Q2 2024 Sprinklr Inc Earnings Call

Participants

Eric Scro

Manish Sarin; CFO; Sprinklr, Inc.

Ragy Thomas; Founder, Chairman & CEO; Sprinklr, Inc.

Arjun Rohit Bhatia; Co-Group Head of the Technology, Media, and Communications Sector & Analyst; William Blair & Company L.L.C., Research Division

Austin Cole

Brett Anthony Knoblauch; Research Analyst; Cantor Fitzgerald & Co., Research Division

Fiona Grace Hynes; Research Associate; Morgan Stanley, Research Division

Matthew David VanVliet; Director & Application Software Analyst; BTIG, LLC, Research Division

Michael Turits; MD & Senior Analyst; KeyBanc Capital Markets Inc., Research Division

Michael H. Berg; Associate Equity Analyst; Wells Fargo Securities, LLC, Research Division

Pinjalim Bora; Analyst; JPMorgan Chase & Co, Research Division

Tyler Maverick Radke; VP & Senior Analyst; Citigroup Inc., Research Division

Unidentified Analyst

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Sprinklr Second Quarter Fiscal 2024 Earnings Conference Call.
(Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Eric Scro, Vice President of Finance for introductory remarks. Please go ahead, Eric.

Eric Scro

Thank you, Doug, and welcome, everyone, to Sprinklr Second Quarter Fiscal Year 2024 Financial Results Call. Joining us today are Ragy Thomas, Sprinklr's Founder and CEO and Manish Sarin, Sprinklr's Chief Financial Officer. We issued our earnings release a short time ago, followed the related Form 8-K 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 the 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 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 third fiscal quarter of 2024 and full fiscal year 2024, our strategy, our product capabilities and our market opportunity, our actual results might differ materially. 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, which are also posted on our website.
With that, I'll now turn it over to Ragy.

