Sprinklr Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
June 4, 2025

Key Takeaways

Error: Response status code does not indicate success: 429 (Too Many Requests).
AI Generated. May Contain Errors.
Earnings Conference Call
Sprinklr Q1 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Greetings. Welcome to Sprinklr First Quarter Fiscal Year twenty twenty six Earnings Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this call is being recorded.

Operator

It is now my pleasure to introduce Eric Skrow, Vice President, Finance. Thank you. You may begin.

Eric Scro
Eric Scro
VP - Finance & Head of Investor Relations at Sprinklr

Thank you, operator, and welcome, everyone, to Sprinklr's first quarter fiscal year twenty twenty six financial results call. Joining us today are Rory Reed, Sprinkler's President and CEO and Manish Serene, Sprinkler's Chief Financial Officer. We issued our earnings release a short time ago, filed the related Form eight ks with the SEC, and we've made them available on the Investor Relations section of our website, along with the supplementary investor presentation. Please note that on today's call, management will refer to certain non GAAP financial measures. While the company believes these non GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Eric Scro
Eric Scro
VP - Finance & Head of Investor Relations at Sprinklr

You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAAP. In addition, during today's call, we'll be making 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 second fiscal quarter and full fiscal year of 2026, 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. 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, including Sprinklr's quarterly report on Form 10 Q for the quarter ended 04/30/2025. With that, I'll now turn it over to Rory.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Thank you, Eric, and hello, everyone. It's nice to be with you today. I'll start by providing a few 1Q financial highlights before covering some of my thoughts on the progress we are making in transforming the Sprinkler business. First quarter total revenue grew 5% year over year to $205,500,000 and subscription revenue grew 4% year over year to $184,100,000 We generated $36,700,000 in non GAAP operating income, which resulted in an 18% non GAAP operating margin for the quarter. I'd also like to highlight the record $81,000,000 in free cash flow generation for the quarter.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I want to thank Sprinklr team members from around the globe and our customers and partners for trusting us to help them solve some of their most important business needs. In April, we welcomed Sanjay Makwan as our Chief Information Officer. Sanjay's experience, leading enterprise technology and information security at scale will help strengthen our security posture, so we can deliver hardened world class products while supporting our long term vision to make every customer experience extraordinary. I expect we will make further leadership team additions as we move through FY 2026. Now I'd like to provide you with an up on Sprinklr's transformation.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Today, we have established a clear ambidextrous strategy, implemented a business management system, optimized our cost structure, realigned our go to market coverage model and strengthened our product delivery roadmaps. We are creating a foundation from which we will strategically invest and efficiently run Sprinklr to improve our business. While we saw positive improvements in the business in the quarter, particularly around non GAAP operating income and free cash flow, we are still a work in progress and have significant work to do across our business to elevate the consistency of our execution, improve the predictability of our results and drive future growth. As I have shared in our previous two earnings calls, FY twenty twenty six is a transitional year for Sprinklr. We anticipated some near term challenges as we implemented a series of strategic and operational changes to directly address past execution challenges and to position the company for the long term.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

During my many meetings with customers around the world, there are clear instances where some of them were not effectively implemented or properly supported, which understandably led to their dissatisfaction. In addition, the broader macroeconomic uncertainty has resulted in longer sales cycles and increased scrutiny of enterprise spending. This heightened scrutiny coupled with inconsistent operational execution and lingering technical debt from the past several years has continued to put pressure on our renewal cycles, resulting in more down sell activity and in some cases, logo churn. Addressing all forms of churn is a top priority in our transformational journey, and we are actively working to resolve these issues. As Manish will cover later in the call, we are maintaining our FY 'twenty '6 subscription revenue non GAAP operating income guidance.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

However, we must continue to improve our execution to drive stronger financial performance in FY 'twenty seven and beyond. Our commitment is to help our customers realize the full value of our AI native platform. This is why we are focused on taking steps to strengthen our implementation processes and increased our post sales support. We believe these changes and our continued investment will help customers see faster time to value, deepen confidence in the value of our solutions and unlock expansion opportunities aligned to our customers' critical priorities. We are also making changes to improve our day to day execution.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Our new business management system provides a more comprehensive view of the business with clear understanding of potential risks and opportunities, so we can take proactive steps to address them quickly. And our new sales pod structure implemented in February enables our sales services and product teams to operate in a more unified and collaborative way to support customers. We are getting closer to the C suite customers and building champions within the CIO and CTO organizations to better align with our customers' technology roadmap and their business priorities. We continue to strengthen our sales teams with hires across our pod structures. With respect to the health of our pipeline, Sprinklr core remains strong and is at the highest level over the past eighteen months.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Reenergizing and growing the core is a key driver to durable growth for Sprinklr. Since our founding, Sprinklr has been an undisputed market leader in social media management for the world's largest iconic brands. We believe shifting trends in social media today, notably the advancements in AI, social commerce, immersive content experiences and cross functional content strategies play to Sprinklr's strength and positions us to win. And in service, we have a pipeline with numerous 7 figure opportunities to pursue and win. Our AI solution was one of the key reasons we are winning as a disruptor in service.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We're witnessing a pivotal shift where AI is no longer confined to automating basic tasks. Instead, is driving real time decision making and the depth and breadth of the Sprinklr platform is helping turn data into insights and insights into actions that's creating value for the brands we serve. Our LLM agnostic architecture is built on Sprinklr's proven automation and AI engine. This foundation enables seamless integration of AI agents into existing workflows. Customers are reporting containment rates ranging from 30% to as high as 80%, significantly reducing the need for human intervention.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Now I'd like to cover our Project Bearhug, which was one of our key back to the field initiatives focused on deeply engaging our top 500 customers. This group represents approximately 80% of our revenue. In the first few months of Project Bearhug, we've had detailed engagements with well over 100 of our largest customers. We're encouraged by the early results and new expanded use cases as we help companies drive accelerated ROI across the Sprinklr platform. This initiative brings together all functions of Sprinklr, sales, service, product, marketing to bear hug our customers, enabling us to better understand their priorities and deliver better outcomes for their business.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

