Sprinklr - Earnings Call - Q4 2025

Executive Summary

• Q4 FY2025 beat consensus: revenue $202.54M vs $200.59M*, and non-GAAP diluted EPS $0.10 vs $0.071*, driven by several large customer deals across Core and Sprinklr Service.
• GAAP EPS spiked to $0.37 on a discrete, non-cash $87.1M deferred tax benefit from releasing U.S. valuation allowances; underlying non-GAAP margin remained solid at 13%.
• FY2026 guidance initiated: ~3% y/y revenue growth, non-GAAP operating margin ~16%, and free cash flow ~$120M; subscription gross margin headwind (~400 bps) from higher data/hosting costs (e.g., X/Twitter license) is baked in.
• Transformation catalysts: 15% workforce reduction, go-to-market “pod” coverage model, implementation rigor, and product roadmaps (telephony, WFM, reporting) to stabilize execution and reaccelerate growth toward Rule of 40 targets.

What Went Well and What Went Wrong

• What Went Well

  • “We are encouraged by our Q4 results driven by several large customer deals across both Core and Sprinklr Service” and continued progress on margin discipline; non-GAAP operating margin 13%.
  • Landmark customer wins/expansions: an 8-figure multiyear renewal at a global technology company and new wins with Delta, Ford, MSCI, Live Nation, Ralph Lauren.
  • KPI resilience: $1M+ customers rose 18% y/y to 149; calculated billings +10% y/y to $298.6M; cRPO +4% y/y to $612.5M.

• What Went Wrong

  • Subscription gross margin under pressure from data/hosting costs; FY2026 guide embeds ~400 bps headwind; professional services margins at breakeven near term.
  • Net dollar expansion rate cooled to 104% (lagging effect of FY2025 churn/downsells), with management highlighting need to fix implementation consistency and renewals discipline.
  • Free cash flow moderated in Q4 to $1.5M as mix and timing shifted; GAAP operating income declined y/y for Q4 despite revenue growth.

Transcript

Operator (participant)

Greetings, and welcome to the Sprinklr Q4 fiscal year 2025 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation. If you'd like to ask a question, you may press star one to be placed into question queue at any time, and we ask that you please ask one question and one follow-up, then return to the queue. 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.

Eric Scro (VP of Finance)

Thank you, Operator, and welcome everyone to Sprinklr's Q4 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 8K 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.

Rory Read (President and CEO)

Thank you, Eric, and hello everyone. It's nice to be with you today. I'll start by providing a few Q4 financial highlights before covering some of my thoughts on the progress we are making in transforming our business. Q4 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 FY2026 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 land and develop our ideal customer set and enhancing our product innovation roadmaps. We have also strengthened our leadership team and board with accomplished leaders who have deep expertise and a strong track record of driving growth. In early January, we announced the appointment of Joy Corso as our Chief Administrative Officer. Joy's extensive experience in the B2B tech industry, as well as her focus on delivering operational efficiencies, business transformation, and scale, will be critical to supporting our next phase.

We also announced the addition of Jan Hauser and Steve Ward to our board of directors. Jan will assume the chair of our audit committee, and Steve brings a wealth of technology and enterprise experience to the board and as a member of our compensation committee. Each of these executives have technology and SaaS experience with a long history of demonstrating results in building growth businesses at scale. I'd also like to thank Ed Gillis, who is stepping down from the board in June, for his service on the board and dedication to Sprinklr.

As we move into the next phase of our strategic plan, we are now taking critical steps designed to transform our business for durable growth and improve profitability. On our three-queue call in December, we noted that you will first see an improvement in our operating margin, given that this is in our direct control. This action would also create the capacity to reinvest, add critical talent, and refocus on areas to drive better performance. On February 6, we filed an 8K with the SEC, which detailed the decisive actions we took to better optimize and rebalance our expense base.

This has included an approximate 15% reduction in our workforce. While changes like these are hard to make, it is essential to allocate our investments, talents, and resources to better serve our customers and partners. Most actions associated with this workforce reduction are now complete, with a few smaller areas to be completed in two queues based on regulatory requirements. Manish will provide further financial details on this in his remarks in just a few minutes. Sprinklr intends to deliver a portion of our cost savings to improve operating margins this year. We will also leverage some of this gained efficiency to hire and invest in prioritized areas.

