Ladies and gentlemen, thank you for standing by, and welcome to Sprinklr's Second Quarter of Fiscal 2022 Earnings Conference Call. Joining us today are Sprinklr's Founder and CEO, Ragy Thomas; Vivek Kundra, Chief Operating Officer; and Chris Lynch, Chief Financial Officer. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Chris Lynch, for introductory remarks. Please go ahead, Chris.

Thank you, and thanks to everyone joining us today for Sprinklr's Second Quarter of Fiscal Year '22 Earnings Call, our first as a public company. We issued our earnings release a short time ago, filing the associated 8-K with the SEC, and we've also made that available on the Investor Relations section of our website. As a reminder, during today's call, we'll be making forward-looking statements about the business and about the financial results of Sprinklr that involve many assumptions, risks and uncertainties, and our actual results might differ materially. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today, and we disclaim any obligation to update them. For more details on the risks associated with these forward-looking statements, please refer to the text in the company's press release issued today and to our periodic reports filed with the SEC, including our prospectus filed on June 24 and our quarterly report on Form 10-Q for the quarter ended July 31, 2021, that will be filed with the SEC. With that, let me turn the call over to our Founder and CEO, Mr. Ragy Thomas. Ragy?

Thanks, Chris, and hello, everyone. It's wonderful to speak with you all today during our first earnings call as a publicly traded company. Our IPO was an important milestone, but it was just one step in what we believe will be an exciting multi-decade journey. We've always believed that this is a marathon, not a sprint. And today, I'm pleased to share that our first quarter as a public company was a strong one, with Q2 total revenue rising to $118.7 million, up 27% year-over-year. This is the third consecutive quarter that we have accelerated our revenue growth rate, which reflects continued validation from the world's largest enterprises that there's a massive need to deliver a unified customer experience across digital channels and customer-facing functions and that our Unified-CXM platform is the solution. At Sprinklr, everything we do centers around delivering value for our customers, building the world's best product and creating an amazing culture. And when I look at the momentum we built this quarter, it's clear that focus is paying off. Through Q2, we now have 74 customers with more than $1 million in trailing 12-month subscription revenue. These are the world's largest and most iconic brands who continue to grow with us quarter after quarter and year after year, spending $1 million, $5 million, and in some cases, over $10 million annually. We know how mission-critical we've become to these global companies, and it's something that we're truly humbled by. It's why we are so obsessed with creating transformational enterprise value, whether it's increasing revenue, reducing costs or mitigating risk for these brands and delighting them at every touch point from product to marketing and from sales to success. This quarter, we were also named a leader in the most recent Forrester Wave: Social Suites report, which…

Thank you, Ragy, and good afternoon, everyone. When I look at the strength of this quarter and revenue increasing 27% year-over-year, I see the results of amazing execution across every function, from product to marketing to our field sales teams, services and customer success and a company that's scaling up and delivering. And it's happening on a global scale across 4 major product suites in every market around the world, from the Americas to Europe to APJ. With a $50 billion-plus TAM, we believe Unified-CXM is going to be a massive category for decades to come, and we're playing to win. That's why we've been investing in key areas like sales and marketing to capitalize on the opportunity in front of us. And with visibility into hiring and pipeline, we believe we're well positioned to march forward and drive durable long-term growth. One key driver helping to fuel the growth is the fact that we continue to see high customer retention rates across the board. That's even more clear in our $1 million-plus customer base, which continues to grow. As of Q2, we now have 74 customers generating $1 million-plus in subscription revenue, up from 60 just 1 year ago. We landed some amazing new logos this quarter from Allianz to Robinhood to Neiman Marcus to SimpliSafe and expanded in many others with upsells and cross-sells from world-class brands like Microsoft, Samsung, Netflix, Siemens, Diageo, TikTok, Moncler, Sonos, Havas and the U.S. Marine Corps, just to name a few. Let me take a minute now and tell you about 2 of them. The first customer I want to highlight is Siemens, which is one of the brands setting the standard when it comes to modern marketing and advertising, with over 2,000 in-house and agency users working together on 1 Unified-CXM…

