Sprinklr, Inc. Q1 FY2026 earnings call

• 1Q financial highlights: Total revenue grew 5% to $205.5M, subscription revenue grew 4% to $184.1M, non-GAAP operating income was $36.7M with an 18% margin, and record free cash flow of $81M. - Transformation: Established ambidextrous strategy, implemented business management system, optimized cost structure, realigned go-to-market coverage model, and strengthened product delivery roadmaps. New CIO Sanjay Mccwan appointed. - FY 2026 is a transitional year with challenges like execution issues, macroeconomic uncertainty causing longer sales cycles and renewal pressure. - Project Bear Hug: Focused on top 500 customers, with early positive results. - Product innovation: Gained industry recognition from Gartner and Forrester, highlighting cross-product innovation and unified platform vision. - Customer wins: Continued landing and expanding with brands like Calvin Klein, LG Electronics, etc. 146 customers with over $1M in subscription revenue. - Focus on helping customers realize AI-native platform value, strengthening implementation processes and post-sales support. New business management system provides comprehensive view. New sales pod structure implemented in February for better collaboration. Sprinklr, Inc. Core remains strong, AI solution plays key role in service with containment rates ranging from 30% to 80%.

For the first quarter, total revenue grew 5% year over year to $205.5 million, with subscription revenue growing 4% year over year to $184.1 million and professional services revenue at $21.4 million. The subscription revenue base net dollar expansion rate in the first quarter was 102%. At the end of the first quarter, there were 146 customers contributing $1 million or more in subscription revenue, a 6% year-over-year increase. On a non-GAAP basis, subscription gross margin was 78%, professional services gross margin was 6%, and total non-GAAP gross margin was 70%. The company generated $80.7 million in free cash flow in the quarter, which would have been $92.5 million if considering the $11.8 million cash paid out for restructuring. Calculated billings for the first quarter were $204.3 million, an increase of 7% year over year. Total remaining performance obligations (RPO) was $943.2 million, up 2% compared to the same period last year, and current RPO (CRPO) was $596.8 million, up 5% year over year.

• Q2 guidance: Total revenue expected to be in the range of $205M to $206M (4% growth at midpoint), subscription revenue in $184M to $185M (4% growth at midpoint), professional services revenue $21M (9% growth), billings just under $200M, non-GAAP operating income in $33.5M to $34.5M, non-GAAP net income per diluted share approx $0.10. - FY 2026 guidance: Subscription revenue expected in $741M to $743M (3% growth at midpoint), total revenue in $825M to $827M (4% growth at midpoint, driven by increased professional services revenue expectation), non-GAAP operating income in $129M to $131M, non-GAAP net income per diluted share $0.39 to $0.40, expected 15% free cash flow margin in FY 2026 with approx $125M free cash flow generation, and GAAP net income positive for the full year.

• Macro economic uncertainty leads to longer sales cycles and increased scrutiny of enterprise spending. - Inconsistent operational execution and lingering technical debt from past years put pressure on renewal rates, resulting in more down-sell activity and logo churn. - Volatility of the US dollar has a $10 million negative impact on non-GAAP operating expenses, but the company is confident in identifying savings to offset this headwind.

Q: Arjun Bhatia asked about how long it will take for the go-to-market to reach its full potential and drive cross-sell, up-sell, and customer retention.

A: Rory Read responded that FY 2026 is a transitional year. Progress is being made with the pod structure implemented in February. Project Bear Hug is helping, with about 200 top clients engaged so far. An enablement program for internal pods and partners is starting, with classes planned, and looking for momentum in the latter part of the second half and into FY 2027-2028.

Q: Pinjalim Bora inquired about whether the elongation in sales cycles is broad-based across customers or certain geographies/verticals and about logo churn and dollar churn.

A: Rory Read said the pressure is broad-based across the planet due to macro and uncertainty, not specific to verticals or geographies. Renewal pressure is driven by the need to make the company a mature enterprise software company, improve implementation, and engage customers. Looking for a bend in the business in the second half with improvements in execution.

Q: Catharine Trebnick asked about the difference in churn among Sprinklr, Inc. marketing, insights, and social and about R&D activity to help with renewal.

A: Rory Read stated there's not much variation between the three components. Focused on Project Tiger Shark to improve user experience, UI, and look for acquisition opportunities. Engaging with customers is key, and they're seeing progress with large core deals.

Q: Jackson Ader asked about the rationale behind the 200 Bear Hug customers.

A: Rory Read said they started with the largest accounts and are using analytics to understand account health. Bear Hug starts from largest to smallest, and they're looking at sales activity and customer engagement factors to improve buying propensity.

Q: Raimo Lenschow asked about the vision for CCaaS and the comprehensiveness of the business management system.

A: Rory Read talked about the AI capability and unified platform being key in CCaaS, with customers liking the experience and functionality. Manish Sarin said the BMS is broader than just renewals, covering product delivery, enablement, and sales team performance, providing a 360-view of the business.

Q: Elizabeth Porter asked about the receptiveness of teams to the pod structure and metrics to measure success.

A: Rory Read explained the pod structure encourages collaboration and teamwork, with incentives to drive sales activity. Building trust and ownership is important, and it takes time to change the culture, with new hires providing an opportunity to train and grow. Winning begets winning, and they're highlighting successes to drive the culture change.

Q: Patrick Walravens asked about the strategic value of Sprinklr, Inc. and the dollar expansion rate.

A: Rory Read discussed the optimization, transitional, and acceleration phases of transformation. Manish Sarin said the 102 net dollar expansion rate is expected to remain around that level as the company focuses on growth from new business and upsells into existing accounts