We will strategically add talent across the globe in such areas as go-to-market sales pods, customer implementations, AI, core product skills, and service R&D skills, which these may take one to three quarters to execute. Additionally, our new go-to-market coverage model was implemented at the beginning of our fiscal year in February and launched in detail during our sales kickoff three weeks ago. Territories are assigned, compensation plans are rolled out, and coverage ratios are set. This structure will cultivate deeper customer relationships within the C-suite. Our initial focus will be on our top 400 customers.

We believe these efforts will enable us to deliver more value through year-round engagement and deeper account planning. At the end of FY25, we had 149 customers generating at least $1 million in annual subscription revenue, which grew by 18% year over year. Furthermore, we had an impressive group of customers generating $10-$20 million in subscription revenue over the last 12 months. We have built sophisticated products that address complex needs of the world's largest companies. It's clear that when we get it right and execute effectively and consistently, our customers value these solutions and the expertise we provide.

We are most successful in the enterprise segment, with the Global 2000 to Global 5000 being our sweet spot. This will now be the primary focus of our go-to-market and marketing efforts, driven by the recent changes and initiatives I have mentioned previously. Now, on the R&D front, we are maturing our operational rigor to continue to deliver innovation in a more consistent, reliable manner. Our FY2026 technology and product innovation roadmaps are focused on improving product delivery, functionality, security, and reliability of our broader platform.

Additionally, we are still in early phases of revamping our pricing and packaging, but our focus on solution selling with aligned incentives for multi-year deals and emphasis on the C-suite. We believe the combination of the actions we have taken, including: one, establishing a clear ambidextrous strategy; two, implementing a well-established business management system to track and drive execution; three, optimizing a more efficient cost structure, allowing for sustained and improved operating margin and strategic investments; four, realigning our go-to-market coverage model; and five, strengthening our product delivery roadmaps.

It will be a significant step forward in Sprinklr's transformation plan. Now, I'd like to shift gears a little bit and talk about our customers, one of our most important and powerful assets here at Sprinklr. I have met with approximately 100 customers and partners over the past three months, and while we have experienced some inconsistent implementations leading to pressure on customer renewals and satisfaction, we are actively addressing this. During the Q4, we continue to land and expand with many leading brands, companies such as Delta Airlines, Ford Motor Company, MSCI, Live Nation, and Ralph Lauren, to name a few.

While we've had several large customer deals across Sprinklr Core and Service this quarter, I'd like to highlight two that demonstrate what we are capable of when we get it right. We're excited about the work we are doing with one of the world's premier specialty coffee retailers. Through deep discovery, relationship building, and consistent tech validation, our platform's core offerings, Sprinklr Social and Sprinklr Insights, are already providing value to their international customer experience.

We are delivering a scalable, unified solution that meets their global business needs to proactively monitor their brand, protect brand reputation, and through social publishing and engagement effort, they are leveraging customer insights to inform and optimize their marketing performance. This is the kind of transformation we drive, connecting brands with their customers in a smarter, more impactful way. Our second story is one of the largest technology companies in the world. We closed an eight-figure multi-year renewal with them this quarter, which is a powerful testament to our long-standing partnership and relentless focus on innovation.

Sprinklr has become mission-critical for them to deliver seamless, scalable, and highly personalized customer service. Our platform powers their shift from costly channels like voice and email to efficient AI-driven support on digital channels, accelerating their goal of 50% plus call deflection by 2027. With Sprinklr, the company has already reduced their service costs by millions of dollars while improving resolution speed and customer satisfaction. They continue to expand their investment with Sprinklr, leveraging our full suite across marketing, social, and insights to drive engagement and operational efficiency at scale.

We're working closely with them to push the boundaries of AI innovation, automation, and digital transformation, ensuring that they don't just stay ahead of the evolving landscape, but in fact, they define it. In closing, while there is plenty of work to do and this transformation will take time, we are making real and tangible progress with swift, clear actions. Looking at FY2026 as a transitional year, we intend to stabilize the company and burn in our execution over the first two quarters, which we hope will drive better results throughout the year.

