Q2 2024 Sprinklr Inc Earnings Call
Ladies and gentlemen, thank you for standing by.
To sprinkler second quarter fiscal 2024 earnings conference call.
At this time all participants are in a listen only mode. After.
After the Speakers' remarks, there will be a question and answer session.
Please limit your questions to one with one follow up so we will have time to go through all the questions.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker today, Mr. Eric Crowe Vice President Finance for introductory remarks. Please go ahead Eric.
Thank you, Doug and welcome everyone to sprinklers second quarter of fiscal year 'twenty 'twenty four financial results call. Joining us today are Roger Thomas Sprinklers, founder and CEO and many serene sprinklers Chief Financial Officer, We issued our earnings release, a short time ago, followed the related form 8-K, with the SEC 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 or as a.
The 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 result of sprinkler that involve many assumptions risks and uncertainties.
Including our guidance for the third fiscal quarter of 2024, and full fiscal year 'twenty 'twenty four our strategy, our product capabilities and our market opportunity 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 with the SEC, which are also posted on our website with that I'll now turn it over to Rajiv.
Thank you, Eric and Hello, everyone. Thank you for joining us today.
Very pleased that Q2 was another strong quarter that exceeded guidance across all key metrics Q2, total revenue grew 18% year over year to $178 5 million and subscription revenue grew 23% year over year to 163 point.
5 million.
With our continued focus on operational efficiency, we generated $21.3 million in non-GAAP operating income for the quarter.
Our key focus areas continue to be creating a new category that we call unified CX M innovating.
Innovating faster than our competitors by harnessing the power of AI and improving our offer operational efficiencies, while focusing on measurable value for our customers.
We are pleased with how unified CX M is continuing to evolve basic category and we are focused on mainstreaming, our cold product suite across the broader front office.
In my travels around the world last quarter, the best brands in the World are continuing to ask us to help consolidate the front office technologies reduce their operating costs helped reduce risks all while bringing people and data together to create better customer experiences for them.
Large and complex enterprise brands seamless experiences are impossible to XT eight.
Cross a multitude of channels function business units and markets that are traditionally operating inside those units.
Unified CX him is differentiated at its core with a single single instance, AI powered architecture that simplifies. This complexity. It also gives fans access to publicly available conversational, mostly unstructured data in a safe and privacy compliant way that.
The current CRM and C D P relational databases cannot.
The second topic every customer's mind is AI on the heels of announcing our AI plus integration with open AI. We are now excited to announce the integration of the sprinkler AI plus platform with Google Cloud vertex AI just means that sprinkling AI plus can now provide.
Ramped with even more generally debate I capabilities that our prebuilt for enterprise level governance security and data privacy more importantly customers will now be able to bring bring along their own models from open AI robotics, AI create nuance or integrate them.
Appropriate with our proprietary AI.
We believe that every company will embrace AI eventually our assertion is that companies that approach AI as a foundational strategy will win against AI adoptive and AI enabled companies in the long run as we shared with you during our Investor day.
Generative AI has given our proprietary AI wings and sprinklers AI is the fastest way for customers and prospects to deploy deploy AI across their entire front office.
As we all know the macro environment continues to be uncertainty. However, we are diligently managing what's in our control with our go to market strategy.
Productivity improvements and execution.
This past quarter, we made a few more key hires into service specialist team to add expertise and depth to selling our contact center offerings and we continue to provide vertical lie solutions to enable quicker time to value and faster deployment.
Now includes financial services Airlines C P G technology and retail.
Regarding our partner ecosystem. We're also encouraged with some of our recent successes, including the launch of our new unified partner. This program. We have integrated several new types of partners, including independent consultant referral partners and technological solution brokers and business.
Process outsourcing partners partners as you all probably know are especially critical in the contact center space and we remain committed to training and onboarding them as rapidly as we can.
Two of our largest see Cas deals in Q2 were both sourced by partners.
Furthermore, our technology solution brokerage model is showing great momentum, providing us with almost 50 new opportunities in the past two months in the contact center space.
And finally, we continue to make progress with our self serve products. We've added dozens of new paying customers through this initiative in Q2.
We believe that our investment in self service products will help us expand access to sprinkler product and enable companies of all sizes. Eventually do expedient the power of our front office platform with decision, making around product purchases, becoming increasingly Democrat diced, even inside of <unk>.
Companies are self service product provides easy access to teams and practitioners.
Eventually and recommending it to senior stakeholders within their organization.
