Ladies and gentlemen, thank you for standing by, and welcome to Sprinklr's Third Quarter of Fiscal 2022 Earnings Conference Call. Joining us today are Ragy Thomas Sprinklr's Founder and CEO, Vivek Kundra, Chief Operating Officer, and Chris Lynch, Chief Financial Officer. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. 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. Chris Lynch for introductory remarks, please go ahead, Chris.

Thank you. And thanks to everyone for joining us today for Sprinklr's third quarter earnings call for the three-month period, ending on October 31. We issued our earnings release a short time ago, filing the associated 8-K with the SEC, and we've also made 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, then evolve 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 quarterly report Form 10-Q for the quarter ended October 31st 2021 that will be filed with the SEC. With that, let me turn the call over to Ragy.

Thanks, Chris and hello, everyone. It is wonderful to speak with all of you again. First and foremost, I'm really pleased to report a really, really excellent third quarter that exceeded guidance on all metrics. Q3 revenue grew 32% year-over-year to a $127.1 million, and subscription revenue grew 29% year-over-year to a $109.9 million. This is the fourth quarter that we have accelerated our revenue growth rate back to back, which is a continued validation from the world's largest enterprises that there's a massive need to unify experiences across customer-facing functions and tips from Care to Marketing on all modern channels. And the need is not just to unify customer experiences across functions and teams. It is to unify customer experiences across markets globally. And in many cases, the need is to even unify experiences across brands or business unit for multi-brand and multi-business unit companies. Our vision and strategy hasn't changed since the company was founded 12 years ago. We are here to do 3 things: 1. To lead a new category of enterprise software that we call unified customer experience management. 2. To build the world's most loved, and I repeat most loved enterprise software company. And 3, to create a culture that obsesses about customers and treats one another like family. The sustained execution and results that you're seeing from us this quarter, are simply a reflection of who we are and who we always have been. And with this renewed momentum, we have never been more excited about the opportunity in front of us. Our customers are telling us that they want to replace point solutions in the front office with a single platform. That they need that platform to be purposed built for modern channels, and that it needs to integrate with other best-of-suite platforms…

Thank you, Ragy. And good afternoon, everyone. In Q3, we had phenomenal execution across every function, with revenue increasing 32% year-over-year. This performance is validation, not only that our go-to-market strategy is working, but that this company continues to scale up and deliver across multiple products, and in every market around the world, from America to Europe, to APJ. You've heard us talk about Sprinklr being a story of reaccelerating growth. And over the past year, you've seen exactly that. We've increased our revenue growth rate for four quarters in a row, this growth is powered not only by strength in our new bookings, upsells, and cross-sells, but also by the fact that we continue to have world-class customer retention across-the-board, from our largest and most strategic global customers to our smaller enterprise customers. That retention is a clear indication of the stickiness. An immense value of this enterprises are realizing from our platform. And it is even more evident when you look at our 1 million-plus customer base. As of Q3, we now have 80 customers globally generating 1 million plus or more in subscription revenue. These are the world's largest and most iconic brands like Microsoft, Vodafone, and Twitter. And they represent the best of what Unified-CXM looks like. Today, 90% of these 1 million plus customers have at least 3 of our 4 product suites. And they continue to expand with us quarter after quarter. As you've heard me say before, we have a growth flywheel that's working at scale across our customer base, with a proven ability to up-sell, cross-sell, and expand across brands and geographies. I want to congratulate the team on driving a significant increase in our net dollar expansion this quarter to 117%. From our ability to up-sell, expanding an account like Pepsi…

Thanks, Vivek. Today I'm going to provide a brief overview of our third quarter financial results and provide guidance for the fourth quarter; and also for our full fiscal year, both of which end on January 31st of 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. As you've heard from both Ragy and Vivek already, we delivered another really strong quarter across the board, accelerating the pace of our top-line growth yet again. Last quarter, we reported revenue growth of 27%, And this quarter, we're reporting another significant acceleration with total revenue up 32% year-over-year to $127.1 million. That's driven largely by subscription revenues of $109.9 million, which grew 29% versus Q3 of last year. Our non-GAAP subscription gross margin improved to 80% in Q3, which helped us deliver a non-GAAP total gross margin of 71%. And on the bottom line, we generated a non-GAAP operating loss of $13.5 million for the quarter, while using just $1.1 million in operating cash flow, and only $4.1 million in free cash flow. That impressive cash flow result, helped us end the quarter with well over $0.5 billion of cash and short-term investments on the Balance Sheet. So we have plenty of capital to continue growing the business. I'm also happy to report a notable 300 basis point increase in our net dollar expansion rate this quarter to 117%. That calculation you'll remember, is using trailing 12 months subscription revenues. And this dramatic increase over the last 90 days is further evidence that the go-to-market investments we…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions ]. Our first question is from Raimo Lenschow of Barclays. Please proceed with your question.