As many of you know, product and technology innovation have always been at the core of our strategy and competitive advantage. This focus is earning us industry recognition. We are extremely proud to be highlighted in three top tier analyst evaluations by Gartner and Forrester, showcasing our exceptional cross product innovation and unified platform vision. These accolades validate our ambidextrous strategy to reenergize and grow the core while hardening and expanding our service offering to deliver industry's most powerful AI native unified customer experience management platform. This momentum confirms our continued leadership in the Martech space and as a formidable disruptor and challenger in the voice of the customer and CCaaS markets.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Now I'd like to talk about some of our recent customer wins. During 1Q, we continued landing and expanding with many leading brands, companies such as Calvin Klein, LG Electronics and Pepsi to name just a few. As of April 30, we now have 146 customers generating at least $1,000,000 in annual subscription revenue, which is up 6% year over year. I'd like to highlight a couple examples that demonstrate how we're helping customers to win and deliver measurable results. This quarter, a Fortune 500 global medical technology leader replaced a five year legacy vendor to reset their digital foundation for future growth.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

They needed a more innovative enterprise ready platform. They chose Sprinklr in a highly competitive process for our ability to unify global operations, deliver best in class publishing capabilities and support future growth across customer service, advertising and listening all on one AI native platform. Now with Sprinklr Social and Sprinklr Service, the company is transforming how it delivers content and customer experience across markets, equipping its customer service and global social media operations teams with AI powered workflows, stronger governance and smarter campaign execution. This win signals a strategic shift to unify and scale while positioning Sprinklr at the core of their long term customer engagement strategy. Our next win is with a leading British retailer in the healthcare and wellness space.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

They were in search of a strategic partner to completely reimagine their contact center, transforming it from a cost center to driver of valuable insights and revenue growth. Following a competitive RFP process, they selected Sprinklr's unified platform to power a four phase transformation, capturing the voice of the customer through advanced quality management and analytics, deflecting low value contacts with intelligent knowledge management, deepening digital engagement via bots, live chat and WhatsApp, and ultimately unifying voice, workforce optimization and CX operations. This win signals a bold shift in how the brand views its services organization and Sprinklr as a heart of this evolution. A big congratulations to the bear hugging of cross functional pods who helped win these customers in Q1. In closing, we're focused on building and we're making tangible progress in our transformation.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We have acknowledged there will be challenges along the way and we still have significant work to do. But we have clarity about where we are going, where we must improve and how we will help our customers win. And I'm optimistic about the opportunity in front of us, but this will take some time. Sprinklr is the definitive AI native platform for unified customer experience management that empowers customer facing teams to deliver seamless and consistent experiences across every touch point of the customer journey. The world is moving from transactional customer engagement to unified three sixty degree customer experiences.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We will leverage our AI based unified platform and execute an ambidextrous approach to reenergize and grow our leading Sprinklr core business, while hardening and expanding our disruptive Sprinklr service solution in our march towards the Rule of 40. Thank you again, Sprinklr team members around the world who are passionate about our future. We are driven by a shared vision and commitment to innovation and aligned to our commitment to creating long term value for our customers, partners, shareholders and each other. Now I'd like to turn the call over to Manish to go through the numbers in a bit more detail. Manish?

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Thank you, Rory and good morning everyone. For the first quarter, revenue was $205,500,000 up 5% year over year, while subscription revenue was $184,100,000 up 4% year over year. Professional services revenue came in at $21,400,000 Our subscription revenue base net dollar expansion rate in the first quarter was 102%. This reflects the ongoing impact from the elevated customer churn and down sell activity that we have experienced in the quarter and over the past twenty four months. At the end of the first quarter, we had 146 customers contributing $1,000,000 or more in subscription revenue over the preceding twelve months, which is a 6% increase year over year, but down slightly on a sequential basis versus Q4 of last year.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

