Sprinklr Inc

NYSE:CXM

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. And welcome to Sprinklr’s Fourth Quarter and Full Year Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. Please limit your questions to one so we will have time to go through all the questions. Please be advise that today’s conference is being recorded.

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

[Eric Scro, Senior Vice President, Finance]

Thank you, Diego. And welcome everyone to Sprinklr’s fourth quarter and full year 2022 results financial call. Joining us today are Ragy Thomas, Sprinklr’s Founder and CEO; and Manish Sarin, Chief Financial Officer.

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

With the call, let me please turn it over to Ragy.

[Ragy Thomas, Founder and CEO]

Thanks, Eric, and hello, everyone. It is wonderful to speak with you all again. Before I get into the numbers, I want to start by welcoming Manish, our new CFO to Sprinklr. I couldn’t be more excited to have him and frankly his track record of scaling high growth tech companies as we continue to position Sprinklr for the next chapter of scale, growth and efficiency. I know he’s looking forward to getting to know all of you.

Manish will take you through a detailed financial results in a few minutes, but I wanted to start with some of the highlights. First and foremost, I am pleased to report another strong quarter that exceeded guidance on all metrics. That includes Q4 total revenue, which grew 30% year-over-year to $135.7 million and subscription revenue, which climbed to $117.7 million, which is an increase of 31% year-over-year.

Coming off significant reacceleration that we drove over the past four quarters, this is now our second straight quarter delivering more than 30% in revenue growth. With this, with the strength of that execution, we finished FY 2022 with $492.4 million in total revenue, which is an increase of 27% year-over-year and that was primarily driven by $427.7 million in subscription revenue, which is up 26% year-over-year.

Not only have we reaccelerating growth, we are also doing it at scale, with nearly $0.5 billion in revenue for the year. A combination that we believe reflects the durable multiyear growth opportunity that we see for Sprinklr and our ability to win in a massive Customer Experience Management category that we believe is only getting started.

As you know, we have four product suite for major customer facing functions including customer care, research, sales and marketing, each of which have reached significant revenue scale for us and are leading solutions in their respective areas.

I want to start with an update on our suite for the CCaaS space, which we call Modern Care. We are incredibly excited about the growth we continue to see in this suite, which included multiple Q4 deals near or above the $1 million mark in ARR. Phenomenal wins with new customers like Blend Scott and Vrooms, and expansions with big names like Uber and Honda.

Customer care represents a huge opportunity for us with both the world’s largest and most established companies like Samsung and L’Oreal, and a new class of emerging enterprise brands like RobinHoods and Uber.

The reason is very clear. If you run customer care at an established global enterprise, you have likely added one point solution after another over the years with one tool for email you -- another one for voice, another one for LiveChat, have one for social media and maybe a different one for communities.

Your customers are moving across these traditional and modern channels in real time seamlessly, but your teams they can’t, asking customers to share the same information over and over again, which is filed away in some siloed system. You are always reacting, struggling to solve your customer’s most basic issues with software that was built 10 years, 20 years ago.

Meanwhile, the gap between the care you deliver and what modern customers expect has only widened, driven by a new wave of new digital companies that are unencumbered by the legacy technology of the past.

Our CCaaS solution wins with both groups. The enterprise is building care infrastructures from the ground up, they want one platform that can do everything they need across channels and the enterprises that have been around for decades that need a bridge from the past infrastructure to the future.

Great customer care is often the foundation for great Customer Experience Management. And because of that, it serves as a natural entry point for new customers and an obvious of expansion opportunities for existing customers at Sprinklr.

A great example of that and a company that continues to grow with us on a CXM journey is Uber, who started working with us back in 2014, using our Social Engagement and Sales suite to publish brand content from hundreds of accounts across multiple countries and continents.

In 2018, as Uber saw exponential growth around the world, they added 600 more seats for community managers to handle the growing volume of customer inquiries. Uber then took it to the next level, adding our second suite for customer feedback and insight. So that new rapid response team could proactively listen for critical safety and brand issues and use Sprinklr’s advanced automation engine to triage the high priority ones.

Recently, Uber went live with a third suite for customer care, ramping up to more than 1,000 agents around the globe. With Sprinklr AI identifying most important of the 4 million -- more than 4 million inbound messages Uber receives every year. Sprinklr has already saved these agents thousands of hours since launch and it’s helping them respond to increase with an industry average -- industry leading average response time of 145 minutes.

Earlier this year, we highlighted a big win with one of the world’s largest banks that signaled other rival in the CCaaS space, where we beat out some of the industry’s bigger players. Thanks to a digital first AI powered approach and we replaced 10 plus point solutions there with enabled over 15,000 agents to serve customers across channels that included voice, email, LiveChat, WhatsApp, social media and text message.

