Q2 2025 Sprinklr Inc Earnings Call
oh time i have so go over momentbetter
Speaker Change: Greetings and welcome to the Sprinkler Second Quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. If anyone's require operators, distance during the conference, please press star zero on your telephone keypad.
Speaker Change: A brief question and answer says you will follow a formal presentation. As our reminder, this call is being recorded. I would now like to turn the call over to Eric Scro, by President of Finance. Thank you, Eric. You may be getting it.
Roddy Thomas: Hey, thank you Paul and welcome everybody to Sprinkler Second Quarter Fiscal Year, 2025 Financial Results Call, joining us today at Roddy Thomas.
Trac Pham: Trac Pham, Trac Pham, Trac Pham, Trac Pham, Trac Pham, Trac Pham and Manish Sarin, Chief Financial Officer. We should our earnings release a short time ago, filed a related form 8K with the SEC, and we've made them available on the Investor Relations section of our website, along with the supplementary investor presentation.
Trac Pham: Please note that on today's call, Management will refer to certain non-gap financial measures. While the company believes these non-gap financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation, or as a substitute for financial information presented in accordance with GAP.
Trac Pham: You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to gap.
Trac Pham: In addition, during today's call, we'll be making some forward-looking statements about the business and about the financial results of sprinkler that involve many assumptions, risks, and uncertainties, including our guidance for the third fiscal quarter, and full year of 2025.
Trac Pham: The impact of our corporate strategies and changes to our leadership, the benefits of our platform and our market opportunity. Our actual results might differ materially from such forward-looking statements.
Trac Pham: And he forward-looking statements that we make on this call are based on our beliefs and assumptions as of today and we just claim 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, also posted on our website including sprinklers quarterly report on Form 10Q for the quarter ended July 31st, 2024. With that, let me now turn it over to Rajee.
Rajee: Thank you, Eric, and hello everyone, Q2 total revenue grew 11% year over year to $197.2 million and subscribe from revenue grew 9% year over year to $177.9 million
Rajee: We generated $15.2 million in non-gap operating income which resulted in an 8% non-gap operating margin for the quarter.
Rajee: Included in these results is a credit lost charge of $1.1 million. A free cash flow for the quarter was not impacted by this charge. Manish will discuss the topic in more detail during his remarks.
Trac Pham: As we acknowledged on previous calls, the transformation we're working through will take several quarters. Trac will discuss the progress we're making and how planned to capitalize on our strengths to re-accelerate growth.
Speaker Change: Before I handed over to Trac, I would like to reflect on some recent successes we have achieved.
Trac Pham: To begin with, Sprintless platform has several building blocks that we believe will underpin or turn around.
Trac Pham: In Growth and Profitability, we operate in attractive and growing markets.
Trac Pham: and support a gold star list of customers through an AI powered unified customer experience management platform.
Trac Pham: We have differentiated leadership position in our core product suite and we're also an emerging disruptor within the CECAS phase where our product is already top quadrant generating tangible benefits for our customers.
Trac Pham: During the second quarter, we added several new customers and expanded with existing ones, such as UBS, Ford, Keymobile, Group of Bimbabwe and Planet Fitness across all our products
Trac Pham: Some specific examples include one of the largest global asset managers in the world.
Trac Pham: and this industry-leading company are platform-replaced multiple social tools and point solutions, including an incumbent vendor who is in place for 12 years.
Speaker Change: Wrinkler is unifying AI powered listening, publishing, engagement, marketing and customer service across all social channels which will allow these teams to work better together and improve their customer's experiences.
Speaker Change: Another example is a global EV company.
Speaker Change: who is using our cold products we need to support the aggressive launch in multiple countries.
Speaker Change: This company uses sprinklers inside suite to understand market opportunities and our social capabilities to market on different channels that may be popular in each country.
Speaker Change: We're also seeing some remarkable business results as customers deploy our AI capabilities.
Speaker Change: Motably.
Speaker Change: With our service suite, a large North American retailer was able to use our AI to increase their call selection up to 35 percent.
Speaker Change: This resulted in an estimated 420,000 fewer calls a year that needed to be handled by expensive agents.
Speaker Change: Another example is a large global bank that saw their customers use of AI self-service increased to over 60%.
Speaker Change: This customer has implemented sprinkler CKS and saw their outbound virtual agent productivity improved by 50% as well.
Speaker Change: These are just a few recent examples of how a value proposition is resonating with some of the world's largest enterprise customers.
Speaker Change: In addition to these customer validations, our innovation is also being recognized by industry analysts. In Q2, Sprinkler was named a leader in digital customer interactions solutions for a survey. As cited by Forester and I quote,
Wrinkler Bose: Wrinkler Bose, the most feature complete solution bar none. We were also named a major player in the 2024 IDC MarketScape for Contact Center as a service.
Speaker Change: As you know, we've been building out our executive leadership team. Over the last several quarters, we've attracted and hired leaders who were experts in their fields. And our deeply passionate about driving our business forward. One of these leaders is our co-seer track.
Speaker Change: And now, like to invite Trac to share his thoughts on the work we're doing and the improvements we're making here at Sprintla Trac Over to you.
Trac Pham: Thanks, Ragy. We have strong conviction for the power of our technology vision and the significant progress we have made in building a recognized market-leading platform.
Speaker Change: We acknowledge the near-term challenges we are facing, including lower net bookings we've been experiencing over the past few quarters.
Speaker Change: This is due to execution challenges exacerbated by macroeconomic factors that have impacted customer budgets and spending specifically. First, our Unified Platform enables us to operate in two distinct markets with our course with MCCAS.
Speaker Change: Related to our course weeks, we have seen pressure on renewals due to tightening customer budgets compounded by a renewal process that was not effective enough in demonstrating value.
Speaker Change: Second, our push into C-CAS has required us to make investments in both product and implementation as we gain scale in the set of markets. We have strong offering, both have not yet achieved brand recognition.
Speaker Change: Third, as we entered new markets and pushed for growth, we launched new product innovation to very quickly over the past few years. This has created product and operational complexity, which we are addressing.
Speaker Change: We are now rebalancing our focus between building out our leadership position in our course weeds while pressing our Advantage and CKS, we're taking decisive action and with great urgency to ensure the business is on a solid foundation.
Speaker Change: These are actions we are taking to address these issues.
Speaker Change: We are sharpening our strategic focus to improve execution and scale. Once sold and implemented successfully, our customers love our products.
Speaker Change: We're there for focusing more closely on those segments and products where we can create the most value for customers.
Speaker Change: We're most successful when we sell the full value of our platform and the breadth of this capabilities while lining with the priorities and expectations of our executive clients.
Speaker Change: Related to our go-to-market efforts for the broader platform.
Speaker Change: We are refining execution processes and activities designed to re-excelerate revenue growth and meaningfully expand offering margins.
Speaker Change: Some of these initiatives include one, we are reorienting our sales team with the support of our new renewals team to increase renewal rates and reduce turn.
Speaker Change: This will improve swift engagement with customers throughout the life cycle, helping them unlock the full value of our offerings.
Speaker Change: We are also measuring health factors and renewable likelihood, directing efforts where they have the greatest impact.
Speaker Change: Second, we are changing our geographic support model to be closer to where the customers operate.
Speaker Change: We're doing this in two ways. First, by moving our implementation teams, close to the client geographies, and secondly, better aligning our success and solution consultants with our territory model.
Speaker Change: Additionally, we are deploying specialists to match expertise with customer need to the right deal opportunities. As mentioned earlier, we are elevating our sales and field expertise to focus on key suite selling for both users and technology buyers.
Speaker Change: Third, we are driving improvements in pricing and packaging aimed at simplifying our product solution offerings. We believe this will enable us to create fewer but more targeted bundles aligned with customer expectations and will help remove the sales and purchase
Speaker Change: There are early signs of success with some of these targeted initiatives. In a second quarter, we close several large deals within our global strategic accounts across the tech telecom and retail industries.
Speaker Change: We believe we have a strong product market fit with our marketing, social, insight and services sweets across these segments, and we're building the organization to better serve and scale these customers.
Speaker Change: Another key priority is ensuring we sufficiently invest in areas foundational to our ability to scale. We are examining all areas of the company, including third-party spending, for opportunities to increase productivity and efficiencies.
Speaker Change: While we are in the early stages of this effort, we believe that these actions are required to fund necessary investments to re-accelerate growth and increase margins.
Speaker Change: In closing, we are confronting the challenges we are facing with a clear and aggressive agenda. We're acting with urgency, reassessing our focus areas, and strategically reallocating our resources to align with our top priorities.
Speaker Change: Our commitment to driving excellence across the company is on wavering and we are diligently evaluating our cost structure to drive margin expansion.
Speaker Change: By executing our agenda, we believe we're building a solid operation foundation that will better position us for sustainable success.
Speaker Change: We believe these efforts will enable us to deliver, to deliver long-term value for our customers, partners, shareholders and employees. With that, I'll turn it over to Manish to discuss the financials.
Manish: Thank you, Trac and good afternoon everyone. For the second quarter, total revenue was 197.2 million, up to 11% year over year.
Manish: This was driven by a subscription revenue of 177.9 million, which grew 9% year over year. Services revenue for the second quarter came in at 19.3 million.
Manish: The broader demand environment that we have seen for over a year now has continued with longer sales cycles and heightened budgetary scrutiny.
Manish: In addition, we continue to experience elevated churn in our core product suite and expect this level of churn to continue for the fully RF-25.
Manish: Our subscription revenue-based net dollar expansion rate in the second quarter was 111%. As a reminder, we calculate NDE on a trailing 12 month subscription revenue basis, which makes it a lagging indicator.
Manish: Why we do not forecast NDE, we expect this number to come down over the next few quarters as the lower quantum of new business and elevated turn roves through the revenue waterfall and works its way through the calculation.
Manish: As of the end of the second quarter, we had 145 customers contributing 1 million or more in subscription revenue over the preceding 12 months, which is a 21% increase year over year.
Manish: We believe our continued success in winning and growing seven figure customers is an indicator of the value of the platform we deliver for our customers.
