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01/10 00:13
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed a 19% YoY revenue decline, operating losses, and the withdrawal of FY26 guidance, signaling uncertainty and potential financial challenges. Despite strategic partnerships and optimism for future profitability, the lack of clear guidance and execution challenges weigh negatively. The market cap suggests moderate reaction, leading to a negative sentiment prediction of -2% to -8%.
Total Revenue $70.3 million, a decrease of 19% year-over-year. The decline was attributed to a higher mix of IPD-related costs, a lower mix of demonstration license revenue and PES revenue, and lower economies of scale.
Subscription Revenue $60.3 million, representing 86% of total revenue. No specific year-over-year change or reasons were mentioned.
Revenue from Sale of Software Licenses (Demonstration Versions) $17.9 million, sequentially lower by $15.9 million. This decline was due to reduced demand from distribution partners and strategic customers for demonstration purposes.
Professional Services Revenue $10 million, of which $8.7 million was from prioritized engineering services (PES). Professional services represented 14% of total revenue. No specific year-over-year change or reasons were mentioned.
Non-GAAP Gross Profit $36.3 million, with a non-GAAP gross margin of 52%. The decline in gross margin was primarily due to a higher mix of IPD-related costs, a lower mix of demonstration license revenue and PES revenue, and lower economies of scale.
Non-GAAP Operating Loss $57.8 million. No specific year-over-year change or reasons were mentioned.
Non-GAAP Net Loss $49.8 million, with a non-GAAP net loss per share of $0.37. No specific year-over-year change or reasons were mentioned.
Net Cash Used in Operating Activities $33.5 million. No specific year-over-year change or reasons were mentioned.
Free Cash Flow Negative $34.3 million. No specific year-over-year change or reasons were mentioned.
Cash, Cash Equivalents, and Marketable Securities $711.9 million at the end of the quarter. No specific year-over-year change or reasons were mentioned.
Strategic Integrator Program: Introduced a software OEM program licensing the C3 Agentic AI platform to others for designing, developing, and operating industry-specific applications. Expected to be a large and growing business line.
C3 Agentic AI platform: Positioned as a solution to challenges in generative AI, including data exfiltration, cybersecurity risks, and hallucination. Demonstrated high success rates in deployments across industries.
Market Opportunity: Addressable market opportunity estimated to approach $2 trillion annually. Focused on establishing leadership in Enterprise AI applications.
Customer Engagements: Involved in approximately 60 large-scale customer engagements across various sectors, including government, manufacturing, and defense.
Revenue Performance: Total revenue for the quarter was $70.3 million, a 19% year-over-year decrease. Subscription revenue accounted for 86% of total revenue.
Financial Guidance: Revenue guidance for Q2 FY 2026 is $72 million to $80 million. Previous guidance withdrawn due to leadership changes and restructuring.
Leadership Changes: Appointed Stephen Ehikian as the new CEO and restructured sales and service organizations globally. Introduced a Chief Commercial Officer and new leadership in EMEA, North America, and federal operations.
Strategic Customer Wins: Nucor, Qemetica, HII, and the U.S. Army expanded partnerships with C3 AI for enterprise-wide AI programs and operational improvements.
Focus on Enterprise AI: Reaffirmed commitment to market leadership in Enterprise AI software, emphasizing the C3 Agentic AI platform and turnkey applications.
Revenue Decline: Total revenue for the quarter decreased by 19% year-over-year, with a significant drop in demonstration license revenue and professional services revenue, indicating challenges in maintaining consistent revenue streams.
Sales Execution Issues: Poor sales execution and resource coordination were identified as root causes for the financial underperformance, leading to confusion in the sales process and missed revenue guidance.
Leadership Transition Challenges: Mid-quarter changes in leadership across sales and service organizations caused disruptions and confusion, negatively impacting sales processes and customer engagement.
Gross Margin Decline: Non-GAAP gross margin declined to 52%, driven by higher costs associated with initial production deployments, lower economies of scale, and a reduced mix of high-margin revenue streams.
Operating Loss: Non-GAAP operating loss for the quarter was $57.8 million, reflecting inefficiencies and challenges in cost management.
Cash Flow Issues: Net cash used in operating activities was $33.5 million, with free cash flow being negative $34.3 million, indicating liquidity pressures.
Customer Conversion Challenges: Out of 374 initial production deployments (IPDs), only 266 remain active, highlighting difficulties in converting IPDs to ongoing subscriptions or consumption contracts.
Market Execution Risks: Despite a large addressable market, the company failed to capitalize on opportunities due to internal execution issues rather than external market conditions.
Dependence on Leadership: The absence of active involvement from the Executive Chairman due to health issues revealed an over-reliance on specific individuals for sales and resource coordination.
Guidance Withdrawal: The company withdrew its previous guidance for fiscal 2026, signaling uncertainty in its ability to forecast and achieve financial targets.
Revenue Guidance for Q2 FY 2026: Projected revenue is between $72 million and $80 million.
Non-GAAP Loss from Operations for Q2 FY 2026: Expected to range between $49.5 million and $57.5 million.
Future Guidance Updates: The company plans to provide guidance for Q3 FY 2026 and full-year FY 2026 when announcing Q2 FY 2026 results.
Strategic Integrator Program: Expected to become a large and rapidly growing line of business, enabling OEMs, systems integrators, and service providers to design and operate industry-specific applications using the C3 Agentic AI platform.
Market Opportunity: The company is targeting a large and expanding addressable market, estimated to approach $2 trillion annually.
Generative AI and Agentic AI: The company is involved in approximately 60 large-scale customer engagements across various industries and expects high success rates due to its platform's ability to address common challenges in generative AI.
The selected topic was not discussed during the call.
The earnings call summary presents mixed signals: strong revenue growth and bookings contrast with operational losses and cash flow deficits. The strategic focus on expanding markets and partnerships provides optimism, but gross margin pressures and economic uncertainties pose risks. The Q&A reveals confidence in future growth but lacks concrete guidance. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction (-2% to 2%) as positive and negative factors balance each other out.
The earnings call revealed a 19% YoY revenue decline, operating losses, and the withdrawal of FY26 guidance, signaling uncertainty and potential financial challenges. Despite strategic partnerships and optimism for future profitability, the lack of clear guidance and execution challenges weigh negatively. The market cap suggests moderate reaction, leading to a negative sentiment prediction of -2% to -8%.
The company's revenue growth, strategic alliances, and strong cash position are positive indicators. Despite an operating loss, the guidance suggests improvement in cash flow and profitability in future quarters. The Q&A revealed some concerns about the lack of clarity on specific deals and guidance, but overall sentiment remains positive due to strong revenue growth and strategic partnerships. The stock's market cap suggests a moderate reaction, leading to a positive prediction.
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