that fishing and our execution with Forrester report ranking sprinkler as having a stronger current offering that anyone else.

Yeah.

But at the end of the day, what our customers really love is our people.

Can't tell you the number of times I've heard from customers that there's something special about sprinkler right.

Whether it's their willingness to go the extra mile or the fact that they do it with a smile always nothing makes me prouder. So it was incredibly gratifying to hear that in Q2 sprinkler was certified as a great place to work.

And recognized by Inc, Fortune and computer World for the culture that we're as firing to build each and every day.

Now I'd like to take a step back for a moment to share some of the market trends, we're seeing and why we are more bullish than ever about the opportunity in front of us.

When Covid hit last year every company that didn't already know it became acutely aware that their digital transformation initiatives.

To accelerate.

And the world's largest companies, where we operate even the most well intentioned an urgent desires to transform can take 612, sometimes 18 months to really kick off so the acceleration in digital transformation. We're seeing has not been instantaneous, but it has been obvious.

With a number of trends picking up that we fully expect to stay.

One of the most significant trends that we see is in customer care, where we're seeing a huge opportunity with the digital transformation of the traditional call center.

During the pandemic many companies quickly have to pivot from in person call centers centered around traditional channels like the phone too.

Virtual care centers increasingly focused on modern channels like messaging and live chat.

Now, we're seeing many companies realize that by shifting from traditional to modern channels. They can not only deliver a better customer experience. They can do so at a lower cost.

At the start of the pandemic for example, one well known electronics manufacturer came to us to consolidate multiple point solutions within customer care.

They wanted to unify care and marketing workflows as well to improve their customer experience and and provide self help solutions like chatbot, so customers could troubleshoot their own issues faster on the modern channels that they prefer all while deflecting calls volumes.

From more expensive call centers. So far this company has reduced cost by 8%.

While increasing customer satisfaction satisfaction by 18%, that's a double win reducing costs and making customers happier and last quarter, we doubled the size of our partnership with the customer and adding more products like modern research and modern sales and engagement.

We also had a big win this quarter with one of the world's largest banks.

And we believe really signals our arrival in D. C. GAAP contact center as a service space as we beat out some of the industry's biggest names. Thanks to a digital first and AI powered approach.

Today, we're not only replacing more than 10 point solutions at this company and helping this customer completely re imagine its customer care infrastructure with a unified CX and platform. We're also empowering more than 15000 contact center agents globally to.

Work across several channels like live chat Whatsapp, social SMS email.

And now voice and we're not talking about traditional voice capabilities with the advantage of building from the ground up on a modern digital platform like sprinklers, we've been able to re imagine what voice can be.

Using artificial intelligence, despite challenging conversations and changing sentiments in real time.

And analyzing millions of unstructured interactions to identify the most effective responses to any issue.

Tactically helping.

Your worst performing agent to emulate your best performing agent at any given point in time.

The other thing that's really powerful here is the fact that sprinklers unified agent console is integrated directly into this bank's CRM and back end systems.

With that we can eliminate the paint customers feel having to switch channels to resolve issues and the paying agents feel and swiveling tariffs between systems. These agents will also be able to leverage sprinklers, AI and automation to drive greater efficiency with the support of Chatbot voice.

<unk> workforce management and IV are all on top of an enterprise grade platform with the security compliance and governance trusted by nine of the world's top 10 financial services brand.

As you can see bringing a modern mindset to a traditional capability like voice and putting it alongside the modern digital channels that consumers now use more it's a powerful differentiator for us and it's an area, we'll continue to invest it to that and we.

We've just completed the acquisition of a small company called voice then.

AI powered voice to text analytics and workforce optimization platform and we have brought on its remarkable engineering team with the domain expertise in voice to text and contact center AI as we continued to double down and build out our capability.

Yes.

With these trends and the immense innovation, we're seeing in this space.

Modern care has quickly become one of our fastest growing and more strategic products highly.

Highlighted by a number of care deals in Q2 with brands like Samsung.

Robin Hood, Milwaukee tool monocular.

<unk> Fi.

Simply safe.

Our pace of innovation has always been one of the things that set sprinkler. Apart. This quarter was no different as we executed a major platform release with over 540 new features.

Including conversational AI.

And all new video, calling option for care usability enhancements across the platform more out of the box integrations with S&P for care and Adobe and pre move for marketing and advertising.

We also introduce modern research light.

A new easy to use product for marketing product and PR personnel to use publicly available digital data to discover AI powered insights about their customers brands and competitors.

Many cases within minutes with zero configuration required and a streamlined user interface with prebuilt dashboards for dozens of use cases.

