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Thank you for standing by, and welcome to C3.ai, Inc.'s fourth quarter fiscal year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the call over to Amit Berry. Please go ahead.

Good afternoon. And welcome to C3.ai, Inc.'s earnings call for the fourth quarter of fiscal year 2025, which ended on April 30, 2025. My name is Amit Berry, and I lead investor relations for C3.ai, Inc. With me on the call today are Tom Siebel, chairman and chief executive officer, and Hitesh Lath, chief financial officer. After the market closed today, we issued a press release with details regarding our fourth quarter and full fiscal 2025 year results, as well as a supplemental to our results, both of which can be accessed through the Investor Relations section on our website at ir.c3.ai. This call is being webcast, and a replay will be available on our earnings web 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 date. We disclaim any obligation to update any forward-looking statements or outlook. Statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. 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 financial measures is included in our press release. Finally, at times in our prepared remarks and 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, C3 Agentic AI. I will now provide a recap of our financial results and additional color on our business. All figures are non-GAAP unless otherwise noted. Total revenue for the quarter increased 26% year over year to $108.7 million. Subscription revenue increased 9% year over year to $87.3 million, representing 80% of total revenue. Revenue from the sale of software licenses that are demonstration versions of C3 AI applications was $33.8 million during the quarter. We sell these licenses to our distribution partners and enable them to demonstrate our software effectively to their customers and to large strategic customers to enable them to accelerate AI adoption across their companies. This was a strong bookings quarter. We had bookings of $135.4 million during the quarter, which increased from $42 million in the fourth quarter of last year. Our non-Baker Hughes revenue grew by 37% year over year during the quarter and by 40% during the year. Professional services revenue was $21.4 million, of which $17 million was revenue from prioritized engineering services or PES. Professional services represent 20% of total revenue during the quarter, and our subscription and PES revenue combined was $104.4 million and accounted for 96% of our total revenue. This was an increase of 22% compared to $85.7 million one year ago. As a reminder, prioritized engineering services are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions that are planned in a future product roadmap. When the software feature is delivered, it becomes integrated into our core product offering. It's available to all subscribers of the underlying software product and enhances the operation of that product going forward. Such PES results in a production-level computer software compiled code that enhances the functionality of our production products, which is available for our customers to use over the life of their software licenses. Since we've experienced significant growth in PES revenue over the last few quarters, we expect subscription and PES revenue combined to generally account for 90% or more of our total revenue during fiscal 2026. We expect the professional services revenue, including TES, to generally stay within 10% to 20% of total revenue for fiscal 2026. Non-GAAP gross profit for the quarter was $75.2 million, and gross margin was 69%. Gross margin for professional services remained high at over 85%. Operating loss for the quarter was $31.2 million, and our net loss for the quarter was $21.9 million. Our operating loss was better than the guidance due to continued focus on expense management. Our non-GAAP net loss per share was $0.16. Our net cash generated from operating activities was $11.3 million. Free cash flow for the quarter was positive $10.3 million, compared to positive $18.8 million in the fourth quarter of last year. Free cash flow for the year improved to negative $44.4 million, compared to negative $90.4 million last year. We continue to be very well capitalized and closed the quarter with $742.7 million in cash, cash equivalents, and marketable securities. During the quarter, we signed thirty-six initial production deployments. At the end of the quarter, we had cumulatively signed 346 initial production deployments, of which 263 are still active. This means they are either in their original three to six-month term, extended for some duration, converted to an ongoing subscription contract, and/or are currently being negotiated for conversion to an ongoing subscription contract. We are very excited about our expanding distribution network and go-to-market initiatives with our partners, including Microsoft, AWS, and McKinsey. We expect to continue to see some moderation in our gross margins due to a higher mix of initial production deployments in the near term, which carry a greater cost of revenue during the initial phase of the customer life cycle, and also due to our investments in expanding our support capacity. We also expect some moderation in our operating margin in the near term due to investments we are making in our business, especially in expanding our strategic partner ecosystem, our sales organization, and research and development. Now I'll move on to our guidance for the next quarter. Our revenue guidance for Q1 of fiscal 2026 is $100 million to $109 million. For the full fiscal 2026, we are anticipating revenue in the range of $447.5 million to $484.5 million. Our guidance for non-GAAP loss from operations for the first quarter is $23.5 million to $33.5 million. Our non-GAAP loss from operations for the year guidance is $65 million to $100 million. Our guidance is predicated on the assumption of geopolitical stability. Were there to be a situation where the US government closed, the budget did not pass, or we see indications of global trade friction, given the reality of these market risks, those could have unknown and adverse consequences on our business results. Last year, our revenue growth was 25%, and our expenses grew by 18%. As we approach fiscal 2026, we expect the revenue growth rate to continue to exceed our expense growth rate, so profitability remains simply a matter of scale. Our expectation is that we will cross into non-GAAP profitability during the second half of fiscal 2027, and we expect to be free cash flow positive in the fourth quarter of fiscal 2026 and in successive years thereafter. With that, I'd like to turn the call over to the operator for Q&A. Operator?

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press. Our first question comes from the line of Patrick Walravens of Citizens. Please go ahead, Patrick.

