Q4 2022 C3.ai Inc Earnings Call
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Ladies and gentlemen, please remain holding the conference will begin momentarily again, please remain holding the conference will begin momentarily.
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Good afternoon, and thank you for attending today's <unk> earnings call for the fourth quarter of the fiscal year 2022. My name is Jason and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call of an opportunity for questions and answers at the end if you'd like to ask a question. Please.
Press Star followed by one on your telephone keypad I would now like to pass the conference over to our host ball fields, Vice President of Investor Relations.
Good afternoon, and welcome to <unk> earnings call for the fourth quarter of fiscal year 2022, which ended April 32022. This is Paul Phillips VP of Investor Relations with me on the call today are Tom <unk>, Chairman and CEO and you Hope marketing Chief Financial Officer after the market close today we.
Issued a press release with details regarding our fourth quarter and full year results as well as a supplement to our results both of which can be accessed on the investor Relations section of our website at IR Dot C III Dot AI.
Call is being webcast and a replay 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 do.
Any obligation to update any forward looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations for a 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 of GAAP to non-GAAP measures is included in our press release finally at times in our prepared comments in response to your questions. We may discuss metrics that are incremental to our usual presentation to provide greater insights into the dynamics of our business or our quarterly.
Results. Please be advised that we may or may not continue to provide this additional detail in the future with that let me turn the call over to Tom for his prepared remarks, Tom. Thanks.
Thank you Paul.
Good afternoon, everyone. Thank you for joining us.
I'm pleased to I'm here with you hope parking and our Chief Financial Officer.
And.
I am pleased to share with you our results for the fourth quarter and for the entire fiscal year of 2022 bottom line. It was a great quarter with.
We finished the quarter with $72 $3 million in revenue up 38% year over year.
Exceeding our guidance and exceeding I believe all analysts' expectations and I haven't really loved get lately at the matrix Chubb high growth software companies, but I expect that would be in the top decile.
All growth rates.
Subscription revenue was.
$56 3 million up 31% year over year, our non-GAAP gross profit was $58 5 million a 43% improvement over the previous year. We ended Q4 of fiscal year 'twenty, two with GAAP RP O of 477 4 million a <unk>.
62% increase year over year, non-GAAP RVO is $516 million.
50% increase year over year, we continue to sustain.
A healthy non-GAAP gross margins of 81%.
Our free cash flow for the quarter was a negative $14 8 million a 46% improvement year over year, we finished the quarter with $992 million in cash and cash equivalents. So we have roughly $1 billion at the bank and the bank and at this rate it will take quite a few floor.
Quarters to deplete our cash reserves.
Looking at the results for the year.
Were quite good and exceeding our guidance and exceeding analysts' expectations, finishing the year at 252 7 million in revenue a 30% growth rate over the previous year.
Subscription revenue was $206 9 million, a 31% increase year over year and our non-GAAP gross margin increased a little over five points to 81 7 million.
I wanted to talk a little bit about the addressable market opportunity, which is really quite staggering enterprise AI software is predicted to be almost a 600 billion dollar market by 2025.
We spent the better part of a decade building, what we call actually more than a decade now building, what we call the <unk> AI suite.
That is a software platform that provides all of the services necessary and sufficient to design develop provision operate even the most complex enterprise applications and on top of that we have developed and delivered to the market now 42 enterprise AI applications that meet the needs of.
<unk> utilities oil and gas chemicals, aerospace state and local government and other industries.
Now Ed.
Enterprise AI is a very complex market and it has a lot of players who do a lot of things and it is confusing to investors. It is confusing to customers and it is confusing to the market at large because we have all of these kinds of bright shiny objects out there that are provided by hyperscale.
<unk> and our available as all but some are available as open source solutions and they do things like provide machine learning library is or virtualization or data persistence or machine learning pipelines or whatever it may be and many of these are great products. Many of these are.
<unk> companies, but again.
This is really very confusing to investors to customers to enter the market at large and CGI is frequently lumped into this category. So I want to take a minute and talk about how we enter enterprise AI because it's quite different from all of this and it's quite different from the way that these companies as they enter the market.
These organization is generally make piecemeal components that do interesting things like platform independent data persistence auto ml or whatever.
Now the when we think about enterprise AI applications is the way the market is thought about enterprise application software for the last few decades literally first began developing enterprise application software in the early eighty's at companies like Oracle and SAP P and later people soft and.
Siebel systems and others, we basically built these applications on top of relational database systems and on top of relational databases, we build a set of development tools for building dreams that reports informs and whatnot and we use those to build families of applications that solve business problems like CRM and ERP and.