Manish: Regarding gross margins for the second quarter, on a non-gap basis, our subscription gross margin was 81% and professional services gross margin was negative 1% who resulting in a total non-gap gross margin of 73%.
Manish: Turning to profitability for the quarter, non-gap operating income was 15.2 million or an 8% margin, which drove non-gap net income of 6 cents per diluted chain.
Manish: Included in this non-gap operating income is a $10.1 million credit last charge.
Manish: Excluding this charge would have resulted in a non-gap operating income of 25.3 million or a 13% non-gap operating margin and higher than the guidance range provided for the quarter.
Manish: This charge was booked to the GNA expense line in Q2 and is largely driven by two factors.
Manish: As we entered new markets and launched new products in recent years, we saw early traction in international markets.
Manish: Business Practices in these markets result in elongated collection cycles.
Manish: Furthermore, we experienced implementation challenges in some of these markets where we did not have established partnerships and implementation teams with deep technical expertise in our new product offerings.
Manish: Assuch, we have taken specific reserves against select accounts, which will impact both revenue recognition and cash collection from these accounts.
Manish: We have since invested in both to show up our implementation performance as we continue to expand and scale our product offerings.
Manish: This charge had no effect on free cash flow for the quarter. However, these customer situations resulted in approximately $5 million being removed from our CRPO calculation as of July 31st.
Manish: With respect to free cash flow, we generated 16.5 million during the second quarter, which represents an 8% free cash flow margin compared to free cash flow of 8.7 million in the same period last year.
Manish: This cash flow generation contributed to our healthy balance sheet, which now stands at 468.5 million in cash and equivalents, would know that outstanding.
Manish: During the second quarter, pursuant to the company stock by the program, we purchase 17.1 million shares of our classic common stock for a total cost of 169.8 million.
Manish: These purchases, we have completed the full 300 million dollar buyback that was authorized by the board.
Manish: A total of 27.9 million shares were repurchased and returned to the company's authorized, but uneasured share reserved during the buyback program.
Manish: Calculated Billings for the second quarter over 190 to 0.8 million, and increase percent of year over year.
Manish: As of July 31st, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized, was 887.1 million up 10% compared to the same period last year.
Manish: and CRD was 557.8 million up 9% year over year.
Speaker Change: DC Quenchel decline in RPO and CRPO was driven by the soft demand environment, elevated chain and the approximately $5 million impact from specific customer situations as described earlier.
Speaker Change: Moving now to the Q3 and fully at FY25, non-gap guidance in Business Outlook.
Speaker Change: We continue to see elevated chain and our current assumption is that the macro softness that we are experiencing will continue through the entirety of FY25.
Speaker Change: For Q3, we expect total revenue to be in the range of 196 million to 197 million, presenting 5th to 7th year over year at the midpoint.
Speaker Change: Within this, we expect subscriptions have in you to be in the range of 177.5 million to 178.5 million, representing 4% growth year over year at the midpoint.
Speaker Change: yeah
Speaker Change: The Q3 Guide implies approximately 18.5 million in professional services revenue.
Speaker Change: As we have signaled on prior earnings calls, we are continuing to invest in our C-cast delivery capabilities given the growth opportunities available to us in that market.
Speaker Change: Assuch, we expect service of gross margins to decline in Q3 to approximately negative 15%.
Speaker Change: As we continue to gain scale and sea cast, we will begin to focus on billing rates and utilization which should improve services growth margins going forward.
Speaker Change: We expect non-gap operating income to be in the range of 19 million to 20 million, resulting in non-gap net income per diluted share of approximately 8 cents.
Speaker Change: Assuming 266 million diluted weighted average shares outstanding.
Speaker Change: The sequential decline in non-gap operating income from the Q2 adjusted level of 25.3 million is driven by two factors.
Speaker Change: First, an increase in subscription cost from higher data and hosting cost as we launch new environments. And second, from the higher professional services costs related to seecast delivery as mentioned earlier.
Speaker Change: For the full year FY25, we expect subscription revenue of 710.5 million to 712.5 million, representing 6% growth year over year at the midpoint.
Speaker Change: We expect total revenue to be in the range of 785 million to 787 million representing 7% growth year over year at the midpoint.
Speaker Change: Note that the approximately $5 million impact to CRPO described earlier equates to an approximately $3.5 million impact to FY25 subscription revenue and is factored in the revised guide for both Q3 and fully at FY25.
Speaker Change: In plus, certainly, about numbers is that we are increasing RFY-25 service guidance from 65 million to 74.5 million.
Speaker Change: For the full year FY25
Speaker Change: We are reducing our non-gap operating income to be in the range of 80.5 million to 81.5 million. Equating to non-gap net income per diluted share of 32 cents to 33 cents, assuming 270 million diluted weighted average shares of standing.
Speaker Change: This implies a 10-person non-gap operating margin at the midpoint.
Speaker Change: In adjusted for non-recurring expense categories, as well as the $11 million credit lost charges taken in the first half of FY25, this is in line with the previously issued guidance of 104 million to 105 million.
Speaker Change: These items include, first, severance and related costs of 4 million, incurred in Q2, for the reduction in force we executed in May.
Speaker Change: Second.
Speaker Change: 5 million dollars spent on consulting resources for strategic and operational initiatives to be spent during FY25.
Speaker Change: 3.5 million FY25 revenue impact from the approximately $5 million in back to CRPO as discussed previously.
Speaker Change: In deriving the net income per share for modeling purposes, we estimate $24 million in other income for the full year, with 5 million of that to be earned here in Q3.
Speaker Change: This other income line primarily consists of interest income.
Speaker Change: Furthermore, a $15 million total tax provision for the full year of 0.25 needs to be added to the non-gap operating income ranges provided.
Speaker Change: We estimate a tax provision of 4 million here in Q3. We are still tracking to be gap net in composite for the full year FY25, consistent with our comments on the past few earnings calls.
Speaker Change: With respect to Billings, Q3 is traditionally our weakest quarter and we estimate Billings to be down approximately 10% compared to the same quarter last year.
Speaker Change: and consistent with the billing strand from last year, we expect a billing re-acceleration in the fourth quarter such that four-year F.25, Billings will be up to 6% in line with the subscription revenue growth rate for the full year.
Speaker Change: With respect to free cash flow, we now estimate to generate approximately 55 million in free cash flow for the full year.
Speaker Change: Lastly, I would like to thank all our employees for their dedication and passion for what we are building at sprinkler. And with that, let's open it up for questions. Operator.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you'd like to ask your question, please press star one on your telephones, please.
Speaker Change: You may press star 0, you may press star 2 if you like to remove your questions from the queue.
Speaker Change: The participant using speaker equipment may be necessary to pick up your hands at the full press in the star keys.
Speaker Change: One moment please will we call for questions.
Speaker Change: Thank you. Our first question is from Arjun Badiah with William Blair. Please pursue your question.
Speaker Change: Hi everyone, I'm Willow Miller on for Argin. Thanks for taking our question, so start off.
Willow Miller: It sounds like pricing pressure is continuing. What's hoping to get a more color there? Is it to the same extent as last quarter? Just trying to see if there's any changes there.
Ragy: This is Ragy, I'll take that question. We're continuing to see budgetary pressures in terms of the better version last quarter, I say it's not getting any better.
Ragy: and in fact a kind of consistent with what we have seen in the past quarter and quarter before.
Speaker Change: Okay, and then any of a pair of marks you call out pricing and packaging changes, hoping for you to unpack that a little bit more.
Speaker Change: Yeah, so we have the unified platform that was organically built out over the last 14, 15 years and it's evolved quite a bit in terms of its functionality and capabilities.
Speaker Change: So where it stands now is we have been consolidating point solutions that are...
Speaker Change: or customer use and replacing it with this unified platform. And our pricing and packaging has been evolving organically based on the products we compete.
Speaker Change: We realize that there are opportunities to be more efficient and more accretive for the business by re-looking at the pricing and packaging and aligning it more to how customers buy now.
Speaker Change: Even that in the 15 years, each one of these sub-industries have also dramatically changed. So we're working with higher depriting.
Speaker Change: Building a pricing payment internally, as well as working with a pricing consulting company to evaluate the market and talk to a customer's company hand to three.
Speaker Change: Gotcha, okay. This is helpful. Thanks for taking your questions.
Speaker Change: Stop.
Speaker Change: And I might just also add that we have an opportunity to look at how we're pricing our AI. And we have been throwing it in because we're an AI first platform, but there's an opportunity to really look at examined data as well.
Speaker Change: Thank you. Our next question is from RIMO Lenshow. Please proceed with your question.
Speaker Change: Hi, this is Frank Renn for RIMO. Thanks for taking the question. So last quarter you called out a bit of an AI crowning out effect in marketing spend specifically. Just want to check in and see how you've seen this trend play out with another quarter of data and customer conversations. Thank you.
Speaker Change: Yeah, so we're seeing, um...
Speaker Change: Pretty interesting success in terms of business outcomes with AI, more on our seek-as and our service weed.
Speaker Change: Our marketing products suite, you've got a ton of AI, but I think it's more pronounced in our service suite where we're able to deflect calls using our bots and our IVR capabilities powered by AI.
Speaker Change: and as I called down in my prepared remarks, I have a couple of case studies that are pretty interesting, one where the customers are...
Speaker Change: 60% of the time, more than 60% of relying on AI powered but now as opposed to.
Speaker Change: finding their way to the human agent. We have another one with a large telecom company where we replace their current.
Speaker Change: AI-powered bot that had 12% containment and out of the gate after implementation we were able to boost that containment up to 20%.
Speaker Change: So we're seeing some, and this is in addition to making the inbound and the outbound agents more productive. So we're seeing some pretty interesting numbers there.
Speaker Change: Thank you. Our next question is from Pendulum Bora with JP Morgan. Please proceed with your question.
Pendulum Bora: Great, thank you for taking the questions just pulling in that thread that you're answering before.
Pendulum Bora: The, um...
Pendulum Bora: You have obviously seems like
Pendulum Bora: Some of your customers are seeing some pretty good productivity increases, but what are you hearing from these companies in terms of agent growth as they see these productivity improvements and then how do you feel about that transition of sprinkler?