And research light gifts enterprise France.

Self service way to trial, a lightweight version of sprint.

This is something we are very very excited about is it's a new way to make a comprehensive platform more approachable to companies that are not sprinkler customers yet.

When we founded sprinklers 12 years ago. It was clear to us that we were entering a new world of business evolved where billions of consumers. We're moving from traditional to modern channels, a world where the data from those channels was unprecedented and unstructured in a world where customers had new expectation.

Yeah.

For an instant and seamless experience across every channel across every touch point and every single time.

Over the years enterprises.

Spent fortunes trying to address these new realities.

But they've gone about it in a piecemeal way falling into point solution chaos and fracturing the customer experience with market and care research and sales in every team.

Behind their own technology products to tackle smart small parts of the customer experience problems.

Sprinkler was born to offer a new path forward away to listen engage and reach customers of the dozens of digital channels that they prefer.

And each of those that will come next.

A way to harness experience data using powerful AI to analyze the vast ever expanding ocean of unstructured customer data and the automation to act on it at scale.

And a way to modernize customer facing functions, while enabling them to work together.

Providing each function with the next generation of capabilities. They need built on a single code base with shared governance workflows analytics automation, so everything and everyone can work together, we call it unified customer experience management.

From the beginning we set out to define this emerging new category that we believe represents one of the single most strategic investments for any modern company and we set out to build a different kind of software company, while doing it. We've always said that unified CX M is an idea whose time has.

Come and it's never been more clear to us that time is now.

To our new investors. Thank you for joining us on this journey for recognizing like we do that there's an inevitable an immense new category of enterprise software, that's coming together and that is only getting started two.

To our customers and partners. Thank.

Thank you for the trust you have placed in particular through the years. Many of you like US saw this category coming from the beginning and pioneered it along with us to build.

From this chart, we wouldn't be where we are today without your support and most of all our employees for waking up every day and working hard to create this wonderful company and create this category for all of US. The best is really yet to come with that let me turn it over to our CEO with a code.

Sure.

Thank you Roger and good afternoon, everyone. When I look at the strength of this quarter and revenue increasing 27% year over year I see the result of amazing execution across every function from product to marketing to our field sales teams services and <unk>.

Customer success, and our company the scaling up and delivering.

And its happening on a global scale across four major product suites in every market around the world from the Americas to Europe to a P. J.

With a 50 billion plus Tam, we believe unified CX M is going to be a massive category for decades to come.

And we're playing to win.

That's why we've been investing in key areas like sales and marketing to capitalize on the opportunity in front of us and.

And with visibility to hiring and pipeline, we believe we're well positioned to March forward and drive durable long term growth.

One key driver helping to fuel the growth is the fact that we continue to see high customer retention rates across the board.

That's even more clear in our 1 million plus customer base, which continues to grow.

As of Q2, we now have 74 customers generating 1 million plus in subscription revenue up from 60, just one year ago.

We landed some amazing new logos this quarter from OEM through Robinhood to Neiman Marcus just simply save.

And expanded and many others with Upsells and cross sells from World class brands like Microsoft Samsung Netflix Siemens the Azure Tuk-tuk Montclair, Sonus Havas and the U S. Marine Corps just to name a few.

Let me take a minute now and tell you about two of them. The first customer I want to highlight is Siemens, which is one of the brands setting the standard when it comes to modern marketing and advertising with over 2000 in House and agency users working together on one unified system.

Four.

This quarter, we renewed and expanded our partnership with a three year deal that includes hundreds of new users.

<unk> increase in AD spend and an expansion of modern research to benchmark and get competitive insights on the performance of Siemens content with 293000 employees in more than 120 agencies in over 60 countries.

<unk> started this journey with US two years ago looking to increase efficiency and effectiveness at scale, while managing thousands of global campaigns today Simmons is using modern marketing and advertising to plant produce an annualized one and paid content performance across more.

More than 10 digital channels from its website blogs and social properties to internal communication platform.

Administration and management costs have dropped and enable Siemens to reinvest back into advertising, all while generating higher ROI with the help of AI optimization.

Another customer we're thrilled to be partnering with this quarter is simply save one.

One of the leading brands in home security I always would simply say as chief customer experience officer, Doug Wood or was shared with me why they chose sprinkler.

To quote him we chose <unk> because we know there are as obsessed with customer experience as we are and then built modern technology with everything from AI powered chatbot to IV deflection all on one unified platform.

That can become the foundation of everything we do when it comes to caring for our customers and quote.

