Q2 2025 C3.ai Inc Earnings Call
Events are in a listen only mode. After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to them.
Speaker Change: Move yourself from the queue. Please press star one one again please be advised today's conference is being recorded I would now like to hand, the call over to Amit Berry. Please go ahead.
<unk>: Good afternoon, and welcome to <unk> earnings call for the second quarter of fiscal year 2025, which ended on October 31, 2024. My name is <unk> and I lead Investor Relations at <unk> with me on the call today are Tom Siebel, Chairman and Chief Executive Officer and hit a slot chief.
Speaker Change: Officer.
Speaker Change: After the market closed today, we issued a press release with details regarding our second 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 <unk> Dot AI. 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 the business that may be considered forward looking under federal Securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date, we disclaim any obligation to update any forward looking statements or outlook.
Speaker Change: These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
Speaker Change: 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.
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 continue to provide this additional detail in the future and with that let me turn the call over to Tom.
Thank you Mitch.
Tom: Good afternoon, everyone.
Speaker Change: And thank you for joining our call today.
Speaker Change: We had another outstanding quarter with strong <unk>.
Speaker Change: And Bottomline performance.
Speaker Change: This quarter marked our seventh consecutive quarter of accelerating revenue growth.
Speaker Change: Our year over year revenue growth has accelerated from 11% in Q1, 'twenty, 4% to 17% in Q2, 24% to 18% in Q3 24, 20% in Q4, 21% in Q1 'twenty.
Speaker Change: In Q first quarter of 'twenty, five and now.
Speaker Change: 29% in the second quarter of fiscal year 'twenty five.
Total revenue for the quarter was $94 $3 million exceeding the high end of our revenue guidance.
Speaker Change: Subscription revenue was $81 2 million and increased 22% from a year ago.
Speaker Change: Subscription and prioritize engineering services revenue combined was $90 8 million and accounted for 96% of total revenue an increase of 27% compared to 71 3 million one year ago.
Speaker Change: Also note that our non Baker Hughes' revenue grew by 41% year over year.
Speaker Change: Our non-GAAP gross profit was $66 3 million, representing approximately a 70% gross margin.
Speaker Change: Our non-GAAP operating loss was $17 2 million and substantially better than our guidance for a loss of $26 7 million to $34 7 million.
Speaker Change: Our non-GAAP net loss per share was <unk>.
Speaker Change: We ended the quarter with over.
Speaker Change: $730 million in cash cash equivalents and investments.
Speaker Change: No. This is this is the 16th consecutive quarter as a public company and in which we have met or exceeded our revenue guidance.
Speaker Change: While I would describe our performance is generally on track with the plan. We provided there is no question that our new Microsoft Alliance provided a tailwind.
Speaker Change: Our growth continues to gain traction.
Speaker Change: With increasing revenue momentum quarter after quarter.
A significant driver of this success.
Speaker Change: Is our expanding partner ecosystem, which plays a critical role in driving our leadership in the market our partner market ecosystem. Today includes Google AWS, Microsoft <unk> fractal paradigm, Booz Allen Rts ECS cap Gemini and Baker.
Speaker Change: Hughes.
Speaker Change: Our partnering activity with a hyperscale orders in the quarter remained brisk with 62% of our agreements being close with where through.
Speaker Change: Google Cloud AWS and Azure.
Speaker Change: Looking at our current installed base as measured by customer logos as of October 24, 51% of our contracts run Google cloud, 21% were autos or in 2024% were on AWS and 5% for on Prem.
Speaker Change: The most significant event of the quarter and perhaps the most significant event in the company's history was most certainly the substantial expansion of our strategic alliance with Microsoft Azure.
Speaker Change: On September 32020 for Microsoft and <unk> entered into a new and expanded strategic alliance for an initial five and a half year term ending March.
Speaker Change: 2030.
Speaker Change: I believe this will constitute an inflection point in the enterprise AI industry.
Under the terms of the Microsoft C III AI strategic Alliance agreement.
Speaker Change: All <unk>.
Speaker Change: Enterprise all C III enterprise AI.
Speaker Change: And Cte generative AI solutions are now available on Azure price list.
C III enterprise AI and generated of AI solutions are now order a bull on the Microsoft Azure marketplace.
Speaker Change: All <unk> solutions are sellable by the entire is your sales organization globally.
Speaker Change: <unk> sales personnel will receive commissions quota credit and special bonuses.
Speaker Change: <unk> <unk> sales.
Speaker Change: <unk> salespeople will receive design wind credits for each <unk> <unk> sale.
Speaker Change: Importantly, all C. III AI products are now <unk> on Microsoft paper, incorporating the Microsoft Enterprise license agreement that Microsoft has in place with I believe over 95% of the Fortune 500, this will dramatically.
Speaker Change: Shorten <unk> sales cycles.
Speaker Change: And finally, Microsoft will subsidize C III AI pilots and C. III production deployments unabsorbed over the term of this agreement.
Speaker Change: There are a large number of joint sales and marketing activities.
Speaker Change: That we have agreed to in the alliance agreement.
Speaker Change: The two firms will jointly build a pipeline of customer accounts.
Speaker Change: Just on that point joint business plan.
Speaker Change: With.
Speaker Change: Mutual sales leadership sponsors joined.
Speaker Change: Joining customer acquisition target.
Speaker Change: Robust governance structure and executive meeting cadence.
Speaker Change: Global system Integrator Alliance.
Speaker Change: Deal registration process.
Speaker Change: Sales and technical support resources publicity and press releases marketing initiatives and joint solutions offerings.
Speaker Change: <unk> AI and Microsoft will create joy Webinars and sales collateral to train the Microsoft and <unk> sales forces on our joint offering solutions and value propositions.
Speaker Change: Microsoft will list all C III AI software solutions on the Microsoft commercial cloud portal.
Speaker Change: <unk> and Microsoft.
Speaker Change: Our joint marketing fund will be established for.
Speaker Change: Cooperative marketing and promotion of the integrated solutions.
Speaker Change: And such other activities is <unk> being a platinum sponsor at Microsoft conferences and participation in Microsoft Azure industry days and AI innovation summits.
Speaker Change: She three AI and Microsoft with schedule and attend.
Industry solution roadmap review meetings on a quarterly basis, the executive sponsorship the alliance or foresee three AI, Tom Siebel, the CEO and chairman.
Judson: For Microsoft Judson out off the chief customer officer of Microsoft.
Speaker Change: Importantly.
Speaker Change: For all of the Microsoft funded projects Ctrip will position the Microsoft Azure cloud as its preferred cloud provider and Microsoft will designate <unk> as its preferred enterprise AI application provider.
Speaker Change: <unk> been pioneering enterprise AI now for 15 years, we invented enterprise AI, we've built over 100 enterprise applications that deliverable measurable value to our customers around the world and now Microsoft is fully onboard.
Speaker Change: And leaning in it is difficult to overestimate the impact of this agreement.
Speaker Change: <unk> AI and upon the enterprise AI market writ large.
Speaker Change: As a direct result, direct and immediate result of this alliance the effective number of <unk> sellers will grow from order of hundreds of sales professionals and Cc order of 100 sales professionals at <unk>.
Speaker Change: As of October one 2024 to potentially.
Speaker Change: 10000 sales professionals operating in every geography in every vertical market.
Speaker Change: Microsoft is the largest software company in the world.
Speaker Change: We believe that over 95% of the Fortune 500 companies use Microsoft products.
Speaker Change: They are an established brand with the largest sales channel in the cloud.
Speaker Change: Partnering with Microsoft allows us <unk>.
Speaker Change: To leverage its unparalleled reach.
Speaker Change: Robust cloud capabilities and trusted reputation in the market.
Speaker Change: Together.
Speaker Change: Microsoft can see three share a bold vision to redefine how businesses transform this partnership will accelerate the adoption of enterprise AI auto Saar and enable us to tackle some of those.
Speaker Change: Most complex business challenges of the 21st century for organizations.
Speaker Change: Across every industry.
Speaker Change: We're going to market with industry centric turnkey AI solutions that address the value chains of federal defense and intelligence manufacturing pharmaceutical chemicals oil and gas utilities and others by combining <unk> proven.
Thomas Siebel: We invented Enterprise AI. We've built over 100 Enterprise AI applications that deliver measurable value to our customers around the world. And now, Microsoft is fully on board and leaning in.
Invented enterprise AI, we've built over 100 enterprise applications that deliverable measurable value to our customers around the world and now Microsoft is fully onboard and leaning in.
Speaker Change: Enterprise AI applications with Microsoft's superior cloud infrastructure and global reach we are exceptionally well equipped to help organizations achieve higher levels of efficiency innovation sustainability.
Thomas Siebel: It is difficult to overestimate the impact of this agreement upon C3.ai and upon the Enterprise AI market writ large. As a direct result, direct and immediate result of this alliance, the effective number of C3.ai sellers will grow from order of hundreds of sales professionals at C3, order of 100 sales professionals at C3.ai as of October 1st, 2024, to potentially order of 10,000 sales professionals operating in every geography in every vertical market. Microsoft is the largest software company in the world. We believe that over 95% of the Fortune 500 companies use Microsoft products. They're an established brand with the largest sales channel in the cloud.
It is difficult to overestimate the impact of this agreement a pilot <unk> AI and upon the enterprise AI market writ large.
As a direct result, direct and immediate result of this alliance the effective number of <unk> sellers will grow from order of hundreds of sales professionals with Cc order of 100 sales professionals at <unk>.
Speaker Change: And rapid economic return.
Speaker Change: The momentum that we've generated this quarter is undeniable and we are energized by what lies ahead.
Speaker Change: Now, let's look back at the quarter and shifted customer success in the second quarter C. III AI closed 58 agreements, including 36 pilots.
As of October one 2024 to potentially.
Order of 10000 sales professionals operating in every geography in every vertical market.
Speaker Change: New and expanded agreements with Exxonmobil Coke DAU wholesome shell, Duke energy, Boston Scientific Rolls Royce Cameco Mars is flat.
Microsoft is the largest software company in the world.
We believe that over 95% of the Fortune 500 companies use Microsoft products.
Speaker Change: <unk> and <unk> among others. Additionally, we continued to expand our footprint across state and local government closing nine agreements in California, Texas, Michigan, Idaho, New Mexico, Washington, and Florida.
Their established brand.
With our largest sales channel in the cloud.
Thomas Siebel: Partnering with Microsoft allows C3.ai to leverage its unparalleled reach, robust cloud capabilities, and trusted reputation in the market. Together. Microsoft and C3.ai share a bold vision to redefine how businesses transform. This partnership will accelerate the adoption of enterprise AI on Azure and enable us to tackle some of the most complex business challenges of the 21st century for organizations. across every industry. We're going to market with industry-centric turnkey AI solutions that address the value chains of federal defense and intelligence, manufacturing, pharmaceutical, chemicals, oil and gas, utilities, and others by combining C3.ai's proven enterprise AI application. With Microsoft's superior cloud infrastructure and global reach, we are exceptionally well-equipped to help organizations achieve higher levels of efficiency, innovation, sustainability.
