Q1 2022 C3Ai Inc Earnings Call
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Yes.
Good day, and thank you for standing by welcome to the CTG AI first quarter fiscal year 'twenty to 'twenty two earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
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Now I'd like to turn the conference over to your first speaker today, Mr. Paul Phillips, Vice President of Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to <unk> earnings call for the first quarter of fiscal year 2022, which ended July 31.2021.
This is Paul Phillips, Vice President of Investor Relations of <unk> and with me on the call today are Tom Siebel, Chairman and CEO and Dave Barter CFO.
After the market closed today, we issued a press release with details regarding our first quarter results as well as a supplement to our results both of which can be accessed on the IR section of our website at IR Dot <unk> Dot AI. This call is being webcast and a replay will be available on our IR website. Following the conclusion of the call.
During today's call, we will make statements relating to our business that may be considered forward looking under federal Securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date, we disclaim any obligation to update any forward looking statements or outlook. These statements are subject to a variety.
City of risks and uncertainties that could cause actual results to differ materially from expectations for further discussion of the material risks and other important factors that could affect our actual results. Please refer to our filings with the SEC also during the course of today's call. We will refer to certain non-GAAP financial measures a reconciliation.
<unk> of GAAP to non-GAAP measures is included in our press release finally at times in our prepared comments and responses to your questions. We may discuss metrics that are incremental to our usual usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to <unk>.
This additional detail in the future.
Let me turn the call over to Tom for his prepared remarks Tom.
Okay. Thank you Paul and good afternoon, everyone.
Most pleased to provide you an update on our first quarter results and provide some comments on the state of the business as we see it.
We posted another set of strong results in the first quarter with.
We will continue to make great progress in solidifying our position as the pure play enterprise AI application software company.
Our progress continues as planned on track.
Our products are powering some of the world's largest enterprise AI application deployment.
As we extend our production footprint across industries and regions globally.
Our first quarter performance was a strong start to the new fiscal year.
Let's look at some of the financial and business highlights total revenue for the quarter was $56.0 million up from $45.0 million a year ago, an increase of 29% year over year.
Subscription revenue was $47.0 million up from $42.0 million, one year ago, an increase of 29% year over year.
Non-GAAP gross profit was $49.0 million or <unk>.
78% gross margin compared to $32 million gross profit of 75% gross margin a year earlier. This was an increase in gross margin.
Of 35% year over year.
Our remaining performance obligations or <unk> was $296 million compared to $276.0 billion a year ago, an increase of 6% year over year.
Non-GAAP <unk> was 357.3 million compared to 279.5 million a year ago, an increase of 28% year over year.
We ended the quarter with 89 enterprise customers, an increase of 85% year over year.
As we have previously discussed historically, our business has been characterized by quarter to quarter Lumpiness due to the substantial size of our average order value.
Now as <unk>.
As applications sales become an increasingly large part of our revenue mix roughly 50% of our subscription last quarter in Q1, our crude from application software.
We are increasingly.
Offering lower priced high value products like <unk>, AI, CRM Nx market out and as we've discussed we've been diversifying our distribution model to complement enterprise selling with tele sales distributors market partners and direct market place Shelly.
While we have not yet fully eliminated the lumpiness from our business model. We have made great progress with average subscription total contract value of shrinking from $18.0 million in fiscal year 19 to $13.0 million in fiscal year 'twenty to $9.0 million in fiscal year 'twenty one.
We have $9.0 million in the quarter ended July 31.
My expectation.
Does this average contract value will continue to increase going forward as we continue to add diversity to both product mix and our distribution model.
Our average revenue per customer in the first quarter was $535000.
Let's talk about our market partner ecosystem, we significantly expanded.
This partner ecosystem in Q1, entering an important highly strategic alliance with Google cloud to allow the entire global cloud global sales and service organization to cross sell and service the entire family of sheet three AI applications globally.
The two companies will tightly integrate <unk>.
Three AI and Google Cloud technologies and go to market initiatives with the effect of accelerating enterprise AI adoption.
The comprehensive alliance includes coordinated software development road maps.
Tight product integration as well as joint selling joint marketing and joint customer success programs at global scale.
<unk> AI and Google Cloud will regularly synchronize our software engineering roadmaps and activities to ensure that the Google cloud, Google cloud applications, and the <unk> suite and AI enterprise applications are fully optimized and tightly integrated the companies will engage in.
Significant ongoing marketing development activities, and we will coordinate sales and service activities globally to assist small medium and large enterprise customers to accelerate the adoption and time to value of their enterprise cloud.
<unk> AI applications. We expect this partnership will dramatically accelerate the adoption of matter prize AI applications across all industry segments and will prove an additional growth engine for <unk>.