Ragy Thomas

Thank you, Eric, and hello, everyone. Thank you for joining us today. We are very pleased that Q2 was another strong quarter that exceeded guidance across all key metrics. Q2 total revenue grew 18% year-over-year to $178.5 million, and subscription revenue grew 23% year-over-year to $163.5 million. With our continued focus on operational efficiency, we generated $21.3 million in non-GAAP operating income for the quarter. Our key focus areas continue to be creating a new category that we call unified CXM, innovating faster than our competitors by harnessing the power of AI and improving our operational efficiencies, while focusing on measurable value for our customers. We are pleased with how Unified-CXM is continuing to evolve as a category, and we are focused on mainstreaming our core product suite across the broader front office.
In my travels around the world last quarter, the best brands in the world are continuing to ask us to help consolidate front-office technologies, reduce their operating costs, help reduce risk, all while bringing people and data together to create better customer experiences. For large and complex enterprise brands, seamless experiences are impossible to create across a multitude of channels, functions, business units and markets that are traditionally operating in silos.
Unified-CXM is differentiated at its core with a single -- single-instance AI-powered architecture that simplifies this complexity. It also gives brands access to publicly available conversational and mostly unstructured data in a safe and privacy compliant way that the current CRM and CDP relational databases cannot.
The second topic on every customer's mind is AI. On the heels of announcing our AI plus integration with OpenAI, we are now excited to announce the integration of the Sprinklr AI+ platform with Google Cloud's Vertex AI. This means that Sprinklr AI+ can now provide brand with even more Generative AI capabilities that are prebuilt for enterprise-level governance, security and data privacy. More importantly, customers will now be able to bring along their own models from OpenAI, Vertex AI, create new ones or integrate them as appropriate with our proprietary AI. We believe that every company will embrace AI eventually. Our (inaudible) is that companies that approach AI as a foundational strategy will win against AI adoptive and AI-enabled companies in the long run.
As we shared with you during our Investor Day, Generative AI has given our proprietary AI wings, and Sprinklr's AI is the fastest way for customers and prospects to deploy AI across their entire front-office. Third, as we all know, the macro environment continues to be uncertain. However, we are diligently managing within our control with our go-to-market strategy, productivity improvement and execution. This past quarter, we made a few more key hires in the service specialist team to add expertise and depth to selling our contact center offerings. And we continue to provide verticalized solutions to enable quicker time to value and faster deployment. This now includes financial services, airlines, CPG, technology and retail.
Regarding our partner ecosystem. We're also encouraged with some of our recent successes including the launch of our new Unified Partners Program. We have integrated several new types of partners, including independent consultants, referral partners and technological solution brokers and business process outsourcing partners. Partners, as you all probably know, are especially critical in the contact center space, and we remain committed to training and onboarding them as rapidly as we can. Two of our largest CCaaS deals in Q2 were both sourced by partners. Furthermore, our technology solution brokers model is showing great momentum, providing us with almost 50 new opportunities in the past 2 months in the contact center space. And finally, we continue to make progress with our self-serve products. We've added dozens of new paying customers through this initiative in Q2.
We believe that our investment in self-service products will help us expand access to Sprinklr product and enable companies of all sizes eventually to experience the power of our front office platform with decision-making around product purchases, becoming increasingly democratized, even inside of large companies, a self-service product provides easy access to teams and practitioners who eventually end up recommending it to senior stakeholders within their organization.
With respect to Sprinklr service, we have continued our momentum as a disruptor in the contact center as a service space. Our vision to help customers -- is to help customers transform the contact center from a legacy voice focused cost center to a more efficient AI-powered omnichannel revenue center by unifying it with marketing and sales. Sprinklr's AI-first Unified CCaaS provides its customers and prospects with: one, more seamless, consistent customer experience across channels; two, a lower agent attrition rate; and three, a lower total cost of ownership. During the second quarter, we once again saw several meaningful CCaaS deals closed across all 3 of our primary theaters and the majority of our service deals won were with new logos.
During the second quarter, we continued to add new customers and expand with existing customers. This includes world-class brands like Deutsche Telekom, LVMH, Novo Nordisk, Toyota and TransUnion. Here are some examples. In Q2, one of the largest technology companies signed a multiyear $60 million-plus ELA agreement, expanding its partnership with Sprinklr across all 4 of our product suites as it drives tech consolidation across its company-wide ecosystem. Sprinklr replaced 2 more competitors this time in the marketing and engagement space, onboarding hundreds of new users to the platform, enabling tighter collaboration between these teams and saving the company significant dollars by replacing point solutions.
The company also added 1,000 new Sprinklr social seats and unlimited listening from Sprinklr Insights. This customer has served the Sprinklr definition partner for our AI product, and we look forward to a continued partnership with them. This past quarter, Deutsche Telekom expanded its partnership with Sprinklr further into the contact center. Europe's largest telco provider, first partnered with us in 2022, when it implemented Sprinklr marketing and Sprinklr service to manage content marketing and social customer service in the German market. As a part of this latest expansion, Deutsche Telekom will move its entire European contact center operation across 11 countries onto Sprinklr's AI-powered customer service platform. Until now, the company's contact centers have each been using its own set of legacy solutions.
A transition to Sprinklr cloud-based solution will enable them to streamline operations and enhance efficiency, while improving agent workflows and customer experiences. The flexible architecture of Sprinklr's CCaaS solution will enable Deutsche Telekom to integrate its contact center ecosystem across Europe and drive its consolidation and innovation strategy across the region. By the end of next year, the company will have more than 40,000 customer service agents across 11 countries working from one unified platform.
Another Sprinklr service win this past quarter is with the company of a different profile than our traditional Global 2000 base. This North American delivery company facilitates same-day delivery of groceries and household essential via its app and website. The company will replace 6-point solutions with Sprinklr's Unified platform. And with help it's over 700 agents to drive a more frictionless experience with customers. Sprinklr Service will power best-in-class customer service to companies' members and shoppers across voice, chat, e-mail, SMS and social in more than 250 metropolitan areas across the U.S. Sprinklr's platform will be integrated into the company's other back-end systems, including their order management tool and will help to future-proof their business by supporting new self-service features like chat and voice bots.
Earlier this year, I told you about an exciting first-of-its-kind win in the public center when Sprinklr was selected by the Civil Services and Government Development Bureau of Qatar as its technology partner to transform how the government provides services to and engages with the public. Today, I have another exciting development in the public sector space. This time, the emirate of Ajman, which is in the northern part of the United Arab Emirates. Emirates leadership's futuristic vision is to transform the experience of its citizens, residents and tourists. For this, the Digital Department of Ajman or DDA has been tasked with transforming the citizen and tourist experience across 17 local government entities. DDA selected Sprinklr as its future unified citizen experience management platform, offering government services seamlessly across social, digital and voice channels to more than 500 citizens and residents and more than 300,000 tourists who visit the emirate every year.
Before wrapping up, I'd like to take a moment to celebrate our incredible engineering team who make holidays possible. Their speed of innovation and dedication continues to differentiate Sprinklr in the marketplace. In closing, we are pretty pleased with the quarter's results and even more excited about what is to come. We are encouraged by the engagement and the momentum we see from customers and the broader ecosystem. We believe that a unified platform, industry-leading AI and efficient execution will set us apart in helping customers unify their teams, consolidate front office technology, increased productivity, lower cost and mitigate brand risk. We remain committed to our vision of becoming the most loved enterprise software company, innovating for our customers, succeeding with our partners, delivering shareholder value and executing for growth and continued profitability. Thanks to our customers, partners and our employees for their hard work and results. And to all our investors, thank you for believing in the vision.
I'll now hand over the call to Manish.

