Q4 2023 Sprinklr Inc Earnings Call
Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome to Sprinklers fourth quarter fiscal 2023.
Speaker 2: I'd now like to hand the conference over to your first speaker today, Mr. Eric Scrow, Vice President of Finance, for introductory remarks. Please go ahead, Eric. Go ahead, Eric.
Speaker 3: Thank you, Kevin, and welcome everyone to Sprinklers' fourth quarter and fiscal year 2023 financial results call. Joining us today are Rajee Thomas, Sprinklers' founder and CEO , and Manish Saran, chief financial officer. We issued our earnings release a short time ago, filed the related form 8K with the SEC.
Speaker 3: and we've made them available on the investor relations section of our website, along with the supplementary investor presentation. Please note that on today's call, management will refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation.
Speaker 3: or as a substitute for the financial information presented in accordance with GAAP. You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAAP. In addition, 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.
Speaker 3: including our guidance for the first fiscal quarter of 2024 and full fiscal year 2024, and our 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 our filings.
Speaker 4: Q4 was another strong quarter that exceeded guidance across all key metrics.
Speaker 4: Q4 total revenue grew 22% year-over-year to $165.3 million and subscription revenue grew 26% year-over-year to $148.3 million. With our continued commitment to operational efficiency, we generated a record of over
Speaker 4: $14.3 million in non-GAAP operating income for the quarter due to strong revenue growth and greater operational discipline company-wide.
Speaker 4: While we expect the sales cycles to remain elevated in FY24, we did have a record number of new bookings due to strong expansion deals and exciting new logo growth. Our growth retention was on par with leading enterprise software companies.
Speaker 4: And we saw continued strong momentum in our sprinkler service suite, formerly known as Modern Care. Sprinkler service represented over 40% of our new bookings for the quarter.
Speaker 4: Let's start with the go-to market.
Speaker 4: On the go-to-market front, we believe that spending environment was largely unchanged in Q4 compared to previous quarters.
Speaker 4: But we are increasingly confident that the changes we are making and its impact on our business and our ability to execute.
Speaker 4: Our focus, as you know, has been on making it easier to sell sprinklers. Here are a few examples of the work that is underway. We added dedicated sprinkler service specialists. We created a dedicated team of new logo sales reps. We're leveraging partners now to act more at ease.
Speaker 4: deal sourcers rather than just deal influencers. We are in the process of developing a verticalized solution-based selling approach as opposed to a product based approach. And we are moving to a productivity driven sales model as opposed to just pure capacity-based.
Speaker 4: sales model.
Speaker 4: I also want to share the progress that we've seen from our expanded partnerships with Salesforce and Accenture that we talked about last quarter. We continue to win enterprise deals with customers transitioning out of social studio. One of those deals, for example, in Q4 led to a seven-figure multi-year contract with a leading global CPG company.
Speaker 4: Our deep expertise in social combined with the new AI innovations and integrations are just a few reasons why we believe that Sprinkler will continue to remain the leader in enterprise social media management.
Speaker 4: There are several exciting announcements on the platform side to start with. We renamed our product suites this quarter to simplify them and to align them with our longer term strategy to mainstream each one of them.
Speaker 4: We believe this provides better clarity for our customers and reflects the market categories they belong to more accurately to drive awareness and brand recognition in the marketplace.
Speaker 4: Modern care is now sprinkler service.
Speaker 4: aligned with the CCAS market. Social engagement and sales is now simply sprinkler social. Modern marketing and advertising is now sprinkler marketing. And modern research is now sprinkler insight.
Speaker 4: Finally, our live portfolio as we roll out more self-service capabilities will now just be referred to as self-service.
Speaker 4: Next, let's take a deeper dive into sprinkler service and why we are seeing success as a radical disruptor in the C-Cast Base.
Speaker 4: Printer Service is a comprehensive AI-powered contact center as a service platform.
Speaker 4: we are transforming the contact center.
Speaker 4: from an old voice-based cost center to an omnichannel revenue center by unifying marketing and sales for more efficient service and growth for the business. And with Sprinkler Insights, as you know, we have the unique ability to harness the
Speaker 4: publicly available digital data in addition to traditional call transcripts to quickly identify top service issues and reduce overall ticket volume coming in. Our pace of innovation in this phase continues as highlighted in our recent announcement 2 clip this
Speaker 4: of over 100 features that we have added to our service offering, notably predictive intelligence, AI-based quality management, and outbound voice data.
Speaker 4: According to a recent Gartner report, $800 billion is going to be spent annually on contact center labor costs.
Speaker 1: Thank you.
Speaker 4: technology and labor. We all know that AI is going to optimize this fairly dramatically.
Speaker 4: Now, it might surprise you to know that today, Sprinkler supports on our platform 75,000 call center agencies.
Speaker 4: with 30 new deployments happening with large brands around the world as we speak.
Speaker 4: In FY23, we had 11.
Speaker 4: 1 million or more deals in our service suite alone. And just a few weeks ago, we were named a challenger in the Gartner Magic Quadrant for Enterprise Conversational AI Platforms.