Partnering with Microsoft allows <unk>.
AI to leverage its unparalleled reach robust cloud capabilities and trusted reputation in the market.
Speaker Change: In our federal business, we had strong execution across the board and secured key wins and expansions with multiple agencies, we entered into new and expanded agreements with the U S Department of defense.
Together.
Microsoft and <unk> share a bold vision to redefine our business has transformed this partnership will accelerate the adoption of enterprise.
Speaker Change: The U S Air Force U S Navy the U S Army U S Marine Corps, the defense Logistics agency.
Sure and enable us to tackle some of the.
Most complex business challenges of the 21st century for organizations.
And the chief.
Speaker Change: Digital artificial intelligence office among others.
Speaker Change: Yes.
Across every industry.
Speaker Change: The U S Army as program manager for intelligence and system analytics slot.
We're going to market with industry centric turnkey AI solutions that address the value chains of federal defense and intelligence manufacturing pharmaceutical chemicals oil and gas utilities and others by combining <unk> AI.
Speaker Change: <unk> AI and ECS federal to transform its intelligence collection with <unk> decision advantage delivered under a $23 million award. This AI application unifies data from multiple systems to streamline tasking and collection.
<unk> enterprise AI applications.
With Microsoft's superior cloud infrastructure and global reach we are exceptionally well equipped to help organizations achieve higher levels of efficiency innovation sustainability.
Speaker Change: Including digitizing scheduling workflows. These modernization efforts to make it easier for the army workforce.
Speaker Change: Quickly provide real time predictive intelligence to leaders, France has accelerated.
Thomas Siebel: and Rapid Economic Return.
And rapid economic return.
Speaker Change: The accelerated decision making.
Thomas Siebel: The momentum that we've generated this quarter is undeniable, and we are energized by what lies ahead. Now, let's look back at the quarter and shift to customer success. In the second quarter, C3.ai closed 58 agreements, including 36 pilots. We entered new and expanded agreements with ExxonMobil, Coke, Dow, Holcim, Shell, Duke Energy, Boston Scientific, Rolls-Royce, Cameco, Mars, ESAB, Flex, and Worley, among others. Additionally, we continue to expand our footprint across state and local government, closing nine agreements in California, Texas, Michigan, Idaho, New Mexico, Washington, and Florida. In our federal business, we have strong execution across the board and secured key wins and expansions with multiple agents.
Yeah.
The momentum that we've generated this quarter is undeniable and we are energized by what lies ahead.
Speaker Change: The United States Air Force Rapid Sustainment office continued the expansion of its sensor based algorithm algorithms with <unk> AI.
Now, let's look back at the quarter and shift of customer success in the second quarter C. III AI closed 58 agreements, including 36 pilots.
Speaker Change: With a new contract.
Speaker Change: The <unk> application.
Speaker Change: Which is the designated U S Air Force system of record for all CDM, plus and predictive maintenance will expand to include new systems to monitor aircraft. The KC 46, and KC 135.
We entered new and expanded agreements with Exxonmobil Coke DAU wholesome shell Duke energy.
Boston Scientific Rolls Royce Cameco, Mars, SaaS, flax and worthy among others. Additionally.
Speaker Change: The defense logistic agency, a cornerstone of the U S Department of advances supply chain expanded its use of C. III contested logistics application to drive efficiency and productivity across its workforce, ensuring supply network resilience and availability and protested environments.
We continued to expand our footprint across state and local government closing nine agreements in California, Texas, Michigan, Idaho, New Mexico, Washington, and Florida.
In our federal business, we had strong execution across the board and secured key wins and expansions with multiple agencies, we entered into new and expanded agreements with the U S Department of defense.
Speaker Change: DLA uses <unk> tested logistics to streamline workflows and decision making for risk management Sustainment.
Thomas Siebel: We entered into new and expanded agreements with the U.S. Department of Defense. the U.S. Air Force, the U.S. Navy, the U.S. Army, the U.S. Marine Corps, the Defense Logistics Agency. and the chief. Digital Artificial Intelligence Office, among others. The U.S. Army's Program Manager for Intelligence and System Analytics selected C3.ai and ECS Federal to transform its intelligence collection. with C3.ai Decision Advantage. Delivered under a $23 million award, this AI application unifies data from multiple systems to streamline tasking and collection, including digitizing scheduling workflows. These modernization efforts make it easier for the RME workforce to quickly provide real-time predictive intelligence to leaders for enhanced, accelerated decision-making.
Speaker Change: Scenario based.
The U S Air Force U S Navy the U S Army U S Marine Corps, the defense Logistics agency.
Speaker Change: <unk>.
Speaker Change: Proactive readiness and predictive maintenance across the department of defense together.
And the chief.
Speaker Change: <unk> continues to support BLA to enhance war fighter readiness drive operational efficiency and improved mission effectiveness across the globe.
Digital artificial intelligence office among others.
Yes.
The U S Army as program manager for intelligence and system analytics, Slack <unk> and ECS federal to transform its intelligence collection.
Speaker Change: <unk> AI is most certainly a trusted partner for these agencies, providing innovative innovative and secure solutions.
With <unk> decision advantage delivered under a $23 million award.
Speaker Change: Empowering modernization and agility.
Speaker Change: I suspect.
Speaker Change: <unk> there will be a question about Baker Hughes select me address that upfront now five five years into the Baker Hughes agreement. There is no question that this has been and continues to be in the best interest of our shareholders.
Application unifies data from multiple systems to streamline tasking and collection, including digitizing scheduling workflows. These modernization efforts make it easy easier for the army work for us.
Speaker Change: That being said the relative importance of Baker Hughes and our overall business mix is diminishing.
Quickly provide real time predictive intelligence to leaders, France has accelerated decision making.
Speaker Change: In fiscal year 'twenty, three Baker Hughes accounted for 35% of our revenue in fiscal year 'twenty for Baker Hughes accounted for 27% of our revenue.
Thomas Siebel: The United States Air Force Rapid Sustainment Office continued the expansion of its sensor-based algorithms with C3.ai. with a new con. Japan to application. which is the designated U.S. Air Force system of record for all CBM plus and prediction maintenance will expand to include new systems and two monitored aircraft, the KC-46 and the KC-135. The Defense Logistics Agency, a cornerstone of the U.S. Department of Defense's supply chain, expanded its use of C3.ai contested logistics application to drive efficiency and productivity across its workforce, ensuring supply network resilience and availability in contested environments. DLA uses C3.ai-contested logistics to streamline workflows and decision-making for risk management, sustainment, scenario-based planning.
The United States Air Force Rapid sustained Bureau office continued the expansion of extensive based arrow algorithms with <unk> AI.
Speaker Change: Last quarter bigger use accounted for 18% of our revenue.
With a new contract.
The <unk> application.
Speaker Change: Revenue ex Baker Hughes increased by 41% year over year in Q2 fiscal year 'twenty five.
Which is the designated U S Air Force system of record for all CDM, plus and predictive maintenance will expand to include new systems and to monitor aircraft. The KC 46, and KC 135.
Speaker Change: Our oil services exclusive marketing agreement with Baker Hughes.
Speaker Change: As expect is scheduled to expire in June.
The defense logistic agency, a cornerstone of the U S Department of advances supply chain expanded its use of C. III contested logistics applications to drive efficiency and productivity across its workforce.
Speaker Change: Of 2025, unless we renew or extend it as we have done three times previously.
Speaker Change: Now as I sit here today, I think it's much more likely than not that.
During supply network resilience and availability in contested environments.
Speaker Change: The agreement will be extended okay, and will be renewed but as we consider our renewal options going forward, particularly in light of the new Microsoft agreement and the many direct customer relationships that we have successfully established the oil and gas market.
DLA uses <unk> tested logistics to streamline workflows and decision making for risk management Sustainment.
Scenario based.
Thomas Siebel: proactive readiness, and predictive maintenance across the Department of Defense, together. C3.ai continues to support DLA to enhance warfighter readiness, drive operational efficiency, and improve mission effectiveness across the globe.
<unk>.
Proactive readiness and predictive maintenance across the department of defense together.
Speaker Change: We need to consider carefully.
<unk> continues to support BLA to enhance war fighter readiness drive operational efficiency and improve mission effectiveness across the globe.
Speaker Change: It isn't the best interest of our shareholders to partner exclusively with Baker Hughes in the oil and gas market or whether off we're better off whether.
Thomas Siebel: is most certainly a trusted partner for these agencies providing innovative and secure solutions. Empowering Modernization and Agility.
Speaker Change: We are better off partnering.
<unk> AI.
Speaker Change: All of the oil and gas service providers.
Yes, most certainly a trusted partner for these agencies, providing innovative innovative and secure solutions.
Speaker Change: Any of these outcomes will not impact our guidance and at this point.
Empowering modernization and agility.
Speaker Change: It is not particularly significant to our outlook.
Thomas Siebel: I suspect there will be a question about Baker Hughes, so let me address that up front. Now, five and a half years into the Baker Hughes Agreement, there is no question that this has been and continues to be in the best interest of our shareholders. That being said, the relative importance of Baker Hughes in our overall business mix is diminishing. In fiscal year 23, Baker Hughes accounted for 35% of our revenue. In fiscal year 24, Baker Hughes accounted for 27% of our revenue. In last quarter, Bigger Hughes accounted for 18% of our revenue. Revenue x Baker Hughes increased by 41% year-over-year in Q2 fiscal year 25.
As we have successfully diversified our revenue mix, let's put this in respect.
I suspect there will be a question about Baker Hughes. So let me address that upfront now five five years into the Baker Hughes agreement. There is no question that this has been and continues to be in the best interest of our shareholders.
Speaker Change: Our relationship with Baker Hughes is great. They are a great company. The order of I think a $24 billion business right now.
Speaker Change: The Big story today, the Big story is Microsoft Microsoft Notwithstanding is order of $250 billion business and so this by far overshadows anything that we've done.
That being said the relative importance of Baker Hughes and our overall business mix is diminished.
Fiscal year 'twenty, three Baker Hughes accounted for 35% of our revenue in fiscal year 'twenty for Baker Hughes accounted for 27% of our revenue.
Speaker Change: We value our relationship with Baker Hughes as I sit here today, I think it will be extended but whether it's extended or not is no.
In last quarter bigger use accounted for 18% of our revenue.
Speaker Change: Impact on our outlook our guidance.
Revenue ex Baker Hughes increased by 41% year over year in Q2 fiscal year 'twenty five.
Speaker Change: Talk a minute about.
Speaker Change: Generative AI.
Speaker Change: This is clearly this generative AI issue represents.