Microsoft.
Our partnership our strategic partnership with Microsoft continues to expand to date, we have closed more than $200 million.
Okay business with Microsoft our joint teams are currently working a pipeline of more than $350 million in specific opportunities recent wins with Microsoft include the United States Missile Defense Agency Cargill ball comments.
I'd say, it's air force rapid sustained the office.
And we continue to make great strides in the market in Europe, and North America and in federal and it is.
Very very important relationship.
C. III AI CRM, we are seeing increased interest in the <unk> AI CRM family of applications that address the currently installed investments of CRM systems estimate and these investments are estimated to be well in excess of $500 billion. When you think about it.
C. Three CRM sales and software sales this year will be $120 billion. This year alone. So we put some number of years of investment so.
Salesforce Siebel.
Dynamics, Accenture Pwc, Deloitte et cetera. This is.
There's no way you don't get to a number greater than a half a billion dollars installed half a trillion dollars installed base that was <unk> CRM companies can easily upgrade their existing salesforce deployment.
<unk> deployments Siebel deployments service now Veeva.
CRM and retain those investments, but at the same time make them fully predictive.
Including now precise AI revenue forecasting AI product forecasting next best product next best offer customer retention and customer satisfaction management.
As you can imagine we are seeing.
Really substantial interest from the largest integration partners that see this as an opportunity to upgrade and add additional services into their existing CRM installed base and so you can expect from this to see additional market partner announcements in the U K in this.
Area in.
In the coming quarters.
Customer momentum.
We expanded our enterprise AI footprint in the first quarter and defensive chemicals in financial services manufacturing oil and gas energy sustainability and utilities.
We have new quite significant enterprise production deployments went live at Lyondellbasell shell, Angie and Con Edison.
We initiated new enterprise AI projects with Baker Hughes Ball Corporation Cargill comments Angie.
Koch industries, the missile Defense agency more scope and standard chartered bank.
And we significantly expanded business with Cargill, Lyondellbasell and standard chartered bank.
And of course the quarter.
We continued to advance our product leadership position in enterprise AI in the first quarter. We released two major upgrades to the <unk> suite and we have now released 40 enterprise AI software applications into production release for banking for manufacturing for telecommunications.
Public sector energy utilities defense and intelligence. We also released a new version of <unk> Energy management solution that helps enterprise control and mitigate greenhouse gas emissions and manage energy consumption and energy costs.
And we launched <unk> etch market are no code AI.
An analytics platform that anyone can use and continue to deliver new features to enhance and simplify the user experience.
We gained.
Quite a bit of additional industry recognition in the course of the quarter <unk> was named.
The leader in the IDC Margaret Scape worldwide for industrial Iot applications.
The <unk> three <unk>.
IDC marketplace position Ctrip.
As the leader.
For being a play as our AI platform provider importantly, our customer at the Airforce rapid sustained mid office was selected as a finalist for the constellation Supernova Abe AI and data award. This is the highest honor in enterprise AI.
Excellent.
This is an award that was won last year by <unk> AI customer shell for its <unk> enterprise AI accomplishments in production use.
We continue to grow our enterprise AI production application footprint through both new customer acquisitions and expanded use by existing customers.
We had 101 discrete applications in production at the end of the first quarter up from 67, a year earlier.
Operating at massive scale as of the end of the first quarter.
The <unk> AI suite applications were integrated with roughly 850 unique enterprise an extra price data sources, we are processing $8.0 billion predictions per day, we're managing to.
<unk> 24 in excess of 24 trillion data elements and evaluating in excess of 33 billion machine learning features daily.
We've been doing a lot of work as you have seen in the media and online in brand awareness and we considerably extended our brand leadership for enterprise AI, capturing both the number one and number two internet search positions for that category in the first quarter.
And we exceeded the next closest competitor by a factor of three to one.
<unk> digital transformation, it's Stuart I want to make a few comments about that important initiative, we continue to invest in.
Important University partnerships at UC, Berkeley University of Illinois, Urbana Champaign Princeton.
Carnegie Mellon Stanford University of Chicago, and K Th in Sweden, with the C. III AI digital transformation Institute.
In the first quarter, we announced and funded $8.0 million. Okay. At an initial cash awards to support 21 kind of ground breaking research projects focusing on using the <unk> platform, Okay, and the developing new AI techniques to advance.
<unk> energy efficiency and lead the way.
Lower carbon.
Higher efficiency economy.
We have been doing a lot of work really in focusing and leadership and sales leadership in the company importantly, with the addition of former Vmware and SAP Executive sound Alka Rod as President and Chief revenue officer to lead the global expansion of <unk> sales and customer service.
