Greetings, and welcome to the Sprinklr Q4 Fiscal Year 2025 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Eric Scro, Vice President of Finance. Eric, please go ahead.

Thank you, operator and welcome, everyone to Sprinklr's fourth quarter and fiscal year 2025 financial results call. Joining us today are Rory Read, Sprinklr's President and CEO, and Manish Sarin, Sprinklr's Chief Financial Officer. We issued our earnings release a short time ago, filed the related Form 8-K with the SEC and we've made them available on the Investor Relations section of our website along with the supplementary investor presentation. Please note that on today's call management will refer to certain non-GAAP financial measures. While the Company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAAP. In addition, during today's call we'll be making some forward-looking statements about the business and about the financial results of Sprinklr that involve many assumptions, risks and uncertainties, including our guidance for the first fiscal quarter and full fiscal year of 2026, the impact of our corporate strategies and changes to our leadership, the benefits of our platform and our market opportunity. Our actual results might differ materially from such forward-looking statements. 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 our filings with the SEC, also posted on our website. With that, let me turn it over to Rory.

Thank you, Eric and hello, everyone. It's nice to be with you today. I'll start by providing a few 4Q financial highlights before covering some of my thoughts on the progress we are making in transforming our business. Fourth quarter total revenue grew 4% year-over-year to $202.5 million and subscription revenue grew 3% year-over-year to $182.1 million. We generated $25.9 million in non-GAAP operating income which resulted in 13% non-GAAP operating margin for the quarter. I want to thank Sprinklr team members around the globe and our customers and partners for trusting us to help them solve some of their most important business needs. We believe we have a strong hand with growing markets, a leading-edge AI platform and gold standard customers with a mission to help them deliver next generation unified engagement journeys that reimagine the customer experience. We now have the clear ambidextrous strategy and execution plan in place to re-energize and grow our Sprinklr core while hardening and expanding Sprinklr service to enable our customers to realize the full value of our AI based unified customer experience platform. However, there is much more work to do on our journey and FY '26 will be an important transition year as we stabilize the business. As I have acknowledged, there are still challenges ahead as we strengthen our teams, simplify our offerings and resolve the operational and technical debt that has hindered us in the past. While we still see important areas needing focus and improvement, the transformation of Sprinklr is well underway. We defined a well-focused customer wide business strategy, we've implemented a well-established business management system, BMS to track and drive execution and we took swift action to optimize our expense base and rebalance our investment and resources. We have also redefined our go-to-market coverage model to…

Thank you, Rory, and good morning, everyone. For the fourth quarter, total revenue was $202.5 million, up 4% year-over-year while subscription revenue was $182.1 million, up 3% year-over-year. Professional services came in at $20.5 million. All metrics meet the guidance range provided for the quarter. Our subscription revenue based net dollar expansion rate in the fourth quarter was 104%. Given the trailing nature of this calculation, this quarter's metric reflects the full impact of elevated churn we experienced during FY '25. At the end of the fourth quarter, we had 149 customers contributing $1 million or more in subscription revenue over the preceding 12 months, which is an 18% increase year-over-year. We believe our continued success in winning and growing seven figure customers is a testament to the value of the platform we deliver for our customers. These are some of the leading enterprises in the world and a targeted focus of ours with the changes we have made in our go-to-market efforts. Regarding gross margins for the fourth quarter, on a non-GAAP basis, our subscription gross margin was 79% and professional services gross margin was break even resulting in a total non-GAAP gross margin of 71%. As noted on previous calls, we are experiencing higher data and hosting costs as we launch new cloud environments in response to new business opportunities, especially in Sprinklr service. We acknowledge professional services margins are not optimal at this level and we are working to address this as part of our overall work on becoming more efficient. Turning to profitability for the quarter, non-GAAP operating income was $25.9 million or a 13% margin which drove non-GAAP net income of $0.10 per diluted share. I want to address one point regarding taxes and our non-GAAP EPS number for the quarter. In Q4 FY '25,…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Pinjalim Bora from JPMorgan. Your live is now live.

Great. Thank you so much for taking the questions. Rory, you have obviously put a lot of changes in motion. It's great to see kind of the improvement in the operating margin that you saw in Q4 as well as what you're guiding towards. Maybe talk about the avenues that is driving the cost efficiency. I'm trying to understand how we should think about that cost efficiency versus growth? Is that largely low hanging fruits or is there an element that it could actually be coming at an expense of some growth?