Speaker 4: Let's switch gears to social now. We are very excited to announce the self-service version of our industry leading social media management institution called Sprint faith!
Speaker 4: social media teams can now access Sprinklersocial on a self-service basis for publishing, engagement, and reporting. It's also integrated with OpenAI's generative AI models to create better content faster and with fewer resources.
Speaker 4: This out-of-the-box product is simpler, smarter, and better than any other competing social media management tool available in the market today.
Speaker 4: The self-service and enterprise versions of SprinklersSocial, like with SprinklersService before, are both on the same backend codebase, which means that teams can start with the self-service version and seamlessly opt for the enterprise offering as their needs grow.
Speaker 4: Let's talk about AI, which I know is quite a popular topic these days.
Speaker 4: Five years ago, back in 2018, we issued a press release.
Speaker 4: describing how Sprinkler was the only enterprise software provided in the front office that gives brands the capabilities to reach, engage, and listen to their customers across a growing number of digital channels. So it's not a new buzzword for us. Our entire Unified CXM platform and every one of our full robust products with.
Speaker 4: was built from the ground up with our proprietary AI capability. I want to make it clear that in building Sprinkler, we took an operating system approach to our platform, which makes it very easy for us to integrate with any existing or new software product.
Speaker 4: when and where it upgrades our own capabilities.
Speaker 4: This is one of the reasons we are so excited about our integration with OpenAI. There's a massive potential and a big market transition happening with Generated AI. And we see the potential of how we can work together to truly revolutionize front office for our mutual customers.
Speaker 4: AI and machine learning will continue to be a cornerstone and a competitive advantage for Spring Web. And we will play our part to help mainstream AI across all customer facing functions of large companies.
Speaker 4: We look forward to further integrating OpenAI across our entire platform and in all our products. During the fourth quarter, we continue to add new customers and expand with existing customers.
Speaker 4: This includes world-class brands like AT&T, Activision, IKEA, Mars, Prudential, and Telefonica. Here are some examples of how customers are currently using Sprintpa.
Speaker 4: Let's start with Sprinklers Service, our omni-channel customer service solution. Last year, we were chosen to support the large-scale CCaaS transformation of one of the largest banks in the world, HDFC. We have replaced more than 10 point solutions and have replaced more than 10 point solutions.
Speaker 4: inbound and outbound voice, text, and voice.
Speaker 4: voice, text, social, and messaging.
Speaker 4: Our platform now supports more than 5 million interactions on text-based channels every month and more than 12 million voice calls. With a strong focus on AI and unification across channels and teams, we've also launched the banks first.
Speaker 4: voice bot, and conversational chat bots.
Speaker 4: our AI is able to resolve 70% of customer inquiries and has reduced the average case handling times across all channels by 15%. HDFC has reduced the first response time by more than 50%, five zero. And Sprinkler is now integrated with eight of the banks.
Speaker 4: backend systems across 100 customer journeys, making Sprinkler the single screen for most users and enabling them to provide a consistent and seamless experience to its 71 million customers.
Speaker 4: last quarter, we shared a big win in the CCAS space with one of the world's leading global streaming media companies.
Speaker 4: This quarter, I am pleased to announce that they have expanded their partnership with Sprinkler Marketing. The company is consolidating 15 desperate solutions and
Speaker 4: Its entire global marketing team of more than 700 users in 30 countries onto Sprinkler Marketing. With a clear, real-time view of paid, owned, and earned media performance, the company's marketing team can make faster, more collaborative, and data-driven creative and media investment decisions.
Speaker 4: Sprinklers AI-powered insights will enable them to increase their reach, optimize their creative assets, and drive excitement in the market around their title releases.
Speaker 4: The next example is my favorite and it demonstrates the true transformational power of the unified customer stage in front of this platform.
Speaker 4: In the very first of its kind for any country that we know of, the Civil Services and Government Development Bureau of Qatar selected Sprinter as its technology partner to transform how the government provides services to and engages with the public.
Speaker 4: Qatar National Vision for 2020 is focused on building a competitive government with the ability to measure, monitor, and improve its public services.
Speaker 4: The government aims to meet the demands of Qatari citizens and residents for fast, personalized interactions with government agencies on any communication channel. With Sprinkler, Qatar will now eliminate several fragmented technology solutions and unify approximately 40 public service agencies.
Speaker 4: onto one unified citizen experience management platform. This enables, obviously, the seamless delivery of omni-channel experiences to its citizens, residents, and visitors. I'd like to take a moment to celebrate our incredible engineering team who makes all of this possible. They continue to innovate at a breakneck pace that differentiates us in a big way in the market.
Speaker 4: In closing, I'd like for you to have three clear takeaways. Number one, we're going to be a disruptive player in CCAS. That's a pretty 30, 40 year old industry. We are a digital native company who has created a modern omnichannel approach to integrating 30 plus digital channels.
Speaker 4: innovate and win in social. It's where we started as a company and that foundation has enabled us to build disruptive new opportunities like we are doing in CCAS. And lastly, number three, we are well positioned to begin mainstreaming our solutions and AI for customer facing functions.