<unk>, Sam is an experienced and proven sales executive with a long track record of building and managing highly effective sales and customer service teams. Sam previously served as senior Vice President and global head of sales for Vmware Tansu portfolio of applications that was roughly a billion.
Our software business and prior to Vmware SAB upheld a number.
Senior executive positions at SAP.
We are human capital, we continue to be just extraordinarily fortunate in the quality of human capital that we're able to track from bleeding universities and from other organizations globally.
In the first quarter believe it or not we received just shy of 6200, I'm, sorry, 9200 employment applications and from that I think we interviewed 500 people and added 54 net new employees.
People are as bright and experienced as they get.
We ended the quarter with 628 full time employees.
As you can see on the Internet <unk> continues to be ranked amongst the best places in the world to work by Glassdoor.
So in summary, the enterprise AI application software market is rapidly growing we see accelerating interest in our applications across industries geographies and marketed Margaret segments.
We are aggressively investing to extend our product and technology leadership to expand our market partner ecosystem and the associated distribution capacity.
That comes along with that ecosystem.
As we continue to execute.
In delivering high value outcomes for our customers.
<unk> are increasingly well positioned to establish a global leadership position in enterprise application software Bottomline our performance in the first quarter was strong across the board and we're planning for continued growth in this year and accelerating growth next year overall, I would say that <unk>.
You said the company is exactly on track with the plan that we laid out for you during before the IPO and during the IPO and as updated in the past two quarters I believe the company has never been better positioned to achieve its objective of establishing a clear market leadership position.
And in enterprise AI applications software globally, I will now turn this over to our CFO, David barter for more color on the quarter David.
Thank you Tom.
We delivered another strong performance in the first quarter with revenue and profitability that exceeded our guidance.
We ended the quarter with a healthy contractual backlog.
It provides us with meaningful revenue coverage and it supports our growth ambitions.
Revenue.
Was $56.0 million, an increase of 29% year over year.
Description revenue was $47.0 million, an increase of 29% Europe over a year.
This level of growth represents a substantial increase.
From the fourth quarter subscription revenue grew 17% year over year.
Professional services revenue in Q1 was $9.0 million subscription.
Revenue represented 88%.
Total revenue in the quarter.
This is an increase of six percentage points from Q4.
Continue to expect our mix of subscription revenue to trend in the high 80% range.
Our revenue growth was highlighted by continued diversification and broad based strength in our industry verticals.
Five industry verticals each contributed over 10% of our revenue this quarter.
This includes the financial services industry vertical, which grew 45% year over year.
Geographically our revenue diversification also improved during the first quarter revenue from customers in EMEA and APAC grew 37% year over year and represented over 30% of our revenue.
From a backlog perspective total remaining performance obligations were $304.0 million up 6% year over year incurred <unk>, which we expect to recognize over the next 12 months was $145 million, an increase of 10% from a year ago.
We ended the quarter with an additional $66.7 million.
In backlog from contracts with the cancellation rate when combined with our GAAP. Our Apio. We ended the quarter with non-GAAP <unk> of 357.3 million, an increase of 28% from a year ago.
As I noted last quarter, our non-GAAP <unk> does not include any backlog associated with Baker Hughes that does not have an existing <unk> customer contract.
Baker Hughes commitment at the end of the first quarter, representing an additional $208.0 million of backlog.
In the first quarter total revenue from our partnership with Baker Hughes was $17.0 million up 69% year over year.
As a reminder, a portion of this revenue is reported as related party revenue, whereas in customer contracted directly with Baker Hughes for where the revenue relates to Baker Hughes as a customer.
The total amount included in related party revenue was $15.0 million in the first quarter.
Turning to expenses and profitability I will be referring to non-GAAP metrics, which excludes stock based compensation expense and the employer portion of payroll tax expense related to stock transactions a GAAP to non-GAAP reconciliation is provided with our earnings press release.
Gross margin in the first quarter was 78% up 340 basis points from a year ago.
The margin expansion reflects the strong growth of our subscriptions subscription.
Subscription gross margin in Q1 was 81, 8%. This compares favorably to Q4 when margin was 87% and a year ago. When it was 76, 5%.
Persistent margin expansion illustrates the leverage generated by our operating model.
Operating expenses were $62.
$6 million compared to $32.0 million, a year ago, reflecting planned strategic investments to drive our long term growth.
Operating loss was $29.0 million in the first quarter and better than our guidance of an operating loss of $28 million to $35 million, we continue to invest thoughtfully in head counting programs to accelerate our revenue growth.
Turning to our balance sheet and cash flows we ended the quarter with $1.09 billion in cash cash equivalents and investments.
