Q1 2025 C3.ai Inc Earnings Call
Because presentation, there will be a question and answer session.
Ask the question during the session you will need to press star one on your telephone.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your speaker for today.
Speaker Change: Barry you may begin.
Ahmed Barry: Good afternoon, and welcome to <unk> earnings call for the first quarter of fiscal year 2025, which ended on July 31, 2024. My name is Ahmed Barry and I lead Investor Relations at <unk>.
Speaker Change: With me on the call today are Tom <unk>, Chairman and Chief Executive Officer, Ed <unk>, Executive Vice President and Chief Technology Officer, and <unk> Chief Financial Officer.
Speaker Change: After the market close today, we issued a press release with details regarding our first quarter results as well as a supplemental to our results both of which can be accessed through the investor Relations section of our website at IR Dot C III Dot AI.
Speaker Change: This call is being webcast and a replay will be available on our IR website. Following the conclusion of the call.
Speaker Change: During today's call, we will make statements related 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.
Speaker Change: We disclaim any obligation to update any forward looking statements or outlook.
Speaker Change: 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.
Patrick Walravens, Michael Cikos, Timothy Horan, Matthew Calitri, Amit Berry, Hitesh Lath, C3.ai Patrick Walravens, Michael Cikos, Timothy Horan, Matthew Calitri, Amit Berry, Hitesh Lath, C3.ai
Speaker Change: All figures will be discussed on a non-GAAP basis, unless otherwise noted.
Speaker Change: Also during 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.
Speaker Change: Finally at times in our prepared remarks in response to your questions. We may discuss metrics that are incremental to our usual presentation to give greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not provide may or may not continue to provide this additional detail in the future and with that let me turn the call over to Tom.
Yeah.
Tom: Thank you Amit good afternoon, everyone and thank you for joining our call today.
Speaker Change: We are off to a solid start for fiscal year 'twenty five in Q1, we exceeded all expectations for revenue cash flow and profitability.
Tom: This quarter marked our sixth consecutive quarter of accelerating revenue growth, reflecting our high levels of customer satisfaction and increasing demand for enterprise AI applications are year over year revenue growth has accelerated from 11% in Q1, 'twenty, 4% to 17% in Q2.
Tom: 18% in Q3, 20% in Q4 and 21% in Q1 year over year revenue growth in Q1 of fiscal year 'twenty five.
Tom: Total revenue for the quarter was $87 2 million exceeding analysts' expectations subscription.
[inaudible]
Speaker Change: Subscription revenue was $73 5 billion and increased 20% from a year ago.
Speaker Change: Our non-GAAP gross profit was $60 9 million, representing a 70% gross margin.
Speaker Change: Our GAAP operating loss was 72.6 $72 6 billion.
Speaker Change: Good day, and thank you for standing by. Welcome to the C3's A.A. at first quarter fiscal year 2025 Conference call. At this time, all participants are on a listen only mode.
Speaker Change: Our non-GAAP operating loss was $16 6 billion and substantially better than our guidance for a loss of 22% to $30 million.
Speaker Change: Our non-GAAP net loss per share was <unk>.
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you would need to press start one one on your telephone. Please be advised that today's conference has been recorded.
Speaker Change: Our net cash provided.
Speaker Change: By operating activities was $8 million.
Speaker Change: And we generated free cash flow of $7 1 million in the quarter.
Speaker Change: I would now like to hand the conference over to you speaker for today. Amit Berry, you may begin.
Speaker Change: Both substantially exceed market expectations.
We ended the quarter with over $716 million in cash cash equivalents and investments.
Amit Berry: Good afternoon and welcome to C3AI's earnings call for the first quarter of fiscal year 2025, which ended on July 31, 2024. My name is Amit Berry and I lead investor relations at C3AI.
Speaker Change: I'll note that this is the 15th consecutive quarter as a public company in which we have met or exceeded our revenue guidance.
Speaker Change: With me on the call today are Tom Sebel, Chairman and Chief Executive Officer, Ed Abel, Executive Vice President and Chief Technology Officer and Hitesh Lath, Chief Financial Officer.
Speaker Change: In the first quarter the company closed 71 agreements, including 72 new pilots.
Speaker Change: Marking a 117% year over year increase in our pilot count.
Speaker Change: After the market close today, we issued a press release with details regarding our first quarter results, as well as a supplemental to our results. Both of which can be accessed through the investor relations section of our website at IR.c3.ai.
Speaker Change: We entered into new agreements with GSK electro bras Valero Swift.
Speaker Change: With Rx Sanofi U S intelligence community.
Speaker Change: Department of defense, Belgium, the bottom Ingersoll Rand and others.
Speaker Change: This call is being webcast and a replay will be available on our IR website following the conclusion of the call.
Speaker Change: Additionally, we significantly expanded our footprint across state and local government.
Speaker Change: During today's call, we will make statements related to our business that may be considered forward looking under federal securities loss. These statements reflect our views only as of today and should now be considered representative of our views as of any subsequent days.
Speaker Change: Q1 side, the company side 25 agreements with state and local governments.
Speaker Change: With municipal County, and state agencies in Texas, California, and New Jersey, Georgia, Washington, Connecticut, Virginia, Rhode Island, Maine, New Mexico and Florida.
Speaker Change: With this claim any obligation to update any forward lifting statements or outlaw.
Speaker Change: These statements are subject to a variety of risks and uncertainties that would cause actual results to differently from expectations. For further discussion of the material risks and other important factors that could affect our actual results, please refer to our findings with the SEC.
