AI earnings name for the interval ending June 30, 2024.
Picture supply: The Motley Idiot.
C3.ai (AI -1.88%)
Q1 2025 Earnings Name
Sep 04, 2024, 5:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Operator
Good day, and thanks for standing by. Welcome to the C3 AI’s first quarter fiscal yr 2025 convention name. Right now, all contributors are in a listen-only mode. After the audio system’ presentation, there will likely be a question-and-answer session.
[Operator instructions] Please be suggested that at this time’s convention is being recorded. I might now like at hand the convention over to your speaker for at this time, Amit Berry, you could start.
Amit Berry — Investor Relations
Good afternoon, and welcome to C3 AI’s earnings name for the primary quarter of fiscal yr 2025, which ended on July thirty first, 2024. My identify is Amit Berry, and I lead investor relations at C3 AI. With me on the decision at this time are Tom Siebel, chairman and chief government officer; Ed Abbo, government vp and chief know-how officer; and Hitesh Lath, chief monetary officer. After the market closed at this time, we issued a press launch with particulars relating to our first quarter outcomes, in addition to the supplemental to our outcomes, each of which will be accessed by way of the investor relations part of our web site at ir.c3.ai.
This name is being webcast, and a replay will likely be out there on our IR web site following the conclusion of the decision. Throughout at this time’s name, we’ll make statements associated to our enterprise which may be thought of forward-looking underneath federal securities legal guidelines. These statements mirror our views solely as of at this time and shouldn’t be thought of consultant of our views as of any subsequent date. We disclaim any obligation to replace any forward-looking statements or outlook.
These statements are topic to a wide range of dangers and uncertainties that might trigger precise outcomes to vary materially from expectations. For an additional dialogue of the fabric dangers and different necessary components that might have an effect on our precise outcomes, please confer with our filings with the SEC. All figures will likely be mentioned on a non-GAAP foundation until in any other case famous. Additionally throughout at this time’s name, we’ll confer with sure non-GAAP monetary measures.
A reconciliation of GAAP to non-GAAP measures is included in our press launch. Lastly, at instances in our ready remarks, in response to your questions, we might focus on metrics which are incremental to our common presentation to present larger perception into the dynamics of our enterprise or our quarterly outcomes. Please be suggested that we might or might not present, might or might not proceed to supply this extra element sooner or later. And with that, let me flip the decision over to Tom.
Tom Siebel — Chairman and Chief Govt Officer
Thanks, Amit. Good afternoon, everybody, and thanks for becoming a member of our name at this time. We’re off to a strong begin for fiscal yr ’25. In Q1, we exceeded all expectations for income, money movement, and profitability.
This quarter marked our sixth consecutive quarter of accelerating income development, reflecting our excessive ranges of buyer satisfaction and growing demand for enterprise AI purposes. Our year-over-year income development has accelerated from 11% in Q1 ’24 to 17% in Q2, 18% in Q3, 20% in This fall and 21% in Q1 year-over-year income development in Q1 of fiscal yr ’25. Complete income for the quarter was $87.2 million, exceeding analyst expectations. Subscription income was $73.5 million and elevated 20% from a yr in the past.
Our non-GAAP gross revenue was $60.9 million representing a 70% gross margin. Our GAAP working loss was $72.6 million. Our non-GAAP working loss was $16.6 million and considerably higher than our steerage for a lack of $22 million to $30 million. Our non-GAAP web loss per share was $0.05.
Our web money offered by working actions was $8 million, and we generated free money movement of $7.1 million within the quarter, each considerably exceed market expectations. We ended the quarter with over $760 million in money, money equivalents, and investments. I will be aware that that is the fifteenth consecutive quarter as a public firm wherein now we have met or exceeded our income steerage. Within the first quarter, the corporate closed 71 agreements, together with 72 new pilots marking a 117% year-over-year improve in our pilot depend.
We entered into new agreements with GSK, Eletrobras, Valero, Swift, SmithRx, Sanofi, the U.S. Intelligence Group, the U.S. Division of Protection, Dolce & Gabbana, Ingersoll Rand, and others. Moreover, we considerably expanded our footprint throughout state and native authorities.
In Q1, the corporate signed 25 agreements with state and native governments with municipal, county, and state companies in Texas, California, New Jersey, Georgia, Washington, and Connecticut, Virginia, Rhode Island, Maine, New Mexico, and Florida. State and native authorities is a big and underserved market that we’re quickly penetrating. Our options improve effectivity whereas sustaining the best requirements for accuracy, transparency, and safety. They drive substantial price financial savings and the mixed advantages end in improved public providers and improved buyer expertise.
In brief, C3 AI is enabling authorities companies to do extra with much less, in the end benefiting the general public. To cite from the Assessor of Riverside County, and I quote, “We set the bar excessive for C3 AI they usually delivered with over 90% mannequin accuracy in our property valuations. This know-how is letting our employees do the mundane duties quicker and simpler to allow them to think about the very sophisticated properties. And our staff are beginning to see the fruits of this effort translating into higher customer support.
Total, we’re seeing unbelievable outcomes with C3 AI.” The confirmed advantages of C3 AI native authorities suite, mixed with our partner-supported and concentrated gross sales technique resulted in an accelerated gross sales cycle inside the sector. The expansion was fueled by a extremely, collaborative joint gross sales and advertising marketing campaign with C3 AI and Google Cloud to advertise the C3 AI state and native authorities suite, together with C3 AI property appraisal and C3 Generative AI for public advantages. By means of these efforts, we noticed excessive adoption with state and native authorities closing 24 agreements within the quarter. Let me offer you a really feel for the pace of those gross sales cycles.
In Q1, we closed an settlement with a county within the Northwestern United States. County decision-makers obtained launched to C3 AI at an business convention. And inside 24 hours, we had been in contract negotiations. Simply 12 hours later, we had been in contract for C3 AI property appraisal.
One other instance is with a county within the Southeast. This buyer attended our Annual Customers Group Convention, C3 Remodel in March of 2024. Then 4 weeks later, we held an government briefing for the county management. And now after three months of contract dialogue, the county has signed a seven-figure, five-year subscription deal for C3 AI property appraisal.
Our state and native enterprise has grown greater than 500% yr over yr, and we’re excited concerning the traction, the potential for enlargement, and the client advocacy for C3 AI. As we now take these public sector options to market in Europe, the addressable market greater than doubles. Turning to the C3 AI federal enterprise. This sector continues to expertise substantial sustained momentum, representing over 30% of our bookings for the quarter.
We entered in new enlargement agreements with the US Air Drive, the U.S. Navy, U.S. Marine Corps, and the U.S. Intelligence Group amongst others.
These companies belief C3 AI to supply safe and revolutionary purposes that assist them modernize. The U.S. Marine Corps and C3 AI continued the profitable collaboration to digitally remodel the department’s legacy software program methods. The Marine Corps is utilizing the C3 AI Protection and Intelligence suite to enhance the effectivity of personnel administration methods by accelerating crucial processes and time-to-decision assist.
This work with C3 AI is backed by Manpower IT Methods Modernization program and aligns with the Marine Corps multiyear roadmap and targets. C3 AI’s buyer base continues to increase, each inside and throughout industries, whereas sustaining distinctive ranges of buyer satisfaction by our continued concentrate on delivering measurable, important enterprise worth. At Eletrobras, the most important energy technology transmission firm in Latin America, we partnered to reinforce their grid resiliency and availability. Brazil’s grid is among the many world’s most complicated as a result of its various technology profile, variability, expansive service territory, and difficult regulatory setting.
With C3 AI, Eletrobras can successfully and effectively course of and analyze real-time information servicing low-latency AI insights to mitigate community disturbances. Nucor Company is seeing important success in bettering manufacturing outcomes with the C3 AI Provide Chain suite. This deployment contains three distinct C3 AI purposes, C3 AI Demand Forecasting, C3 AI Stock Optimization, and C3 AI Manufacturing Schedule Optimization, working collectively to assist and optimize day by day decision-making throughout a number of services. As we enter Q2, we’re centered on increasing gross sales capability, increasing in North America, increasing in Europe, and increasing within the public sector.
Our associate community continues to generate alternatives and open new deal movement. We had a really energetic first quarter in alliances, working carefully with our companions to shut new agreements. Internet-net, 72% of our whole agreements had been closed with and thru our associate ecosystem. This was a rise of 155% yr over yr and 82% quarter over quarter.
Our partner-supported bookings grew 94% yr over yr and our exercise ranges with our companions that embrace AWS, Booz Allen, Google Cloud, and Microsoft proceed to extend considerably. Within the first quarter, we closed 40 agreements with Google Cloud. This is a rise of 300% yr over yr. This development was largely pushed by the joint marketing campaign between C3 AI and Google Cloud which I simply mentioned earlier, centered on the general public sector.
