Q4 2025 Sprinklr Inc Earnings Call
Speaker Change: Greetings, and welcome to the Sprinklr Q4 Fiscal Year 2025 Earnings Call. At this time, all participants are listening on me mode. If anyone would require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation.
Speaker Change: If you'd like to ask a question, you may press star one to be placed into question cue anytime and we ask you please ask one question and one follow up then return to the cue. As a reminder this conference is being recorded.
Speaker Change: It's on my pleasure to introduce your host, Eric Scro, Vice President of Finance. Alright, please go ahead.
Eric Scro: Thank you, operator, and welcome everyone to Sprinklr's fourth quarter and fiscal year 2025 financial results call.
Speaker Change: Joining us today are Rory Read, Sprinklr's president and CEO and Manish Sarin, Sprinklr's Chief Financial Officer.
Speaker Change: We issued 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.
Speaker Change: Please note that on today's call management will refer to certain non-GAAP financial measures.
Speaker Change: While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation, or as a substitute for financial information presented in accordance with GAAP.
Speaker Change: The impact of our corporate strategy 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 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 detail.
Speaker Change: On the risks associated with these forward looking statements. Please refer to our filings with the SEC also posted on our website with that let me turn it over to Rory.
Rory Read: Thank you, Eric and Hello, everyone. It's nice to be with you today I'll start by providing a few for you financial highlights before covering some of my thoughts on the progress we are making in transforming our business.
Rory Read: Fourth quarter total revenue grew 4% year over year to $202.5 million and subscription revenue grew 3% year over year to $182 $1 million.
Rory Read: We generated $25 $9 million in non-GAAP operating income, which resulted in 13% non-GAAP operating margin for the quarter.
Rory Read: I want to thank sprinkler team members around the globe and our customers and partners for trusting us to help them solve some of their most important business needs.
Rory Read: We believe we have a strong hand with growing markets, our leading edge AI platform and gold standard customers with a mission to help them deliver next generation unified engagement journeys that re imagined the customer experience.
Rory Read: We now have the clear and by the extra strategy and execution plan in place to Reenergize and grow our sprinkler core.
Rory Read: While hardening and expanding sprinkle their service to enable our customers to realize the full value of our AI based unified customer experience platform.
Rory Read: However, there is much more work to do on our journey in FY 'twenty six will be an important transition year as we stabilize the business.
Rory Read: So I have to acknowledge there are still challenges ahead as we strengthen our teams simplify our offerings and resolve the operational and technical debt that has hindered us in the past.
Rory Read: Well, we still see important areas needing focus and improvement the transformation of sprinkler is well underway.
Rory Read: We defined a well focused customer wide business strategy.
Rory Read: We've implemented a well established business management system BMS to track and drive execution.
Rory Read: We took swift action to optimize our expense base and rebalanced, our investment and resources.
Rory Read: We have also redefined our go to market coverage model to land and develop our ideal customer set and enhancing our product innovation road maps.
We have also strengthened our leadership team and board with accomplished leaders, who have deep expertise and a strong track record of driving growth.
Rory Read: In early January we announced the appointment of Joy Corso as our chief administrative officer.
Rory Read: Joy has extensive experience in the b to B tech industry as well as her focus on delivering operational efficiencies.
Rory Read: Isn't this transformation at scale will be critical to supporting our next space.
Speaker Change: We also announced the addition of Jan Houser, and Stephen Ward to our board of Directors Jan will assume the chair of our audit Committee and Steve brings a wealth of technology and enterprise experience to the board and as a member of our compensation Committee.
Speaker Change: Each of these executives have technology and SaaS experience with a long history of demonstrating results and building growth businesses at scale.
Speaker Change: I'd also like to thank Ed Gillis, who is stepping down from the board in June for his service on the board and dedication to sprinkler.
Speaker Change: As we move into the next phase of our strategic plan. We are now taking critical steps designed to transform our business for durable growth and improved profitability.
Speaker Change: On our three <unk> call in December we noted that you will first see an improvement in our operating margin given that this is in our direct control.
Speaker Change: This action would also create the capacity to reinvest any critical talent.
Speaker Change: And refocus on areas to drive better performance.
Speaker Change: February six we filed an 8-K with the SEC, which detailed the decisive actions, we took to better optimize and rehab balance our expense base. This is included an approximate 15% reduction in our workforce.
Speaker Change: While changes like these are hard to make it is essential to allocate our investment talent and resources to better serve our customers and partners.
Speaker Change: Most actions associated with this workforce reduction are now complete with a few smaller areas to be completed in two Q based on regulatory requirements Minis will provide further financial details on this in his remarks in just a few minutes.
Speaker Change: Sprinkler intends to deliver a portion of our cost savings to improve operating margins. This year. We will also leverage some of this gain deficiency to hire and invest in prioritized areas, we will strategically add talent across the globe in such areas.
Speaker Change: As go to market sales pods customer implementations AI core product skills and service R&D skills.
Speaker Change: With these may take one to three quarters to execute.
Speaker Change: Additionally, our new go to market coverage model was implemented at the beginning of our fiscal year in February and launched in detail during our sales kick off three weeks ago.
Speaker Change: Territories are assigned compensation plans are rolled out and coverage ratios are set.
Speaker Change: This structure will cultivate deeper customer relationships within the C suite. Our initial focus will be on our top 400 customers. We believe these efforts will enable us to deliver more value through year round engagement and deeper account planning.
Speaker Change: At the end of FY 'twenty five we had 149 customers generating at least $1 million in annual subscription revenue, which grew by 18% year over year.
Speaker Change: Furthermore, we had an impressive group of customers generating $10 million to $20 million in subscription revenue over the last 12 months.
