Sprinklr, Inc. ((CXM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Sprinklr, Inc. Earnings Call Reflects Balanced Sentiment Amid Transition
The recent earnings call for Sprinklr, Inc. painted a picture of a company in transition, with a mix of positive developments and ongoing challenges. While there is notable progress in areas such as revenue growth, AI product uptake, and leadership changes, the company continues to grapple with churn and renewal pressures, technical debt issues, and slower growth guidance. The sentiment expressed during the call was balanced, highlighting both promising advancements and significant areas needing improvement.
Revenue Growth
Sprinklr reported an 8% year-over-year increase in total revenue for the second quarter, reaching $212 million. Subscription revenue grew by 6% year over year, amounting to $188.5 million. This growth reflects the company’s efforts to expand its market presence and enhance its subscription offerings.
Non-GAAP Operating Income
The company achieved a record $38.2 million in non-GAAP operating income, resulting in an 18% non-GAAP operating margin for the quarter. This milestone underscores Sprinklr’s ability to manage its operations efficiently and maintain profitability.
Project BearHug Success
Project BearHug has positively impacted customer relations, with detailed engagements involving nearly half of the top 700 customers, who collectively represent over 80% of total revenue. This initiative is crucial in strengthening customer loyalty and satisfaction.
New Leadership Hires
Sprinklr has bolstered its leadership team by hiring Bit Rambusch as Head of Global Services and Support and Scott Millar as Chief Revenue Officer. These experienced leaders are expected to drive growth and enhance the company’s strategic direction.
AI and Product Innovation
Investments in AI functionality across marketing, insights, and CCaaS products are showing strong uptake. New AI-based product enhancements are driving customer satisfaction, positioning Sprinklr as a leader in innovative technology solutions.
Increase in Large Customers
As of July 31, Sprinklr has 149 customers generating at least $1 million in annual subscription revenue, an increase of three from the previous quarter. This growth in large customers highlights the company’s success in attracting and retaining high-value clients.
Churn and Renewal Pressure
The company continues to face scrutiny of enterprise spending and inconsistent operational execution, which are pressuring renewal cycles. Customer churn remains a significant focus, indicating areas where Sprinklr needs to improve its retention strategies.
Technical Debt Challenges
Lingering technical debt from past years continues to impact operational execution and customer satisfaction. Addressing these challenges is essential for Sprinklr to enhance its service delivery and customer experience.
Guidance for Slower Growth
Sprinklr’s guidance for the third quarter indicates a total revenue range of $209 million to $210 million, representing only a 4% growth year over year. Subscription revenue is expected to grow by 3% year over year, reflecting a cautious outlook amid market uncertainties.
Gross Margin Pressure
Higher data and hosting costs due to increased AI product consumption are expected to reduce gross margins by 2-3 points in the second half of the year. This pressure on margins highlights the cost implications of expanding AI capabilities.
CFO Departure
The departure of CFO Manish Sarin adds to the leadership transition challenges facing Sprinklr. This change in leadership may impact the company’s strategic initiatives and financial management in the short term.
Forward-Looking Guidance
Sprinklr has issued guidance for the upcoming fiscal periods, projecting total revenue for the third quarter to be between $209 million and $210 million, with subscription revenue anticipated between $186 million and $187 million. Professional services revenue is expected to grow by 15% year over year. For the full fiscal year 2026, Sprinklr raised its guidance for subscription revenue to between $746 million and $748 million, indicating a 4% year-over-year increase. The company forecasts a non-GAAP operating income of $131 million to $133 million for the full year, implying a 16% non-GAAP operating margin.
In conclusion, Sprinklr’s earnings call reflects a balanced sentiment, with both promising advancements and significant areas needing improvement. While the company is making strides in revenue growth and AI innovation, challenges such as churn, technical debt, and leadership transitions remain. Investors and stakeholders will be closely monitoring how Sprinklr navigates these challenges and capitalizes on its growth opportunities.