Manish Sarin

Thank you, Ragy, and good afternoon, everyone. As you heard from Ragy, we're pleased with this quarter's solid results. For the second quarter, total revenue was $178.5 million, up 18% year-over-year and above the high end of our guidance range. This was driven by subscription revenue of $163.5 million, which grew 23% year-over-year, also above the high end of our guidance range. Professional services revenue for the quarter came in at $15 million, above our guidance of $14 million. Our subscription revenue-based net dollar expansion rate in the second quarter was 120%.
As we have discussed in the past, the NDE statistic is not something we monitor as part of growing our business, but rather a byproduct, as macroeconomic conditions moderate renewal rates and customer upsells, and as we focus more on new logo acquisition, we expect NDE to decline slightly in the coming quarters. In terms of new logos, we are very pleased with the number of new customers that joined the Sprinklr platform in Q2. This is particularly true with our Sprinklr Service product suite as many of the deals in our Service product suite over the last few quarters have been with new customers. Given our momentum in the CCaaS market and how early we are in targeting this opportunity, we are confident in our ability to add new logos at a healthy clip going forward.
As of the end of the second quarter, we had 120 customers contributing $1 million or more in subscription revenue over the preceding 12 months, an increase of 5 customers sequentially and a 22% increase year-over-year.
Turning to gross margins for the second quarter. On a non-GAAP basis, our subscription gross margins came in at 83% as we continue to drive efficiencies in our cloud operations with total non-GAAP gross margins of 76%. Non-GAAP gross margins for professional services were slightly negative, coming in at minus 2%, but was positive 4% for the first half of the year and ahead of the breakeven estimate we shared last quarter. As we have discussed in the past, we continue to invest in CCaaS delivery capabilities and build out our expertise in that area. We also continue to generate efficiencies in sales and marketing and have shown consistent improvement in sales and marketing efficiency over the last several quarters.
Non-GAAP sales and marketing expense in the second quarter now stands at 41% of revenues compared to 52% in Q2 of last year. Non-GAAP R&D costs increased sequentially in the second quarter as we onboard our annual cohort of new R&D engineers every summer from leading universities in India, but held steady at 11% of total revenue for the quarter.
Turning to profitability for the quarter. Non-GAAP operating income was $21.3 million resulting in non-GAAP net income of $0.10 per basic share. This 12% non-GAAP operating margin for the quarter was a result of revenue over performance, improved subscription gross margins coupled with broad-based expense discipline and is the fourth consecutive quarter of non-GAAP profitability.
Lastly, on the topic of profitability. For the second consecutive quarter, we posted positive GAAP net income totaling $10.5 million or $0.04 per basic share. In terms of free cash flow, we generated $8.7 million during the second quarter compared to free cash flow generation of $1.4 million in the same period last year. Recall on the Q1 earnings call, we had alluded to a large annual payment to one of the public cloud vendors as the reason for expecting negative free cash flow in Q2. However, during the quarter, we were able to renegotiate a set of more favorable payment terms. With this result in Q2, our free cash flow generation during the first half of this year now stands at $23 million, higher than what we had generated during the entirety of last year.
Our balance sheet remains healthy, now standing at $628.4 million in cash and marketable securities with no debt outstanding. Calculated billings for the second quarter were $179.2 million, an increase of 19% year-over-year. Q2 billings benefited from several million dollars more of early renewals than we had anticipated. As of the end of Q2, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was $806.4 million, up 35% compared to the same period last year, and cRPO was $510.4 million, up 22% year-over-year. The strength in RPO is driven by multiyear renewals at some of our largest customers that closed during the quarter as well as multiyear Sprinklr Service deals. This is a testament of the commitment that some of the largest, most recognized brands around the world are making with Sprinklr.
Moving now to our Q3 and full year FY '24 non-GAAP guidance and business outlook. As you heard today, long-term demand trends and engagement for Sprinklr remains strong. However, we recognize that the macroeconomic environment continues to be uncertain. And our current assumption is that the broader macro trends from the last few quarters are likely to continue throughout FY '24. For Q3 FY '24, we expect total revenues to be in the range of $179 million to $181 million, representing 14% growth year-over-year at the midpoint. Within this, we expect subscription revenue to be in the range of $164 million to $166 million, representing 18% growth year-over-year at the midpoint.