Speaker Change: We have built sophisticated products that address complex needs of the world's largest companies.
Speaker Change: It's clear that when we get it right and execute effectively and consistently our customers value the solutions and expertise we provide.
Speaker Change: We are most successful in the enterprise segment with the global 2000 to global 5000, being our sweet spot.
Speaker Change: This will now be the primary focus of our go to market and marketing efforts driven by the recent changes and initiatives I have mentioned previously.
Speaker Change: Now on the R&D front, we are maturing our operational rigor to continued to deliver innovation and a more consistent reliable manner.
Speaker Change: Our FY 'twenty six technology and product innovation Roadmaps are focused on improving product delivery functionality security and reliability of our broader platform.
Speaker Change: Additionally, we are still in the early phases of revamping, our pricing and packaging, but our focus on solutions selling with aligned incentives for multiyear deals and emphasis on the C suite.
Speaker Change: We believe the combination of the actions, we have taken including one establishing a clear and by the extra strategy to implementing a well established business management system to track and drive execution three optimize our more.
Speaker Change: More efficient cost structure, allowing for sustained and improved operating margin and strategic investments for realigning our go to market coverage model and by strengthening our product delivery roadmaps will be a significant step forward in.
Speaker Change: Sprinklers transformation playing out.
Speaker Change: Now I'd like to shift gears, a little bit and talk about our customers one of our most important and powerful assets here at sprinkler.
Speaker Change: I have met with approximately 100 customers and partners over the past three months.
Speaker Change: And while we have experienced some inconsistent implementation leading to pressure on customer renewals and satisfaction. We are actively addressing this.
Speaker Change: During the fourth quarter, we continue to land and expand with many leading brands companies such as Delta Airlines Ford Motor Company.
Speaker Change: MSCI live nation, and Ralph Lauren to name a few.
Speaker Change: Well, we've had several large customer deals across sprinkler core.
Speaker Change: In service this quarter I'd like to highlight two that demonstrate what we are capable of when we get it right.
Speaker Change: We're excited about the work we are doing with one of the world's premier specialty coffee retailers through deep discovery relationship building and.
Speaker Change: System test validation, our platform's core offerings sprinkler, social and sprinkler insights are already providing value to their international customer experience.
Speaker Change: We are delivering a scalable unified solution that meets their global business needs to proactively monitor their brand protect brand reputation and through social publishing and engagement effort. They are leveraging customer insights to inform and opt.
Speaker Change: <unk> their marketing performance.
Speaker Change: This is the kind of transformation, we drive connecting brands with their customers in a smarter more impactful way.
Our second story is one of the largest technology companies in the World. We closed an eight figure multiyear renewal with them this quarter.
Speaker Change: Which is a powerful testament to our long standing partnership and relentless focus on innovation.
Speaker Change: Sprinkler has become mission critical for that to deliver seamless scalable and highly personalized customer service our platform powers their shift from costly channels like voice and email to efficient AI driven support on digital channels excelled.
Speaker Change: The rating their goal of 50% plus called the flaxen by 2027 with.
Speaker Change: With sprinkler the company has already reduced their service costs by millions of dollars, while improving resolution speed and customer satisfaction.
Speaker Change: And they continue to expand their investment with sprinkler, leveraging our full suite across marketing social and insights to drive engagement and operational efficiency at scale.
Speaker Change: We're working closely with them to push the boundaries of the AI innovation automation and digital transformation and ensuring that they don't just stay ahead of the evolving landscape, but in fact, they define it.
Speaker Change: In closing while there is plenty of work to do and this transformation will take time, we are making real and tangible progress with Swift clear actions looking at FY 'twenty six as a transitional year, we intend to stabilize the company.
Speaker Change: Burnt in our execution over the first two quarters.
Speaker Change: We hope will drive better results throughout the year.
It's never a perfectly straight line and there will be challenges along the way, but I continue to be optimistic of the opportunity in front of us.
Speaker Change: We have clarity about the way forward and what we have to fix and we will get there step by step day by day quarter by quarter.
Speaker Change: The World is moving from transactional customer engagement to unified 360 degree customer experiences and we believe our vision to divine the world's ability to make every customer experience extra ordinary positioned us well to capitalize on this.
<unk> opportunity.
Sprinkler is the platform where it all comes together for a customer activities around discovery commerce support and service.
Speaker Change: We will leverage our AI based unified platform execute an ambidextrous approach to re energize and grow our sprinkler core while we hardened and expand sprinkler service and our March on the rule of 40.
Speaker Change: Thank you again to the sprinkler team members around the world, who are passionate about our future and creating powerful value for our customers and embracing this transformational journey with urgency and commitment.
Speaker Change: Now I'd like to turn the call over to <unk> to go through the numbers in a bit more detail niche.
Speaker Change: Thank you Tony and good morning, everyone.
Speaker Change: For the fourth quarter total revenue was $202 5 million.
Speaker Change: Up 4% year over year, while subscription revenue was $182 1 million up 3% year over year.
Speaker Change: Professional services came in at $25 million.
Speaker Change: All metrics meet the guidance range provided for the quarter.
Speaker Change: Our subscription revenue base net dollar expansion rate in the fourth quarter was 104%.
Speaker Change: Given the trailing nature.
Speaker Change: This quarter's metric reflects the full impact of elevated churn.
Speaker Change: Hi.
Speaker Change: At the end of the fourth quarter, we had 140 customers comfortable with the $1 million or more in subscription revenue over the preceding 12 months, which is an 18% increase yes.
Speaker Change: We believe our continued success in winning Angerly seven figure customers is a testament to the value of the platform.