Yeah, that's a great question. Absolutely. We're focused 100% on making the business more efficient. That's crucial. I think over the past several years there was growth in investments in areas and organizations kind of expand. It was time to really focus on where were our critical customers, where were the most important product structures, where did we have to make the right investments. So, we did an analytic and looked at the business end to end. That's how we began to redo the go-to-market. That's how we restructured into a POD coverage model. Then we did work on the roadmaps for this year to make sure the right innovations were prioritized first. And we looked at where we were taking our marketing and our go-to-market dollars. Where is our ideal customer? Our ideal customer is the top of commercial to very large enterprise. So we understood that and then we optimized the business structure to capture that and to prioritize the investments in product areas. So, we streamline the business and we take a significant tens of millions of dollars of cost out. That's a tough decision and always difficult to do. And I want to, emphasize we did that with respect and care for everyone that was affected and we spoke to every individual directly. What that allows us then do is to flow some of that return to the bottom line. Our business should be returning in that 15% to 20% range over the next couple of years. That's what it should look like as an enterprise software player in this space. To your question, did we sacrifice growth? Absolutely not. That's never what we want to do. You can improve the bottom line and what we did was free up additional dollars in this action that…

Thank you. Understood. Thanks for the clarity. And one for Manish. Manish, I was a little bit surprised with the 400-basis point negative impact seems like to subscription gross margin. Is there a way to understand how much of that is coming from higher data cost versus hosting?

Yeah, we don't break it out. But you remember in the Q3 call we spoke about renewing the Twitter license and I'd also mentioned that came with a commensurate increase. Data cost across every vendor are going up only because you're using these data feeds for training, AI models and such. And I think every data vendor has realized that there is value in the data that they provide. We don't really break down the hosting side either. But you also remember we've said as we've spun up new data centers, there's an initial setup cost to each one of these. It's close to $2 million per Pop. So, as we see more growth in Sprinklr service, we're obviously going ahead and investing in the hosting capabilities. And that all in the aggregate is what's impacting gross margins here in the short term.

Got it. Thank you very much.

Thank you. Next question is coming from Arjun Bhatia from William Blair. Your line is now live.

Perfect. Thank you so much. Rory, one for you to start off with. As you think about just the growth potential going forward, it seemed like a lot of your commentary was focused on the installed base and some of the changes that you can make there. How are you thinking about focusing go-to-market resources on new customer acquisition versus the opportunity that exists within your existing customers? Is there one that's a bigger priority? And I'd be curious how you’re thinking about that. Thank you.

Sure. I think the way to think about that in the tactical time frame is to make sure that the base is solid. We want to solidify the base and we have huge opportunities to expand. A software company of our size to have $149 million customers is pretty unusual. I mean that's a big number. And then to have a group of those customers in the $10 million, $20-plus million purchasing range is, I think, extremely unusual. We have an opportunity to grow those customers and we need to make sure that renewals improve, and it's really about creating a go-to-market that nurtures and keeps those relationships 365 degrees and that moves up into the C level. We're absolutely moving into more mission-critical capabilities. And as this convergence of the customer experience applications evolve the platform play of unifying the social activities across all vectors of engagement, discovery, commerce, support service. That's why the CCaaS business is so important. And then using AI to knit that experience and to create that value, that's going to grow. So yes, in the tactical time frame, protect and stabilize the base expand on that base, grow that $149 million into larger account. You always want to feed the engine. So net new logos are super important. But let's not go to the bottom and go to mom-and-pop stores and do $12,000 or $5,000 deal. That's going to be a distraction. This is an enterprise software company with gold standard customers. Our top 500 accounts are the most important in the world. Adding a couple of mom-and-pop shops, regional little play, that's going to be a distraction. We can double back on that in a couple of years let's grow with the place that our ideal customer set is. Our customers value Sprinklr when we knit these solutions together and we create a differentiated customer experience. That's why we're seeing this uptake. And if we execute FY '26, the transitional year, to improve the consistency of our implementation and our delivery, we will see improved growth. That's 100%. So answer the question straightforward, tactically and in the midterm focus on the base, solidify it, expand it. There's a lot of opportunity to grow it, and we prove that when we get it right, they see value. Two, of course, feed the engine with net new but make sure it's those ideal customer sets. We want a great one that I mentioned in the prepared remarks. I mean that's a huge coffee player around the world and to get in there and getting in a significant way, I think we can expand that four, five-fold over the next three, four years. But we've got to continue to focus on the base and get that solidified and then keep beating the engine with net new. I'd slant it 70/30 toward the base right now.