Driven to build lasting relationships with its customers simply say for leveraged sprinklers AI powered modern care suite to replace multiple point solutions and provide a unified care experience that saves agents' time, while improving the customer experience.

Charged with providing customers with self help their community forum and knowledge base, where they can read about product find pips of troubleshoot issues and connect with other lawyers simply save customers for advice with the help of AI agents are alerted when these conversations need their attention and can quickly jump in with Brad.

<unk> approved responsive.

And with live chat customers not have instant access to agents, who can help them with everything from sales to support.

Whether youre Siemens or simply save their three value drivers that matter to every enterprise.

And Kristen revenue, reducing cost and mitigating risk and in Q2, we delivered that value even faster.

Accelerating girl lifetime by 30% with pre configured environments and templates higher sand boxes.

One of the reasons, we've been able to build such a strong business is because we have a growth flywheel that's working at scale.

Whether it's our ability to upsell landing in an account like Siemens with modern marketing and advertising and continue to grow seats in volume.

Or our ability to cross sell.

As we have with Montclair lending with a product like modern research, then, adding others like modern care and.

Lastly, given the global nature of our client base, expanding with customers like Samsung across divisions and into new Geos from the Americas to Europe to a P. J.

This cross flywheel is fueled by a proven go to market motion with a direct sales model and a partner ecosystem.

From the beginning our focus on large enterprises with 1 billion plus in annual revenue has been our primary growth vector.

And it continues to be with thousands of companies that are left to target as our sales capacity grows.

We believe this segment will fuel our growth for years to come.

We're also excited about our second growth vector of enterprises with $100 million to 1 billion in annual revenue.

These are large organizations with complex business problems and in Q2, we're seeing signs of early success with new customers like simply safe and block five.

To serve our customers and expand our footprint, we've built a broad partner ecosystem, whether it's global systems integrators like Accenture, Deloitte technology partners like Google Amazon or Microsoft Channel partners, like Facebook, and Twitter or agencies like publicists and have.

Ross These partners see the power of our platform and the opportunity of unified CX them.

And when a partner is engaged our average deal size typically doubles, we see a significant opportunity to scale. This ecosystem and this quarter. We continue to see our GSI is doubling down for example, Deloitte launched regional practices in five new countries across EMEA.

Yeah, and a P J and expanded with us in the public sector.

Accenture doubled its number of sprinkler certified consultants, who know support 100, plus sprinkler clients with everything from implementation to managed services.

Today more than 1000 of the world's largest and most valuable enterprises Trust sprinkler.

First <unk>.

Five six and platform as a vital a backbone of their digital transformation.

We went for three main reasons number one the depth and breadth of our unified systems platform, which is purpose built for the enterprise and customer facing functions from research from marketing to sales to care number two industry, leading AI. They give these enterprises something they've never had before.

A way to make sense of a vast ever expanding ocean of unstructured customer experience data and the ability to act on it at scale and number three consistently delivering meaningful ROI for our customers by increasing revenue reducing cost or mitigating risks.

With that let me turn the call over to Chris Lynch to review the financials Chris.

Thanks Vivek.

I'm going to provide a brief overview of our second quarter financial results and discuss guidance for our third quarter and for our full fiscal year, which ends on January 31st 2022, and then we'll open it up for questions I should point out that in addition to our GAAP financial results I'll also be discussing certain non-GAAP numbers today are GAAP results.

Along with a reconciliation between GAAP and non-GAAP results can be found in today's earnings release and on our Investor Relations website. So let's get into those results for Q2, where we delivered a very strong quarter across the board and I'm really proud of the company wide execution that drove some exceptional top line growth.

Total revenue grew 27% year over year to $125.0 million that was driven largely by subscription revenues of $106.0 million, which grew 25% year over year.

Our non-GAAP subscription gross margin was 17, 9% in Q2 and that helped US drive a total non-GAAP gross margin of 70%.

And on the bottom line, we generated a non-GAAP operating loss of $15.0 million for the quarter.

There's a few other momentum metrics I think it's helpful to share at this point, the first of which is our customer count.

On July 31st we had 1062 customers and as you know we're focused on selling a unified CX and platform to the world's largest enterprises and then growing our footprint in those accounts over time.

That large enterprise focus is one of the things that continues to set us apart and as you heard from Rajiv.

We now have 74 customers generating $1 billion or more in subscription revenue on a trailing 12 month basis, and that's a 23% increase year over year.

That footprint growth or net dollar expansion rate, which we calculate also on a trailing 12 month subscription revenue basis that was 114% of Q2, which was very consistent with the Q1 result.