Thanks, Vivek. Today, I'm going to provide a brief overview of our second quarter financial results and discuss guidance for our third quarter and for our full fiscal year, which ends on January 31, 2022. And then we'll open it up for questions. I should point out that in addition to our GAAP financial results, I'll also be discussing certain non-GAAP numbers today. Our GAAP results, along with the reconciliation between GAAP and non-GAAP results, can be found in today's earnings release and on our Investor Relations website. So let's get into those results for Q2, where we delivered a very strong quarter across the board, and I'm really proud of the company-wide execution that drove some exceptional top line growth. Total revenue grew 27% year-over-year to $118.7 million. That was driven largely by subscription revenues of $103.3 million, which grew 25% year-over-year. Our non-GAAP subscription gross margin was 79% in Q2, and that helped us drive a total non-GAAP gross margin of 70%. And on the bottom line, we generated a non-GAAP operating loss of $11.4 million for the quarter. There's a few other momentum metrics. I think it's helpful to share at this point. The first of which is our customer count. On July 31, we had 1,062 customers, and as you know, we're focused on selling our Unified-CXM platform to the world's largest enterprises and then growing our footprint in those accounts over time. That large enterprise focus is one of the things that continues to set us apart. And as you heard from Ragy earlier, we now have 74 customers generating $1 million or more in subscription revenue on a trailing 12-month basis, and that's a 23% increase year-over-year. That footprint growth or net dollar expansion rate, which we calculate also on a trailing 12-month subscription…

[Operator Instructions] Our first question comes from the line of Raimo Lenschow with Barclays.

Congratulations on a great quarter and the reacceleration. Ragy, first question for me, like if I look through, you are showing up in a lot more Magic Quadrant, Forrester reports, et cetera, than anyone else because your platform is much, much broader or like you're trying to kind of solve a much broader problem than some of your more point solution competitors. Can you just kind of talk a little bit about how you're going about kind of filling out this kind of platform and where we are in terms of that journey? And then I have one follow-up for Chris.

Yes, absolutely. First off, thank you, all, for taking the time. We're excited to be on this call and speaking to you all. Raimo, thank you for that question. Good to talk to you again. The answer is this is not an afterthought at Sprinklr. This strategy to build a platform, put AI, put an omnichannel ability to re-engage and listen to the foundation of it, build end-to-end stacks for marketing care, it's very ambitious but we know this is something that needs to be undertaken. We've seen this happen in other industries. So we've always focused on getting the platform right and then going after product areas. And so if you look at our past, it should be obvious to you that we will go into a specific area like content marketing, as an example, or conversational AI is another one. You'll see us competing with point solution. In the beginning, we start with the strength of the platform, and we stay on it. And listening to our customers, we don't rest until we become #1 ideally in every single space. And what we are trying to do for digital channels and modern channels, by providing this unified platform with best-in-class product functionality, we're giving our customers, our target segment of 171,000 companies, a no-compromise solution. Traditionally, you think, do I want a unified platform or should I go for best-of-breed? And we're making the decision [indiscernible] success for us. So let me give you the example with one of our customers, Siemens, that started with marketing. And in the beginning, you have a point solution, a different workflow for social, a different one for press releases, a different one for corporate communication, a different one for research and sentiment and competitor analytics. And just within marketing and advertising, you're now able, in this case, put a lot of these solutions together on one platform. And certainly, the cost is down, it's easier to maintain, the CIO gets a better handle for compliance, governance and you get a lot more bang for your buck and create better experiences with AI.

Yes. Makes sense. And then Chris, since the first quarter, like, how do you want us to look at the kind of the leading indicators? Obviously, in the past, we had billings. There's, like, RPO coming up, et cetera. Like, how do you see the business? And what are kind of some of the moving parts we should kind of maybe consider? And congrats again.

Yes. Raimo, thanks for the question. Yes. So you're right, billings for us. And if you see the billings in this result, the calculated billings using the short-term deferred revenue, that grew over 30% year-over-year. RPO is a better metric potentially just because it looks at the full contract value for new sales and renewals. And the duration of those contracts get taken into account, so it's not a perfect metric. So we look at the trend in that one. That one is up over Q1, which is sequentially up over Q4. We don't have the year-over-year for RPO simply because in Q2 last year, we were a private company. That's not a metric that we reported. So our last year-over-year comparison was at our Jan 31 year-end, which grew 30% year-over-year. So again, I think it's those 2 are the best leading indicators for us.