C3 AI continues to be a pretty associate for the hyperscalers as our 90 enterprise AI purposes quickly drive substantial workload of their compute and storage clouds whereas including rapid worth to our joint clients. As you’ll be able to see from our supplemental deck, our bookings proceed to be more and more various. Our generative AI enterprise is surprisingly various with many candidly, unanticipated use circumstances throughout the board in a variety of industries. As well as, our whole non-Baker Hughes income grew 37% yr over yr.
Now I will hand it over to Ed for an replace on our merchandise and generative AI. Ed?
Ed Abbo — Govt Vice President, Chief Know-how Officer
Thanks, Tom. Let me first recap the place C3 AI suits within the AI tech stack. Beginning on the backside, the 4 layers embrace silicon, cloud infrastructure, basis fashions. And on the prime, harnessing all this innovation to ship enterprise worth to our AI purposes.
That is the place C3 AI performs with prebuilt AI purposes that may be deployed in a short time. In distinction, the choices you are seeing within the AI software program market at this time fall into two distinct classes. First, legacy software program corporations which are scrambling to maintain up with AI. To attempt to keep related, these corporations are rebranding their Twentieth-century software program stacks with AI on the field.
The technical depth to rewrite their software program to reap the benefits of a contemporary, scalable AI tech stack is just insurmountable. For them, AI is only a bolt-on constrained to a small fraction of the enterprise information managed by their legacy software program. Second, we see a couple of extra fashionable software program corporations that had been designed primarily for information integration, information administration, or information engineering not claiming to be enterprise AI platforms to construct and function AI purposes. Basing an enterprise AI utility plan on these incomplete tech stacks requires clients to undertake important, protracted software program improvement initiatives the place minimal buyer worth is realized.
That is clearly mirrored within the buyer satisfaction scores of those distributors. The C3 AI platform is exclusive in that it was a clear sheet design, offering all of the providers mandatory and ample to design, develop, provision, and function real-world enterprise AI options. This gives customers with wealthy workflow-enabled AI purposes working on an utility platform with superior information fusion and governance and scalable AI/ML operations capabilities. We leverage all layers of the AI tech stack, silicon cloud infrastructure providers, and basis fashions.
The C3 AI platform was purpose-built and hardened over 15 years to quickly ship strong buyer AI purposes. Now let me take a second to unpack what we imply by prebuilt purposes as it is a key differentiator for C3 AI. As a buyer, should you purchase a prebuilt utility, you need not outline what the applying does, design and develop the ontology, the enterprise logic, the AI or GenAI mannequin pipelines, or the consumer interface. We have accomplished all that.
C3 AI prebuilt purposes are tried, examined, and confirmed out there, so the applying will be quickly configured to the client information sources. AI/ML fashions tuned to clients’ information and the consumer interface tuned for the client. This enables clients to shortly configure, deploy, onboard and prepare customers, scale out their enterprise, and quickly notice enterprise worth. Let me offer you an instance.
Holcim, which is a big international constructing options producer scaled out C3 AI reliability, our prebuilt AI-based predictive upkeep utility to most of its vegetation in simply eight months after a profitable pilot. The appliance screens a number of hundred crucial plant belongings reminiscent of vertical curler mills and ball mills to precisely predict potential issues properly upfront of failure. It does so by repeatedly ingesting information from over 9,500 sensors and different methods and analyzes these information utilizing 850 machine studying fashions. The C3I reliability utility permits Holcim to keep away from important operational disruptions and high-cost remediations.
Immediately, now we have prebuilt AI purposes with turnkey ontologies that tackle whole worth chains throughout business verticals. These purposes do not function in silos. They’re designed and constructed to work in live performance, all working on the C3 AI platform. Every new utility can deploy quicker than the final, due to the power to reuse information integrations, ontologies, AI/ML pipelines, workflows, and consumer interface parts.
And as extra C3 AI purposes are deployed, enterprises accrue enterprise advantages quicker and the tempo of their AI transformation accelerates. We additionally provide a collection of prebuilt and extensible C3 Generative AI purposes that can be utilized as stand-alone options or deployed alongside different C3 AI purposes. This quarter, we deployed C3 generative AI for industrial asset inspections at a big producer. This utility unifies information throughout unstructured inspection reviews and structured information on asset efficiency, reminiscent of threat reviews, corrosion evaluation, work orders, and so on., which makes these information simply and shortly accessible to plant operators.
A few of these inspection reviews embrace scans of handwritten textual content and engineering diagrams which are over 50 years previous. Utilizing this utility, the corporate has been capable of streamline the day-to-day work of inspectors, cut back pricey operational errors and threat, and speed up their turnaround efforts and time. In Q1, we launched C3 Generative AI for presidency packages, which has an immense potential for federal, state, or native authorities companies by eliminating service delays, lowering wait instances, enhancing the effectiveness of contact facilities, and bettering the citizen expertise. We have already signed a pilot with a state on the U.S.
East Coast and sit up for supporting public sector companies throughout the board. It is necessary to grasp that the C3 generative AI purposes are distinctive out there. We offer the power to work together with omnimodal information that’s structured sensor information, databases, unstructured paperwork, photographs, embedded tables, leverage any LLM out there out there. For instance, GPT 4.0, Gemini, Claude, Llama, Mistral, to call a couple of, and a number of specialised LLMs in the identical utility, providing full supply traceability for each structured and unstructured information and granular enterprise entry controls.
We additionally present instruments to allow information scientists to tune system responses for prime accuracy in manufacturing with minimal hallucination, carry out chain of thought, reasoning, writer and execute mathematical capabilities, provide state-of-the-art LLM guardrails and protections, and orchestrate and chain collectively AI brokers to carry out high-value duties, for instance, to provoke workflows or write summaries. We offer out-of-the-box pipelines to synthesize outcomes throughout AI brokers, mechanically detect and floor consistencies in underlying information, seize engine logs for auditability and traceability, present instruments for our clients, builders, and information scientists to configure their very own customized generative AI pipelines, and provide fine-tuning providers for embedding fashions and LLMs. C3 generative AI can be distinctive in its enterprise-grade assist for working in extremely safe air hole environments. This can be a prerequisite for protection intelligence and monetary providers clients.
I will now flip it over to Hitesh to cowl the financials.
Hitesh Lath — Chief Monetary Officer
Thanks, Ed. I’ll now present a recap of our monetary outcomes and extra coloration on our enterprise. All figures are non-GAAP until in any other case famous. As Tom talked about, whole income for the quarter elevated 21% yr over yr to $87.2 million.
Subscription income elevated 20% yr over yr to $73.5 million, representing 84% of whole income. As a reminder, our subscription income is comprised primarily of software program licenses, Software program as a Service providing, normal search engine optimisation assist providers, pilots and trials of our C3 AI purposes or generative AI, and consumption-based pricing for which income is acknowledged over time. Our subscription income additionally contains income from software program licenses for which ongoing upkeep and assist shouldn’t be required. And in accordance with ASC 606, the income is acknowledged when the license is made out there to the client.
Skilled providers income was $13.7 million. This represents 16% of whole income within the first quarter of fiscal ’25 as in comparison with 15% of whole income within the first quarter of fiscal ’24. We count on the skilled providers income to typically keep inside 10% to twenty% of whole income for fiscal ’25. Gross revenue for the quarter was $60.9 million and gross margin was 70%.
Gross margin for skilled providers remained excessive at over 90%. working loss for the quarter was $16.6 million. Our working loss was higher than steerage as a result of continued concentrate on expense administration. Our web money offered by working actions was $8 million.
Free money movement for the quarter was optimistic $7.1 million. We had been capable of generate optimistic free money movement in the course of the quarter due to continued concentrate on money administration. We proceed to be very properly capitalized and closed the quarter with $762.5 million in money, money equivalents, and marketable securities, a rise of $12.2 million in comparison with This fall. On the finish of Q1, our accounts receivable stability was $140.1 million, together with unbilled receivables of $81.5 million.
Complete allowance for dangerous debt stays de minimis at lower than $400,000, and we shouldn’t have issues relating to collections. The final well being of our accounts receivable stays sturdy. In the course of the first quarter, we signed 52 pilots, 117% improve from final yr and up 53% from final quarter. At quarter finish, we had cumulatively signed 224 pilots, of which 191 are nonetheless energetic.
This implies they’re both of their authentic three- to six-month time period or prolonged for some length or transformed to a subscription or consumption contract or are at the moment being negotiated for conversion to subscription or consumption contracts. We proceed to count on short-term stress on our gross margins as a result of increased mixture of pilots, which carry a larger price of income in the course of the pilot section of the client life cycle. We additionally count on short-term stress on our working margin as a result of further investments we’re making in our enterprise, together with in our gross sales pressure, analysis and improvement, and advertising spend. As we proceed to make important investments within the enterprise, we count on to be free money movement destructive for Q2 and Q3 however stay on observe to be free money movement optimistic for This fall and in addition for the total fiscal yr ’25.