In Q4, we continue that momentum with another big CCaaS win at Lenskart, one of the world’s fastest e-commerce brands that originated in India. As Lenskart has grown, so to have the number of cases coming in across channels from voice to LiveChat to social. With Sprinklr, the company will replace four point solutions all at once enabling 1000 agents across the U.S., Middle East and Asia to improve agent productivity and to deliver more proactive customer care.

A second place customer frequently start their journey with Sprinklr is our product suite for customer feedback and insight, which we call Modern Research. We saw that trend continue in Q4 with large deals from new customers like Columbia Sportswear and BWT Alpine F1 Team and significant expansions with customers like Albertsons and Twitter.

Listening to customers is the perfect place for you to start if you are looking to deliver exceptional customer experiences and the Alpine F1 Team is a great example of that. The iconic racing team will implement three of our four product suites to start with, in beginning with the ability to listen to fans around the world in more than 50 different languages.

The real differentiator for our solution, however, is the AI that powers it, which will enable them to turn those unstructured conversations into insights that they can act on. They will also be able to create more personalized marketing content from the insights they get, while simultaneously engaging with 10 times more fans across channels in real time.

Social Engagement and Sales is the third suite that customers often land with. And this quarter was no different as we closed multiple large deals and secured amazing new logos like Jaguar Land Rover, Hawaiian Airlines and Doc Martens, and expanded with other global brands like Pepsi and Roche.

Doc Martens is a great example of our customers land with us, in this case with two product suites, following its IPO last year, the iconic European brand, they entered a new key stage of growth and as they look forward to becoming a digital first direct-to-consumer company with global reach, they partnered with us to support that growth, to drive efficiency, visibility and collaboration across their customer facing teams, bringing them onto one platform and replaced the multiple point solutions in the process.

With more than 9 million followers across Instagram, Facebook, TikTok -- and TikTok, Doc Martens will use Sprinklr to listen to its customers and inform how and where they connect with them. They will also be able to engage that community more effectively managing brand content across channels and benchmarking its performance against other best-in-class brands.

We continue to see strong growth in our fourth product suite for marketing and advertising as well, expanding with customers like Lululemon, TSB Bank and U.S. Marine Corp. As one of the leading banks in the U.K., TSB is a great example of a company that’s already unified CXM across all four of our product suite and continues to grow with us.

When they first joined us in 2019, TSB started with three of our four suites to publish brand content across channels, benchmark against competitors and to do customer service on Twitter and Facebook Messenger.

In 2020, TSB added our fourth suite for marketing and advertising, enabling internal teams and agency partners to coordinate campaigns across channels and easily measured the impact of their work.

In Q4, TSB expanded their use of our Modern Marketing and Advertising even further and tripled their social engagement and sales lead, enabling more teams to benefit from the unified CXM platform that we provide.

Our unmatched pace of innovation is at the core of our ability to win in each of these customer facing functions. Last year alone, we rolled out approximately 1,600 new features, enhancements and products, including Sprinklr Voice, to reduce call volume with a radically different context center model and Sprinklr AI Studio to empower users to create and customize AI models without having to write code.

As you know, we also launched our first two self service products, something that we are very excited about in the long run, Modern Research Lite and Modern Care Lite, which makes it easier for companies that aren’t yet Sprinklr customers to try your platform, especially as we expand our footprint to our second vector of growth, which is focused on companies with $100 million to $1 billion in annual revenue. Just in a few months after launching our Care Lite in Beta, we are already closing new customers in this second vector.

One of our first is the Mauritius-based telco group, Emtel, which was looking for an easy to use omnichannel platform for its care team. They founded in Sprinklr Care Lite, which enabled Emtel to go live on day one with seamless integration and with no hardware or software installation.

Since moving to Care Lite solution, Emtel’s agents have been able to stop responding natively and handle thousands of tickets across five different channels, including email, WhatsApp, LiveChat, Facebook and Instagram, and again, all on one platform. We continue to be super excited about the early response we are seeing with these Lite products and the positive impact we are seeing on demand generation.

As you heard in the examples I just shared, we are seeing two clear trends and we are seeing it again and again. The first thing we see is that every customer facing function, from care, to research, to sales, to marketing, they face the exact same problem. You should talk to some of our customers and talk to any brand to realize what the problem is, point solution chaos.

Every one of these teams has its own disjointed set of tools some newer, some older. But none of it built to work together. Inevitably, the leaders of these functions will look to replace these point solutions and unify the functions tech start -- tech stack with the modern suite that delivers the experience that today’s consumers expect and when they do, many of them are turning to Sprinklr.