Our next question comes from the line of Tom Roderick with Stifel.

Congratulations on the results and the recent IPO. Fantastic job right out of the gates. I think there's so much to ask here relative to the breadth of the platform, and I'm really interested in sort of understanding a little bit more of the go-to-market motion. The product's been there. Ragy, you were pretty transparent in the road show and what we read in the S-1 with respect to sort of slowing down the pace of sales hiring during the middle of COVID. And then you reaccelerated that, of course, on the way out as we entered 2021. So really encouraging to see the revenue acceleration. Tell me a little bit more about what you're seeing from sales productivity, what you're trying to do in terms of adding sales capacity and how you feel the pace of hiring is working relative to the opportunity set out there.

Let me start by saying we feel really good, Tom, and thank you for that question. We feel really good. We saw the impact of COVID hit us, like everyone else, the first 2 quarters of 2020. And then we saw that the business began to recover in Q3, and in Q4, we exceeded our original pre-COVID plan. So we did take a -- we did do a -- pause our spend in capacity building. And I think it was the right thing and prudent thing for us to do. And you'll always find this management team act prudently. And we're here for the long run, not a quick flash in the pan move. And then -- so what you're seeing is a continued investment. So we unpaused our expenses and then built it back up. Vivek, why don't you add to it?

Sure. I think, look, we're already seeing signs of things paying off. As you saw from Q1, where we had revenue at 19.3%, to where we are at 27%, and we're actually ahead of our hiring plan. So sales and marketing is actually our biggest focus area to continue to drive organic growth. And we continue to add sales reps to build up this capacity to ensure that we're capturing the market that Ragy articulated. And we're also investing on marketing and building out our demand-gen engine and broader brand awareness. So we're actually very pleased by our ability to attract top talent, especially in this dynamic market.

Outstanding. And this is probably a pretty good follow-on question for Ragy, both you, and Vivek. But I look at the long history of this company, and Ragy, even your time spent in the messaging industry before. It's really fascinating to watch the large enterprise work within the bounds of changing use cases. And whether that was messaging moving into marketing and now we're seeing the social media management space, of course, move from marketing into care. Tell us a little bit more about how some of your biggest customers here are evolving that use case. In particular, I'd love to hear more about the use case on care because that seems to be a massive potential for wallet share and maybe not a massive current percentage of the existing ARR in terms of the care use case.

Yes. Thank you. That was a great question. It should blow everybody's mind when you realize an average global enterprise company has 92-point solutions in marketing alone. So the other day, we were talking to one of our larger customers in Europe and we threw out the stat and he looked very amused. So we asked him why, you guys seem like you're in a good situation. He says, "No, we aspire to get down to 92." So it should be very obvious that this is not sustainable. Let's take care. It's -- again, you have your traditional call center infrastructure that was built primarily for voice, and then you bolt on e-mails, typically a different solution. You've got a different solution for live chat. Now you need a community system, that's another solution. You got a knowledge base. There's a new crop of companies that are providing AI capabilities to call center. That's coming on as a bolt-on. Another one to speech to text. A third one, speech-to-text sentiment detection. It's not sustainable. These channels will continue to increase. So let me give you the example of Samsung, one of our clients, which Vivek mentioned. Started out with social and digital customer care on modern channels. We got that down, expanded out from Europe back to APJ, then to U.S., expanded more channels, all the traditional social channels, if you will, and then added live chat, added video calling, now in the process potentially to add things like community and knowledge base and AI-based routing, all of that. Now that's an obvious situation, large global company, scores and scores of markets that are independent. We blew them on this unified care situation. They are now expanding from care, adding sales to it, which we think is where the future is. Care is -- care has to transform. Contact center has to transform from a reactive inbound to potentially being the face of the company where your customers are calling in. Now that's a typical traditional use case for us, right, large company, lots of complex point systems. Let me kind of switch gears and talk about another example, SimpliSafe. That's a great example in the second vector, the next 30,000 companies. And SimpliSafe is a direct-to-consumer growing private company. It was interesting to see how they had the same situation: a different solution for community, a different solution for live chat, a different solution for knowledge base, a different solution for social, a different solution for e-mail. It goes very, very quickly out of control. And so the beautiful thing is by moving to this unified platform, you are actually increasing customer satisfaction. You're increasing customer satisfaction and you're reducing cost. That's a beautiful thing. A large electronics manufacturer in the U.S., a U.S.-based global company drove CSAT up by cutting response times, and they saw a 7% increase right after that.