We generated positive operating cash flow of $1 million in the first quarter and with capital expenditures of $1 million free cash flow was breakeven for the quarter.
Deferred revenue grew to $108.0 million up a very healthy 33% from the fourth quarter.
It's important to note that two deals closed in the first quarter included a structure and billing terms that led to less deferred revenue than our typical deal.
All in all Q1 nicely built on a very strong fourth quarter and supports our confidence for the remainder of the year.
Turning to our guidance for the second quarter and the full fiscal year in.
In Q2, we expect total revenue in the range of $56 million to $58 million, representing growth of 35% to 40% and an acceleration in top line growth from the first quarter and prior fiscal year.
We anticipate subscription revenue mix will continue to trend in the high 80% range.
We expect to make growth investments and anticipate a non-GAAP operating loss in the range of $30 million to $37 million.
For full fiscal year 2022.
We continue to expect revenue in the range of $243 million to $247 million.
Representing growth of 33% to 35%.
With a focus on making thoughtful growth oriented investments over the balance of the year.
To accelerate our growth, we anticipate a non-GAAP operating loss in the range of $107 million to $119 million.
In summary, we delivered first quarter results that were above our guidance.
With healthy sales activity, we believe we are well positioned to meet the increasing demand for our technology from customers, who realize significant economic benefit from deploying our solutions and remain optimistic about our ability to penetrate a very substantial opportunity over the long term.
Thank you for joining today's call now I'll turn the call over to the operator for questions.
Operator.
As a reminder to ask a question over the phone lines. Please press star followed by the number one on your telephone keypad again that is star then the number one do withdraw your question press the pound or dash.
And maybe also ask the analysts to limit yourself to asking one question and one follow up each one of them. Thank you.
Your first question comes from the line of Michael <unk> from Keybanc. Your line is open.
Hey, guys.
Wanted to ask you Tom about the diversification.
Down market and to more of a run rate business that you discussed sounds like you've made good progress on reducing the tcl.
And <unk> excuse me.
Can you talk a little bit about what youre doing to get yourself. There are adding more people you've talked a little bit about partnerships and how much progress you're actually making with X market how to get you. There also.
Thank you Michael I think a lot of it is really we're seeing we.
We saw a dramatic increase we're seeing an increase in application software versus platform.
As.
A component of our revenue mix and the applications.
The application sell for.
Substantially less money in the platform does so that's a big contributor.
At smart.
As you know is making a positive contribution to it but I really would expect to see that kick in.
In the fourth quarter of this year and next year and getting into big numbers.
But you know.
I think it's mostly a move towards you know.
Applications are what is moving the moving the needle on.
Bringing the <unk> down and it has come down substantially against contract a couple of years ago was $16 million average TCE and last quarter. It was four and a half so we're making good progress great.
Great. Thanks, Tom and then Dave a couple of comments on the always fascinating RPI calculation. So RPM.
The GAAP, our IPO just declined slightly sequentially and then if I add all the pieces together adjusted total did also but the one that looked like it was up sequentially was that cancel piece, which I think is most of the government. So can you talk about what the puts and takes are on those different components of IPO.
Okay.
Absolutely Michael and thank you for your question Youre right. When we think about structuring our deals. We do include that cancel portion because it is a right and it's a piece of flexibility that with the literature. It gets carved out of GAAP and so we find the GAAP ARPA was an incomplete measured which is why we provide you with a non-GAAP <unk>, which increased 28%.
In terms of the adjusted <unk>, which includes the Baker Hughes component you might remember that that's a five year commitment so when it first signed.
The step up and then it amortize over time, which is why that is not increasing when you think about the adjusted our view.
So the non-GAAP IPO really as the measure you should look at because it's reflective of our commercial activity.
Right.
The cancel piece that I'm, sorry to interrupt.
This is the cancel a piece that went up really nicely sequentially from 51, it looks like up to <unk>.
66, if I do the math, but is that does that expresses some strong government contracts.
Michael Hi, its Tom those are almost all those are exclusively nongovernment the.
The government contracts are almost by definition kind of 12 months in duration.
Even even if it's funded for multi years that kind of a parts era vocal of nonrefundable is only 12 months at a time.
So the cancel deals are tend to be where we do.
Three or four or five year transactions with a large.
Private sector Corporation, where.
If it's not going well after the first year they have the right to counsel and Michele you can be certain that we have.
Every incentive to make sure that customers I always satisfied at the end of the first year.
And so there's almost no public sector of it.
Okay. Thanks, Tom Thanks, David.
It might be you raise a great point, when we're signing multiyear federal contracts, that's over and above this number.
