Sprinklr Inc

NYSE:CXM

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. And welcome to Sprinklr’s First Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mr. Eric Scro, Vice President of Finance for introductory remarks. Please go ahead, Eric.

[Eric Scro, Senior Vice President, Finance]

Thank you, Shamali, and welcome everyone to Sprinklr’s first quarter fiscal year 2023 earnings call. Joining us today are Ragy Thomas, Sprinklr’s Founder and CEO; and Manish Sarin, Sprinklr’s Chief Financial Officer.

We issued our earnings release a short time ago, filing the associated 8-K with the SEC and we’ve made that available on the Investor Relations section of our website, along with the supplementary investor presentation.

With that, let me turn the call over to Ragy.

[Ragy Thomas, Founder and CEO]

Thank you, Eric, and hello, everyone. Thank you for joining us today as we share the results of our first quarter in FY '23. I will get started with highlights including what I'm hearing from customers in some of our key wins. Manish will then share details of our financial results.

I am very pleased to report that Q1 was another strong quarter that exceeded guidance. Q1 total revenue grew by 31% year-over-year to $145 million, and subscription revenue climbed to $127.3 million, an increase of 32% year-over-year, coming off a strong finish to our FY '22. This is now our third straight quarter delivering more than 30% in total revenue growth. We continue to believe that there is a durable long-term growth opportunity for Sprinklr to lead the unified customer experience management category that we believe is still just getting started.

Before diving into details, let me take a moment to welcome our new CMO Arun Pattabhiraman to Sprinklr. As you saw in our announcement in May, Arun joins us from Freshworks, where he served as the Chief Growth Officer of the company. He brings extensive experience in marketing hypergrowth SaaS companies and we're excited about his ability to position Sprinklr for our next phase of growth.

In Q1, I had the privilege and opportunity to sit down face-to-face with over 100 of our top customers and over 75 of our top customer-facing Sprinklrites. The message we're hearing is remarkably consistent. Again, large global companies are all focused on creating great customer experiences across channels. But in today's environment, they're also trying to reduce cost, mitigate risk and convert legacy cost centers to profit centers.

Marketing and care have evolved dramatically in a short period of time. We're seeing the volume of customer interaction shift to new channels like live chat and messaging like never before. Customers are demanding personalized human interactions across what used to be siloed internal departments. And that's what a unifying customer facing platform that can bring functions together from care to marketing can do with an AI powered architecture behind.

We're starting to see brands move from -- move their customer care to Sprinklr because our vision for customer service is different from that of traditional care vendors. They're buying into our vision that care can be proactive, care can be omnichannel, and care can be unified across markets. And it can and it should transition from a cost center to potentially a profit center.

They're also buying into our vision that everything starts by listening to the customer first, not just episodically with the survey, but in real time. Customers are using -- customers using Sprinklr are now able to understand what their customers like and dislike and what they want and they don't want. And they are now using this information to make products better optimize the marketing content and campaigns, reduce the number of customer service calls they get and get an early warning and potential crisis. And to do all of that in a consumer privacy first secure and compliant enterprise platform.

As we look across our customer base, and analyze what they're doing with our platform, we're now able to see revenue generating, costs reducing and risk mitigating solutions emerge consistently in every industry from technology to financial services. And that makes Sprinklr an increasingly business critical part of many of our customers global front office IT architecture.

Let me now share with you some exciting innovation across our product suite and along with some customer wins and why they chose Sprinklr. As a reminder, we have four products suite that support brands major customer facing functions and they are customer care, research, engagement and sales and marketing and advertising suite, each of which has significant revenue scale currently.

In modern care, we enhanced several key features this quarter. Our improved knowledge base capability now allow customers to find quick answers before engaging with a live agent. Our improved guided workflows enable newer agents to be as productive as the top agents by simplifying the entire troubleshooting process with easy step-by-step process flows. And our advanced contact center intelligence now has real time speech analytics for in depth insights and a single source of truth for understanding CSAT sentiment and escalations for complete performance visibility.