Our next question comes from the line of Brian Schwartz with Oppenheimer.

I just had a follow-up on the partner announcements during your introductory commentary. You did announce a number of expansion partnerships to the large GSIs. And so I just had 2 questions. The first question was on those announcements, if it's possible to highlight which of these new expansions or partnerships stand out to you in terms of being the most significant. And then second, just looking at the partner channel in its entirety, I'm wondering if you're seeing any meaningful change with the partner velocity of deals or in their execution.

Let me kick it off. We have different types of partners. One is the cloud service providers like the Amazons and the Azures and the Google Clouds. We've got our channel partners like Facebook and Twitter. We've got agency partners, and we've got system integration and other service partners. We're committed to the partner ecosystem and the tech companies, the tech partnerships that we have where we connect to other larger players. So our point of view is that the world will move from a best-of-breed hundreds of solutions to a best-of-suite where 3 to 5 of these platforms work very well together. And that's really what we are trying to do. Vivek, why don't you add something?

When you think about expanding our global footprint, a company like Deloitte continues to expand with us into countries like, whether it's Italy or South Korea. And then when we look at Accenture as an example, they're able to help us serve 100-plus customers and get consultants that are being certified in the Sprinklr platform as they move forward with more and more complex implementations like in the care world. This is allowing us to actually get leverage. But also when we look at our pipeline, they're able to actually help us source bigger deals, larger deals, more strategic. But I want to be clear that we're still very early in our journey. We continue to invest in our partners. But what they're seeing is, as the example that Ragy shared at the top, when you think about these large kind of global banks and partnering with companies like Google, from a technology perspective, it really allows us to not just expand our footprint from an implementation perspective, but also our hosting and channel partners.

Brian, let me also add that it helps to our case that most of these are also our clients. So they're [indiscernible] platform like, for example, Twitter, to really see the power of what we do to enable them to use their own channels and other channels. So it's a pretty interesting dynamic, and we're very early, like Vivek said.

Our next question comes from the line of Mark Murphy with JPMorgan.

And I will add my congrats on a very nice performance. Ragy, I was wondering if you could dive deeper into the point products that you're displacing in some of these large accounts. I had recalled that comment that the average enterprise has 92-point solutions in marketing. You mentioned the company replacing 10 contact center point solutions, I believe. Could you just help us understand which ones are the most vulnerable that you can displace with your unified products?

So let me try not to take any specific names but try and answer your question in a way that makes sense, right? So let's take live chat as an example. That's an independent category, and you know the companies that play in it. Let's take traditional social engagement. That's a category that we were in and we understand it very well. There's still a lot of kind of point solution companies in it. You can take community, which is the ability to get your customers to help each other. That's a product that was a category, a full-blown category, and the companies got acquired, and there are different point solutions still offering that. I would take, for example, there is agent assist and voice analytics. There are very specialized companies that do that. I mean, these are all examples just inside of the tech center when you peel the onion, how many of these things are trying -- sticking in there. And what's funny is most people don't realize how many of these are -- have been put in place because it's out of sight, and it will be funny to see how many CIOs and CMOs will actually be surprised if someone did their CXM techscape and put it out in a diagram for them. And not to mention in marketing and advertising, right, you can see plenty of point solutions, the influence of marketing. That's a category. Advocacy is a category. So if you go on our website and look at products, you practically -- with 31 products, and you probably -- you can easily pick 27 categories from within those.

Yes, okay. The breadth of it is impressive. Just as a quick follow-up, Chris, on the composition of the results, obviously, we -- you've always been clear that billings is not a key focus for Sprinklr. I think we all know that. The composition -- so that said, the composition is more weighted to the recognized revenue and it's less in deferred revenue than I think what we -- generally than what consensus expected. So I'm just curious, what is the underlying driver of that in this case?

