Good evening. Thank you for attending today’s C3 AI Second Quarter Fiscal Year 2022 Earnings Call. My name is Tania, and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call with an opportunity to ask questions and answers at the end. I would now like to pass the conference over to our host, Paul Phillips, with C3 AI. Please go ahead.

Good afternoon and welcome to C3 AI’s earnings call for the second quarter of fiscal year 2022 which ended October 31, 2021. This is Paul Phillips, Vice President of Investor Relations of C3 AI. With me on the call today are Tom Siebel, Chairman and Chief Executive Officer; and David Barter, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our results as well as a supplement to our results, both of which can be accessed on the Investor Relations section of our website at ir.c3.ai. This call is being webcast, and a replay will be available on our IR website following the conclusion of the call. During today’s call, we will make statements relating 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. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. Also during the course of today’s call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release. Finally, at times in our prepared comments and responses to your questions, we may discuss metrics that are incremental to our usual presentations 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. With that, let me turn the call over to Tom for his prepared remarks.

Thank you, Paul. Good afternoon, everyone. I’m pleased to provide an update on our second quarter results and give you a feel for the state of the business. We finished Q2 quite strong, exceeding company guidance and analyst expectations on almost all fronts. Top line revenue for Q2 was $58.3 million, a 41% increase over the prior year. This exceeds company guidance and all published sell-side analyst expectations. Customer count at the end of the quarter increased to 104, up from 64, a 63% increase over Q2 of last year. GAAP RPO ended at $465.5 million, an increase of 74% year-over-year. Our cash burn for the first six months of fiscal year '22 was $19.8 million, reflecting increased investments in human capital, marketing, and brand equity. We finished Q2 with $1.08 billion in cash and cash equivalents and investments, enabling us to continue to invest in growth for some time. As we entered Q3, our increased revenue visibility and improved sales processes led us to raise revenue guidance to $66 million to $68 million for Q3 and $248 million to $251 million for fiscal year '22, representing a 35% to 37% growth rate year-over-year, up from a 17% growth rate in fiscal year '21. Let’s address customer momentum. We expanded and extended our strategic partnership with Baker Hughes last quarter for the second time. In June of 2020, we extended the agreement for the first time by extending the agreement for two years and increasing the cash and revenue commitments to C3 from Baker by $130 million. This October, we increased the value of the contract again, this time by an additional $45 million to $495 million and extended its term from five to six years, guaranteeing a minimum of $357 million in revenue to C3 over the next 3.5 years. Historically, C3 AI has relied upon a high-touch white-glove service and strategic selling model to acquire and retain customers. In July of 2021, in an attempt to further accelerate revenue scalability and customer adoption, we reorganized sales as an independent unit along traditional hierarchically regimented selling structures, like those in place at SAP and IBM. That proved to be a mistake. While the revenue attainment in the quarter was strong, the overall performance of the sales organization and specifically new sales activity in the second quarter was unacceptable. The management team and I have spent the past month restructuring the global sales function molded in the traditional model that we know to be effective as a high-touch classic strategic selling machine. That process is now complete, and early indicators are quite positive. Our customer energy has increased, our sales visibility has increased, and the amount of revenue of Q3 revenue that we have closed as of the end of November gives us high confidence levels in our Q3 revenue forecast. On a positive note, we expanded our enterprise AI footprint in several diverse industries, including agriculture, agricultural implements, manufacturing, oil and gas, insurance, financial services, life sciences, and energy, with new enterprise production deployments at Cargill, Johnson Controls, Shell, a new contract signed with CNHI, Liberty Mutual, a top 5 life sciences company, and new business with existing customers, including Cargill and now FIS, Mosaic, and PTT Global Chemical. We substantially increased our Public Sector business in defense and intelligence with new production deployments at the U.S. Air Force, new business with the U.S. Space Force, and additional business with the Missile Defense Agency. In Q2, our Public Sector business grew 33% year-over-year. We expect that growth rate in this sector to increase substantially in the last two quarters of fiscal year '22. Let me talk about our partner ecosystem. We are off to a strong start with our new strategic partnership with Google Cloud, making significant progress on joint product