We expect non-GAAP operating income to be in the range of $15 million to $17 million and non-GAAP net income per share of $0.06 to $0.07 per share, assuming 274 million basic shares outstanding. The slight decrease in non-GAAP operating income sequentially can be attributed to the seasonal hiring in R&D, whose full impact is felt in Q3 as well as our ongoing investments in Sprinklr Service product delivery. For the full year FY '24, we are raising and tightening both our subscription and total revenue outlook for the year. We now expect subscription revenue to be in the range of $658 million to $660 million, representing 20% growth year-over-year at the midpoint. This is an increase of $8 million at the midpoint, which is greater than the full magnitude of the Q2 beat and the subscription revenue guidance raise for Q3.
As we discussed in prior earnings calls, we have been investing in making our products easier to implement and therefore, accelerating the time to value for customers. In addition, we have also been cultivating a partner ecosystem around delivering our product suites such that we expect our service delivery partners to take on a larger proportion of the Services revenue attached in delivering our products. These transitions have now picked up steam and are happening faster than what we had previously anticipated. As such, we now expect professional services revenue of approximately $30 million for the second half of FY '24, split evenly between Q3 and Q4 so approximately $15 million per quarter.
We also expect non-GAAP gross margin for professional services to be approximately negative $2.5 million in each of Q3 and Q4, driven by investments in Sprinklr Service product delivery as we continue to scale that business. Given this, we expect total revenue to be in the range of $719 million to $721 million for the full year FY '24, representing 16% growth year-over-year at the midpoint. One way to internalize this guide is from the perspective of the 20% subscription revenue growth year-over-year, which is being dragged down by the approximately 13% decline in professional services compared to the full year FY '23.
Similar to last quarter, we have included a bridge slide for our revenue guidance which can be found on the investor presentation currently posted on our Investor Relations website. For the full year FY '24, we are raising and tightening our non-GAAP operating income estimate to now be in the range of $65 million to $67 million equating to a non-GAAP net income per share of $0.30 to $0.31 assuming 273 million basic weighted average shares outstanding. This implies an approximately 9% non-GAAP operating margin at the midpoint. Note the increase of $13 million at the midpoint is greater than the full beat for Q2 and the accompanying operating income raise for Q3.
In deriving the net income per share for modeling purposes, we estimate $24 million in interest income for the full year with $6 million of that to be earned here in Q3. Furthermore, a $6 million total tax provision for the full year FY '24 needs to be added to the non-GAAP operating income range just provided. We estimate a tax provision of $2.5 million here in Q3. And given the performance through the first half of the year, we expect to be GAAP net income positive for every quarter as well as for the full year FY '24, consistent with our comments on the past few earnings calls.
As I alluded to earlier, we had several million dollars worth of early renewals in Q2 than expected. This will impact Q3 billings, which is already our seasonally slowest billings quarter. As such, we estimate Q3 billings to be in the mid-$150 million range. For the full year FY '24, however, we expect billings to grow approximately 18% year-over-year, which would equate to around $780 million for the full year. And consistent with our prior commentary, we expect to be solidly free cash flow positive on a full year basis.
Lastly, I would like to thank all our employees for their dedication and passion for what we are building at Sprinklr. I'm also grateful for the confidence that our customers have placed in us during these uncertain times. We remain focused on building a track record of successful execution and operating discipline across the business.
And with that, let's open it up for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Our first question comes from the line of Pinjalim Bora with JPMorgan.

Pinjalim Bora

And congrats on a very strong quarter. Ragy, it seems like you're starting to close some material CCaaS wins. I want to ask you if AI is becoming kind of a core decisioning factor for customers because you have been investing in AI for quite some time, you have a very strong foundation. But is that becoming, at this point, a decisioning factor for customers, especially in the CCaaS market to choose Sprinklr versus others?