Well, in this case, we had very strong services. You probably saw that from the earnings release. Our services -- so we recognized more revenue from deferred, so our billing came in pretty much where we thought it would. We ended up recognizing more for revenue out of deferred, and that's why deferred was down a little bit. So that -- and a big chunk of that was services. Our services team had a really strong quarter. And remembering it's not a massive piece of our business. It's 13% of our total revenue, and it tends to fluctuate on a quarter-to-quarter basis. And that's why you see from a guidance standpoint in Q3, I'm guiding services down a little bit, really more to average it out between Q2 and Q3. Again, from a subscription perspective, we're really excited to see the stair-step increase to the 25%, and that's -- the 25% range is what I'm guiding to for the balance of the year. So that's really, I think, what's driving that, if that answers your question, Mark.

Okay, very clear.

Our next question comes from the line of Stan Zlotsky with Morgan Stanley.

One question for me. I will actually -- and then a quick follow-up. The very aggressive pace of hiring that you guys are going through right now obviously makes a ton of sense, considering the opportunity that you're going after. How -- what are you seeing as far as, like, the productivity and the ramp in productivity within the new sales hires that you're bringing on board now?

So look, we're seeing productivity very consistent with enterprise companies. And that's one of the reasons, as Ragy mentioned, we're actually investing because we know we can [indiscernible] doing it in a very, very responsible way to make sure that we're sequencing it appropriately and ensuring that the AEs that we're hiring are actually hitting the productivity metrics.

And Sam, let me just add that there's a little bit of a pent-up relief from the COVID slowdown and pause we did, right? So there's a little bit of a catch-up in investing we have to do just as we look to the out-years. But we'll always be watching our expenses in line with the growth and validating it before we invest more.

Got it, got it. And then just on the guidance for Q3 for Chris. For subscription revenue and total revenue, is there anything else that we need to be mindful of there beyond just the pro services ticking down sequentially and just the typical conservatism in the Q3 revenue guidance?

No, nothing else in there. And as you say, I mean, as we think about our guidance strategy more broadly, when we guide to a number, it's got to be a number that we feel comfortable with. So nothing else in there.

Our next question comes from the line of Pat Walravens with JMP.

This is Joe on for Pat. Could you just give us some -- maybe some color around kind of the mix of bookings in the quarter versus -- new logo versus existing customers?

Vivek, any comment?

Yes. Let me do that, if I may. So happy to report in Q2, no change in the mix of sales to new and existing customers and it stayed within a very consistent range over the last year. As I reported, we have 1,062 very large enterprise customers. And because of the breadth of the capabilities of the platform that you all know about, there's a natural upsell and cross-sell motion into the existing client base on the back of the value we create for them. But we also had some great new logos in Q2 that we're pretty excited about. Internally, we tend to look more of the trend in ASP rather than new logos. Because of our focus on large enterprises, new logos tend to fluctuate a little bit on a quarterly basis, so I wouldn't read too much into the absolute number in any discrete quarter. Instead, I'd probably look at new logos on a trailing 12-month basis to normalize things out. And as I say, we tend to think about the ASP. So if you took our trailing 12-month subscription revenue, divide it by the client count at the end of the period, it's up over $350,000 in terms of ASP now. And I think that really tells the story of the type of customers we focus on and how strategic our platform is today.

Our next question comes from the line of Arjun Bhatia with William Blair.

And I'll add my congrats on the quarter and the IPO. Maybe first question might be for Ragy or Vivek, but I want to touch on the existing customer base and the growth opportunity you see there, right? We've talked about this transition from best-of-breed to best-of-suite. Where do you think your existing customers are in that transition? And is there further room to either cross-sell or expand even those 7-figure relationships that you have across your customer base today?

It's -- even in our existing customers, we are hardly scratching the surface, Arjun. Thank you for that question. So let me tell you, if you take the top 10 banks that work with us, the bank that's paying us $5 million and using more of our software is no different from the bank that's probably paying us $600,000. And so it's just a question of getting our go-to-market motion down to get our message heard by everybody that matters, and the natural go-to-market evolving with stories that are verticalized and getting to these people. And same thing with technology, there's nothing different for a large tech company that pays us $300,000, there's nothing different from another company in the same space, the same size who's paying us $7 million or $10 million. That's the same thing with if you take any of these industries, retail. And so it's just a question of normalizing, educating. We see this as a long journey. And so we think we can build an amazing company just for our existing customers. So we're going to start activating our second vector as that's important in the long run as well.

