Sprinklr, Inc. Q3 FY2025 earnings call

Rory Read joined as President and CEO, emphasizing the company's industry-leading tech, strong customer base, and attractive markets. He aims to make Sprinklr a Rule of 40 company, needing faster top-line growth and margin expansion. Manish Sarin discussed financial details including revenue, gross margins, profitability, free cash flow, RPO, and provided Q4 and FY '25 guidance. Rory noted initial observations on the business, highlighting the need to address challenges and build on strengths, while Manish detailed the financial metrics and outlooks for the quarter and full year.

In Q3, total revenue grew 8% year-over-year to $200.7 million, with subscription revenue at $180.6 million (up 6% year-over-year). Professional services revenue was $20.1 million. Subscription revenue-based net dollar expansion rate was 107% in Q3. At the end of Q3, there were 147 customers contributing $1 million or more in subscription revenue, a 20% year-over-year increase. Non-GAAP subscription gross margin was 80%, professional services gross margin was negative 8%, resulting in a total non-GAAP gross margin of 72%. Non-GAAP operating income was $23.3 million (12% margin). Free cash flow for Q3 was $4.9 million. Billings for Q3 were $147.9 million (down 8% year-over-year). RPO was $906.3 million (up 17%) and cRPO was $545.6 million (up 11%).

For Q4, total revenue is expected to be in the range of $200 million to $201 million (3% growth year-over-year at midpoint), subscription revenue $180 million to $181 million (2% growth year-over-year at midpoint), and professional services revenue $20 million. Non-GAAP operating income is expected to be $17.5 million to $18.5 million. For full-year FY '25, subscription revenue is expected to be $715.9 million to $716.9 million (7% growth year-over-year at midpoint), total revenue $793.9 million to $794.9 million (8% growth year-over-year at midpoint), and non-GAAP operating income $76.4 million to $77.4 million. Billings are expected to reaccelerate in Q4, with FY '25 billings estimated at ~$826.5 million (6% growth year-over-year).

Risks associated with forward-looking statements, including potential material differences from guidance. Challenges in reducing churn, improving sales and marketing efficiency, and managing data costs. Also, risks related to the impact of corporate strategies and changes to leadership on actual results.

Q: Arjun Bhatia asked about the future direction between CCaaS and core social.

A: Eric Scro discussed focusing on reenergizing the core and expanding services, emphasizing the ambidextrous strategy of reenergizing the core and hardening/expanding services.

Q: Arjun Bhatia asked about leading indicators for growth.

A: Manish Sarin mentioned RPO and cRPO as stronger indicators compared to billings.

Q: Pinjalim Bora asked about changes taking hold and incremental changes.

A: Rory Read discussed pod structure, renewal account managers, and partner ecosystem, noting these will be detailed in the March call.

Q: Pinjalim Bora asked about dollar churn.

A: Manish Sarin said there is marginal improvement but more work needed in reducing churn.

Q: Elizabeth Porter asked about pricing and packaging.

A: Rory Read said simplified pricing and packaging in FY '26, moving to essential and professional Sprinklr with modules.

Q: Patrick Walravens asked about churn root cause.

A: Rory Read discussed macro environment and execution issues, including past tactical errors and the need for better coverage and incentives.

Q: Patrick Walravens asked about macro outlook.

A: Rory Read was optimistic about mid-single-digit IT spend and demand in the customer experience space.

Q: Raimo Lenschow asked about management structure.

A: Rory Read discussed basic blocking and tackling, team investment, and focusing on efficiency and execution.

Q: Raimo Lenschow asked about billings reacceleration.

A: Manish Sarin said billings reacceleration pattern was similar to previous years.

Q: Catharine Trebnick asked about sales organization.

A: Rory Read discussed dual pod structure and sales kickoff in FY '26, focusing on mature enterprise coverage.

Q: Jackson Ader asked about net new dollars vs. resource shifts.

A: Rory Read discussed rebalancing resources and retention bonuses, emphasizing rebalancing to efficient areas.

Q: Jackson Ader asked about rep churn.

A: Rory Read said retention bonuses were for key skills, not reps, and focused on building the right sales structure.

Q: Parker Lane asked about M&A philosophy.

A: Rory Read said open to tuck-in acquisitions but focused on execution first before major M&A moves.

Q: Brian Schwartz asked about timing of optimization strategy.

A: Rory Read said go-to-market changes first, then product, with go-to-market changes manifesting earlier in FY '26