Now I will transfer on to our steerage for the subsequent quarter. Our income steerage for Q2 goes to be $88.6 million to $93.6 million. We’re sustaining our earlier steerage of $370 million to $395 million for fiscal ’25. This means a year-over-year development charge of 19% to 27%, making C3 AI one of many fastest-growing corporations within the software program public firm universe.
Our steerage for non-GAAP loss from operations for Q2 is $26.7 million to $34.7 million. We’re sustaining our earlier steerage of $95 million to $125 million for fiscal ’25. Now I would like to show the decision again over to Tom.
Tom Siebel — Chairman and Chief Govt Officer
Thanks, Hitesh. Let me tackle path to profitability. Our price of products bought is considerably lower than our price of producing income. And as such, C3 AI is a structurally worthwhile enterprise.
Our year-over-year income development in Q1 was 21% and accelerating. Our year-over-year expense development charge was 12%. Within the coming years, we count on our income to typically develop at a larger charge than our expense development charge. It follows that non-GAAP profitability is now merely a perform of scale.
Whereas we proceed to put money into market share, we imagine our income development charges would typically exceed our expense development charges. The expense and income traces will converge, crossing over to constant non-GAAP profitability. Right now, we count on to be money movement optimistic in This fall fiscal yr ’25 and for the whole yr of fiscal yr ’25. Now let’s discuss form of the overall space of the — I need to speak concerning the common enterprise AI market, and I need to discuss buyer success in C3 AI.
We actually are companions to our clients, usually on pace dial, participating with them a number of instances a day to make them profitable and self-sufficient. We’re not working from residence, we’re on the market on the location with our clients day by day, each week. We sit shoulder to shoulder, and we get into the small print of their enterprise to guarantee that all the pieces is working easily because it pertains to their enterprise AI purposes. We maintain weekly government critiques to trace progress on the highest ranges.
This proactive, boots-on-the-ground strategy is what drives the client satisfaction mirrored in our Internet Promoter Scores. This dedication to shut hands-on collaboration is demonstrated in our partnership with Shell. Shell has over 100 C3 AI purposes in improvement and deployment for all the pieces from asset integrity to manufacturing optimization. We began working with Shell initially on predictive upkeep again in 2018.
And now, they monitor over 15,000 items of apparatus with C3 AI. They estimate that this program alone generates this complete C3 AI program that they’ve written massive that they name Shell AI has generated annual profit to shell of $2 billion. And we’re not accomplished. We proceed to collaborate increasing into new use circumstances, together with some service reservoir administration and oil situation monitoring.
These purposes, we count on to be all scaled out throughout a number of belongings. This strategy can be evident in our work with Con Edison. We started our partnership with Con Ed in 2017, initially specializing in the superior metering infrastructure venture. This can be a venture that enhances the operational effectivity, public security, and buyer satisfaction of their sensible grid infrastructure, and it continues to scale.
Annual price discount uncovered is over $45 million. The venture is exceeding expectations with a projected advantage of greater than $3.2 billion over 20 years, $500 million greater than initially projected. Now Con Edison is deploying generative AI for meter administration and asset mapping, which addresses billing discrepancies and reduces mismappings on the electrical grid and reduces price and will increase buyer satisfaction. Buyer success is on the core of why we constructed this firm.
Now let’s take a second right here and assume again OK? For these of you who’ve been round, OK, for a couple of many years, they usually’ve obtained in contact with what is going on on with individuals. C3 AI is the unique enterprise AI firm, onerous cease, OK? We started C3 AI in January of 2009, take into consideration that, with the imaginative and prescient to develop a software program platform and enterprise purposes that permit organizations to take advantage of, what we imagine, could be the computing platform of the longer term. And that included elastic cloud computing, the Web of Issues, massive information, and predictive analytics. And we did this in the course of the depth of the AI winter.
This was properly earlier than the appearance of the GPU, earlier than Azure existed, earlier than GCP existed and when AWS was nascent. We invested into 1000’s of person-years in over a decade, OK, constructing the C3 AI platform, the primary reference platform structure for enterprise AI onerous cease on the first, OK? And at this time, now over 90 C3 AI enterprise purposes tackle the worth chains of vitality, authorities, protection, manufacturing, monetary providers, agribusiness, pharma, and others. We deploy these purposes at this time in Europe, Asia, South America, North America, OK, and in governments all over the world. Now 15 years later, the Elastic Cloud, the Web of Issues, massive information, and predictive analytics have turn into ubiquitous.
Enterprise AI is broadly acknowledged as one of many largest and fastest-growing markets within the historical past of enterprise software program. It’s a mandate for each company and authorities chief at this time to harness the facility of enterprise AI, and C3 AI is very well-positioned to serve this huge and quickly rising market demand. C3 AI is at this time one of many fastest-growing corporations within the public software program universe. And most significantly, on this present cacophony of AI market hype, C3 AI is attaining among the many highest ranges of buyer satisfaction for worth realized within the enterprise software program world.
OK. I refer you to our earnings supplemental deck at this time, OK, the place we’re showcasing, OK, C3 AI’s Internet Promoter Scores, benchmarking C3 AI towards different main enterprise software program corporations, OK, lots of which purport to be — virtually all of which purport to be, OK, AI corporations. And this report is revealed by a 3rd celebration referred to as Comparable. The underside line is our enterprise software program corporations are essentially the most glad within the software program business, persistently driving unmatched worth from our options.
Attaining this stage of buyer satisfaction does not simply occur, it’s the results of relentless dedication, unwavering dedication, an intensive understanding of our buyer wants, superior software program know-how, and deep, deep experience in enterprise AI, honed over a few years of excellence. Within the remaining evaluation, buyer worth realized would be the solely standards that may decide the chief in enterprise AI and C3 AI is precisely on observe. Now I would like to show this over to the operator to start our QA session. Thanks all.
Questions & Solutions:
Operator
Thanks. [Operator instructions] Please stand by whereas we compile the Q&A roster. Our first query comes from the road of Patrick Walravens with Residents JMP. Your line is open.
Patrick Walravens — Analyst
Oh, nice. Thanks very a lot and congratulations. Hey, Tom, are you able to begin out by simply form of characterizing what the tone of enterprise was like for you guys in Q1? And particularly, I am your deal band chart the place you had 71 offers and the typical TCV is 700. So, should you multiply these collectively, you get like virtually $50 million, which is up so much.
So, simply should you might simply touch upon the tone of enterprise, that may be nice.
Tom Siebel — Chairman and Chief Govt Officer
Pat, it is fairly wild on the market. I imply, I might say, significantly with the appearance of generative AI. I imply I feel it’s totally tough for people who find themselves assessing these corporations to actually perceive the complexity of what is going on on within the AI market, OK, the place now we have totally different flavors of enterprise AI, now we have these generative AI purposes that go from very form of small, low-priced use circumstances to very excessive priced, high-value use circumstances. And actually, it is tough to mannequin that.
I imply this isn’t a easy enterprise. As we enter this type of new world of AI, I imply, it is actually complicated. And we won’t merely multiply, we did these many widgets this quarter, and we’ll that many widgets within the subsequent quarter. And that is the expansion charge of widgets.
That is the gross margin. And subsequently, that is what the — we proceed to be simply amazed by the broad vary of purposes that we’re discovering for enterprise AI, and I might say in generative AI, lots of which we simply could not have anticipated. I might say like public sector, we did not anticipate that, and we simply fell right into a gold mine there, OK? Regulation companies, medical diagnostics is simply fascinating.
Patrick Walravens — Analyst
Superior. And Hitesh, if I might ask a follow-up for you. I feel individuals are in all probability questioning given how sturdy the bookings appear to be why the steerage did not go up. How did you consider that?
Hitesh Lath — Chief Monetary Officer
You are speaking concerning the steerage for the Q2, income steerage.
Patrick Walravens — Analyst
No, for the yr, you stored it the identical.
Hitesh Lath — Chief Monetary Officer
Yeah. That also represents 19% to 27% income development. it nonetheless makes us one of many fastest-growing corporations on this public software program firm universe.
Patrick Walravens — Analyst
OK. Thanks, guys.
Hitesh Lath — Chief Monetary Officer
Thanks.
Operator
Please stand by for our subsequent query. Our subsequent query comes from the road of Timothy Horan with Oppenheimer. Your line is open.