It's never a perfectly straight line, and there will be challenges along the way, but I continue to be optimistic of the opportunity in front of us. We have clarity about the way forward and what we have to fix, and we will get there step by step, day by day, quarter by quarter. The world is moving from transactional customer engagement to unified 360-degree customer experiences, and we believe our vision to define the world's ability to make every customer experience extraordinary positions us well to capitalize on this opportunity. Sprinklr is the platform where it all comes together for customer activities around discovery, commerce, support, and service.

We will leverage our AI-based unified platform, execute an ambidextrous approach to re-energize and grow our Sprinklr core while we harden and expand Sprinklr Service in our march on the Rule of 40. Thank you again to the Sprinklr team members around the world who are passionate about our future and creating powerful value for our customers and embracing this transformational journey with urgency and commitment. Now, I'd like to turn the call over to Manish to go through the numbers in a bit more detail. Manish?

Manish Sarin (CFO)

Thank you, Rory, and good morning, everyone. For the Q4, 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 beat the guidance range provided for the quarter. Our subscription revenue-based net dollar expansion rate in the Q4 was 104%. Given the trailing nature of this calculation, this quarter's metric reflects the full impact of elevated journey experience during 2025.

At the end of the Q4, 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 Q4, on a non-GAAP basis, our subscription gross margin was 79%, and professional services gross margin was breakeven, 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 FY2025, based on recent and forecasted profitability in our Sprinklr US legal entity, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets are realizable, and we have therefore released the valuation allowance on our U.S. federal and state deferred tax assets. This valuation release resulted in a discrete U.S. GAAP non-cash deferred tax benefit of approximately $87 million.

We still have approximately $335 million in U.S. NOLs remaining for FY2026 and beyond. Given this, we do not expect a material near-term impact on cash taxes paid. With respect to free cash flow, we generated $1.5 million during the Q4. This free cash flow generation contributed to our healthy balance sheet, which now stands at $483.5 million in cash and marketable securities with no debt outstanding. Calculated billings for the Q4 were $298.6 million, an increase of 10% year over year.

As of January 31, 2025, total remaining performance obligations, or RPO, which represents revenue from committed customer contracts that has not yet been recognized, was $987.7 million, up 2% compared to the same period last year. Current RPO, or CRPO, was $612.5 million, up 4% year over year. Turning to a quick summary of financial results for the full year FY25, total revenue was $796.4 million, up 9% year over year, with subscription revenue of $717.9 million, up 7% versus the prior year. Calculated billings for the full year were $831.1 million, up 6% year over year.

We reported non-GAAP operating income for the full year of $84.8 million, equating to a non-GAAP net income per diluted share of $0.35 and a non-GAAP operating margin of 11%. In terms of free cash flow, we generated $59.2 million in free cash flow for the year, equating to a free cash flow margin of 7%. Before moving to guidance, I would like to provide more information on the restructuring we recently concluded as part of our overall efficiency efforts. We recently completed a company-wide internal review across product areas, regions, and support functions.

We concluded that significant structural changes were necessary to better execute our ambidextrous strategy and our objective to get to the Rule of 40. As a result of this review, and as we disclosed in the 8-K filed with the SEC on February 6, 2025, we reduced our global workforce by approximately 15%. These reductions impacted teams and functions across every department. This restructuring is intended to help position the company for long-term success by realigning employee costs with the current business and freeing up capital for incremental investments.

We expect that these incremental investments will include hiring in key strategic areas that best align with our growth objectives, notably additional go-to-market and R&D resources to both grow the core products and to harden our service product. Expenses related to this action are expected to be approximately $22 million. We estimate $16 million of these expenses will be booked as a restructuring charge here in Q1 FY2026. The balance will be booked in Q2. These restructuring charges are not included in the non-GAAP guidance figures we provide here and going forward for FY2026.