Manufacturing automation supply chain management, and what have you.
Few decades later this has grown to be roughly a $500 billion off our market and everybody understands it.
In these applications are used to solve.
Very real world business problems.
They enabled companies for example to report their inventory balances in their supply chain, our supply chain say four at Boeing for a Boeing 777 might be annoying components and a supply chain that stretches from South Carolina to Shenzhen and consists of resistors and transformers and flap actuators.
And propulsion devices and flight management systems, and they want to be able to report every 30 days or 90 days or 365 days exactly what was the inventory of each item and by the time you add the Boeing 777 to the 87 787 to the 767% to $7 57 and <unk>.
737, the Boeing 707.
Theres, a pretty big parts inventory that you need to be able to report accurately.
Or you might be able to water you might report on what your customer churn was 60 days ago or 90 days ago. Okay. If you're a bank you might have to report on how much fraud took place like anti money laundering took place 90 days ago are of heightened 80 days ago, and if you don't do this correctly as CEO you get to <unk>.
You resume you get to pay billions of dollars in fives and you might go to jail. So it's really quite important to get this right.
You might want to report on what your customer churn rates were at refresh ample at Verizon.
And so there's enterprise software so how about the end market.
And you do that you know us pretty well as ERP and CRM and supply chain management and what have you I was there when we started it and today, it's roughly a half a trillion dollars business now.
Now these applications are inherently descriptive in nature. They provided a company up perfect 2020 hindsight into what happened three months ago six months ago, a year ago.
Now, let's see three AI, we spent a decade and almost $8 billion building a software technology stack that consists of a platform as a service.
And application development platform and low code development tools, and now, including 42 turnkey enterprise applications and these.
With <unk>, we make these existing enterprise applications predictive in nature.
Okay. So now instead of using a database.
A relationship database for data storage, we are using the cloud okay. We're using existing ERP systems, and Crs, just CRM systems, like SAP, and Salesforce and Oracle and what have you.
And we built an AI application layer that make me say that makes these applications predictive in nature.
I can tell us what's going to happen in the future should if we can change the future.
So rather than simply telling us how many parts we had in inventory had been historically, a predictive AI application will tell us exactly how many parts we need in each bin and each of the next 180 days to meet the demand function.
Okay, rather than tell us how.
How many customers left US 90 days ago, or 180 days ago. These applications will now tell us which customers by name are going to leave us in the next 180 days. So we can take action to retain rather than tell us for example, a number of fraudulent events that we had some time ago it will identify fraudulent.
In real time, so we can progress the fraud from happening.
Beauty of enterprise AI, Okay is what do we apply AI to the market and enterprise applications. They become predictive in nature, Okay, we can't predict the future and change the future now this promises to be ordered at least 600 billion dollar market not too many years down the road.
I believe that if we look 2345 years out this is a complete replacement market for everything that happened in the enterprise application software in the last three decades I do not believe that in two years or three years or four years companies aren't going to be satisfied knowing what their customer churn was 90 days ago. They got it done.
As you know, which customers are going to leave if they don't take ACH.
Rather than no what our non deployment rate was for tractors aircraft automobiles theyre going to want to have predictive maintenance applications that tell them, which machines are going to fail in advance so that they can fix the devices before they fail and have lower failure rates, that's that big deal that's what.
Rise AI is all about now.
Now.
When we look at the companies that many people in the market investors and customers, okay considered to be competitive as the AI. Okay.
Really not only use our competitors, they're all in fact partners now why <unk>. It provides out of out of the box. Okay. All of the services necessary to design develop provision and operate at AI application. Many of our customers in fact, all of our customers will have so much.
Experience working with AI tools, and they don't want to use many of these third party products like data bricks for data virtualization or snowflake.
Platform independent data persistence or Amazon Sage banker for citizen data scientists are what our Python to develop machine learning tools and <unk> provides the orchestration layer that enables customers to easily nifty solutions together agile cohesive solution.
And all of these applications both open source and proprietary are entirely compatible with the <unk> platform. So we need to think all over there of all of these things out there ex Tensorflow AWS, Google cloud data bricks. They used to look more like partners than the election competitors, let's take a look at.
The example of shell AI platform right on top of Azure, They put C. Three AI and because they have investments are value and things like kubernetes for catering as containerization and data rich for virtualization and Tensorflow from machine learning libraries MATLAB Kitco.
<unk> what have you we enable them.
Very easily incorporate these.
Andrew The C. III platform architecture. This is this is shale AI, but virtually 100% of our customers 100% are using some combination of these other products with the <unk> platform. So.
