Revenue accelerated 17% year-over-year;
Increased traction in C3 Generative AI
Customer engagement increased 81%
year-over-year
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,
2023.
“It was a solid quarter, with total revenue growing 17%
year-over-year to $73.2 million, and customer engagement growing by
81% year-over-year. We saw unprecedented interest and traction in
our generative AI offerings. Importantly, we are seeing a return to
accelerating revenue growth as we continue our transition to a
consumption-based pricing model,” said C3 AI CEO and Chairman
Thomas M. Siebel. “In the trailing four quarters, we have seen top
line year-over-year revenue growth increase from -4% in Q3 FY23, to
0% in Q4 FY23, to 11% in Q1 FY24, to 17% in Q2 FY24.”
Fiscal Second Quarter 2024 Financial Highlights
- Revenue: Total revenue for the quarter was $73.2
million, an increase of 17% compared to $62.4 million one year
ago.
- Subscription Revenue: Subscription revenue for the
quarter was $66.4 million, constituting 91% of total revenue, an
increase of 12% compared to $59.5 million one year ago.
- Gross Profit: GAAP gross profit for the quarter was
$41.1 million, representing a 56% gross margin. Non-GAAP gross
profit for the quarter was $50.4 million, representing a 69%
non-GAAP gross margin.
- Net Loss per Share: GAAP net loss per share was $(0.59).
Non-GAAP net loss per share was $(0.13).
- Cash Reserves: $762.3 million in cash, cash equivalents,
and investments.
- Customer Engagement: Customer Engagement for the quarter
was 404, an increase of 81% compared to 223 one year ago. [See
FY23-Q4 Investor Supplemental for more details on Customer
Engagement methodology.]
Key Customers
During the quarter, C3 AI closed 62 agreements including 36
pilots.
- The Company entered into new agreements with GSK, Indorama, and
First Business Bank and expanded agreements with Con Edison, Roche,
Nucor Corporation, and Hewlett Packard Enterprise, among
others.
- C3 AI’s federal business continues to show significant strength
with federal bookings representing almost half of total bookings,
up nearly 187% from the year prior. C3 AI signed 20 new federal
agreements, including five agreements for C3 Generative AI.
- The Company closed new and expanded deals with the U.S. Navy,
the Office of the Director of National Intelligence, Joint Staff
J8, the Defense Logistics Agency, and the Administration for
Children & Families, a division of the Department of Health
& Human Services.
Customer Success Stories
- Building on its success in the manufacturing sector, C3 AI
continues to work with Nucor to optimize production
schedules across several mills, expanding the largest U.S. steel
producer’s AI program. This expansion with Nucor also included two
new use cases initiated in Q2: AI to improve forecasting, and
generative AI targeted at facilitating proper health and safety
procedures.
- Con Edison, a customer since 2017, continues to expand
its use of C3 AI applications, most recently with C3 Generative AI
to help workers quickly find answers to questions and analysis
related to smart meter, service, and infrastructure data. In the
second quarter, Con Edison completed two pilots of the newest
application, which have since converted to production.
- C3 AI also converted two pilots and expanded its federal
business within the U.S. Department of Defense at the Defense
Logistics Agency (“DLA”), which provides logistical,
acquisition, and technical support for the Army, Navy, Air Force,
Marine Corps and other federal agencies and allies. C3 AI is
helping the DLA improve efficiency, visibility, and readiness
across the supply chain predicting consumption, inventory, and
transportation of critical goods such as parts, components, and
fuel.
- In Q2, the Administration for Children and Families
(“ACF”), a division of the U.S. Department of Health and Human
Services, has made the first order to C3 AI under a $90 million
blanket purchase agreement. As a critical civilian agency, the ACF
works to help unaccompanied children who cross the U.S. border find
temporary shelter or permanent homes. The ACF will use the C3 AI
Platform to perform complex data analysis more efficiently,
examining the scope and resource landscape for children within the
agency’s care, including staffing needs and how long these children
are with their case managers — and ultimately use the resulting
insights to inform decision makers on resource allocation and
needs.