Speaker 4: we have a five-year head start and advantage in building proprietary AI that's integrated into all products across our entire platform. A platform that's built on a highly open, scalable, and flexible architecture.
Speaker 4: This is a great competitive advantage because it offers our customers a way to connect to any homegrown or in-house systems they build or any other industry solution in the marketplace. I want to thank our customers, partners, and...
Speaker 4: Most importantly today, our employees for their incredible hard work and results. I also want to thank all of you and our investors for believing in the vision. Let me hand the call over to Manish.
Speaker 4: importantly today, our employees for their incredible hard work and results. I also want to thank all of you and our investors for believing in the vision. Let me hand the call over to Manish. Thank you, Rajeev, and good afternoon everyone.
Speaker 4: As you heard from Rajee, FY23 was a stellar year for sprinkler, which we capped off with a strong Q4 that once again exceeded expectations.
Speaker 4: In fact, during the fourth quarter, we achieved quarterly records in gross new bookings, total revenue, gross margin, and non-GAAP operating income.
Speaker 5: Many of the tailwinds that Vaji mentioned coupled with sprinklers leading artificial intelligence and product development capabilities really excited me about the company when I joined a year ago.
Speaker 5: But we also uncovered several areas in need of structural improvements, and we have been executing on these initiatives for the last several quarters.
Speaker 5: During FY23, we pivoted towards a productively led model, eliminated projects that were not yielding an attractive ROI, and as Rajee discussed, we made a deliberate effort to make it easier to sell sprinkler. We made a deliberate effort to make it easier to sell sprinkler.
Speaker 5: You saw the fruits of our efforts play out throughout the year as demonstrated by sequential growth and subscription revenue, the stability and absolute non-GAAP operating expenses.
Speaker 5: our ability to generate free cash flow, and our reported non-GAAP operating income in both Q3 and Q4.
Speaker 5: These results were driven by a conscious effort to be more efficient and develop a culture of good corporate hygiene and financial prudence.
Speaker 5: In line with this, we recently concluded an internal review across product areas, regions, and support functions to help us grow and scale the business and to ensure our resources are best aligned with sprinklers' priorities moving forward. As a result of this review, we restructured our global workforce by approximately 4% back in
Speaker 5: forward financial results.
Total revenue was $165.3 million, up 22% year over year, and above the high end of our guidance range. This was driven by subscription revenue of $148.3 million, which grew 26% year over year, also above the high end of our guidance range. Our subscription revenue continues to accelerate.
in terms of both absolute dollars and growth rate.
In the fourth quarter, the sequential increase in subscription revenue was $8.4 million, a meaningful uptick when compared to the increases in Q2 and Q3.
Services revenue for the quarter came in at $17 million. As noted on the third quarter earnings call, this was driven by a focus on margins for our services business as we have been thoughtful about not taking on lower margin services business.
We will continue to actively manage our professional services margins, which will impact the absolute level of our professional services revenue going forward, something that I will cover in detail later in my prepared remarks.
Our subscription revenue based net dollar expansion rate in the fourth quarter was 124%.
Our gross renewal rate in Q4 was again on par with leading enterprise software companies.
We believe this high renewal rate, coupled with the expansions in our installed customer base, is a testament to how important Sprinkler is to our customers' daily workflows and how our customers view Sprinkler as a platform to standardize on.
As of the end of the fourth quarter, we had 108 customers contributing $1 million or more in subscription revenue over the preceding 12 months, which is a 32% increase year-over-year. As a reminder, with that being said, we did have
We calculate this customer count using $1 million in recognized revenue from these customers on a trailing 12-month basis as opposed to ARR.
Regarding our total customer count, we ended the fiscal year with 1,428 customers, which is a 22% increase in new customers for the year.
Turning to gross margins for the fourth quarter. On a non-GAAP basis, our subscription gross margin was a record 83% as we continue to drive efficiencies in our cloud operations, leading to a total non-GAAP gross margin of 77%, another record for us here at Sprinkler.
We have posted steady and consistent improvement in our non-GAAP subscription and total gross margin every quarter in FY23.
We also reported continued steady improvement in our professional services non-GAAP gross margin in the fourth quarter, which came in at approximately 22%.
We continue to generate efficiencies in sales and marketing and have shown consistent improvement in SNM spent throughout the year.
Sales and marketing expenses in the fourth quarter are now 45% of revenues compared to 56% this time last year. This is a 1100 basis point decrease year over year. We also realized operating leverage from G&A which decreased by 60 basis points year over year.
performance, improved gross margins, coupled with operating expense discipline across every department.
This quarter's non-GAAP operating margin compares very favorably to the negative 8% operating margin in the fourth quarter of last year.
To that end, in terms of free cash flow, we generated $16.3 million during the fourth quarter compared to a burn of $18 million in the same period last year.
Calculated billings for the fourth quarter were $232.2 million, an increase of 25% year-over-year, and a billings record for sprinklers.