And then just to add to what Ragy said, if you look at this quarter, we had some amazing upsells with Samsung and Netflix, Diageo, Moncler, as I mentioned. And if you really think about our customer base, about 10% of our customers actually use all 4 suites. So there's plenty of room and opportunity for us to continue to expand. And when we land an account, we generally land with 2 products, demonstrate value and then continue to expand from there.

So again, I've mentioned to you that our vision is to be ultimately the world's most loved enterprise software company. So we tend to start small. We tend to start with asking for an opportunity to deliver value. So I'll use the example of an electronics company that was one of our first clients has started with $30,000 that pay us over $3 million or $4 million now. And that's a story that can play out in any one of our customers.

Wonderful. And then one for Chris, if I can. The -- we talked about leading indicators from a billings and RPO perspective. Obviously, you pointed out strong growth in professional services. Can you just help us understand how you think about that -- the growth there as a potential leading indicator? Is that implementation, sort of managed services? Just help us understand that a little bit.

Yes. So services for us, you may remember, it's made up of 2 components. Again, it's 13% of our total revenue, but the 2 components sort of split roughly 50-50. We have a recurring service business we call managed services and then platform enablement services in there that you see in most enterprise software businesses. Revenue from managed services, it looks a lot like our subscription business, is generally recurring in nature, is recognized evenly over the contract term. And so that means really that more than 90% of our total revenues actually become recurring. And so it's that enablement work that tends to fluctuate on a quarterly basis based on a variety of different factors like the timing of when that work is performed. But we see that -- one of the reasons the guidance in Q3 is a little bit less than the outperformance that we saw in Q2 is really the normalized rate there is around the $14 million to $15 million mark on a quarterly basis. And so there's nothing -- there's no strange changes. As far as your models are concerned, it's very -- it should be very consistent. Nothing has changed in that business.

Our final question comes from the line of Michael Turits with KeyBanc.

Just a quick one. Vivek, can you just drill down, please, on Research Lite and your rollout and more generally as a self-service go-to-market?

Yes, Michael, let me take that. This is Ragy. So this is an attempt for us to make our platform, that's very comprehensive, as you know, more accessible to our target segment. So to be clear, we're only targeting the largest and fastest-growing companies in the world. And we've always needed to help them get their hands in experiencing the platform and getting to know how things work. And this is also a way for us to hopefully shorten the sales cycle. And so this is -- the self-service option is so that you can try before you buy, and you can get your hands-on key, both maybe as a user but from a target company. So we're not driving any traffic to the site outside of our [indiscernible]. As we go to the next 30,000 companies on our list, removing friction in the sales process is a very, very important part of our things to solve. And it's also a bigger part of our strategy to drive more inbound request and demand. So we need to just smoothen the funnel all the way from the top, down, further down.

And last thing, just to add to what Ragy said. When you really think about our TAM, which is north of $50 billion, if you think about the 171,000 customers that are potentially target customers for Sprinklr, we purposely targeted our account executives and the sales team to the first 10,000, the first vector that Ragy was speaking about. And then the second vector, we've got plenty of room to continue to expand and grow. And as Chris mentioned, when you look at that ASP of $350,000, we've got plenty of room to continue to grow this business for decades to come.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I will now turn the call over to Ragy Thomas for closing remarks.

I want to thank you all again for joining this call and the opportunity to present to you. Appreciate your support and your interest. We're here trying to create a brand-new category. In a few years, it should be very obvious that this could be what -- be coming after the big -- last big one, which is CRM. And the trend is very, very obvious as you read the new S-1s that are coming out and how the language is changing, even existing large companies, the word unified appears a lot more, the word CXM appears a lot more. And we've got a 10-year advantage on it. And so this is playing for the long game, and hopefully, in that process, create a company that our investors, partners and customers will love. Thank you again for your time, and we look forward to talking to you soon.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.