Thomas Siebel: Our oil services exclusive marketing agreement with Baker Hughes is scheduled to expire in June of 2025 unless we renew or extend it as we have done three times previously. Now, you know, as I sit here today, I think it's much more likely than not that this agreement will be extended, okay, and will be renewed. But, you know, as we consider our renewal options going forward, particularly in light of the new Microsoft agreement, and the many direct customer relationships that we have successfully established at the oil and gas market. We need to consider care. Whether it is in the best interest of our shareholders to partner exclusively with Baker Hughes in the oil and gas market, or whether we are better off, or whether We are better off partnering with all of the oil and gas service providers.
Speaker Change: A pivotal moment in enterprise technology, and the significance of generative AI just cannot be overstated.
Our oil services exclusive marketing agreement with Baker Hughes.
<unk> is scheduled to expire in June of 2025, unless we renew or extend it as we have done three times previously.
Speaker Change: <unk> is at the forefront of this revolution with a highly differentiated product offering providing customers with safe secure fast reliable information from across the enterprise.
Now as I sit here today, I think it's much more likely than not agreeing.
Speaker Change: Many others companies are still making a lot of noise and experimenting with prototypes <unk> AI is already deployed generative AI in production and hardened real world highly secure enterprise environments. In Q2, we closed 15, new generative AI.
The agreement will be extended and will be renewed but as we consider our renewal options going forward, particularly in light of the new Microsoft agreement and the many direct customer relationships that we have successfully established at the oil and gas market.
Speaker Change: Agreements with organizations, including Boston Scientific Coke Rolls Royce U S. Navy the National Science Foundation, and several government agencies in Texas, Washington, and New Mexico.
We need to consider carefully.
It is in the best interest of our shareholders to partner exclusively with Baker Hughes in the oil and gas market or whether off we're better off whether.
Speaker Change: Additionally, we converted pilots into production agreements at Dow Cargill, Norfolk, arent in metal and Florida crystals, demonstrating our ability to deliver results at scale in manners that are safe secure hallucination free and kind of lay it all.
We are better off partnering.
All of the oil and gas service providers.
Thomas Siebel: Any of these outcomes will not impact our guidance and at this point It is not particularly significant to our as we have successfully diversified our revenue. Let's put this into perspective. Our relationship with Baker Hughes is great. They're a great company. They're order of, I think, a $24 billion business, okay?
Any of these outcomes will not impact our guidance and at this point.
It is not particularly significant to our outlook.
As we have successfully diversified our revenue mix, let's put this into perspective.
Speaker Change: Hob goblins, the read about associated with generative AI.
Our relationship with Baker Hughes is great. They are a great company. The order of I think a $24 billion business right now.
Speaker Change: Enterprise select seafood generative AI for its proven ability to drive.
Thomas Siebel: Now, you know, what is the big story today? The big story is Microsoft. Microsoft, if I'm not mistaken, is order of a $250 billion business. And so, this by far overshadows anything that we've done. And we value our relationship with Baker Hughes. As I sit here today, I think it'll be extended. But whether it's extended or not, it has no impact on our outlook.
The Big story today, the Big story is Microsoft Microsoft Notwithstanding as order of a 250 billion dollar business and so this by far overshadows anything that we've done.
Speaker Change: To drive measurable business outcomes in a way that is safe secure trace.
Speaker Change: Traceable and doesn't cause data ash filtration problems.
We value our relationship with Baker Hughes as I sit here today, I think it will be extended but whether it's extended or not yet no.
Speaker Change: To jumpstart these outcomes and better serve our customers. This quarter, we introduced the <unk> regenerative AI accelerator program, we kicked off this program by hosting multiple fortune 500 companies at our headquarters in Redwood City for an immersive hands on three day workshop participants work with experts.
<unk> at our outlet for our guidance.
Thomas Siebel: talk a minute about generative AI. This is clearly this generative AI issue, you know, represents a pivotal moment in enterprise technology. And the significance of generative AI just cannot be overstated. C3.ai is at the forefront of this revolution with a highly differentiated product offering, providing customers with safe, secure, fast, reliable information from across the enterprise. While many other companies are still making a lot of noise and experimenting with prototypes, C3.ai has already deployed generative AI in production, in hardened, real-world, highly secure enterprise environments. In Q2, we closed 15 new generative AI agreements with organizations including Boston Scientific, Koch, Rolls-Royce, the U.S.
Talk a minute about.
Generative AI.
This is clearly this generative AI issue represents.
A pivotal moment in enterprise technology, and the significance of generative AI just cannot be overstated.
Speaker Change: Tailored generative AI solutions that meet their business needs and leave with production ready AI applications. The feedback has been extremely positive and.
<unk> is at the forefront of this revolution with a highly differentiated product offering providing customers with safe secure fast reliable information from across the enterprise.
Speaker Change: And we will be doing many many more of these around the globe in the months and quarters ahead.
Speaker Change: It's still early days for regenerative AI adoption, but the trajectory is clear according to Gartner by 2028 33 of 33% of enterprise software applications will include agenda AI up from less than 1% today. This will be a massive shift and.
Many others companies are still making a lot of noise and experimenting with prototypes sheath.
As already deploy generative AI.
Production in hardened real world highly secure enterprise environments. In Q2, we closed 15, new generative AI agreements with organizations, including Boston Scientific Coke Rolls Royce the U S Navy the National Science Foundation and several government.
Speaker Change: <unk> is uniquely positioned to lead the way, it's a major highlight of the quarter and it is difficult to overestimate. The importance of this is the award to see three AI of U S patent number.
Thomas Siebel: Navy, the National Science Foundation, and several government agencies in Texas, Washington, and New Mexico. Additionally, we converted pilots into production agreements at Dow, Cargill, Norfolk Iron and Metal, and Florida Crystals, demonstrating our ability to deliver results at scale in manners that are safe, secure, hallucination-free, and kind of avoid all the hobgoblins that you read about associated with generative AI. Enterprise selects C3 generative AI for its proven ability to drive to drive measurable business outcomes in a way that is safe, secure, traceable, and doesn't cause data exfiltration problems. To jumpstart these outcomes and better serve our customers, this quarter we introduced the C3 Generative AI Accelerator Program.
Agencies in Texas, Washington, and New Mexico.
Speaker Change: 12111859 covering agenda.
Additionally, we converted pilots in the production of great events at Dow Cargill, Norfolk arent in metal and Florida crystals, demonstrating our ability to deliver results at scale in manners that are safe secure hallucination free and kind of all.
Speaker Change: Which strengthens our market position dramatically.
Speaker Change: Patent protection.
Speaker Change: Instigated system and method for orchestrating multiple AI agents using multi modal foundation models. This patented technology is integrated.
The hob goblins, the read about associated with generative AI.
Speaker Change: Into the janitor seafood generative AI architecture, enabling independent AI agents to retrieve information across structured unstructured data reason take actions and actionable insight.
Enterprise select seafood generative AI for its proven ability to drive.
To drive measurable business outcomes in a way that is safe secure trade.
Okay.
Speaker Change: I mean come on your.
Speaker Change: Youre listening all of the results. There is no enterprise software company that is not yet being okay about.
Traceable and doesn't cause data ash filtration problems.
To jumpstart these outcomes and better serve our customers. This quarter, we introduced the <unk> III generative AI accelerator program, we kicked off this program by hosting multiple fortune 500 companies at our headquarters in Redwood City for an immersive hands on three day workshop participants work with experts.
Speaker Change: About <unk> <unk>.
Speaker Change: And the importance of generative. These generative these AI agents to their future Okay newest flash okay.
Thomas Siebel: We kicked off this program by hosting multiple Fortune 500 companies at our headquarters in Redwood City for an immersive hands-on three-day workshop. Participants work with experts to tailor generative AI solutions that meet their business needs and leave with production-ready AI applications. The feedback has been extremely positive and we will be doing many, many more of these around the globe in the months and quarters ahead.
All of that is covered by our <unk> iPad date is January of 2023 that is R.
Speaker Change: Intellectual property people and that is that is an important milestone and here's to your enterprise AI.
Generally if AI solutions that meet their business needs and leave with production ready AI applications. The feedback has been extremely positive and.
Speaker Change: This is a transformative time.
We will be doing many many more of these around the globe.
Speaker Change: For <unk>, we continue to report strong and accelerating growth.
In the months and quarters ahead.
Thomas Siebel: It's still early days for generative AI adoption, but the trajectory is clear. According to Gardner, by 2028, 33% of enterprise AI software applications will include agentic AI, up from less than 1% today. This will be a massive shift, and C3.ai is uniquely positioned to lead the way.
It's still early days for regenerative AI adoption, but the trajectory is clear according to Gartner by 2028 33 of 33% of enterprise software applications will include jet tick.
Speaker Change: We continue to expand our thriving partner ecosystem.
Speaker Change: And we continue generating meaningful economic returns for our customers, resulting in exceptional customer satisfaction levels.
Speaker Change: <unk> has a significant first mover advantage.
Up from less than 1% today this will be a massive shift and CBOE is uniquely positioned to lead the way.
Speaker Change: And a strong and proven technology Foundation.
Thomas Siebel: It's a major highlight of the quarter, and it is difficult to overestimate the importance of this, is the award to C3.ai of US patent number 12111859, covering agentic AI, which strengthens our market position dramatically. This patent protects a sophisticated system and method for orchestrating multiple AI agents using multi-modal foundation models. This patent technology is integrated into the C3 generative AI architecture, enabling independent AI agents to retrieve information across structured and unstructured data, reason, take actions, and actionable insights. Come on, you're listening to all the results. There is no enterprise software company that is not yapping about agentic AI, and the importance of these AI agents to their future.
Speaker Change: The <unk> AI platform is widely recognized as the leading AI ml platform and powers all of the <unk> AI enterprise applications that are now tried tested and proven in the market.
A major highlight of the quarter and it is difficult to overestimate. The importance of this is the award to <unk> of U S patent number 12111859 covering <unk>.
Speaker Change: C III has never been better positioned to capitalize.
Which strengthens our market position dramatically.
Speaker Change: On this market opportunity.
Patent protection.
Speaker Change: Last year, we made well considered investments to strengthen the business.
Instigated system and method for orchestrating multiple AI agents using multi modal foundation models. This patented technology is integrated.
Speaker Change: That resulted in the increased growth that you are seeing.
Speaker Change: With those investments in lead generation and customer success.
Into the janitor seafood generative AI architecture, enabling independent AI agents to retrieve information across structured unstructured data reason take actions and actionable insight.
Now supporting considering more pilots.
Speaker Change: What are you considering more pilots every quarter and accelerating topline growth in Q2, we supported 70% more pilots than we did a year ago and now with the Microsoft partnership we're expecting too.
Okay.
Correct.
Listening to all of the results there as you know enterprise software company that has not yet.
Speaker Change: Further accelerate this growth.
About objective.
Speaker Change: Given the magnitude and the great potential of the new Microsoft Alliance, we are going to invest in the Microsoft partnership in a big way to do that.
