Sprinklr, Inc. (CXM) Earnings Call Transcript & Summary

Okay. Good morning, everyone. I am Mark Murphy, software analyst with JPMorgan. And it is a great pleasure to be here, with Ragy Thomas, who is Founder and CEO of Sprinklr. Ragy, first off, thank you for being here, and welcome to the conference.

Thank you, Mark. It's always fun to be here with you.

And I do want to state upfront that Sprinklr is in its quarterly quiet period, and so we're going to stay away from certain near-term demand discussions and financial questions. Ragy, maybe you can spend a moment just giving a brief introduction of Sprinklr and of yourself just for the benefit of anyone out there that might not be familiar.

Absolutely. So we provide a unified customer experience management platform for businesses, especially larger companies. What that means is we provide next-generation digital customer care, digital customer marketing, advertising, customer feedback management and engagement product that large companies can deploy around the world. It does 2 things. It allows them to reach, engage and listen to customers across 36 channels and -- any new ones that may come. And on the other side, it allows people to work across business units and markets and internal silos to create amazing experiences for customers. So the company was founded in late 2009, and we're about 3,200 people now headquartered out in New York City.

So Ragy, I was on stage with you. Thinking back on this, it was about roughly 5 years ago at a different conference -- JPMorgan Conference, and Sprinklr was still a private company. And I was reflecting back on the investor questions we would get, and they would say, there is a lot under the hood here. There's a lot -- this is a big product. And people would say, maybe you're trying to take on too much. Maybe is it possible you should just focus on 1 thing, be like a little narrower. And your response was, well, this is completely intentional, right? And so we look at Sprinklr today. The -- you're heading towards $600 million in revenue, you're growing 30%. We talk to your customers, and they say, "There is no other product that could handle this level of complexity, right, this problem that we're trying to solve." So is it clear now that you were correct to sort of have that this broad of a vision or this ambition of an engineering product?

I'd submit to you that we are yet to fully realize how inevitable this category creation is going to be. And it's very simple, you think about a world where 4 billion people are connected, and they're getting their information from each other. And brands really have no way to understand who they are and respect them for who they are and what they mean to the business. So it's all half aside right now with -- solved with point solutions, and that is not going to scale. So I would encourage you to think about 5 years from now as you have companies like Amazon and Tesla and companies that really do an amazing job of pulling together great customer experiences, how is everyone else going to compete and without an operating system for the customer that has what we call experience data at the core. I don't know how you can do it. CRM holds transactional data, CDP holds behavioral data, but 4 billion people are broadcasting a lot of information about themselves in real time. And that data is what we bring with AI and a next-generation approach to unifying that. And I think that category is very new. So people are always skeptical when someone talks about a new category. What we're seeing with our customers and our growing customers is it's inevitable, and it's just going to just take time.

So 4 billion consumers broadcasting information. You talked about the inevitability of this. I remember you describing, again, many years ago how modern channels are, including social media and others, right, are unlike traditional channels. And you were talking way back then, right, about the volume of data. This is unstructured data. You've got videos. But you would also talk about how it's owned, that is owned by the consumer. And you had this incredible analogy of like you had the swimming pool right next to the ocean. Can you help paint that picture of the -- just help us understand the scale of the problem? And what is the value to the customer when you solve this?