The second thing we see is that, once one customer facing function comes onto Sprinklr, whether its brand, business unit or a team. And they put the foundation of governance and automation and analytics and AI that comes with an enterprise unified platform like ours. The other functions and other teams in other markets and other business units tend to follow and that’s when the true power of platform comes to life in a way that no point solution can ever demonstrate.

When we found the Sprinklr in 2009, we knew that the world would eventually need one platform to unify the edge of the front office where your customer meets your brand. So we build for that future from the start with a single code base.

So everything and everyone can work together to listen to engage and reach customers on any channels that they prefer, any channel that exists today and any that is going to eventually come in the next months and years.

You have heard me say this before. Enterprises don’t start with Unified-CXM, they arrive at. Today as a meet with more and more C-suite executives than ever it’s clear that the vision we had more than a decade ago is increasingly becoming a reality. But the world’s largest enterprise is bringing multiple customer facing teams and functions together on Sprinklr to unify customer experience management.

With that, let me turn it over to Manish.

[Manish Sarin, Chief Financial Officer]

Thank you, Ragy, and good afternoon, everyone. It is great to be here today and I am excited to be at Sprinklr. I am looking forward to working with all of you over the coming days and weeks. As you heard from Ragy, we delivered another strong quarter across the Board and we are pleased with our ability to once again exceed expectations across all key financial metrics.

During the fourth quarter, total revenue was $135.7 million, up 30% year-over-year and above our previously announced guidance range of $129 million to $131 million. This was driven by subscription revenues of $117.7 million, which grew 31% year-over-year and were also above our previously announced guidance range of $113 million to $115 million. Q4 marked the fourth consecutive quarter of accelerating revenue growth for our subscription business.

Turning to gross margins for the fourth quarter, on a non-GAAP basis, our subscription gross margins improved further to 80%, as we begin to drive efficiencies in our cloud operations, leading to a total non-GAAP gross margin of 71%.

Before we review operating expenses, I would like to make you aware that during the fourth quarter of FY 2022, subsequent to the guidance we provided on December 9th, we identified certain immaterial corrections. These relate to the capitalization of cost to obtain customer contract dating back to the initial adoption of ASC 606 in FY 2020.

The net impact of these changes is to capitalize additional expenses each year and amortize these costs over the life of the customer. Additional details are outlined in our Form 10-K that will be filed in the coming days.

It is important to note that this immaterial correction to prior periods has no impact to our previously reported revenues, revenue growth rates, gross margins, cash flow or cash position. The net effect is a decrease to OpEx of $3.2 million in FY 2021 and a decrease of $2.6 million for Q4 -- for Q1 through Q3 of FY 2022.

We have included a slide in the current investor presentation on our Investor Relations website to clearly identify these changes and the impact to FY 2021 and FY 2022. Furthermore, the guidance that I will be discussing shortly reflects the impact of these changes.

In terms of our operating expenses, we continue to invest in sales and marketing, as well as research and development to support our extensive product set and go-to-market initiatives. During the fourth quarter, total non-GAAP operating expenses increased 57% over the prior year to $108.2 million, representing 80% of revenues, up from 66% of revenues during the same period last year.

This investment was partly a catch up investment from the prior year when we had curtailed incremental investments given the unknown impact from COVID, as well as investing for future growth, given the strong demand environment for our products as evidenced in our subscription revenue growth numbers.

Non-GAAP operating loss was $11.5 million or $0.05 per share. Recall our previously announced guidance range was an operating loss of $21 million to $23 million or $0.08 per share to $0.09 per share. The benefit in Q4 from the immaterial correction was approximately $0.015 per share. As a reminder, these numbers do not include the one-time litigation settlement of $12 million, which was accrued for in the fourth quarter, but was paid here in Q1 FY 2023.

In terms of cash flow, we used $18 million in free cash flow during the fourth quarter, compared to $10.4 million in the same period last year, underscoring the continued investments we are making in the business.

I am also happy to report that our subscription revenue based net dollar expansion in the fourth quarter was 120%. This metric has grown consistently for every quarter in FY 2022 and demonstrates our ability to upsell and cross-sell our extensive product set to our installed base of mid and large enterprise customers.

I would now like to dive into the billings topic and provide you additional insights from my perspective. Calculated billings for the fourth quarter were $186.2 million, which was an increase of 28% year-over-year.

Calculated billings for the full year FY 2022 were $535.4 million, up 33% versus the prior year. Additionally, billings in the second half of FY 2022 were up 30% versus the first half. Further demonstrating the strong momentum we are witnessing in our business.