<unk>.
And the importance of degenerative. These generative these AI agents to their future news.
Thomas Siebel: Newsflash, all that is covered by a C3.ai patent dated January of 2023.
Speaker Change: Newsflash okay.
Speaker Change: All of that is covered by our <unk> iPad date is January of 2023.
Speaker Change: To not do so would be non rational.
Thomas Siebel: That is our intellectual property people, and that is an important milestone in the history of enterprise AI.
Speaker Change: We will hire more salespeople, we will hire more customer support people, we will engage in more marketing activity.
Speaker Change: Sure.
Speaker Change: Intellectual property people and that is that is an important milestone in his to your enterprise AI.
Speaker Change: And we will do that to support a more rapidly growing customer base.
Thomas Siebel: This is a transformative time. C3.ai. We continue to report strong and accelerating growth. We continue to expand our thriving partner ecosystem. And we continue generating meaningful economic returns for our customers, resulting in exceptional customer satisfaction level. C3.ai has a significant first mover advantage. and a strong and proven technology foundation. The C3.ai platform is widely recognized as the leading AI ML platform and powers all of the C3.ai enterprise applications that are now tried, tested and proven in the market. C3.ai has never been better positioned to capitalize. on mismarketup. Last year, we made well-considered investments.
Speaker Change: The result will be increased sales.
Speaker Change: This is a transformative time.
Speaker Change: Increased revenue growth and increased market share.
Speaker Change: For <unk>, we continue to report strong and accelerating growth.
Speaker Change: Given this investment decision.
Speaker Change: We continue to expand our thriving partner ecosystem.
Speaker Change: No longer targeting to be cash flow positive for the full year of fiscal year 'twenty five.
Speaker Change: And we continue generating meaningful economic returns for our customers, resulting in exceptional customer satisfaction levels.
Speaker Change: We have more than sufficient cash.
Speaker Change: And we will continue to be and we continue to plan to be cash positive.
Speaker Change: <unk> has a significant first mover advantage.
Speaker Change: Cash flow positive.
Speaker Change: Fourth quarter of this year.
And a strong and proven technology Foundation.
Speaker Change: <unk> is a structurally profitable business and by that I mean that our revenue.
Speaker Change: The C. Three AI platform is widely recognized as the leading AI ml platform and powers all of the <unk> AI enterprise applications that are now tried tested and proven in the market.
Speaker Change: Exceeds our cost of goods sold and plus cost of selling.
Speaker Change: We are well capitalized with.
Speaker Change: $730 million in cash and cash equivalents in hand, we have delivered.
Speaker Change: C III has never been better positioned to capitalize.
Speaker Change: Rapid sustained growth for seven consecutive quarters and are generating massive value for our customers. Our partner network is expanding and we are broadening our footprint across critical is.
Ms Margaret: Ms Margaret opportunity.
Last year, we made well considered investments to strengthen the business.
Thomas Siebel: Strength in the Business. that resulted in the increased growth that you are seeing. with those investments in lead generation and customer success. We're now supporting considering more pilots, we're supporting considering more pilots every quarter, and accelerating top line growth. In Q2, we supported 70% more pilots than we did a year ago.
That resulted in the increased growth that you are seeing.
Ms Margaret: With those investments in lead generation and customer success.
Speaker Change: Industries.
Speaker Change: Our revenue growth continues to exceed our that's.
Ms Margaret: Now supporting considering more pilots various supporting considering more pilots every quarter and accelerating topline growth in Q2, we supported 70% more pilots than we did a year ago and now with the Microsoft partnership we're expecting too.
Speaker Change: Our revenue growth rate.
Speaker Change: Continues to exceed our expense growth rate and as and we expected that to be generally true going forward continuing that trend.
Thomas Siebel: And now with the Microsoft partnership, we're expecting to further accelerate this Given the magnitude and the great potential of the new Microsoft Alliance, we are going to invest in the Microsoft partnership in a big way. To not do so would be non-rational. We will hire more salespeople. We will hire more customer support people. We will engage in more marketing activity, and we will do that to support a more rapidly growing customer base. The result will be increased sales. increased revenue growth, and increased market share.
Speaker Change: <unk> ability is a mathematical certainty with scale.
Ms Margaret: Further accelerate this growth.
Speaker Change: It is important to understand on a type of modeling a little modeling the business.
Ms Margaret: Given the magnitude and the great potential of the new Microsoft Alliance, we are going to invest in the Microsoft partnership in a big way.
Speaker Change: It's important to understand that the AI computing world.
Speaker Change: Is dramatically more complex than the conventional computing world.
Ms Margaret: To not do so would be non rationale we will hire more salespeople, we will hire more customer support people, we will engage in more marketing activity.
Speaker Change: As a result, it is more difficult to model.
Speaker Change: Through <unk> of that is because.
Speaker Change: It's simply not possible to apply conventional computing analytic models to the AI computing world, It's not simply a matter of computing pilots determining the conversion rates and then multiply virtual CPU hours by the VCU price. The fact is that in the reality.
Ms Margaret: And we will do that to support our rapidly growing customer base.
Ms Margaret: The result will be increased sales.
Ms Margaret: Increased revenue growth and increased market share.
Thomas Siebel: Given this investment decision, we are no longer targeting to be cash flow positive for the full year of fiscal year 25. We have more than sufficient cash and we continue to plan to be cash positive. cash flow positive in the fourth quarter of this year. C3.ai is a structurally profitable business, and by that I mean that our revenue exceeds our cost of goods sold and plus cost of selling. We are well-capitalized with $730 million in cash and cash equivalents in hand. We have delivered. rapid sustained growth for seven consecutive quarters and are generating massive value for our customers.
Ms Margaret: Given this investment decision.
Ms Margaret: No longer targeting to be cash flow positive for the full year of fiscal year 'twenty five.
Speaker Change: This new AI world that we're entering.
Ms Margaret: We have more than sufficient cash.
Speaker Change: Complexities and permit patients offers.
Ms Margaret: And we will continue to be in.
Ms Margaret: We continue to plan to be cash positive.
Speaker Change: Offerings required by the market and the number of applicable accounting treatments in any given agreement can be unwieldy.
Ms Margaret: Cash flow positive.
Ms Margaret: Fourth quarter of this year.
Ms Margaret: C. III is a structurally profitable business and by that I mean that our revenue.
Speaker Change: Taken over the Union of all C. Three AI agreements. It is unfathomable cycled Bob think about it.
Ms Margaret: Exceeds our cost of goods sold and plus class of selling.
Speaker Change: <unk> sells over 150 unique software and service solutions, many with multiple components.
Ms Margaret: We are well capitalized with.
Ms Margaret: $730 million in cash and cash equivalents in hand, we have delivered.
Speaker Change: With unique pricing.
Speaker Change: That require per GAAP, a multiplicity of accounting treatments.
Ms Margaret: Rapid sustained growth for seven consecutive quarters and are generating massive value for our customers. Our partner network is expanding and we are broadening our footprint across critical industries.
Alex and trials are recognized over terms.
Thomas Siebel: Our partner network is expanding and we are broadening our footprint across critical industries. a revenue growth continues to exceed our expects group a revenue growth rate. continues to exceed our expense growth rate.
Speaker Change: May vary from 10 days to six months.
Speaker Change: Enterprise AI solutions with continuing performance obligations are recognized ratably over the term of the agreement.
Ms Margaret: Industries.
Ms Margaret: Our revenue growth continues to exceed our met square.
Speaker Change: Some customers prefer subscription licensing that is recognized ratably over time other customers prefer consumption pricing with various monthly based upon utilization.
Our revenue growth rate.
Ms Margaret: Continues to exceed our expense growth rate and as we expected that to be generally true going forward continuing that trend.
Thomas Siebel: Okay, and as we expected that to be generally true going forward, continuing that trend, profitability is a mathematical certainty with scale.
Speaker Change: Demonstration licenses that we provide to our partners and customers to make them more effective proselytizing our solutions do not have continuing performance obligations and are therefore recognized as licenses.
Ms Margaret: <unk> ability is a mathematical certainty with scale.
Thomas Siebel: It's important to understand, I want to talk about modeling a little bit, I love modeling. It's important to understand that the AI computing. is dramatically more complex than the conventional computing world, and as a result, it is more difficult to model. The root of that is because it's simply not possible to apply conventional computing analytic models to the AI computing world. It's not simply a matter of computing pilots determining the conversion rates and then multiplying virtual CPU hours by the vCPU price. The fact is that in the reality of this new AI world that we're entering, the complexities and permutations of the offerings required by the market.
Ms Margaret: It's important understand monetize our modeling.
Modeling the business.
Ms Margaret: It is important to understand that the AI computing world.
Speaker Change: In the period they are delivered.
Speaker Change: Prioritize engineering services working software machine learning models data ontologies et cetera that have utility over the term of the underlying subscription agreement are properly.
Ms Margaret: Is dramatically more complex than the conventional computing world.
Ms Margaret: As a result, it is more difficult to model.
Ms Margaret: Through to that.
Ms Margaret: It's simply not possible to apply conventional computing analytic models to the AI computing world, It's not simply a matter of computing pilots determining that conversion rates and then multiply virtual CPU hours by the V. CPU price. The fact is that in the reality.
Speaker Change: As professional services in the period delivered.
Speaker Change: Conventional professional services are recognized as they are delivered.
Speaker Change: The dizzying dizzying array of products and services that we offer to meet the needs of the rapidly developing AI world resulted in a combination of a unique product and service offerings and associated accounting treatment combinations that is order of 100 factorial.
Ms Margaret: This new AI world that we're entering.
Ms Margaret: The complexities and permit patients offers.
Speaker Change: There are not enough Roes in your spreadsheet to model this business.
Ms Margaret: Offerings required by the market and the number of applicable accounting treatments in any given agreement can be unwieldy.
Thomas Siebel: And the number of applicable accounting treatments in any given agreement can be unwieldy. taking over the union of all C3.ai groups. It is unfathomable. Think about that. Think about it. C3.ai sells over 150 unique software and service solutions, many with multiple components. Many with unique prices. that require, per GAP, a multiplicity of accounting treatment. Pilots in trials are recognized over terms that may vary from 10 days to 6 months. enterprise AI solutions with continuing performance obligations are recognized radically over the term of the agreement. Some customers prefer subscription licensing that is recognized readily over time.
Speaker Change: C. III has been a public company for 16 quarters.
Ms Margaret: Taken over the Union of all CCI AI agreements. It is unfathomable cycle about that think about it.
Speaker Change: In each of those quarters, our revenue results have met or exceeded our guidance and.
Speaker Change: In preparing our guidance each quarter, when we work very hard to catch capture all of the complexities I just described.
Ms Margaret: <unk> sells over 150 unique software and service solutions, many with multiple components.
Speaker Change: Our guidance is likely to produce a more reliable forecast than your conventional <unk>.
Ms Margaret: With unique pricing.
