Q4 2025 C3.ai Inc Earnings Call
Yeah.
Yes.
Speaker Change: Thank you for standing by and welcome to see three a ones.
Speaker Change: Fourth quarter of fiscal year, 'twenty 25 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Speaker Change: Good question during the session you will need to press star one one on your telephone.
It was yourself from the queue you May press Star one one again, please be advised that today's conference is being recorded.
Speaker Change: I'd now like to hand, the call over to Amit Berry. Please go ahead.
Okay.
Amit Berry: Good afternoon, and welcome to city earnings.
Earnings call for the fourth quarter of fiscal year 2025, which ended on April 32025. My name is I'm, a theory and I lead Investor Relations for T. G I.
Speaker Change: On the call today are Tom Siebel, Chairman, and Chief Executive Officer, and <unk> Chief.
Speaker Change: Chief Financial Officer.
Speaker Change: After the market close today, we issued a press release with details regarding our fourth quarter and full fiscal 'twenty 'twenty five.
Speaker Change: As well as a supplemental to our results both of which can be accessed through the investor Relations section on our website at IR Docs history.
Speaker Change: This call is being webcast and a replay will be available.
Speaker Change: Earnings on our IR website, following the conclusion of the call.
Speaker Change: During today's call, we will make statements related to our business that may be considered forward looking under federal Securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date, we disclaim any obligation to update any forward looking statements or outlook.
Speaker Change: These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations for a further discussion of the material risks and other important factors that could affect our actual results. Please refer to our filings with the SEC.
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.
Speaker Change: A reconciliation of GAAP to non-GAAP financial measures is included in our press release.
Finally at times in our prepared remarks and 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.
Speaker Change: 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.
Tom: Thank you, Matt and thank you everyone.
Tom: I'm very pleased to announce.
Speaker Change: We had a spectacular year fiscal.
Speaker Change: Fiscal year 'twenty five that we wrapped up.
Richard: Fourth quarter growth rates for the last three years I think have grown now from 6% two years ago to 16% last year to 25%. This year shall we are most certainly Richard with the new pricing model and the new product mix and the new.
Speaker Change: Partner ecosystem.
Speaker Change: Return to.
Speaker Change: Very rapid growth by any standards.
Speaker Change: Attaining.
Speaker Change: 26% topline growth in the fourth quarter.
Speaker Change: If we look at the facts of the enterprise AI market I think is generally acknowledged today.
Speaker Change: She is an extraordinarily large and rapidly growing addressable market opportunity that is expected to accrue 2 billion.
Speaker Change: Billions trillions.
Speaker Change: Trillions of dollars in.
Speaker Change: Annual economic benefit.
Speaker Change: Annual economic value in terms of the addressable market in fact, the largest market in the history of enterprise application software.
Speaker Change: We were the first standard this market as you'll recall in 2009, and we've been talking about enterprise AI. In 2014, 15, 16, 17, 18, 1920 20, we talked about enterprise AI before anybody even thought of enterprise.
Speaker Change: Now, let's look at where we are the facts of the market.
Speaker Change: Mara.
Mara: I'm sorry in May of 2025, okay.
Mara: Have a generally acknowledged large and rapidly growing market and we look at the AI stack.
Mara: And the companies that are playing at the bottom of the stack, we have silicon providers, the Intel's AMD Ian videos.
Mara: Above that we have the infrastructure providers.
Mara: The Microsoft Azure or AWS, GCB et cetera on top of that we have the people for I think the foundation models.
Mara: AI.
Speaker Change: And anthropic.
Mara: Facebook et cetera.
Top of that we have that providers.
Mara: Many thousands of utilities that are out there that do things like platform independent.
Mara: <unk> database persistence or key value stores or.
Mara: <unk> or virtualization or whatever it may be and for the last 10 years.
Mara: Roughly goes back to you about 2014 people have been trying to assemble all of these components. This service and micro services provided by the hyper scaler.
Mara: Okay.
Mara: Uh huh.
Mara: <unk> models.
Mara:
Mara: Various utilities provided by cloud <unk> and should do.
Mara: Snowflake and what have you and use those in an attempt to build.
Mara: Turnkey enterprise applications that offer value to enterprises.
Mara: Wow.
Mara: In fact billions have been spat attempting to do this.
Mara: Frequently with large professional services riders few if any companies have succeeded at delivering lease solutions. Okay. <unk> approach has been has been unique okay and is highly differentiated from everybody in the market we are in enterprise.
Mara: Application peer play.
Mara: We expect building billions of dollars building the <unk> AI platform.
Mara: This platform enables us and has enabled us to build.
Mara: Rapid Lee.
Mara: Designed developed provisioning to operate over 130.
Mara: Turnkey enterprise AI applications to solve real business problems that deliver very real.
Mara: A real economic benefit what a real business problems as it relates to AI real business problems or things like.
Mara: Predicted maintenance supply.
Mara: Supply chain optimization.
Mara: Supply network risk demand forecasting fraud detection.
Mara: Detection.
Mara: Drug discovery. Okay. These are real world business problems and if you go onto our website at <unk> Youll see hundreds countered hundreds of testimonials from Cargill from Michele from Axa from Coke from the United States Air Force from the U S intelligence community.
Mara: Okay from others that testing.
Mara: You see.
Mara: The $107 million and in some cases billions of dollars of economic benefit that they are realizing from the use of C. Three AI enterprise applications today.
Mara: Okay. The result of this we have experienced.
Mara: As a result of the realization of this center Fry's AI kind of reality, Okay. We've seen enormous growth in our market and again in the last few years going from 6% to 16% to 25%.