Perfect. That's great to hear. And then maybe just following up on that piece a little bit. But you mentioned, I think, historical implementation challenges a few times in your prepared remarks. Just curious how prevalent is that? And how challenging is that to remedy? And as you go back to these customers, where maybe -- you for implementations. Is there an opportunity to go and upsell and cross-sell as you're doing that? Or -- and I'm curious, just like on a timing -- from a timing perspective as well, how long this might how long some of this might take with your minimal base?

Sure. I think around implementation challenges, it's that the organization never really matured those functions. Those functions were almost done in a one-off manner. If you got the right team the implementation went very well. If it was a new team or they didn't have the proper documentation, it might be a bit of an adventure. The idea here, and I've just -- I've moved the service and support function under me now. So, I'm going to spend a fair amount of time on this. We need to trade -- treat implementation as a product. We have to productize it, get it consistent, have it very well documented. Our product documentation is getting up to speed. Documenting our implementations and then enabling our teams to do it consistently and to have that training done time and time again. That's all work that's being done right now. And as part of this transitional year, it's really not going back and fixing old ones. They're up and running. It's the ones that are in motion right now is doubling down, making sure we get them through the installation, make them successful and then creating that long-term relationship with the new coverage model so we can continue to enhance and expand. Your question about is there an opportunity to upsell, always. Every engagement with a customer is an opportunity to show value and to show how they can use the rest of the Sprinklr platform to expand. That's why we're doing a very focused set of work around our top 400, 500 account. We call it Project bear hug. We're going to really target and build account plans across every one of those in the first and second quarter. That will drive it. In parallel, we're working with our service teams to make sure that our implementations are almost productized and they're consistent. I think that will take two or three quarters to get there. I think -- but we're improving every day. I could even take four quarters. We want to make sure we do it right. But every day, we're improving. We're improving the knowledge base, we're sharing the experience, we're putting in the discipline so that it's much more predictable and that's how we've got to think about these implementation challenges. And in the short term, cover the accounts, make sure -- and I'm involved in a lot of them. So that's where I'm getting a lot of feedback and knowledge to understand exactly what it is. And when we have a challenge, get on top of it, solve that and get that customer to successfully implement. And I think the customer appreciates that we're getting better each day, we're not done. We have work to do no question. It took several years to get here. It's going to take more than three or four months to get it fixed, but we know what to do.

Okay, very helpful. Thank you very much.

Thank you. Next question today is coming from Elizabeth Porter from Morgan Stanley. Your line is now live.

Great. Thank you so much. I wanted to go back to the reinvestment in hiring, particularly around kind of the go-to-market strategy? And just how should we think about the timing of these hires in the typical time period for a rep to ramp? I'm really looking to get additional color on kind of what the implications are for when you feel like sales capacity will be durably operating at these higher levels. Thank you.

Yes, Elizabeth, that's a great question. One of the things that I'm trying to think about right now is what's my sales capacity for FY '27? And it takes us about six to nine months to be at a rep to be ramped. So, what we're trying to do now is actually hire in the second middle of the year kind of the hiring for the beginning of next year because we want to bring them on now so that they're ready. We have tried to think about that and try to make a structure. Now of course, you've got to deal with attrition and make sure there's performance. But our whole mindset it's to be hiring in the late second quarter, early third quarter for FY '27 so that we're building that out. What we want to see is an improvement year-over-year of our ramped AEs as we exit the year compared to the previous two or three years. The whole focus here -- and it's not just AEs, it's also about building the ratios within the coverage model. We will continue to invest. We had some technical mismatches. It's a technical solution and customers value the technical experience. If we slant too administratively in terms of skills and our success managers or in our solution architects, I think we missed the mark a bit. So we've really tried to rebalance that. And I think you'll see us also invest in those parts of the pod as well. both at the A level to get ready for FY '27 to make sure that we have the capacity in terms of the success managers. And I plan to add success managers most of the year. Especially technical success managers that really have those right skills and then to add the solution architect. It's all in mind that we'll then have the products hardened and we'll have the implementations more consistent so we can move to the third phase of the transformation to FY '27, which we like to refer to as acceleration. I hope that helps, Elizabeth.

Yes, that definitely does. And just as a follow-up, I understand that really the focus right now is around company-specific execution. But I did want to ask just about Macrel. It felt like exiting the year, we had a bit more clarity post-election, some optimism but certainly like the recent headlines around trade and tariffs that heightened some of the uncertainty. So, what are you guys hearing in terms of your conversations with customers or seeing in terms of deal cycles? And how should we think about the prioritization of spend around customer experience?