Absolutely. So let's start by looking at how things are. The CRM industry grew about 30 years ago. And the basic idea was you got to know what customers have bought from you and where have they bought it, what channels they've bought it from. And you think about how marketing and care has evolved. So you're sitting -- when people called you, you're sitting on that transactional information. When you do e-mail marketing, we are picking up whether somebody opened an e-mail. Think about how tiny those signals are. In my previous companies, we're in e-mail and early digital marketing. So that data is very sparse. And what we are now doing is we're pulling together data, transactional data and behavioral data from different systems into another database structure, call it CDP. And that's very trendy now. I would submit to you, you think about like Marriott, for example, if you look me up or look anyone of you up in a Marriott CRM database, you'll see every time you've stayed at the hotel, how many points you have. So the CDP probably puts together your web activity. But just Google search yourself or anybody, you will find a LinkedIn profile, the Facebook profile, maybe a Twitter profile, maybe you're active on Reddit, maybe you've got a blog and you've left 50 reviews. I would submit to you, take a look at all the digital data that you are putting out there about yourself. How powerful is it for Marriott to see who you look like? Because that's when I walk into the front desk, a lobby of a hotel, they make an assessment if I'm walking in with 3 kids and looks like I just got off a flight. I'm going to be treated very differently than a single person walking in. And all the context that people are putting out about themselves today is not being processed. And you can't use that to creep people out. You have to -- this data is owned by consumers. The thing though, this data keeps changing when you take a new job or you get married, you buy a house, you're posting pictures. How do we start using the data responsibly to make experiences better for customers, right? You wouldn't -- if you're walking into the lobby, it will be unacceptable for the person behind the counter to not read this person and how he feels. And same way, it's going to become unacceptable because people who are putting out information about themselves are expecting others to respect that. Don't ask me the same questions. Please don't send me another survey. Could -- does any one of you wake up going like, "I wish McDonald's asked me how my burger was. Great." So -- and I think all the traditional ways of thinking about getting feedback and understanding customers have to be augmented with this massive amounts of data, but you have to do that understanding that this data belongs to the consumer. And there are rules and restrictions put by the channel owner on that data. And this is all unstructured and conversational. So if you don't have artificial intelligence, this is like a coconut in the hands of a monkey. So you really have to reimagine your back end for this operating system with that unstructured data as the primary source then use AI and then use AI everywhere to make sure that you're being efficient and effective and customers are having better experiences. So the analogy about -- the analogy I've used in the past that Mark was referring to is visualize your CRM data like the water in a swimming pool and CXM data or the public digital data is like the ocean. And you just think about the -- if I'm Samsung or Microsoft or Google, think about all the reviews and ratings and the enormous amount of insights they have in it: what do people like, what don't people like, what do people like about my competitors, and sending that to the product team to make that better, taking the things people care about sending into marketing. You have to reimagine what the edge looks like when you're unifying people across channels and companies across silos.

So it is hard to think that a big multinational firm would not want to tap into that bigger pool that -- I shouldn't say the pool, the ocean of data, right, that is sitting out there.

Let me give you a couple of examples, right? So I just -- I was on world tour, I just got back. I was in Europe and I spoke to a large insurance company that found out through Sprinklr that their logo kind of look like the Russian army symbol. They found that out through an alert that came from Sprinklr. When it got picked up, volumetric triggers got sent out as it was picking up negative sentiment, brand crisis. In 72 hours, they changed all their digital properties and removed the logo and replaced it with text, and they watched the conversation go down, and it was going to go south. I was with another large retailer whose colors -- logo colors look like the Ukrainian flag colors, and they were like watching that very closely, pros and cons and using Sprinklr to understand how every one of their supply chain vendors who are playing in Russia or not playing in Russia. So we're beginning to see businesses get run as a bank. I heard of a story where the CEO of a bank was going to make a statement about the Russia crisis. And the digital listening teams had hold off, another bank is making the statement that night. They watched how the markets reacted to it and decided not to make the statement next day. So how long can you -- it's like would you get on a highway, drive your car, keep your eyes and ears closed. And I think of Sprinklr as the way to listen to and see what's going on in the world around you in a real-time way.

So when we think about the cadence of what is happening out there, that ocean of data, what's happening in the social landscape and the consumer Internet side of the world, right, it goes through waves faster growth, periods of slower growth. And so I think sometimes people would look at it and say, well, you have some of this linkage to those platforms, Facebook, Twitter, WhatsApp, you mentioned LinkedIn. The -- so how do you kind of map that back to Sprinklr's own growth opportunity when the -- when that world is going through some of these cycles?