Customers want to modernize their contact centers with AI, and they want to convert them into proactive and potentially revenue generating customer experience centers. These are some of the reasons we secured exciting wins in our customer care product suite this quarter with new customers like Mercedes Benz and Aramex and had expansions with existing customers like Applebee's and Starhubs and Grupo Bimbo. Let's use Grupo Bimbo is an example, one of the largest food companies in the world that's headquartered in Mexico City.

Grupo Bimbo currently use all our four products suite. Having implemented social engagement and sales, first, modern research and then modern marketing and advertising. Originally when they got started, our AI was helping them gain powerful insights into organic and paid ad performance and was giving them competitive insights on more than 400 of their competitors.

In Q1, they expanded into our modern care suite with our CCaaS solution to and they did that to improve agent productivity to unify customer experiences across digital channels, and to deliver a more proactive care to customers as they themselves continue to expand across Latin America and Mexico, Colombia, Chile and Peru, in line with our stated strategy of innovating and expanding with partners. In Q1, we also announced integrations with Amazon and Twilio, enabling customers of those great companies to take advantage of our modern care suite.

In modern research, we launched conversation insights. The ability to cluster conversations from public digital data that's legally available using AI and to surface brand insights that otherwise may never have been discovered. Customers like PepsiCo are using our conversation insights to inform strategies like sustainable packaging. We also announced enhancements in our media monitoring and analytics module, including new premium data partners like NLA Media Access and Financial Times.

Conversation insights help PR and corporate communications leaders to better understand their digital audience in real time, and it allows them to optimize their messaging. We help them and other marketers to facilitate data driven decisions across organic paid and advocacy marketing. Across the suite we had several expansions in Q1 with customers like Diageo, and Cody.

In our social engagement and sales suite, we announced an official partnership with -- in the old new TikTok content marketing specialty. Sprinklr is now the only TikTok marketing partner with a platform capable of helping marketers manage and execute and optimize both organic and paid content campaigns on TikTok. We also further extended the portfolio of modern channels. So customers can now monitor engage and grow their communities on Discord which supports voice, video and text with 150 million active users.

Our channel relationships and differentiated features like customizable reporting, cross silo workflows, and cross channel customer conversations are what helped us secure new customers like ASOS and expand with brands like cross country mortgage, AkzoNobel this quarter.

And finally, in our marketing and advertising suite, we launched our proprietary creative performance framework. By leveraging AI, our customers can now identify and easily build and duplicate creative assets across channels. We also invested in dynamic image templates, which allow customers to use system generated insights to automatically build several versions of content without investing additional production dollars.

In marketing and advertising, we saw continued momentum with brands like UBS, Ubisoft, Garmin, TransUnion, and Puma. These customers and others choose Sprinklr for our ability to unify workflows across global teams, and optimize paid social media performance across channels using artificial intelligence.

Our unmatched pace of innovation is at the core of our ability to win new customers. In Q1, we release approximately 600 new and unique platform features. Based on customer requests and added new language options in our AI studio, allowing organizations to participate and expand their global listening capabilities. We also added new conversational AI integration, demonstrating our top platform's openness and extensibility.

Our self-service products that we launched a few quarters ago are seeing great momentum as well. Modern care light, which is a newer one and modern research light products continue to drive trials and generate demand for the product platform. When we founded Sprinklr in 2009, we knew the world would eventually need a unifying platform and operating system to manage the extended digital edge for every customer facing team. And that is what we've been building and that's what we will continue to build.

As I reflect on our upcoming 1 year anniversary as a public company, it's almost a year now. I think about the unique 13-year advantage we have in helping brands listen to reach and engage customers on the ever expanding channels of their choice. We've also innovated and grown with our customers providing them with a different path to deliver the next generation of digital customer facing functions. One that doesn't just let them catch up to the present, but also future proves them in our rapidly changing world.

With that, let me now turn the call over to Manish.

[Manish Sarin, Chief Financial Officer]

Thank you, Ragy and good afternoon, everyone. As you heard from Ragy, we delivered another strong quarter across the board, and are pleased with our ability to once again exceed expectations across all key financial metrics. In spite of a challenging macro environment, our ability to deliver strong results demonstrates the long-term tailwind from our customers transforming their digital edge, the breadth of our product offering and the importance of our unified CXM platform.