That's adequate.
That's not that's that recorded here at all and so we actually got quite a few of those where we have multi year federal agreements.
And because the way that the GSA.
But you know those contracts work.
We.
We don't report that at all so that's something that would be on top of anything that we've reported.
Got it.
Thanks, David.
Thanks, Mike.
Your next question comes from the line.
Mark Murphy from Jpmorgan Your line is open.
Yes, Thank you very much and I'll add my congrats.
Tom.
I wanted to ask you about the Google cloud.
Our relationship and just whether you're expecting that to appeal to a different type of customer.
Because I think we're.
Where the Google Cloud platform has a different architecture, there's more private cable.
Larger pipes, they can absorb more traffic there is more local points of presence.
Just wondering if it fits a different need maybe certain vertical or machine learning models that are maybe a little more demanding in some ways.
Well you know this Thomas Crane has really changed the <unk>.
Nature of Google cloud in a big way as you're well aware.
They've gone from maybe 400 salespeople.
A couple of years ago, who were kind of in middleware salespeople to order of 4000 salespeople today and these are kind of experienced enterprise sales men and women.
Their focus is very much on the enterprise.
So I don't think it's that different and it's just the Thomas has made a decision a very concerted decision to approach the market in a different way so rather than the other hyperscale.
And rather than sell Cpus seconds, and storage hours, which.
They have.
The argument that I wont go into and I'm not really qualified.
They argued successfully that what they do is technically superior to other people, maybe it's true I don't know, okay, but rather than rather than compete based upon speak speeds and feeds they've made a decision they're going to compete based upon applications. So they're gonna be shy stochastic after administration of the supply chain.
Are there going to be selling.
<unk> network risk besides anti money laundering fraud detection, what have you and that's just how this is how they are positioning the company as to deliver of turnkey solutions.
And we're very fortunate that they decided to partner with us in that in that effort with this gives them kind of a unique position in the hyperscale market. Okay.
Hyperscale market, where they're selling turnkey applications and everybody else is selling CPU seconds now. The net result of these applications is when they're up and running they do nothing but consumes gpus <unk> and storage hours, but it's a you know it's I think we're seeing a changing dynamic in the hyperscale.
Mark you might want to take a look at I think that's what's going on.
Okay understood and then as that.
A quick follow up.
There is a comment regarding the Microsoft relationship that you've closed deals worth over $200 million.
To date, obviously, a great accomplishment and I was just wondering maybe maybe David or Tom you could clarify.
Is that a specific reference to the CRM use case.
That you mentioned with dynamics in other systems or is that all of the Q3 deployments of any product that are that are running on azure and if you could just clarify what is that is that $200 million sitting in the ERP O balance.
Some of it is most of it is first of all it is not specifically CRM.
Mark Okay. It really all of our application support Azure okay.
Microsoft has been enormously supportive and providing technical support to make sure. We take full advantage of all the Azure resources. They are a great partner.
Very small component of it is salary.
And it's these are commercial applications. These are federal applications.
Supply chain.
<unk> maintenance this is kind of bread and butter stuff and most of it is sitting in our payout.
Got it thank you.
Your next question comes from the line of Sanjay Singh from Morgan Stanley. Your line is open.
Thank you for taking the questions Tom what's this sort of shift towards and applications focused strategy.
Versus kind of the <unk> suite as the business shifts more towards application.
What does that imply in terms of future revenue growth.
I look at the growth in your in.
The number of applications is up really solidly I think 50% plus versus your RPM growth of in the high Twenty's does that mean that over time, we should see RPM growth.
Sort of converged to the growth in sort of the application sales that you're sort of seeing.
Okay, we're kind of keep that there's kind of some analysts' maps here that I can't quite keep up with okay, but let me. So Sanjay first of all this our emphasis on applications is not new.
No. There is no change here at all okay. So we've been selling I mean, you saw you will recall during the IPO Road show I was leading with applications applications for four.
Yeah.
Utilities oil and gas companies manufacturing companies.
Actual services companies, what have you and so theres no change in our ambition, we sell both applications and we sell the platform.
And we kind of sell whatever the market whatever the market wants that this quarter and I wish I could give you guys. Some guidance, okay got it going forward, but we took a hard look at the data.
Sure.
Yesterday in anticipation of kind of this question of what we're going to expect to be applications versus platform in coming quarters.
It just jumped around so much from quarter to quarter that we can't tell you that but but there is no no change in emphasis in applications on our part okay, where we've always led with applications.
There is certainly a change on the part of Google's part and it just happens to bode very well for us.
It makes total sense, Tom maybe a follow up question on the Google partnership.