There are two distinct trends in our billings that investors need to be mindful of. Firstly, there is a seasonality within our billings, with Q4 being the highest billings quarter of the year, given the cyclical nature of demand inherent across the technology industry. Similarly, Q3 is our lowest billings quarter, driven by the timing of renewal activity. This billing pattern has remained consistent over the last several years.

Secondly, we maintain a high degree of short-term billings in our business. Approximately 75% of contracts on a dollar basis are billed annually, with the remainder being a mix of monthly, quarterly or semi-annually given unique customer requirements in this regard.

To be clear, we do enter into multi-year contracts with our customers with contract terms ranging from one to three years, which is consistent with other enterprise software companies. However, the billing cadence for these contracts varies and often comes with a duration that is less than 12 months. This creates a dynamic whereby billings growth is more volatile than revenue growth. During the pandemic we worked constructively with our customers to accommodate their needs, further exacerbating this billing dynamic.

Turning to a quick summary of financial results for the full year FY 2022, total revenue was $492.4 million, up 27% year-over-year, whereas subscription revenue was $427.7 million, up 26% for the full year.

As stated earlier, calculated billings for the full year were $535.4 million, up 33% year-over-year. Billings growth in FY 2022 was higher than revenue growth in the year, but this was largely a result of the lower billings we experienced in that FY 2021 driven by the pandemic, making the FY 2022 billings growth seem larger in comparison.

As we revert to a more normalized demand environment with aggregate billings duration expected to remain below 12 months, we anticipate there to be a delta between revenue growth and billings growth, with annual billings growth lagging revenue growth by approximately 5% assuming all else stays the same.

For the full year FY 2022, total non-GAAP operating expenses increased 55% over FY 2021, representing 78% of revenues, up from 64% of revenues during FY 2021. As outlined earlier, this incremental investment during FY 2022 should be viewed in light of the strong demand environment we are experiencing, as well as the continued investments to broaden our product portfolio and work with customers on their digital transformation projects.

Non-GAAP operating loss for the full year was $35.5 million, equating to a net loss per share of $0.24. As you recall, our previously announced guidance range for the full year was an operating loss of $48 million to $50 million or $0.30 per share to $0.31 per share.

In terms of cash flow, we used $45.3 million in free cash flow for the full year, with $33 million used in operating the business, $6.1 million in capital expenditures and an additional $6.3 million in R&D costs that were capitalized on the balance sheet. We ended the year with $532.4 million in cash and short-term investments.

As of the end of FY 2022, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was $586.4 million, up 36% compared to the same period last year and CRPO was $409.2 million, up 30% year-over-year.

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

And finally, we now have 82 customers contributing $1 million or more in subscription revenue over the last year, which is a 26% 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 in recognized revenue from these customers for the duration of the year as opposed to ARR. Regarding our customer count, we ended the fiscal year with 1,166 customers. Going forward, we will be disclosing this customer count metric on an annual basis only.

Moving now to our Q1 and full year fiscal 2023 guidance and business outlook, we firmly believe that companies will continue that digital transformation journey and the move towards unified CXM will continue to take shape. Given that, we are projecting meaningful growth for our fiscal 2023 guidance.

Starting with the first quarter of FY 2023, we expect total revenue for the first quarter to be in the range of $140 million to $142 million, representing 27% growth year-over-year at the midpoint. Within this we expect subscription revenues to be in the range of $123 million to $125 million, representing 28% growth year-over-year at the midpoint. We expect a non-GAAP operating loss in the range of $14 million to $16 million and a non-GAAP net loss per share of $0.67, assuming 260 million weighted average shares outstanding.

For the full year fiscal 2023, which ends on January 31, 2023, we are providing the following initial guidance. We expect subscription revenues to be in the range of $536 million to $544 million, representing 26% growth year-over-year at the midpoint and we expect total revenues to be in the range of $607 million to $615 million, representing 24% growth year-over-year at the midpoint.

As a reminder we have an easier compare in Q1 of this year from a revenue growth perspective and the comparisons get more challenging in subsequent quarters, given the strong and accelerating growth we have demonstrated over the last four quarters. We also anticipate the billing cadence to follow the same pattern as demonstrated with the recent fiscal year 2022 results.

For the full year, we expect a non-GAAP operating loss in the range of $44 million to $48 million, equating to a non-GAAP net loss per share of $0.20 to $0.22, assuming 260 million weighted average shares outstanding.

In deriving the net loss per share, an incremental $7 million in tax provisions for FY 2023 needs to be added to the non-GAAP operating loss range just provided with a de minimis amount accrued in Q1 and then building throughout the year. The non-GAAP operating loss outlined above is inclusive of the benefit of a couple of million dollars related to the immaterial correction referenced earlier.

