Sprinklr Inc. (CXM) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• Revenue Growth

Q2 total revenue grew 11% year-over-year to $197.2 million, with subscription revenue growing 9% year-over-year to $177.9 million.

• New Customer Additions

Added several new customers and expanded with existing ones such as UBS, Ford, T-Mobile, Grupo Bimbo, and Planet Fitness.

• AI Capabilities

Customers deploying AI capabilities saw significant improvements, such as a large North American retailer increasing call deflection by 35% and a global bank seeing AI self-service usage increase to over 60%.

• Industry Recognition

Named a leader in digital customer interaction solutions by Forrester Wave and a major player in the 2024 IDC MarketScape for Contact Center-as-a-Service.

• Executive Leadership

Building out the executive leadership team with experts passionate about driving the business forward.

Pessimistic Highlights

• Credit Loss Charge

Included a $10.1 million credit loss charge in Q2 results, impacting non-GAAP operating income.

• Elevated Churn

Continued to experience elevated churn in core product suites, expected to persist through FY '25.

• Macro Environment

Broader demand environment remains challenging with longer sales cycles and heightened budgetary scrutiny.

• Services Gross Margin

Services gross margin was negative 1%, and expected to decline further in Q3 due to investments in CCaaS delivery capabilities.

• Lower Net Bookings

Lower net bookings over the past few quarters due to execution challenges and macroeconomic factors impacting customer budgets and spending.

Company Outlook

• Revenue Guidance

For Q3, total revenue expected to be $196 million to $197 million, representing 5% growth year-over-year. Full year FY '25 total revenue expected to be $785 million to $787 million, representing 7% growth year-over-year.

• Subscription Revenue

Full year FY '25 subscription revenue expected to be $710.5 million to $712.5 million, representing 6% growth year-over-year.

• Non-GAAP Operating Income

Full year FY '25 non-GAAP operating income expected to be $80.5 million to $81.5 million, implying a 10% non-GAAP operating margin at the midpoint.

• Free Cash Flow

Estimated to generate approximately $55 million in free cash flow for the full year FY '25.

• Strategic Focus

Sharpening strategic focus to improve execution and scale, with initiatives to increase renewal rates, reduce churn, and drive improvements in pricing and packaging.

Q & A Highlights

• Q: Pricing Pressure Continuation (Willow Miller, from William Blair)

A: Continuing to see budgetary pressures, consistent with past quarters. (Ragy Thomas)

• Q: Pricing and Packaging Changes (Willow Miller, from William Blair)

A: Evaluating opportunities to be more efficient and accretive by aligning pricing and packaging with how customers buy now. (Ragy Thomas)

• Q: AI Crowding Out Effect in Marketing Spend (Unidentified Analyst, from William Blair)

A: Seeing success in AI capabilities, particularly in CCaaS and service suite, with significant improvements in call deflection and agent productivity. (Ragy Thomas)

• Q: Agent Growth and AI Impact (Pinjalim Bora, from JPMorgan)

A: Companies are using AI to cut down human labor costs and improve sales productivity. Evaluating interaction-based models for AI pricing. (Ragy Thomas)

• Q: Billings Trend and Visibility (Pinjalim Bora, from JPMorgan)

A: Q3 is traditionally the weakest quarter, with a sequential decline expected. Q4 is the strongest quarter, expected to drive full year FY '25 billings up 6%. (Manish Sarin)

• Q: Build vs. Buy Debate in AI (Elizabeth Porter, from Morgan Stanley)

A: Confident in Sprinklr's unique enterprise-grade AI capabilities, focusing on application layer AI, governance, compliance, and guardrailing. (Ragy Thomas)

• Q: Sales Force Productivity (Elizabeth Porter, from Morgan Stanley)

A: Making the right changes with good leaders in place, seeing early signs of stabilization despite macro headwinds. (Trac Pham)

• Q: Customer Churn and Competitors (Jackson Ader, from KeyBanc Capital Markets)

A: Seeing budget cuts and down sales, not a significant shift to competitors. (Ragy Thomas)

• Q: Credit Charge Mechanics (Jackson Ader, from KeyBanc Capital Markets)

A: $10.1 million charge includes write-offs and specific reserves, impacting cRPO and FY '25 subscription revenue. (Manish Sarin)

• Q: Pricing and Packaging Impact (Matt VanVliet, from BTIG)

A: Project is ongoing, expected to run through another quarter, with no impact for this year. (Ragy Thomas)

• Q: Renewal Team and Headcount (Matt VanVliet, from BTIG)

A: Building a central focus for renewals, hiring more AEs to drive bookings and support renewals. (Trac Pham)

• Q: Self-Serve Social Media Management Solution (Jack McShane, from Stifel)

A: Strategy is experimental, not a revenue driver, aimed at providing an alternative for independent teams and allowing enterprise customers to explore the product. (Ragy Thomas)

• Q: Renewal Challenges (Catharine Trebnick, from Rosenblatt Securities)

A: Pressure on renewals due to budget cuts and internal execution issues, focusing on improving implementation and consistent support. (Ragy Thomas)

• Q: AI Overhang in Marketing Departments (Catharine Trebnick, from Rosenblatt Securities)

A: Marketing suite is the smallest, not attributing pressure solely to AI overhang. (Ragy Thomas)

• Q: Go-to-Market Productivity (Unidentified Analyst, from Cantor Fitzgerald)

A: Focused on internal execution to drive growth, optimizing cost structure to align with growth. (Trac Pham)

• Q: Share Buyback Program (Unidentified Analyst, from Cantor Fitzgerald)

A: Evaluating the best use of cash going forward, leveraging balance sheet to create value for shareholders. (Trac Pham)

• Q: Operational Complexities in Implementation (Austin Cole, from Citizens JMP)

A: Addressing implementation challenges in CCaaS and core products, developing partners, building internal muscle, and creating playbooks for consistent delivery. (Ragy Thomas)

• Q: Million Dollar Plus Customers (Clark Wright, from D.A. Davidson)

A: Growth driven by upsell and selling the full platform, not specific to CCaaS or core products. (Manish Sarin)

• Q: Enterprise Specific Bookings (Clark Wright, from D.A. Davidson)

A: Continuing to do well in the enterprise segment, which is the company's sweet spot. (Trac Pham)