It's really quite different than I think what is perceived to be.
Bottom line all of these independent of powder products that appear to us that that appear to some to be competitors are in fact partners.
Okay their partners at shell at Koch industries at the United States Air Force at virtually every <unk> customer.
I'm going to address the issue of customer account.
<unk> has been growing quite substantially in recent years.
And then the last year alone. It grew from 151 customers to 223 customers.
But.
And if you look at our diversification by industry, it's really become increasingly.
There were some oil and gas, which is a pretty good market to be in today with oil at in excess of or rough order of $100 a barrel pretty good business at the same time we.
We've seen a lot of diversification outside of oil and gas and this if we look this is a diversification of industries, including oil and gas. This is bookings. Okay. This is bookings without oil and gas.
And you can see that while our year over year, our bookings in oil and gas grew 95% outside of oil and gas it grew by 116%.
So let's talk about customer penetration.
Very certainly focused on landing new customers that being said.
When you think about many of our large global customers like shell Koch industries, the United States Air Force Department of Defense. Angie, we are very much focused on penetrating these customers deeply and if we look at this customer base that we have today it might be 5% to 10% penetrated now with many companies.
In the AI space or the SaaS software space and Vance.
Investors are really interested in how many new logos to the vendor added in the quarter at perhaps 10 or $20000 H each.
Not the business, where it is okay. We are in the business of lending very large customers, okay investing in those customers and making them very large and very successful over over a period of years. Let me give you a couple of examples. Okay. Shell is I think the fifth largest company in the world one of the largest hydrocarbon producers in the world.
<unk> standardized.
<unk> AI across all lines of business upstream downstream midstream integration of renewables today.
I have over 10000 pieces of equipment monitored by our platform.
They have 23 assets in production now understand that asset at that shell isn't it a pump or a valve.
An asset at shallow something like Pernis furnace being the largest refinery in Europe , but I think processes order of a half a billion barrels of oil a day.
The asset for shell would be like Nigeria, Alan Gash, Okay. So an asset a shell might be larger than 50% of the companies in the world. Okay and they are on the road today that 65 assets in production this year.
Are you is this group in March Okay shell stood up on stage and they realize that they realized in front of all of our customers and our users group conference and then they realized a billion dollars of economic benefit from their C. Three investments last year and they expect to realize $2 billion in economic benefit from our investors this year.
Okay now I ask you how many customers are you aware of from SAP Salesforce Siebel systems Oracle Corporation, whatever it might be all five companies how many.
Customers are you aware of who have stood up on stage and said that they are getting 1234 or $5 billion a year, an economic benefit from that solution.
Argue that none of you have ever heard that because it's never been set.
Let's take a look at the United States Air Force Rapid Sustainment office. Okay. This is predictive maintenance for aircraft in the air for our SaaS roughly 5000 aircraft here, we're doing AI based predictive maintenance for B. One bomber F 15 F 16 F. D. F 18 F 35 joint strike fighter and look at the speed.
This project shows the speed at which we bring lease these applications into production. So what is this all about this is about integrating all of the data about missions about whether about fuel telemetry from from.
The devices on the on the aircraft maintenance systems to build predictive models that will predict what device is going to fail 50.
50, or 100 flight hours before it fails so that we can avoid the failure.
And.
Some of these aircraft cost $100 million of coffee and their current availability rate as say, 50% with <unk>, we can increase the availability by 10%, 20%, 30% and that we deal with the scale of the United States Air Force. This is worth billions of dollars in economic benefit.
Annually I believe we have 16 aircraft platforms live today, and what you expect to have 22 platforms live by midyear. So deeply penetrating. These accounts is what <unk> is all about.
We continue to be focused on adding new customers, but at <unk>. It's more important to look at the lifetime value of our customers then and how many new customers that we're signing.
And yes, our customer base is growing and new customers in the quarter would include Pwc Ey why the county of San Mateo Cargill is a recent customer again, what's really more important. Okay is the penetration of these customers Koch industries, which is more than a $100 billion business. It became a customer a couple of years ago.
<unk> made a decision in the quarter to standardize on <unk> across all lines of business. This would include the Flint Hills resources, Georgia Pacific more lax, all Coke business units are standardized advertising on <unk>. Similarly at Cargill, we're doing predictive supply chain optimization and supply network risk for <unk>.
One of the largest food producers in the world and the value of this is quite significant we are helping to feed the world at a time when much of the world is facing famine.
So.
Yes.
This is what it means to our bookings at <unk> three. So this is an example of that.