Mara: And.
Mara: Our focus is.
Mara: We look at Q3 and Q4 of fiscal year 'twenty five has been building an ecosystem to be able to address this huge sectional sounds that week that we hear out there that has the demand for enterprise applications and in order to address these applications we need.
Mara: Army.
Mara: Our partners and so we have been focused in the last few quarters on establishing this army of strategic partners and enabling this army as strategic partners to be effective at communicating the benefits of these applications and selling these applications and so we form.
Mara: A strategic partnership with Azure, Okay, and as part of that strategic partnership is your acknowledge.
Mara: The <unk> enterprise AI applications are there.
Mara: <unk> AI solutions, Okay, and they provided these on the price list of their tens of thousands of Azure sales reps around the world and they are paying or is there a sales rep commissions to shelve the <unk> enterprise applications and we have spent.
Mara: Okay.
Mara: When they get a commission for selling them and we can sign the after we do the demo after we work with Azure to complete the initial production deployment, which most frequently is done in six months imagine six months, we built.
Mara: Polyethylene unit, Okay and yes.
Mara: And yes, install configure to induce a year youre trading and deliver a fully production enterprise predictive analytics application its offering.
Mara: Tens to hundreds of millions of dollars, making our benefit in six months okay.
Mara: So very much of our effort in the last six months is about forming these partnerships as we did with <unk>.
Mara: As your okay, as we did with AWS Azure.
Mara: With GGP, Okay, as we're doing with.
Mara: Booz Allen in the federal space.
Mara: Our field business in the federal space.
Mara: Lastly, I forget.
Mara: Forget to talk about.
Mara: Rents at Baker Hughes.
Mara: So we formed a higher initial partnership with Baker Hughes to address the needs of the oil and gas market.
Mara: What month it was in 2019, we did the initial relationship that we have expanded since then until this quarter, we have expanded and.
Mara: That agreement and extended that agreement I believe for Cai.
Mara: And that was the current agreement was scheduled to expire I believe in.
Mara: June of 2025 and while.
Speaker Change: Our friends in the sell side Davis.
Speaker Change: No credit okay for the tailwind okay that occurred from that come on guys. Jerry a half of $1 billion in revenue. Okay. Okay for <unk> was that in the best interest of share of CCA shareholders that have a $1 billion in revenue from shell from Exxonmobil from Eni from <unk>.
Speaker Change: From Qatar gas from Qatar LNG from tick higher fertilizer.
Speaker Change: From a coke industries from Lyondellbasell from.
Speaker Change: Holy Moly, how good can it get well, we got very little credit from the sell side for us from a tailwind I've been reading.
Speaker Change: Recently as this morning, Okay from.
Speaker Change: So I'm sorry about.
Speaker Change: About the substantial headwind that would accrue shared that contract not be originators.
Speaker Change: Surprise surprise as we expected pay that contract was renewed in.
Speaker Change: In the fourth quarter and it was extended through 2028.
Speaker Change: What we're doing in the marketplaces expanding considerably and so we are continuing to go to market. We continue to develop we continue to deliver solutions to Baker Hughes and we continue to deliver the solutions to the market. So what what what has been.
Speaker Change: So as we added our.
Speaker Change: Sell side analyses.
Speaker Change: Very pleased too worried about the impending tailwind.
Speaker Change: Headwinds that now are.
Speaker Change: The fact of tailwind so okay.
Speaker Change: What else are we focused on in the last two quarters, we've been further said and.
Speaker Change: Enabling these partners to be effective okay. We have tens of thousands of salespeople that absorb I believe tens of thousands of salespeople at AWS, Okay thousands of salespeople at DCP.
Speaker Change: They have lots of products to sell in their bag and it's very confusing so we needed to make it simple so in order to make it simple for them. We invested in building demo applications that run and take advantage of the full utility of the azure stack or the AWS.
Speaker Change: AWS stack or the GGP stack, so these people and Frankfurt, and Munich, and Detroit, and Madrid, and Marine Okay can go into that customer and get a demo of a complex application to customers show them what the.
Speaker Change: Benefit is.
Speaker Change: <unk> chain optimization of demand forecasting of predictive maintenance and we.
Speaker Change: We accrued so there was a very very significant focus on arming.
Speaker Change: Our.
Speaker Change: Our partner ecosystem and I believe we have the largest and most powerful partner ecosystem in the enterprise application software world. Okay, I'm confident that we do and I think we've done good work at arming our partners.
Speaker Change: With demonstration licenses that constituted I think almost 30% of revenue for the quarter. Okay think about that as an investment in future growth, Okay, where else did we sell demonstration licenses, we sold demonstration licenses to our customers why would we do that because.
Speaker Change: Dow chemical or shell or coke or cargill, or whoever it more or the United States Air Force whoever it may be they have a hugely successful application.
Speaker Change: And whatever it may be where in polyethylene orient protein distribution or in predictive maintenance for.
Speaker Change: Aircrafts for the case of the Air Force and they want to.
Speaker Change: Encourage others to use these applications for example, the air Force wants.
Speaker Change: We have it I think 2022 platforms today and they wanted to deploy the application across 44, Affleck 44 platforms Dow we've done a really excellent job.
Speaker Change: Joining the applications across their polyethylene units, but they wanted to deploy it across the rest of their chemical units should they want demonstration applications. So they can accelerate the change management and.
Speaker Change: And accelerate the adoption of these technologies within their organizations. So the investments we made in demonstration licenses that were there are companies that our partners and our customers are happy to pay for.