roadmaps and joint sales pipeline. Our growing joint sales pipeline with Google Cloud contributes to our confidence in increased growth in the second half of this year. I think our pipeline that we’re currently working with the Google Cloud team is over 90 transactions, totaling as of today, $58 million in business for the second half of this year. Our significant partnership with Microsoft continues apace. To date, we’ve closed over $220 million in business with Microsoft. If I look at the joint pipeline that we’re tracking with Microsoft for the second half of this year, it looks like roughly 120 transactions that total $140 million in business. All of these pipelines will continue to increase in Q3 and Q4. Through our growing partnership with energy services leader ENGIE, we advanced our position in energy and sustainability across multiple industries with deployments at a multinational packaging leader, a major hotel group, and an iconic global coffee shop brand where C3 AI is helping manage energy consumption and GHG emissions at more than 12,000 sites. We are seeing high interest in the new C3 AI CRM offering, which represents a $120 billion market in 2021. Our best estimate is that the total installed base of CRM exceeds $1 trillion. Many companies have hundreds of millions of dollars invested in their CRM installations that have been highly customized by their systems integration partners, and they are not seeing returns from those investments. We are seeing substantial interest from larger CRM systems integrators in leveraging C3 AI CRM as a complementary addition to their customers’ existing installed CRM systems. This will become a large market and a significant growth opportunity for C3 AI. Let me discuss product innovation. We continue to advance our product leadership in enterprise AI. In Q2, C3 AI announced the launch of C3 AI Data Vision, which we believe represents a fundamental shift in the enterprise application user experience model from today’s clunky forms and table-based approaches to a highly visual, interactive knowledge graph experience. We introduced two new applications last quarter to serve county tax assessors' needs. The new C3 AI applications for residential and commercial property appraisal will be marketed nationally and have broad applicability for state and local governments as well as financial service institutions engaged in mortgage lending. This dramatically accelerates the time to generate accurate, defensible property appraisals with complete evidence packages to support that appraisal if needed. We see this as a significant growth opportunity. Along with C3 AI CRM, C3 AI Ex Machina, and other initiatives, we are aiming to increase revenue diversity. C3 AI production applications showed expanded industry diversification in the quarter, now reaching 14 industries compared to 7 industries a year ago, including notable expansions in financial services, life sciences, healthcare, manufacturing, agriculture, and agricultural instruments. Let me address company leadership. We significantly strengthened our leadership team this quarter with the addition of Lieutenant General H.R. McMaster, U.S. Army retired, to the C3 AI Advisory Board. Adeel Manzoor has joined the Company as Senior Vice President and Chief Administrative Officer. Effective December 3rd, Adeel will also assume the role of CFO at C3 AI. I’m disappointed to announce that David Barter will be retiring from C3 AI for personal reasons effective later this month. He has made substantial contributions to our success and will be missed. Let me discuss our university relations, which is a key strength for C3 AI. We continue to support our university ecosystem through the C3 AI Digital Transformation Institute, which consists of C3 AI, Microsoft, Lawrence Berkeley Labs, the National Center for Supercomputing Applications, UC Berkeley, the University of Illinois-Urbana, MIT, Carnegie Mellon, Princeton, Stanford, and KTH in Sweden. The C3 AI DTI sponsors advanced primary research in AI for digital transformation and holds industry colloquia. I’ll touch on human capital. We continue to attract exceptional talent to the Company. In Q2, we received over 18,000 employment applications and ended the quarter with 668 full-time employees, a 39% increase year-over-year. In summary, C3 AI is a high-growth story, and we are focused on growth attainment. We’ve established a substantial leadership position in the emerging enterprise AI market. The addressable market opportunity is significant, promising to exceed a $300 billion software market by 2025. Our purpose is clear: to establish global market leadership, maintain technology and product leadership, attract and retain top talent, operate a high-performance global enterprise, ensure high customer satisfaction, and establish thought leadership in enterprise AI and ethical AI. I believe our technology foundation is unmatched. Our human capital is exceptional, and our brand equity is growing positively. The enterprise AI market is extensive and rapidly expanding. I believe the growth opportunity for C3 AI is at an unprecedented level, and the Company is well-positioned to achieve a global market presence, which is our goal. With that, I will conclude my comments and turn it over to my colleague, David Barter, to delve deeper into the financial details.