Ms Margaret: Acquire per GAAP, a multiplicity of accounting treatments.
Speaker Change: Spreadsheet model.
Pilots and trials are recognized over terms.
Speaker Change: She three AI leads with AI applications that drive customer results.
Ms Margaret: It may vary from 10 days to six months.
Ms Margaret: <unk> enterprise AI solutions with continuing performance obligations are recognized ratably over the term of the agreement.
Speaker Change: We are turning these results.
Speaker Change: Into adoption.
Speaker Change: And what are you going to churn the adoption in the market leadership.
Ms Margaret: Some customers prefer subscription licensing that is recognized ratably over time other customers prefer consumption pricing that varies monthly based upon utilization.
Speaker Change: Opportunity in enterprise AI is enormous.
Thomas Siebel: Other customers prefer consumption pricing that varies monthly based upon utilization. Demonstration licenses that we provide to our partners and customers to make them more effective, proselytizing our solutions, do not have continuing performance obligations, and are therefore recognized as licenses. in the period of their delivery. prioritize engineering services, working software, machine learning models, data ontologies, etc. that have utility over the term of the underlying subscription agreement are properly recognized as professional services in the period delivered. Conventional professional services are recognized as their delivery.
Speaker Change: And we are investing to build a cash generating.
Speaker Change: Profitable marketing, leading market, leading enterprise AI software company.
Ms Margaret: Demonstration licenses that we provide to our partners and customers to make them more effective proselytizing our solutions do.
Speaker Change: Revenue guidance, our revenue guidance for Q3 fiscal year 'twenty five is 95 five to $100 5 million.
Ms Margaret: Not have continuing performance obligations and are therefore recognized as licenses.
Speaker Change: We are raising our revenue guidance for fiscal 2025 two.
Ms Margaret: In the period they are delivered.
Ms Margaret: Prioritize engineering services working software machine learning models data oncology et cetera that have utility over the term of the underlying subscription agreement are properly agonizing as professional services in the period delivered.
Speaker Change: $378 million to $398 million, our guidance for non-GAAP loss from operations in Q3 is.
Speaker Change: 38, six to $46 6 million and we are updating our previous guidance.
Ms Margaret: Conventional professional services are recognized as they are delivered.
Two.
Thomas Siebel: The dizzying, dizzying array of products and services that we offer to meet the needs of the rapidly developing AI world results in a combination of unique product and service offerings and associated accounting treatment combinations that is order of 100 factorial.
Speaker Change: Previous loss guidance to $105 million to $135 million for fiscal year 'twenty five.
Ms Margaret: The dizzying array of products and services that we offer to meet the needs of the rapidly developing AI world resulted in a combination of a unique product and service offerings and associated accounting treatment combinations that is order of 100 factorial.
Now turn it over to the cash to cover the financials attached.
Speaker Change: Thank you Tom I will now provide a recap of our financial results and additional color on our business.
Thomas Siebel: There are not enough rows in your spreadsheet to model this business.
Speaker Change: All figures are non-GAAP unless otherwise noted.
Ms Margaret: There are not enough Roes in your spreadsheet to model this business.
Speaker Change: As Tom mentioned total revenue for the quarter increased 29% year over year to $94 3 million.
Thomas Siebel: C3.ai has been a public company for 16 quarters. In each of those quarters, our Ravita results have met or exceeded our guidance. In preparing our guidance each quarter, we work very hard to capture all the complexities I just described. Our guidance is likely to produce a more reliable forecast than your conventional. Spreadsheet model. C3.ai leads with AI applications that drive customer returning these results. into adoption. and we're going to turn the adoption into market leadership.
Ms Margaret: <unk> has been a public company for 16 quarters.
Speaker Change: Subscription revenue increased 22% year over year to $81 $2 million, representing 86% of total revenue.
Ms Margaret: In each of those quarters, our revenue results have met or.
Ms Margaret: Our guidance.
In preparing our guidance each quarter, when we work very hard to catch capture all the complexities I just described.
Professional services revenue was $13 2 million.
Speaker Change: This represents 14% of total revenue in the second quarter of fiscal 'twenty five.
Ms Margaret: Our guidance is likely to produce a more reliable forecast than your conventional <unk>.
Speaker Change: As we've said in prior quarters.
Ms Margaret: Spreadsheet model.
Speaker Change: We expect the professional services revenue, which includes periodically with engineering services revenue to generally.
Ms Margaret: She leads with AI applications that drive customer results.
Speaker Change: Generally stay within 10% to 20% of total revenue for fiscal 'twenty five.
Ms Margaret: We are turning these results.
Ms Margaret: Into adoption.
Speaker Change: And what are you going to churn the adoption in the market leadership.
Speaker Change: As a reminder, our professional services revenue include service fees and prioritizing Engineering Center.
Thomas Siebel: The opportunity in enterprise AI is enormous. And we are investing to build a cash generating profitable, marketing leading, market leading enterprise AI software. Revenue guidance.
Speaker Change: Opportunity enterprise AI is an enormous.
Speaker Change: Service fees include revenue from services, such as consulting training and implementation services.
Speaker Change: And we are investing to build a cash generating.
Speaker Change: Profitable marketing, leading market, leading enterprise AI software company.
Speaker Change: The auditor of engineering services.
Thomas Siebel: Our revenue guidance for Q3 fiscal year 25 is $95.5 to $100.5 million. We are raising our revenue guidance for fiscal 2025 to $378 to $398 million. Our guidance for non-GAP WOS for operations in Q3 is 38.6 to 46.6 million. And we are updating our previous guidance to our previous loss guidance to 105 to 135 million for fiscal year 25.
Speaker Change: Revenue guidance, our revenue guidance for Q3 fiscal year, 2005 is 95 $5 million to $105 million.
Speaker Change: Yes.
Speaker Change: Anything you can win a customer request that we accelerated the design development and delivery of software features and functions that our plan and our future product roadmap.
Speaker Change: We are raising our revenue guidance for fiscal 2025 two.
Speaker Change: We negotiated and agreed upon fee to accelerate the development of the software.
Speaker Change: $378 million to $398 million, our guidance for non-GAAP loss for operations in Q3 is.
Speaker Change: And when the software if we can deliver it.
Speaker Change: It becomes integrated to our core our core product offering.
He is available to all subscribers of the underlying software product.
Speaker Change: 38, six to $46 6 million.
Speaker Change: Enhancing the operation of that product going forward.
Speaker Change: And we are updating our previous guidance.
Speaker Change: So let's be answer those in production level computer software.
Speaker Change: Two.
Speaker Change: Previous loss guidance to a $105 million to $135 million for fiscal year 'twenty five I will now turn it over to the cash to cover the financials attached.
Speaker Change: <unk> call.
Hitesh Lath: I will now turn it over to Hitesh to cover the financials. Thank you, Tom. I will now provide a recap of our financial results and additional color on our page. All figures are non-GAAP, unless otherwise. As Tom mentioned, total revenue for the quarter increased 29% year-over-year to $94.3 million. Subscription revenue increased 22% year-over-year to $81.2 million, representing 86% of total revenue. Professional services revenue was $13.2 million. This represents 14% of total revenue in the second quarter of 2020. As we said in Tri-Quarter. We expect the professional services revenue. includes prioritized engineering services. generally stay within 10-20% of total revenue for fiscal year 2020.
Speaker Change: Enhancing the functionality of our production products.
Speaker Change: We have available for our customers to use over the life of their software licenses.
Speaker Change: Thank you Tom I will now provide a recap of our financial results and additional color on our business.
Speaker Change: Our subscription and preorder data engineering services revenue combined was $90 8 million.
Speaker Change: All figures are non-GAAP unless otherwise noted.
Speaker Change: <unk> hundred 496% of our total revenue an increase of 27% compared to $71 3 million one year ago.
Speaker Change: As Tom mentioned total revenue for the quarter increased 29% year over year to $94 3 million.
Speaker Change: Subscription revenue increased 22% year over year to $81 2 million representing.
Speaker Change: Gross profit for the quarter was $66 3 million and gross margin was 70%.
Speaker Change: Representing 86% of total revenue.
Speaker Change: Gross margin for professional services remained high at over 90%.
Speaker Change: Professional services revenue was $13 2 million.
Speaker Change: This represents 14% of total revenue in the second quarter of fiscal 'twenty five.
Speaker Change: Operating loss for the quarter was $17 2 million.
Speaker Change: And our net loss for the quarter was $7 8 million.
Speaker Change: As we've said in prior quarters.
Speaker Change: We expect the professional services revenue, which includes periodic data engineering services revenue.
Speaker Change: Our operating loss was better than guidance due to continued focus on expense management and certain sales and marketing and R&D expenses that were pushed to the third and fourth quarters.
Speaker Change: Under lease.
Speaker Change: And then 10% to 20% of total revenue for fiscal 'twenty five.
Hitesh Lath: As a reminder, our professional services revenue includes service fees and prioritized engineering. Service fees include revenue from services such as consulting, training, and paid implementation. Prioritize engineering services or PES. are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions. that are planned in a future product. We negotiate an agreed-upon fee to accelerate the development of the software. And when the software feature is delivered, it becomes integrated to our core product offering. is available to all subscribers of the underlying software. and enhances the operation of that product.
Speaker Change: As a reminder, our professional services revenue include service fees and prioritizing engineering services.
Speaker Change: Our net cash used in operating activities was $38 $7 million free.
Speaker Change: Free cash flow for the quarter was negative $39 $5 million.
Speaker Change: Service fees include revenue from services, such as consulting training and implementation services.
Speaker Change: As compared to negative $55 $1 million in the second quarter of last year.
Speaker Change: We are doing the engineering services RBS.
Speaker Change: We continue to be very well capitalized and closed the quarter with $734 million in cash cash equivalents and marketable securities.
Speaker Change: Our undertaken when a customer request that we accelerate the design development and delivery of software features and functions.
Speaker Change: At the end of second quarter, our accounts receivable balance was $160 million.
Speaker Change: Our plan and our future product roadmap.
Speaker Change: We negotiated and agreed upon fee to accelerate the development of the software.
Speaker Change: Including Unbilled receivables of $97 5 million.
And when the software if we can deliver it becomes integrated to our core our core product offering.
Speaker Change: Total allowance for bad debt remains at less than half a million dollars and we do not have concerns regarding collections agenda.
Speaker Change: Billable to all subscribers of the underlying software product.
Speaker Change: The general health of our accounts receivable remained strong.
Speaker Change: <unk> enhances the operation of that product going forward.
Hitesh Lath: Such PES results in production-level computer software. Compiled code that enhances the functionality of a production product. which is available for our customers to use over the life of their. Our subscription and prioritized engineering services revenue combined was $90.8 million and accounted for 96% of our total revenue, an increase of 27% compared to $71.3 million per year. Gross profit for the quarter was $66.3 million and gross margin was $70.3 million. Gross margin for professional services remained high at over 90%. Operating loss for the quarter was $17.2 million and our net loss for the quarter was $7.8 million.