A large integrated energy company in Europe . There are initial contract was with us for about 300000 euros and over eight years and it has continued to grow to 120 million euros.
This is an example of.
A large chemical company in the United States, where their initial contract was for $9 million and then it grew to $14 million and then $59 million. This company stood up on stage, our users group and said they expect to realize a billion dollars in economic benefit from <unk>. This year.
1 billion this.
This is a major U S government agency and how you know that we have penetrated that this is a large.
Industrial manufacturing company, what have you so while we might start small we might start with a trial a free trial of $50000 trial, a 500 dollar product a half a million dollar trial. Our initial project for a couple of $1 million our goal is to realize.
Sometimes 1 billion 2 billion 3 billion $4 billion in annual economic benefit for the customer so.
As you can see this is quite a different story, but you know from what you're used to seeing in Ito in enterprise application software or people are selling hundreds if things were $20 $20000 of base.
So our primary focus is penetrating existing customers. This is an example of a utility in Europe that today is generating billions of dollars in annual benefit from spark get analytics now.
<unk> strategy.
I've covered this you're all familiar with how we're growing the business. We continue to grow geographically in North America in Europe , and Asia Pacific at the same time, we're building vertical market sales organizations in financial services manufacturing what have you. We're aligning with go to market partners in each vertical Baker used in oil and gas F I asset.
<unk> services Raytheon.
In aerospace and defense and then we have very meaningful horizontal market partnerships with hyperscale.
Very significant relationship with Microsoft significant and growing relationship with Google.
HPE Nvidia, Okay, and others and so this is what this is how we are expanding all facets of the cube to establish a leadership position and we've made a big investment in this over the years I've talked about it I've talked to you about this that need us or how is this investment paid off with these partners hi.
<unk> <unk>.
Vertical market partners utility partners gas burners.
Paid off pretty well, if we look at our bookings for last year of 64% of our bookings. Okay was generated in partnership with these market partners. So this is this is becoming.
Really quite significant we have a substantial and growing partner ecosystem, we have we have.
You know.
A recognized market leadership, we have a proven track record of success, we have a veteran management team. We have a very high performance culture, we have excellence in execution Big Pictures.
Today is a quarter of a $1 billion software business growing at roughly a 40% compound annual growth rate, we have a roughly a $1 billion of cash in the bank and our strategy is quite simply to establish and maintain our market leadership position globally in enterprise AI.
Okay, let's talk about guidance, okay. Okay, as I mentioned, the addressable market opportunity is large and expand our.
Our pipeline continues to expand.
Our customer footprint is growing our balance sheet is rock solid okay. I have never been more optimistic about C. III add that I am AI than I am today, we have exceeded revenue guidance for each of the six consecutive quarters that we've been a public company and we are tracking exactly to long term plan that we laid out during the <unk>.
Roadshow listened to go play back the tape is still out on the web and we are tracking exactly to what we said that our revenue growth rate was 38% in the year ending April okay up 17%.
<unk> up from 17% in the prior year.
Now in the past few years as you know we've been making substantial investments in branding and advertising. These investments have contributed substantially to our brand equity and market recognition I'm confident these were prudent and productive investments, we largely created and now leave the market category of enterprise.
Hey art.
That being said, it's not lost on us that there has been a fundamental shift in capital market expectations regarding cash flow.
Until recently the market rewarded rapid growth at any cost. This has clearly changed the market currently demanding sustainable growth combined with with free cash flow with free cash flow. We are confident that we can achieve that goal our economic model is quite healthy.
Structurally profitable business with a strong cash balance and our non-GAAP gross margin of 80%.
Our investments in branding and advertising over the last few years have been very effective in establishing <unk> as a market leader in the enterprise AI.
And those investments will now permit us to dramatically reduce our branding investments as a percent of revenue going forward will.
We will benefit from cost of economies of scale and product marketing and development and.
And we will realize additional savings from expanding the bulk of our engineering and services capacity in our new Guadalajara, Mexico facility.
To drive growth, we will continue to expand our investments in sales partner capacity and service capacity commensurate with revenue growth our target is to generate sustainable positive free cash flow within eight to 12 quarters under stable market conditions, I would guide to a 30% or greater growth rate for fiscal year.
Year 2023.
With the current economic and political uncertainty, however, and pervasive market passivism were inclined to set the expectations are low.
While we are much more optimistic.
About the business, we're not sure of the guiding high is that any benefit to our shareholders also candidly we did see some business that we expected to close in Q4 that move out of the quarter. We still there is still a lot too much lumpiness in our pipeline taking all of this into consideration. We believe it is prudent to guide.
<unk>.