For the first quarter, total revenue was $145 million, up 31% year-over-year, and above our previously announced guidance range of $140 million to $142 million. This was driven by subscription revenue of $127.3 million, which grew 32% year-over-year, and was also above our previously announced guidance range of $123 million to $125 million. Q1 marked a fifth consecutive quarter of accelerating revenue growth for our subscription business.

I'm also happy to report that our subscription revenue based net dollar expansion rate in the first quarter was 123%. This metric continues to grow and demonstrates our ability to upsell and cross sell our extensive product set to our installed base of mid and large enterprise customers. And we now have 90 customers contributing $1 million or more in subscription revenue over the preceding 12 months, which is a 30% increase year-over-year. This momentum speaks to the strategic value that our platform creates for the world's largest and most valuable brands. As a reminder, we calculate this customer count using $1 million and recognize revenue from these customers for the duration of the 12 months as opposed to ARR.

Turning to gross margins for the first quarter. On a non-GAAP basis, our subscription gross margin improved further to 81% as we continue to drive efficiencies in our cloud operations, leading to a total non-GAAP gross margin of 72%. Our professional services gross margin came in at approximately 10% consistent with the last few quarters.

In terms of our operating expenses, we continue to invest in growing our sales and marketing capabilities to tap the market opportunity in front of us. As Ragy alluded to earlier, we are excited to welcome Arun as our new CMO, and we will be working with him to further energize and streamline our go-to-market initiatives.

During the first quarter, total non-GAAP operating expenses increased 41% over the prior year to $115 million representing 79% of revenue, up from 73% of revenue during the same period last year. As you may recall, on the last call, we said that this level of investment was partly the result of catch up investments from prior years due to the unknown impact of COVID at that time. That level of catch up investment is nearing its end, and we estimate the magnitude of the year-over-year increase in non-GAAP operating expenses to decelerate in the coming quarters.

Non-GAAP operating loss was $10.3 million or $0.05 per share. Recall our previously announced guidance range was an operating loss of $14 million to $16 million, or $0.676 per share to seven cents per share. This is important to highlight for two main reasons. Firstly, the top line beat a $4 million at the midpoint dropped entirely to the bottom line, demonstrating our ability to run an efficient operation as we scale the business.

Secondly, non-GAAP operating losses have been on a declining trajectory for the last few quarters, highlighting our renewed focus on operating discipline across the business. As we've indicated since the IPO, we believe the market for CXM is expensive, and investing in the platform is the best way to maximize the opportunity and drive long-term value for our shareholders. However, I want to stress that we closely monitor the returns we get on these investments. And if those returns degrade, we will pare back our level of investment accordingly.

To that end, I'm very pleased to report that in terms of free cash flow, we generated a positive $6.2 million in adjusted free cash flow during the first quarter, compared to a burn of $12.6 million in the same period last year. The adjusted free cash flow metric excludes the $12 million litigation settlement that was accrued for in Q4 FY '22, but paid in the first quarter of FY '23. This litigation settlement was a one-time non-recurring item and therefore excluded from the free cash flow calculations.

The positive adjusted free cash flow in Q1 was driven by the strong billings number posted in Q4 FY '22, coupled with the operational improvements we've been making throughout our business. Given the seasonality and low duration of our billings, we estimate that free cash flow will remain negative on a full year basis for FY '23. However, we remain committed to getting to a free cash flow breakeven level during FY '24 as indicated on our Q4 FY '22 earnings call.

We ended the quarter with a healthy balance sheet including $531 million in cash and investments, putting us in excellent shape to continue investing in strategic initiatives that will drive growth with an eye towards profitability. Calculated billings for the first quarter were $138.7 million, which was an increase of 27% year-over-year. The dynamics of our billings trends as outlined on the fourth quarter earnings call continue to hold true, specifically as it pertains to seasonality and duration.

And as noted previously, we expect the delta between revenue growth and billings growth, with billings growth lagging revenue growth by approximately 5 percentage assuming all else stays the same. As of the end of Q1, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was $585.8 million, up 34% compared to the same period last year. While current RPO was $412.5 million, up 30% year-over-year, both metrics attached to the durability of our business.