Speaker Change: During the second quarter, we signed 36 pilot at.
Speaker Change: <unk> results in production level computer software.
Speaker Change: At quarter end, we had cumulatively signed 265.
Speaker Change: By call it enhances the functionality of our production products.
Speaker Change: 210 are still active.
Speaker Change: We have available for our customers to use over the life of their software licenses.
Speaker Change: This means they are either in the original three to six months.
Speaker Change: What extended for some duration.
Speaker Change: Our subscription and preorder data engineering services revenue combined was $90 8 million and accounted for 96%.
Speaker Change: All converted to subscription or consumption contract.
Speaker Change: Currently being negotiated for conversion to subscription or consumption content.
Speaker Change: Total revenue, an increase of 27% compared to $71 3 million one year ago.
We are excited about our partnership with Microsoft and the joint go to market initiatives.
Gross profit for the quarter was $66 $3 million and gross margin was 70%.
Speaker Change: As Tom said and I'd like to underscore that we are investing aggressively in this partnership.
Speaker Change: Gross margin for professional services remained high at over 90%.
Speaker Change: We expect some moderation on our gross margins due to higher mix of pilots in the near term.
Operating loss for the quarter was $17 $2 million and our net loss for the quarter was $7 million to $8 million.
Kenny a greater cost of revenue during the pilot phase of the customer lifecycle.
Speaker Change: We also expect some moderation.
Hitesh Lath: Our operating loss was better than guidance due to continued focus on expense management. and certain sales and marketing and R&D expenses that were pushed to the 3rd and 4th. Our net cash used in operating activities was $38.7 million. Free cash flow for the quarter was negative $39.5 million as compared to negative $55.1 million in the second quarter. We continue to be very well capitalized and close the quarter with $730.4 million in cash, cash equivalents and marketables. At the end of second quarter, our accounts receivable balance was $160 million. including unbilled receivables of 97.5%. Total Allowance for Bad Debt remains at less than $500,000 and we do not have concerns regarding it.
And our operating margin in the near term due to additional investments we are making in our business, including in our sales force customer support.
Speaker Change: Our operating loss was better than guidance due to continued focus on expense management and certain sales and marketing and R&D expenses that were pushed to the third and fourth quarters.
Speaker Change: Research and development and marketing.
Speaker Change: As we continue to make significant investments in the business, we expect to be free cash flow negative for the third quarter.
Speaker Change: Our net cash used in operating activities was $38 7 million.
Speaker Change: Free cash flow for the quarter was negative $39 5 million as compared to negative $55 $1 million in the second quarter of last year.
Speaker Change: We remain on track to be free cash flow positive for Q4.
Speaker Change: With that I'd like to turn the call over to the operator to begin the Q&A session.
Speaker Change: We continue to be very well capitalized and closed the quarter with $734 million in cash cash equivalents and marketable securities.
Speaker Change: Operator.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.
Speaker Change: At the end of second quarter, our accounts receivable balance was $160 million include.
Speaker Change: Our first question.
Speaker Change: Including Unbilled receivables of $97 5 million.
Speaker Change: It comes from the line of Patrick Wall Ravens of citizens JMP.
Speaker Change: Total allowance for bad debt remains at less than half a million dollars and we do not have concerns regarding collections, but general health of our accounts receivables remains strong.
Speaker Change: <unk> Please Patrick.
Speaker Change: Okay, great. Thank you.
Hitesh Lath: The general health of our accounts receivables remains... During the second quarter, we signed 36 pilots. As quarter-end, we had cumulatively signed 260 of which 210 are still active. This means they are either in their original 3-6 month term are extended for some duration. or convert it to a subscription for consumption contract.
Speaker Change: Congratulations.
Speaker Change: Tom I think two questions from me if I may I would love to hear the history.
Speaker Change: During the second quarter, we signed 36 pilots.
Speaker Change: The relationship with Microsoft and how you got it to this point did.
Speaker Change: At quarter end, we had cumulatively signed 265.
Speaker Change: Did you work with jetson.
Speaker Change: Some pointed oracle.
Speaker Change: All of which 210 are still active.
And then secondly, just your thoughts on how federal spending might change under the new administration.
Speaker Change: This means they are either in the original three to six months.
Speaker Change: But extended for some duration.
Speaker Change: Hi.
Speaker Change: Converting to a subscription or consumption contract.
Greg Johnson, and I did not overlap with Oracle.
Hitesh Lath: All are currently being negotiated for conversion to subscription or We are excited about a partnership with Microsoft and the joint go-to-market. As Tom said, and I'd like to underscore, that we are investing aggressively in the We expect some moderation on our gross margins due to higher mix of pilots in the near term, which carry a greater cost of revenue during the pilot phase of the customer life. We also expect some moderation in our operating margin in the near term due to additional investments we are making in our business, including in our sales force, customer support, research and development, and marketing.
Speaker Change: Or are currently being negotiated for conversion to subscription or consumption contract.
Speaker Change: But he was at Oracle I hate you ran alliances and Oracle at the time that Oracle acquired.
We are excited about our partnership with Microsoft and the joint go to market initiatives.
Speaker Change: Siebel systems in January.
Jeff: Jeff 2006, and many of the Siebel people went to work for him.
Speaker Change: As Tom said and I'd like to underscore that we are investing aggressively in this partnership.
Speaker Change: Did <unk>.
Speaker Change: We expect some moderation on our gross margins due to higher mix of pilots in the near term.
Speaker Change: Relationship between Microsoft and <unk> is pretty much always been driven between well.
Speaker Change: Each county, a greater cost of revenue during the pilot phase of the customer lifecycle.
Judson Eni: Judson Eni.
Judson Eni: And this agreement was put together with Janssen and IMT and are coordinating very closely federal.
Speaker Change: We also expect some moderation in our <unk>.
Speaker Change: Operating margin in the near term due to additional investments we are making in our business.
Speaker Change: I just came from the.
Speaker Change: Including in our sales force customer support.
Speaker Change: Our Reagan.
Speaker Change: Research and development and marketing.
Speaker Change: Defense Forum and Simi Valley.
Hitesh Lath: As we continue to make significant investments in the business, we expect to be free cash for negatives for the third quarter. will remain on track to be free cash for positive.
Speaker Change: Where all of the defense contractors, they're all of the software companies you there.
Speaker Change: As we continue to make significant investments in the business, we expect to be free cash flow negative for the third quarter.
Speaker Change: Criteria's of defense or their Army Navy Air Force Marines, all the military leaders in acquisition professionals.
Speaker Change: Remain on track to be free cash flow positive for Q4.
Unknown Executive: With that, I'd like to turn the call over to the operator to begin the Q&A. operator. As a reminder to ask a question you will need to press star 1 1 on your telephone to remove yourself from the queue. You may press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question. comes from the line of Patrick Walravens of Citizens JMP. Your question please, Patrick. Okay, great. Thank you. And congratulations. Tom, I think two questions for me, if I may. I would love to hear the history of the relationship with Microsoft and how you got it to this point.
Speaker Change: With that I'd like to turn the call over to the operator to begin the Q&A session.
Speaker Change: Whereas in former years, the subjects were about submarines and carriers in the space and aircraft Pat.
Speaker Change: Operator.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press Star one again, please standby, while we compile the Q&A roster.
Pat There was one subject on every panel.
Speaker Change: Okay, and one subject in every speech and that was.
Speaker Change: AI applications AI applications AI applications AI applications, and then cyber.
Speaker Change: Our first question.
Comes from the line of Patrick Wall Ravens of citizens JMP. Your question. Please Patrick.
Speaker Change: That's what went on for <unk>.
Speaker Change: So I think we're going to see a dramatic acceleration of AI adoption in the federal government certainly with Elon <unk> company across all lines of.
Speaker Change: Okay, great. Thank you.
Speaker Change: Congratulations.
Speaker Change: Tom I think two questions from me if I may I would love to hear the history of.
Speaker Change: All aspects of operating the business with a CMS HHS treasury wherever.
Speaker Change: The relationship with Microsoft and how you got it to this point did.
Thomas Siebel: Did you work with Judson at some point at Oracle? And then secondly, just your thoughts on how federal spending might change under the new administration. Um, I Judson and I did not overlap at Oracle, but he was at Oracle and he ran alliances at Oracle at the time that Oracle acquired Siebel Systems in January 2010. of 2006, and many of the Siebel people went to work for him. Our relationship between Microsoft and C3 has pretty much always been driven between Judson and I, and this agreement was put together with Judson and I, and he and I are coordinating this very closely, federally.
Speaker Change: Did you work with jetson.
Speaker Change: Some pointed oracle.
Speaker Change: Department of Justice, but most certainly in the defense and intelligence community and I think theyre going to dramatically change.
Speaker Change: And then secondly, just your thoughts on how federal spending might change under the new administration.
Speaker Change: The way that they acquire these technologies, where they acquire the bulk of them.
Speaker Change: Hi.
Speaker Change: Greg Johnson and I did not overlap at Oracle.
Speaker Change: In the defense Department, but as Youre aware Theres a fire of the acquire almost everything from six vendors I think those days are over and I think the beltway batted heads are going to be spending as the private enterprise moves in to support that.
But he was at Oracle I Hany ran alliances and oral call at the time that Oracle acquired.
Speaker Change: Siebel systems in January.
Speaker Change: Jeff 2006, and many of the Siebel people went to work for him.
Speaker Change: <unk> intelligence companies in.
Speaker Change: Did our relationship between Microsoft and <unk> is pretty much always been driven between well.
Speaker Change: In the current administration.
Speaker Change: Great. Thank you very much and congratulations again.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Judson Eni.
Our next question comes from the line of Timothy Horan of Oppenheimer.
Speaker Change: And this agreement was put together with jetson and IMT and I are coordinated administered very closely federal.
Speaker Change: Your question please Timothy.
Thomas Siebel: I just came from the Reagan Defense Forum in Simi Valley, where, you know, all the defense contractors there, all the software companies are there, you know, secretaries of defense are there, Army, Navy, Air Force, Marines, all the military leaders and acquisition professionals. And whereas in former years, the subjects were about submarines and carriers and space and aircraft, Pat, there was one subject on every panel, okay, and one subject at every speech and that was AI applications, AI applications, AI applications, AI applications, and then cyber. That's what went on for two days. And so I think we're going to see a dramatic acceleration of AI adoption in the federal government, certainly with Elon and company across, you know, all lines of, all aspects of operating the business, whether it's CMS, HHS, Treasury, wherever, Department of Justice, but most certainly in the defense and intelligence community, and I think they're going to dramatically change the way that they acquire these technologies, where they acquire the bulk of their, you know, in the Defense Department, as you're aware, they acquire almost everything from six vendors.
Speaker Change: I just came from the.
Speaker Change: Thanks, guys.