To provide fiscal year 'twenty, three Q1 revenue guidance of $65 to $67 million and.
Fiscal year, 'twenty, three growth targets of 23% to 25% by the way the typo on the slide that the vendor was not able to pick up so.
It says 22 and in factories to say 23, so I apologize for that error.
When Margaret conditions stabilized, we expected target 35, 30% to 35% steady state topline growth, while continuing to growth free cash flow to 20%.
non-GAAP targets.
Now while free cash flow to us its just 20% target predict not yet okay, now I'm going to turn.
The call over to our experienced and accomplished Chief Financial Officer Officer, you are parking and to provide additional color on our business results and plans and then we'll throw this open to questions.
You all over to you. Thank you Tom.
First off I want to quickly recap on some refinance where results as Tom mentioned, we ended the quarter with revenue of $72 3 million or 38% growth year over year subscription revenue increased by a healthy 31% year over year growth I would also like to highlight the remaining performance obligations was 477.
Forming a 62% year over year increase further during the quarter, we repurchased approximately 720000 shares for $15 million under our share repurchase program announced in Q3.
With respect to the full year.
We are roughly a quarter of a billion dollar business as Tom mentioned with a 38% year over year increase and we've been able to maintain really quite excellent gross margin rates of 79% for the year, which is three point increase from the prior year.
Here are the trends from the past year, indicating again, a nice healthy growth on a year over year basis.
Moving onto the deal, but we were quite happy to see a 35% sequential increase in deals to close 27 deals during the quarter. We saw a nice increase with respect to our band of less than a million dollar deals where we do a lot of transactions in trials with customers and then in the higher bands, we saw application and platform deals.
It was with new customers directly and through enterprise deals or renewals or expansions with existing customers.
Overall, our path towards a lower average GCB continues to improve we're at Q3, we were at $5 6 million now in Q4, our average <unk> was $2 9 million.
With respect to the revenue mix subscription revenue was 78% of Q4 revenue on professional services was up 22% what do we think about the sizes of the deals we make with some of the most known entities on the planet is nonrational for us not to invest in these customers with professional services, we generally see expansions in.
As a result of successful pro serve engagement.
We were able to improve.
We were able to improve our gross margins our non-GAAP operating margin during the period as well.
Path to profitability.
We spent some time this quarter thinking about the long term prospects and the long term path to sustained operating profit on a non-GAAP basis.
We've broken out for everybody's benefit sales and marketing into separate marketing and sales Lance. In addition, you'll see the traditional research and development and G&A as well as cost of revenue.
The key takeaway is that we currently operate a negative 29% non-GAAP operating margin. We are confident that we have a robust executable plan to get to an operating profit position sometime in FY 'twenty forward to FY 'twenty five range.
We believe that we are structurally profitable and are able to maintain our gross or are able to maintain our gross margin on a prospective basis as we have indicated during the IPO. We have invested heavily in brand recognition, which we believe has been very successful. We believe that we have reached a point where from here we can sustain.
Our brand with lower investment.
Respect to our sales team, we will continue to invest in additional capacity on a global level with respect to research and development. We're very pleased with our start with our Guadalajara application development Center professionals and expect strong growth in that theme the natural benefits from economies of scale combined with the lower human capital call.
<unk> will drive R&D spend lower of the proportion of total revenue.
Finally for G&A related costs, we expect the economies of scale to reduce the proportional spend in this category.
Overall, we're excited about our Q4 results and are looking forward for the upcoming fiscal year and with that it's time to hear the questions operator.
If you would like to ask a question. Please press star followed by one on your total keypad if.
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So you briefly ask questions are registered.
Okay.
Our first question is from Arvind <unk> with Piper Sandler. Please proceed.
Hi.
Thanks for taking my question.
I wanted to ask about.
No guidance on the last earnings call, although you didn't provide formal guidance.
You had talked about being comfortable with consensus which was about.
33% growth.
And then.
This is number kind of growth is closer to like.
Mid 20%.
If you can just kind of talk about a change in the environment.
That caused kind of everybody from guidance or is it do I looked at your guidance it sort of more sort of conservative and this is Scott.
Turning point for the year.
Well hi, Robert its Tom.
Thanks for the question.
You know I haven't seen a lot of.
Enthusiasm and cheer, okay in any market.
Activity in the last few months since our last call and I would say that what we're seeing from the market.
You know as you really quite dire.
If you look at.
You know candidly.
<unk>.
Think that given everything that is going on in the market.
Okay.
You do it.
It seemed prudent to us.
Two.
<unk>.
Market expectations at.