The 12 month look back period in our calculation. It means the impact of Covid from last year continues to impact this number but that will start to walk through the results in the second half and longer term. We expect this number to increase again.

And we expect to recognize approximately $333.0 million or 73% of that revenue over the next 12 months.

Cash and short term investments as of July 31st was $549 million and that was bolstered by the $276 million in net proceeds that we raised in our IPO.

That cash influx strengthen an already rock solid balance sheet and gives us ample resources to aggressively pursue the attractive growth opportunity in front of US and then finally, we used $11.0 million in operating cash flow and $16.0 million in free cash flow during Q2.

As we indicated during our IPO after delivering positive free cash flow in both of the last two fiscal years, we've made a conscious decision to invest some of the capital we raised and use it to accelerate topline growth and I'm happy to report that we're making good progress on that goal as these results show.

That brings me to guidance for the third quarter of FY 'twenty two ending on October 31st.

We expect subscription revenue to be in the range of $104 million to $106 million and that represents 23% growth year over year at the midpoint.

And we expect total revenue to be within the range of 117, and $119 million, representing 22% growth year over year at the midpoint.

We expect a non-GAAP operating loss in the range of 24 to 26 million and a non-GAAP net loss per share of nine to 10 cents, assuming 260 million weighted average shares outstanding.

No I think it's worth just double clicking on that loss for a second because it is growing meaningly from Q2 and to be clear that's absolutely in line with the operating plan, we set out at the start of the year.

Our goal was to build capacity across the company to drive and support the topline acceleration that you're now seeing start to come through in these results.

We continue to make investments to capitalize on that large addressable market opportunity in front of us and it's the return on those investments that we're starting to see now on the top line, which will help us drive leverage into the model and that's how we start moving towards the longer term margins that we talked about during the IPO.

For our full fiscal year, which ends on January 31st 22, we are providing the following guidance.

We expect subscription revenue to be in the range of $413 million to $418 million and we expect total revenue to be within the range of $470 million to $475 million and at the midpoint of these ranges. This represents a 22% growth rate year over year for both subscription revenue and total.

Revenue.

We expect our non-GAAP operating loss in the range of $62 million to $66 million and we expect a non-GAAP net loss per share between <unk> 36, and 38 cents, assuming 197 million weighted average shares outstanding.

In closing I'm excited to be able to report such strong results in our first quarter as a public company and by the momentum that we're building to capitalize on a very large market opportunity and drive durable multiyear growth from a unified CX M platform.

With that Rajeev Vivek and I are happy to take your questions.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Please limit to one question and one follow up question.

Our first question comes from the line of Raimo <unk> with Barclays. Please proceed with your question.

Congratulations on a great quarter and a reacceleration.

Rajiv.

First question for me like if I look through your showing up and a lot more magic quadrant, Forrester reports et cetera than anyone else because your platform is much much broader.

You came to kind of solve a much broader problem than some of your more point solution competitors can you just kind of talk a little bit about how you're going about kind of.

Filling out this.

This kind of platform and where we are in terms of that journey and then I had one follow up for Chris.

Absolutely first off thank you all for taking the time.

With me on this call and speaking to you all Raimo. Thank you for that question.

Good to talk to you again.

The answer is this is this is not an afterthought and sprinkler the strategy to build a platform.

<unk> AI put an omnichannel ability to reach engage and listen to it the foundation of it.

Build.

<unk> marketing care, it's very ambitious, but we know this is something that needs to be undertaken we've seen this happen in other industries. So we've always focused on getting the platform right and then going after product areas and so if you look at our past it should be obvious to you that we will go in.

To a specific area.

Content marketing as an example, or.

Conversational AI is another one you will see us competing with point solutions in the beginning we start with the strength of the platform and we stay on it and listening to our customers. We don't rest until we become number one ideally in every single space and what we are trying to do.

Digital channels and modern channels by providing this unified platform with best in class.

<unk> functionality, we're giving our customers our target segment of 171000 companies a no compromise solution. They traditionally you'd think do I want a unified platform or should I go for best of breed.

Making the decision to invest.

At a success for us.

So let me give you. The example, with the with one of our customers Siemens that started with marketing and and.

Beginning you have a point solution a different workflow for for a social a different one for press releases a different one for corporate communication a different one for research and sentiment and competitor analytics, just within marketing and advertising Youre now able in this case put a lot of these.

Solutions together.

On one platform and can be the costs. It down is easier to maintain GAAP. The CIO gets the better handle for compliance governance.

And then you get a lot more bang for Buck and create better experiences with AI.

Yeah makes sense okay. Thank you.

Chris.

