The News: REDWOOD CITY, Calif. – June 2, 2021 – C3.ai, Inc. (NYSE: AI), the Enterprise AI application software company, today announced results for its fiscal fourth quarter and the full year ended April 30, 2021.
Below are the company provided highlights. For the full release visit C3 AI’s Newsroom.
Fourth Quarter Financial Highlights
- Revenue: Total revenue for the quarter was $52.3 million, up from $41.6 million one year ago, an increase of 26% year over year.
- Subscription revenue: Subscription revenue for the quarter was $43.1 million, up from $36.8 million one year ago, an increase of 17% year over year.
- Gross Profit: Gross profit for the quarter was $40.6 million (a 78% gross margin), compared to $32.1 million gross profit (a 77% gross margin) one year ago, an increase in gross profit of 26% year over year.
- Remaining Performance Obligations (“RPO”): RPO was $293.8 million, compared to $239.7 million one year ago, an increase of 23% year over year.
- Non-GAAP RPO: Non-GAAP RPO was $345.1 million, compared to $246.9 million one year ago, an increase of 40% year over year.
- C3 AI Customer Count: Total enterprise AI customer count was 89, an increase of 82% year over year.
Full Year Fiscal 2021 Financial Highlights
- Revenue: Total revenue for the year was $183.2 million, up from $156.7 million one year ago, an increase of 17% year over year.
- Subscription revenue: Subscription revenue for the year was $157.4 million, up from $135.4 million one year ago, an increase of 16% year over year. Subscription revenue as a percentage of total revenue remained 86%, constant year over year.
- Gross Profit: Gross profit for the year was $138.7 million (a 76% gross margin), compared to $117.9 million gross profit (a 75% gross margin) one year ago, an increase of 18% year over year.
Analyst Take: C3 AI had a solid year of growth (17%) and finished its year with strong momentum growing at a much faster clip during the fourth quarter (26%). While the company is still losing money, it did narrow losses significantly in the most recent quarter providing an encouraging sign for stronger earnings results in its FY ’22.
The company saw its revenue mix, which primarily consists of subscription revenue grow, while professional services provides a solid foundation but remaining at only about 14% of revenue for the full fiscal year.
The strong subscription numbers are critical and noteworthy providing a solid foundation of stable long-term revenue that will enable significant YoY growth as more customers are added. Based upon the revenue of $183 million and 82 customers, each customer added represents about $2 million–~80% subscription makes every customer add highly valuable.
C3 AI’s Industry Approach Came Well Ahead of Popular “Cloud Industry” Branding
With the company’s model-based architecture serving as its foundation, the business is built on the recently popularized industry based approach. As C3 AI is deeply focused on building models for enterprise, I believe this approach is correct, and the company has pursued this path prior to the acceleration of marketing “Industry Cloud” solutions. In short, I believe C3 AI’s solutions being industry focused are critical to its success as customization by industry is much more achievable than broad customization at scale.
With a large long-term commitment coming from Royal Dutch Shell, the Oil & Gas category continues to represent more than a third of the company’s revenue. With AI and ML critical to the O&G, utilities, and Financial Services sectors, the breakdowns make sense. However, I expect to see life sciences and defense growth in the future as C3 AI has shown promise in both of these data intensive industries.
Winning Big Customers is Where C3 AI Shines
C3 AI’s customer count remains relatively small, but the quality of its customers is top notch. Essentially, C3 AI serves a collection of the largest companies in each of the industries that it serves with a clear winning approach in highly regulated and complex industries like financial services, energy, utilities, and healthcare.
As its customers continue to spend more as data volumes increase, and model complexity and development evolves, I expect C3 AI to benefit from not only winning more logos, which it did relatively well in FY 2021 (up 82%), but also net revenue expansion from its existing customer base.
Overall Impression of C3 AI Earnings
Q4 marked an encouraging finish to the company’s year. AI is hot, and while the growth potential may exceed the actual growth, I’m encouraged by the progress the company has made throughout the year.
In FY ’22 it will be important to see customer growth, both in the form of net new and net revenue expansion.
The streamlining of enterprise AI through pre-built models that serve various industries is a winning approach. The company’s key partnerships with Microsoft, Infor, FIS, and others provide scale and industry imperative partnerships.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.