As we scale the business and continue to demonstrate meaningful year-over-year growth we are endeavoring to become more efficient. We estimate the quarterly non-GAAP operating losses to improve materially in the second half of FY 2023.

In terms of free cash flow, while we intend to keep investing for growth, given the market opportunity in front of us, we expect to get to a free cash flow breakeven level during FY 2024.

In summary, let me leave you with a few key takeaways from my perspective from my early tenure here at Sprinklr. I would like to start by thanking everyone at the company for delivering a strong Q4 and a great start to fiscal year 2023, and for helping create a durable multiyear growth opportunity for the company.

I have been very encouraged by all the people that I have met at Sprinklr, the breadth of our technology platform and our remarkable customer base. We are building a track record of successful execution with the opportunity for consistent, sustainable revenue growth, coupled with prudent operating discipline across the business. We are excited to be on this journey with you.

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

[Operator]

Thank you. [Operator Instructions] Our first question comes from Mark Murphy with JP Morgan. Please go ahead.

[Mark Murphy, JP Morgan]

Yes. Thank you very much and congratulations on a very strong finish to the fiscal year. Ragy, I am wondering what you are sensing in terms of business confidence from marketers and social media teams, especially in Europe, because the results and the guidance is quite strong, you are calling for a solid year of growth. Are the geopolitical events and the macroeconomic factors starting to cross their minds at all, as they think about their budgets or do you sense relatively smooth pipeline building in Europe and kind of good business confidence overall for this category?

[Ragy Thomas, Founder and CEO]

Thank you, Mark. Good to talk to you again. We are actually sensing the renewed confidence in the offering that we bring to the table. I just got back from a week in Europe where we met with over 75 customers. And what was interesting was almost all of them use that were using our customer feedback and insights product, right? Our Modern Research product had configured dashboards to understand the impact of the -- what’s going on in Ukraine and Russia to their business.

Let me give you two specific stories. One customer I met with just told us that the previous week they discovered online conversations about their logo looking like the Russian Army symbol. And it was picked up by Sprinklr’s volumetric triggers, reflecting negative sentiment picking up and in 72 hours, they saw that conversations go from tens to hundreds to thousands and tens of thousands.

And because they were watching it grow, in the same 72 hours they were able to make a business decision and remove their logo and replace it with text and all digital properties and then subsequently saw those conversations decline. I thought that was fascinating.

We know another customer I visited basically was explaining how they discovered their logo look like the Ukrainian flag colors and that was frankly attracting a different set of conversations and they made the decision of engaging and responding and putting out their point of view on it all based on strategic insight that we were delivering from the voice of the world.

And then another bank that I know of basically was planning to, the CEO was going to make a decision and take a stance on it and discovered that using Sprinklr the other competitors of his did make their stance is public and would negatively affect it.

So we are super encouraged by businesses making decisions. I mean, obviously, because the Sprinklr, but making decisions that are based on the voice of the world and voice of the customer.

So that’s just the start businesses are moving digital, direct-to-consumer is a huge deal and we serve everything from conversational commerce to digital customer care. I think the world is moving in our direction.

[Mark Murphy, JP Morgan]

Well, those are wonderful answers. Thank you for sharing that and I will…

[Manish Sarin, Chief Financial Officer]

Net loss per share was $0.20 to $0.22…

[Mark Murphy, JP Morgan]

… limit it to one question to comply with your instructions here. Thank you.

[Ragy Thomas, Founder and CEO]

Thank you, Mark.

[Operator]

Thank you. Our next question comes from Raimo Lenschow with Barclays. Please state your question.

[Unidentified Analyst]

Hey. This is Frank [ph] on for Raimo. Congrats to a strong end to the year here. Could you remind us of the rollout cadence or any early feedback you are getting around the late offerings and how is this baked into the guidance specifically for FY 2023? Thank you.

[Ragy Thomas, Founder and CEO]

Thank you, Frank. We are not factoring major revenue from the Lite offering in our models. As I mentioned before, in previous quarters, the ability for us to make our platform in a self-service very low touch, zero day -- one day on being are getting up and running, it’s a strategic multiyear plan for us.

So we are very early. The results are very encouraging. We are watching clients get on on board by themselves setup with -- I saw a client that had setup over 100 automation rules by themselves and are up and running. So we know we are moving in the right direction. We know we are simplifying what is a fairly massive piece of technology in the front office and but they are all experiments for us for now and the numbers are infected.

[Unidentified Analyst]

Great. Thank you.

[Ragy Thomas, Founder and CEO]

Thank you, Frank.

[Operator]

The next question comes from Elizabeth Porter with Morgan Stanley. Please go ahead.