The first quarter like how do you want us to look at kind of the leading indicators. So it's obviously you know in the past we had billings stirs like RP, all coming up et cetera, like how do you see the business and what are you what are kind of something moving parts, we should kind of maybe consider thank you and congrats again.

Yeah, Thanks, Hey, Hey, Hey, Ryan Thanks for the question, yes, so you're.

Youre right billings for us and if you see the billings.

In this resolve the calculated billings using the short term deferred revenue that grew over 30% year over year P. O. RVO is a is a is a better metric potentially just because they looked at the full contract value for new sales and renewals and the duration of those contracts get taken into account, there's not a perfect metric so.

We look at the trend in that one that one is up over Q1, which is sequentially up over Q4, we don't have the year over year for RP O simply because in Q2 last year, we were probably the company that's not a metric that we reported to our loss year over year comparison was it Jan 31st year end width.

Grew 30% year over year. So again I think it's those two of the best leading indicators for us.

Okay perfect. Okay. Thanks for Congress.

Thank you.

Our next question comes from the line of Tom Roderick with Stifel. Please proceed with your question.

Great Hi, everybody. Thank you for taking my questions. Congratulations on the results and the recent IPO fantastic job right out of the gates.

I think there's so much to ask here relative to the breadth of the platform and I'm I'm really interested in sort of understanding.

A little bit more on the go to market motion the product spend there rajeev, we're pretty transparent in the roadshow in the and what we read in the S. One with respect to sort of slowing down the pace of sales hiring during the middle of Covid and then you reaccelerate that of course on the way out as we entered 2021, so really encouraging to see.

The revenue acceleration tell me a little bit more about what youre seeing from sales productivity, what you're trying to do in terms of adding sales capacity and how you feel the pace of hiring is working relative to the opportunity set out there.

So let me start by saying, we feel really good time and thank you for that question.

We feel really good we saw the impact of Covid hit us like everyone else.

First two quarters of 'twenty 'twenty and then we saw that the business began to recover in Q3 and in Q4, we exceeded our original pre Covid plan. So we did take we did do a cost or spend and capacity building.

And I think it was the right thing and prudent thing for us to do and you will always find US management team Act prudently and we're here for the long run not not a quick flash in the Pan move.

And then so what you are seeing is a continued investments that we <unk> our expenses and then build it back up.

And to add to it sure I think look we're already seeing signs.

Paying off as you saw from Q1.

We had revenue of 19, 3% to where we are at 27%.

And we're actually ahead of our hiring plan, so sales and marketing is actually our biggest focus area to continue to drive organic growth and we continue to add sales reps to build out this capacity to ensure that we're capturing the market that <unk> articulated.

We're also investing on marketing and building out our demand Gen engine and broader in our brand awareness.

So we're actually very pleased by our ability to attract top talent.

Especially in this dynamic market.

Outstanding and you know this is.

Probably a pretty good follow on follow on question for for Rajiv, both you and come back but.

I look at the long history of this company and Rajeev in your your your time spent the messaging industry before it's really it's really fascinating to watch the large enterprise work within the bounds of.

Changing use cases, and whether that was messaging moving into marketing and now we're seeing the social media management space of course moved from marketing into care.

Tell us a little bit more about how some of your biggest customers here are evolving that use case in particular I'd love to hear more about the use case on care because that seems to be a massive potential for wallet share and maybe not a massive current percentage of the existing IRR in terms of the care use case.

Yeah. Thank you that's a great question.

[laughter] shouldn't blow everybody's mind, when you're when you're realizing an average and a global Enterprise company has 92 point solutions in marketing alone.

The other day, we were talking to one of our larger customers in Europe, and we threw out the staff and staff and he looked very amused until we ask them why.

Are you guys seem like you're in a good situation he says.

No we as fire to get down to 92, so it should be.

It's very obvious that this is not sustainable let's take care.

It's again you have your traditional call center infrastructure that was built primarily for voice and then you bolt on email. It's typically a different solution you've got a different solution for life that now you're getting into the community systems at another solution, you've got a knowledge base, there's a new crop of companies that are providing AI.

Abilities to Colton that that's coming on as a bolt on another one to two speech to text a code once feature.

Sentiment detection not sustainable.

These channels will continue to increase so let me give you. The example of Samsung one of our clients with Big mentioned started out with social and digital customer care on modern channels, we got that down expanded out from Europe back to a P J than to U S.

Expanded more channels all the traditional.

Social channels, if you will.

And then added life that added video, calling now in the process potentially to add things like community and knowledge base in AI based routing all of that now that's an obvious situations large global company.