Speaker Change: State and local government is a large and underserved market that we're rapidly penetrating our solutions increase efficiency, while maintaining the highest standards for accuracy transparency and security they drive substantial cost savings and the combined benefits result in improved public services.
Speaker Change: All figures will be discussed on a non-gap basis unless otherwise noted. Also during today's call, we would refer to certain non-gap financial measures. A reconciliation of Gap-denon Gap measures is included in our press release.
Speaker Change: And improved customer experience and short C. Three AI is enabling government agencies to do more with less ultimately benefiting the public.
Speaker Change: Finally, at Time's Inuprepair remarks in response to your questions, we made discuss metrics that are incremental to our usual presentation to give a greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not provide the may or may of continue to provide this additional detail in the future.
Speaker Change: To quote from the access or the successor of Riverside County, and that quote.
Speaker Change: Yes.
Speaker Change: We set the bar high for <unk> AI and they delivered.
Speaker Change: <unk>, 90% model accuracy in our property valuations. This technology is leading our staff to the mundane tasks faster and easier. So they can concentrate on the very complicated properties and our employees are starting to see the fruits of this effort translating into better customer service.
Speaker Change: and with that, let me turn the call over to Tom.
Tom Sebel: Thank you, Amit, good afternoon, everyone, and thank you for joining our call today.
Tom Sebel: We are off to a solid start for fiscal year 25. In Q1, we exceeded all expectations for revenue, cash flow and profitability.
Speaker Change: Overall, we're seeing incredible results with <unk> AI.
Tom Sebel: This quarter marked our sixth consecutive quarter of accelerating revenue growth, reflecting our high levels of customer satisfaction and increasing demand for enterprise AI applications.
Speaker Change: Yeah.
Speaker Change: The proven benefits of C III AI and.
Speaker Change: The <unk> state and local government suite combined with our partner supported and concentrated sales strategy resulted in accelerated sales cycle within the sector.
Tom Sebel: Our year over year revenue growth has accelerated from 11% in Q1, 24.
Tom Sebel: 17% in Q2, 18% in Q3.
Speaker Change: The growth was fueled by a highly collaborative joint sales and marketing campaign with <unk> AI and Google cloud.
Tom Sebel: 20% in Q4 and...
Tom Sebel: 21% in 21 year revenue growth in 21 of fiscal year 25. Total revenue for the quarter was 87.2 million exceeding out analyst expectations.
Speaker Change: Both the <unk> AI state and local government suite, including <unk> property appraisal and C. III generative AI for public benefits through these efforts, we saw higher adoption with state and local government closing 24 agreements in the quarter.
Tom Sebel: Subscription Revenue was 73.5 billion and increased 20% from the year ago.
Tom Sebel: Our non-gap growth profit was $6.9 million, representing a 70% growth margin.
Speaker Change: Let me give you a feel for the speed of these sales cycles.
Speaker Change: Q1, we closed an agreement with the county.
Speaker Change: Our gap operating laws was 72.6 72.6 So, we'll see you in the next video.
Speaker Change: In the northwestern United States.
Speaker Change: How many decision makers got introduced to see three AI at an industry conference and within 24 hours. We were in contract negotiations just 12 hours later, we were in contract for <unk> II property appraisal.
Speaker Change: Our non-gap operating loss was 16.6 million and substantially better than our guidance for a loss of 22 to 30 million.
Speaker Change: Our non-gap and atlas per share was five cents.
Speaker Change: Another example is with the county, and the Southeast U S. This customer attended our annual users Group conference seafood transform in March of 2024, then four weeks later, we held an executive briefing for the County leadership.
Speaker Change: Our net cash provided.
Speaker Change: by operating activities with $8 million.
Speaker Change: and we generated a free cash flow of 7.1 million in the quarter, both substantially exceed market expectations.
And now after three months of a contract discussion.
Speaker Change: We ended the quarter with over 716 million cash, cash equivalents and advancements.
Speaker Change: The county, aside a seven year seven figure five year subscription deal for <unk>.
Speaker Change: I'll note that this is the 15th consecutive quarter as a public company in which we have met or exceeded a revenue guidance.
Speaker Change: AI property appraisal.
Speaker Change: Our state and local business has grown more than 500% year over year and we are excited about the traction the potential for expansion.
Speaker Change: In the first quarter of the company closed 71 agreements, including 72 new pilots.
Speaker Change: Marking 117% you over your increase in our pilot count.
Speaker Change: And the customer advocacy for <unk> AI.
Speaker Change: As we now take these public sector solutions to market in Europe, the addressable market more than doubles.
Speaker Change: We entered the new agreements with GSK, ElectroBras, Valero, Swift.
Speaker Change: Smith, RX, Sonofi, the US Intelligence Community, the US Department of Defense, Dolce and the bottom, Ingersol Rand and others.
Speaker Change: Turning to the <unk> federal business. This sector continues to experience substantial sustained momentum representing over 30% of our bookings for the quarter.
Speaker Change: Additionally, we significantly expanded our footprint across state local government. The Q1 site, the company's site, 25 agreements with state local governments.
Speaker Change: We entered into new expect new and expansion agreements with the United States Air Force U S. Navy U S Marine Corps, and the U S intelligence community amongst others.
Speaker Change: With Municipal County and State Agency's in Texas, California, New Jersey, Georgia, Washington, Connecticut, Virginia, Rhode Island, Maine, New Mexico, and Florida.