With respect to sprinkler service, we've continued our momentum as a disruptor in the contact center as a service space our vision to help customers.
Is to help customers transform the contact center from a legacy voice focused cost center to a more efficient.
AI powered Omnichannel revenue center by unifying it with marketing and sales.
<unk> AI first unified C cost.
Provides its customers and prospects with one more seamless consistent customer experience across channels to lower agent attrition rate and three a lower total cost of ownership.
During the second quarter, we 11 again saw several meaningful seek out deals close across all three of our primary theaters and the majority of our service deals one where with new logos.
During the second quarter, we continued to add new customers and expand with existing customers. This includes world class brands like Deutsche Telekom L. V M H Novo Nordisk, Toyota and Transunion Transunion heroes that makes it simple.
In Q2, one of the largest technology companies signed a multiyear.
$16 million plus E L. A acreage met expanding its partnership with sprinkler across all four of our product suite as it drives tech consolidation across its company wide ecosystem sprinkler replaced two more competitive at this time and the marketing and engagement space Onboarding.
Hundreds of new users to the platform, enabling tighter collaboration between these themes and saving the company significant dollars by replacing point solutions.
The company also added a thousand new sprinkler, social teach and unlimited listening from sprinkle that inside this customer has served the sprinklers definition partner for our AI product and we look forward to our continued partnership with them.
This past quarter Deutsche Telekom expanded its partnership with sprinkler further into the contact center.
Largest telco provider first partnered with us in 2022, when it implemented sprinkler marketing and sprinkler service to manage content marketing and social customer service in the German market.
As a part of this latest expansion Deutsche Telekom will move it entire European contact Center operation.
Across 11 countries onto sprint sprint.
Sprinklers AI powered customer service platform until now the companies contact centers have each been using its own set of legacy solutions.
So you shouldn't do sprinklers cloud based solution will enable them to streamline operations and enhance efficiency, while improving agent workflows and customer experiences. The flexible architecture of sprinklers see cash solution will enable Deutsche Telekom to integrate its contact center.
System across Europe , and drive its consolidation and innovation strategy across the region.
By the end of next year. The company will have more than 40000 customer service agents across 11 countries working from one unified platform.
Another sprinkle service win this past quarter is with the company if a different profile than our traditional global 2000 base. This north American delivery company facilitates same day delivery of groceries and household essentials via its hap and website the company will.
Replaced six point solutions with <unk> unified platform and with help it's over 700 agents to drive a more frictionless experience with customers.
[laughter] Printless servers with power best in class customer service to companies members and shoppers across voice chat email SMS and social and more than 250 metropolitan areas across the U S sprinklers platform will be integrated.
The Companys other back end systems, including their order management tool and will help to future proof their business by supporting.
New self service features like chat and voice bot.
Oh, there this year I told you about an exciting first of its kind when in the public center. When sprinkler was selected by the Civil services and government Development Bureau of Qatar.
As its technology partner to transform how the government provide services too and engages with the public today I have another exciting development in the public sector space. This time, the emirate of asthma.
Which is in the northern part of the United Arab Emirates.
The Emirates leaderships futuristic vision is to transform the experience of the citizens residents and tourists for dish digital department of Weizmann or D. D. E has been tasked with transforming the citizen in two to six medians across 17 local government entities.
It did.
<unk> selected spring, but as its future unified it doesn't disadvantage with platform.
Offering government services seamlessly across social digital and voice channels to more than 500, and say this isn't residents and more than 300000 tourists who visit the emirate every year.
Before wrapping up I'd like to take a moment to celebrate our incredible engineering team, who make all of this possible their speed of innovation and dedication continues to differentiate sprinkler in the marketplace.
In closing we are pretty pleased with the quarter's results and even more excited about what is to come.
We're encouraged by the engagement and the momentum we see from customers and the broader ecosystem.
We believe that our unified platform industry, leading AI and efficient execution will set us apart in helping customers unify their teams.
Consolidated front office technology increased productivity lower costs and mitigate thread to risk we remain committed to our vision of becoming the most loved enterprise software company innovating for our customers, succeeding with our partners delivering shareholder value and.
Executing for growth and continued profitability, thanks to our customers partners and our employees for their hard work and results and to all our investors. Thank you for believing in the vision I'll now hand over the call diminish.
Yeah.
Thank you Roger and good afternoon, everyone. As you heard from Rajiv we're pleased with these quarters solid results.