And just as a quick reminder, our fourth quarter billings have historically been the largest for us given the timing of our renewals. Turning to a quick summary of financial results for the full year FY23, a year in which we posted material improvements and strong growth across the board, including total revenue, gross margins, and the total revenue.
non-GAAP operating income, free cash flow, and our key performance indicators. Total revenue was $618.2 million, up 26% year over year, and subscription revenue was $548.6 million, up 28% versus the prior year.
calculated billings for the full year were $659.3 million, up 23% year over year. I am happy to say that we posted non-GAAP operating income for the full year of $6 million, equating to a non-GAAP net income per share of one cent and a non-GAAP operating margin of one percent. Our non-GAAP operating income improved
by $41.5 million over FY22, which coupled with the incremental $125.8 million in revenue, demonstrates the inherent operating leverage in our business and computes to an incremental operating margin of approximately 33%.
In terms of free cash flow, we generated 22.2 million in adjusted free cash flow for the year, compared to a burn of 45.3 million in FY22.
This is a $67 million improvement in free cash flow generation in just one year. This cash flow generation contributed to our very healthy balance sheet, including $579 million in cash and investments and no debt.
A quick side note on Silicon Valley Bank SVB, our exposure to SVB is immaterial and our cash balances are held at other large well-capitalized financial institutions. We have a $50 million credit facility with SVB that we are currently in the process of terminating. Because of the end of FY23, total remaining performance obligations are now in effect.
We continue to believe that subscription revenue, subscription revenue growth, RPO, and RPO growth represent the best metrics to evaluate the underlying health of the business.
Our billings can fluctuate significantly relative to revenue based on the timing of invoicing, cadence of renewals, and the duration of customer contracts. Moving now to our Q1 and full year FY24 guidance and business outlook.
As you heard today, long-term demand trends and engagement for sprinklers remain strong.
We are encouraged by the leading indicators coming out of the fourth quarter and the momentum we have across our business, especially sprinkler service.
we recognize that the macroeconomic environment continues to be uncertain and volatile, and our current assumption is that the broader macro trends from the last few quarters are likely to continue through FY24. For Q1 FY24, we expect total revenue to be in the range of $168 million to $170 million.
representing 17% growth year over year at the midpoint. Within this, we expect subscription revenue to be in the range of $153 million to $155 million, representing 21% growth year over year at the midpoint. We expect non-GAAP operating income to be in the range of $1.5 million to $1.5 million, representing 21% growth year over year at the midpoint.
in Q1, we spent approximately $4 million, which is included in the above numbers.
said differently, excluding this charge, non-GAAP operating income would have been in the range of $7 million to $9 million.
For the full year FY24, we expect subscription revenue to be in the range of $644 million to $648 million, representing 18% growth year over year at the midpoint.
We expect total revenue to be in the range of $710 million to $714 million, representing 15% growth year over year at the midpoint. For modeling purposes, assume the quarterly revenue numbers follow the same distribution as FY23.
These guidance ranges imply a services revenue of $15 million for Q1 and $66 million for full year FY24.
For modeling purposes, assume $30 million in services revenue for the first half and $36 million in the second half. We expect services revenue to decline marginally in both Q1 and fully at FY24 for all the reasons we have been discussing over the last few quarters.
In addition, we expect the services mix to migrate more towards managed services, which carries a higher margin.
As a result of this migration, we will be hiring more managed services consultants in the first half of FY24, which will depress services margins in the first half to break even before picking back up to approximately 15% for the second half of the year.
for projecting billings for both Q1 and full year FY24, it would be prudent to assume that billings growth tracks revenue growth for the full year.
This implies total billings for FY24 of 759 million. For modeling purposes, this total billings number should be spread across the arc of the four quarters, largely following the same trend as FY23. As I had stated earlier, the total billings number should be spread across the arc of the four quarters, as well as the total billings number should be spread across the arc of the four quarters.
We have been working on migrating customer billings to an annual billing cycle and have begun to see the early results of that effort, improving billings growth and narrowing the historical 5% gap between revenue growth and billings growth.
For fully at FY23-24, we estimate non-GAAP operating income to be in the range of $41 million to $45 million, equating to a non-GAAP net income per share of $0.13 to $0.15, assuming 273 million weighted average shares outstanding.
This implies a 6% non-GAAP operating margin at the midpoint. In deriving the net income per share for modeling purposes, an $11 million total tax provision for full year FY24 needs to be added to the non-GAAP operating income range just provided.
We estimate a tax provision of 2.5 million here in Q1. We also expect to be solidly free cash flow positive on a full year basis and to generate positive net income for the full year on a GAAP basis, which would be the first time ever.
Lastly, I would like to thank all our employees for their dedication, delivering a record quarter for Sprinkler and for closing the year strong. During an uncertain macro environment and continued volatility in the financial markets, I am also grateful for the confidence that our customers have placed in us.
We remain focused on building a track record of successful execution and operating discipline across the business.
And with that, let's open it up for questions. Operator. Thank you. We're now conducting a question-and-answer session. As a reminder, please ask one question and one follow-up to return to the queue. If you'd like to be placed into question queue, please press star-1 at this time. One moment, please, while we poll for questions. Our first question today is coming from Remo Lencho from Barclays. Your line is now live.
