Thomas Siebel: Let me comment on the nos. The no wasn’t that the pilot wasn’t successful. Okay. The no because I know exactly what they are and they are hugely successful. That said, what happened is the genius CIO went to the CEO and said we’re going to build this ourselves out of a bunch of tinker toys, so let him go do that. He’s going to go through that for about two years. They’re not going to be able to resolve their cyber security problems, their IP infringement problems, they’re going to have data exfiltration problems, they’re going to have random answers and they’ll be back. So the sales cycle there was just a little bit longer than we thought. They’re not lost. They just — they’re just suspended. Sorry, could —
Noah Herman: No. I appreciate that, appreciate the clarity. And just a quick follow-up on the gross margins. Just any way to kind of help us with our model going forward in terms of how to think about gross margins, I know you laid out your commentary about this quarter’s impact, but just any additional thoughts there would be helpful for the year?
Juho Parkkinen: I mean, I think, Noah, the punch line is that we are still expecting some margin pressure on it and as there is going to be more pilots, it’s going to be margin pressure until the consumption becomes a more dominant portion of the revenue stream, which would then offset it and start picking up that margin, so continue to expect some pressure still on the gross margin.
Operator: Thank you. One moment for our next question. Our next question comes from Sanjit Singh with Morgan Stanley. You may proceed.
Sanjit Singh: Thank you for taking the questions. I had one for Tom and one for Juho. Tom, what’s the vision around sort of multimodal? I know there’s a lot of interest around the language models that as you think about the different diffusion models, video, audio, image, what’s the — what’s the vision around supporting those types of models if multimodal becomes the dominant deployment architecture for enterprise AI?
Thomas Siebel: Are you talking about data, Sanjit? I’m not sure I understand the question.
Sanjit Singh: Yeah, what I was referring to is like obviously like the GPT models or language models and they’ve taken the world by storm, but there other AI models that deal with image, audio, video with other sources of data as we think of —
Thomas Siebel: So you are commenting on the fact that these large language models tend to be almost exclusively limited to text, HTML, and code. So other sorts of data they don’t know how to ingest. Okay, good, good. So let’s talk about this. We are the Masters of the Universe at ingesting what you call multimodal data images, okay, images from space, trajectories of hypersonics, high-speed telemetry, trading volume, the rate at which electrons are going across the grid, enterprise data free text, and so we’re using our standard architecture to ingest those data. We’re using one of our standard deep learning models to basically parcel this data and store all the relationships in a vector data store, okay. All the large language model we’re using for is interacting with you and me to handle the natural language, to understand what we’re saying and it takes the answer back from the data and give it to us in pros rather than some gibberish that might be spewed out of SAP.
Sanjit Singh: Right. It makes perfect sense
Thomas Siebel: That is one of the reasons why people find our generative AI solution attractive as we’re tried, tested, and proven at ingesting any kind of data they can think of.
Sanjit Singh: Understood. And then the question for Juho is if I sort of look at the presentation and we sort of look at where we are in the sort of transition Phase 1, Phase 2, it sounds like we’ve just started sort of Phase 2 and the glass sort of implies that we’ll put to get to revenue neutral by seven quarters in, we’re about four quarters in and then revenue accretive about eight quarters in, so about three or four quarters away, is that still the timeline should we should be thinking about in terms of revenue acceleration, any color around that would be hugely helpful.
Juho Parkkinen: So, Sanjit, the chart that you’re looking at, I think you should think about this as a kind of per-customer basis, right, like it’s not necessarily the entirety of how our business is going, but the idea is that as we now have some of the regional early pilots from last year’s Q2 and Q3, they’re starting in the Phase 2 category. And as I mentioned on my prepared remarks, we have preliminary data on actual VCPU consumption for that first three quarters and it’s slightly above what we’ve modeled before. So we are in this fourth quarter of the transition and we are starting to see some very positive indicators with respect to how the consumption will run for these consumption-based deals.
Sanjit Singh: Got it. I appreciate the context. Thank you.
Juho Parkkinen: Thank you.
Operator: Thank you. And we have time for one final question. Our final question comes from Michael Turits with KeyBanc Capital Markets. You may proceed.
Eric Heath: Hey, thanks for taking the question. This is Eric Heath on for Michael. So I wanted to ask on Baker Hughes, two-part question, just one of you can give us some color on what changed with the relationship that they are no longer considered a related party? And then secondly and I hope this isn’t too nuanced, but if I take that $16.5 million of Baker revenue contribution for two months in the quarter and kind of extrapolate that out for an additional month, I get about $24 million versus what we’re thinking of around $20 million, so I guess my question is how did the Baker Hughes contribution in the quarter compared to your expectations and anyway to understand how the non-Baker Hughes did relative to your guidance. Thanks.
Thomas Siebel: First of all, Baker Hughes is not a related party because they monetize some of their stock. Remember they bought some stock some time ago for about 3 bucks and they sold it for I forget what the rough number was. It could be half by a buck or 2, I don’t know but for nothing and they sold it for a lot, so it’s pretty darn good trade. And today, because they own less than 5% by definition they no longer related party. As it relates to the Baker Hughes revenue, you should actually know that, didn’t we provide that in the memo, in other words — that we wrote like three quarters ago. I mean it’s — I’m sorry, I forgot to ask the question.
Juho Parkkinen: What was your name?
Eric Heath: Hey, Tom, it’s Eric from KeyBanc.
Thomas M. Siebel: Okay. We were actually — it’s on our website. It’s on our IR site. You’re going to be able to see what the minimum Baker Hughes revenues is. We provided that in great detail and it’s on the IR site.
Eric Heath: Anyway to just kind of quickly frame how it wasn’t that quarter relative to your expectations and contribution. Sorry, it’s something that I forgot about.
Thomas Siebel: Exactly what we expected.
Juho Parkkinen: That’s right.
Thomas Siebel: Exactly what we expected.
Eric Heath: All right. Thank you.
Juho Parkkinen: Thank you.
Amit Berry: I guess that was our last question. Ladies and gentlemen, so, Tom and Juho are out. Thank you for your time. Thank you for your attention and we look forward to providing an update at the end of our second quarter. So thanks a lot. Stay tuned and hopefully we’ll have some exciting things to report.
Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.