For the second quarter total revenue was 178 5 million up 18% year over year and above the high end of our guidance range.
This was driven by subscription revenue of $163 5 million, which grew 23% year over year also above the high end of our guidance range.
<unk> services revenue for the quarter came in at $15 million above our guidance of 14 million.
Our subscription revenue base net dollar expansion rate in the second quarter was 120%.
As we have discussed in the past the N D. E statistic is not something we monitor as part of growing our business, but rather a byproduct as macroeconomic conditions moderated in new Orleans, and desktop ourselves and as we focus more on new logo acquisition, we expect <unk> to decline slightly in the <unk>.
During quarters.
In terms of new logos, we are very pleased with the number of new customers that joined the sprinkler platform in Q2.
This is particularly true with our sprinkler service product suite as many of the deals in our service product suite over the last few quarters have been with new customers.
Given our momentum in the <unk> market and how early we are in targeting this opportunity. We are confident in our ability to add new logos at a healthy clip going forward.
As of the end of the second quarter, we had 120 customers contributing $1 million or more in subscription revenue over the preceding 12 months, an increase of five customers sequentially and a 22% increase year over year.
Turning to gross margins for the second quarter on a non-GAAP basis.
Our subscription gross margins came in at 83% as we continued to drive efficiencies in our cloud operations with total non-GAAP gross margins of 76%.
non-GAAP gross margin for professional services was slightly negative come in and coming in at minus 2%, but was positive 4% for the first half of the year and ahead of the breakeven estimate we shared last quarter.
As we have discussed in the past, we continue to invest in sea gas delivery capabilities and build out our expertise in that area.
We also continue to generate efficiencies in sales and marketing and have shown consistent improvement in sales and marketing efficiency over the last several quarters.
non-GAAP sales and marketing expense in the second quarter now stands at 41% of revenues compared to 52% in Q2 of last year.
non-GAAP R&D costs increased sequentially in the second quarter as we onboard our annual cohort of new R&D Engineers every summer from leading universities in India, but held steady at 11% of total revenue for the quarter.
Turning to profitability for the quarter non-GAAP operating income was $21 3 million, resulting in non-GAAP net income of 10 cents per basic share.
This 12% non-GAAP operating margin for the quarter was the result of revenue over performance improved subscription gross margins, coupled with broad based expense discipline and is the fourth consecutive quarter of non-GAAP profitability.
Lastly on the topic of profitability for the second consecutive quarter, we posted positive GAAP net income totaling $10 5 million or four cents per basic share.
In terms of free cash flow, we generated $8 7 million during the second quarter compared to.
Free cash flow generation of $1 4 million in the same period last year.
You'll recall on the Q1's earnings earnings call, we had alluded to a large annual payment to one of the public cloud vendors as the reason for expecting negative free cash flow in Q2.
However, during the quarter, we were able to renegotiate instead of more favorable payment terms with this result in Q2, our free cash flow generation. During the first half of this year now stands at $23 million higher than what we had generated during the entirety of last year.
Our balance sheet remains healthy now standing at $628 4 million in cash and marketable securities with no debt outstanding.
Calculated billings for the second quarter was $179 2 million, an increase of 19% year over year.
Q2 billings benefited from several million dollars more of early renewals than we had anticipated.
As of the end of Q2 total remaining performance obligations or RVO, which represents revenue from committed customer contract that has not yet been recognized was $806 4 million up 35% compared to the same period last year and CRT deal was 510.
And $4 million up 22% year over year.
The strength in our view is driven by multiyear renewals at some of our largest customers that closed during the quarter as well as multiyear sprinkler service deals. This is a testament to the commitment that some of the largest most recognized brands around the world are making disciplined.
Moving now towards Q3, and full year, FY 'twenty for non-GAAP guidance and business outlook.
As you heard today long term demand trends in engagement for sprinkler remains strong.
However, we recognize that the macro economic environment continues to be uncertain and our current assumption is that the broader macro trends from the last few quarters are likely to continue throughout FY 'twenty four.
For Q3, FY 'twenty four we expect total revenues to be in the range of 179 million to $181 million, representing 14% growth year over year at the midpoint.
Within this we expect subscription revenue to be in the range of 164 million to 166 million, representing 18% growth year over year at the midpoint.
We expect non-GAAP operating income to be in the range of 15 million to $17 million and non-GAAP net income per share of six cents to seven cents per share assuming 274 million basic.
