REDWOOD CITY, Calif. – December 7, 2022 – C3.ai, Inc. (“C3 AI,” “C3,” or the “Company”) (NYSE: AI), the Enterprise AI application software company, today announced financial results for its fiscal second quarter ended October 31, 2022.
“It was a solid second quarter, with subscription revenue growing 26% year over year,” said CEO Thomas M. Siebel. “We made substantial progress ramping our consumption-based sales motion effort, which has been well received by our customers, partners, and sales organization. We expect consumption-based sales will be a substantial contributor to growth in forthcoming quarters.”
Fiscal Second Quarter 2023 Financial Highlights
- Revenue: Total revenue for the quarter was $62.4 million, an increase of 7% compared to $58.3 million one year ago.
- Subscription Revenue: Subscription revenue for the quarter was $59.5 million, an increase of 26% compared to $47.4 million one year ago.
- Gross Profit: GAAP gross profit for the quarter was $41.7 million, representing a 67% gross margin, compared to GAAP gross profit of $42.3 million one year ago. Non-GAAP gross profit for the quarter was $47.8 million, representing a 77% non-GAAP gross margin, compared to non-GAAP gross profit of $45.3 million one year ago.
- Remaining Performance Obligations (“RPO”): GAAP RPO of $417.3 million, down from $465.5 million one year ago. Our GAAP RPO represents 163% of Q2 annualized revenue. Non-GAAP RPO of $453.5 million, down from $529.3 million one year ago.
- Net Loss per Share: GAAP net loss per share was $(0.63), compared to $(0.55) one year ago. Non-GAAP net loss per share was $(0.11), compared to $(0.23) one year ago.
- Cash Reserves: With $858.8 million in cash, cash equivalents, and investments, we believe C3 AI is well positioned to sustain equity market turbulence and to continue to invest in growth through Enterprise AI innovation and sales expansion.
C3 AI successfully completed its transition from a subscription-based pricing model to a consumption-based pricing model. At the same time, C3 AI largely restructured the global sales organization, now composed of highly technical domain experts. While the short-term effect of this transition lowers revenue growth and decreases RPO, the Company believes the medium and long term effect provides a substantial accelerator to revenue growth.
The number of completed contracts in the quarter increased to 25, slightly greater than a 100% increase from 12 one year earlier. The average contract value in the second quarter was $0.8 million, down from $19.0 million a year earlier as a result of the new pricing model. C3 AI believes the new pricing model will result in a substantially increased number of smaller transactions providing greater forward visibility into revenue and bookings, and a substantially increased customer base from which to grow revenues.
C3 AI remains focused on its accelerated path to profitability. Non-GAAP loss from operations for the second quarter was $15.0 million, an improvement from $22.6 million in the quarter a year earlier. The Company expects to be operating profitably on a non-GAAP basis and be cash positive by the end of fiscal 2024.
C3 AI Second Quarter Customer Success
- C3 AI expanded its footprint in the U.S. Department of Defense with new and expanded deals with the Chief Digital and AI Office (“CDAO”), Missile Defense Agency, U.S. Air Force, and Defense Counterintelligence and Security Agency (“DCSA”).
- C3 AI was awarded a sub-contract via Intelligent Waves LLC for the USAF Crowd Sourced Flight Data Program. C3 AI is providing the C3 AI Platform for the rapid development and operational deployment of a roadmap of mission-critical applications in support of the 59th Test and Evaluation Squadron (“TES”) located at Nellis Air Force Base in Nevada.
- C3 AI configured a production deployment of C3 AI Reliability for 280 discrete assets (turbines, pumps, etc.) with one of the world’s largest Liquefied Natural Gas (“LNG”) producers in less than six months.
- Shell successfully implemented C3 AI Sustainability for Manufacturing application at two of their key offshore facilities in the Gulf of Mexico.
- C3 AI Ex Machina customers including Baker Hughes and Con Edison have grown their runtime consumption of the application by an average of 270% making C3 AI Ex Machina an essential part of their data lakehouse analytics efforts.
- C3 AI’s Law Enforcement application was introduced and licensed as the standard by San Mateo County, California.
- C3 AI saw continued licensing and service expansions at Bank of America, Cargill, Koch Industries, Missile Defense Agency, Baker Hughes, and Duke Energy.
C3 AI Partner Model Success
- C3 AI and Google Cloud continued joint investment in industry applications with the launch of two new enterprise AI applications optimized for GCP. The sales teams are actively co-selling to over 300 accounts. C3 AI and Google Cloud closed an expansion with a transportation company, jointly signed one of the top 50 retailers in the world to license C3 AI Supply Chain applications and signed several new deals in the financial services and oil & gas industries.
- AWS remains C3 AI’s largest installed base. C3 AI expects to continue to grow its installed base on AWS in fiscal 2023 and beyond.
- C3 AI and Microsoft closed deals specifically this quarter in the Energy and Manufacturing sectors.
- In Q2, C3 AI and its partner Baker Hughes secured strategic deals with two supermajor national oil companies in the Middle East, another supermajor European oil and gas company, one of the largest chemical and plastics manufacturers in North America, and a major oil and gas company in the Asia-Pacific region.
- C3 AI and Booz Allen Hamilton formed a strategic partnership to address the growing Enterprise AI needs of the U.S. Federal Government and specifically the U.S. Department of Defense in congested logistics, financial systems, decision support, readiness, and multi-domain command and control.
New C3 AI Software Releases
- Launch of C3 AI ESG: an application that harnesses artificial intelligence and machine learning to enable companies to monitor, report, and improve their ESG (“Environmental, Social, and Governance”) performance.
- Shell PoC: C3 AI successfully concluded an ESG trial with Shell, which focused on leveraging Natural Language Processing (“NLP”) to generate targeted insights on the rapidly evolving ESG priorities of key stakeholders.
- C3 AI Reliability Suite: Introduced two new product releases that make the C3 AI Reliability application more accessible to developers to extend and configure the application, along with product enhancements that improve application end user experience.
- C3 AI CRM: Delivered a major release of C3 AI CRM with new features in four key areas: (1) multi-hierarchy and multi-cadence forecasting, (2) Sales Pipeline Analytics, (3) Admin Portal, and (4) filtering, navigation, and search.
- C3 AI Ex Machina: Announced new pricing and packaging, unifying multiple editions and tiers into one version, and introducing consumption-based pricing that aligns with pricing models of the underlying cloud data lakes.
C3 AI Industry Leadership
- Industry Recognition: C3 AI was featured in the 2022 Constellation ShortListTM in the Artificial Intelligence and Machine Learning Cloud Platforms category. Constellation evaluates more than 10 solutions categorized in this market. Selection is determined by client inquiries, partner conversations, customer references, vendor selection projects, market share and internal research.
- Robust Patent Portfolio: C3 AI’s technology is now protected by a broad patent portfolio with over 100 granted patents and pending applications in the United States and numerous international jurisdictions. C3 AI’s most recently issued U.S. Patent 11,449,315 titled “Systems and Methods for Utilizing Machine Learning to Identify Non-Technical Loss” discloses various embodiments for analysis methods using unsupervised machine learning algorithms to determine sources of non-technical loss, such as theft or utility meter malfunction.
- Energy Management: As part of a major sustainability effort, New York State has issued a new executive order directing all state agencies to use the C3 AI powered NY Energy Manager application as the system of record for their energy data. The NY Energy Manager application, built on the C3 AI Energy Management application, includes more than 17,000 facilities for more than 1,000 customers, including communities, businesses, municipalities, and electricity providers in New York.