Speaker Change: Can you discuss maybe what was unique about what you can do that Microsoft Couldnt do and a little bit more detail.
Speaker Change: Our Reagan.
Speaker Change: Defense Forum and Simi Valley.
Speaker Change: Where all of the defense contractors, they're all of the software companies you there.
Speaker Change: And then.
Speaker Change: Who else do you kind of competing with the needs and these kind of contracts or.
Speaker Change: Criteria's of defense or their Army Navy Air Force Marines, all the military leaders in acquisition professionals.
Speaker Change: Who else, maybe just Mike supporting with anybody and then secondly does this meet the enterprise contract commitments in terms of volume the enterprise agreements.
Whereas in former years the subjects were about.
Speaker Change: <unk>.
Speaker Change: So we have some dollar spent over the next couple of years as a bundle together services. Thanks.
Speaker Change: Submarines and carriers in the space and aircraft Pat.
Speaker Change: Okay have you reversed happy birthday, Tim.
Speaker Change: Pat There was one subject on every panel.
Speaker Change: Okay, and one subject in every speech and that was.
<unk>.
Speaker Change: Let's ask the last question first so yes as it relates.
Speaker Change: AI applications AI applications AI applications AI obligations and then cyber.
Speaker Change: These sales.
Speaker Change: Do apply against customer commitments to Microsoft's where they've made these large hundreds of millions in some cases billions of dollars commitments to Brian Microsoft software services.
Speaker Change: That's what went on for Anna.
Speaker Change: So I think we're going to see a dramatic acceleration of AI adoption in the federal government certainly with Elon <unk> company across all lines of our.
Speaker Change: In the years to come the <unk> sales do burn down those commitments.
Speaker Change: All aspects of operating the business with our CMS HHS Treasury wherever.
Speaker Change: What is the difference between what.
Speaker Change: Microsoft I mean, how does this differ from what Microsoft sells Microsoft sells a vast array of services is or a lot of AI services like AI studio and whatnot that allow us to persistence technologies.
Speaker Change: Department of Justice, but most certainly in the defense and intelligence community and I think theyre going to dramatically change.
Speaker Change: The way that they acquire these technologies, where they acquired the bulk of their <unk>.
Speaker Change: So far but as Youre aware theres a fire require almost everything from six vendors I think those days are over and I think.
Speaker Change: Machine learning model technologies, all of which we take advantage of and building turnkey applications and so rather than providing services that you can use to build applications. We're using those services to provide the turnkey applications. It does things like supply chain optimization demand.
Unknown Executive: I think those days are over. And I think the beltway banded heads are going to be spinning as the private enterprise moves in to support the defense and intelligence companies in the current administration. Great. Thank you very much and congratulations again. Thank you.
Speaker Change: <unk> battery pads are going to be spending as the private enterprise moves in to support the defense and intelligence companies in.
Speaker Change: In the current administration.
Speaker Change: Great. Thank you very much and congratulations again.
Speaker Change: Shane optimization okay.
Speaker Change: Thank you.
Forecasting customer churn fraud, what have you. So we're entirely complementary with the Azure AI services. We use all of this is there AI services, we deliver those services packaged in a turnkey application that offer economic benefit.
Speaker Change: Thank you.
Unknown Executive: Our next question comes from the line of Timothy Horan of Oppenheimer. Your question, please, Timothy. Thanks, guys.
Speaker Change: Our next question comes from the line of Timothy Iran opt.
Speaker Change: Oppenheimer Your question please Timothy.
Unknown Executive: Can you discuss maybe what was unique about what you can do that, you know, Microsoft couldn't do in a little bit more detail? And then, you know, who else are you kind of competing with in these kind of contracts? Or, you know, who else maybe is Microsoft partying with, if anybody?
Speaker Change: Thanks Scott.
Speaker Change: Can you discuss maybe what was unique about what you can do that Microsoft Couldnt do and a little bit more detail.
Speaker Change: And then.
Speaker Change: In a very short period of time.
Speaker Change: Who else do you kind of competing with these kind of contracts or <unk>.
Tom: Thanks for the well wishes Tom and.
Speaker Change: Well, maybe it's my supporting with anybody and then secondly does this meet the enterprise contract commitments in terms of volume the enterprise agreements for.
Unknown Executive: And then secondly, does this meet the enterprise contract commitments in terms of volume, you know, the enterprise agreements for to make some dollars spent over the next couple of years as they bundle together services.
Speaker Change: So I mean that's.
Speaker Change: Pretty big statement that youre going to be their preferred AI application partner is that I mean.
Speaker Change: Is that correct.
Speaker Change: <unk>.
Speaker Change: Doug.
Speaker Change: We haven't put a dollar spent over the next couple of years as a bundle together services. Thanks.
Speaker Change: I read that from the agreement.
Speaker Change: There is.
Thomas Siebel: Okay, happy first happy birthday, Tim. The Let's ask the last question first. So yes, as it relates, these sales do apply against customer commitments to Microsoft. So where they've made these large hundreds of millions, and in some case, I suspect, billions of dollars commitments to buy Microsoft software services in the years to come, the C3.ai sales do burn down those commitments. What is the difference between what Microsoft, I mean, how does this differ from what Microsoft sells? Microsoft sells a vast array of services in Azure, a lot of them AI services like AI Studio and whatnot that allow us to, you know, persistence technologies, machine learning model technologies, all of which we take advantage of in building turnkey applications.
Speaker Change: Okay have you reversed happy birthday, Tim.
Speaker Change: That is the agreement Tim So all of this.
Speaker Change: They.
Speaker Change: Where we're going to market together in this alliance, which is all around the world, where we partner together okay.
Speaker Change: Let's ask the last question first so yes as it really.
Speaker Change: <unk> sales.
Speaker Change: Do apply against customer commitments to Microsoft's where they've made these large hundreds of millions in some cases billions of dollars commitments to Brian Microsoft software services.
Speaker Change: We are pretty we are going into that customer positioning of <unk> as our preferred cloud provider and Microsoft is going into the customer positioning.
Speaker Change: C. III is their preferred enterprise AI solution, yes, there is a big statement and yes that is a big day for <unk>.
In the years to come the <unk> sales do burn down those commitments.
What is the difference between what.
Speaker Change: And lastly, when do you think this will start contributing to revenue and maybe you can give us some color on how meaningful it could be overall revenue growth I mean, you're already growing at 30%.
Speaker Change: Microsoft.
Speaker Change: How does this differ from what Microsoft sells Microsoft sells a vast array of services and is or a lot of the AI services like AI studio and whatnot that allow us to persistence technologies machine learning model technologies, all of which we.
This accelerates that at some point.
Speaker Change: It already has contributed to revenue growth.
Speaker Change: <unk>.
Speaker Change: The agreement was signed on September 30th already has contributed to our revenue growth.
Speaker Change: And I think while the the <unk>.
Speaker Change: We take advantage of and building turnkey applications and so rather than providing services that you can use to build applications. We're using those services to provide the Cherokee application that does things like supply chain optimization demand chain optimization okay.
Thomas Siebel: And so rather than providing services that you can use to build applications, we're using those services to provide the turnkey application that does things like supply chain optimization, demand chain optimization, okay, forecasting, customer churn, fraud, what have you. So we're entirely complementary with the Azure AI services. We use all of the Azure AI services, but we deliver those services packaged in a turnkey application that offer economic benefit.
Speaker Change: <unk> to which this might contribute is unknowable.
Speaker Change: We have gotten from order of 100 salespeople around the world to potentially order of 10000.
Speaker Change: So.
Speaker Change: I don't think Theres any question that this provides a tailwind in the years ahead that could be quite substantial and offers us a.
Speaker Change: Forecasting customer churn fraud, what have you. So we're entirely complementary with the Azure AI services. We use all of this is there AI services, we deliver those services packaged in a turnkey application that offer economic benefit.
Dashel differentiator from anybody else in the enterprise, who either is in the enterprise application business or reports to be in the enterprise AI application business.
Speaker Change: Thank you congratulations.
Thomas Siebel: You know, in a very short period of time.
Speaker Change: Thank you.
Speaker Change: In a very short period of time.
Speaker Change: Thank you.
Thomas Siebel: Thanks for the well wishes, Tom, and so, I mean, it's a pretty big statement that you're going to be their preferred AI application partner. Is that, I mean, is that correct? That I read that from the agreement that is that is that is that is the agreement. So as all these, where we're going to market together in this alliance, which is all around the world, where we partner together, we're going into that customer positioning Azure as our preferred cloud provider, and Microsoft is going into the customer positioning. C3.ai is the preferred enterprise AI solution.
Our next question.
Speaker Change: Thanks for the well wishes Tom and.
Speaker Change: It comes from the line of.
Speaker Change: So I mean, that's a pretty big statement that youre going to be their preferred AI application partner is that I mean.
Speaker Change: Mike.
Speaker Change: Needham Your question please Mike.
Speaker Change: Great. Thanks for taking my questions here guys.
Speaker Change: Is that correct.
Speaker Change: Totally understand on the investments that you guys are making behind partnerships and in this opportunity here just wanted to get a better understanding with the free cash flow push out that we had previously anticipated for fiscal 'twenty five.
Speaker Change: I read that from the agreement.
Speaker Change: Okay.
Speaker Change: That is the agreement Tim So all of this.
Speaker Change: But where we're going to market together.
Speaker Change: This alliance, which is all around the world, where we partner together okay.
Speaker Change: Should we now expect that the company can turn free cash flow positive in fiscal 'twenty six or how.
Speaker Change: We operate we're going into that customer positioning of <unk> as our preferred cloud provider and Microsoft is going into the customer positioning.
How far out is that timeline has been pushed out.
Speaker Change: Well.
Speaker Change: <unk>.
Speaker Change: How far is the reverse I mean, Mike to not invest in this is like kind of crazy rate. We have we did raise this money in public.
Speaker Change: C. III is their preferred enterprise AI solution, yes, there is a big statement and yes that is a big day for <unk> III.
Thomas Siebel: Yes, that is a big statement, and yes, that is a big day for C3.ai.
Thomas Siebel: And lastly, when do you think this will start contributing, you know, to revenue and maybe can give us some color how meaningful it could be to overall revenue growth? I mean, you're already growing at 30%. Can you know, can this accelerate that at some point? already has contributed to revenue growth. The agreement was signed on September 30th, so it already has contributed to our revenue growth. And I think while the extent to which this might contribute is unknowable, we have gone from order of 100 salespeople around the world to potentially order of 10,000.
Speaker Change: December 2020 for exactly this purpose to invest in market share.
Speaker Change: And lastly, when do you think this will start contributing to revenue and maybe you can give us some color how meaningful it could be its overall revenue growth I mean, you're already growing at 30%.
Speaker Change: Investing in growth.
Speaker Change: <unk> been using that those resources very carefully I think we raised $1 billion and we have what $730 million in the bank. So.
Speaker Change: Can this accelerate that at some point.