Speaker Change: These agencies trust <unk> to provide secure and innovative applications that help them modernize.
Speaker Change: The U S Marine Corps and <unk> continue their successful transfer collaborations.
Speaker Change: State Local Government is a large and underserved market that were rapidly penetrating.
Speaker Change: Our solutions increase efficiency while maintaining the highest standards for accuracy, transparency, and security. They drive substantial cost savings and the combined benefits result in improved public services.
Speaker Change: and improved customer experience. In short, C3AI is enabling government agencies to do more with less, ultimately benefiting the public.
Speaker Change: to quote from the successor of Riverstari County and that quote.
Speaker Change: We set the bar higher for C3AI and they deliver it, and we go over 90% model accuracy in our property valuations.
Speaker Change: This technology is letting our staff do the mundane tasks faster and easier so they can concentrate on the very complicated properties.
Speaker Change: and our employees have started to see the fruits of this effort, translating into better customer service. Overall, we are seeing incredible results with C3AI and quote.
Speaker Change: The proven benefits of C3AI and the C3AI state local government suite, combined with our partner supported and concentrated sales strategy resulted in accelerated sales cycle within the sector.
Speaker Change: The growth was fueled.
Speaker Change: Byley, a highly collaborative joint sales and marketing campaign with C3AI and Google Cloud. To promote the C3AI State and Local Government's suite, including C3AI Property and Prasem, and the C3Gernative AI for Public Benefits.
Speaker Change: Through these efforts, we saw higher adoption with state local government closing 24 agreements in the quarter.
Speaker Change: Let me give you a feel for the speed of these sales cycles. In Q1, we close the Greek and agreement with the county in the northwestern United States.
Speaker Change: County decision makers got introduced to C3 AI at an industry conference, and within 24 hours we were in contract negotiations. Just 12 hours later we were in contract for C3 AI property operation.
Speaker Change: Another example is with a county in the southeast US.
Speaker Change: This customer attended our annual user's group conference, C.C. Jansform, in March of 2024. Then, four weeks later, we have an executive briefing for the county leadership.
Speaker Change: and now after three months of contract discussion, the county has signed a seven-year, seven-figure, five-year subscription deal for C3.
Speaker Change: Hey, I'd probably appreciate it.
Speaker Change: A state and local business has grown more than 500 percent year over year and we are excited about the traction, the potential for expansion.
Speaker Change: and the customer advocacy for C3AI. As we now take these public sector solutions to market in Europe, the dressable market more than doubles.
Speaker Change: Turning to the C3I Federal Business, this sector continues to experience sustained momentum, representing over 30% of our bookings for the quarter.
Speaker Change: We entered a new and expansion agreements with the United States Air Force, the US Navy, the US Marine Corps, and the US intelligence community, among others.
Speaker Change: These agency trust C3AI provides a cure and innovative applications that help them modernize.
Speaker Change: U.S. Marine Corps in C3I continue their successful collaboration to digitally transform the branches of legacy software systems.
Speaker Change: The Marine Corps is using the C3AI Defense and Intelligence Suite to improve the efficiency of a personal management system.
Williams: Williams, by accelerating critical processes and time to decisions for it.
Williams: This work with C3AI, backed by Manpower IT, Systems Modernization Program, and Alliance.
Williams: With a Marine Corps multi-year road map and goals.
Speaker Change: C3AI's customer base continues to expand both within and across industries while maintaining exceptional levels of customer satisfaction. Bye bye.
Arcun Cheneyude: Arcun Cheneyude focused on delivering measurable, significant enterprise value.
ElectroBoss: and ElectroBoss.
Speaker Change: The largest power generation transmission company in Lath America.
Speaker Change: We partnered to enhance their grid resiliency and availability. Brazil's grid is among the world's most complex. Do a do a do a do a do a do a do.
Speaker Change: Diverse Generation Profile, Variability, Expansive Service Territory, and Challenging Regatory Environment, with C3AI, Electroproskin Effectively.
Speaker Change: and Officially Processed and Analyze Real-Time Data, Surfacing, Low-Latency AI Insights, Commiticate Network Distributors.
Speaker Change: Newport Corporation is saying significant success in improving manufacturing outcomes with the C3AI Supply Tain suite.
Speaker Change: This deployment includes three distinct C3AI applications, C3AI demand forecasting.
Speaker Change: C3AI, Inventory Optimization, and C3AI Production Schedule Optimization, working together to support and optimize daily decision-making across multiple facilities.
Speaker Change: As we enter Q2, we're focused on expanding sales capacity, expanding North America, expanding in Europe, expanding in the public sector.
Speaker Change: Our partner network continues to generate opportunities and open new deal flow.
Speaker Change: We had a very active first quarter in alliances, working closely with our partners to close 51 new agreements.
Speaker Change: Netnet 72% of our toll agreements were closed with and through our partner ecosystem. This was an increase of 155% year over year and 82% quarter of our core.
Speaker Change: Our partner supported bookings through 94% year over year, and our activity levels with our partners that include AWS, Booze Allen, Google Cloud and Microsoft, continues to increase substantially.
Speaker Change: In the first quarter we closed 48 agreements with the school cloud. This is an increase of 300% in your upper year. This growth was largely driven by the joint campaign between C3AI and Google Cloud that we just discussed earlier, focused on the public sector.
Speaker Change: C3I continues to be an attractive partner for the hyperscalers, as are 90.
Speaker Change: Enterprise AI applications rapidly drive substantial workload in their compute and storage clouds while adding immediate value to our joint customers.