Sure. So, I think the macro environment is a bit unpredictable and a bit choppy right at the moment. A couple of answers from our perspective, tariffs don't really affect us directly. So that's not the issue. Will customers look to be more prudent on their spending? Yes, that's possible. I think that people are a little bit of wait and see. There's a bit of a correction that's going on in the market right now. We've got a pristine balance sheet. We've taken the cost actions and we've given you guidance that we think is very prudent. And we think that we can pretty much handle whatever the macro throws at us within reason. I mean if there is some gigantic shock to the market, that affects everybody. But I think we've positioned how we've laid out this year, and this is a transitional year to think about that. Customers are always going to be -- when there's a bit of uncertainty, but we're seeing a good pipeline. I mean, that's -- we're not seeing any huge issues there. Our issues, and there's plenty of businesses is not a gigantic company. I mean it's just under $1 billion. Our issue is making ourselves much more consistent, reliable and predictable. I think there's business to be won. I think it's both in our core as we reenergize and grow that. And in the services space, we have plenty of demand. But we have to harden that to make sure that's consistently delivered. Yes, if there are going to be some chop in the macro, I think we've got the balance sheet at the right place. I think we've got our costs at the right place. And we set our guidance prudently so that we can move through this. But we're not seeing anything major at this point, but we'll watch it. We'll watch it. Thanks, Elizabeth.

Thank you.

Thank you. Next question today is coming from Patrick Walravens from Citizens JMP. Your line is now live.

Oh, great. Thank you and congratulations on the start, Rory. Can you address federal, like how big is the federal government for Sprinklr? If I just look on USA spending, it looks like defense, commerce and asset health and human services all seem to use Sprinklr in some place. And we're hearing from salespeople and some other companies, they can't even get their phone calls and e-mails return for different parts of the federal government right now given everything that's going on. So, I'm just wondering if you can address what you're saying, that would be great.

Yes. What I would comment on that is it's very small for our business, Pat. It's not material in any way. Very small. You're right. We do have toeholds in a couple of those spots. But because we're at the beginning of like a Fed ramp approval, that limits how far we can do. So, you shouldn't factor that in any way as a negative or positive for us. You are not exposed on the federal side. While we have a few relatively small implementations in the millions of dollars? It's not material.

That's great. And then as a follow-up, can I ask, you had a very specific sort of algorithm and plans coming into this role. Has anything been harder than you expected?

No. I mean, what you see in transformations, it's pretty consistent. I mean, what's great about this company is the technology is quite good. The platforms, I think, is highly scalable. The AI is real, and it's truly infused. It's been in place for eight years. I think that's kind of differentiated. I think the market is moving towards unified customer experiences. We see this in the demand of our CCaaS solutions, where it knits together with our digital and our social activities. These are big brands, and they see this as a truly differentiated experience. If we get this right, it could be kind of a game-changing play in that space. I think we're -- when you look at this business, the maturity of some of the execution and processes feels like a startup, okay? And it's a compliment to the team that they grew it so big with such amazing customers. but we have to clean up those processes, get consistent implementation so that it's done, get the documentation properly done, get the coverage model properly done. These are basic fixable things. I've not come across anything catastrophic. Part of the reason we have some customer renewal pressure and satisfaction issue is because we've neglected some of the relationships or we didn't do some of the innovations or the implementation wasn't as clean as others. But then on the other hand, when we get it right, the customer grows and grows and grows. So, what we have to do is do it in a consistent way. This is that kind of -- we've done the first part, the business optimization, that's Phase I. All those five things I listed in the prepared remarks are done, and they're in the books now. Now we're moving to the second phase,…

All right, great. Thank you, Rory.

Thank you. Next question is coming from Jackson Ader from KeyBanc Capital Markets. Your line is now live.

Great. Good morning, everybody. Thanks for taking our questions. The first one is just on the bookings activity in the fourth quarter. Were there any deals that maybe slipped or duration adjustments that you weren't expecting? Or were there any of the changes that you've been looking to implement, Rory, that might have impacted some of the performance there in that fourth quarter?

So, Jackson, I think on the fourth quarter, the activity was stronger than expected. So, I thought that was a good sign we saw a good mix of small and large deals, expansion and new logos, and we saw them both in core and service. So, I thought it was a good finish to the year. Nothing about that was an issue. As you go through changing the whole go-to-market, we have to watch that in 1Q and 2Q. That's obviously the period when you have the most change. And we're -- I'm spending a truly disproportional amount of time in the field on the road in all three geographies. My frequent flyer miles are adding up because we need to manage that and work that during that transitional period as we improve our execution. So no, I didn't see anything about fourth quarter it was a bit better than expected. But it really matters where we get to as we move through the next four quarters.