Speaker Change: As potentially there is some pressure on Agent Groot going forward and you talked about pricing and packaging, could we see some kind of consumption based element when it comes to AI specifically.
Speaker Change: with a few questions, but let me connect. We'll see the companies.
Operator: Greetings and welcome to the Sprinklr 2nd quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: by for a couple of ways. One, their companies were really looking to cut down human labor costs in the context center and using AI as a way to do so. To be fair though, the, the, the,
Operator: A brief question and answer session will follow the formal presentation. As a reminder, this call is being reported.
Speaker Change: The turnover in the context of this pretty high, so if you get 25 percent more.
Eric Scro: I would now like to turn the call over to Eric Scro, Vice President of Finance. Thank you, Eric. You may be getting.
Speaker Change: Morifish and you just covered in one year's worth of nutrition. To be finding...
Eric Scro: Hey, thank you, Paul.
Eric Scro: Welcome everybody to Sprinklr 2nd quarter fiscal year 2025 financial results call.
Speaker Change: Companies who are translating that newfound productivity into sales improvement. Most of the contact centers we go into both.
Eric Scro: Joining us today are Rodgie Thomas, Sprinklr founder and co-CEO, Trac Pham, co-CEO, and Manish Sarin, Chief Financial Officer. We issued our earnings release a short time ago, filed the related form 8K 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-gap financial measures. While the company believes these non-gap financial measures provide useful information for investors, the presentation of this information is not intended to be considered an isolation or as a substitute for financial information presented in accordance with GAP.
Speaker Change: have inbound, as well as outbound activity inbound customer services, well as outbound TV sales.
Speaker Change: and so as they cut down on one they're able to repurpose those dollars in time into more outbound support and cross-selling from the inbound service. So those are the two trends we see.
Speaker Change: with AI, we know that the agent can see the account is going to come down. So we've priced our AI differently as different modules and we are evaluating as a part of this.
Eric Scro: You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAP. In addition, during today's call, we'll be making some forward-looking statements about the business and about the financial results of Sprinklr that involve many assumptions, risks, and uncertainties, including our guidance for the third fiscal quarter and full year of 2025. The impact of our corporate strategies and changes to our leadership, the benefits of our platform, and our market opportunity.
Speaker Change: for a more comprehensive exercise evaluating interaction based models as well.
Speaker Change: Got it. One follow from Manish. If I hood that correctly, I think killing is supposed to be down 10% a year or two, three, and then seems like a big sequential ramp in Q4.
Manish: I'm wondering what gives you confidence in that maybe talk about the pipeline slash visibility going to the second half of the year at this point.
Eric Scro: Our actual results might differ materially from such forward-looking statements. 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, also posted on our website and including Sprinklr's quarterly report on Form 10Q for the quarter ended July 31, 2024.
Jalim: Hi, I'm Jalim. So one is if you look at Q3 of last year, then even Q3 of FY22.
Speaker Change: So, you will note that there is always a big sequential decline, so last year was 10% and I think the one the year before that was also in the same range.
Ragy Thomas: With that, let me now turn it over to Roger. Thank you, Eric, and hello, everyone. Q2 total revenue grew 11 percent year-over-year to $197.2 million, and subscript from revenue grew 9 percent year-over-year to $177.9 million. We generated $15.2 million in non-GAP operating income, which resulted in an 8 percent non-GAP operating margin for the quarter. Included in these results is a credit-law charge of $10.1 million. A free cash flow for the quarter was not impacted by this charge.
Speaker Change: There was just given the quantum of new business that we were booking back then and just given the renewals screens.
Speaker Change: Q3 for us is always a little pronounced because it's our slowest quarter of the book of business as a smallest. So I think it has a more pronounced impact in Q3, which is what we are reflecting now in this guide.
Speaker Change: And then Q4, you'd remember it is always our strongest quarter. It always accounts for give or take 40% of our business. So I think just going by what we've seen and what visibility we have, that's what's facted into the guide that I've provided.
Mr.: and Mr. Thank you.
Ragy Thomas: Manish will discuss this topic in more detail during his remarks. As we acknowledged on previous calls, the transformation we're working through will take several quarters. Track will discuss the progress we're making and our plan to capitalize on our strengths to re-accelerate growth.
Speaker Change: Thank you. Our next question is from Elizabeth Porter with Morgan Stanley. Please say with your question.
Elizabeth Porter: Great, thank you for the question. I wanted to go back on the AI debate. It's really interesting to hear some of the case studies on improvements that customers are seeing when they leverage sprinklers AI capabilities.
Ragy Thomas: Before I hand it over to Track, I would like to reflect on some recent successes we have achieved. To begin with, Sprinklr's platform has several building blocks that we believe will underpin our turnaround in growth and profitability. We operate in attractive and growing markets and support a gold start list of customers through an AI-powered unified customer experience management platform. We have differentiated leadership position in our core product suite, and we're also an emerging disruptor within the CCAS space where our product is already top quadrant, generating tangible benefits for our customers.
Speaker Change: I think the other side of the debate that we often hear is what happens when customers decide to build AI themselves as we've seen also some headlines in the news.
Speaker Change: So I'd love to just get your view on the build versus bi-divate and watch out your confidence that the deal is slow down. It's more macro versus customers trying to do more themselves versus bi. Thank you.
Speaker Change: So let's have a dad's a great question and thank you for asking dad, we...
Speaker Change: To be clear, I think when you talk about AI, I want to just frame it the way we see it, okay? We see the foundation of AI, which is this insatiable need for more hardware, for which I'm sure Nvidia is being a very, very successful company because of it.
Ragy Thomas: Summers. During the second quarter, we added several new customers and expanded with existing ones, such as UBS, Ford, T-Mobile, Cooper Bimbo, and Planet Fitness, across all our product suites. Some specific examples include one of the largest global asset managers in the world. At this industry-leading company, our platform replaced multiple social tools and point solutions, including an incumbent vendor who is in place for 12 years. Sprinklr is unifying AI-powered listening, publishing, engagement, marketing, and customer service across all social channels, which will allow these teams to work better together and improve their customer's experiences.
Speaker Change: We see what we call as the infrastructure layer of AI, which is the general purpose models that companies like OpenAI and Google and Meta and others are building. And there's a lot of value in that stack and what you're going to build on top of it is going to be based on the best models that are currently available.
Speaker Change: Building Models Expensive, we have a run that's built on open source available Models and we enhance them.
Speaker Change: But Sprintler has traditionally focused on what we call as the application layer of AI which is the third layer that sits on top of these general purpose models.
Speaker Change: When you look at large companies, they have large corporations of internal data and the context and that's your knowledge base that's your product spec that is custom of feedback.
Ragy Thomas: Another example is a global EV company who is using our core product suites to support their aggressive launch in multiple countries. This company uses Sprinklr's insight suite to understand market opportunities and our social capabilities to market on different channels that may be popular in each country. We're also seeing some remarkable business results as customers deploy our AI capabilities. Notably, with our service suite, a large North American retailer was able to use our AI to increase their call deflection up to 35%.
Speaker Change: All of that today resides on internet and documents and some old legacy knowledge base. If you look at marketing and product information, that's in the dam that's on a website. So it's all over the place.
Speaker Change: So companies are going to need to bring these together somewhere where they can sanctify it because they change in the document going forward if AI is answering customer inquiries.
Speaker Change: It's a long change in the document can be catastrophe for customer experience. So there's a whole need to bring the data together, have closed loop feedback and training.
Ragy Thomas: This resulted in an estimated 420,000 fewer calls a year that needed to be handled by expensive agents. Another example is a large global bank that saw their customers use of AI-sub-service increased to over 60%. This customer has implemented Sprinklr's CCAS and saw their outbound virtual agent productivity improved by 50% as well. These are just a few recent examples of how our value proposition is resonating with some of the world's largest enterprise customers.
Speaker Change: Work flows in version control of your internal data, all of which Sprintler provides. Second is the ability to provide governance and compliance on that data who made the change why did AI save us?
Speaker Change: What was the approval workflow? And third on top of that is God-railing. What is the AI allowed to do not allowed to do? And depending on how you move that slider left to right, it can have undesirable effects. So, these are application level things that we specialize in, which makes us very confident that what we bring to the enterprise is very unique and it's very enterprise-grade and it's built to be on top of general purpose models.
Ragy Thomas: In addition to these customer validations, our innovation is also being recognized by industry analysts. In Q2, Sprinklr was named a leader in digital customer interaction solutions for a stir wave. As cited by Forester and I quote Sprinklr boasts the most feature complete solution. We were also named a major player in the 2024 IDC market scape for contact center as a service.
Speaker Change: Yeah, and I don't have to stress Elizabeth that, you know, AI, we all know that there's going to be a huge economic boom that's going to happen because of AI.
Elizabeth Porter: And it's tempting to think it's going to be just AI and this model that do everything. In reality, this AI has to be applied to every channel. That's number one. This AI has to be applied to every function. And this AI has to be applied across...
Ragy Thomas: As you know, we've been building out our executive leadership team. Over the last several quarters, we've attracted and hired leaders who were experts in their fields and are deeply passionate about driving our business forward.
Elizabeth Porter: and every customer facing teams for a car company from the dealership to the global marketing back in Japan. So all of these have to...
Trac Pham: One of these leaders is our co-sea-year track. I now like to invite track to share his thoughts on the work we're doing and the improvements we're making here at Sprinklr track over to you. Thanks, Raju. We have strong conviction for the power of our technology vision and the significant progress we have made in building a recognized market-leading platform. We acknowledge the near-term challenges we are facing, including lower net bookings we've been experiencing over the past few quarters.
Speaker Change: B.D. and of centralized ontologies and unification, and we're in a very unique position, not downplaying our execution focus, or we need to have in the short term, but in a very unique...
Speaker Change: Place where we spent 14 years unifying the fabric of this independent business units and market which we have solved very well in starting in social channels, which has been a differentiator for us.
Trac Pham: This is due to execution challenges exacerbated by macroeconomic factors that have impacted customer budgets and spending, specifically. First, our unified platform enables us to operate in two distinct markets with our courseweets and C-CAS. Related to our courseweets, we have seen pressure on renewals due to tightening customer budgets compounded by a renewal process that was not effective enough in demonstrating value. Second, our push into C-CAS has required us to make investments in both product and implementation as we gain scale in a competitive market.