The sequential decline reflects the cumulative impact from some of the down sell and customer churn challenges we have referenced in the past year. This had led to some customers that were previously included in this metric falling below the $1,000,000 level in trailing twelve months revenue and fewer customers expanding into this cohort. We believe our bear hug focus on customers at the high end of the market should positively impact our seven figure customer count over time. Regarding gross margins for the first quarter, on a non GAAP basis, our subscription gross margin was 78% and the professional services gross margin was six percent, resulting in a total non GAAP gross margin of 70%. As noted on previous calls, we are experiencing higher data and hosting costs as we are launching new cloud environments in response to new business opportunities, especially in Sprinklr steps.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Turning to profitability for the quarter, non GAAP operating income was 36,700,000.0 or an 18% margin, which drove non GAAP net income of $0.12 per diluted share. In the quarter, we booked $16,300,000 in restructuring charges and paid out $11,800,000 in cash related to the restructuring. We also incurred $800,000 in litigation costs that we deem to be non core to the operations of the business. As a reminder, these restructuring charges and litigation costs are not included in our non GAAP figures. With respect to free cash flow, we generated $80,700,000 during the first quarter, which is a record for Sprinklr.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

And if you factor in the $11,800,000 cash paid out of the restructuring, free cash flow would have been $92,500,000 for the quarter. This was a good start to the year and positions us well. This strong metric reflects our ongoing efficiency efforts, better expense discipline and improved collection processes. This free cash flow generation contributed to our healthy balance sheet, which now stands at $570,200,000 in cash and marketable securities with no debt outstanding. As we disclosed in our earnings release, I'm happy to report that Sprinklr's Board has authorized a new $150,000,000 stock buyback program and we intend to complete the full buyback by 06/30/2026.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Given the strong cash flow generation in Q1 and the operational improvements we have been making, we believe this is a prudent use of cash at this time. Calculated billings for the first quarter were $204,300,000 an increase of 7% year over year. As of 04/30/2025, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was $943,200,000 up 2% compared to the same period last year. And current RPO or CRPO was $596,800,000 up 5% year over year. Before moving to guidance, I would like to comment on the macro environment.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Since our last earnings call, it is clear the macro environment has been changing. While we continue to see a healthy pipeline, we think it is reasonable to expect customers to be more cautious and scrutinize their spending decisions for the remainder of the year. Furthermore, I want to address the potential impact on the volatility of the U. S. Dollar on our business.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Given that most of our billings are in U. S. Dollars, changes in exchange rates do not materially impact our revenue. From an expense perspective, however, as a significant proportion of our employee population is based outside The U. S.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

And paid in local currency, we have a more significant impact on operating expenses. At this point, we estimate a $10,000,000 negative impact on our non GAAP operating expenses based on current FX rates. However, at this time, we are confident we will be able to identify savings across the business to offset this headwind. Our guidance reflects these assumptions. Now moving to the numbers.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

For Q2, we expect total revenue to be in the range of $2.00 $5,000,000 to $2.00 $6,000,000 representing 4% growth year over year at the midpoint. Within this, we expect subscription revenue to be in the range of $184,000,000 to $185,000,000 representing 4% growth year over year at the midpoint. The Q2 guide implies $21,000,000 in professional services revenue, which is growing by 9% year over year. As we have signaled in prior earnings calls, we will continue to invest in our professional services delivery capabilities and expect professional services gross margin to be approximately breakeven in Q2. With respect to billings, we estimate total billings of just under $200,000,000 here in Q2.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

We expect non GAAP operating income to be in the range of $33,500,000 to $34,500,000 resulting in non GAAP net income per diluted share of approximately $0.10 assuming $270,000,000 diluted weighted average shares outstanding. This equates to a 17% non GAAP operating margin at the midpoint. As we discussed on the call in March, we began investing some of the capital freed up from our restructuring earlier this year. This includes hiring in key areas such as go to market, R and D and AI resources to both grow the core and harden our service product offering. For the full year FY 'twenty six, we maintain our expectation for subscription revenue to be in the range of $741,000,000 to $743,000,000 representing 3% growth year over year at the midpoint.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

As we previously shared, we continue to make progress in our transformation, but there is much more work still to do and challenges to address. We expect this transformation to continue across FY 2026. We now expect total revenue to be in the range of $825,000,000 to $827,000,000 representing 4% growth year over year at the midpoint. This is a $3,500,000 increase from prior guidance, driven by an increase in our professional services revenue expectation to 84,000,000 For modeling purposes, you can assume approximately $21,000,000 in professional services revenue for both Q3 and Q4. For the full year FY 2026, we are maintaining our non GAAP operating income to be in the range of $129,000,000 to $131,000,000 This equates to non GAAP net income per diluted share of $0.39 to $0.40 assuming $277,000,000 diluted weighted average shares outstanding.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

This implies a 16% non GAAP operating margin at the midpoint. When modeling the spread of non GAAP operating income for the second half of FY 2026, you can assume a midpoint of 30,000,000 for both Q3 and Q4 as the investments flow through the income statement. In deriving the net income per share for modeling purposes, a total tax provision of approximately 39,000,000 needs to be added to the non GAAP profit before tax. To get to non GAAP profit before tax, start with the non GAAP operating income ranges provided and add an estimated $19,000,000 in other income for the full year with $4,000,000 of that to be earned here in Q2. This other income line primarily consists of interest income.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

We estimate a tax provision of $10,000,000 here in Q2. This equates to approximately a 26% effective tax rate on our non GAAP profit before tax for both the quarter and the year. We also expect to be GAAP net income positive for the full year FY 2026 consistent with our performance over the last two years. Regarding free cash flow, we're still tracking to achieve a 15% free cash flow margin in FY 2026, which would equate to free cash flow generation of approximately $125,000,000 for the full year. Q1 coming in at $92,500,000 gives us a strong start to this year.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Lastly, I would like to thank all our employees for their dedication and passion for what we are building at Sprinklr and I'm grateful for the confidence that our customers have placed in us. And with that, let's open it up for questions. Operator?