We continue to believe that subscription revenue, subscription revenue growth, RPO and RPO growth represents the best metrics to evaluate the underlying health of our business. Our billings can fluctuate significantly relative to revenue based on the timing of invoicing cadence of renewals and the duration of customer contracts.

Moving now to our Q2 and full year FY '23 guidance and business outlook. I had alluded to this during the Q4 FY '22 earnings call, and it is probably worth repeating here that we face tougher compares for the remainder of this year, given the strong growth we demonstrated over the last three quarters of FY '22. We also recognize that macroeconomic and geopolitical issues are currently impacting businesses and global market. And as these conditions can have a near-term impact in our business, we have incorporated that into our guidance.

Starting with Q2 FY '23, we expect total revenue to be in the range of $146.5 million to $148.5 million, representing 24% growth year-over-year at the midpoint. Within this, we expect subscription revenue to be in the range of $129.5 million to $131.5 million, representing 26% growth year-over-year at the midpoint. We expect a non-GAAP operating loss in the range of $11 million to $13 million and a non-GAAP net loss per share of $0.05 to $0.06, assuming 263 million weighted average shares outstanding.

For the full year FY '23, we are raising both our subscription and total revenue outlook for the year. We expect subscription revenue to be in the range of $540.5 to $546.5 million representing 27% growth year-over-year at the midpoint. We expect total revenue to be in the range of $612 million to $618 million representing 25% growth year-over-year at the midpoint. Note that the midpoint has moved up by the full amount of the Q1 beat. In addition, the low end has moved up by more than the Q1 beat and the range now has been tightened as we move across the arc of FY '23.

For the full year, we expect the non-GAAP operating loss in the range of $37 million to $41 million, equating to a non-GAAP net loss per share of $0.18 to $0.20, assuming 263 million weighted average shares outstanding. Note that the beat at the midpoint for Q1 for operating loss was $4.7 million, but we are comfortable improving the full year operating loss by an additional $2.3 million for a total full year improvement of $7 million. Again, this is a continuation of our focus on operating discipline and managing the business, while still delivering a strong growth metric.

As a quick reminder in deriving the net loss per share for modeling purposes, a $9.4 million in tax provision for full year FY '23 needs to be added to the non-GAAP operating loss range just provided. We booked a $2.5 million provision in Q1 as the timing of some estimated tax credits were delayed. We estimate the tax provision to be approximately $2.5 million here in Q2 with the remaining tax provision spread across Q3 and Q4.

Moving forward, we are firmly focused on durable revenue growth, continued operational improvement, leading to declining operating losses. We estimate the quarterly non-GAAP operating losses to improve markedly in the second half of FY '23. Lastly, I would like to thank all our employees for delivering a strong Q1 and a great start to FY '23. In the midst of an uncertain macro environment and volatility in the financial markets, I'm grateful for the confidence that our customers have placed in us and the dedication of our employees. We remain focused on building a track record of successful execution with prudent operating discipline across the business.

And with that, let's open it up for questions. Operator?

[Operator]

[Operator Instructions] And our first question comes from the line of Pinjalim Bora for JPMorgan. Please proceed with your question.

[Pinjalim Bora, JPMorgan]

Oh, great. Thank you for taking the questions and congrats on a good start to the year. I wanted to ask you about the demand environment. It seems like in the Q2 guide, kind of incorporate some kind of buffer from potential adverse impacts from the macro. Maybe you could talk about the demand environment that you're seeing so far, in Q2 across your various theaters globally, especially in Europe. And how would you characterize the pipeline? Are you seeing any change in the texture of the deal dynamics or customer conversations? Any color will be helpful?

[Ragy Thomas, Founder and CEO]

Great question and thank you for that. Let me confirm that we are not seeing any shift in the demand for our product, let me and platform, let me clarify by just maybe giving you an example. Two weeks ago, I was talking to a large manufacturer who spends about a $1.5 billion between content and advertising. They had deployed a marketing and advertising solution, originally for media measurement and optimization on digital side and the projected savings was $25 million, which they wanted to, use that to do fund some other initiatives. And now they are looking at -- we did a workshop to see how much content optimization can take them.