Mark, if you go back and look at how the category of social media management got created, I would say, Sprinklr had a role to play in it. We were the first who put listening and advertising and publishing altogether. And 2016 is when we realized the game was not about social media. So that's when we started building the marketing, the care and just building the digital layer of customer-facing functions. And you know we just added voice recently. So our top customer care channels are now quickly becoming live chat and text and e-mail, and I'm sure voice will pick up as well. So we are not dependent on the traditional social media the way most people might venture to think. We don't really care which channel you want to engage in. You think about banking, right? We give you a way to be compliant digitally when you engage with customers. That's why 13 of the 14 largest banks work with Sprinklr because you need the ability to listen to customers, you need the AI to understand when to engage, you need the ability to engage and respond in a compliant way. And when there's an issue, you've got to have digital customer care, and you got to do that with the 17 compliance requirements and 11 archival. Nobody does all of that on the unified platform except Sprinklr that I know of. So like how are you compliant if you're not using Sprinklr? So those are the use cases that just really quickly help you understand. It's not about one channel or what happens on one channel versus the other. The fact is a multichannel world justifies the existence and growth of Sprinklr.

So let's pull on that thread a little bit of the evolution of the channels, right? When we look back to the beginning, you began with some of the modern channels, right, the channels that were emerging. And then so in customer care, right, in these contact centers, you would see -- you would have an agent and they would be using Sprinklr for those channels, right? And then they would like swivel their chair and look at a different screen if it was something that had come in over e-mail or phone. And so now you're talking about this, you're talking about becoming omnichannel. And you did just mention voice, right, adding voice into the Sprinklr console. Could you explain how that's happening? Because to me, it feels like you're almost on the cusp of moving -- kind of disrupting an even larger market perhaps.

We are. And I'd say we're kind of beyond the cusp. We're in it. To bring it to life, we'll take the example of one of the largest tech companies in the world, PC laptop manufacturer. And for years, we were and still are the digital customer care software for this organization, of this brand. And what was happening is they started with social media management and responding to customers on all these channels. But the volume of customer complaints and issues on WhatsApp and WeChat -- in China, 90% of those engagement is now WeChat. We had a customer in the Middle East that turned on -- a Pan-Asian company that turned on WhatsApp and 25% of customer care already moved over. And so as these channels and the volume of customer care on these channels started increasing and you're putting your 300th agent on this tech, this was 4 years ago, and we were asked, "Look, guys, are you kind of going to build the contact center capabilities, workforce management, smart assignment, routing, supervisor console, all that? Or should we just not think about scaling with Sprinklr?" So we had that aha moment many years ago where we said, "Look, volume is shifting to digital. People are going to put thousands of agents on these channels. And we're going to either build all of that or we're not going to have that opportunity." So we started literally taking apart all the things that contact centers need and we started building it. And arguably, and we're going to be in all those waves. We're not in it yet, but we're -- the customers are using that when they use Sprinklr for digital customer care. They were able to reduce the time to resolve an issue, typically 30% to 50% time to respond to issues, typically, again, 20% to 60%. And they were able to increase customer satisfaction and reduce dissatisfaction. And the reason you're able to do that is if I'm tweeting at you, I'm an airline, and I'm tweeting at you. I have a lot of context coming in from that first tweet. I know who the person is. I can look you up. I can -- AI can read where you are, your flight details, and I can do a lot of things that cannot be done in a traditional contact and without putting you through 17 hoops. And I can also route it to the right person who has best resolved this issue in the past and feed him with the best response anybody has done using AI, all right off the bat. That's how you're able to bring the cost down, respond and resolve faster and increase customer dissatisfaction. And then you watch the sentiment of that person responding to you and then escalate if needed. And our customers were going, like, I'm getting this benefit with AI and digital channels. Can you do that from a traditional channel? Because who doesn't want to reduce their cost by 20%? And that's what we're doing with voice. We're transcribing in real time and then applying the same AI to it.

So you're doing that with voice. It sounds as though you're doing that with LiveChat as well, right?

Absolutely.

So LiveChat -- I noticed this stood out in my mind. LiveChat has become your #2 care channel, right?