Timothy Horan — Analyst
Thanks, guys. On the subscription income has been somewhat lumpy right here. On skilled providers, I do know, Tom, you mainly simply stated it’s totally tough to mannequin out. However are you able to give us some coloration on the traits? Like is that this a very good jump-off level for the remainder of the yr? After which possibly simply on the bills, the place ought to we be modeling and the bills elevated virtually within the subsequent quarter or two? Thanks.
Tom Siebel — Chairman and Chief Govt Officer
Let me tackle subscription versus providers underneath ASC 606, it is somewhat complicated. Sure issues that was referred to as software program and now are referred to as providers underneath the brand new steerage, and we adjust to what the steerage is. That being stated, we have guided that our providers income could be 10% to twenty% of income in any given quarter. Our providers income was 16% on this quarter.
And so, we’re properly inside our steerage there. Earlier than we form of bemoan the very fact the providers had been somewhat increased than they anticipated to be, let’s keep in mind what providers margins are at C3 AI. Whereas our software program certification margins are fairly excessive 66%, OK, our providers margin, everyone, you may recall, is in extra of 90%. So, providers is a reasonably darn good enterprise.
And whereas we proceed to be centered, I imply, we’re a licensing firm, OK? We’re not one among these providers corporations pretending to be a software program firm. They’re one or two of them on the market, OK? We’re not that dangerous, however we proceed to be — however it’ll proceed — for the subsequent yr or two, you’ll be able to count on our providers to bounce round within the 10% to twenty%. It’s going to in all probability common about 15%. However keep in mind, our providers margins are larger than 90%.
I feel 93% is that the quantity I obtained. So, it is good work if you will get it.
Timothy Horan — Analyst
So, was there any reclassification this quarter or one-time gadgets or ought to the midpoint of 15% is form of a very good run charge going ahead?
Hitesh Lath — Chief Monetary Officer
No, no reclassification.
Timothy Horan — Analyst
OK. Nice. And expense line gadgets, something to concentrate on the subsequent quarter or two the place we must always see a pickup?
Hitesh Lath — Chief Monetary Officer
Yeah. So, when it comes to our bills, we plan to proceed to make investments in our gross sales pressure, R&D, in addition to advertising efforts.
Timothy Horan — Analyst
OK. Nice. Just about throughout the board. And simply lastly, any change within the aggressive dynamics on the market? I imply who do you run up towards most lately?
Tom Siebel — Chairman and Chief Govt Officer
That is Tom. Nicely, Ed, what’s the aggressive setting? You are nearer to it than I.
Ed Abbo — Govt Vice President, Chief Know-how Officer
Yeah. I feel the default or de facto competitors is the data know-how, the IT group, the CIO attempting to construct these purposes themselves. And people are our greatest prospects is ones which have tried to do information science after which scale that up throughout a big enterprise, usually work out how tough that’s with out the appropriate information and AI platform. So, that’s the de facto competitors out there for us.
Tom Siebel — Chairman and Chief Govt Officer
And people are simply prospects a few years down the street as a result of all of them come crashing down throughout these — now we have the CIO with 10,000 individuals in Bangalore, attempting to construct this factor out of piece/components from hyperscalers, and invariably comes crashing down round him. And so, they’re simply — we simply put them within the pipeline two or three years down the street they usually come again.
Ed Abbo — Govt Vice President, Chief Know-how Officer
That is proper. Thanks.
Timothy Horan — Analyst
Thanks, guys.
Operator
Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Mike Latimore with Northland Capital Markets. Your line is open.
Michael Latimore — Analyst
Hello, nice. Thanks. The pilot development was very sturdy sequentially yr over yr. Are the scale of the pilots, the worth of the pilots for traditional and generative AI form of as anticipated?
Tom Siebel — Chairman and Chief Govt Officer
The worth of the pilots, the form of the center of the street, and I may very well be off right here by 10% or 15%. However in the course of the street pilot for enterprise AI utility is $0.5 million, the center of the street for a generative AI utility is about $0.25 million. The worth of the generative AI pilot often takes three months to finish, enterprise AI pilot will take eight months to finish, OK? After which we go into contract negotiation they usually go reside. We have given steerage earlier than that we count on about 70% of our pilots to transform to manufacturing contracts.
I feel that is about proper. And actually, the 30% that do not convert — it isn’t as a result of many of those are enormously profitable initiatives. It is not as a result of — they don’t convert as a result of the pilot wasn’t profitable, they can not convert as a result of some genius CIO decides he will attempt to construct this himself out of some piece components of a hyperscaler. They usually’ll be again.
Michael Latimore — Analyst
Yeah. Bought it. Bought it. OK.
So, no change in pricing or worth, it appears like on pilots. After which when it comes to the second quarter steerage, the midpoint is about 24% income development, which is a reasonably large step up from the expansion you had this quarter. And I feel the most important step-up within the final 4 quarters, I imagine. However is the — what offers you confidence in that enchancment? Is it these pilots you simply landed? Or is it skilled providers development or massive offers getting deployed? Simply what offers you confidence in that acceleration?
Tom Siebel — Chairman and Chief Govt Officer
Utilizing form of the perfect skilled judgment now we have, OK, the arrogance we gave is what we expect goes to occur. Now we have been public, I feel, for 15 quarters, and we have been proper 15 out of 15 quarters. And I do know that lots of you are attempting to mannequin this enterprise should you can mannequin it, you are higher than I as a result of there may be a variety of transferring components right here. And I feel essentially the most — the perfect indicator of what we’ll do is what we information you to.
I imply, you might just about take to the financial institution for every of the final 15 quarters. We have been fairly spot on with that. So, proper now, that is what we expect we’ll do. That is our greatest skilled judgment.
And you are going to ensure we’ll be working diligently to fulfill or exceed that.
Michael Latimore — Analyst
All proper. Thanks.
Operator
Thanks. Women and gents, we’ll take our final query from the road of Kingsley Crane with Canaccord. Your line is open.
Kingsley Crane — Canaccord Genuity — Analyst
Hello, thanks for taking the query. Forty agreements with GCP, that is spectacular. Fifty-one agreements with the associate community general. So, might you communicate to the associate efforts outdoors of GCP? What’s working properly? What would you want to enhance? After which is the GCP partnership as dominant from a bookings contribution perspective as it’s in deal frequency? Thanks.
Tom Siebel — Chairman and Chief Govt Officer
I am undecided Kingsley, I do not assume I’ve the bookings contribution information right here. So, I am unable to accurately reply that one. I might say that the connection with GCP is nice. The connection with AWS is nice.
We’re doing a variety of good work with AWS, with Microsoft, Azure. And I imply, we’re nice companions for these guys. I imply what we do after they associate with us, we get the applying up quick, the client will get worth, I imply they do not earn a living when corporations are constructing purposes utilizing their platforms, they earn a living when individuals are working their different purposes. So, we’re consuming CPU assets, we’re consuming GPU assets, we’re consuming storage.
They usually’re all nice companions, they’re nice corporations. They’re fantastic to work with, and it is a privilege for us to have the ability to associate with them.
Kingsley Crane — Canaccord Genuity — Analyst
All proper. OK. That is very useful. After which final one, simply to make clear.
For the state and native agreements, had been most of these pilots?
Tom Siebel — Chairman and Chief Govt Officer
All of them form of began as pilots. Sure, in different phrases, I am undecided which quantity you are referring to. Did we confer with what number of pilots there have been and what number of transformed within the quarter, we stated this?
Hitesh Lath — Chief Monetary Officer
No. We do not speak concerning the conversions. We’ve got the quantity for what number of pilots closed within the quarter, 52 —
Tom Siebel — Chairman and Chief Govt Officer
Kingsley, they virtually all started as pilots, OK? All of them start as pilots. They go from, for example, one to 3 months, after which the good majority of them convert to manufacturing.
Kingsley Crane — Canaccord Genuity — Analyst
Is sensible. Sure, understood on this context. All proper. Congrats on the quarter.
Tom Siebel — Chairman and Chief Govt Officer
Thanks. Thanks, everyone. I feel that is the tip of our name. We actually admire your consideration.
That is fairly an journey. I feel we’re breaking floor in enterprise AI. I do know we’re breaking floor in enterprise AI. And I might simply inform you, for these of you who’ve visited us or these of you who’ve an opportunity to go to, it is so thrilling and it is simply palpable.
And so, we’ll proceed to get after it, and we thanks in your time. We thanks in your consideration, and need you all a very good day.
Operator
[Operator signoff]
Period: 0 minutes
Name contributors:
Amit Berry — Investor Relations
Tom Siebel — Chairman and Chief Govt Officer
Ed Abbo — Govt Vice President, Chief Know-how Officer
Hitesh Lath — Chief Monetary Officer
Patrick Walravens — Analyst
Timothy Horan — Analyst
Michael Latimore — Analyst
Mike Latimore — Analyst
Kingsley Crane — Canaccord Genuity — Analyst
AI earnings name for the interval ending June 30, 2024.
