Sprinklr’s Earnings Call: Growth Amidst Challenges

Sprinklr, Inc. ((CXM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Sprinklr, Inc.’s recent earnings call painted a picture of both optimism and caution. The company reported positive revenue growth and an increase in high-value customers, yet it also faces significant challenges such as elevated churn and increased operational costs. The leadership’s focus on enhancing consistency and execution for FY ’26 indicates a period of transition and restructuring.

Revenue Growth in Q4

Sprinklr reported a 4% year-over-year increase in total revenue for the fourth quarter, reaching $202.5 million. Subscription revenue also saw a 3% rise, totaling $182.1 million. This growth reflects the company’s ability to expand its market presence despite challenging conditions.

Improved Non-GAAP Operating Income

The company achieved a non-GAAP operating income of $25.9 million, translating to a 13% non-GAAP operating margin for the quarter. This improvement highlights Sprinklr’s efforts in enhancing operational efficiency and cost management.

Increase in Million-Dollar Customers

By the end of FY ’25, Sprinklr had 149 customers generating at least $1 million in annual subscription revenue, marking an 18% year-over-year growth. This increase underscores the company’s success in securing and maintaining high-value customer relationships.

Strategic Leadership Appointments

Sprinklr announced key leadership changes, including the appointment of Joy Corso as Chief Administrative Officer and the addition of Jan Hauser and Stephen Ward to the Board of Directors. These strategic appointments are expected to strengthen the company’s leadership team and drive future growth.

Successful Large Customer Deals

The company closed a significant eight-figure multi-year renewal with a major technology firm, which not only reduced service costs by millions but also improved resolution speed and customer satisfaction. This deal exemplifies Sprinklr’s ability to deliver value to its clients.

Professional Services Gross Margin

Sprinklr’s professional services gross margin was break-even, which the company acknowledges as suboptimal. Efforts are underway to address this issue and improve profitability in this segment.

Increased Data and Hosting Costs

Higher data and hosting costs have impacted subscription gross margins by approximately 400 basis points for FY ’26. This challenge highlights the need for Sprinklr to manage its operational expenses more effectively.

Churn and Customer Renewal Pressure

The subscription revenue-based net dollar expansion rate stood at 104%, reflecting the impact of elevated churn during FY ’25. Sprinklr is actively working to mitigate churn and enhance customer retention.

Workforce Reduction

As part of its restructuring efforts, Sprinklr reduced its global workforce by approximately 15%. This move aims to optimize and rebalance the company’s expense base for improved financial performance.

Challenges with Inconsistent Implementations

The company faced issues with inconsistent implementations, which put pressure on customer renewals and satisfaction. Sprinklr is addressing these challenges to ensure better customer experiences and retention.

Forward-Looking Guidance

Looking ahead, Sprinklr provided guidance for the first fiscal quarter and full fiscal year 2026. The company anticipates total revenue growth of 3% year-over-year for both periods, with subscription revenue projected to reach $741 million to $743 million for the full year. Sprinklr aims for a non-GAAP operating income of $129 million to $131 million, alongside a 16% non-GAAP operating margin at the midpoint. Additionally, the company plans to achieve a 15% free cash flow margin, translating to approximately $120 million in free cash flow for the year.

In conclusion, Sprinklr’s earnings call highlighted a mixed sentiment with both achievements and challenges. While the company is on a growth trajectory with increased revenue and high-value customers, it must navigate the hurdles of churn, operational costs, and restructuring. The forward-looking guidance suggests a cautious yet optimistic outlook for FY ’26, with a focus on enhancing financial performance and customer satisfaction.