Key News
- The C3 AI partner ecosystem continues to drive significant
growth. In Q2, the Company closed 40 agreements through its partner
network, which includes AWS, Baker Hughes, Booz Allen, Google
Cloud, and Microsoft. The qualified opportunity pipeline with
partners has increased by 75% in the past year.
- C3 AI and AWS expanded their Strategic Collaboration Agreement
(“SCA”). Under the expanded SCA, C3 AI and AWS will focus on
continuing to offer advanced generative AI solutions for
enterprises.
- To meet market demand, C3 AI has announced and released a
no-code, self-service generative AI application in AWS Marketplace,
C3 Generative AI: AWS Marketplace Edition.
- In Q2, C3 AI was recognized multiple times for its innovation
in the AI space. C3 AI has been named to Fortune 50 AI Innovators
list and was recognized as a top 10 AI partner by Everest Group in
its inaugural ‘Artificial Intelligence Top 50’ list of global
market-leading AI-first technology providers.
- For the fourth year in a row, Constellation Research named C3
AI as a “solution to know” on its ShortListTM for Artificial
Intelligence and Machine Learning Cloud Platforms in Q3 2023.
Pilot Growth
During the quarter, C3 AI closed 62 agreements including 36
pilots. The 36 pilots represented an increase from 24 pilots in the
first quarter and 13 pilots in the year-ago quarter. Notably, 20 of
these pilots were generative AI pilots, an increase from eight in
the first quarter.
Consumption Pricing
In Q1 FY23, C3 AI introduced a transition to a consumption-based
pricing model to fuel growth, which the Company believes is
becoming the standard among enterprise SaaS companies in the
industry. The consumption-based pricing model is based on
vCPU/hour, in line with industry-standard cloud software pricing
standards. The transition has been met with great reception among
C3 AI’s prospects, customers, and partners. Since this transition,
the Company has closed over 100 pilots on the new consumption
pricing model. The Company believes traction with C3 Generative AI:
AWS Marketplace Edition will further accelerate the Company’s
consumption pricing adoption and customer engagement metrics.
C3 Generative AI
Recent estimates suggest that the market for Enterprise AI
applications is bigger and expanding faster than certain experts
previously anticipated. Bloomberg Intelligence estimates that
generative AI will become a $1.3 trillion market by 2032. Goldman
Sachs predicts that AI could increase corporate profits by 30% in
the next decade, and that generative AI alone could raise the
global GDP by 7%. C3 AI believes it is in a prime position to see a
significant increase in opportunities for Enterprise AI, and the
Company is also well-positioned to accelerate growth, gain market
share, attain sustainable non-GAAP profitability and establish a
market-leading position globally. As such, the Company plans to
further accelerate its investment in generative AI, deepening its
investments in lead generation, branding, market awareness, and
customer success.
C3 AI closed 20 new agreements for C3 Generative AI in the
second quarter. C3 Generative AI is addressing use cases across
multiple industries including manufacturing, financial services,
and defense & intelligence.
- The generative AI qualified pipeline grew to over 225 in Q2, an
increase of more than 55% from Q1.
- C3 AI has announced a no-code, self-service generative AI
application in AWS Marketplace, C3 Generative AI: AWS Marketplace
Edition, allowing users of all technical levels to begin using
generative AI in minutes in their enterprise. The application
provides a starting point for customers and can be quickly scaled
across the enterprise and can be used together with all other C3 AI
applications. C3 Generative AI: AWS Marketplace Edition is now
available under a 14-day free trial in AWS Marketplace via private
preview.
Financial Outlook:
The Company’s guidance includes GAAP and non-GAAP financial
measures.