Speaker Change: Customers.
Speaker Change: These are some of the leading enterprises.
Speaker Change: And as targeted focus of ours. So the changes we have made in our go to market efforts.
Regarding gross margins for the fourth quarter on a non-GAAP basis, our subscription gross margin was 79% and professional services gross margin was breakeven, resulting in a total non-GAAP gross margin of 71.
Speaker Change: Uh huh.
Speaker Change: As noted on previous calls.
Speaker Change: Experiencing higher data hosting cost as we launched new cloud.
Speaker Change: In response to new business opportunities, especially in service.
Speaker Change: We acknowledge professional services margin are not optimal at this level and we are working to address this as part of our overall war on becoming more efficient.
Speaker Change: Then to profitability for the quarter non-GAAP operating income was $25 9 million audio 13% margin, which drove non-GAAP net income of 10 cents per.
Speaker Change: Per diluted share.
Speaker Change: I wanted to address one point regarding taxes in our non-GAAP EPS number for the quarter.
In Q4, FY 'twenty five based on recent and forecasted profitability in our spring U S legal entity.
Speaker Change: We concluded that it is more likely than not led by the U S Federal and state deferred tax assets are realizable and we have therefore released the valuation allowance on our U S federal and state deferred.
Speaker Change: Tax assets.
Speaker Change: This valuation will use resulted in a discrete U S GAAP noncash deferred tax benefit of approximately $87 million.
Speaker Change: We still have approximately $335 million in U S Nols remaining.
Speaker Change: Slide 26 and beyond.
Speaker Change: Given this we do not expect a material near term impact on cash taxes paid.
Speaker Change: With respect to free cash flow, we generated $1 5 million during the fourth quarter.
Speaker Change: This free cash flow generation contributed to our healthy balance sheet, which now stands at $418 5 million in cash and marketable securities with no debt outstanding.
Speaker Change: Calculated billings for the fourth quarter were $298 6 million, an increase of 10% year over year.
Speaker Change: As of January 31, 2025.
Speaker Change: Total remaining performance obligations at Apio, which represents a avenue from committed customer contract that has not yet been recognized was $987 7 million up 2% compared to the same period last year.
Speaker Change: And talent at Apio, our CRP was $612 5 million up 4% year over year, turning to a quick summary of financial results for the full year FY 'twenty five.
Speaker Change: Revenue was $796 4 million up 9% year over year.
Revenue of $717 9 million up 7% versus the prior year.
Speaker Change: Alkylate and billings for the full year.
Speaker Change: And $31 1 million up 6% year over year.
Speaker Change: We reported non-GAAP operating income for the full year of $84 8 million equating to a non-GAAP net income per diluted share a 35 songs.
Speaker Change: non-GAAP operating margin of 11.
Speaker Change: In terms of free cash flow, we generated $59 2 million in free cash flow for the year equating to a free cash flow margin of 7%.
Before moving to guidance I would like to provide more information on the restructuring. We recently included as part of our overall efficiency efforts.
Speaker Change: We have recently completed a company wide internal review across product areas regions and support functions.
Speaker Change: We concluded that significant structural changes where necessary.
Speaker Change: Execute our ambidextrous strategy.
Speaker Change: Our objective to get to the 40.
As a result of this review and as we disclosed in the 8-K filed with the SEC on February six 2025, we reduced our global workforce by approximately 50%.
Speaker Change: These reductions impacted teams and functions across every department.
Speaker Change: This new structure is intended to help position the company for long term success.
Speaker Change: Realigning employee cost with the current business and freeing up capital for incremental investments.
Speaker Change: We expect that these incremental investments will include hiring in key strategic areas that best align with our growth objectives, notably additional go to market and R&D resources to both grow the core products and to Harden our service product.
Expenses related to this action I would expected to be approximately $22 million.
We estimate $16 million of these expenses will be booked as they construct sudden charge you had in Q1 FY 'twenty six.
Speaker Change: <unk> will be booked in Q2.
Speaker Change: Restructuring charges are not included in the non-GAAP guidance figures that we provided here and going forward for FY 'twenty six.
Speaker Change: Now moving to our official guidance for Q1, we expect total revenue to be in the range of $201 5 million to $202 5 million.
Speaker Change: <unk>, 3% growth year over year at the midpoint.
Speaker Change: Within this we expect subscription revenue to be in.
Speaker Change: The range of 182 million to $183 million, representing 3% growth year over year at the midpoint.
Speaker Change: The Q1 guide implies $19 5 billion in professional services revenue.
As we have signaled in prior earnings calls, we will continue to invest in our professional services delivery capabilities.
Speaker Change: Gross margins here it'll be approximately breakeven in Q1.
Speaker Change: We expect non-GAAP operating income will be in the range of 31 5 million to $32 5 million.
<unk> and non-GAAP net income per diluted share of approximately <unk> 10 cents, assuming 269 million diluted weighted average shares outstanding.
Speaker Change: This equates to a 16% non-GAAP operating margin at the midpoint.
Speaker Change: Note that we are now applying a protein percent non-GAAP tax rate for computation of the EPS number driven by the release of the U S valuation allowance. However, it should be noted that the.
Speaker Change: Actual cash taxes paid I would expect it to be substantially lower given the NOL position described earlier.
Speaker Change: For full year FY 'twenty six.
Speaker Change: <unk> subscription revenue to be in the range of 741 million to $743 million, representing 3% growth year over year at the midpoint.
Speaker Change: We expect total revenue to be in the range of 821 5 million to $823 $5 million, representing 3% growth year over year at the midpoint.
Speaker Change: <unk> guidance ranges imply.