<unk> and scores of markets that are independent we glued them on the unified care situations. There is now expanding from here, adding sales do it which we think is worth it.

The future is care is Canada is to transform contact center has to transform from a reactive inbound potentially being the face of the company.

Customers are calling in.

Oh, that's a typical traditional use case for US right large company lots of complex point system, Let me kind of switch gears and talk about another sample.

So please save that.

And people in the second vector the next 30000 companies.

And simply safe is a direct to consumer growing private company.

And it was interesting to see how they had the same situation a different solution for community a different solution for life that a different solution for knowledge base a different solution for social different solutions with E. Mail. It goes very very quickly out of control and so the beautiful thing is by moving to this unified platform.

You are actually increasing customer satisfaction you are increasing.

And you're reducing cost that's the beautiful thing largest electronics manufacturer in the U S. U S based global company.

Drove.

<unk> set up by cutting response times and they saw a 7% increase right off the bat.

That's great color. Thank you very much I'll jump back in the queue, but I really appreciate that Roger.

Anytime.

Thank you. Our next question comes from the line of Brian Schwartz with Oppenheimer. Please proceed with your question.

Yeah, Hi, Thanks for taking my question. This afternoon I just had a follow up on the partner announcements during your introductory commentary.

Gives me you did announce a number of expansion partnerships to the large GFS sized and.

So I just had two questions. The first question was on those announcements if it's possible to highlight which of these new expansions of partnership stand out to you in terms of being the most significant and then second just looking at that partner channel in its entirety I'm wondering if you're seeing any meaningful change with the partner velocity.

If deals or in their execution. Thanks.

Let me kick it off.

We have different types of partners one is the.

The cloud service providers like the Amazons and the Azure origin to Google Cloud, We've got our channel partners like Facebook and Twitter, We've got agency partners and we've got system integration.

And and other service partners.

We're committed to the partner ecosystem and a tech companies to take partnerships that we have where we connect to other larger players. So are our view is that the world will move from a best of breed hundreds of solutions for best of suite, where three to five of these platforms work very well together and that's really.

What we're trying to predict why don't you add some.

Do you think about.

Spending on our global footprint.

Company like Deloitte continues to expand with us into countries like Italy, or South Korea, and then when we look at Accenture as an example, they're able to help us serve 100 plus.

Version get consultants that are being certified on the Supreme Court platform as we move forward with more and more complex implementations like in the carrier World.

This is allowing us to actually get leverage but also when we look at our pipeline.

They're able to actually help us source.

Bigger deals larger deals more strategic but I want to be clear that we're still very early in our journey, we're continuing to invest in our partners, but what they're seeing is.

The example of that.

Roger shared at the top when you think about the large you know kind of global banks.

And partnering with companies like Google from a technology perspective, it really allows us to not just expand our footprint from an implementation perspective, but also our hosting and channel partners.

And let me I'll also add that it helps to our case that most of these are also our clients are there.

The platform like for example, Twitter.

To really see the power of what we do to enable them to use their own channels and other channels. It's a pretty interesting dynamic and we're very early like we make sense.

Thank you.

Thank you. Our next question comes from the line of Mark Murphy with Jpmorgan. Please proceed with your question.

Oh, yes, thank you and I'll add my congrats on a very nice performance.

Rajiv I was wondering if you could dive deeper into the point products that you are displacing and some of these large accounts I I had recalled that comment that the average enterprise. It was 92 point solutions and marketing you mentioned the company, replacing 10.

Contact Center point solutions I believe could you just help us understand which ones are the most vulnerable.

That you can displace with your unified product.

So let me let me try not to take any specific names to try and answer your question in a way that makes sense right. So let's take lives had as an example, that's an independent category you know the companies that play in it let's stake.

Traditional social engagement, that's a category that we were in and we understand it very well it is still not a ton of point solution companies in it.

You can take a community.

Which is the ability to get your customers to help each other.

<unk>.

A product that was a category of full blown category and the company has got a quiet and there are different point solutions still offering that.

I would take for example, there is.

Agent assist and voice to voice analytics that are very specialized companies that do that.

I mean these are all examples just inside of the SEC Center when you Peel the onion, how many of these things are trying but sticking in there and what's funny is most people don't realize.

How many of these are have been put in place.

Because it's out of sight and Ob funny to see.

How many CIO and CMO as well could we be surprised if someone did their CX M to escape.

Put it out in a diagram for them.

Yeah.

And not to mitigate any marketing and it.

And advertising revenue you can see plenty of point solutions the influence of marketing that's a category advocacy is a category.

So if you go on our website and look at products practically 31 products that you probably you can easily pick 27 categories from within those.