Speaker Change: As you can see from our Suffolk Melb-Dak.
Speaker Change: Our bookings continue to be increasingly diverse.
Speaker Change: Our Journal of Advice is surprisingly diverse with many candidly unanticipated use cases across the board in a wide range of industries. In addition, our total non-baker QS revenue grew 37% Euro-year Q1.
Speaker Change: Now I'll hand it over to Ed for an update on our products in general as well as Ed.
Ed Abel: Thank you, Tom. Let me first recap where I see three AI fits in the AI text stack.
Ed Abel: Starting at the bottom, the four layers include silicon cloud infrastructure, foundation models, and at the top, harnessing all this innovation to deliver a business value or AI applications.
Speaker Change: This is where C3I plays with pre-built AI applications that can be deployed very quickly.
Speaker Change: In contrast, the offerings you're seeing in the AI software market today fall into two distinct categories.
Speaker Change: First Legacy Software Companies that are scrambling to keep up with AI. To try to stay relevant, these companies are rebranding their 20th century software stacks with AI on the box.
Speaker Change: The technical debt to rewrite their software to take advantage of a modern scalable AI tech stack is simply insurmountable.
Speaker Change: For them AI is just a bolt-on constrained to a small fraction of the enterprise data managed by their legacy software.
Speaker Change: Second, we see a few more modern software companies that were designed primarily for data integration, data management, or data engineering. Now, claiming to be enterprise AI platforms to build and operate AI applications.
Speaker Change: Basing in Enterprise AI Application Plan on these incomplete text acts, requires customers to undertake significant retracted software development projects where minimal customer values realized.
Speaker Change: This is clearly reflected in the customer satisfaction scores of these vendors.
Speaker Change: The C3I platform is unique in that it was a clean sheet design providing all the services necessary and sufficient to design, develop, provision and operate real world enterprise AI solutions.
Speaker Change: This provides users with rich workflow enabled AI applications operating on an application platform with advanced data fusion and governance and scalable AIML operations capabilities.
Speaker Change: We leverage all layers of the tech stack, so we can cloud infrastructure services and foundation models.
Speaker Change: The C3I platform was purpose-built and hardened over 15 years to rapidly deliver robust customer AI applications.
Speaker Change: Now, let me take a moment to unpack what we mean by pre-built applications.
Speaker Change: As this is a key differentiator for C3AI.
Speaker Change: As a customer, if you buy a pre-built application, you don't need to define what the application does. Design and develop the ontology, the business logic, the AI or Gen AI model pipelines, or the user interface.
Speaker Change: We've done all that.
Speaker Change: C3 AI pre-built applications are tried, tested, and proven in the market so the application can be rapidly configured to the customer data sources, AIML models tuned to customers' data, and the user interface tuned for the customer.
Speaker Change: This allows customers to quickly configure deploy onboard and train users, scale out their enterprise, scale out across their enterprise and rapidly realize enterprise values.
Speaker Change: Let me give you an example.
Speaker Change: Halsum, which is a large global building solutions manufacturer, scale that C3I reliability, our pre-built AI-based predictive maintenance application to most of its plants in just eight months after a successful pilot.
Speaker Change: The application monitors several hundred critical plant assets such as vertical roller mills and ball mills to accurately predict potential problems while in advance of failure.
Speaker Change: The dust sewed by continuously ingesting data from over 9,500 sensors and other systems and analyzes those data using 850 machine learning models.
Wilson: The C3I Reliability Application allows Wilson to avoid significant operational disruptions and high-cost remediation.
Speaker Change: Today we have pre-built AI applications with turnkey on apologies that address entire value chains across industry verticals.
Speaker Change: These applications don't operate in silos. They're designed and built to work and concert. All running on the C3I platform.
Speaker Change: Each new application can deploy faster than the last, thanks to the ability to re-isdate integrations on apologies, AIML pipelines, workflows, and user interface components.
Speaker Change: and as more CPI applications are deployed, enterprises accrue business benefits faster and the pace of their AI transformation accelerates.
Speaker Change: We also support, we also offer a suite of pre-built and extensible C3 Generative AI applications that can be used to stand alone solutions or deployed alongside other C2 AI applications.
Speaker Change: This quarter we deployed C3 Gen. of AI for industrial asset inspections at a large manufacturer.
Speaker Change: The application unifies data across unstructured inspection reports and structured data on asset performance.
Speaker Change: such as risk reports, corrosion analyses, work orders, etc., which makes these data easily and quickly accessible to plant operators. Some of these inspection reports include scans of a handwritten text and engineering diagrams that are over 50 years old.
Speaker Change: Using this application, the company has been able to streamline the day-to-day work of inspectors, reduce costly operational mistakes, and risk, and accelerate their turnaround efforts in time.
Speaker Change: And in Q1, we launched C3 Generative AI for government programs, which has an immense potential, which has immense potential for federal, state or local government agencies by eliminating service delays, reducing weight times.
Speaker Change: Enhancing the effectiveness of contact centers and improving the citizen experience.
Speaker Change: We've already signed a pilot with a state on the U.S. East Coast and look forward to supporting public sector agencies across the board.
Speaker Change: It's important to understand that the C3 Genre of AI applications are unique in the market.
Speaker Change: We provide the ability to interact with on the model data that is structured sensor data databases, unstructured documents, images, embedded tables.
Speaker Change: Leverage any L-Alam available in the market, for example, GPT 40, Gemini, Claude, Lama, Nick Strahl to name a few. And multiple specialized L-Alams in the same application.