Oh, great. Thank you. And congratulations across a number of fronts, including the renewal of Baker Hughes, but also Tom adding Ken Goldman to your board. So I guess my first question would be, just in terms of this Microsoft partnership, how do you go about activating tens of thousands of Azure sales reps to actually deliver C3.ai, Inc.?

Great question, Pat. Because I would say at the level of the senior executives of Microsoft, be it Judson, or the people who run Europe, the people who run federal, the people who run North America, they're totally bought in. But the people who are really important are the tens of thousands of Azure reps in Munich, Moline, Madrid, and elsewhere. What we are doing is we are charting our order of a hundred salespeople to each reach out and form partnerships with ten Azure salespeople. Each of those guys focuses on two accounts. That's the leverage. Our sales guys reaching out to their sales guys who are motivated to work with us. We have solutions for them. We make joint sales calls with them. But if we can get roughly a hundred C3.ai, Inc. salespeople focused with ten partner people, all of a sudden, we've gone from a hundred people to a thousand people working together around the world. Today, in May of 2025, I think we're jointly tracking over six hundred accounts together just with Microsoft. But that's the key to this leverage. It's not going to be at the executive level, where the relationships are intimate. We really need to engage with the feet on the street, and that's what we're focused on doing. We've done a lot of focus in the last two quarters on providing the Azure sales reps, AWS sales reps, and GCP sales reps the tools they need to go in and do a demo to their customer on the first call. But that is the challenge that's before us. That's what we've been focusing the bulk of the last two quarters on, and that's what we'll focus the bulk of the next two quarters on is really realizing the potential of these partnerships with the tens of thousands of Azure reps that feed on the street because we can help them retire their quota, and we can help them make their customers successful.

Wonderful. And if I could ask a follow-up. With your permission, Tom, I hope this is okay. But in February, you informed us that you'd suffered a health setback, and it was limiting your ability to travel, and then you were going to have Jim Snobby help out. But I was delighted to hear on this call that you're, I mean, probably not delighted to get on a red-eye, but I was delighted to hear that you're getting on a red-eye because that sounds like some positive developments. So I don't know. Any comments that you're okay sharing with us on that, I'm sure would be greatly appreciated.

I did get slowed down for a little bit. There's no question about it, and I had to, you know, it's very unlikely to work from home. You know that. And I had to work from home for a little while, take it easy, and recover, but I will catch a red-eye to Washington DC tonight. I will be in Washington DC again for three days, I think ten days from now, after attending a wedding in Cabo. So just when you thought it was safe, Pat. I'm back.

Okay. Alright. Thanks, and congratulations again.

Thank you. Our next question comes from the line of Mike Cikos of Needham and Company. Please go ahead, Mike.

Hey, guys. This is Matt Calitri on for Mike Cikos over at Needham. Thanks for taking our questions, and congratulations on the expanded relationship with Baker Hughes. Can you provide some color there on what the economics of the new deal look like and how they might differ compared to your prior engagements?

It's, you know, Matt, given it's covered under NDA, I don't want to get into the specifics of it. But, you know, it's broadened significantly. We're continuing to provide solutions to Baker Hughes, continuing to develop solutions with Baker Hughes, continuing to enable Baker Hughes to develop derivative works on top of the C3 applications, and we're continuing to serve customers together all around the world. We've expanded it for another three years. I think this, if I'm not mistaken, is the fifth such expansion. It's a great partnership. It's a great relationship. I continue to be on speed dial with Lorenzo Simonelli, the CEO of Baker Hughes. We are and always have been close friends. The speculation that somehow the relationship between C3.ai, Inc. and Baker Hughes was rocky was simply, candidly, delusional. I can't imagine a stronger partnership, and we're continuing to kick it together in Abu Dhabi, Qatar, or the Netherlands.

Understood. That's great. Thank you for that. And then looking at your FY 2026 revenue guidance, the band of outcomes is considerably larger than what you've given in past quarters. How did you think through guidance construction this quarter, and what needs to happen to achieve the high end of that band versus the low end?

Well, we read the same newspaper that you guys read. We did talk to the president, and I had dinner with the speaker of the house last night. I spoke with the leader of the senate last week, and I'll meet them. We do know these people, and we do read the newspaper. We all know there is risk. There is risk in Europe. We have kinetic risk. We have geopolitical risk. We have budget risk of, in fact, the government even shutting down. These are real, and we have companies out there withdrawing guidance altogether. We thought in the interest of being, we have to acknowledge that these risks are real. As a result, we have a broader range than usual to accommodate the unanticipated. When we deal with these guys who are making America great again, they seem to hit us with the unanticipated quite frequently. So, you know, that's it. We're just acknowledging real market risk that's out there. Should it go bad, it's going to have an adverse effect on our business as it will General Motors and everybody else in the world.

That's great. Makes a lot. Thanks. Thanks, Tom.

Thank you. I would now like to turn the conference back to Mr. Siebel for closing remarks. Sir?

Ladies and gentlemen, we thank you for your time and the courtesy of tracking us. We're very pleased with the direction the business is going. If you listen to our last ten conference calls, the plan we are executing is exactly the plan we said we're executing. We are right on track. We are growing apace. We expect the future is very bright. We thank you for the courtesy of following us. We look forward to keeping you posted as we power ahead in fiscal years 2026, 2027, and 2028. Thank you all very much.