<unk>.
Conservatively and that's what we get.
Perfect that's great and you know that doesn't.
In terms of kind of bookings growth still seems sort.
If you can kind of doubleclick and give us.
Kind of a little bit granular that is they are seeing.
Kind of.
Bookings growth from.
The particular industries, our clients that that youre seeing from.
Strong growth from in terms of bookings.
Yeah, well, if we look at let's say Q4, let's see.
42% of our bookings were in manufacturing.
18% in financial services.
15% defense and aerospace.
14% in oil and gas.
4% and accounting services and then it goes into agriculture, food processing and retail hospitals, but.
It is becoming increasingly diversified.
Alright perfect.
That's pretty helpful.
I'll hop back in queue for further questions.
As I mentioned for the year I think was your growth in oil and gas, which is a big business for us and a good business was 95% and outside of oil and gas I think it was 115%.
So.
The diversification strategy is playing out well.
Yes, I would agree with that.
Okay.
Thank you for your question.
Our next question comes from Patrick <unk> with JMP Securities.
Oh, great. Thank you.
Hey, Tom can we start hearing a little bit more about the deals that slipped in Q4.
Let's see I'd have to look at the pipeline.
I don't really have that went on my desk Pat.
I mean, I would say that we did see a number of deals move out of Q4 into Q1 and Q2.
Okay.
They didnt disappear and they weren't lost they are just kind of moved in they're lumped through if there is still a lumpiness in the business. We did close how many deals in the course of the quarter to 27. So the number of deals is quite low.
Quite high but we had.
Honestly, we had a number of deals that we are expecting to close the borders. So the bookings number was not as good as not as notable.
As high as we'd like to be that being said.
The revenue growth.
Ceded by our expectations and everybody's expectations for the quarter enter the year.
And can I ask how so how is maintenance so far.
How is one.
How does the last month.
At the beginning of this quarter.
But fair to comment on the business as of today as of the AR.
As of the end of the quarter Pat and.
We've given our guidance for what we think is going to happen in Q1, and so far I don't think we've got really quite confident that we have not fallen short of our guidance.
I think we've hit it okay alright.
We've been a public company, we've exceeded guidance six.
Yeah.
Yeah, Okay and it is so it seems like Baker Hughes I mean last quarter, you called out Baker Hughes because it contributed I forgot what the percentage was but they're really big percentage of bookings so with Baker Hughes seems like it was softer this quarter or is that a fair assessment.
Oil and gas was 13% of our business.
In bookings so that mean it was pretty strong.
Oil and gas last year grew by 95%, which is pretty strong.
In bookings, so I would not describe it as soft did some oil and gas deals move out of the quarter yes.
Yes.
Okay.
Okay and then.
It's quite healthy.
Okay, Great and then one for you which is so.
Can you repeat the.
How much of that you have $100 million buyback plan right and then I think you told us how much you had bought back and I missed them.
Yes, it was $15 million to 720 <unk>.
720000 shares okay, great. Thank you.
Sorry last one one more for you you have what will free cash flow for this coming year, if the operating losses minus 76 to <unk> 86, how should we think about free cash flow.
Well, yes, great question I think on a cash flow basis, we still have a lot of lumpiness in that.
Think on a more longer term perspective, as we are going to reach the operating.
Our profit goals that I outlined youre going to start seeing a more sustained operating or free cash flow positive, but as we march towards that goal, there's going to be lumpiness. There is going to be periods, where we're going to we're going to be closer to positivity in periods, where we're going to be a little bit more free cash flow spent.
Okay. Just so we don't have unpleasant surprises in Q1. So just for Q1, you guided to an operating loss of negative 23% to 28 should we expect cash flow to be in that range.
Worse better.
Thank you.
Yes.
That's a good question I think more broadly speaking again theres going to be we're going to have some activities I think one of the things.
That youre aware of is that we're having to build out on the new lease.
As part of that we'll be incurring some cash outflow items, which don't show up as operating expenses until years. After since they are capitalized as part of the new office tenant improvements in the office building that we're moving into.
Okay alright, thank you.
Thank you for your question.
Our next question comes from Brad Sills with Bank of America.
Please proceed.
Hey, this is Adam on for Brad Thanks for taking my question.
Just a quick one how should we be thinking about the Q1 guide in terms of the mix between subscription and professional services revenue that's kind of been.
And to a higher mix of services. So just wanted to get your take on how.
We should be thinking about that going forward.
I think thats a great question.
We've said earlier that we think our long term target for this mix is probably in the 10% to 15% range. Obviously this quarter we ended at 22.