Hi, this is Isaac on for RIMO. Thanks for taking the question. I wanted to talk a little bit about NRR and the moving pieces there. When thinking about the drivers of this, how should we think about seats versus more modules and functionality? And as we look to FY24, are there any considerations we should note between these two drivers? Thank you.
Hi there, this is Manish. Thank you for the question. What we have said before is two-thirds of our new business comes from existing accounts through upsells. And that can be a mix of whether it's more seats, more modules, more product suites.
and it's a combination of all three. There isn't any discernible difference, and as we look at bolting on more ARR into the business, from our perspective, all those things add more revenue and more opportunity set into the account base. And I think those trends ought to continue, so which is part of the reason you would notice, total customer account increase only 22%.
going from 1166 last year to 1428 at the end of FY23, but our accounts with more than a million dollars in revenue increased 32%. So I think that trend probably will continue through FY24. We're obviously making several initiatives as Raji mentioned earlier around increasing more logos in the end of the business.
But for right now, I think that would be a safe place to start.
Great, thank you.
Thank you. Next question is coming from Brett Knoblock from Cancer Fish Children's. Line is now live. Line is now live.
Hi guys, thanks for taking my questions on the quarter. It seems like you guys saw very good momentum on the new customer addition front in the year. I guess as we look at next year, should we expect maybe the contribution to subscription revenue or billings or however you want to look at it from the new customers added to be a bit greater than maybe what we saw this year?
And maybe on a total new customer ad perspective, should we expect something similar this year? Do you expect that metric to kind of continue to increase given what you guys are doing on the self-service side? Thank you.
Yeah, Brett, this is Raji. Let me take a crack at it. We don't anticipate a big shift in the mix. As we outlined before, our strategy with self-service is to...
to just go after our target account list, which is about 43,000 companies, and just give them a way to get started to try our product before they have to contact sales and get a feel for what the platform does. So we don't, why are we gonna have a little more renewed and dedicated focus? That's something we've been trying to do.
So, there's really not a big focus on customer logos as much as there's a focus on growth and ARR. Perfect. Thank you. And then maybe just one clarification question on RPO or total RPO and current RPO growth.
I guess the year over year growth numbers I have were total of 0.2.7 and current of 18.6. And I believe that's all in 409.2 for current and 586.4 for last year, which was in your press release last year. I guess, am I using the wrong numbers there for the compare period?
Yeah, this is Manish. So I think you'll see this detailed in the 10K that's going to be filed on Monday. The numbers that we're using for RPO and CRPO now are slightly different from what was released in the prior year results.
And as part of our SOTS compliance this year as a first year public company, we've gone ahead and really looked at contracts all the way back to 2013. And we found that there were a handful of contracts from 2014 that had a term for convenience. The customers have obviously been with us since 2014.
but accounting rules would prevent us from including that in the RPO. So we've had to make a small adjustment. So you should go with the numbers that are now placed in the press release versus the numbers in the prior earnings releases.
from including that in the RPO. So we've had to make a small adjustment. So you should go with the numbers that are now placed in the press release versus the numbers in the prior earnings releases. Does that make sense?
Yes, it does. Appreciate the color there. Thanks, Scott.
Thank you. Next question today is coming from Pindralambora from JP Morgan. Your line is now live.
Hey, thank you so much and congrats on the quarter. Rajee, obviously AI is kind of the topic to you and you talked a little bit about it and we all know that Sprinkler has been investing in AI for quite some time, but I wanted to ask you, how do you kind of think about, as you even double down on AI with open AI connections.
How do you think about the productivity improvement that AI provides, which might end up resulting in reducing the opportunity in terms of number of seats versus any opportunity from sprinkler to kind of drive price increases to monetize the value that customers get? Panchalam, great question.
So, we are big believers in AI, as you said. We are very thrilled with the new development and progress on the generative AI front. As you know, we have AI models in every part of the platform. So, this picture of, we're going to make your dollar work harder, is the reason why we are growing.
And so, this is, it doesn't change the story for us. So, we make the ad dollars work harder and marketing resources get you farther. And on the contact center side, as we, you heard the story from HDFC, we make things significantly better. Now, what, as a disrupter in the marketplace, we do have pricing models for
contact center and make it available to consumers from the outside and itself's a model. And that's an ongoing, real-time optimized way of just making sure that your customers are getting better experience. So on the whole, our approach to contact center has been, hey, best care is no care. The second best is you can solve it yourself. The third best is you can solve it yourself.
you know, you call and get the issue resolved in the first call. And our pricing models and our approach as a platform has always been around that and increasingly, you know, as you buy more and more you end up with an ELA that would just kind of give you a lot more and not worry about seed based or resource based pricing.
Got it. Understood. One follow-up, seems like you're already seeing some success in the Salesforce ecosystem with the social studio side. Maybe help us understand or map out the opportunity there. How are some of those conversations been? If you can provide any fidelity in terms of how your relationship with Salesforce is different from
some of the partnerships of some of your competitors that would be helpful. Yeah, so we, look what's consistent about what we're seeing is that when is the target customer that fits.
what looks like an ideal customer profile for us, we have been winning very, very consistently for a long time, and we still are.