[Elizabeth Porter, Morgan Stanley]

Great. Thank you so much and congrats on the strong quarter. I had a question on the NRR recruitment, understanding it’s a 12-month metrics. So there are some COVID quarters probably falling off still. How should we think about the cadence of expansion, do we start to normalize at this 120% or can cross-sell opportunity really accelerate further as customers expand into more?

[Ragy Thomas, Founder and CEO]

Absolutely. Thanks for your question. We have full product suite with a lot of functionality underneath it. If you look at our average revenue per customer, per product suite, that’s -- it’s going to -- you are going to see that range from just below 100 to 150.

If you look at what the largest customer in each one of those suites of pay, as you will see a very, very different number. You will see that our largest customer in marketing and advertising pays us close to north of $6 million, our largest customer in care pays us close to $4 million, our largest customer in research pays us close to $8 million and our largest customer engagement pays us over $5 million.

So it’s super obvious to us that we have got a substantial TAM just within our customer base and our first set of vector one clients as we call it, 10,000 of those. So we know that TAM is big. We know that customers are expanding. It’s our ability to deliver.

We have taken the approach of land and expand in a very soft way, so we love to land with one product through our values and expand into other business units expand into other market. In short what I am seeing is, we anticipate continuing to stabilize and grow on our expansion rate and we think there’s a lot of opportunity right there.

[Elizabeth Porter, Morgan Stanley]

Great. Thank you so much.

[Operator]

Our next question comes from Michael Turits with KeyBanc. Please state your question.

[Michael Turits, KeyBanc]

Great. Thank you very much and wonderful quarter. Ragy, can you drill down, you did some -- did for somewhat on the prepared remarks, but a little bit more on CCaaS. Can you talk about whether you are I don’t know if you mentioned actually replacing other dedicated call center in CCaaS vendors and what some of the revenue uplift is coming from that and conversely, Manish, if there is any headwind to gross profit -- gross margin profitability?

[Ragy Thomas, Founder and CEO]

Absolutely, Michael. We are -- this is an exciting opportunity [Technical Difficulty] from our focus in the last several quarters that we see CCaaS the market adding it 15% year-over-year in aggregate is a great growing opportunity.

What we are finding is a new set of clients that are coming to us are in fact replacing traditional care vendors and it might be, point solution care vendors, like a live cat care vendor. I am not going to name them or a regional voice vendor and but what we are finding in the case of Lenskart, there was a point solution that the inbound voice care team was using.

It was a separate voice solution that the outbound sales team was using, and not to mention, the other point solutions that digital teams were using and all of those are getting replaced with the Sprinklr platform.

Actually what was exciting for me was with Lenskart, they insisted on implementing Sprinklr voice first before they rolled out their digital and social capabilities, which we are very -- which is our original bread and butter.

So we think it’s very early. We have a couple of deployments that are fairly at scale, the 15,000 agent deployment and so we are going in with a lot of caution. As you know, this is an industry that’s very old, right? It around for 40 years, 50 years and there’s a lot of nuances.

From a margin perspective, you know that we are not getting into the deep stack, right, where we are not we are not doing the core voice part. We connect to services like Amazon Connect or Twilio or others and our value creation happens on the application layer, where it should be very obvious to all of you that there is not one other care vendor that has the listening capabilities we do.

So when you turn on Sprinklr Care, you are turning on Sprinklr Listening with it, which means your tickets start flowing in before you publish a 1,800 number, which is that’s fascinating and that’s a core differentiator.

The second core differentiator is the fact that your omnichannel by design and as it is rooted core of the architecture, it’s not like we acquired different point solutions. Stitch them together with the UI. No one else to the best our knowledge has build a solid foundation of channel agnostic customer care.

Number three is our deep AI capability. I know that’s the buzzword. I hate myself for using it. But we have spent seven years, eight years with hundreds of consultants every single day training our AI models in over 100 languages and we are using the same UI to do voice, to speak -- voice to text and sentiment analysis and detection, all the things that we have done really well in digital we are bringing that voice and translating all of that into reducing calls into wait times, reducing call center capacity needs and time to respond in the time to resolve.

And the most important thing is, we take the noise out. I was just talking to a customer that had 400,000 inbound requests, out of which the Sprinklr AI model identified the 10,000. They should be engaging with that given day, and that before and after for this customer was like are rely on arrival.

[Michael Turits, KeyBanc]

Thank you.

[Operator]

Thank you. Our next question comes from Arjun Bhatia with William Blair. Please state your question.

[Arjun Bhatia, William Blair]

Perfect. Thank you and congrats on a strong close to the year. Ragy in your in your prepared remarks, I think, you went through where customers are landing most frequently and where they expand into after that. Can you just give us a sense for how the landing point of the platform has changed for customers over the years, if you developed new capabilities and innovated across your suite and then how frequently are customers now landing with multiple suite, where they say, hey, I want to take advantage of the entire Sprinklr platform or at least multiple, a couple of different product suite with to unify my CXM strategy across multiple domains?