Operator

Thank Our first question is from Arjun Bhatia with William Blair and Company. Please proceed.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

Perfect. Thank you so much. Maybe for you Rory to start out with, it seems like you're making progress on the go to market side with some of the changes that you're implementing. But as you point out, we're still early in the journey and there's a lot of work still to be done. So I'm curious how long is it before you think the go to market or can kind of reach its full potential and start firing and also unders with cross sell with up sell with customer retention kind of getting to levels where you would be unhappy with it?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Yes. Thanks, RJ. That's a great question. The go to market is a fundamental component of the transformation. I think we did a great job with the coverage model that we implemented in February.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think the pod structure and creating those teams and really having them over the right accounts is fundamental to this transformation. In terms of where we are, I think we're making good progress. But as I told you, FY 2026 would be a transitional year. I thought the first half would be choppier than the second half and I'd look for more of a bend as I went through the year. The two things I think that are important about unlocking the go to market is one, I think this push around Project Bearhug to get our team back in front of the customer every day and a focus on sales execution and sales activity, driving that engagement with the customer.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

As we finish May, we've gotten to about 200 of our top clients through this project bear hug and we're definitely seeing traction from that activity. So I'm very encouraged. So we have to get that bear hug work out through about 500, six hundred customers over the next two quarters. And that should put us into somewhere in 3Q. The second thing we have to do Arjun is we need to make sure we are creating a robust enablement program for our internal pods as well as our partners because we have to build out our partner ecosystem and our customer.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

That we're actually implementing this month. We're starting with a series of 100 level classes, 200 level classes. And then later in the summer, we're going to be training our teams on 304 level classes around our eight or nine selling motions. So teaching the pod exactly how to sell, what are the pain points of the customer and how do we ramp them faster and create those use case models that help them sell. So I'd say as we move through this year transitional FY 2026, I'll look for that sales force and that pod structure to really start reaching some of its momentum in the latter part of the second half.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think we should see that in 3Q and 4Q and then in the FY 2027, '20 '20 '8 which is your acceleration time period. That's what I'd look for in that. Does that help, Barden?

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

Yes, perfect. That sounds very promising. Appreciate that. And then maybe the second one, just on CCaaS, it sounds like you're making some progress there. We know it's a competitive market, but it sounds like what you're doing is resonating.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

So I'm curious what from a product perspective customers are coming with to you to Sprinklr and saying, hey, we really like this. This is differentiating the market. And then what's driving that edge in the CCaaS service space?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think what is key in that what differentiates Sprinklr and why some of these iconic brands are looking to us and how we've made some really important inroads in that CCaaS space. We only entered that market about two point five years ago, but we have some really outstanding brands. It's because of the AI capability and this platform. Now CCaaS customers have their agents have an experience where they can see more robust. They don't have to switch screens.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

They can really pull in data about the customer from a unified perspective from the social and listening and the insights world. They have the robust kinds of capability with the right co pilot AI agentic deflection and the social support around it. I think that's what they really like about it. The experience and the forward thinking of that AI native platform that we're creating and then how we link the other components of Sprinklr onto that platform. You're going to hear later in the year some of the wins that we've had in that space at global level.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And I think that they're going to be very important in unlocking the future there. Now the challenge for us has been we have to mature that. And that's when I talk about the strategy about hardening and expanding CCaaS. I need to have that. This is a mission critical application.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

They love the experience. They love the solution and the platform and the AI nativity of it and the functionality around AgenTeq AI, Copilot and our studio work. But we have to have robustness in terms of how we release product, how we support product. We need to be a mature enterprise software company and that's something we'll work across this whole year. So they love the solution, they like the idea, but we have to be better at implementing it and making sure that it's a great experience.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We have to harden it and we have to add some functionality like in areas of workflow management that will enable us to have the full answer. And I think all of that's on track through the end of the year through the beginning of next year. And I consciously not push the accelerator down there. We are still continuing to grow in that space and add new customers but want to get that hardened before I expand further and spending a lot of time with our existing customers to make sure that's a good experience.

Arjun Bhatia
Co-Group Head - Technology, Media & Communications at William Blair

All right. Very good. Thank you.

Operator

Our next question is from Pindulom Bhora with JPMorgan. Please proceed.

Pinjalim Bora
Pinjalim Bora
Executive Director - Equity Research at JP Morgan

Thank you for taking the questions. Two quick questions. The elongation in sales cycles and scrutiny that you highlighted, I want to ask you, is that broad based across your customers? Or is that associated with certain geographies and certain verticals? And maybe talk about what have you seen in terms of spending trends as you stepped into Q2?