Ragy Thomas

Well, let me -- thank you, Pinjalim. There are 3 distinct reasons that we see when customers do pretty extensive process and pick Sprinklr for their CCaaS solution. The first is the fact that we give them a unified platform with 13 products in it that work seamlessly at the architecture level with each other as opposed to point solutions that they have to buy or acquisitions that other competitors offer not in a unified way. Second is the power of AI in everything we do. And it's not just a smart response or a smart routing, pretty much every component in Sprinklr is built with AI and is brought together to create a better experience for the agent and a better experience for the customer.
Third is very simple on proof-of-concepts demonstrably we're able to show value for the business, we're able to bring the cost of technology down, we're able to improve the average handling time, we're able to improve the time to resolve an issue, and we're able to improve NPS scores. So it's like a triple win. Customers are happier, your agents are happier and your company is happier because it's making more money and saving more money.

Pinjalim Bora

Yes. Understood. One question for Manish. The strength in RPO is obviously palpable. You talked about some early -- or some renewals as well as some large deals. But is there -- I want to ask you if there's a meaningful expansion in the contract durations, which is kind of inflating the year-over-year growth rate? Any way to think about that?

Manish Sarin

Yes. And I think we did call out the fact that, look, our growth in RPO is because several large customers renewal on a multiyear basis. But those are the ones you'd remember from even a few years ago, we had them do multiyear billings. So that hasn't happened this time. We are sticking to annual billings. When I called out on the billing side that there were select customers that renewed early, that was only to make sure that as you think about your Q3 billings, you do take that into account.
But I think macro, if you just step back, we're seeing strength in renewal activity, as shown in the multiyear RPO renewals, RPO numbers as well as our sense around overall billings for the year.

Operator

Our next question comes from the line of Raimo Lenschow with Barclays.

Unidentified Analyst

This is Frank on for Raimo. Congrats on another strong quarter here. I just want to double-click on the new customer addition trends that you mentioned. Have we really started to see the investments made into speeding up the time to value for new customers start to pay dividends? Or is CCaaS really the major driver here in the new customer strike?

Ragy Thomas

I would vote CCaaS is definitely is a growth driver for us. But we have been investing consistently in making the technology more accessible and more approachable and easier to use for practitioners. So as you may recall, we've created an entire new UX design paradigm that we call Hyperspace. We've rolled it out across the entire platform. Number two, we've introduced the concept of Persona Apps, so you just only see the stuff that's relevant to you regardless of all the other powerful things the platform can do. And three, you know that we've been systematically rolling out our offerings in a self-service mode so that a practitioner can go get a hands on key bot and experience it, and then come back and buy the enterprise product to continue using it. So I would say it's both. And I think it's pretty refreshing for the practitioner to get a next-generation UI on their hands.

Operator

Our next question comes from the line of Arjun Bhatia with William Blair.

Arjun Rohit Bhatia

Yes. And congrats on the good quarter here, guys. Maybe I want to pick up on that last point around self-service and ease of use. It seems like you are making quite a bit of progress there, Ragy, to the points that you just called out. But what is that enabling from a business perspective? Can you just talk about -- obviously, we see the new customer strength, but is it allowing you to go after a different type of customer? Allowing you to do more deals in a shorter period of time? Help us maybe understand a little bit more of the business ramification and benefits that you're seeing now that's helped -- or ease of use and implementation has gotten better?

Ragy Thomas

Sorry, let me just understand the question clearly, Arjun. Are you asking what's supporting our growth or what benefits -- incremental benefit we're bringing to the customer?

Arjun Rohit Bhatia

No, sorry, more about what's supporting your growth and how you're able to manage and run the business, drive growth differently now that implementation is easier and time to value is quicker? What does that enable from a growth perspective incrementally?

Ragy Thomas

Sure. So there are 2 factors that are helping us. One is obviously strategy to add voice and get into the broader CCaaS space, which, as you know, is a huge market, right, $800 billion market, which technology is not going to just replace technology. I think it's going to replace and scale the human labor. So I think for the first time, a bigger chunk of that $800 billion, which includes human labor is also applied. So that's obviously, I think, as we disrupt that market, that puts us in a good place to grow. Two is we've been very consistent in articulating that we have a focus on our go-to-market side just fixing the fundamentals and making it easier for our salespeople in the field to understand and sell the solution better. And that's going to take a few more quarters to completely roll out, but we're pretty pleased with the results we're seeing so far.

Arjun Rohit Bhatia

Okay. That's helpful. Perfect. And then Manish, can you touch on the go-to-market leverage that you saw this quarter because we saw a pretty significant improvement in sales and marketing spend. I think the dollars actually went down from Q1. Can you help us understand what's driving that? And should we view that as sustainable? Or is there -- are there some onetime factors in there?