Picture supply: The Motley Idiot.
C3.ai (AI -1.88%)
Q1 2025 Earnings Name
Sep 04, 2024, 5:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Operator
Good day, and thanks for standing by. Welcome to the C3 AI’s first quarter fiscal yr 2025 convention name. Right now, all contributors are in a listen-only mode. After the audio system’ presentation, there will likely be a question-and-answer session.
[Operator instructions] Please be suggested that at this time’s convention is being recorded. I might now like at hand the convention over to your speaker for at this time, Amit Berry, you could start.
Amit Berry — Investor Relations
Good afternoon, and welcome to C3 AI’s earnings name for the primary quarter of fiscal yr 2025, which ended on July thirty first, 2024. My identify is Amit Berry, and I lead investor relations at C3 AI. With me on the decision at this time are Tom Siebel, chairman and chief government officer; Ed Abbo, government vp and chief know-how officer; and Hitesh Lath, chief monetary officer. After the market closed at this time, we issued a press launch with particulars relating to our first quarter outcomes, in addition to the supplemental to our outcomes, each of which will be accessed by way of the investor relations part of our web site at ir.c3.ai.
This name is being webcast, and a replay will likely be out there on our IR web site following the conclusion of the decision. Throughout at this time’s name, we’ll make statements associated to our enterprise which may be thought of forward-looking underneath federal securities legal guidelines. These statements mirror our views solely as of at this time and shouldn’t be thought of consultant of our views as of any subsequent date. We disclaim any obligation to replace any forward-looking statements or outlook.
These statements are topic to a wide range of dangers and uncertainties that might trigger precise outcomes to vary materially from expectations. For an additional dialogue of the fabric dangers and different necessary components that might have an effect on our precise outcomes, please confer with our filings with the SEC. All figures will likely be mentioned on a non-GAAP foundation until in any other case famous. Additionally throughout at this time’s name, we’ll confer with sure non-GAAP monetary measures.
A reconciliation of GAAP to non-GAAP measures is included in our press launch. Lastly, at instances in our ready remarks, in response to your questions, we might focus on metrics which are incremental to our common presentation to present larger perception into the dynamics of our enterprise or our quarterly outcomes. Please be suggested that we might or might not present, might or might not proceed to supply this extra element sooner or later. And with that, let me flip the decision over to Tom.
Tom Siebel — Chairman and Chief Govt Officer
Thanks, Amit. Good afternoon, everybody, and thanks for becoming a member of our name at this time. We’re off to a strong begin for fiscal yr ’25. In Q1, we exceeded all expectations for income, money movement, and profitability.
This quarter marked our sixth consecutive quarter of accelerating income development, reflecting our excessive ranges of buyer satisfaction and growing demand for enterprise AI purposes. Our year-over-year income development has accelerated from 11% in Q1 ’24 to 17% in Q2, 18% in Q3, 20% in This fall and 21% in Q1 year-over-year income development in Q1 of fiscal yr ’25. Complete income for the quarter was $87.2 million, exceeding analyst expectations. Subscription income was $73.5 million and elevated 20% from a yr in the past.
Our non-GAAP gross revenue was $60.9 million representing a 70% gross margin. Our GAAP working loss was $72.6 million. Our non-GAAP working loss was $16.6 million and considerably higher than our steerage for a lack of $22 million to $30 million. Our non-GAAP web loss per share was $0.05.
Our web money offered by working actions was $8 million, and we generated free money movement of $7.1 million within the quarter, each considerably exceed market expectations. We ended the quarter with over $760 million in money, money equivalents, and investments. I will be aware that that is the fifteenth consecutive quarter as a public firm wherein now we have met or exceeded our income steerage. Within the first quarter, the corporate closed 71 agreements, together with 72 new pilots marking a 117% year-over-year improve in our pilot depend.
We entered into new agreements with GSK, Eletrobras, Valero, Swift, SmithRx, Sanofi, the U.S. Intelligence Group, the U.S. Division of Protection, Dolce & Gabbana, Ingersoll Rand, and others. Moreover, we considerably expanded our footprint throughout state and native authorities.
In Q1, the corporate signed 25 agreements with state and native governments with municipal, county, and state companies in Texas, California, New Jersey, Georgia, Washington, and Connecticut, Virginia, Rhode Island, Maine, New Mexico, and Florida. State and native authorities is a big and underserved market that we’re quickly penetrating. Our options improve effectivity whereas sustaining the best requirements for accuracy, transparency, and safety. They drive substantial price financial savings and the mixed advantages end in improved public providers and improved buyer expertise.
In brief, C3 AI is enabling authorities companies to do extra with much less, in the end benefiting the general public. To cite from the Assessor of Riverside County, and I quote, “We set the bar excessive for C3 AI they usually delivered with over 90% mannequin accuracy in our property valuations. This know-how is letting our employees do the mundane duties quicker and simpler to allow them to think about the very sophisticated properties. And our staff are beginning to see the fruits of this effort translating into higher customer support.
Total, we’re seeing unbelievable outcomes with C3 AI.” The confirmed advantages of C3 AI native authorities suite, mixed with our partner-supported and concentrated gross sales technique resulted in an accelerated gross sales cycle inside the sector. The expansion was fueled by a extremely, collaborative joint gross sales and advertising marketing campaign with C3 AI and Google Cloud to advertise the C3 AI state and native authorities suite, together with C3 AI property appraisal and C3 Generative AI for public advantages. By means of these efforts, we noticed excessive adoption with state and native authorities closing 24 agreements within the quarter. Let me offer you a really feel for the pace of those gross sales cycles.
In Q1, we closed an settlement with a county within the Northwestern United States. County decision-makers obtained launched to C3 AI at an business convention. And inside 24 hours, we had been in contract negotiations. Simply 12 hours later, we had been in contract for C3 AI property appraisal.
One other instance is with a county within the Southeast. This buyer attended our Annual Customers Group Convention, C3 Remodel in March of 2024. Then 4 weeks later, we held an government briefing for the county management. And now after three months of contract dialogue, the county has signed a seven-figure, five-year subscription deal for C3 AI property appraisal.
Our state and native enterprise has grown greater than 500% yr over yr, and we’re excited concerning the traction, the potential for enlargement, and the client advocacy for C3 AI. As we now take these public sector options to market in Europe, the addressable market greater than doubles. Turning to the C3 AI federal enterprise. This sector continues to expertise substantial sustained momentum, representing over 30% of our bookings for the quarter.
We entered in new enlargement agreements with the US Air Drive, the U.S. Navy, U.S. Marine Corps, and the U.S. Intelligence Group amongst others.
These companies belief C3 AI to supply safe and revolutionary purposes that assist them modernize. The U.S. Marine Corps and C3 AI continued the profitable collaboration to digitally remodel the department’s legacy software program methods. The Marine Corps is utilizing the C3 AI Protection and Intelligence suite to enhance the effectivity of personnel administration methods by accelerating crucial processes and time-to-decision assist.
This work with C3 AI is backed by Manpower IT Methods Modernization program and aligns with the Marine Corps multiyear roadmap and targets. C3 AI’s buyer base continues to increase, each inside and throughout industries, whereas sustaining distinctive ranges of buyer satisfaction by our continued concentrate on delivering measurable, important enterprise worth. At Eletrobras, the most important energy technology transmission firm in Latin America, we partnered to reinforce their grid resiliency and availability. Brazil’s grid is among the many world’s most complicated as a result of its various technology profile, variability, expansive service territory, and difficult regulatory setting.
With C3 AI, Eletrobras can successfully and effectively course of and analyze real-time information servicing low-latency AI insights to mitigate community disturbances. Nucor Company is seeing important success in bettering manufacturing outcomes with the C3 AI Provide Chain suite. This deployment contains three distinct C3 AI purposes, C3 AI Demand Forecasting, C3 AI Stock Optimization, and C3 AI Manufacturing Schedule Optimization, working collectively to assist and optimize day by day decision-making throughout a number of services. As we enter Q2, we’re centered on increasing gross sales capability, increasing in North America, increasing in Europe, and increasing within the public sector.
Our associate community continues to generate alternatives and open new deal movement. We had a really energetic first quarter in alliances, working carefully with our companions to shut new agreements. Internet-net, 72% of our whole agreements had been closed with and thru our associate ecosystem. This was a rise of 155% yr over yr and 82% quarter over quarter.
Our partner-supported bookings grew 94% yr over yr and our exercise ranges with our companions that embrace AWS, Booz Allen, Google Cloud, and Microsoft proceed to extend considerably. Within the first quarter, we closed 40 agreements with Google Cloud. This is a rise of 300% yr over yr. This development was largely pushed by the joint marketing campaign between C3 AI and Google Cloud which I simply mentioned earlier, centered on the general public sector.