Shares outstanding.
The slight decrease in non-GAAP operating income sequentially can be attributed to the seasonal hiring in R&D, whose full impact is felt in Q3 as well as our ongoing investments and sprinkler service product delivery.
For the full year of FY 'twenty, four we are raising and tightening both our subscription and total revenue outlook for the year.
We now expect subscription revenue to be in the range of $658 million to $660 million, representing 20% growth year over year at the midpoint.
This is an increase of $8 million at the midpoint, which is greater than the full magnitude of the Q2 beat and the subscription revenue guidance raise for Q3.
As we discussed in prior earnings calls, we have been investing in making our products easier to implement and therefore accelerating the time to value for customers.
In addition, we have also been cultivating a partner ecosystem around delivering on our product suites, such that we expect our service delivery partners, who take on a larger proportion of the services revenue attached in delivering on products.
These transactions have now picked up steam and not happening faster than what we had previously anticipated.
As such we now expect professional services revenue of approximately $30 million for the second half of FY 'twenty four split evenly.
Between Q3, and Q4, so approximately $15 million per quarter.
We also expect non-GAAP gross margin for professional services to be approximately negative $2 5 million in each of Q3 and Q4 driven by investments in sprinkler service product delivery as we continue to scale that business.
Given this we expect total revenue to be in the range of $719 million to $721 million for the full year FY 'twenty, four representing 16% growth year over year at the midpoint.
One way to internalize. This guide is from the perspective of the 20% subscription revenue growth year over year, which is being dragged down by the approximately 13% decline in professional services compared to the full year FY2023.
Similar to last quarter. We have included a bridge slide four our revenue guidance, which can be found on the investor presentation currently posted on our Investor Relations website.
For the full year FY 'twenty, four we're raising and tightening our non-GAAP operating income estimate to now be in the range of 65 million to $67 million equating to a non-GAAP net income per share of Turkey.
31.
Assuming 273 million basic weighted average shares outstanding.
This implies an approximately 9% non-GAAP operating margin at the midpoint.
The increase of $13 million at the midpoint is greater than the full beat for Q2 and the accompanying operating income rate for Q3.
In driving the net income per share for modeling purposes, we estimate $24 million in interest income for the full year with $6 million of that to be on here in Q3.
Furthermore, a $6 million total tax provision for the full year FY 'twenty four needs to be added to the non-GAAP operating income range just provided.
We estimate the tax provision of $2 5 million here in Q3.
And given the performance through the first half of the year, we expect to be GAAP net income positive for every quarter as well as for the full year FY 'twenty four consistent with our comments on the past few earnings calls.
As I alluded to earlier, we had several million dollars worth of early renewals in Q2 than expected. This will impact Q3, billings, which is already our seasonally slowest billings quarter as such we estimate Q3 billings to be in the mid $150 million range for the full year FY 'twenty four.
However, we expect billings to grow approximately 18% year over year, which would equate to around $780 million for the full year.
And consistent with our prior commentary, we expect to be solidly free cash flow positive on a full year basis.
Lastly, I would like to thank all our employees for their dedication and passion for what we are building and sprinkler and I'm also grateful for the confidence that our customers have placed in us during these uncertain times.
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.
Ladies and gentlemen at this time, we'll be conducting a question and answer session.
To ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Just as a reminder, please limit yourself to one question and one follow up so we may get to everyone's questions.
Our first question comes from the line of pendulum Bora with J P. Morgan. Please proceed with your question.
Oh, great. Thanks.
Thanks for taking the questions and congrats on a very strong quarter.
Rajeev. It seems like you are starting to close some materials sekos wins I wanted to ask you.
Is becoming kind of a core decisioning factor for customers because you have been investing in for quite some time you have a very strong foundation, but is that becoming a at this point the decisioning factor for customers, especially in the sea gas market.
Choose sprinkler versus <unk> versus others.
Well, let me thank you can sell them.
There are three distinct reasons that we see when customers do.
Pretty extensive process and pick sprinkler for this <unk> solution.
First is the fact that we give them a unified platform.
With 13 products in it that works seamlessly at the architecture level with each other.
As opposed to point solutions that they have to buy or.
Acquisitions that other competitors offer not in a unified way.
<unk> is the power of AI in everything we do and it's not just this month response or a smart routing pretty much every component.
In sprinkler is built with AI and.
Is brought together to create a better experience for the agent and a better experience for the.
For the for the customer tone is very simple on.
