C3.ai(US:AI)2025-09-03 22:00Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $70.3 million, a decrease of 19% year over year [4] - Subscription revenue accounted for $60.3 million, representing 86% of total revenue [4] - Non-GAAP gross profit was $36.3 million, with a gross margin of 52% [7] - Non-GAAP operating loss was $57.8 million, and non-GAAP net loss was $49.8 million, translating to a net loss per share of $0.37 [8] - Cash, cash equivalents, and marketable securities at the end of the quarter totaled $711.9 million [9] Business Line Data and Key Metrics Changes - Revenue from software licenses for demonstration versions was $17.9 million, down sequentially by $15.9 million [5] - Professional services revenue was $10 million, with $8.7 million from Prioritized Engineering Services (PES), making up 14% of total revenue [5] - Combined subscription and PES revenue was $69 million, accounting for 98% of total revenue [5] Market Data and Key Metrics Changes - The company signed 28 initial production deployments (IPDs) during the quarter, with a cumulative total of 374 IPDs, of which 266 are still active [9] - Non-GAAP gross margin declined due to a higher mix of IPD-related costs and lower economies of scale [10] Company Strategy and Development Direction - The company aims to establish a market leadership position in enterprise AI applications, focusing on the C3 AgenTeq AI platform and expanding its application footprint [20][21] - A strategic integrator program was introduced to license the C3 AgenTeq AI platform to others, targeting OEMs and systems integrators [17] - The company plans to ramp up sales and service capacity globally, leveraging partnerships with major players like Azure, AWS, and GCP [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the first quarter's financial results were unacceptable, attributing the underperformance to poor sales execution and resource coordination [12][13] - The new CEO, Steven Ahitian, is expected to drive growth and customer satisfaction, with a restructured sales and service organization in place [14][22] - Management remains optimistic about achieving non-GAAP profitability and free cash flow in the future, despite the challenges faced in Q1 [28] Other Important Information - The company is involved in approximately 60 large-scale customer engagements across various sectors, including government and manufacturing [18] - The introduction of generative AI capabilities is expected to enhance project success rates, addressing common challenges in AI deployments [19] Q&A Session Summary Question: How involved will Tom be in the sales process going forward? - Tom stated he will do everything possible to ensure Steven's success and will continue to monitor and assist in the sales process as necessary [25] Question: What gives confidence in the Q2 guidance? - The Q2 guidance is based on sales activity observed in August and the review of the sales pipeline with new leadership [27] Question: How do you see the mix of partner-led versus direct sales evolving? - Tom indicated that 90% of the business closed this quarter was with partners, and there will be significant investment in these partnerships going forward [31][32] Question: How would you weight the underperformance this quarter? - Tom estimated that 70% of the underperformance was due to sales disruption and 30% due to his reduced involvement [39] Question: What execution steps are being taken regarding pilots and contracts? - Tom mentioned that new leadership and confusion in the sales process contributed to the challenges faced, but they are committed to improving execution [41]