Speaker Change: 2026 professional services revenue of $18 5 million.
Speaker Change: As we mentioned on prior earnings calls, we are experiencing higher data and hosting costs and I expect that to continue into FY 'twenty six.
Speaker Change: Our initial estimate.
Speaker Change: These incremental costs will negatively impact subscription gross margins by approximately 400 basis points or 4% for the full year FY 'twenty six and all.
Speaker Change: Into the guidance that you just provided.
Speaker Change: Professional services gross margins are expected to be breakeven for the full year of FY 'twenty six.
Speaker Change: Respect to buildings, we estimate total billings of approximately 863 million. He had in FY 2006, which would imply billings growth rate of 4% year over year.
Speaker Change: Both of those we anticipated billing seasonality pattern in FY 'twenty six similar to that of FY 'twenty.
Speaker Change: For the full year FY 'twenty six we estimate our non-GAAP operating income to be in the range of 129 million to $131 million equating to non-GAAP net income per diluted share up 38 cents to 39.
Speaker Change: Assuming 277 million diluted weighted average shares outstanding.
Speaker Change: This implies a 16% non-GAAP operating margin at the midpoint.
When modeling the spread up non-GAAP operating income throughout the year, you can assume a midpoint of $32 million for both Q1, and Q2, and then $33 million each for Q3 and Q4.
Speaker Change: As part of the restructuring, we just announced we will see a lower opex level in the first half of the year, but investments will begin to ramp up in the second half.
Speaker Change: In terms of the operating expense profile, we expect both R&D and G&A there'll be a boxing only 10% of that venue with the remainder being foreseen marketing.
Speaker Change: Indeed, I think the net income per share for modeling purposes, we estimate 16 million in other income for the full year with $4 million of that to be earned here in Q1.
Speaker Change: This other income line primarily consists of interest income.
Speaker Change: Furthermore, at 39 million total non-GAAP tax provision for the full year of FY 'twenty six.
Speaker Change: Needs to be added to the non-GAAP operating income ranges provided.
Speaker Change: We estimate a non-GAAP tax provision of $9 6 million hit in Q1.
Speaker Change: Due to the recent release of the U S valuation allowance, we have model applying at 13% tax rate on a non-GAAP operating income, but as noted previously given our NOL, we estimate our cash taxes paid to be significantly less than the non-GAAP tax provision.
Speaker Change: We also expect to be GAAP net income positive for the full year FY 'twenty six consistent with our performance over the last two years.
Speaker Change: Regarding free cash flow.
Speaker Change: Believe we can achieve approximately a 15% free cash flow margin for FY, 'twenty, which will equate to a free cash flow generation of approximately 120 million for the full year.
Speaker Change: This excludes the cash outflow as part of the restructuring exercise an ounce this year.
Speaker Change: This metric will be 100% increase in free cash flow generation versus FY 'twenty five.
Speaker Change: Note that we will not be providing a quarterly free cash flow guidance metric.
Speaker Change: This annual metric throughout the year as needed.
Speaker Change: Lastly, I would like to thank all our employees for their dedication and passion for the work we are building at sprint.
Speaker Change: And I'm grateful for the confidence that our customers have placed in us.
Speaker Change: And with that let's open it up for questions operator.
Speaker Change: Thank you, we'll now be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad and as a reminder, please ask one question one follow up.
Speaker Change: Turn to the Q as a reminder, that star one to be placed in the question queue. Please ask one question one follow up then return to the queue.
Speaker Change: Our first question is coming from congestion Bora from JP Morgan Your line is that life.
Great. Thank you so much for taking my questions.
Really.
Speaker Change: You have obviously put a lot of changes in motion, it's great to see kind of the improvement in the operating margin that you saw in Q4 as well as what you are guiding towards maybe talk about the avenues that is driving the cost efficiency I'm trying to understand how we should think about that cost efficiency versus.
Speaker Change: As Google does that largely low hanging fruit.
Speaker Change: Or is there an element that it could actually be coming at an expense of some good.
Speaker Change: Yes, I hear Thats, a great question, absolutely, we're focused 100% I'm, making the business more efficient that's crucial I think over the past several years, there was growth investments in areas and Yo organizations kind of expand it was time to really focus.
<unk>, where we're our critical customers, where we're the most important product structures, where do we have to make the right investments. So we did an analytic and looked at the business end and that's how we began to redo. The go to market. That's how we restructured into a pot coverage model than we did work on that.
Speaker Change: The roadmap for this year to make sure the right innovations, where prioritize first and we looked at where we were taking our marketing at our go to market dollars, whereas our ideal customer our ideal customer is the top of commercial to very large enterprises. So we understood that and then we opt.
Speaker Change: <unk> the business structure to capture that and to prioritize the investments in product areas. So we streamline the business and we take a significant tens of millions of dollars of cost out that's.
Tough decision and always difficult to do I don't want to.
Speaker Change: Emphasize we did that with respect and care for everyone that was affected and we spoke to every individual directly.
Speaker Change: What that allows US then do is to flow some of that return to the bottom line our business should be returning in.
Speaker Change: That 15% to 20% range over the next couple of years, that's what it should look like as an enterprise software player in this space.
Speaker Change: To your question do we sacrifice growth absolutely not that's never what we want to do you can improve the bottom line and what we did was freed up additional dollars in this action that we're going to invest over the next one to three quarters in additional talent additional coverage do improve our product innovation.
Speaker Change: Nation to accelerate activities to improve our delivery and implementation sprinkler has to become much more consistent with the way, we deliver to our customers and how we implement our solutions the way, we deliver our innovation and how our customers receive them and even how we.