<unk> of concepts demonstrably, we're able to show Val.
Value for the business, we were able to bring the cost of technology down we're able to improve the.
Average handling time, we're able to improve the time to resolve an issue and we were able to improve NPS scores. So it's like a triple win you know customers are happier.
Your agents are happier and your.
And your company is happier, because it's making more money and saving more money.
Yep understood well one question from a niche.
The strength in our view is obviously palpable.
You talked about some.
Early renewals as well in some large deals but is there I wanted to ask you. If there is a meaningful expansion in the contract durations, which is kind of in fleeting the year over year grew 3% any way to think about that.
Yeah.
I think we did call out the fact that look our growth and our viewers because several large customers out of New York Hotel basis.
But those are the ones you would remember from even a few years ago, we had them do multiyear billings. So that hasn't happened at this time, we are sticking to annual billings when I called out on the billing side that there were select customers that renewed early that was only to make sure that you know as you think about.
Q3, billings you do take that into account.
But I think macro if you just step back we're seeing strength in renewal activity as shown in the multiyear IPO renewals.
<unk> numbers as well as our sense around overall billings for the year.
Yeah.
Got it thank you.
Our next question comes from the line of Raimo <unk> with Barclays. Please proceed with your question.
Hey, this is Frank on for Raimo Congrats on another strong quarter here just wanted to double click on the new customer addition trends that you mentioned so we really started to see the investments made into speeding up the time to value for new customers start to pay dividends, whereas she has really the major driver here on the new customer strike.
I would vote.
<unk> is definitely is a growth driver for us, but we have been investing consistently in making the technology more accessible and more approachable and easier to use for practitioners. So as you may recall we've.
Created an entire new.
UX design paradigm that we call pipers phase, we've rolled it out across the entire platform.
Number two we have introduced the concept of persona apps. So you just you only see the stuff that's relevant to you regardless of all the other powerful thinks the platform can do and three you know that we have been systematically rolling out our offerings in a self service mode. So that the practitioner can go get our hands on keyboards and experience it.
Then I'll come back in and buy the enterprise product to continue using it. So I would say, it's both and I think it's pretty refreshing for the practitioner to get our next generation UI.
On their hands.
Great. Thank you.
Our next question comes from the line of Iran.
With William Blair. Please proceed with your question.
Yep. Thank you.
That's on the good quarter here guys.
Maybe I want to pick up on that last point around self service and ease of use it seems like you are making quite a bit of progress there.
Points that you just called out but we.
What is that enabling from a business perspective can you just talk about obviously with given your customer strength, but is it allowing you to go after a different type of customer alignment to do more deals and a further period of time.
Help us maybe understand a little bit more of a business around applications.
But you are seeing now that's helpful.
Or ease of use and Scott kind of publication has gotten better.
Oh, sorry, let me just understand the question clearly origin are you asking what is supporting our growth or what benefits incremental benefits, we are bringing to the customer.
No sorry about what's supporting your growth and how you were able to.
Managing run the business and drive growth differently now that.
Implementation is easier on time to value is it's quicker what does that enable from a growth perspective incrementally.
Sure. So there are two factors that are helping us one is obviously <unk>.
Strategy to add voice and get into the broader C cap space, which as you know is a huge market right 800 billion dollar market, which you know.
Technology is not going to just replace technology I think it's gonna, replacing and scale the human labor. So I think for the first time, a bigger chunk of that 800 billion, which includes human labor. It's also at play. So that's obviously I think that.
As we disrupt that market that puts us in a good place to grow too.
Two is we've been very consistent.
Consistent in articulating that be have a focus on our go to market side.
Fixing the fundamentals and making it easier for our salespeople in the field to understand is in cell solution better and that's going to take a few more quarters to completely roll out, but we're pretty pleased with the results will be seeing so far.
Okay.
That's helpful Perfect and then.
Can you touch on the go to market leverage that you saw this quarter, because we saw a pretty significant.
Improvement in sales and marketing spend I think the dollars actually went down from from Q1 can you help us understand what's driving that and should we view that as sustainable.
Or is there are there some onetime factors in there.
So.
And you'd notice if you looked at a four quarter trend it sort of been headed in the right direction.
There isn't anything unusual to call out in Q1, all the factors I think we've discussed in the past.
We actually have been.
Really aligning the sales team around.
The core focus areas, Roger you had mentioned before about making it easier to sell.
Arc nurse.