Speaker Change: Offering full source traceability for both structured and unstructured data in granular enterprise access controls.
Speaker Change: We also provide tools to enable data scientists to tune system responses for high accuracy and production with minimal hallucination.
Speaker Change: Reform, Chain of Flock, reasoning, author and execute mathematical functions, offer state-of-the-art LLM guardrails and protections and orchestrate and chain together AI agents to perform high-value tasks. For example, to initiate workflows or write summaries.
Speaker Change: We provide out-of-the-box pipelines to synthesize results across AI agents, automatically detect and surfacing and system-season underlying data.
Speaker Change: Capture Engine logs for auditability and traceability provide tools for our customers, developers and data scientists to configure their own custom-generative AI pipelines and offer fine-tuning services from bedding models and LLMs.
Speaker Change: C3 Generative AI is also unique in its enterprise grade support for operating in highly secure air-gapton biomits.
Speaker Change: with the prerequisite for defense, intelligence and financial services customers.
Speaker Change: I'll now turn it over to Hitesh to cover the financials.
Hitesh Lath: Thank you Ed.
Hitesh Lath: I will now provide a recap of our financial results and additional colour on our business.
Hitesh Lath: All figures are non-gap unless otherwise known.
Hitesh Lath: As Tom mentioned, total revenue for the quarter increased 21% year over year, 27.2 million dollars.
Hitesh Lath: Subscription revenue increased 20% year over year to 73.5 million, representing 84% of total revenue.
Hitesh Lath: As a reminder, our subscription revenue is comprised from Adly of software licenses, software and service offerings.
Speaker Change: Stand Ready CUE Support Services.
Speaker Change: Piles and trials of our C3 AI applications for generative AI and consumption based pricing for which revenues recognize over time.
Speaker Change: Our subscription revenue also includes revenue from software licenses for which ongoing maintenance is approved is not required and in accordance with ASC606, revenue is recognized when the license is made available to the customers.
Speaker Change: Professional Services revenue was $13.7 million. This represents 16% of total revenue in the first quarter of fiscal 25. As compared to 15% of total revenue in the first quarter of fiscal 24.
Speaker Change: We expect the professional services revenue to generally stay within 10 to 20 percent of total revenue for fiscal 25.
Speaker Change: Gross profit for the quarter was $60.9 million and Gross margin was 70%.
Speaker Change: Gross Margin for Professional Services remain high at over 90%.
Speaker Change: Operating loss for the quarter was $16.6 million, or operating loss was better than guidance due to continued focus on expense management.
Speaker Change: Our net cash provided by operating activities was $8 million. Fee cash flow for the quarter was positive $7.1 million. We were able to generate positive fee cash flow during the quarter because of continued focus on cash management.
Speaker Change: We continue to be very well capitalised and close the quarter with 762.5 million in cash, cash equivalents and marketable securities. An increase of 12.2 million compared to Q4.
Speaker Change: At the end of Q1, our account's receivable balance was 140.1 million, including unwell receivable of 81.5 million dollars.
Speaker Change: Total allowance for bad debt remains the minimals at less than $400,000.
Speaker Change: And we do not have concerns regarding collections.
Speaker Change: The General Health of our account's receivable remains strong.
Speaker Change: During the first quarter, we signed 52 pilots, 117% increase from last year and up to 53% from last quarter.
Quadurann: At Quadurann, we had cumulatively signed 224 pilots of which.
Quadurann: 1991 or still active.
Quadurann: This means they are either in their original 3-2-6-month term or extended for some duration.
Quadurann: Or convert it to a subscription or consumption contract.
Quadurann: or currently being negotiated for conversion to subscription or conversion contract.
Quadurann: We continue to expect short-term pressure on our gross margins due to high-mix of pilots which carry a greater cost of revenue during the pilot phase of the customer life cycle.
Quadurann: We also expect short-term pressure on our operating margin due to additional investments we are making in our business.
Quadurann: Including in our Salesforce.
Quadurann: Research and Development and Marketing Spend.
Quadurann: As we continue to make significant investments in the business, we expect to be free cash flow negative.
Quadurann: For Q2, and Q3.
Quadurann: But remain on track to be free cash to father days for Q4s, and also for the full fiscal year 25.
Quadurann: Now I'll move on to our guidance for the next fours.
Quadurann: A revenue guidance for Q2 is going to be 88.6.
Quadurann: To 93.6 million dollars.
Quadurann: We are maintaining our previous guidance of 370 to 395 million for physical 25.
Quadurann: This implies a year-over-year growth weight of 19 to 27%.
Quadurann: Making C3 AI, one of the fastest growing companies in the software of the company universe.
Speaker Change: Our guidance for non-gap loss form operations for Q2 is 26.7 billion to 34.7 billion dollars.
Speaker Change: We are maintaining our previous guidance of 95-125 million dollars for fiscal 25.
Speaker Change: Now I'd like to turn the call back over to Tom.
Tom Sebel: Thank you, Tash. Let me address past and profitability.
Speaker Change: or Class of the Sold.
Speaker Change: is substantially less than a cost of generating revenue.
Speaker Change: And as such, C3A is a structurally profitable business.
Speaker Change: Are you ever your revenue growth in Q1 was 21% an accelerator?
Speaker Change: Are you over year expense growth rate was 12%.
Speaker Change: In the coming years, we expect our revenue to generally grow that a greater rate that our growth rate.
Speaker Change: It follows.