Speaker Change: Communicate with you and our investors we need to make sure that we're executing at a very consistent way grows and the rule of 40 is an important factor. So as you look you'll see us work through this FY 'twenty six as a transitional year to position us to burn in or execute.
Speaker Change: <unk> improve our consistency the liver R&R a better implementations are better innovation and then to allow us to bend the business. It's all about driving durable long term growth and we've freed up cash so that we can make those investments of expenses throughout the year. So we have degree.
Speaker Change: The freedom to capture that as we uncover those opportunities and we see needs of the customers and remember when we get it right with our customers as I mentioned it a couple of examples in the prepared remarks.
Speaker Change: The solution is deeply valued we've shot ourselves in their foot over the past several years with inconsistent execution inconsistent.
Speaker Change: Delivery inconsistent implementation, we're going to use FY 'twenty six as the year to transition and create very much more predictability and consistent implementation and that will then Ben the business and to return to growth and to get to a rule of 40 into the Thirty's we.
Speaker Change: The return to a better growth level, and we wanted to be prudent with our guidance. There's a macro environment. That's a bit choppy right now we have a pristine balance sheet, let's make sure that we execute these changes over the first two quarters, and then position ourselves to been throughout the year, but again to answer your question.
Speaker Change: No. We are definitely focused on taking the actions that sure improve the bottom line. That's the low hanging fruit that's easier to do but it was with the intent to free up the ability to invest and to create that durable that bend and execution as well as investment to capture that longer.
Speaker Change: Term durable growth.
Speaker Change: Thank you understood. Thanks for the clarity.
Speaker Change: And one from a niche let me say a little bit surprised with the 400 basis point negative impact seems like dos subscription gross margin is there a way to understand how much of that is coming from higher data cost versus hosting.
Speaker Change: Yes, we don't break it out but you will remember in the Q3 call. We spoke about renewing the license and I'd also mentioned that came with a commensurate increase.
Speaker Change: Data cost across every vendor going up only because you're using these data feeds for training AI models, and such and I think every data vendors realize that there is value in the data that they provide.
We don't really break down the hosting side either but you will also remember we've said as we've spun up new data centers. There's an initial set up cost to each one of these it's closer 2 million per Bob So as we see more growth in sprinkler service. We're obviously going ahead and investing in the hosting capabilities and that all in the <unk>.
Speaker Change: Aggregate is what's impacting gross margins here in the short term.
Speaker Change: Got it thank you very much.
Speaker Change: Thank you next question is coming from Arjun Bhatia from William Blair. Your line is now live.
Speaker Change: Alright, thank you so much.
Speaker Change: Brian one for you to start off on us.
Speaker Change: Think about just the growth potential going forward. It seemed like a lot of your commentary my focus on that.
Speaker Change: Installed base and some of the changes that you can make there how are you thinking about focusing go to market resources.
As to your acquisition versus the opportunity that exists within within your existing customers is there one that's a bigger priority.
Speaker Change: Curious, how you're thinking about that sure I think the way to think about that and the tactical timeframe is to make sure that the base is solid we wanted to.
Speaker Change: Solidify the base and we have huge opportunities to expand.
Speaker Change: If we're a company of our size to have 149.
Speaker Change: Million dollar customers, it's pretty unusual I mean, that's a that's a big number and then to have a group of those customers in the 10 2020 plus million dollar.
Purchasing range is I think extremely unusual we are.
Speaker Change: The opportunity to grow those customers and we need to make sure that renewals improve and it's really about creating a go to market that nurtures and keeps those relationships 23.
Speaker Change: 365 degrees that moves up into the C level, where.
Speaker Change: Absolutely moving into more mission critical capabilities and as this convergence of the customer experience application evolved the platform play of unifying the social activities across all vectors of engagement discovery commerce.
Speaker Change: Support service, that's why the <unk> business is so important and then using AI to knit that experience and to create that value that's going to grow so yeah in the tactical timeframe protect and stabilize the base expand on that base grow that 149 into larger accounts.
Speaker Change: I always want to feed the engine. So net net new logos are super important, but let's not go to the bottom and go to <unk>.
Speaker Change: Mom and pop stores, and do $12000 or $5000 deal that's going to be a distraction. This is an enterprise software company with gold standard customers. Our top 500 accounts are the most important in the world.
Speaker Change: Adding a couple of mom and pop shops regional little place that's going to be a distraction. We can double back on that in a couple of years, let's grow with the place that our ideal customer set as our customers value sprinkler when we knit these solutions together and we create a deferral.
Speaker Change: <unk> a customer experience that's why we're seeing this uptake and if we execute FY 'twenty sect that transitional year to improve the consistency of our implementation and our delivery we will see improved growth that's 100%. So answer the question straightforward tactically in.
Speaker Change: In the midterm focus on the base solidify it expand it there is a lot of opportunity to grow it and we prove that when we get it right. They see value to of course speed the engine with net new but make sure. It's those ideal customer sets, we want a great one that I mentioned in the prepared remark I mean.
Speaker Change: That's a huge coffee player around the world and to get in there and to get in in a significant way I think we can expand that.
Speaker Change: Five fold over the next three or four years, but we've got to continue to focus on the base and get that solidified and I keep beating the engine with net new Eid slanted.
Speaker Change: 70, 30 towards the base right now.
Speaker Change: Okay, that's great to hear.
Speaker Change:
Speaker Change: Just following up on that.
Speaker Change: It's a little bit.
Speaker Change: You mentioned that I think historical implementation challenges.
Speaker Change: A few times in your prepared remarks, just curious how prevalent is that and how challenging is that to remedy in as you go back to these customers where maybe.
Speaker Change: For implementations.