The following table summarizes C3 AI’s guidance for the third
quarter of fiscal 2024 and full-year fiscal 2024:
(in millions)
Third Quarter Fiscal
2024
Guidance
Full Year Fiscal 2024
Guidance
Total revenue
$74.0 - $78.0
$295.0 - $320.0
Non-GAAP loss from operations
$(40.0) - $(46.0)
$(115.0) - $(135.0)
A reconciliation of non-GAAP guidance measures to corresponding
GAAP measures is not available on a forward-looking basis without
unreasonable effort due to the uncertainty regarding, and the
potential variability of, expenses that may be incurred in the
future. Stock-based compensation expense-related charges, including
employer payroll tax-related items on employee stock transactions,
are impacted by the timing of employee stock transactions, the
future fair market value of our common stock, and our future hiring
and retention needs, all of which are difficult to predict and
subject to constant change. We have provided a reconciliation of
GAAP to non-GAAP financial measures in the financial statement
tables for our historical non-GAAP results included in this press
release. Our fiscal year ends April 30, and numbers are rounded for
presentation purposes.
Conference Call Details
What:
C3 AI Second Quarter Fiscal 2024 Financial
Results Conference Call
When:
Wednesday, December 6, 2023
Time:
2:00 p.m. PT / 5:00 p.m. ET
Participant Registration:
https://register.vevent.com/register/BIe37b9b099bea488eb9570b24243fce69
(live call)
Webcast:
https://edge.media-server.com/mmc/p/zc6c5s27/ (live and replay)
Investor Presentation Details
An investor presentation providing additional information and
analysis can be found at our investor relations page at
ir.c3.ai.
Statement Regarding Use of Non-GAAP Financial
Measures
The Company reports the following non-GAAP financial measures,
which have not been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP"), in addition
to, and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.
- Non-GAAP gross profit, non-GAAP gross margin, non-GAAP loss
from operations, and non-GAAP net loss per share. Our non-GAAP
gross profit, non-GAAP gross margin, non-GAAP loss from operations,
and non-GAAP net loss per share exclude the effect of stock-based
compensation expense-related charges and employer payroll tax
expense related to employee stock-based compensation. We believe
the presentation of operating results that exclude these non-cash
items provides useful supplemental information to investors and
facilitates the analysis of our operating results and comparison of
operating results across reporting periods.
We use these non-GAAP financial measures internally for
financial and operational decision-making purposes and as a means
to evaluate period-to-period comparisons. Non-GAAP financial
measures are not meant to be considered in isolation or as a
substitute for comparable GAAP financial measures and should be
read only in conjunction with our condensed consolidated financial
statements prepared in accordance with GAAP. Our presentation of
non-GAAP financial measures may not be comparable to similar
measures used by other companies. We encourage investors to
carefully consider our results under GAAP, as well as our
supplemental non-GAAP information and the reconciliation between
these presentations, to more fully understand our business. Please
see the tables included at the end of this release for the
reconciliation of GAAP to non-GAAP financial measures.
Use of Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release other than
statements of historical facts, including our market leadership
position, anticipated benefits from our partnerships and
investments, financial outlook, our expectations relating to our
new consumption-pricing model and the impact to our results of
operations, the expected benefits of our offerings (including the
potential benefits of our C3 Generative AI offerings), our business
strategies, plans, and objectives for future operations, are
forward-looking statements. The words “anticipate,” “believe,”
“continue,” “estimate,” “expect,” “intend,” “may,” “will” and
similar expressions are intended to identify forward-looking
statements. We have based these forward-looking statements largely
on our current expectations and projections about future events and
trends that we believe may affect our financial condition, results
of operations, business strategy, short-term and long-term business
operations and objectives, and financial needs. These
forward-looking statements are subject to a number of risks and
uncertainties, including difficulties in evaluating our prospects
and future results of operations given our operating history, our
dependence on a limited number of existing customers that account
for a substantial portion of our revenue, our ability to attract
new customers and retain existing customers, market awareness and
acceptance of enterprise AI solutions in general and our products
in particular, and our history of operating losses. Some of these
risks are described in greater detail in our filings with the
Securities and Exchange Commission, including our Quarterly Reports
on Form 10-Q for the fiscal quarters ended July 31, 2023 and, when
available, October 31, 2023, although new and unanticipated risks
may arise. The future events and trends discussed in this press
release may not occur and actual results could differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance, achievements, or events and circumstances reflected in
the forward-looking statements will occur. Except to the extent
required by law, we do not undertake to update any of these
forward-looking statements after the date of this press release to
conform these statements to actual results or revised
expectations.