And growing.

And growing. So that is surpassing -- I think you said the other social and messaging channels. Can you expand on that? Just how is it -- how is LiveChat trending if you were trying to compare that to voice where you're growing and also voice text, e-mail, et cetera. How do you put it in there?

Yes. So let's break this down, right? Chat itself is a channel. You put LiveChat on your website, it's just another channel. What really is at work is the bot and the AI that is conversational AI, that's what it is. And the conversational AI engine, the ability to read and understand over 100 languages, we build that because we were doing social interactions over a long period of time. So when we got into chat, we already had that advantage of being channel-agnostic and really good AI. So it was just a natural opening for us. And that part of our business and product has gotten so good now. And it's a no-brainer decision if you're a brand because once you use Sprinklr to create that AI logic and the conversational AI infrastructure, unlike a LiveChat vendor, we're now -- immediately, we can apply the same thing for Twitter and WhatsApp and WeChat and Facebook and Messenger and Instagram. It just starts working universally. So when you make the AI better, you put an automation rule inside Sprinklr or a governance or a brand rule inside Sprinklr or a QA, quality rule inside Sprinklr, it suddenly just starts working across all your front office channels and potentially across even sales and marketing. So I'll give you a quick example of brand compliance. So let's say you're a apparel company, and you basically have a brand promise that you're going to be helpful to your customers and consumers. So Sprinklr governance has a capability where you can say, this is my brand tone and brand commitment. So any time your agency creates a copy for an ad campaign, Sprinklr AI is scanning it to see whether, hey, is it helpful or unhelpful. And if it's unhelpful, it will spit out an error code saying, "Hey, you're off-brand here. You may need to redo this or send it for approval." That same logic now can be applied to the call center, if you're using the unified approach that Sprinklr brings. And that's how you start building your IP. That's why I think the rise of this category is inevitable. And the last point I'd make on LiveChat is like social, if I come to your website and start talking to you, it's almost like me walking into your store, right? When I walk into a store, I can't say, "Well, are you here for customer care or you to buy?" I might walk in with an issue on my phone, but I want to buy a case. I might want to change my plan. So it's just -- it's conversing with the brand, understanding intent and routing it. So we're uniquely positioned because with the unified architecture, we're bringing sales, care and marketing all together in a way that nobody else can without that architecture. So in many cases, when you deploy Sprinklr, you're converting. Like Verizon, for example, they got advanced use cases where the call center is now beginning to produce revenue or become an advocacy play or become an upsell opportunity.

So as you bring all of it together, in your words, I think part of our interest has been -- or part of our thesis, I should say, has been that Sprinklr is not the narrow point product, right, that is kind of getting displaced. You are the broader platform that is out there that is doing the displacement of the point products. And I noticed you had said at some point in the recent past, you said, I think point solution saturation has hit its peak. Point solutions are simply not sustainable. What do you think is the nature of the point products that you're displacing? If you can give -- perhaps just give a few examples. And I think we're wondering how often is that happening.

So we displace somewhere between 5- and 25-point solutions as we go into a brand and typically a lot more as we do global deployments, many of our deployments around the world. So you might use a different listening solution in Germany, a different one in France, a different one in the U.S., and we're replacing all 3 of it. We might use a different LiveChat solution in your Australian contact center, and you might use a different one on your U.S. website. So we're replacing those. We're replacing content marketing tools. We are replacing advocacy -- employee advocacy, we're replacing influencer tools, we're replacing a ton of contact center point solutions. They go by -- contact center AI is a big thing that started to do just that, and we have the capabilities. So we give you chat bots. We give you a community management product. We give you all the supervisor management, workforce management and all of that. So those are the point solutions that we typically take out. And we used to take out a ton of social point solutions. Now we're taking our functional point solutions. And the world is -- it's not -- one platform will now be the answer for sure. What we're trying to do is help the world go from point solution chaos where they got 15 different tools in every market to -- we call it moving from best-of-breed point solution approach to best-of-suite. So we -- you should have a Salesforce, an Adobe, a Microsoft and a Sprinklr. And now if all of them work really well, you got your CRM solution, you got your CDP solution, you got your e-mail, you got your website and you've got all the other digital tools working all very well together. So going to best-of-suites from best-of-breed point solutions, what we're advocating and we see a lot of our customers do.