C3 AI continues to be a pretty associate for the hyperscalers as our 90 enterprise AI purposes quickly drive substantial workload of their compute and storage clouds whereas including rapid worth to our joint clients. As you’ll be able to see from our supplemental deck, our bookings proceed to be more and more various. Our generative AI enterprise is surprisingly various with many candidly, unanticipated use circumstances throughout the board in a variety of industries. As well as, our whole non-Baker Hughes income grew 37% yr over yr.
Now I will hand it over to Ed for an replace on our merchandise and generative AI. Ed?
Ed Abbo — Govt Vice President, Chief Know-how Officer
Thanks, Tom. Let me first recap the place C3 AI suits within the AI tech stack. Beginning on the backside, the 4 layers embrace silicon, cloud infrastructure, basis fashions. And on the prime, harnessing all this innovation to ship enterprise worth to our AI purposes.
That is the place C3 AI performs with prebuilt AI purposes that may be deployed in a short time. In distinction, the choices you are seeing within the AI software program market at this time fall into two distinct classes. First, legacy software program corporations which are scrambling to maintain up with AI. To attempt to keep related, these corporations are rebranding their Twentieth-century software program stacks with AI on the field.
The technical depth to rewrite their software program to reap the benefits of a contemporary, scalable AI tech stack is just insurmountable. For them, AI is only a bolt-on constrained to a small fraction of the enterprise information managed by their legacy software program. Second, we see a couple of extra fashionable software program corporations that had been designed primarily for information integration, information administration, or information engineering not claiming to be enterprise AI platforms to construct and function AI purposes. Basing an enterprise AI utility plan on these incomplete tech stacks requires clients to undertake important, protracted software program improvement initiatives the place minimal buyer worth is realized.
That is clearly mirrored within the buyer satisfaction scores of those distributors. The C3 AI platform is exclusive in that it was a clear sheet design, offering all of the providers mandatory and ample to design, develop, provision, and function real-world enterprise AI options. This gives customers with wealthy workflow-enabled AI purposes working on an utility platform with superior information fusion and governance and scalable AI/ML operations capabilities. We leverage all layers of the AI tech stack, silicon cloud infrastructure providers, and basis fashions.
The C3 AI platform was purpose-built and hardened over 15 years to quickly ship strong buyer AI purposes. Now let me take a second to unpack what we imply by prebuilt purposes as it is a key differentiator for C3 AI. As a buyer, should you purchase a prebuilt utility, you need not outline what the applying does, design and develop the ontology, the enterprise logic, the AI or GenAI mannequin pipelines, or the consumer interface. We have accomplished all that.
C3 AI prebuilt purposes are tried, examined, and confirmed out there, so the applying will be quickly configured to the client information sources. AI/ML fashions tuned to clients’ information and the consumer interface tuned for the client. This enables clients to shortly configure, deploy, onboard and prepare customers, scale out their enterprise, and quickly notice enterprise worth. Let me offer you an instance.
Holcim, which is a big international constructing options producer scaled out C3 AI reliability, our prebuilt AI-based predictive upkeep utility to most of its vegetation in simply eight months after a profitable pilot. The appliance screens a number of hundred crucial plant belongings reminiscent of vertical curler mills and ball mills to precisely predict potential issues properly upfront of failure. It does so by repeatedly ingesting information from over 9,500 sensors and different methods and analyzes these information utilizing 850 machine studying fashions. The C3I reliability utility permits Holcim to keep away from important operational disruptions and high-cost remediations.
Immediately, now we have prebuilt AI purposes with turnkey ontologies that tackle whole worth chains throughout business verticals. These purposes do not function in silos. They’re designed and constructed to work in live performance, all working on the C3 AI platform. Every new utility can deploy quicker than the final, due to the power to reuse information integrations, ontologies, AI/ML pipelines, workflows, and consumer interface parts.
And as extra C3 AI purposes are deployed, enterprises accrue enterprise advantages quicker and the tempo of their AI transformation accelerates. We additionally provide a collection of prebuilt and extensible C3 Generative AI purposes that can be utilized as stand-alone options or deployed alongside different C3 AI purposes. This quarter, we deployed C3 generative AI for industrial asset inspections at a big producer. This utility unifies information throughout unstructured inspection reviews and structured information on asset efficiency, reminiscent of threat reviews, corrosion evaluation, work orders, and so on., which makes these information simply and shortly accessible to plant operators.
A few of these inspection reviews embrace scans of handwritten textual content and engineering diagrams which are over 50 years previous. Utilizing this utility, the corporate has been capable of streamline the day-to-day work of inspectors, cut back pricey operational errors and threat, and speed up their turnaround efforts and time. In Q1, we launched C3 Generative AI for presidency packages, which has an immense potential for federal, state, or native authorities companies by eliminating service delays, lowering wait instances, enhancing the effectiveness of contact facilities, and bettering the citizen expertise. We have already signed a pilot with a state on the U.S.
East Coast and sit up for supporting public sector companies throughout the board. It is necessary to grasp that the C3 generative AI purposes are distinctive out there. We offer the power to work together with omnimodal information that’s structured sensor information, databases, unstructured paperwork, photographs, embedded tables, leverage any LLM out there out there. For instance, GPT 4.0, Gemini, Claude, Llama, Mistral, to call a couple of, and a number of specialised LLMs in the identical utility, providing full supply traceability for each structured and unstructured information and granular enterprise entry controls.
We additionally present instruments to allow information scientists to tune system responses for prime accuracy in manufacturing with minimal hallucination, carry out chain of thought, reasoning, writer and execute mathematical capabilities, provide state-of-the-art LLM guardrails and protections, and orchestrate and chain collectively AI brokers to carry out high-value duties, for instance, to provoke workflows or write summaries. We offer out-of-the-box pipelines to synthesize outcomes throughout AI brokers, mechanically detect and floor consistencies in underlying information, seize engine logs for auditability and traceability, present instruments for our clients, builders, and information scientists to configure their very own customized generative AI pipelines, and provide fine-tuning providers for embedding fashions and LLMs. C3 generative AI can be distinctive in its enterprise-grade assist for working in extremely safe air hole environments. This can be a prerequisite for protection intelligence and monetary providers clients.
I will now flip it over to Hitesh to cowl the financials.
Hitesh Lath — Chief Monetary Officer
Thanks, Ed. I’ll now present a recap of our monetary outcomes and extra coloration on our enterprise. All figures are non-GAAP until in any other case famous. As Tom talked about, whole income for the quarter elevated 21% yr over yr to $87.2 million.
Subscription income elevated 20% yr over yr to $73.5 million, representing 84% of whole income. As a reminder, our subscription income is comprised primarily of software program licenses, Software program as a Service providing, normal search engine optimisation assist providers, pilots and trials of our C3 AI purposes or generative AI, and consumption-based pricing for which income is acknowledged over time. Our subscription income additionally contains income from software program licenses for which ongoing upkeep and assist shouldn’t be required. And in accordance with ASC 606, the income is acknowledged when the license is made out there to the client.
Skilled providers income was $13.7 million. This represents 16% of whole income within the first quarter of fiscal ’25 as in comparison with 15% of whole income within the first quarter of fiscal ’24. We count on the skilled providers income to typically keep inside 10% to twenty% of whole income for fiscal ’25. Gross revenue for the quarter was $60.9 million and gross margin was 70%.
Gross margin for skilled providers remained excessive at over 90%. working loss for the quarter was $16.6 million. Our working loss was higher than steerage as a result of continued concentrate on expense administration. Our web money offered by working actions was $8 million.
Free money movement for the quarter was optimistic $7.1 million. We had been capable of generate optimistic free money movement in the course of the quarter due to continued concentrate on money administration. We proceed to be very properly capitalized and closed the quarter with $762.5 million in money, money equivalents, and marketable securities, a rise of $12.2 million in comparison with This fall. On the finish of Q1, our accounts receivable stability was $140.1 million, together with unbilled receivables of $81.5 million.
Complete allowance for dangerous debt stays de minimis at lower than $400,000, and we shouldn’t have issues relating to collections. The final well being of our accounts receivable stays sturdy. In the course of the first quarter, we signed 52 pilots, 117% improve from final yr and up 53% from final quarter. At quarter finish, we had cumulatively signed 224 pilots, of which 191 are nonetheless energetic.
This implies they’re both of their authentic three- to six-month time period or prolonged for some length or transformed to a subscription or consumption contract or are at the moment being negotiated for conversion to subscription or consumption contracts. We proceed to count on short-term stress on our gross margins as a result of increased mixture of pilots, which carry a larger price of income in the course of the pilot section of the client life cycle. We additionally count on short-term stress on our working margin as a result of further investments we’re making in our enterprise, together with in our gross sales pressure, analysis and improvement, and advertising spend. As we proceed to make important investments within the enterprise, we count on to be free money movement destructive for Q2 and Q3 however stay on observe to be free money movement optimistic for This fall and in addition for the total fiscal yr ’25.
