C3.ai, Inc.

a day and thank you for standing by. Welcome to the C3 AI third quarter fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ruben Gallegos. Please go ahead.

Thank you, and good afternoon, and welcome to C3AI's earnings call for the third quarter of fiscal year 2023, which ended January 31st, 2023. My name is Ruben Gallegos, and I am the Vice President of Investor Relations. With me on the call today is Tom Siebel, Chairman and Chief Executive Officer, and Abo, our Chief Technology Officer, Yuho Parkinen, our Chief Financial Officer. After the market closed today, we issued a press release with details regarding our third quarter results as well as the supplemental to our results, both of which can be accessed through our Investor Relations section of our website at ir.c3.ai. This call is being webcast and a replay will be available on our IR website following the conclusion of this call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainty that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC Today, all figures will be discussed on a non-GAAP basis unless otherwise noted. And also, after the course of today's call, we will refer to certain non-GAAP financial measures in the reconciliation of GAAP to non-GAAP as included in our press release. Finally, at times in our prepared remarks in response to your question, we may discuss metrics that are incremental to our usual presentation to give greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. And with that, let me turn the call over to Tom.

Okay. Good afternoon, everyone, and thank you for joining our call today. You might recall that two quarters ago, I spoke of economic headwinds, lengthening sales cycles, as our customers and prospects anticipated a recession. In July... In August of 2022, we saw a significant negative change in the business environment with the lengthening of decision cycles, and I cautioned that the market downturn could be significant. Now, as we enter into our fourth quarter, we are seeing tailwinds from improved business optimism and increased interest in applying C3 AI solutions to address an increasing range of applications across a broadening set of industries. This is a dramatic change from what we experienced in mid-2022. There is a genuine optimism in the marketplace for our solutions, and the overall business sentiment appears to be substantially improving. In the course of the quarter, we validated our transition to a consumption-based pricing We expanded our partner ecosystem. We expanded our business pipeline. We delivered industry-leading product innovation in enterprise AI. And importantly, we remain on track to become cash positive and non-GAAP profitable by the end of fiscal year 24. Looking at third quarter results, we delivered a strong quarter. Our total revenue was $66.7 million, which exceeded our guidance. Current RPO increased to $176.3 million, and we have 236 customers. We ended the quarter with almost $790 million in cash. And as we enter Q4, we believe C3II is well positioned to continue to invest in growth through enterprise AI innovation and sales expansion while sustaining our path to profitability. Importantly, we have validated the conception-based pricing model. The response to our conception-based pricing model from partners and prospects has been uniformly enthusiastic. Believe it or not, we currently have more than 290 qualified pilot opportunities in our pipeline, exceeding our expectations. Our pilot to production conversion rate is on track. The consumption, pricing, revenue conversion model that we provided last quarter, and Juho will review that with you in a few minutes, appears to be realistic, suggesting substantially increasing revenue growth rates in fiscal year 24 and beyond. We made significant progress with our partner ecosystem in the third quarter. We established, re-established, and substantially expanded our go-to-market partnerships. With Google Cloud, we closed eight new customer deals and expanded our joint pipeline. Our combined teams are currently pursuing 291 enterprise opportunities for our joint solutions over 100 of which we are currently engaged in licensing discussions. Thomas Curran, the CEO of Google Cloud, and I held a joint meeting with a number of clients, prospects, and partners in the US federal region. We've made substantial progress to ensure that all C3 AI products perform optimally in the Google Cloud environment. Finally, we expanded our partnership agreement with Google so that our customers can purchase any C3 AI software solution on the Google Cloud Marketplace. We also renewed and expanded our go-to-market partnership with AWS in the quarter. AWS funded C3 AI to enhance its C3 AI law enforcement application to assure that it's optimized for AWS, integrating Amazon OpenSearch and AWS machine learning services to enhance the speed and quality of analysis for state and local agencies using the application on AWS. C3 and AWS are currently pursuing 75 new opportunities, of which 41 appear highly qualified, and we closed six agreements in the quarter. With Azure, we collaborated to close a deal with a super major U.S. energy company and a European technology company serving the mining and construction sectors. We cooperated to deliver a highly successful pilot engagement to a large U.S. defense agency that shows potential for very large expansion. In the quarter, we established a highly strategic relationship with Booz Allen, focused on providing solutions to the government, defense, and intelligence sectors. We are jointly going to market with Booz Allen. to bring the C3AI platform and a suite of prebuilt C3AI solutions to solve their requirements. Together, the companies have cross-trained our employees on our respective services, and we already closed our first engagement with the Chief Digital Artificial Intelligence Office, CDAO. With Accenture, we renewed our partnership to help customers drive product innovation, design and development, and provide strategic support and systems integration at scale. Together, the companies have trained Accenture employees on the C3II platform and have already collaborated to close two pilot deals in the consumer packaged goods and oil and gas sectors. We are actively engaged with a large oil and gas services company and have generated several new opportunities with target accounts. With EY, we are teaming to address the needs of the healthcare industry in the UK. With Periton, a Washington, D.C. beltway systems integrator, we entered into a partnering agreement to address the modernization of the Veterans Administration. With Baker Hughes, we substantially expanded our strategic partnership in the third quarter. The terms of this expansion resulted in an incremental C3AI booking of $32.5 million, and