CXM Q1 Earnings Call: Profitability and Customer Retention in Focus

Customer experience software provider Sprinklr (NYSE:CXM) exceeded Wall Street’s revenue expectations in Q1 CY2025 as sales rose 4.9% year on year to $205.5 million. Its non-GAAP EPS of $0.12 per share was 21.6% above analysts’ consensus estimates.

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StockStory’s Take

Sprinklr’s first quarter results reflected modest growth in the company’s core subscription software offerings, shaped by ongoing efforts to address customer churn and operational consistency. CEO Rory Read acknowledged that past execution challenges, particularly in customer implementation and support, continued to pressure renewals and drove down-sell activity. Management emphasized that the new business management system and go-to-market “pod” structure were beginning to produce early improvements, with Project Bear Hug—an initiative to deeply engage top clients—yielding positive engagement from over 100 major customers. Read was candid about the transitional nature of this year, stating, “We are still a work in progress and have significant work to do across our business to elevate the consistency of our execution, improve the predictability of our results, and drive future growth.”

Looking forward, Sprinklr’s raised full-year adjusted EPS guidance is underpinned by ongoing efficiency initiatives, re-investment in AI capabilities, and a renewed focus on customer engagement through its sales pod and enablement programs. Management expects that improvements to implementation processes and post-sales support will help reduce churn and unlock expansion opportunities. CFO Manish Sarin also outlined plans to offset foreign exchange headwinds through cost discipline and targeted investments in go-to-market and R&D, especially around AI. However, management is clear that 2025 remains a transitional year, with Read cautioning, “We still have significant work to do and challenges to address,” and that meaningful improvements in sales and retention should materialize in the second half of the year and beyond.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to targeted operational changes, increased customer engagement, and product enhancements, but noted that macroeconomic caution and execution gaps weighed on results.

• Customer churn remains elevated: Renewal rates continued to face pressure, attributed to inconsistent implementation quality and insufficient post-sales support. CEO Rory Read acknowledged, “Addressing all forms of churn is a top priority in our transformational journey.”
• Sales pod structure rollout: The new go-to-market pod model, launched in February, is designed to unify sales, product, and service teams for deeper account engagement. Early data suggests increased customer touchpoints improve sales win rates and pipeline quality.
• Project Bear Hug engagement: By engaging about 200 of Sprinklr’s largest customers, the initiative aims to foster closer relationships, identify use case expansion opportunities, and address renewal risks. Management reports early positive feedback and some expansion wins from these efforts.
• AI-native platform differentiation: Sprinklr highlighted its AI-driven capabilities, especially in its Contact Center as a Service (CCaaS) offering, as a key differentiator. Customers reportedly value unified data integration and agent automation, with some reporting 30–80% reduction in human intervention.
• Operational efficiency and cost discipline: Record free cash flow and a new $150 million share buyback authorization were supported by restructuring, expense controls, and ongoing efficiency measures. However, restructuring charges and workforce reductions also impacted morale and continuity.

Drivers of Future Performance

Sprinklr’s outlook is driven by ongoing transformation initiatives, enhanced AI product investment, and a focus on improving retention and sales execution.

• Retention and implementation improvements: Management believes that elevated churn rates will moderate as new enablement programs and standardized implementation practices take hold, particularly in the core marketing, insights, and social segments. These efforts are expected to stabilize customer relationships and support expansion.
• AI and product roadmap investment: The company plans to direct additional resources into AI research and development, aiming to further differentiate its platform, especially in the CCaaS market. Management highlighted Project Tiger Shark’s focus on user experience and product innovation as a future growth driver.
• Macroeconomic and cost headwinds: Management cited ongoing scrutiny of enterprise technology spending and a $10 million non-GAAP operating expense headwind from foreign currency impacts. The company aims to maintain profitability targets through disciplined spending and selective hiring, particularly in technical and go-to-market roles.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will watch (1) whether the new sales pod structure and Project Bear Hug can reduce churn and improve large account expansion, (2) measurable progress in AI-driven product adoption, particularly in CCaaS, and (3) stabilization of renewal rates and billings growth as transformation initiatives take hold. The effectiveness of cost control measures and timely execution of product enhancements will also be important indicators.

Sprinklr currently trades at a forward price-to-sales ratio of 2.7×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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