C3.ai(US:AI)2023-09-06 16:00Financial Performance - Total revenue for the three months ended July 31, 2023, was $72.4 million, an 11% increase compared to the same period last year[125]. - Subscription revenue grew to $61.4 million for the three months ended July 31, 2023, representing an 8% increase year-over-year[125]. - Professional services revenue accounted for 15% of total revenue for the three months ended July 31, 2023, compared to 13% in the same period last year[124]. - Total revenue for the three months ended July 31, 2023, was $72,362,000, an increase of 11% compared to $65,308,000 in the same period of 2022[176]. - Subscription revenue increased by 8% to $61,352,000, accounting for 85% of total revenue, while professional services revenue rose by 33% to $11,010,000[178][181]. - Gross profit decreased by 14% to $40,549,000, with a gross margin of 56%, down from 72% in the prior year[185]. - Net loss for the period was $64,358,000, compared to a net loss of $71,871,000 in the same period last year[176]. - Free cash flow for the three months ended July 31, 2023, was $(8,902,000), an improvement from $(54,794,000) in the prior year[195]. - The provision for income taxes was $148,000, a decrease of 17% from $179,000 in the same period last year[193]. - Net cash provided by operating activities for the three months ended July 31, 2023, was $3.9 million, a significant improvement from a net cash used of $38.3 million in the same period of 2022[198][199]. - Cash used in investing activities for the three months ended July 31, 2023, was $84.8 million, primarily due to purchases of investments totaling $322.5 million[200]. - The company generated $2.5 million from financing activities during the three months ended July 31, 2023, compared to $1.1 million in the same period of 2022[202]. - The company reported an accumulated deficit of $874.6 million as of July 31, 2023, and expects to continue incurring operating losses in the upcoming quarters[196]. Customer Metrics - Customer Engagement increased to 334 as of July 31, 2023, up from 223 in the same period last year[137]. - The company expects an increase in the number of customers as organizations prioritize digital transformation, with a decrease in average total subscription contract value and revenue from lighthouse customers as a percentage of total revenue[145]. - The company anticipates attracting new customers with a consumption-based pricing model for the C3 AI Platform and C3 AI Applications[146]. Revenue Composition - Remaining Performance Obligations (RPO) were $334.6 million as of July 31, 2023, down from $381.4 million as of April 30, 2023[138]. - RPO included $41.0 million related to deferred revenue and $293.6 million from non-cancellable contracts as of July 31, 2023[139]. - Approximately 15% and 21% of total revenue for the three months ended July 31, 2023, and 2022, respectively, was derived from international customers, indicating growth potential in international markets[158]. - Revenue from existing customers included a decrease of $5.7 million related to the Baker Hughes arrangement for the three months ended July 31, 2023[181]. Strategic Initiatives - The company transitioned to a consumption-based pricing model for new customers, which is expected to accelerate revenue growth in the medium to long term[138]. - C3 AI's go-to-market strategy focuses on large organizations in various industries, including oil and gas, aerospace, and financial services[126]. - The company aims to expand into industries with significant market opportunities, such as telecommunications and healthcare[144]. - The company has a strategic partnership with Baker Hughes, with minimum revenue commitments increasing to $150 million by the fiscal year ending April 30, 2024[153]. - The company anticipates needing additional capital to support its strategic initiatives and may seek additional equity or debt financing in the future[197]. Investment and Expenses - Operating expenses totaled $114,642,000, a decrease of 5% from $120,111,000, with sales and marketing expenses increasing by 2%[188]. - Sales and marketing expenses are anticipated to increase in absolute dollar amounts, while the percentage of total revenue is expected to decline over time[168]. - General and administrative expenses are projected to increase in absolute dollars due to public company operating costs, but are expected to decline as a percentage of total revenue in the long term[172]. - The company plans to maintain high levels of investment in product innovation, expecting research and development spending as a percentage of total revenue to decline over the long term[148]. - Research and development investments will continue to drive core technology innovation, with customers developing nearly two-thirds of applications currently in production on the C3 AI Platform[147]. Economic Conditions - The company faces potential impacts from macroeconomic conditions, including inflation and supply chain disruptions, which may affect customer budgets and consumption[159]. - The company does not believe that inflation has materially affected its business or financial condition[213]. Internal Controls - There were no changes in internal control over financial reporting that materially affected the company's reporting during the period covered[216]. - The management concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[215]. - The company recognizes inherent limitations in the effectiveness of its internal controls, including the potential for misconduct and resource constraints[217].