Hey, this is Frank out for Raimo. Congrats on the results today. So large customer had accelerated again this quarter, could you provide some more color behind that? Was this growing customers across that threshold or were you more landing above via the million dollar mark there?

This was a growing customers across the board. And consistent with previous quarters, we had similar mix in terms of upsells and new logos. What's been really exciting though, is when you think about the 81 million plus customers, that's up 29% year-over-year. We expanded at customers like Pepsi, Keystone, Samsung, Nestle, and the new logos in the customers like Hugo Boss and Land O'Lakes. But also when we talk about Vector2, we continued into add new logos in Ledger, a CrossCountry Mortgage, and Everlane, and saw our partners step-in and add even more value this particular quarter.

That's great to hear. And I was wondering if you could give an update as well on the sales hiring, and ramping? Is there any impact that we should consider also from the tighter labor market?

But I think look from a sales capacity perspective, we've inflected up and you're seeing the result of that inflection in terms of going from 19% to 27% to 32%. And we've got the highest sales capacity we've ever had. And as we look ahead in terms of Q4, we're seeing good kind of pipeline and demand environment. And as far as the labor market is concerned, I think -- look, every company around the world is contending with the great resignation. But as we came out of COVID, one of the things that we did do is made sure that were inflecting up, and we believe we're in a good position with the capacity that we have.

One of the things we've been doing is streamlining sort of that internal career progression within our go-to-market organization, where somebody can start right out of the university into an XDR program, and then SDR program, then into account executive. So we think we have a good short, medium-term strategy to address and get ahead of the labor shortage. And I would also -- back to your question, Raimo. I think what you're seeing is a market recognition of what we've been seeing for a long time. And it's the point solutions isn't sustainable for all these modern channels, right? And there are more modern channels and more customers are jumping onto channels like TikTok and the newer ones, and they can go to more point solutions. And what we're seeing. I would say, having done so many customer meetings in the last 3 months, what we're seeing is sort of a recognition that Sprinklr is probably the only viable, third or fourth platform in the enterprise. So we're not talking SMB, we're talking about large global companies that take 3, 6, 9 months to execute a procurement contract. And in that segment is a recognition that, yes, we have picked Microsoft as salesforce. Yes, we've picked Adobe. Now, who is the third? Who is the fourth platform? How do we get to 80% of the functionality and 90%? And with 31 products, we are the shortest path to that consolidation, which I think IT teams would agree that they need, because the point solution chaos is just unsustainable.

Our next question is from Mark Murphy of JP Morgan. Please proceed with your question.

Thank you very much and congrats on the very nice acceleration that you're seeing in the business. So Ragy, I wanted to ask you, what do you think is underpinning the success that you've been having recently in some of these very large cloud-based contact centers or CCaaS, where I think you've had some of those wins that have been thousands of agent seats. And I'm wondering if the addition of some of the voice offerings -- or excuse me, the voice APIs from Amazon and Twilio, might be creating a tailwind. And then if I could sneak in a follow-up for Chris, I was wondering maybe -- I heard all your comments on sales capacity. Where are we in the cycle of ramping up the quota-carrying sales rep headcount? I'm just wondering, does it continue to rise pretty rapidly in the second half and beyond or is the sales and marketing spend as a percentage of revenue, maybe peaking out somewhere around now?