Speaker Change: that non-gap profitability is now simply a function of scale.
Speaker Change: While we continue to invest in market share, we believe our revenue growth rates would generally exceed our expense growth rates.
Speaker Change: The Expansion Revenue, Lions will converge.
Speaker Change: Crossing over to consistent non-gas profitability.
Speaker Change: At this time.
Speaker Change: With respect to the cash flow, positive.
Speaker Change: In Q4, fiscal year 25, and for the entire year fiscal year 25.
Speaker Change: Let's talk about kind of the general area of the General Enterprise EI market and I want to talk about customer success.
Speaker Change: Okay, in C3AI, we really are partners to our customers, often on speed dial, engaging with them multiple times a day.
Speaker Change: To make them successful and self-deficient, we're not working from home. We are out there on the side with our customers every day, every week.
Speaker Change: We said shoulder to shoulder.
Speaker Change: And we get into the details of their business to make sure that everything is running smoothly as you release their enterprise and any applications.
Speaker Change: We hope weekly Executive Reviews to track progress as the highest levels. This proactive boot-channel ground approach is what drives.
Speaker Change: The customer satisfaction reflected in our net promoter's course.
Speaker Change: This commitment to close hands-on collaboration is demonstrated in our partnership with Shell.
Speaker Change: Shell has over 100 C3AA applications in development and employment for everything from asset integrity to production optimization.
Speaker Change: We started working with Shell.
Speaker Change: Initially on predicted maintenance back in 2018 and now they monitor over 15,000 pieces of equipment with C3AI.
Speaker Change: They asked to make this program alone, generate this whole C3AI program that they have written large that they call shell AI. It's generated an annual benefit shell of $2 billion.
Speaker Change: and we're not done. We continue to collaborate, expanding in the new use cases, including some service reservoir management and oil condition monitoring. These applications we expect to be all scaled out across multiple assets.
Bishop Roach: Bishop Roach.
Speaker Change: He's also having an artwork with connedish. We began our partnership with conned at 2017, initially focused on the advanced metering infrastructure project.
Speaker Change: This is a project that enhances the operational efficiency, public safety and customer satisfaction of their smart career infrastructure and it continues to scale.
Speaker Change: Annual Cost Reduction Uncovered is over $45 million. The project is exceeding in expectations with a projected benefit of more than $3.2 billion over 20 years, $500 million more than originally projected.
Speaker Change: Now, on that is generally a complaint generated by I for meter management and asset and asset mapping, which addresses billing discrepancies and reduces mismapings on the electric grid and increases cost and increases customer satisfaction.
Speaker Change: Customer Success is at the core of why we both discover it.
Speaker Change: Now...
Speaker Change: Let's take a moment here and take back.
Speaker Change: For those of you who've been around for a few decades and they've got to learn a touch of what's going on. People, C3AI is the original Enterprise AI company, hard stop.
Speaker Change: We've began to see 3A in January of 2019, January of 2009.
Speaker Change: Think about that with a division with a vision to develop a software platform and enterprise applications that would allow organizations to exploit what we believe would be the computing platform of the future.
Speaker Change: And that included a last-to-class computing, the Internet of Things, Big Data, and predictive analytics.
Speaker Change: And we did this during the depth of the AI winner. This was well before the ad then of the GPU, before Azurek existed, before GCP existed. And when AWS was made.
Speaker Change: We invested a thousand of some person leaders in over a decade, building the C3 AI platform. The first, okay, reference architecture platform architecture for advertising, I hard stop the first.
Speaker Change: Okay, and over, and today, now, over, 90.
Speaker Change: C3 AI-enerpise applications that address the value chains that energy, government, defense, manufacturing, financial services, agribusiness, farm up and others.
Speaker Change: We deployed these applications today in Europe, Asia, South America, North America, and in governments around the world. Now, 15 years late!
Speaker Change: The Elastic Cloud, the Internet of Things, Big Data, and Predicted Blades.
Speaker Change: Lath, Brigham and Lath, have become ubiquitous.
Speaker Change: Enterprise AI is broadly recognized as one of the largest and fastest-growing markets give the history of enterprise software.
Speaker Change: It is a mandate for every corporate and government leader today to harness the Power of Enterprise AI.
Speaker Change: and C3AI is extraordinarily well positioned to serve this larger graphical and market demand.
Speaker Change: She 3A is today, one of the fastest growing companies in the public software universe.
Speaker Change: and most important in this current cacophony of AI Market Heights. C3EI is a cheating among the highest levels of customer satisfaction for value-realized, in the enterprise software world.
Speaker Change: Good. I refer you to our Burning Supplemental deck today, where we're showcasing C3AIs net promoter scores. Fetchmarking C3A against other leading enterprise software companies, okay?
Speaker Change: Many of which perform to be among all of which perform to be AI companies. And this is your point that's published by a third party called Comparable. The bottom line is...
Speaker Change: Our enterprise software companies are the most satisfied people in the software industry.
Speaker Change: Consistently deriving unmatched value from our solutions.
Speaker Change: Achieving this level of customer satisfaction doesn't just happen, if the result of relentless dedication, unwavering commitment, of thorough understanding of our customer needs, superior software technology, and deep expertise in enterprise AI. Hold.
Speaker Change: Over many years of excellence. In the final analysis, customer value realized will be the only criteria that will determine the leaner, believe, and enterprise AI.
Speaker Change: and C3AI is exactly on track.