In a different fashion as well so I think all of this is as we try to look at an incremental cost to be probably had in the plan. We've been more judicious about spending money than what we've been doing in the past so nothing unusual to call out, but I think you should assume the savings you're seeing sequentially to set up <unk>.
<unk>.
Okay got it. Thank you guys appreciate the color.
Our next question comes from the line of Elizabeth border with Morgan Stanley . Please proceed with your question.
Great. Thank you. This is fiona on for Elizabeth partner. Thank you for taking the question I wanted to ask on the dynamics that you're seeing with large customers. We saw the million dollar plus subscription revenue customers grew 22% year over year and so my question is what are you seeing at the enterprise entered the market in terms of willingness to take on strategic projects how are conversations around expansion.
Is that going as we would start to look ahead into enterprise budget planting season in the second happens this year. Thank you.
Thanks for the question Elizabeth.
As we've articulated before we're seeing a very consistent theme and trend, especially in large.
Among our larger customers.
Of consolidating them.
A cross point solutions into platforms.
And this team.
The marketing team or the <unk>.
Customer service team not being able to run 10, 15, 20, Rfps and then go Hydra system integration vendor and then create data leaks and it's just too archaic and so there is a pronounced shift to having and wanting let's say three to four companies to work together to provide a more complete.
Our front office capability set and so I think we are where we're enjoying the benefits of being that one of the options to consolidate onto so when we go and reap replace anywhere from sometimes five sometimes 15 in 'twenty over the years different point solutions in different markets.
We're positioning ourselves for the third or fourth vendor and benefiting from that consolidation.
Thank you and one follow up to that how do you make this transition and start to benefit from these consolidation trends that youre talking about are you seeing any changes in the personnel now that youre selling to so when you think about the traditional sprinkler the buyer of.
The carrier solution not necessarily the same as the CCAR solution and so I'm curious how that's changing.
And conversations that you have with the ultimate buyer for who you're selling to.
Great question. So we have been steadily seeing that shift at tradition of buyer was the cmo's organization and the CMO.
With our expansion into C. Cap. That's expanded that's expanded to include the CIO C. D. I O organization. So we are more broadly penetrated in the C suite everybody from from.
CMO to a C D O to now the CIO.
Very helpful. Thank you.
Our next question comes from the line of Brett <unk>.
<unk> with <unk>.
Cantor Fitzgerald. Please proceed with your question.
Okay.
The multiyear.
$60 million contract could you provide a bit more color on that I guess, how many year, how much bigger of an annualized value is the new contract relative to the old one.
And then more generally on the expansion motion or are you seeing your customers expand.
More so with additional seats from maybe social or is it more driven by new product expansion with the navy or nursing cast solution. Thank you.
Thank you. So in this case I can confirm that was there was a material upsell in it. So this is again as you would guess one of our larger customers who.
At the end of the term again had more goodbye and wanted to buy more so that's answer to question number one.
<unk> buying boat so in this particular case.
We continue to believe that we have you know the.
The list price of $25 million to $30 million of <unk>.
<unk> payload that a large company can buy if you wanted to deploy across business units and across markets.
This case they've already.
Bought all four product suites in most of our products though.
Some were in EAA mode. So like we pointed out at this time you know listening is unlimited for the insights product suite and so what we're seeing is where the products are not unlimited in the L. A they're expanding more seeds, we talked about 1000, most of the seats and social but it's not restricted to social it's more.
It's more consumption and expanded license and you know at some point, we expect these to end an unlimited use for most of our products.
Yeah.
Perfect and then maybe if I can just follow up with one question I guess, how frequently do you guys I guess two customers do in L. A with you guys or.
One of the.
First of all a disappointment you guys have done or do you see this trend kind of continue on.
As they go forward. Thank you.
It's infrequent.
Thing that we want to get to eventually so this this is a customer who has been with us for over 10 years, Pat as you know, we our sales approaches traditionally and currently being bottoms up so we'd like to get in with with you know in a market for the product suite at one of our.
Sure.
Offerings, and then build credibility and go bottom up so it's typically a multiyear journey and a builds momentum is bottom up success.
Is embraced by an executive who sees the overarching ability to unify and get better business outcomes.
Alright, Thank you guys congrats on the quarter.
Thank you.
Yeah.
Our next question comes from the line of Michael Church with Keybanc. Please proceed with your question.
Hey, Chris.
Jim many struggle on the solid quarter wanted to ask more questions about self service.
So a.