Now I will transfer on to our steerage for the subsequent quarter. Our income steerage for Q2 goes to be $88.6 million to $93.6 million. We’re sustaining our earlier steerage of $370 million to $395 million for fiscal ’25. This means a year-over-year development charge of 19% to 27%, making C3 AI one of many fastest-growing corporations within the software program public firm universe.
Our steerage for non-GAAP loss from operations for Q2 is $26.7 million to $34.7 million. We’re sustaining our earlier steerage of $95 million to $125 million for fiscal ’25. Now I would like to show the decision again over to Tom.
Tom Siebel — Chairman and Chief Govt Officer
Thanks, Hitesh. Let me tackle path to profitability. Our price of products bought is considerably lower than our price of producing income. And as such, C3 AI is a structurally worthwhile enterprise.
Our year-over-year income development in Q1 was 21% and accelerating. Our year-over-year expense development charge was 12%. Within the coming years, we count on our income to typically develop at a larger charge than our expense development charge. It follows that non-GAAP profitability is now merely a perform of scale.
Whereas we proceed to put money into market share, we imagine our income development charges would typically exceed our expense development charges. The expense and income traces will converge, crossing over to constant non-GAAP profitability. Right now, we count on to be money movement optimistic in This fall fiscal yr ’25 and for the whole yr of fiscal yr ’25. Now let’s discuss form of the overall space of the — I need to speak concerning the common enterprise AI market, and I need to discuss buyer success in C3 AI.
We actually are companions to our clients, usually on pace dial, participating with them a number of instances a day to make them profitable and self-sufficient. We’re not working from residence, we’re on the market on the location with our clients day by day, each week. We sit shoulder to shoulder, and we get into the small print of their enterprise to guarantee that all the pieces is working easily because it pertains to their enterprise AI purposes. We maintain weekly government critiques to trace progress on the highest ranges.
This proactive, boots-on-the-ground strategy is what drives the client satisfaction mirrored in our Internet Promoter Scores. This dedication to shut hands-on collaboration is demonstrated in our partnership with Shell. Shell has over 100 C3 AI purposes in improvement and deployment for all the pieces from asset integrity to manufacturing optimization. We began working with Shell initially on predictive upkeep again in 2018.
And now, they monitor over 15,000 items of apparatus with C3 AI. They estimate that this program alone generates this complete C3 AI program that they’ve written massive that they name Shell AI has generated annual profit to shell of $2 billion. And we’re not accomplished. We proceed to collaborate increasing into new use circumstances, together with some service reservoir administration and oil situation monitoring.
These purposes, we count on to be all scaled out throughout a number of belongings. This strategy can be evident in our work with Con Edison. We started our partnership with Con Ed in 2017, initially specializing in the superior metering infrastructure venture. This can be a venture that enhances the operational effectivity, public security, and buyer satisfaction of their sensible grid infrastructure, and it continues to scale.
Annual price discount uncovered is over $45 million. The venture is exceeding expectations with a projected advantage of greater than $3.2 billion over 20 years, $500 million greater than initially projected. Now Con Edison is deploying generative AI for meter administration and asset mapping, which addresses billing discrepancies and reduces mismappings on the electrical grid and reduces price and will increase buyer satisfaction. Buyer success is on the core of why we constructed this firm.
Now let’s take a second right here and assume again OK? For these of you who’ve been round, OK, for a couple of many years, they usually’ve obtained in contact with what is going on on with individuals. C3 AI is the unique enterprise AI firm, onerous cease, OK? We started C3 AI in January of 2009, take into consideration that, with the imaginative and prescient to develop a software program platform and enterprise purposes that permit organizations to take advantage of, what we imagine, could be the computing platform of the longer term. And that included elastic cloud computing, the Web of Issues, massive information, and predictive analytics. And we did this in the course of the depth of the AI winter.
This was properly earlier than the appearance of the GPU, earlier than Azure existed, earlier than GCP existed and when AWS was nascent. We invested into 1000’s of person-years in over a decade, OK, constructing the C3 AI platform, the primary reference platform structure for enterprise AI onerous cease on the first, OK? And at this time, now over 90 C3 AI enterprise purposes tackle the worth chains of vitality, authorities, protection, manufacturing, monetary providers, agribusiness, pharma, and others. We deploy these purposes at this time in Europe, Asia, South America, North America, OK, and in governments all over the world. Now 15 years later, the Elastic Cloud, the Web of Issues, massive information, and predictive analytics have turn into ubiquitous.
Enterprise AI is broadly acknowledged as one of many largest and fastest-growing markets within the historical past of enterprise software program. It’s a mandate for each company and authorities chief at this time to harness the facility of enterprise AI, and C3 AI is very well-positioned to serve this huge and quickly rising market demand. C3 AI is at this time one of many fastest-growing corporations within the public software program universe. And most significantly, on this present cacophony of AI market hype, C3 AI is attaining among the many highest ranges of buyer satisfaction for worth realized within the enterprise software program world.
OK. I refer you to our earnings supplemental deck at this time, OK, the place we’re showcasing, OK, C3 AI’s Internet Promoter Scores, benchmarking C3 AI towards different main enterprise software program corporations, OK, lots of which purport to be — virtually all of which purport to be, OK, AI corporations. And this report is revealed by a 3rd celebration referred to as Comparable. The underside line is our enterprise software program corporations are essentially the most glad within the software program business, persistently driving unmatched worth from our options.
Attaining this stage of buyer satisfaction does not simply occur, it’s the results of relentless dedication, unwavering dedication, an intensive understanding of our buyer wants, superior software program know-how, and deep, deep experience in enterprise AI, honed over a few years of excellence. Within the remaining evaluation, buyer worth realized would be the solely standards that may decide the chief in enterprise AI and C3 AI is precisely on observe. Now I would like to show this over to the operator to start our QA session. Thanks all.
Questions & Solutions:
Operator
Thanks. [Operator instructions] Please stand by whereas we compile the Q&A roster. Our first query comes from the road of Patrick Walravens with Residents JMP. Your line is open.
Patrick Walravens — Analyst
Oh, nice. Thanks very a lot and congratulations. Hey, Tom, are you able to begin out by simply form of characterizing what the tone of enterprise was like for you guys in Q1? And particularly, I am your deal band chart the place you had 71 offers and the typical TCV is 700. So, should you multiply these collectively, you get like virtually $50 million, which is up so much.
So, simply should you might simply touch upon the tone of enterprise, that may be nice.
Tom Siebel — Chairman and Chief Govt Officer
Pat, it is fairly wild on the market. I imply, I might say, significantly with the appearance of generative AI. I imply I feel it’s totally tough for people who find themselves assessing these corporations to actually perceive the complexity of what is going on on within the AI market, OK, the place now we have totally different flavors of enterprise AI, now we have these generative AI purposes that go from very form of small, low-priced use circumstances to very excessive priced, high-value use circumstances. And actually, it is tough to mannequin that.
I imply this isn’t a easy enterprise. As we enter this type of new world of AI, I imply, it is actually complicated. And we won’t merely multiply, we did these many widgets this quarter, and we’ll that many widgets within the subsequent quarter. And that is the expansion charge of widgets.
That is the gross margin. And subsequently, that is what the — we proceed to be simply amazed by the broad vary of purposes that we’re discovering for enterprise AI, and I might say in generative AI, lots of which we simply could not have anticipated. I might say like public sector, we did not anticipate that, and we simply fell right into a gold mine there, OK? Regulation companies, medical diagnostics is simply fascinating.
Patrick Walravens — Analyst
Superior. And Hitesh, if I might ask a follow-up for you. I feel individuals are in all probability questioning given how sturdy the bookings appear to be why the steerage did not go up. How did you consider that?
Hitesh Lath — Chief Monetary Officer
You are speaking concerning the steerage for the Q2, income steerage.
Patrick Walravens — Analyst
No, for the yr, you stored it the identical.
Hitesh Lath — Chief Monetary Officer
Yeah. That also represents 19% to 27% income development. it nonetheless makes us one of many fastest-growing corporations on this public software program firm universe.
Patrick Walravens — Analyst
OK. Thanks, guys.
Hitesh Lath — Chief Monetary Officer
Thanks.
Operator
Please stand by for our subsequent query. Our subsequent query comes from the road of Timothy Horan with Oppenheimer. Your line is open.