Thank you, Tom. We delivered strong second quarter results that again exceeded our guidance ranges for revenue and operating income. At the same time, our notable increase in backlog helps improve our revenue visibility and provides us with confidence in our outlook for the full year. Revenue was $58.3 million, which is above the high end of our guidance, and it represented an increase of 41% from the prior year. Within revenue, subscription revenue was $47.4 million, up 32% from a year ago. Professional services revenue increased to $10.9 million. Despite the higher proportion of professional services revenue in the second quarter, we continue to target our subscription revenue mix in the high 80% range. Our revenue continues to be well diversified across industry verticals and geographies. Five industry verticals each contributed over 10% of our revenue this quarter. Revenue growth from oil & gas and financial services led the way in Q2. We’re also excited about the growth being generated by sales to federal government agencies, and we expect growth in this vertical to increase meaningfully in the second half of the year. Geographically, we are well diversified. APAC continues to perform particularly well with revenue up 77% in Q2. Revenue from customers in EMEA and APAC represented 28% of our first half revenue. The amendment of our JV with Baker Hughes enhances our backlog and our revenue visibility. The amendment includes several noteworthy improvements. One, it increased the total contract value by $45 million; two, it extended the JV term by one year; and three, a new pricing model makes it easier for Baker Hughes to further accelerate the sales of C3 AI software. Since future revenue from Baker Hughes is now contracted and committed, the majority of the future revenue related to the JV agreement is now included in GAAP RPO. With this in mind, at the end of the second quarter, current RPO was $179.4 million, up 34% from a year ago and 24% from last quarter. Total GAAP RPO was $465.5 million, an increase of 74% from a year ago and 60% from last quarter. Our cancelable backlog, which is not included in GAAP RPO but has historically converted to revenue, was an additional $63.8 million. Combining our GAAP RPO to cancelable backlog leads to a non-GAAP RPO of $529.3 million, up a meaningful 74% from a year ago and 48% from the prior quarter. We believe these are very healthy metrics which further raise our confidence and visibility. As a reminder, revenue associated with the Baker Hughes JV consists of related party revenue contracted directly with Baker Hughes for their own use or as sell-through to their end customers in oil & gas. The related party revenue in the second quarter was $15.9 million. Nonrelated party revenue derived from transactions assisted by Baker Hughes but contracted directly with C3 AI was $4.7 million. In total, this produced $20.6 million of revenue from our JV in the second quarter. With the Baker Hughes JV amendment executed in the second quarter, we expect a related party disclosure to be less relevant due to the change in sales model going forward. Turning to expenses and profitability, I will be referring to non-GAAP metrics, which exclude stock-based compensation expense and the employer portion of payroll tax expense related to stock transactions. A GAAP to non-GAAP reconciliation is provided with our earnings press release. Gross margin in the second quarter was 77.8%, up 150 basis points from a year ago, reflecting leverage in our operating model as our business continues to scale. Subscription gross margin in the quarter was 81%, consistent with a year ago. And professional services gross margin was 63.8% compared to 47% a year ago. Operating expenses were $67.9 million, up 66% from last year as we continue to focus on executing planned strategic investments to drive our long-term growth. Operating loss was $22.6 million in the second quarter, better than our guidance of a loss of $37 million to $30 million. Turning to our balance sheet and cash flows, we ended the quarter with $1.08 billion in cash, cash equivalents, and investments. Operating cash flow was an outflow of $18.9 million in the second quarter. And after capital expenditures of $0.9 million, free cash outflow was $19.8 million. Deferred revenue was $72.9 million at the end of the quarter compared to $82 million in the prior year. Turning to our guidance for the third quarter and the full year. Our amended Baker Hughes JV agreement reinforces our confidence as we look forward. In Q3, we expect total revenue in the range of $66 million to $68 million, representing growth of 34% to 38% from a year ago. We expect to invest thoughtfully in headcount and initiatives that will drive our continued growth and anticipate a non-GAAP operating loss in the range of $30 million to $26 million. For full fiscal year 2022, we are increasing our revenue guidance to the range of $248 million to $251 million, representing growth of 35% to 37%. We now anticipate a non-GAAP operating loss in the range of $108 million to $100 million, which also represents an improvement from our prior guidance. In summary, we’re pleased to deliver second quarter results that exceeded our guidance ranges. We are optimistic about the momentum we are generating in the marketplace, which further supports our outlook for fiscal year 2022. Finally, I’d like to add that it has been a privilege to have been a part of the C3 AI team. I’m very appreciative of the opportunity Tom provided to me and for all his support. Before opening up the call for questions, I’d like to invite Adeel Manzoor, our new Chief Financial Officer, to say a few words.