Speaker Change: Opportunity to go and upsell and cross sells or as Theyre doing that or.
Speaker Change: And I'm curious just like on a timing from a timing perspective as well how long this might.
Speaker Change: How long some of this might take with your with your installed base.
Sure I think around implementation challenges, it's that the organization never really matured those functions those functions. We're almost done in a one off manner. If you've got the right team the implementation went very well.
Speaker Change: It was a new team or they didn't have the proper documentation it might be a bit of an adventure.
Speaker Change: The idea here and I've, just I've moved the service and support function under me now so I'm going to spend a fair amount of time on this we need to trade it treat implementation as a product we have the product ties it could get it consistent have it very well.
Speaker Change: Documented.
Speaker Change: Our product documentation is getting up to speed documenting our implementations and then enabling our teams to do it consistently and have that training done time and time again, that's all work that's being done right now and as part of this transitional <unk> no.
Speaker Change: It's really not going back and fixing old ones, they're up and running it's the ones that are in motion right now is doubling down making sure we get them through the installation make them successful and then creating that long term relationship with the new coverage model. So we can continue to enhance and expand.
Speaker Change: Your question about is there an opportunity to upsell always every engagement with a customer has an opportunity to show value and show how they can use the rest of the sprinkler play a platform to expand that's why we're doing a very focused set of work around our top four or 500 account we call. It project bear hug.
Speaker Change: We're going to really target and build account plans across every one of those in the first and second quarter that will drive it in parallel we're working with our service teams to make sure that our implementations are almost product ties and their consistent I think that will take two to three quarters to get there I think but.
Speaker Change: We're improving everyday could even take four quarters or so.
Speaker Change: We want to make sure we do it right, but every day, we are improving we're improving the knowledge base. We're sharing the experience we're putting in the discipline. So that it's much more predictable and that's how we've got to think about these implementation challenges and I you know in the short term.
Speaker Change: Cover the accounts make sure I'm involved in a lot of them. So that's where I'm getting a lot of feedback and knowledge to understand exactly what it is and when we have a challenge.
Speaker Change: Get on top of it solve that and get that customer to successfully implement and I think the customer appreciates that we're getting better each day. We're not done we have work to do no question. It took several years to get here is going to take more than three or four months to get it fixed, but we know what to do.
Speaker Change: Okay very helpful. Thank you very much.
Speaker Change: Thank you next question today is coming from Elizabeth Porter from Morgan Stanley. Your line is now live.
Elizabeth Porter: Great. Thank you so much I wanted to go back to the reinvestment in hiring particularly around kind of the go to market strategy and just how should we think about the timing of these hires and the typical time period for a rep to ramp I'm really looking to get additional color on kind of what the implications are for when you feel like sales capacity will be terribly off.
Elizabeth Porter: Operating at these higher levels. Thank you.
Elizabeth Porter: Yes, Elizabeth that's a great question one of the things that.
Speaker Change: Trying to think about right now is what's my sales capacity for FY 'twenty seven it takes us about six to nine months to be at.
Elizabeth Porter: No.
Rep to be ramp so what we're trying to do now is actually higher in the year.
Elizabeth Porter: Second middle of the year kind of the hiring for the beginning of next year, because we wanted to bring them on now so that they are ready we've tried to think about that and tried to make our structure now of course, you've got to deal with the Tricia to make sure Theres performance, but our whole mine.
Elizabeth Porter: That is to be hiring in the late second quarter early third quarter for FY 'twenty seven.
Elizabeth Porter: So that we're building that out what we want to see is an improvement year over year of our ramped aes as we exit the year compare compared to the previous two or three years the whole focus here and it's not just as it's also about building the ratios within the coverage model.
Elizabeth Porter: We will continue to invest we had some technical mismatches, it's a technical solution and customers value. The technical experience. If we plan to administratively in in terms of skills and our success managers or NR.
Elizabeth Porter: Solution architects.
Elizabeth Porter: I think we missed the mark a bit so we've really tried to rebalance that and I think you'll see US also invest in those parts of the pod as well both at the a level to get ready for FY 'twenty seven to make sure that we have the capacity in terms of the success managers that I play.
Elizabeth Porter: They add success managers most of the year, especially technical success managers that really at those rates skills and then to add the solution architect to all in mine that will then have the products Harden and we'll have the implementations more consistent so we can move to the third.
Elizabeth Porter: As of the transformation of FY, 2007, which we like to refer to as acceleration I hope that helps Elizabeth.
Elizabeth Porter: Yes that definitely does and just as a follow up I understand that really the focus right now is around company specific execution, but I did want to ask just about back row. It felt like exiting the year, we had a bit more clarity post elections in optimism, but certainly like the recent headlines around trade and tariffs.
Speaker Change: And some of the uncertain team so where are you guys hearing in terms of your conversations with customers or seeing in terms of deal cycles, and how should we think about the prioritization, that's prioritization of spend around customer experience.
Elizabeth Porter: Sure So I think.
Elizabeth Porter: Macro environment, a bit unpredictable and a bit choppy right at the moment a couple of answers from our perspective tariffs don't really affect us directly so that's not the issue.
Elizabeth Porter: Customers.
Look to be more prudent on their spending yes, that's possible.
People are a little bit of wait and see if theres a bit of a correction that's going on in the market right now.
Elizabeth Porter: We've got a pristine balance sheet, we've taken the cost actions and we've given you guidance that we think is very prudent and we think that we can pretty much handle whatever the macro throws at us within reason.
Elizabeth Porter: There is some gigantic shock to the market.
Elizabeth Porter: That affects everybody, but I think we've positioned how we've laid out this year and this is a transitional year to think about that customers are always going to be.