[Ragy Thomas, Founder and CEO]

Hey, Arjun. Good to talk to you again. We are actually increasingly seeing our landing spots open up and it is a lot more across the Board than it ever was and you remember, you and I have talked over the years and it used to be our sales and engagement or research and now we are seeing customers start with us for care and customers start with us from marketing and advertising. And I think what we are increasingly seeing is an acceptance that they all need to come together.

So that’s the first trend and honestly our product is pretty and platform is very simple to understand, right, everybody’s selling, everybody’s marketing, everybody is doing customer care, everyone’s trying to understand what customers want and get feedback in real-time, right, without doing surveys. We just provided in a unified way and that’s the key difference.

So we are seeing that the deflection from pointed landing spots to diffuse across our platform and product suite. Interestingly, what we are also seeing is the emergence of a new crop of next generation companies like the Vrooms and the Lenskart or the RobinHoods or the Ubers of the world, who are fearlessly coming in and saying, hey, listen, I think, I don’t want to -- I want to just clean up.

Lenskart is a great example, where they said, I don’t want inbound and outbound colliding with each other. Think about their business where, people buy their glasses like every, twice every four years or three times. And they are calling in to get an order filled or they have a question and you have got outbound people trying to reach this in-person and get them to buy again.

And they were all getting in each other’s way and think about the market they serve, someone trying to reach you on WhatsApp and then you want to get them on the phone to ask a question quickly or ask them to try out something.

It was just getting in all over the place and you got a Co-Founder of the company going, I just want to -- this is where my business is going to go direct-to-consumer next generation. I just can’t afford to bring the Franken stack of the past and so we are seeing that breed of companies to seamlessly start with two, three, sometimes all four of us with.

[Arjun Bhatia, William Blair]

Very helpful. Thank you, Ragy.

[Ragy Thomas, Founder and CEO]

Thank you.

[Operator]

Our next question comes from Tyler Radke with Citi. Please go ahead.

[Tyler Radke, Citi]

Yes. Thanks for taking the question. Maybe I will turn to throw question over to Manish, if you are still on the line there and congrats on the first earnings call here and a good quarter. Just a couple of housekeeping questions, so first, could you talk about the current RPO growth in the quarter? Apologies, if I may have missed that. And then, secondly, maybe just help us understand, as you took a look at the business and set guidance for the year, what are areas that may have changed from a guidance philosophy perspective relative to your predecessor and how are you just kind of thinking about the inputs and level of conservatism in your guide? Thanks.

[Manish Sarin, Chief Financial Officer]

Thank you for the question and thank you for asking me a question, I was getting bored over here. So really appreciated. So I think the first question, RPO growth was 36%, so that is part of the prepared remarks. I think that number was $589.4 million. CRPO growth the current portion was 30% and I believe that number is $409.2 million.

In terms of guidance philosophy, I don’t think much is different, except as I was saying in my prepared remarks, several things have happened during the course of FY 2022. Firstly, we have invested significantly both in our go-to market initiatives, product development and all of that is beginning to bear fruit. The business is now a scaled business, I mean, at the midpoint of the range that I provided for the full year. We are $611 million, so definitely hitting a scale perspective and try and achieving growth and that perspective.

The other thing we are obviously very well aware is, given the investments we have made in FY 2022, we are going to be more efficient as we go through the arc of this particular year. So we are looking for operating losses to improve materially during the second half. And I also said, as you then stress that out another year, we are looking to be free cash flow neutral in FY 2024.

So I think maybe that probably is a little bit material input as you build out your models, because we do believe the investments we have made are beginning to bear fruit and we can look to be more efficient as we keep up this pace of growth.

[Tyler Radke, Citi]

Thank you.

[Operator]

Thank you. Our next question comes from Parker Lane with Stifel. Please go ahead.

[Parker Lane, Stifel]

Yeah. Hi, guys. Thanks for taking the question. Ragy, wondering if you could comment on whether or not you have seen a change in the persona the person bringing Sprinklr in with the launch of Lite. Are you seeing more and more like line of business users that wouldn’t historically have found Sprinklr as accessible pushing for their companies to adopt the solution? Thank you.

[Ragy Thomas, Founder and CEO]

Thank you for the question, Parker. We are seeing -- again we have got hundreds of people trying out their Lite products and they are usually practitioners who is a segment of our prospects that we typically don’t land was start with, right? We typically go to decision makers or the C-suite.