the frequency of payments from Baker Hughes was accelerated over the term of the agreement. C3AI agreed to provide additional products and services to Baker Hughes and provided Baker Hughes additional flexibility in the manner in which they sell C3AI products and services. The expanded agreement also enables Baker Hughes to extend the term of the agreement at its option beyond its current six-year term. We believe the partnership with Baker Hughes has substantially enhanced our credibility in the oil and gas and chemicals markets. As a result of our partnership with Baker Hughes, combining both joint selling through the partnership and the sales that we have closed independently of Baker Hughes, C3AI has closed, to date, 87 contracts in the oil and gas and chemicals sector, including Lyondell Bissell, Shell, Exxon Mobil, Petronas, ENI, Aramco, Qatar Gas, Adnok, Yokogawa, Baker Hughes, Brandscom, Flint Hills Resources, and others. All of these in aggregate have resulted in our closing over $650 million in bookings, and we have recognized in excess of $350 million in revenue through the third quarter of fiscal year 23. Let me talk for a minute about our ESG solutions. We've made significant progress with our ESG application, which is part of our sustainability suite, which includes C3AI Energy Management, our most mature application that was first introduced to market in the first quarter of 2010. This product is used to measure, manage, and mitigate of the energy and greenhouse gas footprint at over 6 million residences and businesses today. In September of 2022, we announced the availability of C3AI ESG, developed as a significant enhancement to the C3AI Energy Management Suite. C3AI ESG provides a single source of truth for all matters of materiality related to ESG, aggregated and synthesized from the many ERP, supply chain, procurement, SCADA, CRM, HR, and other enterprise systems installed in an enterprise, all tracked longitudinally at the asset, division, and corporate levels. This enables organizations to publish their ESG compliance reports consistent with a multiplicity of conflicting ESG reporting standards, including SASD, GRI, TCFD, and CDP. Most importantly, C3 AI ESG provides rich, predictive analytics using AI to allow managers to track their gaps to plan for ESG materiality in out years, be it CO2, H2O, methane, workplace injuries, whatever. And it recommends mitigation measures to close the gaps so the company can be assured of meeting its EST objectives in 2030, 2040, 2050, et cetera. According to Verdantix, EST represents a $16 billion addressable market in 2027, and our product is being enthusiastically received. Our initial EST customers are EY, Shell, and Baker Hughes. Now, I'd like to talk a little bit about our intellectual property portfolio. C3AI continues to make significant investments in technology innovation. We have been awarded 26 patents to date and have an additional 96 patents pending. One of our most important inventions is the model-driven architecture for enterprise AI applications, the core architecture of the C3AI platform. We have issued several patents for this architecture, including systems, methods, and devices for an enterprise AI application development platform. This platform provides all the software services necessary and sufficient for the rapid deployment and operation of enterprise AI applications. Importantly, it also serves as an orchestration system, allowing us to immediately embed and exploit the utility of ongoing innovations in the open source and proprietary world. Examples include new techniques in machine learning, virtualization, encryption, commercial products like Databricks, Snowflake, Vertex AI, Amazon SageMaker, Azure ML, TensorFlow, Jupyter, Python, et cetera, all of which are immediately compatible and interoperable with the C3 AI platform and all of which are commonly used by many of our customers. The recent explosion of innovation and availability of large language models and generative pre-trained transformers are also immediately compatible with the C3 AI platform, enabling us to increase the utility of our platform and our applications. We believe the importance of the ongoing developments in generative AI is difficult to overestimate. Now, there's been a lot of recent news about C3 generative AI. Let me address that for a moment. By combining the utility of the C3 AI platform, predictive analytics, enterprise search, natural language processing, generative pre-trained transformers, and reinforcement learning, we have developed a new and novel technique to fundamentally improve the human computer interface for enterprise applications. This is kind of a non-obvious use of generative AI. This is not about chat. This is about enterprise search. And we believe that this invention represents a breakthrough development that will dramatically facilitate the ease of use and explainability of enterprise AI applications. In addition to providing users immediate, highly controlled access to potentially the entire body of data and information systems within an enterprise, be it Dow Chemical, the United States Air Force, Shell, whatever it may be. In the news release that they put out, we have a link to that application so you can actually see what it is, how it works, and how to put it together. And if you're interested, I encourage you to take a look at it. It is really neat. Okay. We expect the C3 AI generative search capability to be incorporated into the C3 AI platform and applications and generally available to our customer base this spring. It is currently being deployed as a core capability in the C3 AI platform, and we are doing early deployments at Koch Industries and Baker Hughes. To protect this intellectual property, we have several patents pending in multiple jurisdictions around the world. And I encourage you to go find the link on our website and take a look at it because it is really something. Okay, let's talk about guidance. Turning to guidance for the fourth quarter and fiscal year 2023. First, I will remind everybody on the call that this is the eighth consecutive quarter as a public company in which the third quarter is the eighth consecutive quarter in which we have exceeded our revenue guidance, okay? We expect revenue for Q4. Okay, to be between Q4 2023 to between $70 and $72 million. And for the full year, fiscal year 23, we expect revenue to range between $264 and $266 million. Bottom line, Q3 was tough. Okay, we have validated the consumption-based pricing model. The addressable market is huge, business is strong, customers are happy, our workforce is highly productive, and the future is bright. And now I will turn this over to my colleague, Juho Parkinen, for additional details regarding our financial results. Juho.