C3.ai, Inc.

Good day, and thank you for standing by. Welcome to the C3AI's third quarter fiscal year 2024 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 the session, you will need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amit Berri. Please go ahead.

Good afternoon, and welcome to C3AI's earnings call for the third quarter of fiscal year 2024, which ended on January 31, 2024. My name is Amit Berri, and I lead investor relations at C3AI. With me on the call today is Tom Siebel, Chairman and Chief Executive Officer of Juho Parkinen, Chief Financial Officer, and Hitesh Lath, Chief Accounting Officer. After the market closed today, we issued a press release with details regarding our third quarter results, as well as supplemental to our results, both of which can be accessed through the 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 the 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 day. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion on material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. All figures will be discussed on a non-GAAP basis unless otherwise noted. Also during today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release. Finally, at time in our prepared remarks, in response to your questions, 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.

Thank you, Amit. Good afternoon, everyone, and thank you for joining our call today. C3AI had a great third quarter. Total revenue of $78.4 million grew 18% year over year, exceeding the high end of our guidance range. The total number of customer engagements was 445, an increase of 80% compared to 247 a year ago. Subscription revenue was 70.4 million, constituting 90% of total revenue and increasing 23% from a year ago. Non-GAAP gross profit was 54.7 million, representing a 70% gross margin. Our GAAP operating loss was 82.5 million. Our non-GAAP operating loss was 25.8 million, better than our guidance for a loss of 40 to 46 million. Our non-GAAP net loss per share was 13 cents. We ended the quarter with $723.3 million in cash, cash equivalents, and investments. All these numbers exceeded our guidance and exceeded analyst consensus. This is the 13th consecutive quarter as a public company in which we have met or exceeded our revenue guidance range. None of this should have come as a surprise. The enterprise AI market is on fire. We have been predicting for some years that the market for enterprise AI would be quite large. Those predictions were subject to much speculation in the analyst community and media. As of February 2024, I believe it's broadly resolved that the enterprise AI market opportunity is substantially larger than anyone predicted, constituting a secular change in the composition and growth rate of enterprise software writ large. Cloud infrastructure is scaling rapidly. NVIDIA grew 265% year-over-year. NVIDIA's data center GPU sales grew by 409% year-over-year. Now, some believe that this capacity is being built to use LLMs to write Christmas cards in the style of Charles Dickens and write college application essays to Yale. But that's simply not the case. This capacity is being built to run enterprise AI applications. Stochastic optimization of the supply chain, supply network risk, predictive maintenance, demand forecasting, fraud detection, production optimization, customer engagement, predictive medicine, precision medicine, and government services. And that is what we do at C3.AI. So as we power into 2024 and 2025, the world is very much coming our way. C3 AI has been preparing for this enterprise AI market explosion for 15 years. We started in 2009 at the infancy of AWS. This is before Azure and before Google cloud even existed.