Yeah, Okay. The breadth of it is impressive and just as a quick follow up Chris.

On the composition of the results obviously, we you've always been clear that billings is not a key focus for sprinkler I think we all know that.

The composition, so that said the composition is more weighted to the recognized revenue and it's less in deferred revenue than I think what we generally than what consensus expected I'm.

I'm just curious what.

What is the underlying driver of that in this case.

Well in this case, we had very strong services you probably saw that from the from the earnings release, our services. So we recognize more revenue from deferred so our billing came in pretty much where we thought it would we ended up recognizing more.

For revenue, our deferred and that's why deferred was down a little bit so.

Yeah.

A big chunk of that was services our services team had a really strong quarter.

And remembering it's not a massive piece of our business is 13% of our total revenue.

And the it tends to fluctuate on a quarter to quarter and that's why you see from a guidance standpoint in Q3, I'm guiding services down a little bit really more to average it out between Q2 and Q3.

Again from a from a subscription perspective, we're really excited to see the the <unk>.

Is that the increase to the 25% and that's the 25% range is what I'm guiding to for the balance of the year. So that's really.

What's driving that if I answer your question Marc.

Okay very clear thank you.

Thank you. Our next question comes from the line of Stan thought ski with Morgan Stanley. Please proceed with your question.

Perfect. Thank you so much guys.

One question for me actually and then a quick follow up.

The the very aggressive pace of hiring that you guys are.

Going through right now, obviously makes a ton of sense considering the opportunity.

That you are going after.

How what are you seeing as far as like the productivity and the ramp in productivity within the new sales hires that you bring on board now.

So look we're seeing productivity very consistent with enterprise companies.

It's one of the reason as Roger mentioned.

Actually investing because we know we can.

Doing it in a very very responsible way to make sure that we're sequencing it appropriately.

And ensuring that it is that we're hiring are actually hitting the productivity metrics.

And let me just add that there is a little bit of pent up.

Relief from the Covid slowdown and plus we did right. So there's a little bit of a catch up in investing we have to do.

Just as we look to the outer years, but we'll always be watching our expenses in line with the growth and validating it before we invest more.

Got it got it and then just on.

The guidance for Q3 for Chris.

For subscription revenue and total revenue is there anything else that may need to be mindful of there.

Beyond just the pro services ticking down sequentially and the.

Just the typical conservatism in the Q3 revenue guidance.

No nothing else in there and as you say I mean, whereas we think about our guidance strategy more broadly when we guide to a number it's going to be a number that we feel comfortable with nothing else than that.

Okay perfect. Thank you so much guys.

Thank you.

Our next question comes from the line of Pat Walraven with JMP. Please proceed with your question.

Hi, This is Joe on for Pat. Thank you so much for taking our question.

Could you just give us some maybe some color.

Color around kind of the mix of our bookings in the quarter versus new logos versus existing customers. Thank you.

Yeah, Let me do that if I may so happy to happy to report in Q2, no change in the mix of sales to new and existing customers and it stayed within a very consistent range over the last year.

As I reported we have 1062, very large enterprise customers and because of the breadth of the capabilities of the platform that you will know that there is a natural upsell and cross sell motion exist.

Existing client base on the back of the value we create for them, but we also had some great new logos in Q2 that we're pretty excited about.

Internally, we tend to look more of the trend in ASP.

Rather than new logos because of our focus on large enterprises, new logos tend to fluctuate a little bit on a quarterly basis. So I wouldn't read too much into the absolute number in any discrete quarter. Instead, I'd, probably look at new logos on a trailing 12 month basis to normalize things out and and as I say, we tend to think about the ISP. So if you took.

Trailing 12 months subscription revenue divided by the client count at the end of the period, it's up over $350000 in terms of AFP known and I think that really tells the story of the type of customers, we focus on and how strategic our platform is to them.

Understood. Thank you.

Yeah.

Thank you. Our next question comes from the line of Arjun Bhatia with William Blair. Please proceed with your question.

Yes, perfect. Thank you very much and I'll add my congrats on the quarter and the IPO.

Maybe first question might be for Rajiv.

But I wanted to touch on the existing customer base and the growth opportunity you see there are we've talked about this transition from best of breed. The best of suite, where do you think your existing customers are in that transition and is there further room to either cross sell foreign expand even though seven figure relationships that you have.

Across your customer base today.

Even in our existing customers were hardly scratched the surface origin. Thank you for that question. So let me tell you if you take the top 10 banks that work with us.

