Generative AI is 'giving us wings' for AI capabilities: Sprinklr CEO

The ongoing demand for artificial intelligence is giving software developer Sprinklr even more confidence in the space following its latest earnings beat. Sprinklr Founder and CEO Ragy Thomas joins Yahoo Finance Live to talk about the company's full-year guidance, its services forecasts, and the growth opportunities AI is allowing.

Video Transcript

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- Sprinklr shares on the move after its first quarter earnings report seeing a beat on the top and bottom line. The New York based software company was founded in 2009 and went public via IPO in 2021. Now it powers software for customer experience management of large corporations such as Microsoft, L'Oreal, Cisco, and Samsung.

Joining us now is founder and CEO Ragy Thomas. And also joining us is Yahoo Finance's Brad Smith here for the conversation as well. Big welcome to you both here. So Ragy walk us through the quarter that was. And especially when we see how much of this was driven by this higher subscription revenue.

RAGY THOMAS: Well, thank you. Brad, it's great to see you again. We-- the quarter was an excellent one. We had a beat on pretty much every metric. Reported revenues of $173.4 million. Which is a year-over-year growth of 20%. And subscription revenues came in higher and growth percentage was higher at 24%. And I think what was surprising for most on the street was the fact that we also posted $11 million of non-GAAP operating income.

BRAD SMITH: I think what the street was also paying close attention to, and it's great to see you, Ragy, really paying attention to this guidance here. And so what are you seeing within the relationship, what you're hearing from some of your customers right now that gives you confidence to come back out to the street and communicate that there's a strong amount of demand that is really going to benefit Sprinklr?

RAGY THOMAS: Well, it-- it was cool to connect with the few customers. I was able to connect and talk to in the last several 12 months. What we are hearing consistently from all customers across industries that we serve. Now keep in mind these are some of the largest companies in the world. What we are hearing is that what's going on in front of this technology, customer-facing technology is unsustainable.

When you think about a large global company, let's take a Microsoft, or a Samsung, or a Dell or any of the large global companies, you're talking about large businesses that have multiple business units. Some cases like, 40, 50, 60 business units which are large companies in and of itself.

Each business unit operates in, I don't know, 50, sometimes 100 markets. And in each market, they're doing customer service, they're doing marketing, they're doing advertising, they're doing voice of customer surveys and insights and sales. And in marketing in the UK, they're using 5 to 15 channels.

And now, think about a consumer or a customer of that brand on the other side. It's kind of funny. It's impossible for a large company to stay on brand and create consistent brand messaging across all these channels, across all these functions, across all these markets, and across all these business units.

And we have stuffed the front office with somewhere between 50 and 75-point solutions on an average, almost in every function. It's unsustainable because they don't talk to each other. You can't see the customer across these systems.

So I'll give you the example of a large credit card company whose contact center which is replaced and upgraded with Sprinklr. Before Sprinklr, if you email the agent, the email customer service agent was just unable to use any other channel. So if you ask for a credit limit increase on email, he had to wait for the customer to respond back if you ask a question. Now you hit the phone button hey, sir, can you provide your supporting evidence for your income and then boom, the case that would have taken a week now takes 20 minutes to close.

BRAD SMITH: Sounds like on the productivity front, that's a huge benefit for some of these companies. And on that topic of productivity, what we've continued to hear and track over the course of this earnings season is any mention of artificial intelligence and generative AI. When you think about your own business, I see you smiling, I see you laughing at this one.

But at the end of the day, investors also want to know. All right, for a company that has a founder CEO like Ragy Thomas, how you're thinking about generative AI with some of the existing Sprinklr framework and where that could potentially benefit some of your customers that are looking for better productivity?

Brad, that's a great question coming from you. I'm sure you recall that we had almost seven pages describing our artificial intelligence in our IPO prospectus. So first off, AI is something that we've been talking about, and our entire platform has been built on for the last five years. And it's a core differentiator for Sprinklr.

Let me just help everybody understand the way we see AI and what we see happening now. Yes, there's a lot of buzz about generative AI now. There's plenty of companies that are jumping in, introducing product SKUs. And most of them are doing something very simple. They have a developer or a small team making a call to an open API and putting the results back, and it looks cool.

Let me tell you what the problem is. If you don't control the data set that the AI is trained on. If you're training your AI models on unbound data sets, your results your outcome is going to be unpredictable. In the enterprise world, we now have countries that are running on Sprinklr.

Qatar government cannot afford to have-- Coca-Cola, Microsoft, McDonald's, JPMorgan Chase, Citibank they can't afford to have unpredictable outcomes in the front office. It has to be on brand. It has to be compliant.

So there's a lot more rigor that you can't afford when Bard makes a mistake, or ChatGPT makes a mistake. That's fun. It's a joke. But brands can't afford to do that.

So what we have done, for the last five years, is we have developed over 2000 models. Actually, hundreds of models custom done for customers. And these models have been trained on pretty much all publicly available data in over 100 languages. And we make over 10 billion predictions a day.

Every part of Sprinklr is built on AI. And what we are able to do with generative AI now is to take cryptic messages that we're doing in terms of AI-driven generation-- I'll give you an example. In the contact center, we had something called a smart response that would allow the agent to suggest a response. And before generative AI, which is kind of cryptic. We would parse through all the cases in the past and say, hey, suggest this option as a way to fit.

With generative AI, we can give them an entire script. So we're seeing 300% increase in adoption of that feature with generative AI. But there are like hundreds and thousands of AI features. And generative AI is giving us wings for our AI capability.

- So Ragy in terms of the growth story from here. I mean, I know you opened a new R&D hub in India as well. But on the other hand, you have regulators sort of really trying to figure out how they can put some guardrails around AI. How do you sort of focus on the growth story while keeping an eye on what regulators might have planned as well?

RAGY THOMAS: We are very, very, very early in the AI revolution. It's going to be a quantum leap. I think-- I'm a fan of responsible AI. I think-- we've seen this in crypto, we've seen this in social.

I think we should come up with frameworks very early on and not wait for game-changing technology like AI to grow without control, and then you're going to have a lot of companies go out of business because people get just pumped up, and a lot of people lose money. And so I'm a fan of responsible AI. I'm a fan of common sense regulations that allow companies like Sprinklr and Google and Facebook, and others who work on AI to put stuff out there responsibly.

BRAD SMITH: Ragy, just while we have you. You mentioned advertising right now. And typically, during an economic downturn, advertising is one of the first marketing spends to go. We're going to be at Ken Lyon speaking with a range of Chief marketing officers, perhaps some of the clients that you work with as well.

And I'm wondering, even as we're thinking about the impending economic downturn that has been widely telegraphed, can marketing-- can advertising do enough to get some of these companies through the other side or to generate enough demand to get companies through a downturn? And we only have about 30 seconds.

RAGY THOMAS: We're spot on. There's a pull back on advertising and marketing spend. People are stepping back to see how it shakes out before spending again. The good news is, we have put about 80% of our energy into our contact center product, which is like taking off.

And our thesis that we bring customer service and marketing, and sales together so we can transform those agents into sales sales people and then really convert your contact center into a revenue center.

- It's been absolutely fantastic having you on and breaking all this down for us. Ragy Thomas, the Sprinklr founder and CEO, and our very own Brad Smith. Thank you both.