Speaker Change: Great, thank you so much for that, it's a very comprehensive answer. I just wanted to get a quick follow-up in as well. You've been a lot of changes internally, just around elevating, and the sales, and expertise of fields.
Speaker Change: Can you just speak to some of the productivity levels that you're seeing within the Salesforce and where you are on on ramp capacity and where you expect to be heading into next year?
Speaker Change: Hey!
Trac Pham: This is Trac, Elizabeth, I think we're making the right changes. We've got good leaders in place, they're building out their bench strength.
Speaker Change: and it takes time for those things to change.
Speaker Change: I think there's a degree of stabilization that we're seeing which is really good.
Trac Pham: We have strong offering, but have not yet achieved brand recognition. Third, as we entered new markets and push for growth, we launched new product innovations very quickly over the past few years. This has created product and operational complexity which we are addressing. We are now rebalancing our focus between building our leadership position in our courseweets while pressing our advantage in C-CAS. We're taking decisive action and with great urgency to ensure the business is on the Solar Foundation.
Speaker Change: Despite the macro headwinds that we're facing, there are some very encouraging signs that we're stabilizing the business and they're moving ahead in certain areas.
Speaker Change: But we're still in the very early stages of that given that when you make these organizational changes, it does take time for it to flow through.
Speaker Change: Got it. Thank you very much.
Speaker Change: Thank you. Our next question is from Jackson Adder, with QBank Capital Market, please proceed with this question.
Jackson Adder: Great, thanks for taking our questions. First one, when customers are either electing to turn or reduce their sound, or just...
Trac Pham: These are actions we are taking to address these issues. We are sharpening our strategic focus to improve execution and scale. Once sold and implemented successfully, our customers love our products. We are therefore focusing more closely on those segments and products where we can create the most value for customers. We are most successful when we sell the full value of our platform and the breadth of its capabilities while lining with the priorities and expectations of our executive clients. Related to our go-to-market efforts for the broader platform, we are refining execution processes and activities designed to re-accelerate revenue growth and meaningfully expand operating margins.
Jackson Adder: You know, maybe not expand as much with sprinkler upon renewal. Where are they going? Is there a specific competitor that where people are headed or is there other parts of the IT budget that are getting dollars that may be sprinklers not?
Jackson Adder: So we are seeing budget cuts as sort of a common theme which are the things we can't really control.
Speaker Change: But when customers, again, as we mentioned on the last call, we're seeing more like down cells and not logo-chants. So customers are chewing up, it's probably one way to...
Trac Pham: Some of these initiatives include 1. We are reorienting our sales team with the support of our new renewals team to increase renewal rates and reduce churn. This will improve swift engagement with customers throughout the life cycle, helping them unlock the full value of our offerings. We are also measuring health factors and renewal likelihood directing efforts where they have the greatest impact.
Speaker Change: to look at it. But when they go to a competitor, we're not seeing that landscape change dramatically at all. We're not seeing any new shift in where they go or how they go. But I think the more pronounced things.
Speaker Change: That we're seeing the downsides and screwing up and cutting back.
Speaker Change: Hello.
Trac Pham: 2. We are changing our geographic support model to be closer to where the customers operate. We are doing this in two ways. First, by moving our implementation teams closer to client geographies and secondly, better aligning our success and solution consultants with our territory model. Additionally, we are deploying specialists to match expertise with customer needs to the right deal opportunities. As mentioned earlier, we are elevating our sales and field expertise to focus on C-suite selling for both users and technology buyers.
Speaker Change: Okay, all right, understood, and then Manisham the three discodes are the mechanics of the credit charge and view.
Manisham: Recognize revenue from these customers and if you have how much and then if I just think about 10 million or 10 or 11 million in total, 5 million taking out of non-current. Or I'm sorry, current RPO does that mean that the balance.
Manisham: is still left.
Manisham: to come out of revenue in future periods. Thanks.
Speaker Change: Yeah, so I think the way to think about legends look at Q2, the 10.1 million charge.
Speaker Change: Give it a three and a half or four million inches right off. These are, you know, older accounts for a variety of reasons we've deemed uncollectable.
Trac Pham: 3. We are driving improvements in pricing and packaging aimed at simplifying our product and solution offerings. We believe this will enable us to create fewer but more targeted bundles aligned with customer expectations and will help remove sales and purchase friction. There are early signs of success with some of these targeted initiatives. In a second quarter we close several large deals within our global strategic accounts across the tech, telecom, and retail industries. We believe we have a strong product market fit with our marketing, social, insights and services suites across these segments, and we're building the organization to better serve and scale these customers.
Speaker Change: And then I said, as I said in my prepared remarks, 6 million is for specific accounts.
Speaker Change: where either given their geography or some of the implementation challenges that I brought from earlier, for that 6 million of specific reserves, the CRPO associated with those accounts is approximately 5 million.
Speaker Change: So, that would be for the duration of those accounts for FY25, still the end of January. The revenue we would have recognized had we not taken the 6 million worth specific years, there would have been 3.5 million.
Trac Pham: Another key priority is ensuring we sufficiently invest in areas foundational to our ability to scale. We are examining all areas of the company, including third-party spending, for opportunities to increase productivity and efficiencies. While we are in the early stages of this effort, we believe that these actions are required to fund necessary investments to reaccelerate growth and increase margins. In closing, we are confronting the challenges we are facing with a clear and aggressive agenda.
Speaker Change: So that 3.5 million, we have then removed and that is factored into the guidance that I gave for the full year.
Speaker Change: The Zad.
Speaker Change: Square for you?
Zad: Yes, so then the just 6 million minus the 3 to add, that's just going to come in in, you know, we'll be at Edmund to FY 26, as the rest of that CRPO would have fallen into revenue.
Speaker Change: Correct, but just for this year, if the midpoint of the guide right now at 7,11.5 million for subscription, Ragyn, you add back to 3.5 year or sort of at where we were before.
Trac Pham: We're acting with urgency, reassessing our focus areas, and strategically reallocating our resources to align with our top priorities. Our commitment to driving excellence across the company is unwavering, and we are diligently evaluating our cost structure to drive margin expansion. By executing our agenda, we believe we are building a solid operational foundation that will better position us for sustainable success. We believe these efforts will enable us to deliver to deliver long-term value for our customers, partners, shareholders and employees.
Speaker Change: But I was just trying to provide you that bridge for this year and you're correct in your view around there as I had went for next year.
Ragyn: Alrighty, okay, thank you.
Speaker Change: Thank you. Our next question is from Matt VanBlee with BPIG. Please proceed with your question.
Matt VanBlee: Good afternoon. Thanks for taking the question. Just one of the come back to the new pricing and packaging initiatives you put in place.
Manish Sarin: With that, I'll turn it over to Minesh to discuss the financials.
Matt VanBlee: Curious as you've gone through your analysis and now putting that into place, sort of what the expectation is on overall deal sizes.
Manish Sarin: Thank you, Track, and good afternoon, everyone. For the second quarter, total revenue was 197.2 million, up to 11% year-over-year. This was driven by a subscription revenue of 177.9 million, which grew 9% year-over-year. Services revenue for the second quarter came in at 19.3 million.
Speaker Change: Coming out of that, as you sort of stream line and simplify what you're doing there. And then what if any impact would you expect that to also have on the renewals with existing customers?
Speaker Change: So Matt, I want to be very clear. We have not completed that project. In fact, we've just rolled it out in the last quarter, so I would expect that that project to run through another quarter or so and it will not have any impact for this year.
Manish Sarin: The broader demand environment that we have seen for over a year now has continued with longer sales cycles and heightened budgetary scrutiny. In addition, we continue to experience elevated churn in our core product suites and expect this level of churn to continue for the full year FY25. Our subscription revenue-based net-dollar expansion rate in the second quarter was 111%. As a reminder, we calculate NDE on its railing 12-month subscription revenue basis, which makes it a lagging indicator.
Speaker Change: This was Trac was outlining it as a series of things that we're doing as we foundationly said this up for re-actualeration in the out quarters.
Matt VanBlee: Okay, I hope so, and then I guess I'm the...
Speaker Change: The renewal team that you put in place, can you give us a sense of sort of the...
Manish Sarin: While we do not forecast NDE, we expect this number to come down over the next few quarters as the lower quantum of new business and elevated churn rolls through the revenue waterfall and works its way through the calculation. As of the end of the second quarter, we had 145 customers contributing 1 million or more in subscription revenue over the preceding 12 months, which is a 21% increase year-over-year. We believe our continued success in winning and growing 7 figure customers is an indicator of the value of the platform we deliver for our customers.
Speaker Change: The size of that team and any, I guess, head count related expenses that are associated with that and maybe what the discussion internally was about.
Speaker Change: Building out that team rather than just hiring more account executives that would still handle some of that renewal pressure as part of the overall quota.
Speaker Change: Hey man, this is Trac. I think there's two things I would add. One is...
Trac Pham: In the past and part of the problem is that the renewal effort was distributed across, you know, a variety of different teams and different folks.
Speaker Change: The idea of building out the renewal team is to create a central focus that can draw that effort. And to your, that's the first point, second to your point, why wouldn't we hire more agencies?
Speaker Change: Here, gonna do ball.
Speaker Change: We are making sure we hire folks to try better bookings as well as supporting the renal effort. All those things that I'm describing is factored into the guidance that Manish has given. So it's not incremental, incremental to that.
Manish Sarin: Arjun Bhatia, Charles Holla, Credit Lost Charge, excluding this charge would have resulted in a non-gap operating income of 25.3 million or a 13-cent non-gap operating margin and higher than the guidance range provided for the quarter. This charge was booked to the GNA expense line in Q2 and is largely driven by two factors. As we entered new markets and launched new products in recent years, we saw early traction in international markets. Business practices in these markets result in elongated collection cycles.
Speaker Change: Okay, great, thank you.
Speaker Change: Thank you. Our next question is Michael Burr with Wells Farge. Please proceed with your question.