How should we think about that as the opportunity as this is about going for net new customers or is there a certain percentage of the 80 or 98 enterprise customers that you have today that our Google cloud customers and any sort of sense of what the overlap is between Q3 and and Google within your current.
Customer base.
They are relatively small a very small segment of our existing customers are good customers. Google as you know is number three in the market too.
Ws and.
And as Europe, but they are by far the most rapidly growing.
And so and they're closing some very large accounts like Walmart and Deutsche Telekom and others and you can say from my perspective. This is really a focus on this is our focus on net new customers for us.
From them is a focus on both net new customers.
And.
Providing our customers the applications they want to consume the commitments they've made to Google.
It makes perfect sense. Thank you Tom.
Your next question comes from the line of Brad Sills from Bank of America. Your line is open.
Hey, guys. This is Adam on for Brad Congrats on the quarter here.
So just something we've got partnership also.
Can you guys share any expectations you have in terms of that being all that kind of stuff you mentioned that the focus is on net new just now but within the applications that you guys provide do you expect it to benefit more towards the applications are towards the sweet or how should we be thinking about the benefits of the partnership.
We'll be leading first of all.
We've been working on this for.
The Guy who runs sales.
At Google and the.
Rob Enslin and the person who runs sales here Sam Alcoa, our colleagues from Sap's. These guys know each other really well.
And we've been working on aligning of the sales organizations across industries across geographies and focusing on target strategic accounts. So those are pretty well orchestrated and.
We will most certainly okay, leading with applications, but where we're getting it at a large automotive companies or large financial service institutions will you will they want a license the platform absolutely and that will be available.
Google's bag to sell it or will jointly sell it with them, but this is a.
This might be an inflection point in the Hyperscale market.
Got it.
And then just as a follow up is there any commentary you can provide on some of the critical you guys kind of called out financial services in the prepared remarks.
But are there anything to call out.
Anybody have any data on our distribution to just hold on.
I think actually have this data right here just give me a second.
It's pretty high.
Yes.
So.
Yeah.
Well I can't see it by percentages.
Yeah.
Yeah, it's pretty it's pretty highly diversified across <unk>.
Telecommunications High Tech life Science, Aerospace and defense manufacturing financial services utilities oil and gas.
Yeah.
Yeah, I don't see what the percentages are here, but it was something.
It used to be 100% utilities, not too long ago, It's got a long way what do I have it.
Diversity.
Percentages.
Okay. So youre looking at roughly 40% manufacturing, 7% aerospace.
3% utilities, 3%.
This was 27% of oil and gas, 22% High Tech and then we're just got to make any inroads now into.
Life Sciences.
7% aerospace.
So that's what it looks like today.
Awesome. Thank you.
Your next question comes from the line of <unk>.
J Hynes from Canaccord Your line is open.
Hey, Thanks, guys congrats on the quarter.
Tom I wanted to ask about <unk>.
I mean, the commentary this quarter seem to suggest an uptick in activity there maybe.
Maybe even more interestingly on that on the Si partner side can you just talk about what youre seeing with the CRM FERC and I'm curious like is there any installed CRM platform that youre seeing particular traction with any any color there would be helpful.
Well the CRM installed base here is quite large okay and everybody wants to go predictive okay. There's kind of two ways to do that you know you can you can you know you.
You guys do the math, but theyre not but it's no way it can't be less than a half a trillion dollar market.
And everybody wants to go into predictive and they've had two ways to do it you can rip and replace or you can add on top of it. So the way that our share on product works. It sits on top of dynamics on top of Salesforce on top of sequel on top of it on top of Aviva and it installs very.
Quickly it aggregates those data and then allows you to aggregate any other data you want about the market, okay, and those data that you're gonna aggregator like three or four orders of magnitude more data you have a record in the CRM system Econometric data stock prices MLP news and help you out in social media NLP on analyst report.
MLP on.
Yeah.
On.
Annual reports and financial statements.
Hum.
GDP growth rates unemployment rates commodity prices as it relates to that industry maybe its.
Corn and beans, as it relates to AG and their rehab, whether you know.
Rain.
Or is it oil and gas is going to be.
Transportation travel and transportation, maybe it's Jed hey, but when we aggregate all of these data we can build very precise learning machine learning models.
That you know for revenue prediction revenue forecasting product forecasting customer churn and what have you. So we are seeing a lot of interest amongst the same partner ecosystem that we've put in place that you might recall it simple system. So we know these guys pretty well and they see this as an.
Upgrade all of their existing applications. So keep your eye on this space a J. This is going to be a big business for us and.
We're not going to be really what we think what we're doing is entirely complementary to salesforce dynamic siebel.