Speaker Change: Alright, It has contributed to revenue growth.
Speaker Change: Realized I love to read from sell side analysts reports about our hemorrhaging cash and seems like every time I have.
Speaker Change: The the agreement was signed on September 30th if it already has contributed to our revenue growth.
Speaker Change: Quarterly customer call I still have like three quarters of a $1 billion cash left so I can't quite resolve those two issues.
Speaker Change: And I think while the.
Speaker Change: The extent to which this might contribute is unknowable.
Speaker Change: I think if you look out into fiscal 'twenty six we should be crushing we at some point there we should cross over into being cash positive, but right now we're investing in market share we're investing in leadership and I have the.
Speaker Change: Yes.
Order of 100 salespeople around the world to potentially order of 10000.
Thomas Siebel: And so I don't think there's any question that this provides a tailwind in the years ahead that could be quite substantial and offers us a substantial differentiator from anybody else in the enterprise who either is in the enterprise AI application business or purports to be in the enterprise AI application business.
Speaker Change: So.
Speaker Change: I don't think Theres any question that this provides a tailwind in the years ahead that could be quite substantial and offers us a substantial differentiator from anybody else in the enterprises, who either is in the enterprise application business or reports to be in the enterprise AI application business.
Speaker Change: Largest software sales organization in the World again, selling with me and for me and we're going to take advantage of it.
Tom: Understood. Thanks, Tom and maybe just one follow up if I could.
Tom: I know that you guys are obviously this goes into subscription revenue tied into the professional engineering services in that in that pro serve line.
Unknown Executive: Thank you.
Unknown Executive: Congratulations. Thank you.
Speaker Change: Thank you congratulations.
Speaker Change: Thank you.
Thank you.
Thomas Siebel: Our next question comes from the line of Mike Sikos of Needham. Your question, please, Mike. Great. Thanks for taking the questions here, guys. Totally understand on the investments that you guys are making behind partnerships and in this opportunity here. I just wanted to get a better understanding with the free cash flow push out that we had previously anticipated for fiscal 25. Should we now expect that the company can turn free cash flow positive in fiscal 26 or how? How far out is that timeline been pushed? Well, you know. How far has it been pushed out?
With the discussion that we have today is this.
Our next question.
Speaker Change: It comes from the line of.
Tom: Is this relationship with the pro professional engineering services can you help explain that does that in any way have a linkage to the unbilled receivables on the balance sheet.
Speaker Change: Mike.
Speaker Change: Needham Your question please Mike.
Speaker Change: Great. Thanks for taking my questions here guys.
Speaker Change: Totally understand on the investments that you guys are making behind partnerships and in this opportunity here just wanted to get a better understanding with the free cash flow push out that we had previously anticipated for fiscal 'twenty five.
Tom: No no no theyre professional lines basically.
Tom: Prioritize engineering services.
Jeff: The way this is Jeff.
Jeff: When somebody wants us Dow a cargill.
Speaker Change: Should we now expect that the company can turn free cash flow positive in fiscal 'twenty six or how.
Jeff: Baker Hughes of shell wants to take something that we have a plan a roadmap.
Jeff: Our road map to do it now to accelerate and we agreed to do it right. The spec we write the code we do the quality assurance, we do their performance testing and we deliver them object code that they use over the life term of the agreement looks like software smells like software is.
Speaker Change: How far out is that timeline has been pushed out.
Speaker Change: Well.
Speaker Change: Sure.
Thomas Siebel: I mean, Mike, to not invest in this is like kind of crazy, right? I mean, we did raise this money in December 2020 for exactly this purpose, to invest in market share and invest in growth. We have been using those resources very carefully. I think we raised a billion dollars and we have, what, $730 million in the bank. So, I realized, I love to read from sell-side analysts' reports about how we're hammering it in cash, and it seems like every time I have a quarterly customer call, I still have like three-quarters of a billion dollars cash left.
How far is the reverse I mean, Mike to not invest in this is like kind of crazy high rate. We have we did raise this money in a public data.
Speaker Change: December 2020 for exactly this purpose to invest in market share.
Jeff: Really high margin business, okay, but under the current.
Speaker Change: Investing in growth.
Speaker Change: <unk> been using that those resources very carefully I think we raised $1 billion and we have what $730 million in the bank. So.
Jeff: Accounting guidance of ASC 606, it has to be recognized is called a professional service I don't know that's just the language that you used but it looks like software is like software smells like software is in fact software and I think something like 96% of our revenue consists of subscription revenue.
Speaker Change: Realized I love to read some sell side analysts reports about our hammering at CIT cash and seems like every time I have.
Speaker Change: Quarterly customer call I still have like three quarters of $1 billion cash left so I can't quite resolve those two issues.
Thomas Siebel: So, I can't quite resolve those two issues.
Jeff: And professional engineering services so.
Thomas Siebel: I think if you look out into fiscal 26, at some point there, we should cross over into being cash positive, but right now, we're investing in market share, we're investing in leadership, and I have the largest software sales organization in the world selling with me and for me, and we're going to take advantage of it. Thanks, Tom. And maybe just one follow-up if I could. I know that you guys are obviously discussing subscription revenue tied into the professional engineering services in that ProServe line. With the discussion that we have today, is this Is this relationship with the pro professional engineering services?
Jeff: And we will be doing more of it going forward is in the best interest of our shareholders. It's great business.
Speaker Change: I think if you look out into fiscal 'twenty six we should be crushing we at some point there we should cross over into being cash positive, but right now we're investing in market share we're investing in leadership and I have the.
Jeff: And.
Jeff: There's nothing that isn't good about it.
Jeff: Thank you very much Mike.
Speaker Change: Largest software sales organization in the World again, selling with me and for me and we're going to take advantage of it.
Jeff: Yes.
Speaker Change: Thank you I would now like to turn the conference back to Mr. <unk> for closing remarks, Sir.
Speaker Change: Understood. Thanks, Tom and maybe just one follow up if I could.
Speaker Change: Ladies and gentlemen.
Speaker Change: You for joining our call today, Thank you for tracking the progress of <unk>.
Speaker Change: I know that you guys are obviously discussing with subscription revenue tied into the professional engineering services in that in that pro serve line.
Speaker Change: <unk>.
Speaker Change: We.
Speaker Change: There is no question the company has ever been positioned.
Speaker Change: With the discussion that we have today is this.
Speaker Change: Better position than it is today. There is no question I think in anybody's mind on this call that the market for enterprise AI is larger than it ever has been today and growing at a faster rate than any of us anticipated I think that.
Speaker Change: Is this relationship with the pro professional engineering services can you help explain that does that in any way have a linkage to the unbilled receivables on the balance sheet.
Thomas Siebel: Can you help explain this? Does that in any way have a linkage to the unbilled receivables on the balance?
Thomas Siebel: No, no, no, the professional engineering, basically these prioritized engineering services, the way these are just when somebody wants us a Dow, a Cargill, a Baker Hughes, a Shell, wants to take something that we have planned in our roadmap to do it now, to accelerate it, and we agree to do it, we write the spec, we write the code, we do the quality assurance, we do the performance testing, and we deliver them object code that they use over the life term of the agreement, looks like software, smells like software, is incredibly high margin business, okay, but under the current, you know, accounting guidance of ASC 606, it has to be recognized, it's called a professional service, I don't know, that's just the language they use, but it looks like software, is like software, smells like software, is in fact software, and I think something like 96% of our revenue consists of subscription revenue and professional engineering services, so we will be doing more of it going forward, it is in the best interest of our shareholders, it's great business, and there's nothing that isn't good about it.
Speaker Change: No no no congressional basic.
Speaker Change: Basically these.
We are extraordinarily well positioned with our many partnerships including.
Speaker Change: Prioritize engineering services.
Speaker Change: The way this is when somebody wants us Dow a cargill.
Speaker Change: Microsoft to seize this opportunity.
Speaker Change: Baker Hughes is shell once you take something that we have planned roadmap.
Speaker Change: This out okay, guys, there's two stores for the quarter, 29% topline growth okay. Okay.
Speaker Change: Our road map to do it.
Speaker Change: Now to accelerate and we agreed to do it right. The stack we write the code we do the quality assurance, we do their performance testing and we deliver them object code that they use over the life term of the agreement looks like software smells like software is incredibly high margin business, okay, but.
Speaker Change: Very close strategic partnership with the largest software company on the planet Earth that.
Speaker Change: That's the beginning that's the hand, and we're going to take it from here and see what we can do with it ladies and gentlemen, thank you very much for your time.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Under the current.
Speaker Change: Accounting guidance of ASC 606, it has to be recognized is called a professional service I don't know that's just the language that you used but it looks like software is like software smells like software is in fact software and I think something like 96% of our revenue consists of subscription revenue.
Speaker Change: And professional engineering services so.
Speaker Change: And we will be doing more of it going forward is in the best interest of our shareholders. It's great business.
Speaker Change: And.
Speaker Change: There's nothing that isn't good about it.
Unknown Executive: Thank you very much. Thanks, Mike. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you very much Mike.
Speaker Change: Thank you.
Thomas Siebel: I would now like to turn the conference back to Mr. Siebel for closing remarks, sir.
Thank you I would now like to turn the conference back to Mr. <unk> for closing remarks, Sir.
Thomas Siebel: Ladies and gentlemen, thank you for joining our call today. Thank you for tracking the progress of C3.ai. There is no question the company has never been positioned in a better position than it is today. There is no question, I think, in anybody's mind on this call that the market for enterprise AI is larger than it ever has been today and growing at a faster rate than any of us anticipated. I think that we are extraordinarily well positioned with our many partnerships, including Microsoft, to seize this opportunity. I mean, let's net this out, okay, guys. There's two stories to the quarter, okay, 29% top-line growth, okay, in a very close strategic partnership with the largest software company on the planet Earth.
Speaker Change: Ladies and gentlemen.
Speaker Change: <unk> you for joining our call today. Thank you for tracking the progress of <unk>.
Speaker Change: <unk>.
Speaker Change: We.
Speaker Change: There is no question the company has never been positioned.
Speaker Change: And better position than it is today. There is no question I think in anybody's mind on this call that the market for enterprise AI is larger than it ever has been today and growing at a faster rate than any of us anticipated.
Speaker Change: Think that.
Speaker Change: We are extraordinarily well positioned with our many partnerships including.
Speaker Change: Sure.
Speaker Change: Microsoft to seize this opportunity.
Speaker Change: Okay, guys, there's two stories for the quarter, 29% topline growth okay. Okay.
Very close strategic partnership with the largest software company on the planet Earth.
Thomas Siebel: That's the beginning, that's the end, and we're going to take it from here and see what we can do with it.
Speaker Change: That's the beginning that's the add and that we're going to take it from here and see what we can do with it ladies and gentlemen, thank you very much for your time.
Unknown Executive: Ladies and gentlemen, thank you very much for your time.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.