Now, moving to our official guidance for Q1, we expect total revenue to be in the range of $201.5 million-$202.5 million, representing 3% growth year over year at the midpoint. Within this, we expect subscription revenue to be in the range of $182 million-$183 million, representing 3% growth year over year at the midpoint. The Q1 guide implies $19.5 million in professional services revenue. As we have signaled on prior earnings calls, we will continue to invest in our professional services delivery capabilities and expect gross margins here to be approximately breakeven in Q1.

We expect non-GAAP operating income to be in the range of $31.5 million-$32.5 million, resulting in non-GAAP net income per diluted share of approximately $0.10, assuming 269 million diluted weighted average shares outstanding. This equates to a 16% non-GAAP operating margin at the midpoint. Note that we are now applying a 30% non-GAAP tax rate for computation of the EPS number driven by the release of the U.S. valuation allowance. However, it should be noted that the actual cash taxes paid are expected to be substantially lower given the NOL position described earlier.

For full year FY2026, we expect subscription revenue to be in the range of $741 million-$743 million, representing 3% growth year over year at the midpoint. We expect total revenue to be in the range of $821.5 million-$823.5 million, representing 3% growth year over year at the midpoint. These guidance ranges imply a FY2026 professional services revenue of $80.5 million. As we mentioned on prior earnings calls, we are experiencing higher data and hosting costs and expect that to continue into FY2026.

Our initial estimate is these incremental costs will negatively impact subscription gross margins by approximately 400 basis points or 4% for the full year FY26 and are baked into the guidance ranges provided. Our professional services gross margins are expected to be breakeven for the full year FY26. With respect to billings, we estimate total billings of approximately $863 million here in FY26, which would imply a billings growth rate of 4% year over year. For modeling purposes, we anticipate a billing seasonality pattern in FY26 similar to that of FY25.

For the full year FY26, we estimate our non-GAAP operating income to be in the range of $129 million-$131 million, equating to non-GAAP net income per diluted share of $0.38-$0.39, assuming 277 million diluted weighted average shares outstanding. This implies a 16% non-GAAP operating margin at the midpoint. When modeling the spread of non-GAAP operating income throughout the year, you can assume a midpoint of $32 million for both Q1 and Q2, and then $33 million each for Q3 and Q4.

As part of the restructuring we just announced, we will see a lower OPEX level in the first half of the year, but our investments will begin to ramp up in the second half. In terms of the operating expense profile, we expect both R&D and G&A to be approximately 10% of revenue, with the remainder being for sales and marketing. In deriving the net income per share for modeling purposes, we estimate $16 million in other income for the full year, with $4 million of that to be earned here in Q1. This other income line primarily consists of interest income.

Furthermore, a $39 million total non-GAAP tax provision for the full year FY26 needs to be added to the non-GAAP operating income ranges provided. We estimate a non-GAAP tax provision of $9.6 million here in Q1. Due to the recent release of the U.S. valuation allowance, we are now applying a 30% tax rate on our non-GAAP operating income. As noted previously, given our NOLs, we estimate our cash taxes paid to be significantly less than the non-GAAP tax provision.

We also expect to be GAAP net income positive for the full year FY26, consistent with our performance over the last two years. Regarding free cash flow, we believe we can achieve approximately a 15% free cash flow margin for FY26, which would equate to a free cash flow generation of approximately $120 million for the full year.

This excludes the cash outflow as part of the restructuring exercise announced earlier this year. This metric would be a 100% increase in free cash flow generation versus FY25. Note that we will not be providing a quarterly free cash flow guidance metric, but will update this annual metric throughout the year as needed. Lastly, I would like to thank all our employees for their dedication and passion for what we are building at Sprinklr, and I'm grateful for the confidence that our customers have placed in us. With that, let's open it up for questions. Operator.

Operator (participant)

Thank you. Now the conducting of question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. As a reminder, please ask one question, one follow-up, then return to the queue. As a reminder, that's star one to be placed into question queue. Please ask one question, one follow-up, then return to the queue. Our first question is coming from Pinjalim Bora from JPMorgan. Your line is now live.

Pinjalim Bora (Executive Director and Senior Equity Research Analyst)

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 are driving the cost efficiency. I'm trying to understand how we should think about that cost efficiency versus growth. Is that largely low-hanging fruit, or is there an element that it could actually be coming at an expense of some growth?