Manish Sarin

[Can] you notice, if you looked at a 4 quarter trend, it's sort of been headed in the right direction. There isn't anything unusual to call out in Q1, all the factors I think we've discussed in the past, we actually have been really aligning the sales team around the core focus areas, Ragy has mentioned before about making it easier to sell, (inaudible) partners in a different fashion as well. So I think all of this is as we try to look at incremental costs that we probably had in the plan, we've been more judicious about spending money than what we've been doing in the past. So nothing unusual to call out. But I think you should assume the savings you're seeing sequentially to sort of sustain.

Operator

Our next question comes from the line of Elizabeth Porter with Morgan Stanley.

Fiona Grace Hynes

This is Fiona on for Elizabeth Porter. I wanted to ask on the dynamics that you're seeing with large customers. We saw $1 million-plus subscription revenue customers grew 22% year-over-year. And so my question is, what are you seeing at the enterprise end of the market in terms of willingness to take on strategic projects? How are conversations around expansion of this end going as we start to look ahead into enterprise budget planning season in the second half of this year?

Ragy Thomas

Thanks for the question, Elizabeth. We -- as we've articulated before, we're seeing a very consistent theme and trend, especially in large -- among our larger customers of consolidating crosspoint solutions into platforms. And this theme of the marketing team or the customer service team not being able to run 10, 15, 20 RFPs and then go higher system integration vendor and then create data lakes. And it's just to our cake. And so there's a pronounced shift to having and wanting let's say, 3 to 4 companies to work together to provide a more complete front-office capability set. And so I think we're enjoying the benefits of being that one of the options to consolidate onto. So when we go and replace anywhere from sometimes 5, sometimes 15 and 20 over the years, different point solutions in different markets. So we're positioning ourselves at the third or fourth vendor and benefiting from that consolidation.

Fiona Grace Hynes

And one follow-up to that. How do you make this transition and start to benefit from these consolidation trends that you're talking about? Are you seeing any changes in the persona that you're selling to? So when you think about the traditional Sprinklr the buyer of the carrier solution is not necessarily the same as the CCaaS solution. And so I'm curious how that's changing the end conversations that you have with the ultimate buyer for who you're selling to?

Ragy Thomas

Great question. So we have been steadily seeing shipped out traditional buyer with the CMO's -- organization of the CMO with our expansion into CCaaS, that's expanded to include the CIO, CTIO organization. So we are more broadly penetrating the C-suite everybody from CMO to a CTO to now the CIO.

Operator

Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Brett Anthony Knoblauch

The multiyear $60 million contract, could you maybe provide a bit more color on that? I guess, how many years -- how much bigger of an annualized value is the new contract relative to the old one? And then more generally, just on the expansion notion, are you seeing your customers expand more so with additional seats from maybe social? Or is it more driven by new product expansion with maybe your CCaaS solution?

Ragy Thomas

Thank you. So in this case, I can confirm that there was a material upsell in it. So this is, again, as you would guess, one of our larger customers who at the end of the term, again, had more to buy and wanted to buy more. So that's the answer to question number one.
Question number two, are they buying more seats and more products? They are buying both. So in this particular case, we continue to believe that we have list price of $25 million to $30 million of product payload that a large company can buy if you want to deploy us across business units and across markets. In this case, they've already bought all 4 product suites and most of our products. So some were in ELA mode. So like we pointed out this time listening is unlimited for the Insights product suite. And so what we're seeing is where the products are not unlimited in the ELA, they're expanding more seats. We talked about 1,000 more seats in social. But it's not restricted to social, it's more seats, more consumption an expanded license. And at some point, we expect these to end in unlimited use for most of our products.

Brett Anthony Knoblauch

Perfect. And maybe if I can just follow up with 1 question. I guess how frequently do you guys -- I guess, do customers do an ELA with you guys or one of the first ELA deployments you guys have done? Or do you see this trend kind of continuing as we go forward?

Ragy Thomas

It's infrequent. That's something that we want to get to eventually. So this is a customer who's been with us for over 10 years. Brett, as you know we -- our sales approach is traditionally and currently being bottoms up. So we like to get in with -- in a market for the product suite, one of our offerings and then build credibility and go bottom up. So it's typically a multiyear journey, and its builds momentum is bottom up success -- is embraced by an executive who sees the overarching ability to unify and get better business outcomes.

Operator

Our next question comes from the line of Michael Turits with KeyBanc.