Speaker Change: Hi.
Speaker Change: Think about that as an investment in future growth, Okay, So where does the growth.
Speaker Change: Number one if we look at that.
Speaker Change: Enterprise and market writ large it is.
Speaker Change: It is just a huge sucking sound out there that we are really unique.
Speaker Change: We're the only enterprise application application pure play this out there we're selling I think today at over 600 accounts as of today.
Speaker Change: Lately selling with Microsoft.
Speaker Change: By the time, we add AWS TCP Booz Allen Baker Hughes, it's hundreds more where we're selling at four and six legged sales calls around the world. Okay. When we close the deal we're able to sign the deal on Microsoft paper or AWS paper or <unk> paper.
Speaker Change: Why is that important because they already have an enterprise application Matt.
Speaker Change: Master agreement in place and we just have decided to play a jeweler pharma. So it takes.
Speaker Change: Two to five months out of a contract negotiation process and accelerate the sales cycle. So we are well positioned to grow where does the growth come from okay.
Speaker Change: Oil <unk> gas business still grow Youll see that we have.
Speaker Change: Really very significant diversification in the last two years, especially the last year across manufacturing life Sciences government state and local government is huge you guys.
Speaker Change: And.
Speaker Change: And this is enabled by this investment that we've made in enabling our customers and our partners to demonstrate their solutions to within their organizations and to their partners.
Speaker Change: Let's take a look at January <unk>.
Speaker Change: Generally they are.
Speaker Change: <unk>, we've been by the way.
Speaker Change: Everybody is kind of yapping about genetic AI and we have people in the CRM business and the customer service business will have software stacks that they developed in the last century, yes. The last century, okay that are now tagging, putting AI stick around their box and you're asking about.
Speaker Change: <unk> Meanwhile, sheets.
Speaker Change: Okay.
Speaker Change: On the pattern on Egencia chaos and indeed since December.
Speaker Change: Of.
Speaker Change: 2020 to December 2022.
Speaker Change: That's a pretty early date guy so all of these there is.
Speaker Change: And opportunity there. So all of these people who are yapping about argentic AI. Okay. They are using intellectual property that is owned by <unk>.
Speaker Change: We have today I think over 100, <unk> II solutions deployed out there in defense and intelligence in state government and local government and manufacturing in oil and gas in paper and pulp and this is a large and rapid.
Speaker Change: They are growing business so as of the fourth quarter. This is about a six year annual annualize to about 60.
Speaker Change: $60 million.
Speaker Change: Our business, Okay, we have.
Speaker Change: Yeah.
Speaker Change: Depending on how you count Okay someplace between 20, and 100 <unk> AI solutions out there okay introduction in the hands of happy customers and if we were to expand that business and that business out okay and take it to a <unk>.
Speaker Change: For our Bessemer or Nvidia or evidence that business alone would be valued at multiples of where <unk> is today and we all know that's a true statement, so, whereas our growth going to come from okay. Our growth will come from additional applications our growth will come from our partner ecosystem.
Speaker Change: Our growth.
Speaker Change: We have continued to make significant progress in.
Speaker Change: In the federal space and there'll be more announcements coming in the next couple of weeks about that but we have.
Speaker Change: An amazing footprint and the Air force with the RSL panned applications as predicted maintenance, where do a <unk> analysis for the National reconnaissance organization. Okay. We're doing very sophisticated congested logistics for the defense Logistics agency.
Speaker Change: Our federal business is a large and rapidly growing business and I am going to have to cut my.
Speaker Change: Q&A sure when we get to the calls because I needed to catch it.
Speaker Change: To Washington D C and what we've shown on this business so off.
Speaker Change: So net net.
Speaker Change: Business is good guys state and local government business as good <unk> business has good <unk>.
Speaker Change: AI everywhere is really quite exciting our core our core businesses in <unk>.
Speaker Change: In manufacturing and supply chain and demand chain are good.
Speaker Change: We grew again last quarter at 26% compound annual growth rate, we renewed the Baker Hughes.
Speaker Change: Agreement Oh, let's talk about cash okay, we've run from 6% to 16% to 26%, Okay and I love to read these analyst reports about how were hemorrhaging cash.
Speaker Change: I guess I need a class I.
Speaker Change: I need to go on to Linda Dot Com and take a course, a power operated back shelf spreadsheet okay.
Speaker Change: So it gives you a spreadsheet and CSM or seeing cash and yet I look at my bank account and two years ago at three quarters of $1 billion.
Speaker Change: One year ago.
Speaker Change: 300 quarters.
Speaker Change: <unk> is a $1 billion cash.
Speaker Change: Today, I have three quarters of $1 billion cash.
Speaker Change: In a year from now I expect you have three quarters of $1 billion cash into the bank. So some things inconsistent with your <unk> shall macros and the reality in the world that I live where every time I look at the checking Chuck appreciate your quarters of $1 billion cash why is their cash because had cash lap and these people are.
Speaker Change: Put in together.
Speaker Change: Very robust financial controls.
Speaker Change: Very very robust expansion management, okay, and a clear path to profitability okay. Our.
Speaker Change: Revenue growth continued <unk> growth rate continues to exceed our <unk>.
Speaker Change: Expense growth rate, Okay, fast math, okay without the excel spreadsheet okay.
Speaker Change: It's it follows if so facto okay the cash positive.
Speaker Change: And non-GAAP profitability is simply a matter of scale and we've had and I expect in 2027 and beyond we will cross that path into consistent.
Speaker Change: Cash positivity and.