Speaker Change: Now I'd like to turn this over to the operator to be in our QA expansion. Thank you for all for being here.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask the question, you will need to press star 1-1 on your telephone.
Speaker Change: Please stand by while we compare the Q&A roster.
Speaker Change: The End.
Speaker Change: Episode 2
Speaker Change: Our first question comes from a line of Patrick Wall Ravens with Citizen J. M. Pooch, your line is open.
Speaker Change: Oh, great. Thank you very much and congratulations. Hey Tom, can you start out by just sort of characterizing what the tone of business was like for you guys in Q1, and specifically I'm looking at your deal band chart.
Speaker Change: Free at 71 deals in the average TCV is 700, so if you multiply those together, you get like almost.
Speaker Change: Y'all.
Speaker Change: and Hitesh Lath, Hitesh Lath, Amit Berry, Thomas Siebel, So, um...
Speaker Change: Just if you can just comment on the tournament business, that would be great.
Speaker Change: Scruff has passed very well up there, I mean, I'd say particularly with the advent of genera they are. I mean, I think it's very difficult for people who are assessing these companies.
Speaker Change: She really understands the complexity of what's going on in the AI Mark. Where we have 41 different flavors of Enterprise AI. We have these generative AI applications that go from very small, low-pricy use cases to very high.
Speaker Change: A price high value use cases.
Speaker Change: And it's difficult to model that. I mean, this is not a simple business where in this, you know, as we enter this kind of new world of AI, I mean, it's really complex and we can't simply multiply, gee, we can this many widgets this quarter, or we're going to do that many widgets next to that quarter, and this is the growth rates of widgets, and this is the growth margin, and therefore, you know, this is what the, the, you know, we continue to be just amazed.
Speaker Change: By the broad range of applications that we're finding for Enterprise AI, and I would say in general to the AI, many of which we just couldn't have anticipated. I would say like public sector, we couldn't anticipate that, and we just fell into a cold by there. Okay, law firms.
Speaker Change: Medical Diagnostics, it's just fascinating.
Hitesh Lath: and Hitesh, back at Ask a follow-up for you, did you? I think people are probably wondering given how strong the booking seemed to be, why the guidance didn't go up, how did you think about that?
Hitesh Lath: Uh, you talking about the guidance for the Q2 revenue guidance?
Speaker Change: No, for the year you kept it the thing.
Speaker Change: Yeah, that's been represents 19 to 27% revenue growth.
Speaker Change: Will still make sense from the fastest growing companies in the public software company universe.
Speaker Change: The End of Episode 2
Speaker Change: Okay, thank you guys.
Speaker Change: Thank you.
Speaker Change: Please stand by for our next question.
Speaker Change: and the next question comes from the line of Timothy Horan with Oppenheimer, your line is open.
Speaker Change: I think, I'm the on subscription revenue's been a little lumpy here, I'm professional services, I know Tom, you know, basically just said it's
Timothy Horan: Very difficult to model after. Can you give us some color on the trends? Like is this a good jump-up point for the rest of the year? And then maybe just on the expenses, you know, where should we, you know, be modeling and the expenses increase the most than, you know, quarter or two? Thank you.
Speaker Change: Thanks. Let me address subscription versus services. You know, under...
Speaker Change: And C606, it's a little complex, certain things that used to be.
Speaker Change: You know, we used to be called software and I'll call services under the new guidance and we comply with what the guidance is. That being said, we've guided that our services revenue would be 10 to 20% of revenue in any given quarter. Our services revenue was 16% in this quarter.
Speaker Change: Now, and so well within our guidance there, but before we kind of have a moan, the fact that services were a little higher than they expected to be.
Speaker Change: Let's remember what services margins are at C3AI while our software is sufficient and margins are quite high at 66%.
Speaker Change: Okay, our service is tomorrow, and everybody, the overall call is in excess of 90%. So, services is a pretty darn good business, and, uh...
Speaker Change: and, you know, while we continue to be focused on, you know, I mean, we're a licensing company. Okay, we're not one of these services companies pretending to be a software company.
Speaker Change: Wanted to shoot him out there? Okay, and we're not bad, but we can do it before we put it.
Speaker Change: You don't continue. For the next year to two, you can expect services to bounce around in, you know, in the 10 to 20% it will probably, you know, average about 15, but remember our service is margin is about 90% I think 93% is not there to number like that. So it's, you know, it's good work if you can get it.
Speaker Change: So, was there any reclassification this quarter or one time items or you know, the mid-15% is kind of a good run right going forward.
Speaker Change: No Nordic classification.
Speaker Change: Okay, great. And I'll expense line items, you know, anything to focus on the next quarter or two where we should be. See you at the call.
Speaker Change: Yeah, so in terms of our expenses, we plan to continue to make investments in our sales force.
Speaker Change: Hard indeed as well as marketing efforts.
Speaker Change: Okay, great, pretty much across the board. And I'll just laugh at any change in the competitive dynamics out there. I mean, who do you run up against, you know, the most these days?
Tom Sebel: Hi, this is back to Tom, I'll add one in your comment, what's the comment in this moment? You're close to it then, I. Yeah, I think the the the the fall through the fact that competition is the information technology, the IT organization, the CIO, trying to build.
Speaker Change: These applications themselves and those are our best, you know, prospects is ones that have tried to, you know, do you do the data science and then scale that up across a large enterprise, typically.
Speaker Change: Figure out how difficult that is, without the right AI platform. So that is the fact, too.
Speaker Change: Competition in the market for us and in Los Angeles.