Mark, thank you very much, great questions. Let me just try to click on what we're seeing in customer care, as we outlined in previous quarters and at our IPO; care is something that we're putting a lot of focus on as a company. As you know, we got started with customer care in modern channels, so if someone's tweeting at you or sending you a WhatsApp message, or Google messaging you, or Apple messaging you; that digital interaction shows up with a lot of context, as a text message. And if you have deep AI, like we do, we are able to understand what product, what problem, and the agent who's best qualified to resolve it. And then suggesting using AI, a smart response, which makes an average agent as smart as the best agent they got in that specific product issue, and we've been innovating with concepts like guided path, and allowing agents to just really [Indiscernible] down the resolution, and while integrating to all other systems like the traditional care solutions do. And so what we're seeing are first-generation of customer care clients, are actually seeing victory on both sides. They're seeing dissatisfaction go down because we can intervene using AI in real-time with sentiment and either route to a different agent or come up with a better, faster solution. They seen dissatisfaction go down and [Indiscernible] go up. And they are also seeing cost go down because of the integrated nature of chatbots and AI that goes into the platform, and the guided path of the smart responses. So this double victory is, I think of it, it's kind of -- it's a big thing for them. And we are benefiting from more cases moving to modern channels from voice and e-mail, number 1. Number 2, we're also benefiting from customers going, "Hey, if I'm spending 30% less on these channels ", because we are doing such a good job of AI-based optimization, "How do I move my live capital? How do I move my voice [Indiscernible]? " And I mentioned already that our first set of clients going live on VoiceN, and Honda just did. And live chat by the way, has quickly become -- it's our number 2 Care channel today. And it's just eclipsed all our other social and messaging channels, and that's one of our newer innovations. That's where we go up against traditional like chat only competitors, some of which are public companies. So we're benefiting from more volume shifting to Modern Channels. And we're benefiting from customers wanting to take what they are doing on Modern Digital Channel Care Solution using Sprinklr and trying to move more channels to this. Does this make sense?

Yes, it does. I did not realize the Live Chat have become view number 2 channel today, so yes, that's pretty fascinating.

Hey, Mark, it's Chris. Let me pick up on the second element of your question. Last year, you remember we generate positive income on a non-GAAP basis. And we were free cash flow positive in both of the last two fiscal years. So we know how to run an efficient business and make money. But we raised capital, not to put it in the bank and get 20 bits of the interest, but to deploy some of it and accelerate in that top-line growth. And towards the end of last year, we laid out a plan to do that. And with full quarters of accelerating growth rates, we're absolutely delivering on that plan. That plan required us to invest in our go-to-market machine and build out that distribution channel. And that's exactly what we've been doing over the last 12 months. And as Vivek said, we've got more sales reps than ever before and more sales capacity even we've ever had before. And that's the reason you're seeing that sustained acceleration on the top line. And at this scale, we can start driving meaningful leverage into the model when we're ready. But we think the approach we're taking right now is going to generate much more value for our shareholders in the long run. And it is a conservatively run business. And we're very conscious of the need to balance that level of investment with the level of growth, but we think we've got the right balance in the moment. When you think about it, we just grew out top line by 32%. We delivered $127 million in revenue, which anyway you slice it, that makes us a $0.5 billion revenue run rate business. And we did that spending just $1.1 million in operating cash flow. And we think that's pretty darn efficient. So right now, we're continuing to add sales capacity pretty aggressively.

Understood. Thank you very much.

Thank you, Mark.

Our next question is from Michael Teran of Wells Fargo. Please proceed with your question.

Hey there, good afternoon. Appreciate you taking the questions. I guess first, I mean, Sprinklr has historically operated as up-market focused [Indiscernible] average [Indiscernible] in the hundreds of thousands. Can you talk more around the lighter touch self-service products and how those fit or complement that vision? Are those customers you aren't currently addressing or are those ways to get more enterprise customers trialing pieces of the platform and converting over to the broader platform, or maybe you can just expand on the vision there?

Thank you, Michael. So I can confirm that the current strategy is to use these self-service in our trial easy-to-use products as on-ramps to experiencing our brand and our enterprise suite. So we've talked consistently about two vectors of growth. Vector 1 is the biggest 10,000 companies in the world, of which we already have over 1000 brands as customers. What we want to do as we look at the next 5, 10, 15, 20 years, what we wanted to do starting, a couple of quarters ago was: how do we go from looking at those 10,000 companies where we can have reps called one-on-one, to the next 90,000, because we think we are a great fit for companies with, let's say, a $100 million or more in revenue, in most sectors around the world. And 90,000 companies cannot be called on and demo down on a one-to-one basis. So our self-service products are wait for us to introduce our products and capabilities to that Vector2 for the next 90,000, where they can move down that funnel and ramp on so that it's easier for them -- for us when the contact sales are -- when we contact them for us to get them closer to signing a contract. So today, it's not a move to go beyond our 100,000 target customers. But we've seen this movie so many times, whatever works for the next 90,000 is at some point easily extensible to long past that. But we think there is a big company to be built, just in Vector1 one, and as we expand to Vector2, we think that we're really seeding the opportunity in a really large marketplace.

And just to add to what Ragy said, these are still companies that are very large with complex business needs and point solution kiosk. And they have revenue between $100 million to $1 billion. And the goal of these light products is to actually accelerate and drive greater efficiency, as Ragy said. And in terms of making sure inbound engine continues to become more and more efficient.