Michael Burr: Hey, thanks for taking my question. I have a, I have one from Manish here on margin impacts from the Sard. You mentioned on your opening remarks that
Manish: adjusting for the charge as well as the handful of other items that the...
Speaker Change: Operating income would be in line with the prior guidance. Can we think about that prior down to 149 as a starting point for?
Speaker Change: Modeling Out Your Operating In Converses, coming off with a lower number and they're not guiding for out year yet, but just for modeling purposes.
Manish Sarin: Furthermore, we experienced implementation challenges in some of these markets where we did not have established partnerships and implementation teams with deep technical expertise in our new product offerings. As such, we have taken specific reserves against select accounts, which will impact both revenue recognition and cash collection from these accounts. We have since invested in both to show our implementation performance as we continue to expand and scale our product offerings. This charge had no effect on free cash flow for the quarter.
Speaker Change: Yeah, so if I understand your question, you're trying to ask is it?
Speaker Change: is using the 104 million to 105 million. The operating margin derived from there should that be used as a rough rule of thumb for the out years.
Speaker Change: Correct.
Speaker Change: I think we will provide more color right now as I think about Rodgy and Trac alluded. It's squarely focused on the second half of this year.
Manish Sarin: However, these customer situations resulted in approximately $5 million being removed from our CRPO calculation as of July 31st. With respect to free cash flow, we generated $16.5 million during the second quarter, which represents an 8% free cash flow margin compared to free cash flow of $8.7 million in the same period last year. This cash flow generation contributed to our healthy balance sheet, which now stands at 468.5 million in cash and equivalence with no debt outstanding.
Speaker Change: There is a lot of initiatives on the way, so we will provide more constructive color commentary around operating income numbers for the out years, I think in the subsequent calls.
Speaker Change: Help all of me, thank you.
Speaker Change: Thank you, our next question is from Parker Lane with Seafood. Please proceed with your question.
Speaker Change: Great, thanks guys, this is Jack and Shane out for Parker, thanks for taking my question. Trac, you mentioned sharpening your strategic strategies, saying you're going to focus more on segments and products that are delivering most value. Would you mind providing a little color on what products are segments?
Manish Sarin: During the second quarter pursuant to the company's stock buyback program, we purchased 17.1 million shares of our classic common stock for a total cost of 169.8 million. These purchases we have completed the full $300 million buyback that was authorized by the board. A total of 27.9 million shares were repurchased and returned to the company's authorized but uneasured share reserved during the buyback program. Calculated billings for the second quarter were $192.8 million and increase of 8% year over year.
Speaker Change: You may be more or less focused on going forward and I know you guys are just kind of starting this project but any initial thoughts around where you might be a little more focused
Speaker Change: I think that a really good way to describe is that really going back to what we've been good at when you look at
Speaker Change: How we built this company over the course of the 14 years.
Speaker Change: We've done really well when we started it in a prizes and large companies. We've done well when we've been able to sell.
Manish Sarin: As of July 31st, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was $887.1 million up 10% compared to the same period last year, and CRPO was 557.8 million up 9% year-over-year.
Speaker Change: the platform and its full capabilities. We've done well, we've sold up to executives.
Speaker Change: And over the years, as we've expanded the capabilities of the products and we've added more sweets to it and we've added more capabilities, we lost focus of that strategy so in some ways.
Speaker Change: that strategic intent I described is just going back to what made us successful and really being diligent about driving the discipline and unfilking thing that.
Manish Sarin: The sequential decline in RPO and CRPO was driven by the soft demand environment, elevated churn, and the approximately $5 million impact from specific customer situations as described earlier.
Speaker Change: and if we do that we should actually be able to re-accelerate growth, actually re-accelerate growth and try to help their business.
Manish Sarin: Moving now to the Q3 and fully RFY-25 non-gap guidance in business outlook. We continue to see elevated churn, and our current assumption is that the macro softness that we are experiencing will continue through the entirety of FYI-25. For Q3, we expect total revenue to be in the range of 196 million to 197 million, presenting 5% growth year-over-year at the midpoint. Within this, we expect subscription revenue to be in the range of 177.5 million to 178.5 million, representing 4% growth year-over-year at the midpoint.
Speaker Change: God, thanks, that's super helpful. And then one quick one for me. I wanted to ask for an update on your guys.
Speaker Change: Self-Serve social media management solution, you guys announced early last year. How is it fair to the market and is it maybe picking up some demand from traditional social-skilled deals that maybe aren't crossing the finish line given the tougher macro? Thanks again.
Speaker Change: Jack, we had mentioned this in previous earnings call very clearly that our strategy in introducing the self-product. In the short term was not as a revenue driver, but more as, you know, when a company is...
Speaker Change: Very, very independent teams that don't want, that's just one simple too, and we wanted to give them an alternative in sort of having to go out as sprint number one.
Manish Sarin: The Q3 guide implies approximately 18.5 million in professional services revenue. As we have signaled on prior running schools, we are continuing to invest in our CCAS delivery capabilities given the growth opportunities available to us in that market. As such, we expect services growth margins to decline in Q3 to approximately negative 15%. As we continue to gain scale in CCAS, we will begin to focus on billing rates and utilization, which should improve services growth margins going forward.
Speaker Change: Number 2, we wanted to have our enterprise customers have an opportunity to play around, touch and feel what is in the product looks like. So those were our stated goals and consistent with that team, this is more experimental and it's not something that could all any.
Speaker Change: Substantion Fulcuson by designing Intention Disrow. When Trac's comment earlier, this faculty...
Speaker Change: Where we've been successful is a large enterprise and as you know, the large global companies in the world are very complex and very fragmented and require a very hands-on enterprise-saving approach which is where we're going to put our energy on.
Manish Sarin: We expect non-gap operating income to be in the range of 19 million to 20 million, resulting in non-gap net income per diluted share of approximately 8 cents, assuming 266 million diluted weighted average shares outstanding. The sequential decline in non-gap operating income from the Q2 adjusted level of 25.3 million is driven by two factors. First, an increase in subscription costs from higher data and hosting costs as we launch new environments. Second, from the higher professional services costs related to CCAS delivery as mentioned earlier.
Speaker Change: Got it, thank you.
Speaker Change: and welcome to Package.
Speaker Change #100: Thank you. Our next question is cap, is from Catherine Trebner with Rosenblas security.
Catherine Trebner: Thank you!
Catherine Trebner: Yeah, thank you for taking my questions.
Catherine Trebner: Can we go back and talk about renewals for a minute? I'm trying to understand, I understand when you piece-part it, you know, how you're changing your team up. What I'm trying to really get a better hand-on, what's going on within your customer base.
Catherine Trebner: Now why is there a delay and what do you see some of the issues around the renewals from that aspect? Thank you.
Manish Sarin: For the full year of 0.25, we expect subscription revenue of 710.5 million to 712.5 million representing 6 percent growth year over year at the midpoint. We expect total revenue to be in the range of 785 million to 787 million representing 7 percent growth year over year at the midpoint. Note that the approximately 5 million dollar impact to CRPO described earlier equates to an approximately 3.5 million dollar impact to FY25 subscription revenue and is factored in the revised guide for both Q3 and full year FY25. Implicitably above numbers is that we are increasing RF-wide 25 services guidance from 65 million to 74.5 million.
Catherine Trebner: I'm Katherine, this is Ragy, so we can broadly bucket the pressure on renewals in the two categories. One is obviously things we can control budget cuts and re-scrructuring and aqua stuff and that's pretty evident.
Sprintler: to the interesting thing about Sprintler, where more pronounced in the channel is the internal.
Sprintler: Execution, implementation, stuff that we've referred to in the past that we are putting more discipline around.
Sprintler: The platform is evolved pretty substantially, the implementation of that complex platform and the templatizing of that implementation so that we are sanitizing how we implement products by industry. That's something that we
Manish Sarin: William. For the full year FY 25, we are reducing our non-gap operating income to be in the range of 80.5 million to 81.5 million, including expense categories, as well as the $11 million credit loss charges taken in the first half of FY 25, this is in line with the previously issued guidance of 104 million to 105 million. These items include first, severance and related costs of 4 million incurred in Q2 for the reduction in force we executed in May.
Sprintler: are working on right now that we know will impact. The second category are things where we can fix like implementation like.
Sprintler: Making sure that we have consistent AE, success manager, SEC supporting the account. Those are things that we know we can do a better job and we are squarely focused on.
Speaker Change #103: Okay, and then how about the overhang of AI from marketing departments, not from the CKF's perspective, but more from your marketing, market departments, what do you see in there?
Speaker Change #104: It is, we're seeing pressure there, but it's hard to pinpoint that on the AI, just as the AI overhang, we see things we can fix and we're not able to.
Manish Sarin: Second, $5 million spent on consulting resources for strategic and operational initiatives to be spent during FY 25, and third, approximately 3.5 million FY 25 revenue impact from the approximately $5 million impact to CRPO as discussed previously. In deriving the net income per share for modeling purposes, we estimate $24 million in other income for the full year, with 5 million of that to be earned here in Q3. This other income line primarily consists of interest income.
Speaker Change #105: You know, put it on an AI overhang.
Speaker Change #105: Okay, thank you.
Speaker Change #105: Thank you, our next question. It's from Brian Noblah, with Panther Fitzgerald. Please proceed with your question.
Brian Noblah: Hey, what's up?
Brian Noblah: Hi guys, thanks for taking my question, I guess I'm just looking at this year we're going to grow, you know, I guess based in your guidance.
Speaker Change #107: Or is it?
Manish Sarin: Furthermore, a $15 million total tax provision for the full year FY 25 needs to be added to the non-gap operating income ranges provided. We estimate a tax provision of 4 million here in Q3. We are still tracking to be gap net and composited for the full year FY 25, consistent with our comments on the past few earnings calls.
Speaker Change #108: 4 years in description revenue.
Speaker Change #109: The subscription revenue is about maybe $2 million a year and we're spending, call it, more than $3 million in sales marketing.
Speaker Change #110: What in the go-to-market are you specifically doing? That's going to change the productivity of your go-to-market motion to the point where we can start to see growth come back, or it's just entirely dependent on macro.