Speaker Change: Prospects for a couple of years down the road.
Speaker Change: Correct? Because they all come crashing down and we're crossing up, you know, you know, we have this The CIO with 10,000 people in Bangalore trying to build this thing on a piece of parts from.
Speaker Change: You know about the hyperscalers and...
Speaker Change: in very, really comes crashing down around him and so they're just, we just put him in the pipeline for three years to have the road and they come back.
Speaker Change: That's right. Thank you. Thank you, guys.
Speaker Change: Thank you.
Speaker Change: Please stand by for our next question.
Speaker Change: Our next question comes from the line of Mike Lathamor with Northland Capital Market, July and is open.
Mike Lathamor: Thank you. The pilot growth is very strong. Sequential year over year, are the size of the pilots, you know, the value of the pilots for standard and gender to the kind of as expected.
Speaker Change: With the size of value of the pilots, you know, the middle of a road, it could be off here by mid-10 or 15%, but in the middle of a road pilot for Enterprise AI applications, a half a million bucks, the middle of the road for a generator, the AI application is about a quarter of a million dollars. The value of the pilot, in a generator, the AI pilot usually takes three months to complete, the AI pilot will take.
Speaker Change: Stakes six months to complete.
Speaker Change: Okay, and then we go in a contract to go see them. They go live. We get guidance before that we expect about 70% of our pilots convert to.
Speaker Change: Productions, Contracts, I think that's about right, and honestly, the 30% that don't convert, it's not because the many of these are enormously successful projects, and it's not because the pilot was, it was.
Speaker Change: Successful, they can work because some genius CIO decides he's going to try to build a subsale spot of some piece parts of a hyperscaler, and they'll be back.
Speaker Change: Yeah, yeah, I got it. Okay, so, so no change in pricing or value. It sounds like on pilots. And then in terms of the second quarter guidance.
Speaker Change: The midpoint is about 24% revenue growth, which is a pretty big step up from the growth you had this quarter. I guess, and I think the biggest step up our last four quarter, I believe, but it is the...
Speaker Change: You know, what gives you confidence in that improvement? Is it these pilots? He just landed? Or is it professional services grow? Or big deals? Getting deployed? What gives you confidence? Competits, not acceleration?
Speaker Change: Yeah, using kind of the best profile tilt judgment we have, okay, the confidence we gave is...
Speaker Change: What we think is going to happen. Now we've been right. We've been public. I think for 15 quarters and we've been right 15 out of 15 quarters and I can, you know.
Speaker Change: I know that many of you are trying to model this business, if you can model it better than I, because this is a lot of moving parts here, and I think the best indicator of what we're going to do.
Speaker Change: Is what we guide you to. I mean, you can take that to the bank for each of the last 15 quarters we've been pretty spot on with that. So, right now.
Speaker Change: That's what we think we'll do, that's our best professional judgment and you can be sure we're going to be working diligently to meet or exceed that.
Speaker Change #100: Correct, thanks.
Speaker Change #101: Thank you.
Speaker Change #102: Ladies and gentlemen, we will take our last question from the line of King's League Cring with Hannah Cord, Y'all on this open.
Speaker Change #103: Hi, thanks for taking the question. 40 agreements with GCP that's...
Speaker Change #103: Spectacular.
Speaker Change #104: 51 agreements with the partner network overall. So could you speak to the partner efforts outside of GCP? What's working well? What would you like to improve? And then is the GCP partnership as dominant from a booking, contribution perspective as it is in deal frequency? Thanks.
Kingsley: I'm going to share Kingsley, I don't think I have the bookings contribution dating here, so I can.
Speaker Change #106: I can't correctly answer that one. I would say that.
Speaker Change #107: The relationship with the relationship with the idea of this is great. We're doing a lot of good work with AWS.
Speaker Change #107: Our citizens with Microsoft Azure, and I mean, we're great partners for these guys. I mean, what we do when they partner with us, if the application up fast, the customer gets value, I mean, they don't make money when companies are building applications using their platforms, they get money, they make money when people are running their applications.
Speaker Change #107: So we're consuming CPU resources, we're consuming GPU resources, we're consuming storage and they're all great partners, they're great companies, they're wonderful to work with and it's a privilege for us to be a little partner with them.
Speaker Change #108: All right, okay, that's very helpful. And then last one, just to clarify, for the, the sliders state and local agreements were most of those pilots.
Speaker Change #109: They all kind of started his pilots. Yeah, yeah. And I'm not sure which number you're referring to. Did we refer to how many pilots of our how many converted in the court? Do we set this? No, we don't talk about the conversions. We have the number for how many pilots close in the court. 52.
Speaker Change #110: He thinks they almost all began his piling, okay. The all began his piling, it go from, let's say, one to three months and then, of the great majority of them convert to production.
Speaker Change #111: Make sense, yeah, understood in this context. All right, congrats on the quarter thank you. Thank you.
Speaker Change #112: Thank you everybody. I think this is the end of our call. We really appreciate your attention.
Speaker Change #113: You know, this is quite an adventure. I think we're breaking ground in Enterprise AI. I know we're breaking ground in Enterprise AI.
Speaker Change #113: You know, I can just tell you, for those of you who visited us or those of you who haven't seen us to visit, it is so exciting and it's just palpable. And so we're going to continue to get after it and we thank you for your time, we thank you for your attention and we wish you all a good day.
Speaker Change #114: Ladies and gentlemen, this concludes today's conference call. Thank you for participating, you may now disconnect.