Yeah. I hear 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. We did an analytic and looked at the business end-to-end. That is how we began to redo the go-to-market.

That is how we restructured into a pod coverage model. We did work on the roadmaps for this year to make sure the right innovations were prioritized first. 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. We understood that, and then we optimized the business structure to capture that and to prioritize the investments in product areas. 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.

I want to emphasize we did that with respect and care for everyone that was affected. We spoke to every individual directly. What that allows us then to do is to flow some of that return to the bottom line. Our business should be returning in that 15%-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.

What we did was freed up additional dollars in this action that we're going to invest over the next one to three quarters in additional talent, additional coverage to improve our product innovation, to accelerate activities, to improve our delivery and implementation. Sprinklr has to become much more consistent with the way we deliver to our customers and how we implement our solutions, the way we deliver our innovations, and how our customers receive them, and even how we communicate with you and our investors. We need to make sure that we're executing in a very consistent way. Growth and the rule of 40 is an important factor.

As you look, you'll see us work through this FY26 as a transitional year to position us to burn in our execution, improve our consistency, deliver on our better implementations, our better innovations, and then to allow us to bend the business. It's all about driving durable long-term growth. We freed up cash so that we can make those investments and expenses throughout the year. We have degrees of freedom to capture that as we uncover those opportunities and we see needs of the customers. Remember, when we get it right with our customers, as I mentioned in a couple of the examples in the prepared remarks, the solution is deeply valued.

We've shot ourselves in the foot over the past several years with inconsistent execution, inconsistent delivery, inconsistent implementation. We are going to use FY26 as the year to transition and to create very much more predictability and consistent implementation. That will then bend the business and return to growth. To get to a rule of 40 into the 30s, we have to return to a better growth level. We wanted to be prudent with our guidance. There is a macro environment that is a bit choppy right now. We have a pristine balance sheet. Let's make sure that we execute these changes over the first two quarters and then position ourselves to bend throughout the year.

Again, to answer your question, no. We had definitely focused on taking the actions that, sure, improve the bottom line. That's the low-hanging fruit that's easier to do, but it was with the intent to free up the ability to invest and to create that durable, that bend in execution, as well as investment to capture that longer-term durable growth.

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?

Manish Sarin (CFO)

Yeah. We don't break it out, but you'd remember in the Q3 call, we spoke about renewing the Twitter license, and I'd also mentioned that came with a commensurate increase. Data costs across every vendor are going up only because you're using these data feeds for training AI models and such.

I think every data vendor has realized that there is value in the data that they provide. We do not really break down the hosting side either, but you will also remember we have said as we have spun up new data centers, there is an initial setup cost to each one of these. It is close to $2 million per pop. As we see more growth in Sprinklr Service, we are obviously going ahead and investing in the hosting capabilities. That all in the aggregate is what is impacting gross margins here in the short term.

Pinjalim Bora (Executive Director and Senior Equity Research Analyst)

Got it. Thank you very much.

Operator (participant)

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

Arjun Bhatia (Software Research Analyst)

Perfect. Thank you so much. Rory, I want 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 install base and some of the changes that you can make there. How are you thinking about focusing go-to-market resources and new customer acquisition versus the opportunity that exists within your existing customers? Is there one that's a bigger priority? I'm curious how you're thinking about that. Thank you.

Rory Read (President and CEO)

Sure. I think the way to think about that in the tactical timeframe 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. To have a group of those customers in the $10 million, $20 million, $20 million-plus purchasing range is, I think, extremely unusual. We have an opportunity to grow those customers, and we need to make sure that renewals improve. It is really about creating a go-to-market that nurtures and keeps those relationships 365 degrees and moves up into the C level.

We are absolutely moving into more mission-critical capabilities. As this convergence of the customer experience application evolves, the platform play of unifying the social activities across all vectors of engagement, discovery, commerce, support, service. That is why the CCaaS business is so important. Using AI to knit that experience and to create that value, that is going to grow. In the tactical timeframe, protect and stabilize the base, expand on that base, grow that 149 into larger accounts. You always want to feed the engine. Net new logos are super important. Let's not go to the bottom and go to mom-and-pop stores and do $12,000 or $5,000 deals. 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 plays, 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.