Manish Sarin: With respect to Billings, Q3 is traditionally our weakest quarter, and we estimate Billings to be down approximately 10% compared to the same quarter last year. And consistent with the Billings trend from last year, we expected Billings re-acceleration in the fourth quarter such that full year FY 25, Billings will be up 6% in line with the subscription revenue growth rate for the full year. With respect to free cash flow, we now estimate to generate approximately $55 million in free cash flow for the full year.
Speaker Change #111: Oh my god!
Trac Pham: No man, this is Trac, it's going to be more than a lot of this can be driven by internal execution. The macro is a contextual element that we have to be aware of, but a lot of this is going to be our internal execution.
Speaker Change #112: You're highlighting the cost structure and the results that are getting were clearly aware of that.
Speaker Change #113: Our focus right now is recognizing that we haven't built up this structure and the discipline and the operational rigor to drive growth. We do have a cost structure that needs to be optimized.
Manish Sarin: Lastly, I would like to thank all our employees for their dedication and passion for what we are building at Sprinkler.
Operator: And with that, let's open it up for questions. Operator? Thank you.
Operator: We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone signal. You may press star 2 if you'd like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment, please, while we pull for questions. Thank you.
Speaker Change #113: Shoring up the areas that need to be strengthened to turn this business around. And then to that we expect that we should be driving better productivity that will get our cost structure in a place that's committed with a growth.
Speaker Change #114: and then maybe just one follow-up on.
Arjun Bhatia: Our first question is from Arjun Baudia with William Blair. Please proceed with your question. Hi, everyone.
Speaker Change #115: So this year, by that program, I think you guys did it, you guys completed it, it's already planned for you guys to authorize another one given the quite flexible balance sheet you guys have. Thank you.
Ragy Thomas: I'm Willow Miller on for Arjun. Thanks for taking our question. So, to start off, it sounds like pricing pressure is continuing. We're hoping to get a more color there. Is it, to the same extent, as last quarter, just trying to see if there's any changes there. Yeah, this is Ragy, I'll take that question. We were continuing to see budgetary pressures in terms of is it better or worse than last quarter? I think it's not getting any better and kind of consistent with what we've seen in in the past quarter and quarter before.
Speaker Change #116: You know, that well, we've looked ahead, leveraging our, our fellowship to create the most value for shareholders, for the thing about where we stand right now, it gives us a lot of flexibility, and we'll continue to evaluate the best use of cash going forward.
Speaker Change #116: Thank you, our next question is from Patrick Wal-Razons with Citizens JMP. Please proceed with your question.
Speaker Change #116: Yeah, great. Thank you. This is Austin Cole on for Pat. I just wanted to drill down on one of these operational complexities. I think you guys mentioned the implementation challenges last quarter. It seems like that's a little bit more front and center.
Ragy Thomas: Okay. And then you've prepared remarks to call out pricing and packaging changes hoping for you to unpack that a little bit more. Yeah, so we have a unified platform that was organically built out over the last 14, 15 years. And it's evolved quite a bit in terms of its functionality and capabilities. So where it stands now is we have being consolidating point solutions that are customers use and replacing it with this unified platform.
Speaker Change #117: Can you just talk about, like, is this a friction to, to seek acid adoption or like, what specifically do you need to do to shore it up? Like, when might that happen? Is it adding more partners or something internally? Thanks.
Speaker Change #117: [inaudible]
Ragy Thomas: Now pricing and packaging kind of has been evolving organically based on the products we compete. We realize that there are opportunities to be more efficient and more creative for the business by relooking at the pricing and packaging and aligning it more to how customers buy now even that in the 15 years each one of these sub industries have also dramatically changed so we are working with higher the pricing. We're building a pricing team into internally as well as working with a pricing consulting company to evaluate the market and talk to our customers comprehensively.
Speaker Change #118: Flanding zones are all pretty complex as you do global rollout.
Speaker Change #119: So, it's a new muscle and we're developing that muscle and we need regional partners and global partners and we're doing that in each market as we land a customer and we go through that experience and admittedly
Speaker Change #119: There's 40 years of learning that we're going through in an excavator fashion, so you know that's what tax in the implementation there.
Speaker Change #119: What we do in the developing partners and building our own internal muscle, creating playbooks, working with an external company to document it so we can enable a partners on it. All of that is undergoing.
Ragy Thomas: Gotcha. Okay. This is helpful. Thanks for taking our questions. And I might just also add that we have an opportunity to look at how we are pricing our AI and we have been throwing it in because we are an AI first platform, but there's an opportunity to relook and examine that as well.
Ragy Thomas: Thank you.
Speaker Change #119: and I'd say it is probably the first quarter that we feel like the bulk of the heavy lifting and development is kind of done. We're going to continue to evolve some modules that need to be...
Speaker Change #119: That need to be upgraded and built out to me.
Raimo Lenschow: Our next question is from Raimo Lenshapp. Please proceed with your question. Hi, this is Frank from Raimo. Thanks for taking the question. So last quarter you called out a bit of an AI crowding out effect in marketing spend specifically. I just want to check in and see how you've seen this trend play out with another quarter of data and customer conversations. Thank you. Yeah, so we're seeing pretty interesting success in terms of business outcomes with AI more on our seek as in our service suite.
Speaker Change #119: Be the best!
Speaker Change #120: But the bulk of the heavy lifting is a down. So there's a lot of focus and how do we now simplify implementation? Because we are in many cases migrating legacy solutions that have been in place for some cases 20 years. So there's a lot of institutional stuff, there's a lot of learning on how you troubleshoot a customer's infrastructure. Instrument in.
Raimo Lenschow: Our marketing product suite. You've got a ton of AI, but I think it's more pronounced in our service suite where we are able to deflect calls using our bots and our IVR capabilities powered by AI. And as I called out in my prepared remarks, I have a couple of case studies that are pretty interesting, one where the customers are 60% of that are more than 60% are relying on AI powered bot now as opposed to finding their way to the human agent.
Speaker Change #120: You know, fixed things quickly when they're not in your control. So all of that are things that we're learning and I'm pretty happy with the way we're progressing. That's on the C-cast side.
Speaker Change #120: On our core products, they have evolved as well, right? What started out in social media management is now social marketing and advertising is our insights product is evolved to be very, very AI-driven for unstructured data into product insights.
Speaker Change #120: So, we have to now figure out how to do that correctly 100% at the time and we're in the world where, you know, if we're not setting up the product, because we're a premium platform, if we're not setting it correctly, the customer doesn't get value.
Speaker Change #120: Commissarate with the premium that the pay they're going to go to a cheaper solution or a chelnet, right? So, blue printing by industry.
Raimo Lenschow: We have another one with a large telecom company where we replaced their current AI powered bot that had 12% containment. And out of the gate after implementation, we were able to use that containment up to 20%. Sand. So we're seeing some, and this is in addition to making the inbound and the outbound agents more productive. So we're seeing some pretty interesting numbers there. Thank you.
Speaker Change #120: for each solution so that the implementation team can be consistent and deliver it and turning it over to customers with the runbook so they can maintain and get value. Is something that we are focused on and that again is a not trivial things to undertake so I want to make sure that we know these are multi-quarter projects that are underway to solve.
Speaker Change #121: Good, thank you.
Speaker Change #122: Thank you. Our next question is from Clark Wright with DA Davidson. Please consider your question.
Pinjalim Bora: Our next question is from Pinjalim Bora with JP Morgan. Please proceed with your question. Great. Thank you for taking the questions. Just pulling in that thread that you're answering before the you have obviously seems like some of your customers have seen some pretty good productivity increases. But what are you hearing from these companies in terms of agent growth as they as they see these productivity improvements. And then how do you feel about that transition of sprinkler as potentially there is some pressure on agent growth going forward and you talked about pricing and packaging could we see some kind of consumption based element when it comes to AI specifically.
Speaker Change #123: [inaudible] and back to the reality of the universe, you're not the one to fool. See, Casano.
Speaker Change #123: Action.
Speaker Change #124: I'm sorry there's a lot of feedback during your question would you mind repeating that?
Clark Wright: Yes, sure. So on a net basis, you had a 7-new million-dollar plus customers, can you provide any commentaries on how that term impacted this count and then how many of these new customers are a result of CECAS adoption?
Manish Sarin: This is Manish Sarin.
Speaker Change #127: So that I understand your question is the 145, $1 million of more, you're saying that grew sequentially and you want to understand the breakdown of that growth between C-Cass and core threat.
Ragy Thomas: With a few questions, but let me get to connect with number one, we're seeing sort of companies by forget a couple of ways. One, there are companies who are really looking to cut down human labor costs in the context center and using AI as a way to do so. To be fair, though, that the turnover in the context is pretty high. So if you get 25% more, more efficient, you're just covering one year's worth of iteration to be finding companies who are translating that newfound productivity into sales improvement.
Speaker Change #128: Yeah, so first and foremost, I want to make sure you understand the 145 is not ARR driven. It's all trailing 12 months of revenue.
Speaker Change #127: So it's possible we sold these accounts in prior quarters as we have built up the revenue recognition for those accounts, it's edgeed over a million dollars. So I don't think it's...
Speaker Change #129: If there's sort of representation looking at the breakdown because these...
Speaker Change #129: Customers, as you also know, we upsell regularly, we've shared in the past that.
Speaker Change #129: Call it 2-3rds of our new business comes from Upsells, so it can be any number of...
Ragy Thomas: Well, most of the context centers we go into both have inbound as well as outbound. Activity inbound customer services as well as outbound to be sales. And so as they cut down on one, they're able to repurpose those dollars in time into more outbound support and cross selling from the inbound service. So those are the two trends we see with AI. We know that the agent seat and seat count is going to come down. So we've priced our AI differently as different modules. And we are evaluating as a part of this sort of more comprehensive exercise evaluating interaction based models as well. Got it.
Speaker Change #129: Sweet, that we sell to the account.
Speaker Change #129: and as you know, we really got it selling the full platform so I think that in the aggregate is what's driving growth in here, which is what Ragy is going to do as we stick.
Rattageef: Go back to our course, Rattageef.
Ragy: Sticking to selling the full platform, really into larger accounts, that's where we find more success.