Our call center products are primarily deployed to get efficiency using AI and improve agent productivity. So we attach ourselves on the cost reduction and on the revenue improvement site. And traditionally, it's an enterprise platform, selling to the largest companies in the world. And you know, the number of clients we have that pays over a $1 million and that -- it's gone up this quarter as well, like always. We've always engaged in a business outcome and a quantified business outcome based sales approach.

So look, there are a lot of factors that play, while we're not seeing it immediately, it will not be very smart for us to not factor that in. There are uncertainties in the C-suite, the executives we speak to all talk about uncertainties and as Manish would affirm when everyone talks about uncertainty and hesitation is prudent on our part to kind of model some of that.

[Pinjalim Bora, JPMorgan]

Understood. I'll stick to one and get back in the queue. Thank you.

[Ragy Thomas, Founder and CEO]

Thank you.

[Operator]

Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

[Unidentified Analyst]

Hi. This is Frank up for Raimo. Thanks for taking my question. I wanted to ask one around your efforts to verticalize the product, specifically how the steps taken here have been progressing and how has this helped to minimize the time to value for new customers. Thank you.

[Ragy Thomas, Founder and CEO]

Raimo, thank you. It's almost like you read our minds. As I told you about all the customers we met and we built -- we've always been proud of our 33 products and the 4 product suite. As you kind of double-click and now look at our customers who are paying us 7, 8 digit numbers in ARR, what we are finding is they have all standardized business outcome based solutions that they've implemented on the platform. And so there's a big a-ha that we've had that's going to now drive us. You'll see, as early as next quarter, us introducing a whole layer of verticalized solutions.

Let me bring it to life with a couple of examples. When we look at the travel and hospitality industry, an example of product selling would be, hey, Mr. Airlines, you should use our listening capability. We found that when we looked at some of our top implementations is they're not using the word listening anywhere. What one of the airlines, I'm not going to name them, had implemented with Sprinklr was a threat detection solution. What that means is an AI-based listening capability, looking for anyone talking about bombs or explosives or guns or violence associated with the name of the airline. So that's a great example of product solutions. And I'm pretty sure we will have everybody's attention if our SDRs and our AEs consistently talked about the threat detection package as opposed to why they should implement solution like a listening product.

A second example is that of an oil company. Oil companies are largely monopolies, duopolies or like a few large companies in every country and continent. We found that one of the typical use cases for large companies in regulated environments is to understand how consumer perception is shifting. So if I'm an oil company, I want to know where -- how to adjust my policies and where regulation is going to go. And the best way to do that is to understand how public perception, let's say, on renewable energy, solar and electric vehicles are changing and how regulators are going to shift subsidies. And that would allow them to get ahead of it and understand who is for and against their specific industry and how to get ahead of that through policies. So this is a couple of examples. You will start seeing us talk a lot more about solutions. And my hope is that, let's say, a year from now, hopefully, 75% to 90% of the buying that customers do happens at the solution level and not at the product level. Makes sense, Raimo. Good to always talk to you.

[Unidentified Analyst]

Very helpful. Thank you.

[Operator]

Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Please proceed with your question.

[Elizabeth Porter, Morgan Stanley]

Hi. Congrats on the quarter and thanks for taking the question. Previously, you discussed some of the macro volatility of coinciding with increased engagement and just renewed confidence in the platform as customers navigate the difficult environment. And I wanted to ask if that trend has exacerbated or slowed over the last quarter. And any color on how engagement trends have occurred over the last couple of months, just given this volatility and the higher level of uncertainty seems to be the -- at least the new normal for now. Thank you.

[Ragy Thomas, Founder and CEO]

Yes. Thanks for that question, Elizabeth. Well, like I said, we're not seeing any pronounced shifts. We are all -- world is coming back to normal, but we -- most of you should be experiencing what I'm experiencing, mild COVID cases are on the rise. And sometimes there's a procurement person out or a customer champion or an executive buyer who is out. And we're seeing stuff like that, like I'm sure everybody is seeing. But there's lot more conversations about uncertainty and pullback that we're hearing.

So we're just going to be prudent in modeling the rest of the year. And one of the things we have done and like all companies, I'm sure, have and the public market's a great barometer of what they value. We've also, under Manish's leadership, we have put a focus on our bottom line like we have never done before. And you -- if you recall, from most of my conversations, look, our goal is to build a company that can stand the test of time across decades, and we think this is an opportunity. And our goal was to pull this up to a say, 25% plus growth company and then put our attention to the bottom line and that then focus on efficient growth, and that's what we're planning to do.