Michael Turits

Solid quarter. I want to ask some more questions about self-service. So first, a couple, the self-service deals that you've done or where they've taken self-service, is that primarily in land or expand? And what customers -- what have been the customer sizes versus relative to your typical customer sizes? And then I have 2 more details around that same question.

Ragy Thomas

Sure. Sure, Michael. So self-service for us has been a strategy to make sure that we have our defenses lined up, right? To make sure that no one is attacking us from downstream in the long run. In the short run, our focus has been trying to give the practitioner more exposure to the power of Sprinklr get hands on key bot. And you know that we're very, very solidly focused our target ICP, ideal customer profile -- on our ICP, and we've identified 43,000 companies fitting that profile in our target market.
So our strategy has been making these products available for everyone, they can go sign up. but directing our marketing and advertising and outreach only to those 43,000 companies. And we only follow up and encourage when customer is fit our target profile. And 1 of 2 things happen as they come in. Usually, sometimes it's like a small team that wants to try it for a bit, and they can do so. And many times, which we're seeing -- what we're hoping to see and what we're seeing is they try it and they realize that, okay, this is a powerful and easy to use, and they talk to a sales team and buy the enterprise version. We are beginning to see now again, this is as most things strategic like this, it's going to take several quarters, but every quarter, we're seeing increasing green shoots come from this approach. And we're very encouraged by how it's progressing.

Michael Turits

So just 2 follow-ups on that, Ragy, and Manish. Is it possible to tell yet if this is actually reducing your average customer acquisition costs and is it actually reducing the time to deployment for analogous types of build?

Ragy Thomas

Yes. It's too early. Now we've got a few trends kind of going back and forth here. One is, as we get into CCaaS, you know deal cycles take longer because it's a very thorough process. It's -- CCaaS transition is very hard, and they are very -- customer service teams are very risk averse. So it's a much more longer thought out, deliberate kind of RFP, RFI process that takes time. So on the self-service side, we're able to kind of gain some of those momentum, have a deal open and closed within the quarter to offset it. But again, these customers are coming to us in the self service that was trying it out -- tend to be at least on an average smaller in the first deal size.

Operator

Our next question comes from the line of Michael Berg with Wells Fargo.

Michael H. Berg

Congrats on the core. I just wanted to have more of a philosophical view on your guidance. You obviously had a very strong quarter and being raised by more than the -- like you said, and more than the Q3 rate. So maybe what's providing that confidence? Is there anything outside of the strong renewal activity and large deals you saw in the quarter? Maybe just help us parse through what gives you the confidence in the guidance?

Manish Sarin

Yes. Thank you for the question. So I don't think it's any more complex than what you articulate. At the end of the day, if you leave the professional services line item aside, subscription business, it's all driven by the strength in the renewal business, when we do have multiyear renewals, we call it out, and that shows up in our view like it did this time. And it's all driven by the linearity within the quarter. So we have been seeing stronger linearity for the last couple of quarters and what we had modeled, which is part of the reason you're seeing strength in the beats in the quarter and that's giving us more confidence as we look out over the next 2 quarters. And I think that's captured in the guide.

Operator

Our next question comes from the line of Tyler Radke with Citi.

Tyler Maverick Radke

I wanted to just hear how you're seeing things trend so far in Q3. It sounded like some really good execution in the quarter on the renewals and the large 8-figure transaction, but have things kind of been consistent in Q3 versus Q2? What are you just kind of expecting in terms of the large field potential in the second half?

Ragy Thomas

Well, I'll take the first part of it and maybe Manish can talk about the next quarter. Look, the macro environment is just about as uncertain as it was and it has been. So we're not seeing any different behavior this quarter or last quarter than we saw before, budgets are tight. There's more CFO scrutiny and all the good things that come with people being not very sure where the market is going, right, and interest rates are going to be. But I think what you're seeing is like a consistent trickling impact of our better execution and focus on go-to-market.

Manish Sarin

Yes. And just to make sure I understand, was your question, Tyler, are we seeing anything different in the month or so of Q3 that we've been in compared to Q2. Was that what you're trying to ask?

Tyler Maverick Radke

Yes. Sorry. So I guess I'll rephrase the question slightly to make it more specific, and apologies for the background noise. But really the question was just you saw some really good large deal activity in Q2. I know there's been a lot of noise around RPO and current RPO because of the multiyear renewal cycle. So I'm just curious if there's any things to call out in terms of RPO volatility and just how your overall large deals you're expecting those to land in Q3, Q4? Just anything that would be noteworthy to call out as we're building our models.