A couple of the.
Self service deals that you've done or where it would take.
<unk> self service.
Primarily land or expand.
And what customers what has been the customer sizes.
First of all relative to your typical customer sizes.
And then two more details around that same question.
Sure sure Michael So self service for US has been our strategy to make sure that we have our defenses lined up right to make sure that no one's attacking us from downstream in the long run.
In the short run our focus has been.
Trying to give the practitioner more exposure to the power of sprinkler get hands on keyboard.
You know that we're very very solidly focused target ICP ideal customer profile in an ICP and we've identified 43000 companies as fitting debt profile and our target market.
Our strategy has been making these products available for everyone. He can go sign up but directing our marketing and advertising and outreach only to those 43000 companies and we only follow up and encourage when.
Customer is fit our target profile and one of two things happen as they come in usually you know sometimes it's like a small team that wants to try it for a bit and they can do so and in many times, which we're seeing what we're hoping to see and what we're seeing is they try it and they realize that okay.
This is a powerful and easy to use and they talk to our sales team and by the enterprise version.
We are beginning to see now again this is as most things strategic like this is going to take us several quarters, but every quarter were seeing increasing green shoots come from this approach.
We're very encouraged by how it's progressing.
So just two follow ups on that Rajiv.
Hi.
Is it possible to tell you. If this is actually reducing average customer acquisition cost.
Actually reducing the time to deployment.
Sure.
Alagoas types of Bill.
Yeah, it's too early now that we've got a few trends kind of going back on for tier one is as we get into see gas as you know deal cycles take longer because it's a very thorough process, it's seekers transitions.
Very hard and.
They are very.
Customer service teams are very risk averse. So it's much more longer thought our deliberate RFP autophyte kind of process that takes time.
On the self service side, we were able to kind of gain some of this momentum have a deal open and close within the quarter to offset it but again you know these customers who are coming to us.
Because I was trying to tell them tend to be at least on an average smaller than the first deal size.
Okay, Great got it thanks, so much.
Absolutely Michael.
Our next question comes from the line of Michael Berg with Wells Fargo. Please proceed with your question.
Hi, congrats on the quarter and thanks for taking my question I just wanted to have more of them.
Philosophical view on your guidance.
You, obviously have a very strong quarter and being raised by more of that like you said more than the Q3 rates. So maybe what's providing that confidence is there anything outside of the strong renewal activity.
Large deals you saw in the quarter and just help us parse through what's giving you the confidence that the guidance. Thank you.
Yes. Thank you for the question. So I don't think it's any more complex than what you articulate.
At the end of the day, if you leave the professional services.
Line item aside subscription business, it's all driven by the strength in the renewal business. When we do have multiyear renewals, we call it out and that shows up in our view like like it did at this time.
And it's all driven by the linearity within the quarter. So we have been seeing stronger linearity for the last couple of quarters and what we had modeled which is part of the reason youre seeing.
In the beats in the quarter, and that's giving us more confidence as we look out over the next two quarters and I think that's captured in the guide.
Okay.
Couple of questions.
Okay.
Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question.
Yeah, Hi, thanks for taking the question.
Wanted to just hear how you.
You're seeing things trend.
So far in Q3 it sounded like.
Some really good execution in the quarter on the renewals and the.
The large eight figure transaction, but.
If things kind of been consistent in Q3 versus Q2.
What are you kind of expecting in terms of the large deal until in the second half. Thank you.
Well I'll take the first part of it and maybe Manish can talk about the next quarter.
Look the macro environment is.
Just about as uncertain as it was and it has been so we were not seeing any different behavior. This quarter over last quarter than we saw before.
Budgets are tight as most CFO scrutiny and all the good things that come with people.
People who've been not not very sure where the market is going right and interest rates are going to be.
But I think what you are seeing is America.
Consistent trickling impact of our better execution and focus on go to market.
Yeah, and just to make sure I understand was your question Tyler are you seeing anything different.
In the month or so of Q3 that we've been in compared to Q2 was that what you were trying to ask.
Yes, sorry, I, so I guess I'll I'll rephrase the question slightly.
They make it more specific and apologies for the background noise, but really the question was if you saw some really good large deal activity in Q2.
There's been a lot of noise.
It always around <unk> and Bernard.
Our renewal cycles I'm, just curious if there's any things to call out in terms of RPI low volatility and it's how how your overall large deals you're expecting most of the land in Q3.