Speaker Change: And.
Speaker Change: And annualized non-GAAP profitability.
Speaker Change: Thereafter so.
Speaker Change: Great quarter, great year customers are happy products your excellent market is huge and <unk>.
Speaker Change: If there is anybody else in the enterprise AI applications business unaware of who they are so with that I'm going to turn this call over for a little while.
Speaker Change: Two.
Speaker Change: C III <unk> and we felt in the <unk>, Jessica our financial results and our Kpis and we're asking <unk>. We're not just talking about this as something that we're doing this is not admit this is a production product now I'm going to turn it over to <unk> to talk.
Speaker Change: The high points of the quarter, then turn it over to my colleague.
Speaker Change: Hello, Ash, Hey, Jeff Lass, our CFO to talk about specific color on the quarter and then will be most pleased to answer your questions.
Speaker Change: With that I'll turn it over to <unk> to provide the highlights on the quarter and fiscal year 'twenty five thank you.
Speaker Change: Here's the analysis summarizing the major themes across Q4, and the full fiscal year 2025, as we reflect on the past year. It's clear that <unk> has achieved remarkable progress delivering strong financial results deepening strategic alliances and solidifying our leadership in enterprise.
Speaker Change: This AI.
Speaker Change: 2025 has been defined by consistent execution accelerating growth innovation, and then unwavering focus on delivering value to our customers and shareholders.
Speaker Change: Let's begin with a detailed overview of our financial results for the fourth quarter and the full fiscal year 2025.
Speaker Change: All figures are non-GAAP unless otherwise noted.
Speaker Change: For Q4 total revenue reached $108 7 million.
Speaker Change: Reflecting a 26% increase compared to $86 6 million in.
Speaker Change: In the same quarter of the prior year subscription revenue for the quarter was $87 3 million up.
Speaker Change: Up 9% from $79 9 million a year ago.
Speaker Change: Combined subscription and prioritized engineering services revenue totaled $104 4 million.
Speaker Change: Representing 96% of total revenue and a 22% increase from $85 7 million in Q4 of the previous year non-GAAP gross profit for the quarter was $75 2 million equating to a gross margin of approximately 69%.
Speaker Change: Our non-GAAP operating loss was $31 $2 million, which was within the guidance range of 30 million to $40 million.
Speaker Change: non-GAAP net loss per share was <unk> 16.
Speaker Change: We generated free cash flow of $10 $3 million in the quarter and closed Q4 with $742 7 million in cash cash equivalents and investments.
Speaker Change: Please note that our balance for cash cash equivalents and investments remains largely unchanged from a year ago at nearly three quarters of $1 billion.
Speaker Change: For the full fiscal year 2025, total revenue was $389 $1 million or 25% increase compared to $310 $6 million in fiscal 2024.
Speaker Change: Note that we have seen accelerating growth for the last three consecutive years going from 6% in fiscal 'twenty, 3% to 16% in fiscal 'twenty four to now 25% in fiscal 'twenty five subscription.
Speaker Change: Subscription revenue for the year was $327 6 million accounting for 84% of total revenue and reflecting an 18% increase from $278 1 million in the prior year. This marks the 18th consecutive quarter as a public company in which we have met.
Speaker Change: Or exceeded our revenue guidance with these results as our foundation, let's turn to the strategic and operational highlights that have shaped our performance and positioned us for the future.
Speaker Change: Fiscal 2025 has been a transformative year for <unk> marked by significant milestones in our partnerships and accelerating growth across diverse industries.
Speaker Change: One of the most notable achievements in Q4 was the renewal and expansion of our strategic partnership with Baker Hughes.
Speaker Change: Alliance, which began in 2019 has been a cornerstone of our success in the oil and gas sector generating over half of $1 billion in revenue from this vertical and the chemical markets.
Speaker Change: The renewed agreement underscores the proven value, we deliver through our joint efforts enhancing efficiency safety reliability and sustainability across upstream midstream and downstream operations together with Baker Hughes, we serve some of the world's largest operators, including Eni Qatar energy LNG.
Speaker Change: Shell Lyondellbasell Exxonmobil Coke Braskem, Qatar fertilizer company and Petronas. This partnership continues to provide us with substantial credibility and market access globally and we are confident that this renewed collaboration will further drive innovation and opportunity in the energy sector.
Speaker Change: While oil and gas remains a foundational vertical for us our growth beyond the sector has gained significant momentum in fiscal 2025, non oil and gas revenue increased by 48% year over year, reflecting our successful expansion into 19 different industries.
Speaker Change: This acceleration is particularly evident in manufacturing state and local government and life Sciences.
Speaker Change: In manufacturing, we have established a strong track record delivering measurable impact through predictive maintenance energy efficiency quality optimization and supply chain visibility.
Speaker Change: Key customers like wholesome Coke Nucor and flex have expanded their engagements with us while new relationships with iconic companies such as U S steel cements Rolls Royce and Ingersoll Rand signaled the vast potential ahead in state and local government, we have seen remarkable progress with revenue growing over.
Speaker Change: 100% in fiscal 2025, we closed 71 agreements across organizations in 24 states demonstrating the increasing trust in our solutions to enhance public services. Our applications are enabling more efficient law enforcement equitable property valuations and improved government program delivery and states.
Speaker Change: Including California, Texas, New York, Florida, Washington, New Jersey, Georgia, North Carolina, Michigan, and Arizona, Colorado, Virginia, Indiana, Oregon, Connecticut, Tennessee, Alabama, Utah, New Mexico, Idaho, Maine, Rhode Island, Montana and Wyoming.