Manish Sarin

Yes. Thank you for that clarification, Tyler. But there's nothing that I would call out at this stage. We -- as I look at the quantum of business that we're booking, it sort of seems in line with what we would expect. It's -- like any enterprise software company, we are pretty back-end loaded. So I wouldn't make any broad assumptions around how Q3 and Q4 would land. But there is nothing that we are seeing today that would give us any cause for concern. It's sort of along the lines that we would expect. So steady is what I would say.

Operator

Our next question comes from the line of Austin Cole with JMP Securities.

Austin Cole

Ragy, so I'm wondering if you just kind of look back on this more recent AI wave we've seen over the last 6 months or so. And you say that Generative AI is given your proprietary AI wings. Do you think that there's kind of more recent excitement around AI has accelerated and boosted Sprinklr AI efforts or put more pressure on Sprinklr kind of competitively overall? And then over the long term, I mean, do you see some of this -- to what degree is this going to be table stakes? And then how is Sprinklr thinking about being really differentiated over the long-term?

Ragy Thomas

Thank you, Austin. To answer your question, look, I think there's a lot of hype and excitement. And we've all seen this movie many times. Usually, the hype waves settles and then the real deal starts. Well, we've -- we're finding ourselves is having this blessed opportunity of being able to now talk about AI and have people appreciate it. And the awareness that our customers and the buyers have by Persona is now half of the power of what AI can do. And that makes articulation of our capabilities and our differentiators much easier than it used to be. So net-net, we're seeing positive impact on deals with the excitement around AI.
Our strategy has not been to introduce a new AI product or to have a new AI feature because for the last 5 years, we've bet the farm on the idea that we are the purveyors of unstructured conversational data, and there is no way to read and understand and speak back in over 100 languages to billions of people without using AI.
So we think it is table stakes, we think there are different approaches to jumping on the AI wave. And one approach is to say, look, it's going to change everything. We're going to go into a DNA and make sure that it's AI powered, and that's how we think -- the other one is to say there's an opportunity for some incremental dollars or a new product. We've taken the former. We stand by it.

Operator

(Operator Instructions)
Our next question comes from the line of Matt VanVliet with BTIG.

Matthew David VanVliet

Thanks for taking me in at the end. I guess as you look at the contact center opportunity and really broadening it to obviously all of service, how much is that still being driven by high demand from the social media side and that's sort of the entry way in and the knowledge of Sprinklr and all that you can handle versus seeing sort of net new lending opportunities that are more of a pure-play like-for-like replacement of an existing contact center out there?

Ragy Thomas

Matt, excellent question. I'm glad you asked it. We are doing more of real contact center RFPs in proving ourselves to be complete unified replacement solutions for legacy players, more so in the last 2 quarters than we have ever done before. So we're kind of coming into our own as a disruptor with the ability to kind of show value out of the gate. That was not true, I'd say, maybe 2 quarters ago, that was kind of sort of beginning to play out a quarter ago and last quarter, many of our deals which is independent voice solutions, doing an RFP, comparing us to the top 5 players in that space and choosing us. So increasingly, so they are seeing us as a pure CCaaS unified solution as opposed to somebody with social and who can expand to do other things.

Matthew David VanVliet

Very helpful. And then just quickly on some of the growing SI partnerships you've had out there. As they look at this broader portfolio of products that they can go in and help customers really make traditional transformation. Anything you're doing on your end to even, I guess, place a greater emphasis on those partners really leaning into the entire sort of co go-to-market there that you'd call out for us or maybe its on the horizon that could accelerate that business even more?

Ragy Thomas

We have been investing in our partnerships generally and specifically a lot more on the CCaaS side. So companies like Accenture, like Tech Mahindra, who are established players in the contact center space, see this as an opportunity to take the partnership to the next level. I got to admit, though, it's very early for us, right? We're a disruptive. We're building a different kind of -- we're taking a different approach of unifying it. So there's a lot of innovation and a lot of sort of velocity in the change that's happening. So it is going to take us a few more quarters to really even get to documenting everything and enabling the partners. It's very much underway, but I wouldn't count on any other results.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Ragy Thomas

Well, thank you, Doug, and thank you all for joining us today. Again, I'd like to thank our employees, our partners, and most importantly, our customers for their trust and continued business. We look forward to updating you all again soon as we continue this exciting journey of creating a new category that we call Unified Customer Experience Management and building an enterprise software company, we hope our customers love. Thank you very much, and have a good evening.

Manish Sarin

Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.