Pinjalim Bora
Pinjalim Bora
Executive Director - Equity Research at JP Morgan

And the second question is, the logo churn, what is driving that? How should and how should we think about the dollar churn through the year? Thank you.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Yes. So let's take the first one first. I think what you're seeing, there's definitely been pressure in terms of the macro and the uncertainty created by tariffs. It doesn't directly affect us. But I think everyone has and I don't think it's vertical, I don't think it's geography based.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think everyone's just focused on managing expense as effectively as they can and to make sure that they're investing in those areas that get return. We're seeing plenty of opportunities. I mentioned that we're at the highest point in eighteen months in terms of our core pipeline. I think that's a macro effect. I'd say it's across the planet.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I'd say in terms of the impact to us, I'd put that in the 30% plus or minus. I think more of our pressure has been over the past two years is on our execution, okay? I think everyone's going to feel that scrutiny on selling on expense management, But I don't think it's catastrophic. I just think it there's more focus on it. Our key is getting better implementation and better execution, delivering on the commitments we made.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And I can tell you the ones where we're bear hugging and we're spending more time with the customer, we're seeing tangible progress. We just have to do it across a wider swap of the customer set. Now in terms of renewals, we've seen renewal pressure in Sprinklr long before I got here, I guess the past two plus years. I think again, that's really driven by the need to make our company a mature enterprise software company, improve our implementation, engage the customer, make sure we do what we say and own what we do. If we make a customer commitment, deliver on it.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

When we see how we do an implementation, do it effectively. And make sure you're in front of the customer every day. And now each of those activities, we have specific actions with our sales pod, with Project BearHug, with our enablement, with our work to transform our implementations. We want to move to have our implementations be 80% consistent and 20% bespoke. And we want our partner ecosystem to grow significantly as we move forward.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Today, too much of our implementations are unique bespoke implementation and not consistent enough. So in terms of that, from quarter to quarter and predictability, we just are kind of in the same mode. I'm looking for the business to show a bend in the second half. I'm looking for the changes that we're making in terms of the roadmap, in terms of the enablement, in terms of the pods, in terms of the improvements to implementation, improvements to the enablement, that should all start to translate to a bend in the second half of the year. Now plus or minus, we'll look at it.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We're a work in progress. And all I'll continue to do is give you updates on this. The challenges of the past two years plus two years, we're not going to fix in two quarters, but we're going to fix in a transitional year as we move forward. And I think we're working on the right stuff. I really do.

Pinjalim Bora
Pinjalim Bora
Executive Director - Equity Research at JP Morgan

Got it. Thank you.

Operator

Our next question is from Catherine Trebnick with Rosenblatt Securities. Please proceed.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

Thank you for taking my question and good first quarter here. So could you delineate maybe between Sprinklr Marketing, Sprinklr Insights and Sprinklr Social on the churn or any one of those having more of a particular problem on renewal? And then the second follow on question would be, what type of R and D activity are you putting into those projects that help with the renewal? Thank you.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Hey, thanks, Catherine. Catherine, from a standpoint that whole social, that core Martech stack space, I think the company as it pivoted two point five years ago towards CCaaS really neglected and really didn't focus there. And I think it's a fundamental part of our solution long term. We want to reenergize and grow that core. There's no question.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We've changed our incentives this year to make sure and we see that manifesting itself in a better pipeline. That's good news. I like that. I think what we're seeing in terms of renewal, there's not much variation between those three components that you referenced. Maybe one, three, four points higher or lower and it can vary from quarter to quarter, but they're all in the same kind of space.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

When we engage the customer and we work with them on a regular basis and we help them grow and have the right insights, we see stickiness, we see activity, we see buy in. When we don't engage the customer, what would you expect? It atrophies, you don't get the impact. That's why we're pushing so hard in the go to market. Now in terms of innovation, we've got a project we internally call Project Tiger Shark.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

In Tiger Shark, what we're trying to do is really focus on all activities around the core to accelerate. So we have focused on improving the user experience in the UI. We're around innovation and advancing and we're looking externally, are there acquisition opportunities that can add different capabilities and functionality. And there's some interesting opportunities out there that we're going to continue to pursue. I think you're going to see us introduce in the customer feedback management space as a competitor to some of the traditional players in that space, I think we can be very disruptive there.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

The key though fundamentally is being engaged with the customer. When we get it right, we grow. We just implemented a large multimillion dollar core deal that went live. We sold it in 4Q. It was with a big healthcare retailer.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

It went live just the past couple of days, very, very powerful. The key here is engage the customer, continue to innovate, look for acquisitions that are small but meaningful that allow us to continue to expand on that space. No big variation in the renewals between the three pieces of the stack, but we're definitely got an understanding of how to make that change and we're executing on it. Thank you, Catherine.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

Thank you.

Operator

Our next question is from Jackson Adler with KeyBanc Capital Markets. Please proceed.

Jackson Ader
Jackson Ader
Managing Director at KeyBanc Capital Markets

Hi, good morning guys. Thanks for taking our questions. On the bear hug customers, so the 200 that you've identified, what was the rationale behind those 200? Is it just the largest 200? Is it the ones that were most at risk?