Okay. And then, I guess, relatedly, can you give us a sense for the pipeline of either large renewals or large deals in terms of like when they're coming up for renewal and the seasonality? I don't want to lead the witness too much, but like if it's a big first half renewal cycle, right? When you're implementing, as you said, when all these changes could potentially -- that are going into effect, you prefer kind of a later renewal cycle this year. But I'm curious what the seasonality would look like.

The seasonality has been documented on this one. We do hundreds of millions of renewals each year. We're moving more and more to three-year deals, but we have still a lot of one-year deals. So, you see that. Our largest amount of renewals are in the fourth quarter and our second largest is in the second quarter. And so, its slightest in third quarter, but it doesn't look any different this year than each year. But the total number may be a little bit lower this year because of more three-year deals. But we're trying to move more and more with the go-to-market team to the three-year structure but that's a historical trend looks very similar. We've changed our incentives this year for the sales team and make sure that they are properly rewarded for renewals and renewals on time.

Okay. Thank you.

Thank you. In the interest of time, our final question today is coming from Parker Lane from Stifel. Your line is now live.

Hi. Thanks, guys, for taking the question here. Rory, there's a lot of talk about go-to-market changes and what you're doing from an implementation standpoint, but you also referenced technical debt and removing some of that from the platform. Just wondering if there's any particular area of the platform that you think that technical debt is most pronounced. And what's the ideal time line for resolving some of those issues and getting the platform on better footing in your eyes?

Yes, -- that's a great question, Parker. And that was one of the five areas. We spent a lot of time on over the past three, four months, working with Amitabh, the CTO and the team. We built the road maps for all of towers in the platform. We've been adding talent to the team. We have roadmaps in place for this year. We have our metrics in place. We've improved our documentation. We're improving our test coverage we're improving our PLM, or product life cycle and our new product introduction processes. You're going to see improvement as we go through the year. Some of the changes will take one -- sort of two quarters, some will take the whole year. You'll see improved delivery and execution as we move through this FY '26 transitional year. You'll see the focus in the core being around innovation. We're going to have a new product introduction with a very interesting innovation around customer feedback management this year that's going to be very, I think, disruptive in the marketplace, really leveraging AI. I think you're going to see us continue to focus to add value in that space. In the space of CCaaS and service, it's really about completing the work around telephony, so that we have expansive technology telephony options, both with partners and with our own Voice Connect Solution. We have a large number of customers and agents that are already on our solution, and we continue and expect to double that and triple that as we move forward. I think there's work that you're going to see throughout the year on workforce management, which is, I think, will be in a very good space as we get through our July and November releases. I think there's work on reporting on that side. I think we made an architectural decision that wasn't right. We created point-to-point reporting, which causes you almost at right report. I mean it seems like 1990 kind of a solution. We have to create more of a data lake and then a kind of a tableau type solution on top of that so that people can easily do the point and click, we'll fix that this year. There's work around security and reliability that we'll build out throughout the year to make sure that we're robust and that we're highly scalable. But you should watch that. It will be each quarter and as it will improve throughout this year and into next year. And we're making sure that we're not going crazy on the pipeline. We're not going to take every deal we can take. I mean, we want to make sure we harden this before we add too many new major implementation. We're still taking good deals. We're still adding new winners, but we've got to do it in an orderly fashion as we clean all of this debt up. It's this year. FY '26 is the main focus.

Appreciate all the feedback, Rory.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Well, I want to thank everyone for joining the call today. I appreciate everyone across the Sprinklr team around the globe and the hard work that they're doing, they're focused on creating value for our customers. Hey, this is never a straight line. We have -- there will always be new challenges that emerge, but I believe that we've taken the right initial actions. We're positioning ourselves to improve. We know what to improve. We've improved the bottom line. We've now created the capacity to invest to move forward. And then we'll look at FY '26 as a transitional year. We should see the business begin to bend, and we want to improve our growth rate as we move through the year and into next year. It all comes down to better execution. And when we get this right, our customers truly value the solutions we create and the AI solution we've built here on this amazing platform. So, give us time. Let us focus on our execution. We're going to get there day by day, quarter by quarter and throughout this year. We know what to do and we're going to work on it. Thank you for everyone's time today. Have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.