That's helpful. All very sensible. I guess, just one, if I may, on the financials. And Chris, the billings you've mentioned third straight quarter of 30% plus billings growth, it did tick down modestly sequentially here in Q3. It's consistent with what we've seen from the model. So, is there any characterization you could just provide on the seasonal profile of this more in Q2, Q4 [Indiscernible]? Or anything else we should just take into contacts there is helpful. Thank you.

Yes. Thanks for the question. So I think as you probably observed, the interesting thing this quarter is that all of the metrics that we look at as potential leading indicators to revenue growth, are aligning. You've got subscription revenue growing at 29%, you've got the CRPO growing at 29% and you go billing growing at 31%. That sequence, subscription revenue, CRPO and billing, is actually how we internally prioritize the order of those metrics in the context of which are better leading indicators to revenue growth. Specific to the billing question, I've mentioned before, billing can be a little lumpy for us. In part because I've got more than $0.5 billion in the bank. And I tend to be more flexible on billing when I need to be. So when you look at billing over an extended period of time, you can look through some of that quarterly lumpiness and all 3 quarters so far this year, as I mentioned, the billing has grown by more than 30%. And I think full-year billing growth of 30% is how you should think about your modeling for Q4. Hopefully to -- now that you've got CRPO as a year-over-year metric, which we didn't have last quarter. You can lean on that a little bit more, which is a bit more of a robust metric as a leading indicator. But I think just the fact that all metrics are landing in and around the 30% growth mark, kind of helped to triangulate things as well.

Our next question is from Stan Zlotsky of Morgan Stanley. Please proceed with your question.

Thank you so much, guys. And congratulations on a strong quarter. I wanted to actually follow up on the prior question on Sprinklr Lite. Could you refresh us on what are the differences between the core Sprinklr product and the Sprinklr Lite product? Which are the components that truly make it Lite? And what are some initial feedback then, from customers participating in beta? And when could we see the beta transition over to the product being generally available? And I have a quick follow-up.

Sure. Thank you, Stan. Our approach with the light products is to do 2 things. A, all the core capabilities are there and we've stripped down to things that, like really advanced large enterprise deployments need. The second thing is different about the light product versus enterprise product. It's a fact that in the light product, most of Sprinklr's powerful capabilities are pre -configured, either by the industry or by like a solution set. Like for example, in research in other products, the locations, all those things by industry we've pre -configured. Make it super easy for someone to get started. But as you know, large companies want to just that could really get their hands into tweaking and tuning it, right, customize their models, trained and all of that. So it really gives you the entry point and then once you experience it, you go, "Wow, I know this is working for me. And if I'm able to customize this with that, or add more workspaces, then that's what really we can use as a large company. " So that's really the two distinctions that make -- we started with the research product. As I announced today, we are launching our Care product in beta, which we're super excited about. And the research in Care are designed to work together, right? Think about that 1 - star review. That's actually a 1-800 customer call, when you have research and listening connected to Care. And then we'll go onto launch engagement and then we'll follow it up with marketing. And by, say, in the next year, we're going to have the unified front office available in a self-service mode. Now, that's a good time for us to make a decision on, hey, are we going to use this as a revenue generator or we're going to just use this as a pipeline demand generator? And today, it's a pipeline demand generator. So we're really not investing into customers staying on there forever, but more as "Hey, experience the product, you've experienced capabilities, the power and you've experienced our brand. And can we talk into about what you really need and you becoming enterprise class?"

Perfect. That's very helpful. Quick housekeeping points for Chris. If we look at billings and essentially if we do total billings for the year around 30%, that implies roughly 20% year-on-year growth in Q4 for billings. Can you give us a little background in the end of last year in Q4, total billings essentially was 0% growth, current billings were 2%. What are the dynamics that we need to keep in mind from Q4 a year ago that inform the 20% implied billings growth for Q4 of this year?

There's a little bit of seasonality in our billing and it follows a pattern where our renewals happen. But the year-over-year comparison is against the COVID year. And we did I think I mentioned before we did some pretty unnatural things to really support our customers, many of whom were challenged when their businesses got shutdown. And so we pushed a whole bunch of the billing that we ordinarily would have pushed into the earlier part of the year, into the back half. And that's why you're seeing the sort of the year-over-year growth around the 20-something percent mark this year. You see earlier this year, Q1 for us was 45%, if I recall, year-over-year growth. And so it's a bit of an unnatural pattern this year just because of a strange billing pattern in the COVID year.

Got it. Thank you. Chris, did you did you give out a customer account number? I don't know if I -- total customer count, I don't know if I missed it.