Speaker Change #131: Got it, and you know speaking about that success, how did enterprise-specific bookings trend compares your internal expectations of quarter?
Speaker Change #132: Overall, I think we continue to do well at the, you know, sweet spot, you know, which is the end price on the boat.
Ragy Thomas: One follow up for me. If I heard that correctly, I think billing is supposed to be down 10% year year Q3 and then seems like a big sequential ramp in Q4. Wondering what gives you confidence in that? Maybe talk about the pipeline slash visibility going to the second half of the year at this point. Yeah, hi, pendulum. So one is if you look at Q3 of last year than even Q3 of FY 22.
Speaker Change #133: Got it. Thank you.
Speaker Change #133: Thank you, there are no further questions at this time. I'd like to hand the floor, back over to Rajvi Thomas for any closing comments.
Rajvi Thomas: Thank you Paul. And thank you all for joining us today. Let me close by reiterating that we have a strong conviction for our platform.
Rajvi Thomas: We have a strategy to support our vision and we are doubling down execution.
Speaker Change #135: I'd like to thank our employees, our partners, and most importantly, our customers for their trust and continue support.
Ragy Thomas: So you will note that there is always a big sequential decline. So last year was 10% and I think the one year before that was also in the same range. There was just given the quantum of new business that we were booking back then and just given the renewal screens. Q3 for us is always a little pronounced because it's our slower squatter. The book of business is the smallest. So I think it has a more pronounced impact in Q3, which is what we are reflecting now on this guide.
Speaker Change #135: We look forward to updating you all again on our next quarterly call as we continue our journey. Thank you very much and have a wonderful evening.
Speaker Change #136: This concludes today's conference, we may disconnect your eyes through this time. Thank you for your participation.
Ragy Thomas: And then Q4 you remember is always our strongest quarter. It always accounts for give or take 40% of our business. So I think it's going by what we have seen and what visibility we have. That's what's factored into the guide that I've provided. Anderson, thank you.
Elizabeth Porter: Thank you.
Ragy Thomas: Our next question is from Elizabeth Porter with Morgan Stanley. Please that customers are seeing when they leverage Sprinklr's AI capabilities. I think the other side of the debate that we often hear is what happens when customers decide to build AI themselves, where we've seen also some headlines in the news. So I'd love to just get your view on the build versus by debate and what types of confidence that the deal slowdown is more macro versus customers trying to do more themselves versus by.
Ragy Thomas: Thank you. Elizabeth, that's a great question and thank you for asking that. To be clear, I think when you talk about AI, I want to just frame it the way we see it. We see the foundation of AI, which is an inflatable need for more hardware, for which I'm sure Nvidia is being a very, very successful company because of it. We see what we call as the infrastructure layer of AI, which is the general purpose models that companies like OpenAI and Google and Meta and others are building.
Ragy Thomas: And there's a lot of value in that stack and what you're going to build on top of it is going to be based on the best models that are currently available. Building models are expensive. We have a run that's built on open source available models and we enhance them. But Sprinkler has traditionally focused on what we call as the application layer of AI, which is the third layer that sits on top of these general purpose models.
Ragy Thomas: When you look at large companies, they have large corpses of internal data in the contact center that's your knowledge base, that's your product spec, that's custom of feedback. All of that today resides on internet and documents and some old legacy knowledge base. If you look at marketing and product information, that's in the dam, that's on the website. So it's all over the place. So companies are going to need to bring these together somewhere where they can sanctify it because they change in the document going forward.
Ragy Thomas: If AI is answering customer inquiries, wrong change in the document can be catastrophic for customer experience. So there's a whole need to bring the data together, have close loop feedback and training, workflows and version control of your internal data, all of which Sprinkler provides. Second is the ability to provide governance and compliance on that data who made the change. Why did AI say this? What was the approval workflow? And third on top of that is God railing.
Ragy Thomas: What is the AI allowed to do and not allowed to do? And depending on how you move that slider left or right, it can have undesirable effects. So these are application level things that we specialize in, which makes us very confident that what we bring to the enterprise is very unique and is very enterprise grade and is built to be on top of general purpose. And I'd also stress, Elizabeth, that AI, we all know that there's going to be a huge economic boom that's going to happen because of AI.
Ragy Thomas: And it's tempting to think it's going to be just AI, then these models that do everything. In reality, this AI has to be applied to every channel. That's number one. This AI has to be applied to every function. And this AI has to be applied across every custom of facing teams for a car company, from the dealership to the global marketing back in Japan. So all of these have to be driven off centralized ontologies and unification.
Ragy Thomas: And we're in a very unique position, not not downplaying our execution focus, or we need to have in the short term. We're in a very unique place where we spend 14 years unifying the fabric of this independent business units and markets, which we have solved very well in starting in social channels, which has been a differentiator for us.
Trac Pham: Great. Thank you so much for that very comprehensive answer. I just wanted to get a quick follow up in as well. You've made a lot of changes internally just around elevating the sales and expertise of fields. Can you just speak to some of the productivity level that you're seeing within the sales force? Where you are on ungramped capacity and where you expect to be heading into next year? This is track Elizabeth.
Trac Pham: I think we're making the right changes. We've got good leaders in place. They're building out their bench strength and it takes time for those those things to change. I think there's a degree of stabilization that we're seeing, which is really good. Despite the macro macro headwinds that we're facing, there are some very encouraging signs that were stabilized in the business and they're moving ahead in certain areas. But we're still in the very early stages of that given that when you make these organizational changes, it does take time for it to flow through. Got it.
Trac Pham: Thank you very much.
Jackson Ader: Thank you.
Ragy Thomas: Our next question is from Jackson Adder with QBank Capital Marketing. Great. Thanks for taking our questions. First one, when customers are either electing to churn or reduce their spend, they're just, you know, maybe not expand as much with sprinkler upon renewal. Where are they going? Is there a specific competitor that where people are headed or is there other parts of the IT budget that are getting dollars that maybe sprinkler is not?
Ragy Thomas: So we are, we're seeing budget cuts as sort of a common theme, which are the things we can't really control. But when customers, again, as we mentioned on the last call, we're seeing more like downsells and not logo churns. So customers that screwing up is probably one way to look at it. But when we, when they go to a competitor, we're not seeing that landscape change dramatically at all. We're not, we are not seeing any new shift in where they go or how they go. But I think the more pronounced things that we're seeing, the downsells and true and up and cutting back. Okay. All right. Understood.
Manish Sarin: And then, Manish on the, do we just go through the mechanics of the credit charge? Have you recognized revenue from these customers? And if you have how much?
Manish Sarin: And then if I just think about, you know, 10 million, or 10 or 11 million in total, 5 million taken out of non-current, or I'm sorry, current RPO, does that mean that the balance is still left to come out of revenue in future period? Thanks. Yeah. So, I think the way to think about, let's just look at Q2, the 10.1 million charge. Give it a 3.5 or 4 million as just write offs.
Manish Sarin: These are, you know, older accounts for a variety of reasons we've deemed uncollectable. And then I said, as I said in my prepared remarks, 6 million is for specific accounts, where either given their geography, or some of the implementation challenges that I referenced earlier, for that 6 million of specific reserves, the CRPO associated with those accounts is approximately 5 million. So that would be for the duration of those accounts for FY 25, till the end of January, the revenue we would have recognized had we not taken the 6 million worth specific reserves would have been 3.5 million.
Manish Sarin: So that 3.5 million, we have then removed, and that is factored into the guidance that I gave for the full year. Does that square for you? Yes. So then just 6 million minus the 3.5 million, that's just going to come in in, you know, will be a headwind to FY 26 as the rest of that CRPO would have fallen into revenue. Correct. But just for this year, if the midpoint of the guide right now, it's 7.11.5 million for subscription revenue, add back to 3.5, you're sort of at where we were before. But I would just try and provide you that bridge for this year and you're correct in your, in your view around there is a headwind for next year. All righty. Okay. Thank you.
Michael Berg: Our next question is from Matt Van Blee with BTIG. Please procure their questions. Good afternoon. Thanks for taking the question. Just wanted to come back to the new pricing and packaging initiatives you've put in place. Curious as you've gone through your analysis and now putting that into place, sort of what the expectation is on overall deal sizes, coming out of that as you sort of streamline and simplify what you're doing there.
Michael Berg: And then what if any impact, would you expect that to also have on the renewals with existing customers? Matt, I want to be very clear. We have not completed that project. In fact, we've just rolled it out in the last quarter. So I would expect that that project to run through another quarter or so and it will not have any impact for this year. This was a track without lining it as a series of things that we're doing as we foundationly set this up for reaction in the out quarters.
Michael Berg: Okay, I hope so. And then I guess on the renewal team that you put in place, can you give us a sense of sort of the size of that team and any I guess head count related expenses that are associated with that. And maybe what the discussion internally was about building out that team rather than just hiring more account executives that would would still handle some of that renewal pressure as part of the overall quota.
Michael Berg: Hey, Matt, this is track. I think there's two things I would add. One is in the past and part of the problem is that the renewal effort was distributed across a variety of different teams and different folks. The idea of building out the renewal team is create a central focus that can drive that effort. And to your, that's the first point. Second to your point, why wouldn't we hire more easier to do both.
Michael Berg: We are making sure we hire folks to try better bookings as well as supporting the the renewal effort. All those things that I'm describing is factored into the guidance that Manish has given. So it's not incremental, incremental to that.
Matt Van Blee: Okay, great. Thank you.
Michael Berg: Our next question is Michael Berg with Wells Farging. Please proceed with your question. Hey, thanks for taking my question. I have a lot of money here on margin impacts on the charge. You mentioned on your opening remarks that adjusting for the charge as well as a handful of other items that the operating income would be in line with the prior guidance. And can we think about that prior guidance 100 for knowing as a starting point for modeling out your operating income versus coming up with a lower number.
Michael Berg: I know you're not guiding for out your yet, but just for a modeling purposes. Yeah, so if I understand your question, you're trying to ask is is using the 104 million to 105 million. The operating margin derived from there should that be used as a rough rule of thumb for the out years. Correct.
Matt Van Blee: I think we will we will provide more color right now as I think both Rajee and track alluded squarely focused on the second half of this year. There is a lot of initiatives underway. So we will provide you know more constructive color commentary around operating income numbers for the out years. I think in the subsequent calls. Thank you.