If we execute FY2026, the transitional year, to improve the consistency of our implementation and our delivery, we will see improved growth. That's 100%. 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 remark.

I mean, that's a huge coffee player around the world. To get in there and to get in in a significant way, I think we can expand that four- or five-fold over the next three or four years. We have to continue to focus on the base and get that solidified and then keep feeding the engine with net new. I'd slant it 70/30 toward the base right now. Perfect. That's great to hear.

Arjun Bhatia (Software Research Analyst)

Maybe just following up on that piece a little bit, 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? As you go back to these customers where maybe you've had poorer implementations, is there an opportunity to go and upsell and cross-sell as you're doing that? I'm curious, just from a timing perspective as well, how long some of this might take with your install base.

Rory Read (President and CEO)

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 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 treat implementations 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 have that training done time and time again. That's all work that's being done right now, and it's part of this transitional year. It is 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 or 500 accounts. 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 Q2. That'll 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'll take two or three quarters to get there. I think, but we're improving every day. Could even take four quarters. We want to make sure we do it right. 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. That's how we've got to think about these implementation challenges. In the short term, cover the accounts, make sure that and I'm involved in a lot of them.

That's where I'm getting a lot of feedback and knowledge to understand exactly what it is. When we have a challenge, get on top of it, solve that, get that customer to successfully implement. 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.

Arjun Bhatia (Software Research Analyst)

That'll be very helpful. Thank you very much.

Operator (participant)

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

Elizabeth Porter (SVP of Wealth Management and Financial Advisor)

Great. Thank you so much. I wanted to go back to the reinvestment in hiring, particularly around kind of the go-to-market strategy. Just how should we think about the timing of these hires and 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.

Rory Read (President and CEO)

Yeah, 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 FY2027? It takes us about six to nine months to be at a rep to be ramped. 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've tried to think about that and tried to make a structure. Of course, you've got to deal with attrition and make sure there's performance. Our whole mindset is to be hiring in the late Q2, early Q3 for FY2027 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—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 in our success managers or in our solution architects, I think we missed the mark a bit. We have really tried to rebalance that.

I think you will see us also invest in those parts of the pod as well, both at the AE level to get ready for FY2027, to make sure that we have the capacity in terms of the success managers. 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 architects. It is all in mind that we will then have the products hardened and we will have the implementations more consistent so we can move to the third phase of the transformation at FY2027, which we like to refer to as acceleration. I hope that helps, Elizabeth.

Elizabeth Porter (SVP of Wealth Management and Financial Advisor)

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

Rory Read (President and CEO)

Sure. I think the macro environment's a bit unpredictable and a bit choppy right at the moment. A couple of answers from our perspective. Tariffs do not really affect us directly, so that's not the issue. Will customers look to be more prudent on their spending? Yeah, that's possible. I think that people are a little bit await 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. We think that we can pretty much handle whatever the macro throws at us within reason.

I mean, if there's some gigantic shock to the market, that affects everybody. 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 conservative when there's a bit of uncertainty. We're seeing a good pipeline. I mean, we're not seeing any huge issues there. Our issue and there's plenty of businesses is not a gigantic company. I mean, it's just under a billion dollars.

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. Yeah, if there's 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 guide in 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.

Elizabeth Porter (SVP of Wealth Management and Financial Advisor)

Thank you.

Operator (participant)

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

Patrick Walravens (Managing Director and Director of Technology Research)

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

Rory Read (President and CEO)

Yeah. 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 toe holds in a couple of those spots. Because we're at the beginning of a Fed ramp approval, that limits how far we can do. You shouldn't factor that in in any way as a negative or positive for us. We are not exposed on the federal side. While we have a few relatively small implementations in the millions of dollars, it's not material.

Patrick Walravens (Managing Director and Director of Technology Research)

That's great. As a follow-up, can I ask? You had a very specific sort of algorithm and plan coming into this role. Has anything been harder than we expected?