What we are finding in the cases where they convert though, there is so much excitement that they are internally bringing senior people in. I will give you the example, at MTEL, where and also know that our Lite products. It’s early, right?

So we, as you know, we coincide with our customers, which has been a major differentiator for us. We talk to them all the time, ask them what they need and turn around in a very agile fashion, roll it out almost like consumer software companies do.

And so in the case of MTEL, they were excited about what the product could do. They were excited about how agile and innovative we were and the next thing we know we are talking to the CIO, who then proceeds to say, look, I want to bring sister companies in.

But these are smaller teams, 10, 15 folks that traditionally like our sales folks would not have pursued and tried to close. So it’s very early to draw any conclusions, but we are seeing access to practitioners grow.

We are also seeing, which is very refreshing for me as I talk to customers, we are seeing customers move from one company to the other and just the first thing they do is bring Sprinklr in. So that that’s something that’s creating some groundswell for us as well as we have self-service. So, it’s not like they have got to go convince management, they can go try it out and show someone how good Sprinklr is with their new company.

[Parker Lane, Stifel]

Thank you.

[Operator]

Thank you. Our next question comes from Michael Turrin with Wells Fargo. Please go ahead.

[Michael Rawson, Wells Fargo]

Hi. This is Michael Rawson for Michael Turrin. Congrats on a great quarter guys and welcome to the team Manish. Just a quick one from me, I noticed that you added $2 million plus customers in the quarter, which is the lowest net new addition this year and even going back to last year. Is there anything that points you on Zaltec [ph], every other metric looks pretty strong and going to CRPO accelerate or an RPO acceleration, even GMBR are improving, anything to point to on not -- the large customer front?

[Ragy Thomas, Founder and CEO]

Michael, it’s Ragy. Let me speak for Manish. He is new, I am sure he will add to this. Look those are metrics while we disclosed. Those are metrics that the company is not like super aligned and obsessed about. And you will see that Manish is bringing a very different focus and discipline to billings like we have never had before. So you will see us get more control over what that number should be.

I could tell you there is no change in the quarter in terms of customers growing with us. Now they fall $1.1 million where we get them added also remember its revenue, it’s trailing, and so directionally there’s no change in the business, I can tell you that and while the number is too we are seeing the trend that we always see.

[Manish Sarin, Chief Financial Officer]

Yeah. And just to add to that, I think -- this is what I reiterated in my prepared remarks as well. I think the metric the way we have defined it is actually a fairly high bar, because most of the subscription companies talk about customers doing $1 million in ARR, so you could sign them on the last day of the quarter as long as they are big customer they would make the grade.

So the way we have defined it as $1 million in subscription revenue for the year. So that is a much higher bar to clear. And again, I have just been here two months, so we are going to do a deep dive on a number of other metrics and as the arc of the year progresses, we will try to provide more clarity around some of these metrics. But I just wanted to make point this out that this is a fairly high bar that we have set for ourselves.

[Michael Rawson, Wells Fargo]

Understood. Thank you very much. Congrats again.

[Ragy Thomas, Founder and CEO]

Thank you.

[Operator]

Thank you. And there are no further questions at this time. I will turn the call back to Ragy Thomas for closing remarks. Thank you.

[Ragy Thomas, Founder and CEO]

I want to thank you all for participating and taking the time. We, as you can see, are pretty excited about the quarter, very proud of the team that that came through for us. You heard from Manish how in the last year we were pretty focused on making the investments, especially coming after COVID is, we were cash flow positive the year before that. So what you are seeing is the business that went from being conservative during COVID to correcting that in the last year.

I am thrilled about the expectations that we are setting internally and externally of being more efficient as we continue to grow at scale. I have always said that, the price and growth of this industry is inevitable and it’s validated every time we speak to customers who talk to a large global brand, household brand, CPG company that has 60 customer facing brands that operate in 40 to 120 countries each running marketing and care and research and sales in every one of those markets and each one of those teams using different point solution for different channels. this is just ridiculous.

And where the customer meets the brand at the very edge, when they see an ad or call a call center or speak to a sales guy, as I can attest with a much smaller company, it’s painful. So we know that this is going to get resolved. We know that we have invested 12 years into creating an architecture and a full product suite on a unified platform and we think we have another, let’s say, year or two of code to right, before the full picture emerges and so we are very encouraged by where we are and we think the best is yet to come.

[Manish Sarin, Chief Financial Officer]

Thank you,

[Ragy Thomas, Founder and CEO]

Thank you all.

[Eric Scro, Senior Vice President, Finance]

Thanks.

[Ragy Thomas, Founder and CEO]

Have a good evening

[Operator]

And with that, that concludes today’s conference. You may disconnect at this time. Have a good evening.