About C3.ai, Inc.
C3.ai, Inc. (NYSE:AI) is the Enterprise AI application software
company. C3 AI delivers a family of fully integrated products
including the C3 AI Platform, an end-to-end platform for
developing, deploying, and operating enterprise AI applications, C3
AI applications, a portfolio of industry-specific SaaS enterprise
AI applications that enable the digital transformation of
organizations globally, and C3 Generative AI, a suite of
domain-specific generative AI offerings for the enterprise.
C3.AI, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended October
31,
Six Months Ended October
31,
2023
2022
2023
2022
Revenue
Subscription(1)
$
66,449
$
59,508
$
127,801
$
116,534
Professional services(2)
6,780
2,900
17,790
11,182
Total revenue
73,229
62,408
145,591
127,716
Cost of revenue
Subscription
30,937
19,165
61,371
33,257
Professional services
1,179
1,587
2,558
5,901
Total cost of revenue
32,116
20,752
63,929
39,158
Gross profit
41,113
41,656
81,662
88,558
Operating expenses
Sales and marketing(3)
49,895
44,936
93,780
87,923
Research and development
50,399
50,051
101,267
105,928
General and administrative
20,215
18,635
40,104
39,882
Total operating expenses
120,509
113,622
235,151
233,733
Loss from operations
(79,396
)
(71,966
)
(153,489
)
(145,175
)
Interest income
10,480
4,224
20,602
6,762
Other (expense) income, net
(638
)
(945
)
(877
)
(1,966
)
Loss before provision for income taxes
(69,554
)
(68,687
)
(133,764
)
(140,379
)
Provision for income taxes
226
163
374
342
Net loss
$
(69,780
)
$
(68,850
)
$
(134,138
)
$
(140,721
)
Net loss per share attributable to Class A
and Class B common stockholders, basic and diluted
$
(0.59
)
$
(0.63
)
$
(1.15
)
$
(1.30
)
Weighted-average shares used in computing
net loss per share attributable to Class A and Class B common
stockholders, basic and diluted
118,656
108,876
117,125
107,885
(1)
Including related party revenue of $10,581
and $35,568 for the six months ended October 31, 2023 and 2022,
respectively, and $19,238 for the three months ended October 31,
2022.
(2)
Including related party revenue of $5,804
and $150 for the six months ended October 31, 2023 and 2022,
respectively, and $21 for the three months ended October 31,
2022.
(3)
Including related party sales and
marketing expense of $810 and $7,031 for the six months ended
October 31, 2023 and 2022, respectively, and $3,531 for the three
months ended October 31, 2022.
C3.AI, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except for
share and per share data)
(Unaudited)
October 31, 2023
April 30, 2023
Assets
Current assets
Cash and cash equivalents
$
149,009
$
284,829
Marketable securities
613,260
446,155
Accounts receivable, net of allowance of
$359 and $359 as of October 31, 2023 and April 30, 2023,
respectively(1)
143,153
134,586
Prepaid expenses and other current
assets(2)
25,662
23,309
Total current assets
931,084
888,879
Property and equipment, net
92,651
84,578
Goodwill
625
625
Long-term investments
—
81,418
Other assets, non-current(3)
46,754
47,528
Total assets
$
1,071,114
$
1,103,028
Liabilities and stockholders’
equity
Current liabilities
Accounts payable(4)
$
25,740
$
24,610
Accrued compensation and employee
benefits
37,648
46,513
Deferred revenue, current(5)
40,486
47,846
Accrued and other current
liabilities(6)
10,280
17,070
Total current liabilities
114,154
136,039
Deferred revenue, non-current
68
4
Other long-term liabilities
45,616
37,320
Total liabilities
159,838
173,363
Commitments and contingencies
Stockholders’ equity
Class A common stock
116
110
Class B common stock
3
3
Additional paid-in capital
1,856,307
1,740,174
Accumulated other comprehensive loss
(775
)
(385
)
Accumulated deficit
(944,375
)
(810,237
)
Total stockholders’ equity
911,276
929,665
Total liabilities and stockholders’
equity
$
1,071,114
$
1,103,028
(1)
Including amounts from a related party of
$74,620 as of April 30, 2023.
