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Sprinklr(CXM) - 2026 Q2 - Earnings Call Transcript
2025-09-03 13:32
Financial Data and Key Metrics Changes - Total revenue for Q2 FY26 grew 8% year over year to $212 million, while subscription revenue increased 6% year over year to $188.5 million [5][20] - Non-GAAP operating income reached a record $38.2 million, resulting in an 18% non-GAAP operating margin for the quarter [5][22] - Free cash flow generated was $29.8 million, with a total of $123.5 million in the first half of FY26, excluding restructuring payments [22][29] Business Line Data and Key Metrics Changes - Professional services revenue was $23.6 million, driven by large CCaaS implementations [20] - Subscription revenue-based net dollar expansion rate was 102%, reflecting ongoing elevated customer churn and downsell activity [20][21] - The number of customers generating at least $1 million in annual subscription revenue increased to 149, up three from the previous quarter [21][18] Market Data and Key Metrics Changes - Total remaining performance obligations (RPO) was $923.8 million, up 4% year over year, while current RPO (CRPO) was $597.1 million, up 7% year over year [24] - Calculated billings for Q2 were $200.6 million, an increase of 4% year over year [23] Company Strategy and Development Direction - The company is in a transitional year, focusing on business optimization and entering the second phase of transformation, which includes strategic investments in AI and customer engagement [6][7] - Project BearHug aims to minimize churn by deeply engaging with top customers, representing over 80% of total revenue [11][13] - The company is enhancing its product offerings, including AI functionality and improved customer feedback management [16][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in renewals and customer satisfaction but expressed optimism about improvements in the second half of FY26 and into FY27 [32][34] - The focus remains on improving execution, customer engagement, and addressing past implementation issues to drive growth [10][18] - Management expects total revenue for Q3 to be in the range of $209 million to $210 million, reflecting a 4% growth year over year at the midpoint [24][26] Other Important Information - The company has a healthy balance sheet with $474 million in cash and marketable securities and no debt outstanding [23] - The CFO, Manish Sarin, will be leaving the company, and the CEO will assume interim responsibilities while a search for a new CFO is conducted [5][29] Q&A Session Summary Question: When will the company see a bend in its transformation journey? - Management indicated that improvements in renewals, customer satisfaction, and growth metrics are expected in the second half of FY26 into FY27 [31][32] Question: Can you provide an example of a significant churn situation? - Management explained that renewal pressure has been ongoing for several years, with efforts focused on improving customer engagement and execution to mitigate churn [38][39] Question: What are the drivers for unlocking demand in the CCaaS business? - Management highlighted the importance of successful large implementations and enhancing customer experience as key drivers for growth in the CCaaS segment [49][51] Question: How is the hybrid pricing model impacting revenue and profitability? - Management discussed the implementation of a simplified pricing model aimed at increasing customer satisfaction and driving subscription revenue [56][58] Question: What is the company's perspective on AI's impact on customer understanding and adoption? - Management believes that AI is a critical technology and emphasized the importance of integrating AI into workflows to unlock value for customers [77][79]