Speaker Change: This rapid adoption positions. This vertical is a key driver of our long term growth.
Speaker Change: Life Sciences, and healthcare represent an emerging area of strength for us.
Speaker Change: Beyond predictive maintenance, we are leveraging medical and research data to address industry specific challenges such as optimizing clinical workflows, our traction with customers like GSK Quest diagnostics, Sanofi, Boston scientific and Bristol Myers Squibb highlights the growing relevance of our solutions in this.
Speaker Change: Space for more information on customer success visit our website, where you will find numerous customer testimonials that all attest to the rapid value and clear benefits. They are realizing from our AI applications.
Speaker Change: We believe our customer satisfaction score to be among the highest in the enterprise software industry.
Speaker Change: These developments across verticals combined with the renewed Baker Hughes partnership affirm our ability to scale impact and capture diverse market opportunities.
Speaker Change: As we look ahead this diversified growth trajectory.
Speaker Change: It's a strong foundation for sustained progress.
Speaker Change: A critical component of our success in fiscal 2025 has been the substantial expansion of our partner ecosystem, which has become a powerful lever for scaling our business and driving customer value.
Speaker Change: In the past year, 73% of our agreements were delivered in collaboration with our partners with 193 agreements closed through this network of 68% increase from the prior year in Q4 alone partner supported bookings grew by 419% and we closed 59 agreements through these.
Speaker Change: Collaborations.
Speaker Change: Our partnership with Microsoft continues to be a driving force in expanding our market reach in.
Speaker Change: Q4, we closed 28, new agreements together with a particular focus on manufacturing and chemicals, Microsoft Executive team has shown strong advocacy and theyre on the ground presence at events like <unk> transform where they participated in over 100 customer meetings has been instrumental.
Speaker Change: Joint marketing initiatives, including virtual Fireside chats executive round tables and participation in high impact conferences have further amplified our visibility.
Speaker Change: Our alliance with AWS continues to strengthen enhancing our ability to deliver advanced enterprise AI solutions globally. This collaboration has been pivotal in broadening our reach and ensuring seamless execution across diverse customer environments.
Speaker Change: Similarly, our relationship with Google Cloud remains robust, providing additional avenues to connect with enterprises seeking scalable AI solutions, our partnership with Mckinsey quantum Black has also progressed meaningfully in Q4, we jointly closed our first agreement a significant milestone we have a line.
Speaker Change: On priority target accounts and conducted five enablement and training sessions attended by hundreds of quantum Black engineers.
Speaker Change: This initial success is a testament to the complementary strengths of Mckinsey quantum blacks expertise in business transformation.
Speaker Change: And our leadership in enterprise AI and we are focused on replicating this achievement at scale. Additionally, our new strategic alliance with Pwc formed in Q4 targets key industries, such as financial services manufacturing and utilities by combining our egencia AI capabilities with Pwc's advice.
Speaker Change: <unk> expertise, we are well positioned to accelerate AI driven transformation for enterprises in these sectors. These.
Speaker Change: These alliances with Microsoft AWS, Google Cloud and Mckinsey quantum black alongside emerging collaborations like with Pwc are materially advancing customer outcomes and expanding our distribution capacity, we are driving a disciplined effort to capitalize on this trusted network ensuring that our partners are equipped.
Speaker Change: To deliver our solutions effectively.
Speaker Change: Our federal business has been a consistent area of strength with significant achievements in Q4 building on the momentum established earlier in the year a standout development was the increased contract ceiling of $450 million awarded by the U S Air Force rapid Sustainment office to scale to deploy.
Speaker Change: A sensor based algorithms on the panda predictive maintenance platform.
Speaker Change: We fully utilized our initial $100 million ceiling to deploy panda, which is powered by the <unk> AI platform.
Speaker Change: And in 2023 Panda was named the Air Force's designated system of record for predictive maintenance.
Speaker Change: It monitors components across hundreds of aircraft, including the <unk> bomber C. Five KC 135, and C 130, delivering near real time insights from flight maintenance and supply data. This capability reduces downtime improves fleet readiness and strengthens national.
Speaker Change: Preparedness the Air Force has already issued the first task order under the new ceiling expanding panda two additional aircraft and systems beyond the Air Force our work with the Defense Logistics agency for energy saw a significant extension of the <unk> platform in Q4, Pluto also powered by the <unk>.
Speaker Change: Our platform provides real time visibility into global fuel operations, managing nearly 2 billion gallons annually across over 600 supply points by centralizing data Pluto enhances risk forecasting and inventory optimization bolstering resilience and readiness across the department of.
Speaker Change: Hence.
Speaker Change: We also expanded our footprint in the defense and intelligence community through a new collaboration with arc field, a leading provider of government technology and mission support.
Speaker Change: Integrating the <unk> AI platform and C. III generative AI into arc fields offerings enhances capabilities and supply chain optimization predictive maintenance and mission assurance.
Speaker Change: Additionally, Q4 saw new and expanded agreements with entities such as the U S Department of defense. The U S intelligence community. The U S Air Force the U S. Marine Corps. The U S. Navy the defense Counterintelligence Security Agency the missile Defense Agency CA USA Royal Air Force Oscar.
Speaker Change: And talus innovation remains at the core of <unk>, AI and our advancements in generative and agenda. During fiscal 2025 have further distinguished us in the market.
Speaker Change: The C. Three generative AI revenue grew more than 100% in FY 'twenty five we closed 60 63 generative AI initial production deployments across 16 industries. This year with Q4 agreements, including with signature aviation Dow should now Bristol Myers Squibb. The U S Navy the U S intelligence community.