So why is it now? Now is the time the customers are deciding that they're saturated with point products. They're frustrated with point products. What is it about this period in time?

Well, it's a steady transformation because what's happening now I think the big push now is contact centers are coming up for consolidation, moving from on-prem to the cloud. So people are going like, I've got this. I'm spending $100 million, $200 million, and I've got thousands of people, and I've been doing the same thing over and stupid now. I need to move to the cloud and consolidate. Now there are 2 ways to thinking about it. So a, is to go, well, let me just find a cloud provider and do all the things I was doing on-prem on the cloud. in which case you don't need Sprinklr. But if you start thinking like a large bank in Asia, one of the largest ones who moved 15,000 people over to Sprinklr, and they're reimagining what that contact center is. So for them, a contact center now is not reactive. It's proactive. A contact center is not a cost center. It's a revenue center. They're bringing their sales folks to work with their customer care agents. And a contact center is no longer voice-dominated but truly omnichannel. So if you buy into any of those then I think we emerge as you want to bet on the future. You don't want to catch up to the past. You want to think about where the world is going to be, and that's what the narrative and the argument that we present to our customers.

So Ragy, we have run into some large-scale multinational organizations. We'll get into a discussion with them on what they're doing with their CRM core platforms or CXM core platforms. And it's becoming more common that they say, "Well, we're trying to steer that to a core list of providers, right? And several times now, we've heard this, well, it's going to be Salesforce. It's going to be Microsoft. It's going to be Adobe, and it's going to be Sprinklr, right? And so you're making this list of 3 or 4 platforms. How tangible is that opportunity in your eyes to try to elevate the company up and to sort of cement this position where, listen, we are the third or fourth CRM, CXM platform for these companies?

So we've taken the approach of building that bottoms up as opposed to selling the CIO or the CEO the vision, right? So we -- typically, we love getting in a couple of hundred thousand dollars and grow steadily. Every large customer just buys more, and eventually, you're spending millions of dollars with us. And there's internal groundswell that then takes us to the C-suite, and they go, "Oh, it's a no-brainer, I'm spending so much money already, and Sprinklr can do so much more and nobody unifies the front office the way Sprinklr does." So it's a very important part of our narrative to -- in being the digital operating system. And our story is very simple, build your CRM system to hold your transactional data. Build your CDP to hold the behavioral data. You can't co-mingle public digital data with your traditional databases. It just -- it's oil and water, it won't mix. And you shouldn't even try to do it because this data belongs to the consumer. If you delete a tweet, we have to cascade delete it. That's why we have partnerships in place with many of these channels. And 13 years of doing this and doing this well has given us so much experience, but they have to be interconnected. You open a ticket in Sprinklr, the ticket has to be opened in Salesforce. If you close a ticket in Salesforce, it has to be closed inside Sprinklr. But that has to be loosely coupled. So you can extend your CRM to CDP. But the CXM data store and the CXM operating system has to coexist with the other traditional capabilities. So we're building this modern digital platform to listen and engage them and reach customers across these silos that sits alongside your Salesforces and Adobes, and that's where -- I think we're just scratching the surface on that. And that story, you're absolutely right. I probably met with 100 customers in the last 3 or 4 months. And that's a narrative that makes it very easy for them to process what they're doing with Sprinklr.

You were talking recently about -- you were kind of presenting a very compelling kind of image, which was you described Sprinklr's mission as unifying the edge of the front office where the customer meets your brand. And you were using this term digital edge to try to describe that. Can you help us to make that a little more tangible? Maybe give us an example of what we should be imagining there.