Thanks, Tom and Dave, for the warm welcome to C3 AI. I’m incredibly excited to be part of the team. The Company has established such a strong strategic position and is off to a great start. I’m looking forward to working with Tom and the team to drive growth and realize Company goals. I’m also looking forward to working with you all. With that, I’ll turn the call over to the operator for any questions that you may have for us.

The first question is from Sanjit Singh with Morgan Stanley.

Thank you for taking the questions. And sorry to see you go, David. Best of luck with all your endeavors in the future. Tom, I wonder if you could talk a little bit about some of the motivations around the restructuring of the contract. The first go-around with Baker Hughes was right smack in the middle of the pandemic. It made a lot of sense to restructure that contract, extend the life of it. What was the sort of motivation this time and sort of the contribution in terms of our new RPO? And then, if you sort of exclude the bookings from that from Baker Hughes, if we just sort of look at the business ex Baker Hughes in the quarter, how would you sort of characterize the bookings performance in the quarter? It seemed pretty good by our numbers. But then, you sort of hinted at a sort of restructuring in the sales force. I’m trying to put these pieces together and understand how did bookings evolve relative to your expectations in Q2.

There are several questions here, so let me break this down. The primary goal of restructuring Baker Hughes was to realign the sales team. Baker Hughes operates approximately as a $20 billion business with four main business units. The core of our relationship with Baker Hughes revolves around their extensive expertise in energy, particularly in oil and gas, process industries, and chemicals. Initially, when we formed the alliance with C3 AI and Baker Hughes, a new unit called Baker Hughes C3 AI was created, which functioned somewhat independently from the main organizations. This meant that they lacked direct relationships, quotas, and industry expertise. Therefore, we restructured to ensure that all sales resources and quotas were integrated into the operating units of Baker Hughes, where the actual relationships reside. This restructuring also provided them with enhanced pricing flexibility, allowing them to adjust prices in accordance with their business segment. In exchange for this flexibility, they committed to providing us with a nonrefundable revenue guarantee. This amounts to $357 million over the next 3.5 years, providing us a solid foundation to build upon. I believe this decision benefits C3 shareholders. Regarding the sales organization, we initially attempted to create a traditional, hierarchical business unit sales team, similar to those at SAP or IBM, aimed at independently scaling the business. However, I think we launched this too soon. We monitored it closely, and it became clear that it wouldn't meet the Company’s growth needs. Consequently, we reverted to our established strategic selling model, a method we know works well. Implementing this change took about two weeks, and now everything is in place and operational. Based on current observations, it was definitely the right move. We have good visibility for Q3 and a strong pipeline for Q4, so we've adjusted our course and are back on track.

I appreciate all the color on that. That’s super helpful. One more if I might, and this is only sort of partnerships go to market. So, I think you called out a number of them, but the one that sort of perked my ears was Google Cloud and Microsoft. What’s driving the momentum behind that partnership? Is it one of the specific apps you guys did? Is it the CRM app that’s driving a lot of the go-to-market collaboration around that particular approximately, or is it the broader platform or even a whole host of other apps? If you can sort of give us some color or the momentum between Microsoft and Google Cloud, that would be really helpful.

It’s really different between the two. I would say that if you look at the DNA between the Microsoft sales organization and the C3 sales organization, they’re actually very similar. These people are really highly professional experienced enterprise sales professionals. They understand how to approach accounts together, how to address opportunities together. That has been a hugely successful relationship. Their motivation is to drive Azure. Now, Google approached us from a different perspective. Thomas Kurian took over Google with very few salespeople and has built a strong sales team and focused on approaching the hyperscaler market through the application layer and delivering a family of applications for various industries. The net effect is it accelerates the sale of Azure and Google Cloud. If you were in the market and you wanted to partner with somebody that has several turnkey enterprise applications that run on top of the Google Cloud, I would argue this is a great opportunity. And that’s the relationship we put together, and now we’re jointly selling these applications globally. It’s a productive relationship.

Thank you, Mr. Singh. The next question is from the line of David Hynes with Canaccord.

Hey, guys. This is Luke on for DJ. Thanks for taking the questions. So, you called out in your prepared remarks a fairly significant uptick in professional services revenue in the quarter. Could you just expand there and discuss what drove that dynamic? Is that just a reflection of new large customer relationships ramping, or is there anything else to call out there?

It’s a great question. There’s really nothing specific to call out. Our subscription revenue over time has averaged 86%, but it’s moved around 5 or 6 points in any given quarter. This just has to do with the timing of projects and deliveries.