Jackson Ader
Jackson Ader
Managing Director at KeyBanc Capital Markets

How did you define 200 versus the other three to four?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Yes. What we did that's a great question, Jackson. What we did is we started on the strategic accounts, top 25 to 50 accounts. And then we're then expanded to the top 102. They're definitely based on size.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

So we wanted to capture that first. But at the same time through our business management system, we're building more analytics into the accounts and we're one of the things Bearhug did, did a lot of AI analytics around correlations. What things do we see in account that has pressure? And so we're actually getting kind of like a health check on all our accounts. So we started BearHug from largest to smallest and we're going to move in that direction.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

But in parallel, we did this work to do the analytic and we're really starting to understand what are the factors. Are we seeing the right uptake? Are we seeing the engagement in the platform? Are we getting the right customer sales activity? For example, if we touch a customer 15 times or more in a year, whether that's through the website, sales call, getting them to an event, we see their buying propensity increase by 25%.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

That's a big number. So we want to get sales activity up. And so in parallel, bear hug goes top to bottom first, but then we're creating this kind of health analytic that's going to highlight that. And we are now looking twelve months in advance on account so that we're managing way further ahead. When I got here in November, they were talking about renewals that were going to happen that next month in December.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

That's way, way too late. We have to be way ahead of that. And what you're going to see as I answered the question earlier on the call, we've got to see that pod structure fundamentally change the sales culture as we move through the second half of this year. Does that help Jackson?

Jackson Ader
Jackson Ader
Managing Director at KeyBanc Capital Markets

Yes, yes. Makes sense. Thank you. A quick follow-up, Manish. The $10,000,000 FX headwind on non GAAP EBIT or I guess to the expense base, what are some of the areas that you think you can actually some of the levers you have to offset that $10,000,000 in order to kind of keep your profitability metrics in line?

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Yes. Thanks, Jackson. So, I mean, at this point, look, we're actively evaluating the situation. As I think you've picked up, we've been pretty thoughtful in where we're spending our money. So, I think everything is on the table.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

We as we did our reduction earlier in the year, we did keep some dry powder to figure out where we would invest during the course of the year. So we're just going to look thoughtfully at the monies that we have. And as I said in the prepared remarks, we are looking to maintain the guide that we've put out. So we just look at where we can pull back and just be more thoughtful about our spending.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And Jack, I'd add a little bit of color on that one from an investment standpoint. I'm not saving our we're not going to save our way to prosperity here. We want to run an efficient model and I think we've done some good work on cost optimization. We have to continue to invest in innovation as we talked about with Catherine just a minute ago. But I also I think there's key areas like AI.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We have a real leadership product here. We need to continue to extend that. I need some tiger teams in the region, so I can engage the customer faster. I think that's going to be an area I'll look at. Another one is around this pod and enablement structure.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I need them to come up to speed. We need them to come up to speed faster and really understand how to sell. And then our support and services and implementation, we have to transform some of that so that we're way better. I think we've been very prudent in where we've made our investments in the product area and improved the roadmap. But those are three areas.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And I want to make sure that everyone knows that we are going to continue to make those moves that put us in the position for long term durable profitability and growth in 2027 and 2028. And that's what's most important. Those are the areas we're going to look at.

Jackson Ader
Jackson Ader
Managing Director at KeyBanc Capital Markets

Thank you.

Operator

Our next question is from Raimo Lenschow with Barclays. Please proceed.

Raimo Lenschow
Raimo Lenschow
Managing Director at Barclays

Perfect. Thank you. Congrats from me as well, Rory and Manish, good early performance. The question I had on CCARS, there's obviously a big discussion in the industry about like what AI is going to do to them to that space. Can you speak a little bit about your vision there, like how that will come together and how you are maybe slightly differently positioned than the classic CCaaS vendors? Thank you.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Raimo, I love that question. I love this disruption. I think this disruption has opened the door for Sprinklr. I think this AI transformation is 100% real. And this idea of digital deflection and agentic deflection and support is real.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Do I think agents in the CCaaS space are going to dramatically decline? There are some people out there that say 90% of the agents will be gone in ten years. That's not the case. That's not going to happen. But I think that you're going to see an important component of co piloting and agentic work that's going to deflect a fair amount of work.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

You're going to see the digital support activity is going to deflect a significant portion of work. I still see that space growing in total. And I think that you're going to see this kind of movement that's occurring that plays to our hand. We have that capability built in and this will drive this movement to a unified customer experience. Well, you'll pull in the other activities around social and around digital and around voice that will create an end to end solution.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We're already selling it and we're seeing momentum in that space. It's now a question of when does it accelerate. And if you read some of my LinkedIn posts, you'll see that I talk about that. I think that's what I love this disruption. I think it's spot on and that's one of the key reasons I believe in Sprinklr.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Now the key for us to winning it is we've got a good platform, we've got it in the right space, but we have to mature this company. We have to get the right processes. We have to get the right sales motion. We have to get the right support function. That's what this year is about.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

You've got to give us time to fix those items. And if we fix those items and we really can scale with these iconic brands and support this, we're in a very good position to capture a significant part of that business. And I think we're very well positioned for it. But we've got to fix the maturity and harden the platform. This isn't just a social listening platform anymore.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

This is a mission critical unified AI native customer experience platform. You have to behave like that if you're going to support the world's most iconic brands on their mission critical apps. That's what we have to do over the next six, nine, twelve plus months. And if we do that, that transformation and that movement of the marketplace to our hand. I love that this disruption.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I want it to happen. I need to mature the same time. Raimo.