I guess the customers, where they want to go quickly and it gave us the system integrators and opportunity to generate business now in a way that provides enormous value to their customers youre going to see all show that we have re and bad at it I'm not going to pre announce it now okay, but we have.
Fundamentally reinvented, okay. The human computer interaction model as it relates to CRM and when do you see it I think you'll be quite impressed and I've been we've been working on this and I personally have been working on this really hard and it's this is going to be a bigger business than I thought.
Yeah, let's look forward to that sounds interesting.
David as a follow up to you do you have a growth rate for current non-GAAP RVO.
I don't have a breakout of current non-GAAP our view.
Okay, because it seems like that cancel backlog portion, which is by nature, a multiyear is increasingly contributing to non-GAAP RPI. So it would be helpful to get a view of that.
At some point so thank you guys.
Back in the queue.
Thanks Steven.
Yeah.
Yeah.
Yes.
Your next question comes from the line exit Covid.
From Deutsche Bank. Your line is open.
This is Dan on for Patrick.
Congrats on the quarter.
You guys said earlier in response to a question that.
<unk>.
Average contract size is declining.
Because youre selling more applications as opposed to platform and that makes a lot of sense. I guess my question would be on that is.
I guess kind of two parts. One is is that leading to more attraction with smaller customers like absolutely smaller businesses or is it still primarily very large businesses that are buying.
Enterprise apps or has there been any in that move toward the selling more applications has that led to any more deal kind of down market at all and then two I mean, I guess can you kind of comment on you said in response to another question you mentioned that.
It has not been a change in strategy. So I wonder if you can comment kind of why you think youre seeing that shift.
Colin why are we seeing what shift.
Smaller customers.
Shift toward I guess more application and less of the platform.
Well, that's what we lead with applications I mean, that's always the way that it's always the way the sales cycle begins with solving a business problem.
And whether it's anti money laundering cash management gastric optimization of supply chain customer churn or all of it.
There is probably a business problem with Lee with application and an application might sell list price for an application might be like a half a million dollars a year now.
And then what happens is we'll get involved in a pilot and those aside they want one or two or three applications as they might license I think our average contract I think we've disclosed this is like.
Like order of 36 months or something okay, plus or minus something okay. So then sometimes during the course of.
Finding what are two or three applications. They decided they wanted to build 12 and then they license.
The platform also and they want to license the platform for.
25 drill out versus your 50 developers so for them. This is multiple years. So what would that started out as a transaction that was going to be like a million and half dollars turns into 39. So this is how it happens. So we did let the map and at what you know however, the customer wants to buy it now there is a customer list here someplace and yes, we are.
Yes, we are absolutely selling the smaller customers.
There's no question about it.
We used to only sell to companies like maybe it wasn't.
Well that shell there wasn't bank of America.
Didn't we didn't we didn't we didn't call on them, okay, but here, we have relatively small businesses by our standards would be places like Morris go ball.
Spears stone skill yen cerebral edge.
Seed.
And so we're absolutely seeing you know that you were not.
We used to be in the business of just elephant hunting.
Now we're out Alvin hunting deer, hunting, and we're squirrel hunting and in a pretty big way at global scale.
It makes sense. Thanks.
Yes.
Your next question comes from the line of Jack Andrews from Needham Your line is open.
Good afternoon, and thanks for taking my question.
In light of the Google announcement, and just other relationships you have with companies like Microsoft and Snowflake could you just update us in terms of what type of technology vendors do you feel are natural allies for you versus maybe other types that you would be with potentially more competitive.
Our natural allies surely be all the IPO hyperscale.
Natural allies, who would be.
You know a lot of the people who make component tree.
But working with smart they'd like Snowflakes makes a platform independent.
Hum.
Storage system and that's certainly.
Complementary to us I think companies like who make we didn't have products that compete with us like like auto ml I mean, we partner with AUO, we partner with data robot I think that we partner with data robot at shell and so people will get into our auto ml or they can instead of robots auto ml.
Data bricks are many of our customers use data break so we partner with them. So I think the component providers are.
Are you individually.
Potential partners I don't do they look like distribution channels no. Okay, I don't think they do.
The you know the real competitor, what we do are all those components in the aggregate.
And you know Jack where the it organization.
Decides that they want to build this project themselves in one of these kind of multi year multi $100 million science projects, all of which seem to come crashing down after a few years.
So.
Yeah.
I guess, the real competitors, the CIO wants to build it in him or herself.
I just have to let that process run its course.
It is virtually impossible, whether theyre going to succeed at it and after they get through after the crash and burn.
Like they've done in virtually every one of our customers then we come in and bail them out.
It's just a natural part of the process of adopting new technology.