[Elizabeth Porter, Morgan Stanley]

Great. Thank you.

[Operator]

Our next question comes from the line of Michael Turrin with Wells Fargo. Please proceed with your question.

[Michael Turrin, Wells Fargo Securities]

Hey, there. Great, thanks. Good afternoon. I appreciate you taking the question. Obviously, the macro is top of mind for everyone, so we've been fielding a couple of different types of questions that I think your perspective around would be valuable. Number one is just around what's discretionary versus what's necessary in terms of tax spend, particularly looking at marketing-focused software spend And then potential for vendor consolidation. I'm wondering if the vendor consolidation piece is something you feel Sprinklr stands to benefit from, given the number of product offerings you have within your portfolio. And if there are any observations you could share around where you sit on that discretionary versus essential conversation, I think that's also very useful from our side. Thank you.

[Ragy Thomas, Founder and CEO]

Absolutely. Thank you for the question, Michael. We are not -- 100% of our revenue and subscription comes from license, right? We don't -- there's zero consumption-based models at Sprinklr. So the concept of discretionary comes from -- our budgets are fairly fixed. We're not -- they're not -- nobody is creating new budgets for us, so it comes from marketing tech and ad tech and care tech budgets that are consistent. And what we're seeing everybody do, so we're not in -- we're not seeing and we're not in the discretionary pool for anything. And what we are seeing is everybody wants to make the dollar work harder.

And as you mentioned, unifying point solutions into a platform, consolidating vendors and not just consolidating vendors on contract, but unifying it truly so that they're reducing the need for more human capital, right? We are seeing that as a trend and we're seeing on the -- we're on the right side of that movement and CX is fairly resilient and durable. And we see ourselves as a cost reducer. We see ourselves as a risk mitigator. We see ourselves as a revenue generator, right, with conversational commerce.

If you look at financial services, it's a pretty important industry for us. I was talking to a -- the Chief Compliance Officer of one of the larger financial services companies, and they're now paying hundreds of millions of dollars in fines because investment advisers are jumping out into a WhatsApp channel to talk to customers. So we're on the right side of that movement in the short, medium and long-term. Thank you.

[Operator]

Our next question comes from the line of Michael Turits with KeyBanc. Please proceed with your question.

[Michael Turits, KeyBanc Capital Markets]

Hey, guys. Congrats on the continued acceleration in subscription especially. I want to -- Ragy, you pointed to Manish having focused a bit more on the bottom line. So Manish, can you walk through exactly where you've had the most incremental investment in the last year and where that will be the biggest change? In other words, where we should see the most operating leverage among your lines and, if possible, more specifically within those lines. And whether or not all that is going to actually lead to just a quarter of free cash flow in fiscal '24 or if we're really on the path to stay positive full year in '25.

[Manish Sarin, Chief Financial Officer]

Yes, thank you for the question. So I think as I said in my prepared remarks, some of the investments we've been making in FY '22 were really a catch up from 1.5 years of COVID. And we felt, given the investments we have already made in the business, the quantum of investments going forward, ought to be on a sort of declining trend, given the investments already made. As it relates to operating discipline across the business, this is looking at a variety of things. There's not one thing in particular, all the way from where we spend our incremental dollars to the pace of hiring to any number of other investments that we make to grow the business. And again, to be very clear, we are looking to deliver durable growth. And as Ragy said earlier, that's sort of in the 25% to 30% zone, but we're trying to do that a lot more efficiently.

With respect to free cash flow, so Q1 obviously benefited from the strong billings number in Q4 of last year. But on top of that, given all the operational improvements we were making, we got a benefit here in Q1. Given where we sit and again, no different than what I've said in the last call, we would probably wouldn't be able to deliver a positive number for the full year but feel very confident we can do that for FY '24. It's a little too early for me to comment in terms of when in FY '24. We'll see how the business progresses during the arc of this year, and we can obviously provide more color commentary as we get towards the end of the year.