Yeah. It's 1100. I think Vivek mentioned it in his prepared remarks.

Perfect. Thank you so much.

Got it.

Our next question is from Tom Roderick of Stifel. Please proceed with your question.

Great. Everybody, thank you for taking my questions. Let me start this first one. It's a bit of a high-level question. But Ragy, you and Vivek both referenced this 500 million run rate you're running through right now. Some businesses kind of hit a little bit of a wall when they get to that $0.5 billion mark and some start to accelerate. And I guess what it seems like we're seeing with your businesses, it's a ladder. Your business is accelerating. It seems like perhaps some of these bigger deals are coming easier. And I know it's just the world is getting easier for you, but I'd love to hear just a little perspective on maybe the critical mass of what you're accumulating as you go through $0.5 billion. And I guess the question behind that would be, are larger customers leaning in and buying more at a faster pace? And do you feel like the cadence of business is perhaps coming a little faster and easier to you, now that you've got the brand and reputation, the public backing behind you? Just give us some sense of what that means as a public company and the momentum that you're seeing and the sales cadence.

I can confirm that it is actually feeling, and we're sensing that that larger companies and their need to consolidate is much more pronounced today. So I think there are 3 things that play here from what we can see. The first one is, I think this point solution saturation has hit its peak. And you can see -- if you look around at all the point solutions competitors that we used to have, you can see the winners and the others separate themselves in both in the SMB space and on the enterprise space. So you're seeing a lot of companies that are struggling. And that's a recognition by larger companies that look, I can't afford to have another customer ID and under the integration, and under the RFB, and under the content ID, and something that doesn't fit into my workflow. I'm not going to integrate another point solution to Salesforce Adobe. So that's the first point I'd make. The second point is, look, we're chasing a very ambitious vision. We know that. It's -- we're almost building a digital customer operating system for 36 channels, and across different functions where we are rebuilding the care stack for today, looking future backwards. It took us many, many, many years of constantly being under construction and scaffolding all over the place, and customers were sensing that. Now, all you're seeing is a lot of that platform building is done and customers are seeing us add features and making it easier for them to use. And I'll give you an example. We're -- I was talking to the head of business commercial sales with a large automotive company. And they are in the process of rolling Sprinklr out and their team, basically, said that they had never seen consensus across…

That's really helpful, Ragy, I appreciate the thought of the ambitious vision because it certainly seems like that's where you are headed. I want to just talk really quickly or ask really quickly about self-service here, particularly down the Care is out with self-serve as well. Might be a good question for Chris, just relative to the costs associated with supporting that. Obviously that can be a really efficient sales channel once it's up and running. Can you talk about some of the infrastructure needs you might have from a billing and go-to-market perspective, as well as any other things that we ought to be thinking about from an investment perspective to support the buildup of that self-serve business model?

Yeah. Tom, let me just kick it up and physically add to it. I want to say that the self-service product for us is user interface. It's a skin on the same underlying infrastructure that we built for 12 years. So it's not like we've taken a lot of chunk of our engineering team, and simply build down to the product, because this unified platform architecture that we think we've done a really good job of for 12 years and all the expenses are there. So for us to put another UI skin, simplifying all the configurations we've been doing any way to simplify our enterprise implementation. So broader company engineering and go-to-market, it's just not a big lift for us. Chris?

Yeah. Ragy, on the key point there. this isn't a big lift for us. It's really a subset of what we've always been doing and have been doing for the last ten plus years. So yes, there's a little bit of tweaking around the edges, Tom, but this isn't a significant investment like you would think if we were going into a completely different area of the business.

We have reached the end of the question-and-answer session. I will now turn the call back over to management for closing remarks.

I'll close with the thing that I always say. We're here to do three things. We think there's a category coming and whatever we end up calling it, we call it Unified Customer Experience Management, and it sits, connects to the CRM, the transactional data, and consolidates a lot of the operating, heavy lifting that happens around it. This platform would make a salesperson sell better, a care person take care of customers better, a consumer inside person get better inside faster, and I think we will end up being very strategic. The second is we're trying to do something different culturally. In our enterprise software, basically we want to build the world's most loved enterprise software company. What that means is we have to approach our customer's sales market, deliver very differently. And I am very encouraged by the progress we're making on that front. And lastly, we want to set the benchmark for employee culture, where we treat one another like family and take care of each other while we obsess about customers. So I want to thank you all for your interest. And as we always say, this is a 5, 10, 15, 20, 30-year run, and we want to build a durable company. And every other short-term priority will be subservient to this long-term vision for us. Thank you again, and please have a great evening.

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