Last quarter I think it was a team.
You should expect to somewhere to be in the mid teens.
But theyre still going to be some activities in the in the quarter that may change that but I think thats a fair assumption at this point.
Okay Super helpful. And then a quick one for Tom.
You guys kind of called out in the press release the expansion with one medical can.
Can you just talk about what.
The lining plant look like and then how that ultimately evolve into becoming an X mark in that customer. Thank you.
Mark and I believe that one medical began has been excellent.
Each market and our customer and has expanded as a niche market and our customer so.
Mountain mistaken that's that's the standard of the product we have many customers that are only using a smartphone and thats one of them.
The regarding the professional services.
Question I wanted to say I mean think about kind of what's going on and what we do where we.
We're investing maybe we have a million dollar deal or a $10 million deal or a $20 million deal with a company that makes it very clear that if we succeed.
Succeed there is a $100 million in business there. So for right now as we establish market presence and we have established successful customers, it's kind of non rational for us not to invest professional services in the in those accounts and our professional services for US is a very high margin business.
But that being said.
When we can take our company from 300000 to 120 million euros, and do that kind of over and over again to not invest in professional services in the first three years few years to get them live I would suggest to me, it's not a rational for us not to do that in the short term.
It's pushed up our.
Professional services revenue, a little higher than we would like to see.
But.
<unk>.
We're achieving the objective of market penetration.
Alright sounds good thank you very much.
Thank you for your question.
Our next question comes from Michael <unk> with Keybanc. Please proceed.
Hi, This is Eric on for Michael.
A couple of deals you called out is pushing out of the quarter. I was curious if there was any commonalities across those deals either by geography or vertical.
I would say across verticals and across geographies and somebody needs to get budget approval or they needed to get something signed by some.
Senior executive and it didn't get signed in time or there is some committee they needed to go to where the COVID-19 easy to get scheduled.
<unk>.
Several of these are in Europe , So just kind of a year after the deals on your own time.
So it's in many of these are large organizations, where they very bureaucratic and their processes and.
They need to get board approval, our CEO approval, our CFO , who will or whatever it happened in <unk>.
They're operating on their timeline and not ours that's all.
But I would say pretty much across the across industries and across geographies, who was not it was not we didn't see any specific industry fall apart.
And I would say.
Given kind of the market dynamics of what's going on with supply chain disruption.
One of our biggest products is supply network risk as to gastric optimization of the supply chain. This is becoming really mission critical.
And you know associated with all of our applications, where as you can see from our presentations.
Our discussions with the customers is how much money are they saving in a year so as people start to tighten their belts.
<unk>.
What might be an economy that is turning down a week provide tools that enable them to tighten their belts very cost effectively.
That's helpful and then just.
Okay, you had some nice draw down to the $500 million authorization within the D. O D. This quarter so.
Curious what else might be seen in our pipeline, specifically with the Doj and maybe just any broader commentary about opportunities you see in the federal space.
Vod business looks good okay.
Sure.
We're <unk>.
Very sad continued penetration in the Air force with.
RSO.
That is now accelerating at a at a.
We think that offers a big opportunity to accelerate.
We have you know.
Two or three other agencies.
In the defense and intelligence communities that have made okay in our processing large C. Three AI procurements. So we have I think.
$600 million in dry powder, there almost to draw down okay.
<unk>.
<unk>.
Yeah.
Contract vehicles that are in place and we're working on additional contract vehicles at the same time. So we're very optimistic about the U S defense intelligence and civilian businesses.
Got it thanks, that's all for me.
Thank you for your question.
Our next question comes from Bob <unk> with Morgan Stanley . Please proceed.
Hi, This is bobby filling in for Sanjay today, Thanks for taking my question.
So first maybe if we can talk about just the billings for the next quarter and maybe for the full year a little bit.
Obviously fourth quarter billings was seasonally high but it was probably a little lighter than what we thought it would have been maybe if you can just give us.
Sort of.
A trajectory or a better understanding of how we should think about billings going forward for the next 12 months or so.
Yes, Thanks, Bob for the question. So I think some of the things that ties to what I was mentioning earlier.
Pat on the cash flow items, so we transact and we have large deals with large multinationals and they seem to be dual payment terms with specific customers impact the calculated billings metric that youre looking at so.
At this point.
In.
At this point in our company, we're going to have a lot of Lumpiness that you see this you could have an individual quarter, where the calculated billings, which really good and then the next quarter it could be a little bit less so.
I don't think its a metric that you need to focus on particular intensity.
Okay. Thank you that's very helpful. My next question.