[Michael Turits, KeyBanc Capital Markets]

Yes. I’m sorry. I don't know -- hopefully, it's not a second question, but just a clarification. So are you saying full -- I don't think you're saying full year positive free cash flow in fiscal '24? Are you or just at some point?

[Manish Sarin, Chief Financial Officer]

I'm, right now, saying at some point and we will provide more color as we get towards the end of this year.

[Michael Turits, KeyBanc Capital Markets]

Thanks.

[Operator]

The next question comes from the line of Parker Lane with Stifel. Please proceed with your question.

[Parker Lane, Stifel]

Yes, hi. Thanks for taking the questions. Ragy, I wondered if you could hit a little bit more on the rise of TikTok. Just how the brands you're working with are thinking about that channel across the 4 key pillars of the platform. Is there any one area particularly maybe Marketing & Advertising, that they see the most immediate opportunity? And what do you think the future holds there for businesses over the next few years?

[Ragy Thomas, Founder and CEO]

Great question, Parker. So I can confirm that we're seeing increasing interest from our Marketing & Advertising customer base on using the platform and taking advantage of it, so that's exciting. And as you know, there are other platforms that are innovating on short form video and the features are becoming a little more prevalent in other channels. In terms of -- I think it's still early. And as you know, we support 36 channels and we're fairly channel-agnostic.

And with the license model, we're more of a AI-driven optimization workflow governance layer, right, when you're thinking about the Marketing & Advertising side of our business. We -- I think over time, we keep thinking like, "Man, we've got too many counts. We don't need any one more and there's more coming, and we're learning more about ourselves." And so I'm excited about what the future holds. And look, I think there's -- there are -- most people may believe that Metaverse is far and out. The AR/VR world, whether it's far and out or a little sooner than that, I think that could potentially introduce another whole world of the next level of the Internet.

So we have built the foundation of a platform that can scale across channels, across new innovation and the infrastructure, the unified architecture we have created for everything from care to marketing and insights kind of serve us really well.

[Parker Lane, Stifel]

Got it. Appreciate the feedback. Thank you.

[Operator]

And our next question comes from the line of Pat Walravens with JMP Group. Please proceed with your question.

[Pat Walravens, JMP Group]

Oh, great. Thank you. So Ragy, I love that you spoke to 100 customers. I don't know how you did that, but it's fabulous. I'm guessing you're continuing to do it. We are already halfway through your second quarter. How does it feel compared to Q1 so far?

[Ragy Thomas, Founder and CEO]

How you -- do you want to know how to do it? Just stay on a plane for 40 days.

[Pat Walravens, JMP Group]

Well, I was hoping it wasn't all over Zoom. I'm delighted to hear it's in-person [indiscernible].

[Ragy Thomas, Founder and CEO]

No, my friend. No, my friend. Yes, it was amazing. There's no substitute for face-to-face, right? The emotions don't fully copy over video. What -- look, I am more pumped than I ever was. And we touched a little bit on verticalized solutions. You look at our business, any way you want to slice it, the fundamentals are super healthy. You'll -- talk about the NDE that's been going up. You can talk about retention rates and renewal rates, which we see is going up and like kind of enterprise class levels. And it's clear that our customers are buying more and the good ones are buying more and renewing more. And so we just have to having built this expansive platform. It was just about looking at how they're using us and taking generalizing for each industry. So we are pretty pumped up about that.

I can tell you the enthusiasm that we're seeing in the marketplace demand hit. It's -- I mean, the early days of social where we got the wave and the tailwinds, I'm beginning to kind of see the early excitement when we start talking about how do you convert 12 data center contact center operations into potentially something that's going to help you with sales? And these concepts, they're early but a lot of customer service leaders who don't want to be relegated as a cost center in the back office and who think that when customers call you, you could reinvent the next generation of a real-world store, right? They walk in and they could ask you any kind of question. So we're building this headless ability with our bots and with our conversational AI and an operating system to be able to do that. So look, I'm more excited than I ever was, and we still think it's very early.

[Pat Walravens, JMP Group]

That’s great. Thank you.

[Operator]

Our next question comes from the line of Tyler Radke with Citi. Please proceed with your questions.