Bang, that's paying us $5 million and using more of our software is no different from the bank Thats, probably paying a 600000 and so it's just a question of getting our go to market motion down to get a message heard by everybody that matters in the natural.

Yeah.

Go to market evolving with stories that are verticalizing and getting to these people.

Same thing with technology, that's nothing different.

To accompany that pesos.

No.

$300000 Theres nothing different from another company in the same space same size as being a $7 million or $10 million.

Same thing with if you take any of these industries retail and so it's just a question of normalizing educating that we see this as a long journey and so we think we can build an amazing company distress.

Our existing customers, but we're going to start activating a second vector is thats important in the long run as well and then just to add to what Roger said.

You look at this quarter, we had some amazing upsells with Samsung and Netflix Biagio Montclair as I mentioned.

And if you really think about our customer base.

10% of our customers actually use all four suites, so there's plenty of room and opportunity for us to continue to expand and when we landed an account regenerative land with two product demonstrate value and then continue to expand from there too.

So again.

I've mentioned to you that our vision to create the world's most loved enterprise software company. So we tend to start small we tend to start with asking for an opportunity to deliver value. So I'll use. The example of an electronics company that.

It was one of our first clients has started with $30000 that payers over $3 million to $4 million now and that's a story that can play out in any one of our customers.

Yeah.

Wonderful. Thank you very much and then one for Chris if I can be we talked about leading indicators from from a billings and RPI perspective, obviously, you pointed out the strong growth in professional services can you just help us understand how you think about that.

The growth there as a potential leading indicators that implementation services.

Just help us understand that a little bit.

Yes, so services for US you May remember, it's made up of two components again, it's 13% of our total revenue, but the two components. So the split roughly 50.50.

Our recurring service business, we call managed services and then platform enablement services in the IDC and most enterprise software businesses revenue from managed services. It looks a lot like our subscription business is generally recurring in nature is recognized evenly over the contract term and so that means really that more than 90% of our total revenues actually become recurring and so it's that enablement.

That tends to fluctuate on a quarterly basis based on a variety of different factors like the timing of when that work is performed but we see that the one of the reasons that guidance in Q3 is a little bit less and then the outperformance that we saw in Q2 is really the normalized rate there is around the $14 million to $15 million Mark on a quarterly basis.

And so theres nothing Theres no strange changes as far as your models are concerned it's very it should be very consistent nothing has changed in that business.

Okay got it thank you and congrats again.

Thank you. Thank you.

Our final question comes from the line of Michael <unk> with Keybanc. Please proceed with your question.

Just a quick one.

Can you just drill down on research light in Europe rollout and more generally of a self service go to market.

Yeah, Michael Let me, let me take that this is rajiv. So this is an attempt for us to make our platform. That's very comprehensive as you know more accessible to our target segment to be clear, we're only targeting the <unk>.

Largest and fastest growing companies in the world.

And we've always needed to help them.

To get their hands and expedient in the platform.

Getting to know how things work.

And this is also a way for us to hopefully shorten the sales cycle.

And so this is the self service options. So that he can you can try before you buy and you can get your hands on keyboards.

Maybe as a user but from a target company. So we're not driving any traffic to this site outside of R. R.

As we go to the next 30000 companies on our list the removing friction in the sales process as it is.

It is a very very important.

Part of our things to solve and it's also become bigger.

Part of our strategy to drive more inbound.

Requests and demands and we need to just moved and that the funnel all the way from the top down.

<unk>.

Thanks Rajiv.

Okay. Thank you last thing just to add to what Roger said.

When you really think about our Tam, which is north of $50 billion.

We think about the 171000 customers.

The debt or potentially.

<unk> customers for sprinkler, we purposely targeted our account executives in the sales team to the first 10000. The first vector that Roger was speaking about and then the second vector.

Plenty of room to continue to expand and grow and as Chris mentioned when you look at ASP of 350 K.

<unk> got plenty of room to continue to grow this business for decades to come.

Thanks, guys.

Thank you ladies and gentlemen, we have reached the end of the question and answer session and I will now turn the call over to Rajeev Thomas for closing remarks.

I want to thank you all again for joining this call and the <unk>.

The opportunity to present to you I appreciate your support and your interest we're here trying to create a brand new category in a few years it should be very obvious that this could be what.

Be coming after the big last Big one which is CRM and <unk>.

And the trend is very very obvious as you read the new S ones that are coming out and how the language is changing even existing large companies. The word unified appears a lot more towards the XM appears a lot more and we've got a 10 year advantage on it and so this is playing for the long game and hopefully in the process create accompany that.

Our investors partners and customers will love. Thank you again for your time and we look forward to talking to you soon.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.