Raimo Lenschow
Raimo Lenschow
Managing Director at Barclays

Yes. Makes sense. Dick, can I have just one quick follow-up here, maybe it's more for Manish? If you think about your new business information system that is in place now, it's great to see, they usually are things that you realize, oh my god, I know something that I didn't know and now I can act better. How comprehensive will that be for the organization?

Raimo Lenschow
Raimo Lenschow
Managing Director at Barclays

At the moment, you talk a lot about like sales renewal, etcetera. Is that going just is it sort of small for that space? Or is it going broader than that? Thank you.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Yes. Thanks, Raimo. So the BMS is way broader than that. So it's not just focused on renewals. It's everything from product delivery to enablement to how the sales teams are performing.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Most BMS systems you would look at would tend to be just around what's happening in the go to market. And I think one of the things we realized was we were good at what we did, but more in silos. And so I think the BMS is really all around making sure everybody in the company has a full three sixty view of what's going on and how do we perform better as a team versus in our own individual domains.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And what the key here is, Raimo, is you've got to create a thirteen week cadence every quarter. And you've got month one, month two, month three and then you have biweekly components. We review the roadmap. We review the implementation. We do sales every week, the sales cadence.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We do month one, which has a strategic deep dive. We get the entire leadership team together three times a quarter for two days. We're engaged and we have a we look at product, we look at sales, we look at marketing, we look at people, how we're changing the culture, we look at all those components. And across each thirteen week cycle, we have a full calendar of events. Now, we're burning that in.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And I think we're getting if you think of Sprinklr like an airplane, when we got here, it had a couple of dials. You knew how fast it was flying and maybe what height we were. Now we know oil pressure on the engines. We knew the temperature of the water. We know the airspeed.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We know that we're starting to be able to see the weather that's coming in the future. And that's where you have to get the BMS to get proactive. But again, a work in progress, you have to give us time to do the work to create the bet.

Raimo Lenschow
Raimo Lenschow
Managing Director at Barclays

Yes, makes sense. Thank you. Congrats.

Operator

Our next question is from Elizabeth Porter with Morgan Stanley. Please proceed.

Elizabeth Porter
Elizabeth Porter
Executive Director at Morgan Stanley

Great. Thank you so much for the question. I wanted to follow-up on comments around the pod structure and just fundamentally changing the sales culture. Just understanding that culture may be hard to change, I wanted to better understand the receptiveness from the teams kind of what incentives you're putting in place and what are the metrics you're looking at to really measure success of the new pod structure? Thank you.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Yes, Elizabeth that's a great question. So I think the first piece of work we did to launch in February was to get the new coverage model and really have this concept of a pod where you have the AE kind of running the quarterback of the play. You've got this solution consultant being the CTO, the technical. You've got the technical success manager with the right technical skills to have the ongoing relationship to really build that. You've got the RAM, the renewal manager in there.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

You've got the implementation and the managed service. So they're behaving as a single unit and they're getting in front of the customer. It creates that collaboration and teamwork. And we're bringing in product skills. So when we do a win report, you can see sales people, product people, finance people, marketing people, reference is it takes a village.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We've got to create this mindset that everyone's job is around the customer. And our quote, the Sprinklr Way is about this subsection with the customer around accountability. I do what I say and I own what I do. And it's about collaboration and teamwork. I do it as a group.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Only succeed United. And then ultimately, it's about building trust. And remember, I love that book, The Speed of Trust. It's fundamental. If you build trust, you'll be successful.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

In the culture of the sales, you want to create this ownership. We can't have an hit and run sales team. We need a team that's working. We live and die together and we create this engagement with the customer and get the sales activity. Because I referenced earlier, we get the touches, our sales win rate increases by 25%.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

You build better pipeline. We're creating the incentives to encourage it. But you're right, it takes time. That's why we need time to build that in. Now good news is we've had fair amount of attrition in the past two years, so a lot of new people.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

So you can help train them and grow them. That's why we're spending time on enablement right now. And you've got to create this and winning begets winning. We're not all the way there. But we are highlighting where we have these great successes.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And that's the kind of dichotomy of Sprinklr. Sometimes we have this renewal pressure that's been going on for two years and then other accounts we just have these amazing unlocks and we're able to grow it and we're so fundamentally important to them. How do we catch that lightning and show that team? That's how we change the sales culture and the culture of the company. And that's what Joy Corso and her team is focused on.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

It's really creating that kind of cultural transformation. But it will take most of this year. Culture always takes between twelve and twenty four months to get there, always.

Elizabeth Porter
Elizabeth Porter
Executive Director at Morgan Stanley

Great. Thank you. And then just as a quick follow-up. After the 15% reduction in workforce and some of the reinvestment you're doing just in the right areas, how should we think about the puts and takes and what year end headcount could be looking like?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think plus or minus where we are today. I mean maybe a little bit more. I want to be prudent on it. I'm really looking to upgrade our technical capability. I think we have maybe plus or so maybe 200,000,000 and change something like that.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

But I think it's in the ballpark. I think we ought to make sure we don't get ahead of ourselves that we're very prudent. I need I could continue to grow on the 300 plus AI skills that I have. I need to upgrade the technical capability of our success managers and in our solutions consultants. Those are two areas.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think we got to make some investment in the enablement. But I think there's puts and takes. There's some other areas. I think we're in the general right ballpark. And I think let's get revenue.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Let's see a bend in the business and then we can kind of talk about where do we go from there. But I think we can be just as efficient.