Just you obviously had some quite a bit of success on the energy sector oil and gas and starts in <unk>.
Terms of various vertical that you are yet as well as geography like for example, Europe versus U S oil and gas versus machinery.
What verticals are you.
Confident or feel good about going forward and what are maybe some of the verticals or areas that you.
I want to keep a closer eye on going forward.
Energy looks strong utilities that have strong oil and gas look strong chemicals look strong manufacturing look strong.
We really haven't penetrated telco, yet I think theres, a big opportunities there financial services. There I think there are big opportunities. There. We're starting now to consent penetrate consulting companies E Y Pwc and others I think there's going to be a big opportunity there, where we're writing them tools to accelerate there.
There.
And what they do.
So I think it's the question is I mean ultimately this is just like CRM or like ERP all industries adopt it's just that.
<unk> industries adapt at which rates.
And.
You know.
Interestingly enough, we're seeing a lot of interest in agribusiness.
Which is.
<unk>.
Huge supply chain problem globally as it relates to agribusiness as the world faces potential famine.
Associated with wheat, and rice production. So the work we're doing there with some work with.
Cargill and others.
Really interesting and really important.
In general.
We don't really see right now a lot of softness out there, but we do read the newspaper shouldn't read what you guys write and.
We haven't seen a lot in the newspapers and wildlife, we don't see our business looks quite good.
<unk>.
I think as long as we didn't raise the newspapers are here another T V everything would be fine.
Thanks.
That's very helpful.
Thank you for your question.
Our next question comes from.
Jill M Morrow with J P. Morgan. Please proceed.
It looks like we lost JP Morgan.
Sorry, I was I think I was talking to myself on mute.
Apologies.
I wanted to ask you about the deals that got pushed out.
From your conversations with those customers is it entirely driven by macro related considerations or do you think is there an element of the sales organization changes that you have done or the amount of sales capacity.
You have currency given the tight labor market.
Sales capacity has grown pretty considerably really a wafer.
We've been.
So it's not a sales capacity issue.
Yes, I'm looking at these.
Transactions that we expected to close you know here's one in the United States government, Here's a insurance company. This is an oil and gas company, Here's a beltway band as the large energy company in Europe .
Pharmaceutical company in Europe .
Bank in Canada.
Services company in United States retailer in Europe , a civilian agency oil and gas company I'm going to write down the list oil and gas company in Africa.
U S Federal Agency U S Federal Agency U S Federal agency.
Large big box retailer.
A division of the Air Force, Here's a company I don't know what they do.
The division of defense large food provider local.
<unk>.
Yeah.
Theres, a county with roughly a million people in it.
Large.
A large credit card provider.
U S Intelligence agency.
So insurance can I, just read right down the list okay.
Deals that we were looking at that.
We were expecting I would say, particularly the ones that we were absolutely, especially in the quarter would be.
Intel Agency insurance company large European oil company belt.
Beltway integrator.
European Energy Company European Farm.
Suitable company.
Large.
The exchange.
Less stock Exchange Bank in Canada, Food services company and manufacturing company in Wisconsin, So it varies across industries across geographies and it's just.
It's not that their business has gone out there that they're going under.
They are impressive they are.
Processed in time.
Okay.
I guess, one thing that people trying to understand if that was not that was really around the redirection of the list.
Yep understood.
Well the follow up to that.
My follow up would be that.
Obviously, our Cts, obviously, Steve a lot of money when quint deployed.
You have really big economy benefits when deployed however, it seems like it is.
Is it is the factor of the large initial outlay.
Which is kind of creating these problems.
Otherwise people should probably adopt during.
A slower economy environment wouldn't you say.
Well I'm not sure I mean, the initial outlay some beverages.
<unk> $50000 in versus $10000.
Yeah. The initial outlay at a $300 million to $1 billion oil company was.
$300000, which for <unk> might seem like a lot, but it's not a lot for $300 billion company. So I'm not sure the initial outlays.
After that.
You know as you saw from the slides that I showed you frequently the.
The initial outlay is $50000 or $300000 and then it grows over time.
But it's not <unk>.
Got it.
It's large compared to a lot of the other things that you look at in the AI space, where there where I think their average sales prices like $20000 were not in that game.
Alright.
Thank you.
There are no further questions waiting at this time, so I'll pass the call back over.
Go ahead.
Great.
Thanks, everybody for your time, we'll wrap up the call now and I appreciate everyone's interest and have a good rest of your day. Thank you everybody.
That concludes the C. III AI earnings call of the fourth quarter fiscal year 2022. Thank you for your participation you may now disconnect your lines.
All right.