So, you can expect that professional services will stay in the 14% to 20% range of revenue in perpetuity. And that’s kind of where we have it targeted.

Got it. That’s helpful. And then maybe just another on sort of the government opportunity out there. You obviously had a big quarter in terms of signing new contract value with those three agencies you called out. Do you feel like there’s fruit to be had there, or how would you characterize that opportunity going forward? Thanks.

I think that opportunity is huge. And I think we’ve had General Ed Cardon join us as Chairman of Federal Systems and H.R. McMaster has now joined us. You can expect some significant announcements going forward. We’re quite confident that our business in federal, particularly defense and intel, is going to grow at a substantially increased rate in the second half of this year.

The next question is from the line of Jack Andrews with Needham.

Tom, you talked about the continued need for a high-touch sales approach. I was wondering if you could tie that into just the overall state of the market here. I mean, there’s so much noise around AI in general. Do your customers understand the concept of enterprise AI and all the use cases, or do you still need to spend time evangelizing the value proposition of everything that you can deliver to customers?

Great question. Right now, our pipeline that we’re working for the second half of this year is about $800 million. We are looking at a market that is in the first half of the first inning in enterprise AI. People are just starting to figure it out. We’re not really spending much time evangelizing. It’s all about finding customers that are committed to transforming their organization and have decided not to build it themselves. Once we find that customer, we qualify them. Before it’s all over, everybody will be in that third sector. It’s just an evolution the market has to go through, and we’re not concerned about that.

Got it. Thanks for the color. That’s really helpful for me. Maybe just as a follow-up question, just given the sales changes that you’ve made, could you maybe update us in terms of your hiring plans and priorities for the balance of the fiscal year here?

Well, we had 18,000 job applicants in the last quarter. So, we’re hiring across various positions, and we feel very fortunate about the people that we’re able to attract and retain.

The next question is from the line of Michael Turits with KeyBanc.

This is Michael Berg on for Michael Turits. You called out strength in APAC. I was wondering if you could dive into that a little bit, and then compare that to what you’re seeing in EMEA?

Certainly. APAC was up 77%. The strength has been seen in financial services, oil and gas, and some chemicals. It spans a number of industry verticals.

And then, if I could just get a quick follow-up. Is there anything you’d comment on the billings sequential change, any timing or just strange seasonality around that?

I don’t think so. Overall, when thinking about billings, things have been very strong if you're going back over the past quarters. Acknowledging that there may be some movement around invoicing that affects how that flows through the P&L.

The next question is from the line of Brad Sills with Bank of America.

I wanted to ask about some of the newer vertical industries that you’re going after: life sciences, manufacturing, IT services. Did you kind of expand into these other verticals? What kind of traction are you seeing there? Any color on perhaps applications that you’re seeing some early pilots with, and what pipelines look like potentially in those industries?

Hi Brad. I wish I had all the pipelines in front of me. Financial services are going to be huge. We're entering agriculture, insurance, telco, and precision medicine. These markets are just beginning to develop. We’re pragmatically targeting them, and there’s significant upcoming opportunities.

Great. Thanks. And then also, if I could ask about some of these vertical partnerships, FIS, ENGIE. If you could elaborate just a little bit on the commitment there, go-to-market resources, any traction you’re seeing in those partnerships would be really helpful.

ENGIE is mature; we're seeing a lot of traction. They’re using our technology to provide energy services and help customers reduce their energy and carbon footprint. FIS is relatively new, and while there’s been slow but steady progress, we’ll know more over the next two quarters. Raytheon is also a good partnership; they're involved in large defense projects with us.

The final question is from Mark Murphy with JPM.

So, Tom, I was curious. When you look back on it with a few more quarters under your belt, what is your preferred route to market? Is it selling directly, or is it working with application vendors?

Great question. It’s easier to work directly with customers, as you have control over the situation and can influence their projects. However, establishing market leadership relies on leveraging distribution partners to increase scale. The good news is that more partnerships lead to more market leverage. It’s a balance we must navigate.

Okay, I understood. Thank you very much.

Thank you, Mr. Murphy. There are no additional questions waiting at this time. I will now turn the conference back over to Tom for any closing remarks.

Okay, ladies and gentlemen, thank you so much for your time and attention. We look forward to keeping you posted on the progress of our business; our mission is clear: to establish and maintain market leadership in enterprise AI. If we do that, C3 AI will be a successful company. Thank you all very much.

That concludes the C3 AI Second Quarter Fiscal Year 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.