C3.ai(US:AI)2024-05-30 01:15Financial Data and Key Metrics Changes - C3.ai reported a 20% year-over-year revenue growth in Q4, reaching $86.6 million, exceeding guidance and analyst expectations [8][30] - Subscription revenue increased by 41% year-over-year to $79.9 million, accounting for 92% of total revenue [9][30] - Full-year revenue reached $310.6 million, a 16% increase from the previous year, with subscription revenue at $278.1 million, up 21% [9][30] - Non-GAAP gross profit was $60.9 million, resulting in a gross margin of 70% [9][31] - Free cash flow for the quarter was $18.8 million, with total cash, cash equivalents, and investments at $750.4 million [9][31] Business Line Data and Key Metrics Changes - The transition to pay-as-you-go consumption pricing has led to a significant increase in smaller transactions, with average total contract value (TCV) dropping from over $16 million in FY19 to $900,000 last quarter [10] - Professional services revenue was $6.7 million, representing 8% of total revenue, down from 21.5% in Q4 FY23, indicating a better mix towards subscription revenue [30] Market Data and Key Metrics Changes - C3.ai's bookings distribution for Q4 included approximately 50% from Federal, Defense, and Aerospace, 15% from Oil and Gas, and 11% from State Government [16] - The company signed 34 pilots in Q4, a 79% increase from the previous year, with a total of 172 pilots signed cumulatively [33] Company Strategy and Development Direction - C3.ai focuses exclusively on Enterprise AI applications, believing that applications will dominate the value stack as silicon and infrastructure become commoditized [11][13] - The company aims to establish a market leadership position in a potentially $1 trillion addressable software market, emphasizing long-term growth and investment [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the accelerating revenue growth, projecting a 23% increase in revenue for FY25, with Q1 guidance set at $84 million to $89 million [29] - The company anticipates continued investment in growth, particularly in sales capacity and service to support increased demand [52] Other Important Information - C3.ai launched 30 Generative AI products in FY24, receiving nearly 50,000 inquiries from businesses, indicating strong market interest [25] - The company has established a robust partner network, closing 115 agreements in the past year, a 62% increase from the prior year [23] Q&A Session Summary Question: Can you talk about the improvements in Version 8 and its sustainability? - Management indicated that Version 8 was a four-year engineering effort, resulting in a significant architectural revamp, and while performance increases are expected, they may not be as substantial in the near future [35][36] Question: What is the outlook for the Federal, Defense, and Aerospace vertical? - Management views the Federal sector as a growth engine, with significant investments and agreements in place, particularly with the Air Force and Navy [38][40] Question: How are newly converted customers ramping consumption compared to previous cohorts? - Management noted that they have not disclosed specific consumption revenue separately but expect it to ramp up meaningfully in the future [48][49] Question: What drives lower margins during the pilot phase? - Management explained that they prioritize customer success over immediate profitability during pilots, which can lead to margin degradation [64][65]