Speaker Change: <unk> and state and local governments in Alabama, and Tennessee, among others. A compelling example of our impact is our work with the University of Southern California Show a foundation.
Speaker Change: By deploying C. III generative AI. The foundation is fast tracking the transcription and indexing of over 30000 multilingual survivor testimonies related to the Holocaust and other atrocities.
Speaker Change: The technology tax transcripts with keywords, making the visual history archive instantly searchable and is expected to save the foundation over 10 years of manual effort and up to $33 million in costs. This application underscores the transformative potential of our solutions in delivering both efficiency and <unk>.
Speaker Change: Profound societal value.
Speaker Change: Our early leadership in agenda AI reinforced by a recent patent for advanced AI agent generative AI is the result of over a decade of focused innovation with the AI agents market projected to grow from $5 $1 billion in 2024 to $47 $1 billion by 2030 According to <unk>.
Speaker Change: We are well positioned to capitalize on this trend through our production ready solutions.
Speaker Change: As we move into fiscal 2026 C. Three AI is strategically positioned to build on the strong foundation established in 2025.
Speaker Change: Our growth drivers are clear.
Speaker Change: Robust suite of enterprise AI applications are rapidly expanding partner ecosystem.
Speaker Change: And deepening traction across diverse verticals.
Speaker Change: The market for AI applications is vast and growing with value increasingly concentrated at the application layer, where real world business challenges are addressed.
Speaker Change: Our focus on delivering secure scalable and production grade solutions aligns directly with this shift giving us a distinct competitive advantage C. III is unique in the AI world, 95% of our bookings in fiscal 2025 were driven by AI applications. We are the only company whose primary.
Speaker Change: <unk> focus is to deliver turnkey enterprise AI solutions, while others deliver infrastructure tool sets. Our utilities, we are delivering turnkey applications and we have delivered over 130 applications to date. This application footprint will only continue to grow over the past two years, we have successfully.
Speaker Change: <unk> C three AI for growth in the years to come.
Speaker Change: The major market initiatives, you should expect to see in fiscal 'twenty, six or additional penetration of new accounts development of new applications to expand into new verticals and full realization of our strategic alliances that we have with Microsoft AWS, Google Cloud Mckinsey quantum black and others. This enables us to Simon.
Speaker Change: <unk> jointly sell to hundreds of accounts globally as of May 2025, we are currently targeting over 600 joined accounts with Microsoft alone.
Speaker Change: We also expect increased traction in Europe, where we see a large yet underserved market opportunity.
Speaker Change: Increasingly you can expect to see us developing an OEM business, where we are licensing the <unk> AI platform to third parties, including professional services providers, such as fractal and vertical market solutions providers, enabling them to develop differentiated derivative works in the form of AI.
Speaker Change: <unk> that they will offer to their customers and.
Speaker Change: And finally, we expect to see accelerating growth driven by the generative AI and <unk> AI markets, where our solutions are highly differentiated highly beneficial and address a market opportunity that is incalculably large.
Speaker Change: The enterprise AI landscape is at an inflection point and see three AI stands ready to lead.
Speaker Change: The convergence of market demand and our proven capabilities creates a unique opportunity to drive sustained growth by combining best in class technology with a world class network of partners and a relentless focus on customer value. We are poised to shape the future of business operations across industries as we step into fiscal 2010.
Speaker Change: Six our path is clear our momentum is strong and our commitment to delivering impactful AI solutions has never been greater.
Speaker Change: Thank you C three agenda.
Speaker Change: I will now provide a recap of our financial results and additional color on our business.
Speaker Change: All figures are non-GAAP unless otherwise noted.
Speaker Change: Total revenue for the quarter increased 26% year over year to $108 $7 million.
Speaker Change: Subscription revenue increased 9% year over year to $87 $3 million, representing 80% of total revenue.
Speaker Change: Revenue from sale of software licenses that are demonstration versions of <unk> applications.
Speaker Change: $33 8 million during the quarter.
Speaker Change: We sell these licenses to our distribution partners to enable them to demonstrate our software effectively to their customers.
Speaker Change: And two large strategic customers to enable them to accelerate AI adoption across the companies.
Speaker Change: This was a strong bookings quarter.
Speaker Change: We had bookings of $135 $4 million during the quarter, which increased from $42 million in the fourth quarter of last year.
Speaker Change: Our non Baker Hughes' revenue grew by 37% year over year during the quarter and by 40% during the year.
Speaker Change: Professional services revenue was $21 4 million of which $17 million was revenue from prioritized engineering services.
Speaker Change: Yes.
Speaker Change: Professional services represent 20% of total revenue during the quarter.
Speaker Change: And our subscription NPS revenue combined.
Speaker Change: $104 $4 million.
Speaker Change: And accounted for 96% of our total revenue.
Speaker Change: This was an increase of 22% compared to $85 7 million one year ago.
Speaker Change: As a reminder, preorder.
Speaker Change: So your auditors engineering services had undertaken when a customer request that we accelerated the design development and delivery of software features and functions that are planned in our future product roadmap.
Speaker Change: And the software features delivered it becomes integrated to our core product offering it's available to all subscribers of the underlying software product.
Speaker Change: And enhances the operation of that product going forward.
Speaker Change: Such B has resulted in a production level computer software.
Speaker Change: Ah compiled code that enhances the functionality of our protection products.
Speaker Change: Which is available for our customers to use over the life of their software licenses.