So I don't know where the noise is coming from, but for us, we encourage customers to move to the best solution for themselves. And our approach to the marketplace has been that, hey, we provide a better solution, provide better services, and we want you to take advantage of what's best in the marketplace.
Our partnership with Salesforce has been strong. They have been a great partner. And honestly, we're in a world of such open and transparent access to information that it's very hard for what used to work 20 years ago in terms of marketing gimmicks to sway a customer. So we know we have a better product for our customer profiles.
are suited for us and we stand behind it and we've been seeing consistent success. And there's a lot of noise in the down market which frankly that's not of interest to us.
I'll get back to you. Thank you. Thank you. Next question is coming from Arjun Bhatia from William Blair, your line is now live.
Thank you guys and congrats on the quarter. I wanted to maybe start off on just the go to market changes. It seems like
you're putting into place a lot of efforts to actually make that motion more efficient. Can you just give us a high-level view of how your reps are ramping and what you think some of these go-to-market changes can do from a productivity perspective in the organization?
Yeah Arjun, so I can confirm that for the last, I'd say about nine months, we identified four priorities for the company and making it easier to sell was at the top of it and the first principles-based approach you look at
customers who come in who year after year, quarter after quarter, buy more. And they are happy. You know, I talked to 310 customers last year and, you know, I found them to be pretty happy and growing and satisfied. And so the premise was, you know, there is, we got to remove friction for the people who are out there trying to find a new customer.
and make it easier for them to expedience sprinkler. So these changes are deep go-to-market changes and we've been open about the fact that that's not an area that we focused on in our earlier part of our life stage. We've been focused on the platform, we've focused on success, retention, and I think the time's come for us to focus on go-to-market.
Those changes that we're doing are revolutionary in productivity-based models and growth and...
deciding what markets to enter and get out of based on productivity, verticalizing our solutions and going to market with the solution approach. They're all very consistent and these are plays that a large perspective enterprise software giants have done for forever. So we consider this to be a long game. We think it's appropriate time for us with the scale that we have.
big interseason impact from our streamlined operations.
Got it. That's helpful, Raji. And actually, another one for you, back to the generative AI topic. It seems like, I think from what I picked up in your prepared remarks, you've integrated generative AI capabilities into social, maybe care, but can you just broadly speak on the roadmap in terms of...
adding generative AI capabilities to the rest of the product suite, where is that in terms of a priority for you? And what should we expect from a timeline perspective on that integration? Absolutely, Arjun. So we have signed a contract with OpenAI, and we have started rolling out a bunch of changes, as you rightly pointed out with social and self-service first.
We are committed to rolling it out across all product suites and everywhere it can possibly help. Now remember that in some cases we...
Predictability and brand consistency is super important for our customers, the kind of companies we deal with. So it's very important that we train these models on bound datasets and make the responses very predictable. It's cute if you're doing an online search. And it's very important that we train these models on bound datasets and make the responses very predictable. So it's very important that we train these models on bound datasets and make the responses very predictable.
if something comes back as not true and funny, will be a cute story, but that's not what you expect from the top banks or a travel company or any brand that's been, sometimes decades and scores of years building their brand. So we're gonna go all in, but we're gonna take a very thoughtful caution.
Hey Rajin, congrats on strong performance all around both top line and bottom line. First question I think is around the services chain so maybe whether it's Manish or Rajin can you talk a little bit more about exactly where those low margin services are that you can cut and maybe move to partners.
and whether or not, you know, and how you can, you know, what seems like where you're going is towards an even more sophisticated, integrated type of a omni-channel offering. How can you do that with less services?
some of it suggests that you need more. Yeah, Michael, great question, and thank you for asking it. Now, the approach we took in building the platform was to make it extremely powerful and extremely configurable, right? So we spent 10 years doing that.
So pretty much everything in Sprinkler can be configured. Now that added a lot of complexity in our early years. In the last three years, we significantly redid, we created our own UI models and paradigms and frameworks and simplified everything. We made some pretty significant architectural and technology.
changes and created persona-based apps that allow each person to come and just see what they need to see. The last big one was verticalizing it, verticalizing the platform configuration. As a result, we were able to load up configurations.
that get people a long way there, as opposed to doing discoveries and doing it one by one. And this is something that we've been doing steadily. So I'd say standardizing on the solutions, vertical markets, having our pre-built configuration kits, right, sprinkler for financial services of the CPG companies with standardized use cases. And so that's what we're doing right now. We're going to come and Pixar to speaks for themselves and move us to the next space issue that we're going to get to on our live shower. OK. Thank you, all. See you on the boys flamethrower. Alright. OK. So we've Olson on the phone at 12.
productizing more implementation is something that significantly helped us simplify. And it's been a big part of our make it easier to sell and get value from sprinkler move that I think we've made the most progress on. Yeah, and if I could add one other piece to it. When we talk about lower margin, you've heard us talk about we're building an ecosystem of service delivery partners around our products. And I think our hope here is as we enable the likes of Accenture to do more service.
service delivery teams and actually enabling the service delivery partners to do a lot of the other implementation work that historically we've been focused on.