Absolutely. So one of the customers I talked about in our last earnings is Jaguar Land Rover. So I met them in Europe with the Customer Council. And you think about the company, the brand that every automaker is trying to reinvent themselves as in the electric next-generation redefining luxury. But if you are JLR, what does your brand stand for? Because you're marketing the way you did it traditionally, video, TV and magazines and radio and print is not what people are listening to. Your brand is coming through not just through your marketing. By the way, they have 28 markets. So already, every market is doing their own sort of marketing. Every market is doing their own care. Every market is doing their own research and feedback management. By the way, in every market, they got a dealer network. And every dealer is using somewhere between 5 and 15 channels again to sell, again to service, again to market. So I would urge you to think about the edge of the Jaguar Land Rover digital footprint. The edge is where a customer sees an ad from a dealer in an e-mail or in Facebook. The edge is when you walk into a dealership and think about how fragmented that edge is. And nobody is even thinking about the edge. And we did a mathematical exercise at the council said how many touch points do you think you have on the edge broken down by channel? And the answer was close to 1 million. And how do you unify content campaigns, experience, the same brand, the same level of service, if they want to differentiate themselves as a luxury company, how do you do that across these 1 million touch points with teams that don't talk to each other without a unified platform. So that concept of the edge, if you're Coca-Cola, if you're a Procter & Gamble, if you're any large company, take Google or Microsoft, you are going to market with 50, 60, sometimes hundreds of different sub-brands. But people see Google or Alphabet or Microsoft and your brand takes a hit when they don't like your product or service that they have a bad experience. And so this is where we're building an operating system for the edge. And the moment you start understanding the edge, you begin to go, "None of my traditional approaches would work, and I need a different architecture to get a handle on the edge, to have governance on our edge." One of the top tech companies in the world, one of the 3 that you would think about uses Sprinklr as a system of record for their social advertising. And I'll tell you the story how that came about. They have 200 people who are authorized to spend money on social media advertising. They run 35,000 campaigns. The reason they snapped 2 years ago and said, "Everyone's got to get on Sprinklr for governance," with their agencies is because one agency had a workflow error and published a coupon code they should not have published. And they spend millions of dollars allowing customers to redeem that coupon because they couldn't pull it back. And if you have 200 buyers and 35,000 campaigns, tell me humanly how do you manage it without spending a few million dollars on governance across it. And if that company is doing it, I mean, it's just our inability to tell the story that prevents others from wanting to use it.

So millions of touch points at the digital edge, right, and these layers of complexity that you're describing. Obviously, the AI models are going to be critical, right? We've looked at this. You have AI models running in over 100 languages. We know -- we've spoken to your customers, they're using it. So they'll have hundreds of thousands of inbound requests coming in a day, right? They're using your AI. It's triaging essentially where it should go and what the answer should be. It's starting to understand the interactions between an agent and a customer, right? So can you help us understand how deep is Sprinklr's type of AI becoming? And what types of scenarios are possible when you apply that correctly?

Mark, I mean, AI is being bastardized all over, it's a marketing buzzword. I feel seek when I talk about it. Just think about our existence as the company arguably is probably the largest digital listening company, right? When we're sucking in this petabyte data from Twitter, Firehose and Reddit and ratings and reviews and blogs and forums and digitized TV how the hell do we understand anything if we can't read and understand this, right? And so that was a...

[ Either ] a lot of monkeys and a lot of coconuts.

So we literally, for years and years and years have had hundreds of consultants around the world and subcontractors. And it's not just about the models, right? We have 7 layers of AI that act on this incoming data to understand intent, sentiment, products, product families, we've modeled everything. But it's not just the model. It's the fact that we have annotated this and optimized it longer than anyone else. So we're not saying we have the best AI. Look, Google has the best AI probably for search, right? Salesforce might have really good AI for structured relational data. But for public digital people conversational stuff, no one's invested as much or as long as we have, and that's just a massive, massive advantage.

Ragy, we're thrilled for all the great success that Sprinklr has been having, and we're very grateful for you taking the time out during the quiet period to travel up here and be with us. So thank you very much.

Thank you so much for your time.

Appreciate it.