Speaker Change: Since you've experienced significant growth in revenue over the last few quarters.
Speaker Change: We expect subscription and <unk> revenue combined agenda.
Speaker Change: Generally account for 90% or more of our total revenue.
Speaker Change: During fiscal 2026.
Speaker Change: We expect the professional services revenue, including the yet, but generally stay within 10% to 20% of total revenue for fiscal 2026.
Speaker Change: non-GAAP gross profit for the quarter was $75 $2 million and gross margin was 69%.
Speaker Change: Gross margin for professional services remained high at over 85%.
Speaker Change: Operating loss for the quarter was $31 $2 million and our net loss for the quarter was $21 $9 million.
Speaker Change: Our operating loss was better than the guidance.
Speaker Change: <unk> focus on expense management.
Speaker Change: Our non-GAAP net loss per share was <unk> 16.
Speaker Change: Our net cash generated from operating activities was $11 $3 million.
Speaker Change: Free cash flow for the quarter was positive $10 3 million as compared to positive $18 8 million in the fourth quarter of last year.
Speaker Change: Free cash flow for the year.
Speaker Change: Improved to negative $44 $4 million as compared to negative $94 million last year.
Speaker Change: We continue to be very well capitalized and closed the quarter with $742 $7 million in cash cash equivalents and marketable securities.
Speaker Change: During the quarter, we signed 36 initial production deployments.
Speaker Change: At the end of the quarter, we had cumulatively signed 346 initial production deployments of which 263 are still active.
Speaker Change: This means they are either in the original three to six months.
Speaker Change: Our extended for some duration.
Speaker Change: Converted to an ongoing subscription contract.
Speaker Change: <unk> currently being negotiated for conversion to ongoing subscription contract.
Speaker Change: We are very excited about our expanding distribution network and go to market initiatives with our partners, including Microsoft AWS and Mckinsey.
Speaker Change: And we expect to continue to see some moderation in our gross margins due to higher mix of initial production deployments in the near term.
Speaker Change: It's got a greater cost of revenue during the initial phase of customer lifecycle.
Speaker Change: And also due to our investments in expanding our support capacity.
Speaker Change: We also expect some moderation in our operating margin in the near term due to investments we are making in our business, especially in expanding our strategic partner ecosystem.
Speaker Change: Hill's organization and research and development.
Speaker Change: Now I'll move on to our guidance for the next quarter.
Speaker Change: Our revenue guidance for Q1 of fiscal 'twenty six.
Speaker Change: Is $100 million to $109 million.
Speaker Change: For the full fiscal 2026, we are anticipating revenue in the range of $447 $5 million.
Speaker Change: $484 $5 million.
Speaker Change: Our guidance for non-GAAP loss from operations for the fourth quarter is $23 5 million to $33 5 million.
Speaker Change: And our non-GAAP loss from operations for the year, the guidance is $65 million to $100 million.
Speaker Change: Our guidance is predicated on the assumption of geopolitical stability.
Speaker Change: What it will be a situation that the U S government closed.
Speaker Change: The budget did not pause RBC.
Speaker Change: We see indications of global trade friction.
Speaker Change: Given the reality of these market risks those could have unknown and adverse consequences on our business results.
Speaker Change: Last year, our revenue growth was 25% and our expenses grew by 18%.
Speaker Change: As we approach fiscal 'twenty six.
Speaker Change: We expect the revenue growth rate continued to exceed our expense growth rate.
Speaker Change: So profitability remains simply a matter of scale.
Speaker Change: Our expectation is that we will cross into non-GAAP profitability.
Speaker Change: During the second half of fiscal 2017.
Speaker Change: And we expect to be free cash flow positive in the fourth quarter of fiscal 'twenty six.
Speaker Change: And in successive years thereafter.
Speaker Change: With that I'd like the ton I'd like to turn the call over to the operator for Q&A.
Speaker Change: Operator.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone to remove yourself from Mccue you May Press Star one again, please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Patrick Wall Ravens citizens. Please go ahead Patrick.
Speaker Change: Oh, great. Thank you and.
Speaker Change: Congratulations across <unk>.
Speaker Change: A number of fronts.
Speaker Change: Including the.
Speaker Change: The renewal of Baker Hughes, but also Tom adding Ken Goldman to your board. So I guess my first question would be.
Speaker Change: Just in terms of.
Speaker Change: Microsoft partnership how do you go about activating tens of thousands of Azure sales reps too.
Speaker Change: To actually deliver say three AI.
Speaker Change: Okay.
Speaker Change: Great question, Pat because I would say at the level of the senior executives Microsoft be it jets.
Speaker Change: <unk>.
Speaker Change: Or the people around Europe that people run federal that people run are there like totally bought in but the people who are really important the 10.
Speaker Change: Tens of thousands of Azure reps, okay in Munich, Malines Madrid, Okay, Okay, and what have you and so what we are doing is weird chartering our say.
Speaker Change: Order of 100 salespeople to each reach out and formed partnerships with 10 <unk> salespeople.
Speaker Change: Each of those guys focus on two accounts so that the leverage is our sales guys raising out to their sales guys, who are motivated to work with US we have solutions for them, we make joint sales calls with them, but if we get order of today or in a clearly it's expanding.
Speaker Change: <unk> order of roughly 100, CCI salespeople, okay focused with.
Speaker Change: 10 partner people all of a sudden we've gone from.
Speaker Change: 100 people to 1000 people working together around the world today.
Speaker Change: In May of 2025, I think we are jointly tracking over 600 accounts together with Microsoft, but thats. The key to this leverage it's not going to be at the executive level, where the where the relationships are intimate okay, we really need to engage where.