Got it. And then in terms of the outlook, so you got it, you know, it's early in the year, good to be conservative, but you got it essentially back to mid-teens growth again, and yet you had 20s plus RPO growth, your net expansion rate, granted it's trailing 12 months, so at 124 maybe.
Maybe it goes down further from here. But all of them, and you said that you had record bookings. So what's the difference between what looks like 20% plus in many categories versus the 15% guide?
Yeah, and so thank you as always for passing through the numbers. If you look at the subscription guide, you would see that that is almost 10 million higher than consensus. Part of the reason that might be hidden is because of the services number that is down in our guide here over here.
So the overall revenue number seems like it's not moving up very much, but I would subject that as a subscription company, investors ought to focus more on our subscription revenue, and our beat here in Q4 is translating to a higher subscription number both in Q1 and for the fully at FY24.
The overall revenue number seems like it's not moving up very much, but I would subject that as a subscription company, investors ought to focus more on our subscription revenue, and our beat here in Q4 is translating to a higher subscription number both in Q1 and for the full year FY24. Okay, thank you very much.
Thank you. Next question is coming from Matt Van Vliet from BTIG. Your line is now live. Yeah, good afternoon. Thanks for taking the question. I guess looking at the sprinkler service offering, you're talking a lot about modernizing the contact center and recently added voice, but curious in terms of what mix some of those deals are coming in of actually including voice from there or you being brought in first to...
bring in the digital services, create a more omni-channel environment, and then go back and either try to win the voice, or kind of deal with that later on. Ma'am, thank you for the question. It used to be that we would be brought in for...
you know, messaging, social, digital, and then expanded the voice. But increasingly, the people are looking at the platform and in including us in a competitive RFP process, they're comfortable just starting with sprinkler for everything.
So that's, again, remember this is with the new kid on the block with sea gas and we're very encouraged by what we're seeing.
Okay, helpful. And then with the shift to more of a productivity model on the sales side, how should we think about headcount growth from quarter carrying reps or maybe even the whole go-to-market organization for fiscal 24, understanding that you just did a little bit of a reduction and you're looking to drive productivity, but how should we think about
Roth Ward.
be lower than overall revenue growth, which would make sense because as we get to our longer term model, which I know we probably will detail in great detail as we talk about our analyst day, you'll see us show a steady improvement in our spend across the board. And sales and marketing obviously would be a big piece of it.
And as we mentioned last quarter, we're committed to efficient growth and the rule of 40 is something that is a goal for us. Very helpful. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Next question is coming from Parker Lane from Steve Foyer. Your line is now live. This is Matthew Kiecker for Parker. Thanks for taking my questions. You mentioned Accenture briefly, and I wanted to double-click on that a little bit. What impact has that partnership with Accenture had on any new business generation so far, and what excites you most about that opportunity? That's been a long-standing partnership, Matthew.
raster and transform them into deal sources.
especially in the contact center space, that's a big deal. So we're bullish on all the partnership. I think the market is beginning to take shape. You know, you see this concept of bringing marketing and care and sales and advertising all together. It's just very new. I mean, we've done it with CRM companies, but there was most...
how it can do. Okay got it and then secondly, touch on the macro quickly. You have a great guide but is there any one particular business that you've seen maybe some deal scrutiny or elongation of sales cycles?
Okay, got it. And then secondly, touched on the macro quickly. You have a great guide, but is there any one particular business that you've seen, maybe some deal scrutiny or elongation of sales cycles? Okay, great.
Look, not getting worse, not getting better is the way I would characterize it. So what we saw in third quarter is what we saw in fourth quarter, and that's how we're generally feeling. Many of the macro situations haven't improved.
or deteriorate substantially, so it's kind of more of the same. Okay, terrific. Thank you very much. Thank you. Thank you. Next question is coming from Elizabeth Porter from Morgan Stanley . Your line is now live. Great, thank you.
I wanted to double click on some of the changes to making it easier to sell sprinkler. And a lot of the ones that you highlighted were more around the outbound sales motion. But I was hoping to get some color on the changes that you've seen to the inbound demand as a result of having light in-sales service. Should we expect a change of outbound and inbound?
the mix of those two to change over time? And is there a longer term implication to margin just from growing the inbound channel? Thank you. Elizabeth, long term, yes. In the short term, that's not baked into any of our guide and we're not, these changes take time and we're kind of doing everything inside out for better words.
So the marketing team has been very productive and very busy and our self-service products, again like we said, is not really an attempt, not yet, an attempt to expand our target pool, right? So this is just, again, designed around eliminating friction. So I wouldn't model anything in, you know, the next one, two, three quarters.
And then once we have more visibility, we'll articulate how we think that's going to impact margins. Great. And then just as a follow-up on the macro, it's great to hear that there is some stabilization from Q3 to Q4. Is it a similar trend that you're seeing thus far into Q1 now that it's largely behind us?