Timothy Horan — Analyst
Thanks, guys. On the subscription income has been somewhat lumpy right here. On skilled providers, I do know, Tom, you mainly simply stated it’s totally tough to mannequin out. However are you able to give us some coloration on the traits? Like is that this a very good jump-off level for the remainder of the yr? After which possibly simply on the bills, the place ought to we be modeling and the bills elevated virtually within the subsequent quarter or two? Thanks.
Tom Siebel — Chairman and Chief Govt Officer
Let me tackle subscription versus providers underneath ASC 606, it is somewhat complicated. Sure issues that was referred to as software program and now are referred to as providers underneath the brand new steerage, and we adjust to what the steerage is. That being stated, we have guided that our providers income could be 10% to twenty% of income in any given quarter. Our providers income was 16% on this quarter.
And so, we’re properly inside our steerage there. Earlier than we form of bemoan the very fact the providers had been somewhat increased than they anticipated to be, let’s keep in mind what providers margins are at C3 AI. Whereas our software program certification margins are fairly excessive 66%, OK, our providers margin, everyone, you may recall, is in extra of 90%. So, providers is a reasonably darn good enterprise.
And whereas we proceed to be centered, I imply, we’re a licensing firm, OK? We’re not one among these providers corporations pretending to be a software program firm. They’re one or two of them on the market, OK? We’re not that dangerous, however we proceed to be — however it’ll proceed — for the subsequent yr or two, you’ll be able to count on our providers to bounce round within the 10% to twenty%. It’s going to in all probability common about 15%. However keep in mind, our providers margins are larger than 90%.
I feel 93% is that the quantity I obtained. So, it is good work if you will get it.
Timothy Horan — Analyst
So, was there any reclassification this quarter or one-time gadgets or ought to the midpoint of 15% is form of a very good run charge going ahead?
Hitesh Lath — Chief Monetary Officer
No, no reclassification.
Timothy Horan — Analyst
OK. Nice. And expense line gadgets, something to concentrate on the subsequent quarter or two the place we must always see a pickup?
Hitesh Lath — Chief Monetary Officer
Yeah. So, when it comes to our bills, we plan to proceed to make investments in our gross sales pressure, R&D, in addition to advertising efforts.
Timothy Horan — Analyst
OK. Nice. Just about throughout the board. And simply lastly, any change within the aggressive dynamics on the market? I imply who do you run up towards most lately?
Tom Siebel — Chairman and Chief Govt Officer
That is Tom. Nicely, Ed, what’s the aggressive setting? You are nearer to it than I.
Ed Abbo — Govt Vice President, Chief Know-how Officer
Yeah. I feel the default or de facto competitors is the data know-how, the IT group, the CIO attempting to construct these purposes themselves. And people are our greatest prospects is ones which have tried to do information science after which scale that up throughout a big enterprise, usually work out how tough that’s with out the appropriate information and AI platform. So, that’s the de facto competitors out there for us.
Tom Siebel — Chairman and Chief Govt Officer
And people are simply prospects a few years down the street as a result of all of them come crashing down throughout these — now we have the CIO with 10,000 individuals in Bangalore, attempting to construct this factor out of piece/components from hyperscalers, and invariably comes crashing down round him. And so, they’re simply — we simply put them within the pipeline two or three years down the street they usually come again.
Ed Abbo — Govt Vice President, Chief Know-how Officer
That is proper. Thanks.
Timothy Horan — Analyst
Thanks, guys.
Operator
Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Mike Latimore with Northland Capital Markets. Your line is open.
Michael Latimore — Analyst
Hello, nice. Thanks. The pilot development was very sturdy sequentially yr over yr. Are the scale of the pilots, the worth of the pilots for traditional and generative AI form of as anticipated?
Tom Siebel — Chairman and Chief Govt Officer
The worth of the pilots, the form of the center of the street, and I may very well be off right here by 10% or 15%. However in the course of the street pilot for enterprise AI utility is $0.5 million, the center of the street for a generative AI utility is about $0.25 million. The worth of the generative AI pilot often takes three months to finish, enterprise AI pilot will take eight months to finish, OK? After which we go into contract negotiation they usually go reside. We have given steerage earlier than that we count on about 70% of our pilots to transform to manufacturing contracts.
I feel that is about proper. And actually, the 30% that do not convert — it isn’t as a result of many of those are enormously profitable initiatives. It is not as a result of — they don’t convert as a result of the pilot wasn’t profitable, they can not convert as a result of some genius CIO decides he will attempt to construct this himself out of some piece components of a hyperscaler. They usually’ll be again.
Michael Latimore — Analyst
Yeah. Bought it. Bought it. OK.
So, no change in pricing or worth, it appears like on pilots. After which when it comes to the second quarter steerage, the midpoint is about 24% income development, which is a reasonably large step up from the expansion you had this quarter. And I feel the most important step-up within the final 4 quarters, I imagine. However is the — what offers you confidence in that enchancment? Is it these pilots you simply landed? Or is it skilled providers development or massive offers getting deployed? Simply what offers you confidence in that acceleration?
Tom Siebel — Chairman and Chief Govt Officer
Utilizing form of the perfect skilled judgment now we have, OK, the arrogance we gave is what we expect goes to occur. Now we have been public, I feel, for 15 quarters, and we have been proper 15 out of 15 quarters. And I do know that lots of you are attempting to mannequin this enterprise should you can mannequin it, you are higher than I as a result of there may be a variety of transferring components right here. And I feel essentially the most — the perfect indicator of what we’ll do is what we information you to.
I imply, you might just about take to the financial institution for every of the final 15 quarters. We have been fairly spot on with that. So, proper now, that is what we expect we’ll do. That is our greatest skilled judgment.
And you are going to ensure we’ll be working diligently to fulfill or exceed that.
Michael Latimore — Analyst
All proper. Thanks.
Operator
Thanks. Women and gents, we’ll take our final query from the road of Kingsley Crane with Canaccord. Your line is open.
Kingsley Crane — Canaccord Genuity — Analyst
Hello, thanks for taking the query. Forty agreements with GCP, that is spectacular. Fifty-one agreements with the associate community general. So, might you communicate to the associate efforts outdoors of GCP? What’s working properly? What would you want to enhance? After which is the GCP partnership as dominant from a bookings contribution perspective as it’s in deal frequency? Thanks.
Tom Siebel — Chairman and Chief Govt Officer
I am undecided Kingsley, I do not assume I’ve the bookings contribution information right here. So, I am unable to accurately reply that one. I might say that the connection with GCP is nice. The connection with AWS is nice.
We’re doing a variety of good work with AWS, with Microsoft, Azure. And I imply, we’re nice companions for these guys. I imply what we do after they associate with us, we get the applying up quick, the client will get worth, I imply they do not earn a living when corporations are constructing purposes utilizing their platforms, they earn a living when individuals are working their different purposes. So, we’re consuming CPU assets, we’re consuming GPU assets, we’re consuming storage.
They usually’re all nice companions, they’re nice corporations. They’re fantastic to work with, and it is a privilege for us to have the ability to associate with them.
Kingsley Crane — Canaccord Genuity — Analyst
All proper. OK. That is very useful. After which final one, simply to make clear.
For the state and native agreements, had been most of these pilots?
Tom Siebel — Chairman and Chief Govt Officer
All of them form of began as pilots. Sure, in different phrases, I am undecided which quantity you are referring to. Did we confer with what number of pilots there have been and what number of transformed within the quarter, we stated this?
Hitesh Lath — Chief Monetary Officer
No. We do not speak concerning the conversions. We’ve got the quantity for what number of pilots closed within the quarter, 52 —
Tom Siebel — Chairman and Chief Govt Officer
Kingsley, they virtually all started as pilots, OK? All of them start as pilots. They go from, for example, one to 3 months, after which the good majority of them convert to manufacturing.
Kingsley Crane — Canaccord Genuity — Analyst
Is sensible. Sure, understood on this context. All proper. Congrats on the quarter.
Tom Siebel — Chairman and Chief Govt Officer
Thanks. Thanks, everyone. I feel that is the tip of our name. We actually admire your consideration.
That is fairly an journey. I feel we’re breaking floor in enterprise AI. I do know we’re breaking floor in enterprise AI. And I might simply inform you, for these of you who’ve visited us or these of you who’ve an opportunity to go to, it is so thrilling and it is simply palpable.
And so, we’ll proceed to get after it, and we thanks in your time. We thanks in your consideration, and need you all a very good day.
Operator
[Operator signoff]
Period: 0 minutes
Name contributors:
Amit Berry — Investor Relations
Tom Siebel — Chairman and Chief Govt Officer
Ed Abbo — Govt Vice President, Chief Know-how Officer
Hitesh Lath — Chief Monetary Officer
Patrick Walravens — Analyst
Timothy Horan — Analyst
Michael Latimore — Analyst
Mike Latimore — Analyst
Kingsley Crane — Canaccord Genuity — Analyst