(2)
Including amounts from a related party of
$4,983 as of April 30, 2023.
(3)
Including amounts from a related party of
$11,279 as of April 30, 2023.
(4)
Including amounts from a related party of
$2,200 as of April 30, 2023.
(5)
Including amounts from a related party of
$249 as of April 30, 2023.
(6)
Including amounts from a related party of
$2,448 as of April 30, 2023.
C3.AI, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended October
31,
2023
2022
Cash flows from operating
activities:
Net loss
$
(134,138
)
$
(140,721
)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization
6,220
2,413
Non-cash operating lease cost
454
1,101
Stock-based compensation expense
104,049
112,643
Accretion of discounts on marketable
securities
(8,755
)
(582
)
Other
—
186
Changes in operating assets and
liabilities
Accounts receivable(1)
(8,567
)
(14,668
)
Prepaid expenses, other current assets and
other assets(2)
(665
)
(3,204
)
Accounts payable(3)
(2,918
)
(28,197
)
Accrued compensation and employee
benefits
(2,551
)
(1,050
)
Operating lease liabilities
7,804
650
Other liabilities(4)
1,709
(882
)
Deferred revenue(5)
(7,296
)
(18,534
)
Net cash used in operating activities
(44,654
)
(90,845
)
Cash flows from investing
activities:
Purchases of property and equipment
(16,631
)
(39,978
)
Capitalized software development costs
(2,750
)
(1,000
)
Purchases of marketable securities
(489,871
)
(384,024
)
Maturities and sales of marketable
securities
412,554
455,534
Net cash (used in) provided by investing
activities
(96,698
)
30,532
Cash flows from financing
activities:
Proceeds from issuance of Class A common
stock under employee stock purchase plan
5,055
—
Proceeds from exercise of Class A common
stock options
10,163
1,782
Taxes paid related to net share settlement
of equity awards
(9,686
)
(3,375
)
Net cash provided by (used in) financing
activities
5,532
(1,593
)
Net decrease in cash, cash equivalents and
restricted cash
(135,820
)
(61,906
)
Cash, cash equivalents and restricted cash
at beginning of period
297,395
352,519
Cash, cash equivalents and restricted cash
at end of period
$
161,575
$
290,613
Cash and cash equivalents
$
149,009
$
277,622
Restricted cash included in other
assets
12,566
12,566
Restricted cash included in prepaid
expenses and other current assets
—
425
Total cash, cash equivalents and
restricted cash
$
161,575
$
290,613
Supplemental disclosure of cash flow
information—cash paid for income taxes
$
281
$
136
Supplemental disclosures of non-cash
investing and financing activities:
Purchases of property and equipment
included in accounts payable and accrued liabilities
$
7,293
$
18,361
Right-of-use assets obtained in exchange
for lease obligations (including remeasurement of right-of-use
assets and lease liabilities due to changes in the timing of
receipt of lease incentives)
$
778
$
—
Unpaid liabilities related to intangible
purchases
$
—
$
1,500
Vesting of early exercised stock
options
$
294
$
561
(1)
Including changes in related party
balances of $12,444 and $18,023 for the six months ended October
31, 2023 and 2022, respectively.
(2)
Including changes in related party
balances of $(810) and $(2,431) for the six months ended October
31, 2023 and 2022, respectively.
(3)
Including changes in related party
balances of $248 and $(16,396) for the six months ended October 31,
2023 and 2022, respectively.