Speaker Change: With the feet on the street and that's what we're focused on doing and we're focused on we've got a lot of focus in the last two quarters and providing the sales <unk> sales reps in AWS.
Speaker Change: Sales reps and GCB sales reps the tools they need to go in and do a demo to their customer on the first call, but that is the challenge that is before us that's what we've been focusing the bulk of the last two quarters and that's what we'll focus the bulk of the next two quarters.
Speaker Change: John is really realizing the potential of these partnerships with tens of thousands of Azure reps that feed on the street, because we can help them retire their quota and we can help them make their customers successful.
Speaker Change: Okay Wonderful and then if I could.
Speaker Change: If I could ask.
Speaker Change: Follow up with your with your permission Tom I Hope that's okay, but in February.
Speaker Change: You informed us that you'd suffered it helps set back and there was limiting your ability to travel and then youre going to have.
Speaker Change: Jim Snobby help out, but I was delighted to hear on this call that your I mean, you are probably not the right to get out of Red eye, but but I was delighted to hear that.
Speaker Change: Getting out of <unk>, because that sounds like.
Speaker Change: That sounds like some.
Speaker Change: Some positive developments so.
Speaker Change: I don't know any comments that you are okay sharing with us on that I'm sure would be it would be greatly appreciate it.
Speaker Change: I did get slowed down for a little bit. So there's no question about it and I had.
Speaker Change: It's very unlikely to work from home you know that.
Speaker Change: Yes.
Speaker Change: I had to work from home for a little while and take it easy and recover but I'll catch you read either Washington, DC Tonight, Okay, I will be in Washington D. C. Again for three days I think 10 days from now.
Speaker Change: After.
Speaker Change: Attending a wedding in Cabo so.
Speaker Change: <unk> thought it was safe Pat I'm back.
Speaker Change: Okay, alright, thanks, and congratulations again.
Speaker Change: Thank you. Our next question comes from the line.
Speaker Change: Mike.
Speaker Change: Needham <unk> company. Please go ahead Mike.
Speaker Change: Hey, guys. This is Matt <unk> on for Mike So it goes over at Needham.
Speaker Change: Thanks for taking our questions and congratulations on the expanded relationship with Baker Hughes can you provide some color there on what the economics of the new deal look like and how they might differ compared to your prior engagements.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: My favorite is covered under NDA and I don't want to get into the specifics of it okay, but it's broadened significantly.
Speaker Change: We're continuing to provide solutions to Baker Hughes or continuing to develop solutions with Baker Hughes, we're continuing to enable Baker Hughes to develop.
Speaker Change: Derivative works on top of the <unk> applications, and we are getting to serve customers together all around the world. So we've expanded it for another three years I think this but I'm not mistaken. This is the fifth such expansion.
Speaker Change: And it's a great partnership it's a great relationship by continuing to be on speed dial with with Lorenzo Simonelli, the CEO of Baker Hughes.
Speaker Change: And ours have been close friends and the speculation that somehow the relationship between <unk> and Baker Hughes was rocky was simply.
Speaker Change: <unk>.
Speaker Change: Candidly delusional.
Speaker Change: So.
Speaker Change: I can't imagine a stronger partnership and we're continue to kick it together.
Speaker Change: And <unk>.
Speaker Change: <unk> or <unk> or are the Netherlands.
Speaker Change: Understood that's great. Thank you for that.
Speaker Change: And then looking at your your FY 'twenty six revenue guidance.
Speaker Change: Band of outcomes is considerably larger than what you've given in past quarters. How did you think through guidance construction this quarter and what needs to happen to achieve the high end of that band versus the low end.
Speaker Change: Well, we read the same newspaper that you guys right.
Speaker Change: And.
Speaker Change: And we did talk to the President and I had dinner with the speaker of the House last night I spoke with the leader of the Senate last week.
Speaker Change: And so we do know these people and we do read the newspaper and we all know there is risk.
Speaker Change: Is there is risk in Europe, Okay, we have kinetic risk geopolitical.
Speaker Change: Geopolitical risk we have risked.
Speaker Change: Risk of of in fact, the government even shutting down.
Speaker Change: And these are real anyway of companies out there that it was drawing guidance altogether and and we thought in the interest of <unk>.
Speaker Change: We have to acknowledge that these risks are real and so that results as a result, we.
Speaker Change: We have a broader range than usual to accommodate.
Speaker Change: The unanticipated and why don't we deal with.
Speaker Change: So these guys are making great again.
Speaker Change: Seem to hit us with the unanticipated quite frequently so.
Speaker Change: That's it we're just acknowledging very real risk market risk that's out there and should it go bad it's going to adverse effect on our business as it will general motors and everybody else in the world.
Speaker Change: Okay. It makes a lot. Thanks, thanks Tom.
Speaker Change: Yes.
Speaker Change: Thank you I would now like to turn the conference back to Mr. CFO for closing remarks, Sir.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen.
Speaker Change: Thank you for your time and and the courtesy of.
Speaker Change: Of tracking us where.
Speaker Change: Very pleased with the direction the business is going I think yield if you listen to.
Speaker Change: Our last 10 conference calls the plan were executing is exactly the plan that we said we're actually getting okay. We are right on track.
Speaker Change: We are growing our pace and we expect the future is very bright so we look forward to.
Speaker Change: We thank you for the courtesy following us and we look forward to keeping you posted as we power ahead in fiscal years, 2006, 2007 and 28.
Speaker Change: Thank you all very much.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
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