Elizabeth Porter: When there is a bit of uncertainty, but we're seeing.
Elizabeth Porter: A good pipeline I mean that we're not seeing any huge issues. There are issues and there is plenty of business. This is not a gigantic company I mean, it's just under $1 billion.
Elizabeth Porter: Our issue is making ourselves much more consistent reliable and predictable.
Elizabeth Porter: Think there's business to be one I think it's both in our core as we reenergize and grow that and in the services space. We have plenty of demand, but we have to harden that to make sure that has consistently delivered yeah, if theyre going to be some chop chop in the macro I think we've got the balance sheet at the right place I think we've got our costs at the right place.
Elizabeth Porter: And we set our guide and prudently so that we can move through this.
Elizabeth Porter: But we're not seeing anything major at this point, but we'll watch it we will watch it thanks Elizabeth Thanks.
Elizabeth Porter: Okay.
Speaker Change: Thank you. Your next question today is coming from Patrick Wahl rhythms from citizens JMP. Your line is now live.
Speaker Change: Oh, great. Thank you.
Speaker Change: Congratulations on the start rate.
Speaker Change: Can you can you address federal like how big is the federal government for sprinkler, if I just look on.
Speaker Change: USA spending it looks like defense Commerce asset health and human services, all seem to to use sprinkler in someplace.
Speaker Change: And yes, we are hearing from from our salespeople and some other companies they can't even get their phone calls and e-mails return from different parts of the federal government right now given everything that's going on so I'm just wondering.
Speaker Change: You can address what youre seeing that would be that would be great.
Speaker Change: Yeah, what I would comment on that is it's very it's very small for our business Pat its.
Speaker Change: It's not material in any way.
Speaker Change: Very small.
Speaker Change: Youre right, we do have toehold in a couple of those spot, but because we're at the beginning of like a fed ramp approval that limits how far we can do so you shouldn't be.
Speaker Change: <unk> factored that in in any way as a negative or positive for us.
Speaker Change: We are not exposed on the federal side, while we have a few relatively small implementations in the millions of dollars its not material.
Speaker Change: That's great and then as a follow up can I ask you.
Speaker Change: We had a very specific sort of algorithm on plan coming into this role has anything been harder than we expected.
Speaker Change: No I mean, you are what you see in transformations.
Speaker Change: Pretty consistent I mean, what's great about this company is the technology is quite good the platforms.
Speaker Change: I think is highly scalable.
Speaker Change: AI is real.
Speaker Change: And it's truly infused it's been in place for eight years I think that's kind of differentiated I think the market is moving toward unified customer experiences. We see this in the demand of our <unk> solutions, where it knits together with our digital and our social App.
Speaker Change: Activity.
Speaker Change: These are big brands and they see this as a truly differentiated experience that we get this right. It could be you know kind of a game changing play in that space.
Speaker Change: I think we are.
Speaker Change: When you look at this business is you know the maturity of some of the execution and processes feels like a startup okay and it's a compliment to the team that they grew it so big with such amazing customers, but we have to clean up those processes.
Speaker Change: <unk> get consistent implementation, so that it's done get the documentation properly done get the coverage model properly done.
Speaker Change: These are basic fixable things I have not come across anything catastrophic.
Speaker Change: Part of the reason, we have some customer renewal pressure in satisfaction issue is because we've neglected some of the relationships. So we didn't do some of the innovations are the implementation wasn't as clean as others, but then on the other hand, when we get it right the customer grows and grows and grows so what we have.
Speaker Change: To do is do it in a consistent way.
Speaker Change: This is that kind of we've done the first part of the business optimization. That's phase one all of those five things I listed in the prepared remarks are done and they are in the books now.
Speaker Change: Now, we're moving to the second phase, which is burning in and improving execution.
Speaker Change: The next two six month periods are important there are trends trends visional, we've got to stabilize the go to market. We've got to improve the implementation processes. We've got to get the execution on the delivery of product we have to make the right investments over the next one to three months.
Speaker Change: That should begin to bend the business on the performance side, we should leave this year performing better than we started the year and we should see an improvement on the rule of 'twenty as we move through the year our rule of 40 as we move through the year.
Speaker Change: I think that's really important and I think moving into the Twenty's is something that we should try and do as soon as possible. Because then we get ourselves positioned for that better today. So I.
Speaker Change: I think its going pretty much to plan. There is a lot of work to do there is going to be some unknowns that emerge and we have you know we have to execute better every day and that takes time.
Speaker Change: This transformation will take time, but I feel good about where we are I think we know what to do and we'll get there step by step.
Speaker Change: Month by month quarter by quarter.
Speaker Change: Alright, great. Thank you Barry.
Speaker Change: Thank you. Your next question is coming from Jackson at her from Keybanc capital markets. Your line is that life.
Jackson: Great. Good morning, everybody, thanks for taking our questions.
Jackson: First one is just on the bookings activity in the fourth quarter.
Jackson: Were there any deals that maybe.
Jackson:
Jackson: Slipped or or duration adjustments that you weren't expecting or were there any.
Rory Read: Any of the changes you've been looking to implement Rory that might have impacted some of the performance there in that fourth quarter.
Jackson: So Jackson I think on the fourth quarter.
Jackson: Our activity was stronger than expected.
Jackson: So I thought that was a good sign.
Jackson: We saw a good mix of small and large deals expansion and new logos and we saw both in core in service. So I thought it was a good finish to the year.
Jackson: Nothing about that was an issue as you go through changing the whole go to market, we have to watch that in <unk> and <unk>.
Jackson: That's obviously the period when you had the most change.
Speaker Change: Where I'm spending.
