CXM — Sprinklr, Inc.

Summary of Sprinklr Q1 Fiscal Year 2027 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $219.5 million, up 7% year-over-year.
• Subscription Revenue: $194.8 million, up 6% year-over-year.
• Non-GAAP Operating Income: $31.7 million, representing a 14% non-GAAP operating margin.
• Net Dollar Expansion Rate: 104%, showing improvement over the previous quarter.
• Total Remaining Performance Obligations (RPO): $1.04 billion, up 10% year-over-year.
• Current RPO: $627.1 million, up 5% year-over-year.
• Free Cash Flow: $65.8 million, representing a 30% free cash flow margin.
• Subscription Gross Margin: 74%, with total non-GAAP gross margin at 66%.

2. Strategic Updates and Business Highlights

• The company is in the second phase of its transformation, focusing on execution and embedding changes made in the previous year.
• Successful completion of the largest software deal in Sprinklr's history with a global consumer electronics company.
• Strong renewal rates achieved, the highest in over two years, driven by the "Bear Hug" initiative targeting larger customers.
• The acquisition of ViralMoment enhances Sprinklr's AI video analytics capabilities, aligning with the growing importance of short-form video.
• Positive momentum in AI-native products, with 180 AI projects underway, contributing to improved customer engagement and operational efficiency.

3. Forward Guidance and Outlook

• Q2 Revenue Guidance: Expected to be between $214 million and $215 million, representing 1% growth year-over-year.
• Full Year Revenue Guidance: Total revenue expected between $866.5 million and $868.5 million, reflecting 1% growth year-over-year.
• Subscription Revenue Guidance for FY '27: Raised to between $779.5 million and $781.5 million, representing 3% growth year-over-year.
• Non-GAAP Operating Income Guidance for FY '27: Expected to be between $139 million and $141 million, with a 16% non-GAAP operating margin.

4. Bad News, Challenges, or Points of Concern

• Middle East Market Pressure: Ongoing geopolitical challenges have delayed some deals, with an estimated $3 million to $4 million in revenue impacted this quarter.
• Professional Services Revenue Decline: Expected to decrease by 13% year-over-year in Q2 due to the completion of large projects and a shift in focus.
• Cost Pressures: Increased data and hosting costs related to AI initiatives are impacting margins, with expectations of negative gross margins in professional services for Q2.
• Shift in Customer Metrics: The decision to discontinue reporting on the $1 million customer cohort metric raised concerns about potential declines in customer retention and growth.

5. Notable Q&A Insights

• Rory Read emphasized the resilience of the Middle East team and the healthy pipeline despite current challenges, expressing optimism for recovery in upcoming quarters.
• The management team acknowledged the importance of improving customer engagement and renewal rates, particularly focusing on the "Cornerstone" strategy for smaller accounts.
• There was a discussion on the balance between M&A and share repurchases, with a focus on strategic acquisitions that enhance product offerings without compromising capital allocation.
• The executives expressed confidence in the trajectory of the business, citing improved analytics and customer engagement as key indicators of future success.

Overall, Sprinklr's Q1 results reflect a company in transition, making strides in customer engagement and AI capabilities while navigating external challenges and preparing for future growth.