(4)
Including changes in related party
balances of $(2,448) and $(2,510) for the six months ended October
31, 2023 and 2022, respectively.
(5)
Including changes in related party
balances of $(46) and $255 for the six months ended October 31,
2023 and 2022, respectively.
C3.AI, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In thousands, except
percentages)
(Unaudited)
Three Months Ended October
31,
Six Months Ended October
31,
2023
2022
2023
2022
Reconciliation of GAAP gross profit to
non-GAAP gross profit:
Gross profit on a GAAP basis
$
41,113
$
41,656
$
81,662
$
88,558
Stock-based compensation expense(1)
8,993
5,965
17,509
11,308
Employer payroll tax expense related to
employee stock-based compensation(2)
297
186
838
572
Gross profit on a non-GAAP basis
$
50,403
$
47,807
$
100,009
$
100,438
Gross margin on a GAAP basis
56
%
67
%
56
%
69
%
Gross margin on a non-GAAP basis
69
%
77
%
69
%
79
%
Reconciliation of GAAP loss from
operations to non-GAAP loss from operations:
Loss from operations on a GAAP basis
$
(79,396
)
$
(71,966
)
$
(153,489
)
$
(145,175
)
Stock-based compensation expense(1)
53,169
56,013
104,049
112,643
Employer payroll tax expense related to
employee stock-based compensation(2)
1,274
991
3,774
3,033
Loss from operations on a non-GAAP
basis
$
(24,953
)
$
(14,962
)
$
(45,666
)
$
(29,499
)
Reconciliation of GAAP net loss per
share to non-GAAP net loss per share:
Net loss on a GAAP basis
$
(69,780
)
$
(68,850
)
$
(134,138
)
$
(140,721
)
Stock-based compensation expense(1)
53,169
56,013
104,049
112,643
Employer payroll tax expense related to
employee stock-based compensation(2)
1,274
991
3,774
3,033
Net loss on a non-GAAP basis
$
(15,337
)
$
(11,846
)
$
(26,315
)
$
(25,045
)
GAAP net loss per share attributable
common shareholders, basic and diluted
$
(0.59
)
$
(0.63
)
$
(1.15
)
$
(1.30
)
Non-GAAP net loss per share attributable
common shareholders, basic and diluted
$
(0.13
)
$
(0.11
)
$
(0.22
)
$
(0.23
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders, basic and
diluted
118,656
108,876
117,125
107,885
(1)
Stock-based compensation expense for gross
profits and gross margin includes costs of subscription and cost of
professional services as follows. Stock-based compensation expense
for loss from operations includes total stock-based compensation
expense as follows:
Three Months Ended October
31,
Six Months Ended October
31,
2023
2022
2023
2022
Cost of subscription
$
8,514
$
5,486
$
16,570
$
9,758
Cost of professional services
479
479
939
1,550
Sales and marketing
18,226
19,080
35,005
35,859
Research and development
16,685
23,905
33,718
49,122
General and administrative
9,265
7,063
17,817
16,354
Total stock-based compensation expense
$
53,169
$
56,013
$
104,049
$
112,643
(2)
Employer payroll tax expense related to
employee stock-based compensation for gross profits and gross
margin includes costs of subscription and cost of professional
services as follows. Employer payroll tax expense related to
employee stock-based compensation for loss from operations includes
total employer payroll tax expense related to employee stock-based
compensation as follows:
Three Months Ended October
31,
Six Months Ended October
31,
2023
2022
2023
2022
Cost of subscription
$
282
$
170
$
791
$
456
Cost of professional services
15
16
47
116
Sales and marketing
463
356
1,468
886
Research and development
415
386
1,232
1,329
General and administrative
99
63
236
246
Total employer payroll tax expense
$
1,274
$
991
$
3,774
$
3,033
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231206095760/en/
Investor Contact ir@c3.ai
C3 AI Public Relations Cheryl Sanclemente 415-988-4960
pr@c3.ai
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