And does having, I just wanted to kind of give you a perspective, but do customers having a better visibility on 2023 budgets, is that an opportunity to help shorten some of the sales cycles, which really started to elongate at the end of 2022? Thanks. Yeah, I would say like
Q1 is always kind of back and loaded, right? As you can imagine, people coming back from holidays, as a company we do our sales kick off and a lot of internal planning budgeting gets finalized, territories assigned and all of that. So I'd say I don't have enough data to give you any meaningful color.
But we're not seeing any indications of things changing that much from Q4. Got it. Thank you. Thank you. Thank you. Next question is coming from Tyler Radtke from City Your Line. Is that live?...
Yes, thank you. Hi, Raji. I wanted to ask you about this contact center. You talked about some interesting milestones on the seat count and the recognition in some of the Gartner Magic Quadrants, which is great to see. I'm wondering if you could just kind of contextualize that a bit more.
you know, just in terms of how big of a mix of that in your business it is today and what you're seeing in the pipeline and, you know, is that an area that you're really leaning into in terms of hiring, you know, specialists, just given that that's a bit of a different market then.
where traditionally sprinklers focus. Thank you. Yeah, so I can confirm that it is a big focus for the company. In fact, internally we said this is the year of our contact center business. I can confirm that this is something that was very intentional and we have been doing steadily.
we're building out and have built out a team of dedicated specialists. So it's very important to have that domain knowledge and vocabulary in addition to the technology. So we have staffed everything from the product organization to the sales organization and support organization and people who have been doing it in some cases for like 20, 25 years.
who are also equally elated to see a very modern approach to this whole space. And how big is it? Is it percent of the revenue? Yeah, we did.
We did talk about that being 40% of our bookings for last quarter. I can confirm that it's a material part and increasingly becoming more and more material. I think Manish is planning to break out.
we'll probably start talking about the product suite in our analyst day. But it is a big part and a pretty high growth part of our business.
Great. Just to follow up on, as you think about just the opportunity in the generative AI, you talked about the contact center.
product in terms of integrations there. Could you just help us understand like how much of the success you're seeing in contact centers? Are you leading with that product more or is this kind of a traditional replacement of CCAS and then you're layering in generative AI on top of that? Thank you.
So I want to make a difference between generative AI and AI. So the reason we have been disrupting the market is primarily threefold. One is the traditional contact center vendors are voice first companies. You know, bulk of them their R&D and their legacies and that.
voice endpoint management, which now is sadly being commoditized. Our origin founding story is truly omnichannel. So, the ability to hot switch between channels while you're on a case resolution, right? That's just a very powerful thing. So, truly omnichannel number one. Number two is actually AI everywhere. Now, this is the...
the sudden rise of ChatGPT. Every part of Sprinkler, especially the contact center product, is AI based from routing to skill assessment to smart assist where we're suggesting responses. There's a lot of AI and that's how we can clearly demonstrate.
you know, called resolution, time reduction, first response, and all of that. So, AI has been a big differentiator. Now, we're going to obviously add ChatGPD and OpenAI products and make it even better, but the reason people scored us very high is because AI is not an afterthought and you don't have to go buy another AI vendor to do AI inside the contact center. It's all part of this integrated suite.
And lastly is our ability to bring service alongside marketing and sales alongside service, right? That HDFC, the beauty of the model is the outbound telesales teams is on the same platform as in inbound voice response teams. So you could be a customer calling in with a problem with your credit card. And seamlessly now somebody can just come in and talk to you about a different card.
I just had a quick one on the consolidation theme. It's something we had to deal with it as far back as
hear about a lot in this macro environment as CFOs and decision makers look to consolidate their spend on certain vendors.
Would you, anything to point to in your customer conversations or just general activity if you're seeing an increasing amount of consolidation and subsequently seeing meaningful benefit to a district-wide option? Thank you. Massively. Massively, in fact Council is looking into that more sharply.
That's been a part of our strategy and that is why Sprinkler is growing in existing customer implementations and installs. An average customer, average good implementation for Sprinkler, typically consolidates somewhere between five and some cases 30, 40 different point solutions.
in every product suite. And what people don't realize is in the kind of stuff we do, we're literally rolling out 50, 70, sometimes 100 market implementations. In every market you've got a point solution that sometimes nobody else knew about. So this consolidation theme is becoming a huge deal and it makes so much sense. Right? A marketer, a CMO, a CIO, it should not be in the systems integration business.
and expanding, making it super easy to even integrate with code that they may have written themselves.
Great. Thank you. That's it for me. Thank you. We reach out to our question and answer session. I'd like to turn the floor back over to management for any further or closing comments. Thank you, Kevin, and thank you all for joining us today. I'd like to thank, first, our employees and then our partners and our partners.
and most importantly, our customers for their trust and continued business. We look forward to updating you all again as we continue on this exciting journey of creating a new category that we call Unified Customer Experience Management. Thank you very much and have a good evening. Thank you. Welcome to today's teleconference and webcast.