Trac Pham: Our next question is from Parker Lane with Steve. Please proceed with your question. Great. Thanks, guys. This is Jack and Shane on for Parker. Thanks for taking my question. Track, you mentioned sharpening your strategic strategies saying you're going to focus more on segments and products that are delivering most value. Would you mind providing a little color on what products are segmented? Lawrence, you may be more or less focused on going forward.
Trac Pham: And I know you guys are just kind of starting this project, but any initial thoughts around where you might be a little more focused? I think a really good way to describe is that really going back to what we've been good at when you look at how we built this company over the course of 14 years. We've done really well when we've targeted enterprises and large companies. We've done well when we've been able to sell the platform and its full capabilities.
Trac Pham: We've done well. We've sold up to executives. And over the years, as we've expanded the capabilities of the products and we've added more suites to it and we've added more capabilities. We lost focus of that strategy. So in some ways, that strategic intent I described is just going back to what made it successful and really being diligent about driving the discipline on, on focusing thing that. And if we do that, we should actually be able to re-accelerate growth, actually re-accelerate growth and drive a healthier business. Got it. Thanks. That's super helpful.
Trac Pham: And then one quick one for me.
Ragy Thomas: I wanted to ask for an update on your guys self-serve social media management solution. You guys announced earlier last year. How is it fair in the market? And is it maybe picking up some demand from traditional social skewed deals that maybe aren't crossing the finish line given the tougher macro? Thanks again. Jack, we had mentioned this in previous earnings call very clearly that our strategy in introducing the self-serve product in the short term was not as a revenue driver, but more as, you know, when a company has very, very independent teams that don't want to just want to simple too.
Ragy Thomas: And we wanted to give them an alternative instead of having to go out as friendly number one. Number two, we wanted to have our enterprise customers have an opportunity to play around touch and feel what the sprinkler product looks like. So those were our stated goals and consistent with that team that this is, this is more experimental and it's not something that could call any substantial focus on by design and intentionally so when to tracks comment earlier this strategy and where we've been successful is the larger enterprise and as you know, the large global companies in the world are very complex and very fragmented. And require a very hands on and a by seven approach, which is where we're going to put our energy on. Got it. Thank you. Welcome. Thank you.
Catharine Trebnick: Our next question is from Catherine Trevnik with Rosenblast Security. Oh, thank you. Yeah, thank you for taking my question.
Ragy Thomas: Can we go back and talk about renewals for a minute? I'm trying to understand I understand when you piece part it, you know, how you're changing your team up. What I'm trying to really get a better handle on what's going on within your customer base and why is there a delay and what do you see some of the issues around the renewals from that aspect. Thank you. Catherine, this is Rajee, so we can broadly bucket the pressure on renewals in the two categories.
Ragy Thomas: One is obviously things we can control, budget cuts and restructuring and macro stuff, and that's pretty evident. Two, the interesting thing about Sprinklr, where more pronounced in the chat is the internal execution, implementation stuff that you've referred to in the past that we are putting more discipline around. The platform is evolved pretty substantially. The implementation of that complex platform and the templatizing of that implementation so that we are sanitizing how we implement products by industry, that's something that we are working on right now that we know will impact.
Ragy Thomas: So the second category are things where we can fix like implementation, like making sure that we have consistent AES success manager, SES supporting the account. Those are things that we know we can do a better job and we are squarely focused on.
Ragy Thomas: Okay, and then how about the overhang of AI from marketing departments, not from the CCAS perspective, but more from your marketing, marketing department, what are you seeing there? Again, our marketing suite is probably our smallest of the other of the four, right, and so it is, we're seeing pressure there but it's hard to pinpoint that on an AI, just the AI overhang. We see things we can fix and we're not able to, you know, put it on an AI overhang. Okay, thank you.
Ragy Thomas: Thank you.
Brian Knoblauch: Our next question is from Brian Knobblow with Cancer Fitzgerald. Please proceed with your question. Hi, thanks for taking my question. I guess if I'm just looking at this year, what about a grow, you know, I guess based on your guidance for the full year in subscription revenue, you know, subscription revenues on a grow maybe one or two million dollars over a year and we're spending, call it, more than 300 million on sales marketing.
Brian Knoblauch: So I guess what in the go-to-market are you specifically doing that's going to change the productivity of your go-to-market motion to the point where we can start to see growth come back or is it just entirely dependent on macro?
Trac Pham: No, Matt, this is track. It's going to be more than a lot of this can be driven by internal execution. The Macro is a contextual element that we have to be aware of, but a lot of this is going to be our internal execution. You're highlighting the cost structure and the results that we're getting.
Trac Pham: We're clearly aware of that and our focus right now is recognizing that we haven't built up the structure and the discipline and the operational rigor to drive growth. We do have a cost structure that needs to be optimized. I think the key for us right now is balancing the need to look at the challenges that we have. Sureing up the areas that need to be strengthened to turn this business around, and then to that we expect that we should be driving better productivity that will get our cost structure in a place that's committed to it with the growth.
Trac Pham: Perfect.
Manish Sarin: And then maybe just one follow up on the share by that program. I think you guys said that you guys completed it.
Manish Sarin: Turn your plans for you guys to authorize another one given the quite flexible balance sheet. You guys asked. Thank you. You know, that will always look ahead, leveraging our our balance sheet to create the most value for shareholders for the area about where we stand right now. It gives us a lot of flexibility and we'll continue to evaluate the best use of cash going forward. Thank you.
Austin Cole: Our next question is from Patrick Wall raises with citizens JMP. Please proceed with your question. Yeah, great. Thank you. This is Austin Cole on for Pat. I just wanted to drill down on one of these operational complexities. I mean, I think you guys mentioned the implementation. Challenges last quarter, it seems like that's a little bit more front and center. Can you just talk about, like, is this a friction to see cast adoption or like what specifically do you need to do to shore it up? Like when might that happen? Is it, is it adding more partners or something internally? Thanks.
Ragy Thomas: Well, we it's different for our core suite and seek as since you mentioned, let me start with seek ask first. Seek as is a new muscle for us and it's regulated in all market and it's pretty different carrier rules and landing zones are all pretty complex as you do global roll out. So it's a new muscle and we're developing that muscle and we need regional partners and global partners and we're doing that in each market as we land a customer and we go through that experience and admittedly, there's 40 years of learning that we're going through in an accelerated fashion.
Ragy Thomas: So, you know, that's what tacked in the implementation there. What we're doing though is developing partners and building our own internal muscle, creating playbooks, working with an external company to document it so we can enable our partners on it. All of that is undergoing. And I'd say it is probably the first quarter that we feel like the bulk of the heavy lifting and development is kind of done. We're going to continue to evolve some modules that need to be that need to be upgraded and built out to be the best.
Ragy Thomas: But the bulk of the heavy lifting is done. So there's a lot of focus on how do we now simplify implementation because we are in many cases migrating legacy solutions that have been in place for some cases 20 years. So there's a lot of institutional stuff. There's a lot of learning on how do you troubleshoot a customer's infrastructure instrument and, you know, fix things quickly when they're not in your control. So all of that are things that we're learning and I'm pretty happy with the way we're progressing.
Ragy Thomas: That's on the seek outside on our core products they have evolved as well. What started out in social media management is now social marketing and advertising is is our insights product is evolved to be very, very AI driven for unstructured data into product insights. So we have to now figure out how to do that correctly 100% of the time. We're in the world where you know, if we're not setting up the product because we're a premium platform.
Ragy Thomas: If we're not setting it correctly, the customer doesn't get value, and Commissarate with the premium that they're going to go to a cheaper solution or churn it, right? So, blue printing by industry for each solution so that the implementation team can be consistent and deliver it and turning it over to customers with a runbook so they can maintain and get value is something that we are focused on. And that again, these are not trivial things to undertake. So, I want to make sure that we know these are multi-quarter projects. That are underway to solve it. Great, thank you. Thank you.
Clark Wright: Our next question is from Clark Wright with GA Davidson. Please consider your question. Hi, thank you. So, on a net basis, you had a $7 million plus customers, providing you to commentary on how we are as impacted as in how many of these customers are going to see cast adoption. I'm sorry, there's a lot of feedback during your question. Would you mind repeating that? Yeah, sure. So, on a net basis, you added $7 million plus customers.
Clark Wright: Can you provide any commentary on how that churn impacted this count and then how many of these new customers are result of see cast adoption? This has been easy. So, so that I understand your question is the $145 million or more. You're saying that grew sequentially and you want to understand the breakdown of that growth between sea cast and core? Correct. Yeah, so first and foremost, I want to make sure you understand the $145 is not ARR driven.
Clark Wright: It's all trailing 12 months revenue. So, it's possible we sold these accounts in prior quarters. As we have built up the revenue recognition for those accounts, it's edged over a million dollars. So, I don't think it's a fair sort of representation looking at the breakdown because these customers, as you also know, we upsell regularly. We've shared in the past that call it two thirds of our new business comes from upsell. So, it can be any number of these sweets that we sell to the account.
Clark Wright: And as you know, we really got it selling the full platform. So, I think that in the aggregate is what's driving growth in here, which is what Raji alluded to. You're saying as we stick, go back to our core strategy of sticking to selling the full platform really into larger accounts, that's where we find more success. Got it. And then, you know, speaking about that success, how did enterprise specific bookings trend compared to your original expectations of quarter? Overall, I think we continue to do well in our sweet spot, which is the enterprise and above. Got it. Thank you.
Operator: There are no further questions at this time.
Ragy Thomas: I'd like to hand the floor back over to Raji Thomas for any closing comments. Thank you, Paul. And thank you all for joining us today.
Ragy Thomas: Let me close by reiterating that we have a strong conviction for a platform. We have a strategy that supports our vision and we are doubling down execution. I'd like to thank our employees, our partners and most importantly, our customers for their trust and continue support. We look forward to updating you all again on our next quarterly call as we continue our journey.
Operator: Thank you very much and have a wonderful evening.
Operator: Let's conclude today's conference. You may disconnect your eyes to this time. Thank you for your participation.