Speaker Change: A truly disproportional amount of time in the field on the road and all three geographies.
Speaker Change: By frequent flyer miles are adding up.
Speaker Change: We need to manage that and work that during that transitional period as we improve our execution. So no I didn't see anything about fourth quarter, it was a bit better than expected.
Speaker Change: But it really matters, where we get to as we move through the next four quarters.
Speaker Change: Okay, and then I guess relatedly.
Speaker Change:
Speaker Change: Can you give us a sense for the pipeline of either large renewals.
Speaker Change: Or large deals in terms of like when they are coming up for renewal and the seasonality.
Speaker Change: I don't want to lead the witness too much but like if it's a big first half renewal cycle right when you're implementing as you said when all these changes.
Potentially that are going into effect.
Speaker Change: Prefer kind of a later renewal cycle this year, but I'm curious what the seasonality would look like.
Speaker Change: The reality is it's documented on this one we do you know hundreds of millions of renewals each year, we're moving more and more to three year deals but.
Speaker Change: We are still a lot of one year deals. So youll see that our largest amount of renewals are in the fourth quarter and our second largest.
Second quarter, and so you know.
Speaker Change: It's fleitas in third quarter, but it doesn't look any different this year than each year, but the total number maybe a little bit lower this year because of more three year deals but.
Speaker Change: We're trying to move more and more with the go to market team did the three year structure, but that's a historical trend it looks very similar we've trade change our incentives this year for the sales team and make sure that they're properly rewarded for renewals and renewals on time.
Speaker Change: Got it okay. Thank you.
Jackson: Yep. Thanks Jackson.
Speaker Change: Thank you and the interest of time. Our final question today is coming from Parker Lane from Stifel. Your line is now live.
Parker Lane: Oh, hi, Thanks, guys for taking the question here, but there's a lot of talk about go to market changes and what youre doing from implementation standpoint, but you also referenced technical debt and removing some of that from the platform. I was just wondering if theres any particular area of the platform that you think that technical debt is most pronounced in what's the ideal timeline for.
Parker Lane: Resolving some of those issues in getting the platform on better footing in your eyes.
Parker Lane: Yes, that's a great question Parker.
Parker Lane: That was one of the five areas, we spend a lot of time on.
Parker Lane: Over the past three four months working with <unk>, the CTO and the team.
Parker Lane: We built the road maps for all of towers in the platform, we've been adding talent to the team.
Parker Lane: We have roadmaps in place for this year, we have our metrics in place we've improved our documentation, we're improving our test coverage, we're improving our P. L. M R product lifecycle, and our new product introduction.
Parker Lane: <unk> fees Youre going to see improvement as we go through the year. Some of the changes will take you know you know.
Parker Lane: One two.
Parker Lane: <unk> quarter, some will take the whole year, we'll you'll see improved delivery and execution as we move through this FY 'twenty six transitional year Youll see the bogus in the core being around innovation, we're going to have a new product introduction with a very inter.
Kristin nation around a customer feedback management this year, that's going to be very.
Parker Lane: I think disruptive in the marketplace really leveraging AI I think youre going to see us continue to focus to add value in that space.
Parker Lane: In this space of <unk>.
Parker Lane: <unk> CASM service, it's really about.
Parker Lane: Leading the work around telephony, so that we have.
Parker Lane: Expense of technology.
Parker Lane: Allergy telephony options, both with partners and with our own <unk>.
Parker Lane: <unk> connect solution.
Parker Lane: We have a.
Parker Lane: A large number of customers and agents are already on our solution and we continue and expect to double that and triple that as we move forward I think there is work that youre going to see throughout the year on workforce management, which is I think we'll be in a very good space as we get through our July and November releases.
Parker Lane: I think there is work on reporting in that side I think we made a architectural decision that wasn't right. We created point to point reporting which causes you almost that write a report I mean, it seems like 1990 kind of a solution we have to create more of a data Lake and then a kind of a tableau type solution.
Parker Lane: On top of that so that people can easily do the point and click will fix that this year, there's work around security and reliability that will build out throughout the year to make sure that were robust and that we're highly scalable, but you should watch that it'll be each quarter and as it'll prove throughout this year and into next year.
Parker Lane: And we're making sure that we're not.
Parker Lane: Going crazy on the pipeline.
Parker Lane: We're not going to take every deal we can take I mean, we want to make sure. We harden. This before we add too many new major implementation, we're still taking good deals we're still adding new.
Parker Lane: Winners, but we've got to do it in an orderly fashion as we clean the all of this debt up. It's this year FY 'twenty six is the main focus.
Parker Lane: Got it appreciate it we'll feed that growth.
Parker Lane: Thank you we've reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Parker Lane: But I wanted to thank everyone for joining the call today.
I appreciate everyone across the sprinkler team around the globe and the hard work that they're doing their focus on creating value for our customers. Hey. This is never a straight line. We have there will always be new challenges that emerge, but I believe that we've taken the right additional actions we're positioning ourselves.
Parker Lane: To improve we knew we know what to improve we've improved the bottom line. We have now created the capacity to invest to move forward and then we'll look at FY 2006, as a transitional year, we should see the business begin to ban and we wanted to improve our growth rate as we move through the year and into next.
Parker Lane: Year.
Parker Lane: It all comes down to better execution and when we get this right our customers truly value the solutions, we create and the AI solution. We built here on this amazing platform. So give us time, let us focus on our execution, we're going to get their day by day.
Parker Lane: By quarter end.
And throughout this year, we know what to do and we're going to work on it. Thank you for everyone's time today have a great day.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day.
Parker Lane: Thank you for your participation today.
Parker Lane: Yeah.