C3 AI Announces Second Quarter Fiscal 2022 Results

Q2 Revenue of $58.3 million, increased 41% year over year

FY 22 Revenue Guidance raised to 35% – 37% growth, up from 17% growth in FY 21

C3.ai, Inc., the Enterprise AI software company, announced results for its fiscal second quarter ended October 31, 2021.

“We closed another strong quarter, including a revenue increase of 41% from a year ago that exceeds our guidance and sell-side analysts’ expectations”

“We closed another strong quarter, including a revenue increase of 41% from a year ago that exceeds our guidance and sell-side analysts’ expectations,” said CEO Thomas M. Siebel. “We expanded our important relationship with Baker Hughes extending the contract term, significantly increasing its value, and securing that value as a guaranteed future C3 AI revenue stream. We further diversified our enterprise AI production footprint across many industries and continued to innovate with the delivery of C3 AI Data Vision, that fundamentally reinvents the enterprise software user experience.”

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Second Quarter Financial Highlights

• Revenue: Total revenue for the quarter was $58.3 million, up from $41.3 million one year ago, an increase of 41% year over year, exceeding company guidance and sell-side analysts’ expectations.
• Subscription Revenue: Subscription revenue for the quarter was $47.4 million, up from $35.9 million one year ago, an increase of 32% year over year.
• Gross Profit: GAAP Gross profit for the quarter was $42.3 million, up from $31.3 million one year ago. Non-GAAP gross profit for the quarter was $45.3 million, up from $31.5 million one year ago, exceeding sell-side analysts’ consensus expectations by $1.6 million.
• Remaining Performance Obligations (“RPO”): GAAP RPO was $465.5 million, up from $267.4 million one year ago. Non-GAAP RPO was $529.3 million, up from $304.5 million one year ago.
• Net Loss per Share: GAAP net loss per share was $(0.55), compared to $(0.39) one year ago. Non-GAAP net loss per share was $(0.23), compared to $(0.26) one year ago, well above sell-side analysts’ consensus expectations.

Recent Business Highlights

• C3 AI significantly expanded and restructured its strategic relationship with Baker Hughes for the second time, increasing the value of the contract by $45 million to $495 million, extending its term from five to six years, and guaranteeing C3 AI a minimum of $357 million of GAAP revenue over the next 3.5 years. The newly expanded contract also introduced a new pricing model and selling structure designed to further accelerate sales of C3 AI software products into the Baker Hughes customer base.
• C3 AI increased its customer count to 104 customers, representing 63% year over year growth.
• C3 AI expanded its enterprise AI footprint in Manufacturing, Oil & Gas, Chemicals, Agriculture, Agricultural Implements, Building Equipment, Financial Services, Insurance, Life Sciences, and Energy, with new production deployments at Cargill, Johnson Controls, and Shell; new contracts signed with CNH Industrial, Liberty Mutual, and a top 5 Life Sciences company; and new additional business with Cargill, Enel, FIS, Mosaic, and PTT Global Chemical.
• C3 AI production applications showed expanded industry diversification, growing to 14 industries in Q2 FY 22 compared to 7 industries a year ago, including notable expansions in Agriculture, Financial Services, Life Sciences, Healthcare, and Manufacturing.
• C3 AI substantially increased its Public Sector business in defense and intelligence, with new production deployments at the U.S. Air Force, new business with the U.S. Space Force, and additional business with the Missile Defense Agency. The year over year growth is 33%. The company expects this growth rate to accelerate substantially in the second half of the year.
• C3 AI strengthened its leadership team with the addition of Lt. Gen. H.R. McMaster (U.S. Army, retired) to the C3 AI Advisory Board. A graduate of the U.S. Military Academy and veteran of the Gulf War, Operation Enduring Freedom, and Operation Iraqi Freedom, Lt. Gen. McMaster served as National Security Advisor from 2017 to 2018. He has held multiple roles in the United States Central Command, and is a Senior Fellow at the Hoover Institution and lecturer at the Stanford Graduate School of Business.
• C3 AI expanded its university relations program though the C3 AI Digital Transformation Institute, a public-private partnership with C3 AI, Microsoft, Lawrence Berkeley Labs, the National Center for Supercomputing Applications, UC Berkeley, University of Illinois-Urbana, MIT, Carnegie Mellon, Princeton, Stanford, and KTH in Sweden. The C3 AI DTI sponsors advanced primary research in AI for digital transformation, hold regular industry AI colloquia, and has awarded significant research funding to develop advanced AI techniques in precision medicine, COVID and pandemic mitigation, and energy and climate security.
• C3 AI announced the launch of C3 AI Data Vision. C3 AI believes that C3 AI Data Vision represents a fundamental paradigm shift in the enterprise application user experience model from today’s clunky forms and table-based model to a highly visual dynamic knowledge graph experience.
• C3 AI’s partnership with Google Cloud is off to a strong start. The companies’ teams have developed a comprehensive pipeline of over 100 qualified deals across multiple industry verticals and recently closed their first deal, in the form of a trial in the Financial Services sector. The teams have engaged and developed joint product roadmaps and sales enablement collateral. All C3 AI solutions are now available on the Google Cloud marketplace.
• C3 AI introduced two new applications to serve the needs of country tax assessors. The new C3 AI applications–C3 AI Residential Property Appraisal and C3 AI Commercial Property Appraisal–will be marketed nationally and have broad applicability for local and state governments, as well as financial services institutions engaged in mortgage lending and related services, representing a significant new growth opportunity for C3 AI. Along with C3 AI CRM and C3 Ex Machina, this initiative furthers our efforts to increase revenue diversity.
• Through its partnership with energy-services leader ENGIE, C3 AI advanced its position in energy and sustainability across multiple industries, with deployments at an iconic global coffee shop brand where C3 AI is helping manage energy consumption and GHG emissions at more than 12,000 sites, a multinational packaging leader, and a major hotel group.
• C3 AI continued to attract exceptional talent to the company and ended the quarter with 668 full-time employees, an increase of 39% year over year. The company received over 18,000 employment applications in Q2.

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Financial Outlook:

Our guidance includes GAAP and non-GAAP financial measures.

The following table summarizes our guidance for the third quarter of fiscal 2022 and full-year fiscal 2022:

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

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

We report 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.
• Non-GAAP RPO: Non-GAAP RPO represents our GAAP RPO plus the associated cancellable contracted backlog. We believe the presentation of our RPO inclusive of the cancellable backlog provides useful supplemental information to investors about our aggregate contractual backlog 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.

Analyst expectations gathered by FactSet as of November 30, 2021; consensus represents arithmetic average of this guidance. Any opinions, estimates or forecasts regarding C3 AI’s performance made by any analysts are theirs alone and do not represent the opinions, forecasts or predictions of C3 AI. C3 AI does not endorse or concur with any such opinions, estimates or forecasts.

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