Elizabeth Porter
Elizabeth Porter
Executive Director at Morgan Stanley

Thank you.

Operator

Our next question is from Patrick Walravens with Citizens JMP. Please proceed.

Patrick Walravens
Analyst at Citizens JMP Securities, LLC

Great. Thank you. Hey, Rory, can we go back in time a little bit? When you were at and what I'm trying to get at here is sort of as you fix the fundamentals of Sprinklr, the strategic value of this business. So, Advantaj, appointed in July of twenty twenty and Ericsson announced the acquisition in November 21.

Patrick Walravens
Analyst at Citizens JMP Securities, LLC

So that went really quick, right? Can you just walk us through how that played out and help us think about sort of what the strategic value of Sprinklr might be?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Yes. I think as I've shared with you Patrick and the team, there's a particular approach that we go about when we take on one of these transformations and these kind of turnarounds. The first phase is always around business optimization and most of that work is done. That's where we reorganize the go to market and we get the pod structure. That's where we refocus the roadmaps to make sure that we have the right priorities.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

We put in place the BMS. We get the right strategic initiatives. Often companies like this struggle with lack of clarity and they get kind of page like an old mainframe, right? They're so busy switching from idea to idea, they're not really doing any work. They're just paging workload in and out of memory and never getting there.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Now that shows how old I am because that's not the case how it works at computing anymore. But I think you do that optimization work. And most of that is all done. The BMS is in place. I highlighted that.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

The strategy is clearer. Then you go through a transitional phase. And that's somewhere between say twelve and eighteen months. That's why I talked about the first half of this year being that bumpy kind of period and then you look for a bend as we go through the second half into FY 2027. And that puts you somewhere eighteen to twenty four months out.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

I think Vonage had the advantage of the COVID kind of acceleration that it caught the wind at the same time, but we follow the exact same structure. And then you move into an acceleration phase, whether that's twelve to eighteen months in or whether that's twenty months in or twenty four months, it's in that general period. It could be as short as fifteen months, but that's what you're looking for. And then you start to build on it. So you do your optimization work, that's pretty much done here at Sprinklr.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Now we've got clarity on the strategy. Now we use this transition year to fix the processes, the programs. We make some of the investments. We start to change the culture and we move the whole thing in terms of maturation and maturity as a software company. And then that kind of puts us at the end of this year beginning of next year sometime.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And then we're trying to put more logs on the fire. Now you're trying to accelerate the business and grow and that's how you push towards the Rule of 40. Each one is a little bit different. So you can go look at Dell Boomi or Dell Virtu Stream or AMD or Lenovo. There's a whole long list of different companies that I've worked on.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

This is definitely the approach. That's how you should look at it, Patrick. And I think we're right where we should be at this point. Now this transition year is really fundamental and I think we're doing the right things. Now we got to see it each component.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

And I can tell you that we're a better sprinkler than we were six months ago. And I expect to be a better sprinkler in six months and a much better sprinkler in twelve months.

Patrick Walravens
Analyst at Citizens JMP Securities, LLC

Thank you. And Manish, can I do a quick follow-up, which is I think I was looking for 103 on the dollar expansion? You guys came in at 102. So just what should we expect going forward just so we can sort of not be overestimating it?

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

Yes. I think so that's a good question, Patrick. I think where we are right now, the one or two, give or take, is probably where I expect it to be. Again, we don't make any predictions around it. It's hard to sort of estimate.

Manish Sarin
Manish Sarin
Chief Financial Officer at Sprinklr

If you look at a full year growth rate of, call it, four odd percent on the subscription side, that would sort of put the 102 right around where you'd expect it to be because some growth will come from new business sold during the year and obviously a lot will come from upsells into the existing accounts. So I would expect this number to be kind of where it is right now. Again, or take a couple of points below that.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Until we see the bet. Thank you That's it, Patrick. I appreciate that. I think we're good now. All right, Eric, I think we're at the

Eric Scro
Eric Scro
VP - Finance & Head of Investor Relations at Sprinklr

if you have anything else, otherwise, Rory, any last remarks from you?

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Well, first of all, I'd just like to thank everyone for joining. I appreciate everyone's interest in the company. I do want to thank the Sprinklr team members around the world for their passion and energy. I'd ask you to continue to track us as we go through. We'll give you updates in a very open transparent way so you can track where we're going.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

It's a work in progress. But I think we're in the right place at the right time. We're dealing with some of the challenges of the past. We're making the right changes and we're looking for the company to see a bend sometime in the second half of the year. But at this point, we're a work in progress.

Rory Read
Rory Read
President, CEO & Director at Sprinklr

Let's keep focused on making a better Sprinklr and give us a bit of time. I appreciate everyone's interest and thank you, Sherri, for hosting the call today.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Executives
    • Eric Scro
      Eric Scro
      VP - Finance & Head of Investor Relations
    • Rory Read
      Rory Read
      President, CEO & Director
    • Manish Sarin
      Manish Sarin
      Chief Financial Officer
Analysts
Powered by Quartr