Or just anything that would be noteworthy to call out as we're building our models. Thank you.
Yeah. Thank you for that clarification, Tyler, but theres nothing that I would call out at this stage, we as I look at the quantum of business that we're booking it sort of seems in line with what we would expect.
You know like any enterprise software company with pretty back end loaded so I wouldn't make any broad assumptions around how Q3 and Q4 would land, but there is nothing that we're seeing today that would give us any cause for concern.
Sort of along the lines of what we would expect so.
Steady is what I would say.
Thank you.
Okay.
Our next question comes from the line of Austin <unk> with JMP Securities. Please proceed with your question.
Great. Thanks, Raj. So I'm wondering if you can just kind of look back on this more recent AI wave we've seen over the last six months or so and you say that generative AI is given your proprietary AI AI wings do you think that they're kind of more recent excitement around AI has excelled.
Great and boosted our sprinklers AI efforts or or put more pressure.
Sprinkler kind of competitively overall and then over the long term I mean do you see some of this.
So to what degree is this gonna be table Stakes and then how does sprinkler thinking about being really differentiate it over the long term. Thanks.
Thank you Austin So to answer your question look I think there's a lot of hype and excitement. We've all seen this movie. Many times you know usually the hype, we've settled and the real deal start well, we've we're finding ourselves as having this blessed opportunity of being able to now talk.
About AI and how people appreciated.
And and and and the awareness that that customer.
Customers in the buyers have by a person is now half of the power of what AI can do.
And that makes articulation of our capabilities and our differentiator is much easier than it used to be so net net we're seeing positive impact on deals with the excitement around AI.
Our strategy has not been to introduce a new AI product or to have a new AI feature because for the last five years, we've bet. The farm on the idea that we are the purveyors of unstructured conversational data and there is no way to read and understand and speak back and over.
100 languages to billions of people without using AI.
So we think it is table Stakes, we think there are.
Different approaches to jumping on the AI wave and one approach is to say look this is going to change everything we're going to go into our DNA and and make sure that it's AI powered and that's how we think the other one is to say, there's an opportunity for some incremental dollars on a new product we have taken the former we stand by it.
Great. Thank you.
As a reminder, its star one to ask a question. Our next question comes from the line of Matt Van Vliet with BTG. Please proceed with your question.
Yeah. Thanks for fitting me in here at the end I guess as you look at the contact center opportunity and really broadening it.
They all have service.
How much is that still being driven by high demand from the social media side, and that's sort of the entry way in and the knowledge of sprinkler and all that you can handle.
Versus seeing sort of net new lending opportunities that are more of a pure play like for like replacement of an existing contact center out there.
Matt excellent question and I'm glad you asked it.
We are doing more of real contact center, rfps and proving ourselves to be complete unified replacement solutions for legacy players.
More so in the last two quarters than we have ever done before so were kind of coming into our own as a disruptor.
The ability to kind of show value out of the gate.
That was not true I would say, maybe two quarters ago that was kind of sort of beginning to play out a quarter ago and last quarter.
Any of our deals which is independent you know voice solutions doing an RFP comparing us to the top five players in that space and choosing us. So increasingly so they are seeing is just the pure <unk> unified solution as opposed to somebody with social and can expand to do other things.
Very helpful. And then just quickly on some of the growing outside partnerships you've had out there.
As they look at this broader.
Portfolio of products that they can go in and help customers really make true digital transformation.
Anything youre doing on your end to even I guess places a greater emphasis on those partners really leaning into.
The entire sort of co go to market, there that you'd call out for us or maybe it was on the horizon that could accelerate that business even more.
We have been investing in our partnerships generally and specifically a lot more on the <unk> side, so companies like Accenture like Tech Mahindra.
Who are established players in the contact center space. This is the opportunity to take the partnership to the next level.
I got to admit though it's very early for US right. We're a disruptive we're building a different kind of.
Different we're taking a different approach of unifying it. So there's a lot of innovation and a lot of sort of velocity in that change that's happening. So it is going to take us a few more quarters to really even get to documenting everything and enabling the part it's very much underway, but I wouldn't count on any of the results.
Great. Thank you.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Well, thank you Doug and thank you all for joining us today again I'd like to thank our employees our partners and most importantly, our customers for their trust and continued business. We look forward to updating you. All again soon as we continue this exciting journey of creating a new category that we call it unified customer experience.
Instrument and building an enterprise software company, we hope our customers love. Thank you very much and have a good evening. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.