No. Thanks, I appreciate the context and just as a quick follow up.
Sure.
When we think about the cash on your balance sheet.
Just curious are you contemplating any sort of.
Technology related M&A that could potentially.
Accelerate where you're doing on the product development front or.
Do you feel that it's still important to keep developing things internally.
It's a great crusher and make no mistake, we are focused on growing the business organically.
Oh, great shows and we don't see M&A as a big part of the equation might we buy something if we see that there's a unique piece of technology there that compliments.
Our technology stack that we that makes that that would make sense for us to own it because we see that's something really unique there, yes, we might okay, but M&A there is nobody here if he in charge of that.
The default answer when with bankers centers. These decks are out M&A as we kind of say no before we even read them.
Ed.
We're focused on growing the business organically, because I think for us to get involved in M&A. It would really be a distraction I think if we stick to our knitting. Okay. We continue to move the product footprint continue to grow the customer base continue to make our customers successful I think everything is kind of work out just fine.
Thanks for the color.
Your next question comes from the line.
Pat Walraven from JMP Your line is open.
Oh, great. Thank you I have one for Tom and one for David if that's okay.
Tom for you first.
What's the opportunity look like for <unk> three.
In federal and Department of Defense.
I asked that question I realized that obviously you have to be careful what you say, but but all you have to do is go on the department of defense website and.
Two weeks ago.
Vice Admiral Hill was talking about the missile defense testing, which you have something of your press release that look similar and in June.
The Deputy Defense Secretary Kathleen Hicks.
A big thing, where she was talking about the AI and data acceleration initiatives. So it seems like a lot of that is out there publicly already.
Whatever you can say about what the opportunity looks like received three.
Great.
<unk> Pat.
Okay, that's how big it is.
Endless.
And just just from you to me, there's a really interesting book out there called kill chain.
Rick by name Christian boroughs, if you don't like it give me your 19 Bucks back from.
From Amazon about kind of how the whole nature of warfare is changing between us and China, and where AI fits into this but you get to the level of the joint Chiefs of staff Okay.
And you know all of the leaders of all of these managers all they're thinking about is you know.
And how they're gonna AI enable everything.
So.
That is a.
Almost.
That is a business.
Opportunity without bounds I wanted this is one of the reasons, we brought a general card going in.
<unk> gone as the chairman of Federal systems, and he formerly ran.
The U S Cyber command.
And so he and so Paul Nakasone, who runs the NSA and the cyber command, where she is deputy.
And so Paul knows all of these guys and we do spend a lot of time in the Pentagon.
And.
I think that you know.
To the extent that wherever the opportunity to serve.
The United States government, we're privileged to do so I think we're involved in about 12 projects today and know that we invest a lot of time there.
We recently edition to Ed Carr down we brought on Cod whoever as the general manager of <unk>.
Three factors. So we are we are expanding that business and we think.
That market is so big and scary and accurately for war, that's going on between the United States and China in AI.
If we lose that where the story is not going to end well.
And we think there's an opportunity for us to play a role in that.
You had a question for David.
Yes, thank you for that and so David I think if you look at the stock and the aftermarket now it's down 8%.
I think one thing that is confusing is I mean last quarter. You grew 26%. This quarter. You grew 29, so generally people like acceleration and then you just guided if I'm doing my math right, it's 38% growth.
At the.
The midpoint for next quarter.
And usually people guide the deceleration and then try to beat it you guys are guiding to acceleration. So normally that would be well received but the RP O and the billings are bouncing around so much.
That it's really confusing so any any clarity you can help provide for y.
Revenue is accelerating and yet the bookings metrics. This last quarter decelerated and why we should have confidence in that revenue acceleration I think would be really helpful.
There is still a lumpiness in the bookings.
And the bookings Pat this is Tom.
And they're still we're still doing big deals, while we've got and they're not as big as they used to be there is still a lumpiness in Europe. Bottomline is we had some deals move out of Q1 and into Q2.
And so there is still no do I do I believe that way with mechanisms in place to get the lumpiness out of the bookings I do but they are still there.
David do you have anything you want to add to that.
I think you can get out as well.
That's.
Okay. Thank you.
And there are no further questions over the phone line at this time I would now like to turn the call back to Mr. Tom Siebel for the closing remarks Sir.
Okay.
Ladies and gentlemen, thank you for your time, we appreciate your.
You know all of your questions.
And your time, and we will look forward to giving you an update on our business. When we see you next or at the end of the quarter whichever happens first.
Have a great day, everybody and thank you.
Ladies and gentlemen, this concludes today's conference call and we thank you all for participating you may now disconnect.
Okay.
Yes.
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Sure.
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