[Boyoung Kim, Citi]

Hi. This is Boyoung Kim on for Tyler Radke. Thank you so much for taking our question. CRPO growth was very nice, so I'd love to hear if there was, at all, a difference in the growth rate in the U.S. versus international, which is primarily Western Europe and any different dynamics that you're seeing across the region. Thanks.

[Ragy Thomas, Founder and CEO]

I am -- like I said before, we -- and I know we got the same question last quarter, we're on the right side of that cost savings and optimization and revenue. And we're not seeing the impact in Europe and Western Europe. Manish, you want to comment on the …?

[Manish Sarin, Chief Financial Officer]

No, I'd agree with Ragy. I mean, CRPO growth was up 30%. If I look at the booking trends in the quarter across the 3 regions, nothing that would jump out at me as being out of the ordinary. So we're definitely not seeing any slowdown in Europe as some other companies have alluded to. And I think it all points to the tailwinds, as Ragy said in his opening remarks.

[Boyoung Kim, Citi]

Right. Thank you.

[Operator]

And our next question comes from the line of Arjun Bhatia with William Blair. Please proceed with your question.

[Arjun Bhatia, William Blair]

Perfect. Thanks for taking the question. Manish, maybe one for you. When you talk about incorporating some of the perceived macro risks into your guidance, I was wondering if you could just maybe elaborate a little bit into which factors you're sensitizing more. Is it just longer deal cycles do you see potential for down sell or is it more new customer-oriented? And then for Ragy, I'm curious how you think about your go-to-market playbook now that you are in a more settled phase with the sales organization. Do you make any changes into the areas that you're focusing on, whether it's vertical-specific, whether it's geos or how much you focus on new versus expansion activity? Thank you.

[Ragy Thomas, Founder and CEO]

So let me take the go-to-market first, and maybe Manish can answer the part that we're modeling in. In terms of -- Arjun, you remember that in the last year or two, we did make several go-to-market upgrades, if you will, which are just normal for the size and scale and growth of the business, right, establishing a large global accounts program, large enterprise and enterprise program because all our customers are large, right? So we had to kind of trifurcate at the top, laying the foundation for the self-service product for the out years.

So all of that -- all those changes have been made. And we're now -- sales is about capacity and productivity. So I think what you saw us invest in was lay the foundation for capacity expansion and modeling. And what you're going to see now is with verticalization and the changes we are making is not the foundation for productivity optimization. And we also needed like 1,200 implementations in 5 years and 90 customers paying us over $1 million to kind of find enough patterns.

So we -- you will see us focus on productivity more than we did. And I think the capacity angle is kind of fairly sorted out now. In terms of modeling it, look, I think Manish would say to every one of our his peers at Sprinklr say, "Look, I want to keep an eye on what we're spending." And that caution that Manish has is something that Manish expects other CFOs to have. So that, Manish, you want to comment on that?

[Manish Sarin, Chief Financial Officer]

No, I think that's exactly right. So to be abundantly clear, we are not seeing any slowdown in demand yet. We are not seeing anything untoward happen in terms of bookings. But as Ragy was saying, there are folks like me who get paid to worry all the time. And there is a part of that is concerned, they might try to pull back on spend here and there. And that would lead to lengthening sales cycles. That could lead to a number of other things that would slow down business. But again, we aren't seeing that yet. That's our current view and that's what's baked into the guide.

[Arjun Bhatia, William Blair]

Understood. Thank you very much and congrats on a good quarter, guys.

[Ragy Thomas, Founder and CEO]

Thank you, Arjun.

[Operator]

And we have reached the end of the question-and-answer session, and I'll now turn the call back over to Ragy Thomas for closing remarks.

[Ragy Thomas, Founder and CEO]

Thank you, Shamali, and thank you for all of you who joined the call today. I would also like to thank our employees. There's a lot of things going on in the world with inflation and Ukraine and COVID and a lot of stuff, right? That's very -- and it's impacting every one of us. And so I want to especially thank our employees for putting their head up and working through this. And I want to thank our partners and mostly -- most of all, I want to thank our customers for their business and their continued confidence with us. We look forward to updating all of you again as we continue on this exciting journey of creating a new category that we call unified CXM and the best, I'm sure, is yet to come. Thank you much.

[Operator]

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.