Rory Read (President and CEO)

No. I mean, what you see in transformations, it's pretty consistent. I mean, what's great about this company is the technology's quite good. The platforms, I think, are 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 toward 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 when you look at this business, the maturity of some of the execution and processes feels like a startup, okay? It is a compliment to the team that they grew it so big with such amazing customers. We have to clean up those processes, get consistent implementation so that it is done, get the documentation properly done, get the coverage model properly done. These are basic, fixable things. I have 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. On the other hand, when we get it right, the customer grows and grows and grows. 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 one. 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, which is burning in and improving execution. The next two six-month periods are important.

They're transitional. We've got to stabilize the go-to-market. We've got to improve the implementation processes. We've got to get the execution on the delivery of product. We have to make the right investments over the next one to three months. That should begin to bend the business on the performance side. We should leave this year performing better than we started the year. We should see an improvement on the rule of 20 as we move through the year, rule of 40 as we move through the year. Okay? I think that's really important.

I think moving into the 20s is something that we should try and do as soon as possible because then we get ourselves positioned for that better state. I think it's going pretty much to plan. There's a lot of work to do. There's going to be some unknowns that emerge. We have to execute better every day. That takes time. This transformation will take time. I feel good about where we are. I think we know what to do, and we'll get there step by step, month by month, quarter by quarter.

Patrick Walravens (Managing Director and Director of Technology Research)

All right. Great. Thank you, Rory.

Operator (participant)

Thank you. Next question is coming from Jackson Ader from KeyBanc Capital Markets for Line. Is that live?

Jackson Ader (Managing Director and Equity Research Analyst)

Great. Good morning, everybody. Thanks for taking our questions. The first one is just on the bookings activity in the Q4. Were there any deals that maybe slipped or duration adjustments that you were not expecting? Or were there any of the changes that you have been looking to implement, Rory, that might have impacted some of the performance there in that Q4?

Rory Read (President and CEO)

Jackson, I think on the Q4, the activity was stronger than expected. I thought that was a good sign. We saw a good mix of small and large deals, expansion, and new logos. We saw them both in core and service. 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 is obviously the period when you have the most change. 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. No, I didn't see anything about Q4. It was a bit better than expected. It really matters where we get to as we move through the next four quarters.

Jackson Ader (Managing Director and Equity Research Analyst)

Okay. I guess, relatedly, can you give us a sense for the pipeline of either large renewals or large deals in terms of when they're coming up for renewal and the seasonality? I don't want to lead the witness too much, but 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'd prefer kind of a later renewal cycle this year. I'm curious what the seasonality would look like.

Rory Read (President and CEO)

Yeah. 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 Q4, and our second largest is in the Q2.

It's lightest in Q3, but it doesn't look any different this year than each year. The total number may be a little bit lower this year because of more three-year deals. We're trying to move more and more with the go-to-market team to the three-year structure. That's a historical trend. It looks very similar. We've changed our incentives this year for the sales team to make sure that they're properly rewarded for renewals and renewals on time.

Jackson Ader (Managing Director and Equity Research Analyst)

Got it. Okay. Thank you.

Operator (participant)

Yep. Thanks, Jackson. Thank you. In the interest of time, our final question today is coming from Parker Lane from Steve Fogel. Your line is now live.

Parker Lane (Analyst)

Oh, 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. 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. What's the ideal timeline for resolving some of those issues and getting the platform on better footing in your eyes?

Rory Read (President and CEO)

Yeah. That's a great question, Parker. 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 roadmaps for all towers and 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, our product lifecycle, 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 to two quarters. Some will take the whole year.

We'll see improved delivery and execution as we move through this FY26 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 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 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 to write a 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.

You should watch that. It'll be each quarter, and it'll improve throughout this year and into next year. 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 implementations. 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. FY2026 is the main focus.

Parker Lane (Analyst)

Got it. Appreciable feedback, Rory.

Operator (participant)

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

Rory Read (President and CEO)

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, their focus on creating value for our customers. Hey, this is never a straight line. There'll 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. We will look at FY2026 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. 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. 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.

Operator (participant)

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.