Specialist
Former VP at C3.ai Inc
Agenda
- C3.ai’s (NYSE: AI) overall operating environment and competitive dynamics across Palantir (NYSE: PLTR) and others, as well as co-opetition with cloud vendors
- Acceleration of market adoption of AI capabilities, applicability of generative AI and C3.ai’s positioning as a leading AI platform
- Growth outlook as C3.ai diversifies out of O&G (oil and gas) into defence and other verticals
- Consumption pricing model transition, operating environment and outlook amid macroeconomic volatility
- Recent short report raising issues around sales challenges, partnership friction, management problems and turnover
Questions
1.
Could you describe C3.ai and any relevant changes that have been occurring at the company?
2.
C3.ai’s total revenue for Q3 FY23 was USD 66.7m. That exceeded a guidance of USD 63m-65m. The company said it expects Q4 revenue to be between USD 70m and USD 72m. What’s your reaction to its recent performance and guidance, given the current revenue dip as it’s experiencing a transition to the consumption model that you outlined?
3.
In recent earnings, C3.ai said it had a pipeline of 290 qualified pilots. The company’s total customer count, however, was only 236, which it grew by 13%. You mentioned customer count growth as being somewhat flat. What are your expectations for new logo growth velocity, given the pipeline seems to be very large when compared to the current customer count?
4.
On the one hand, you mentioned that C3.ai’s pipeline is being strengthened by cloud partnerships. On the other hand, there is a coopetition element with cloud vendors, and a recent short report said this could be a serious area of risk for the company. Would you agree that the risk here is high, or do you think that whatever C3.ai is bringing to the table will have some lasting stability, whatever that might be?
5.
Regarding customer count growth out of the cloud partnerships, is there anything you would be looking at closely in terms of how this growth is trending, given the risk of the coopetition?
6.
How confident are you in C3.ai’s ability to verticalise faster than the cloud vendors?
7.
The recent short report I referenced mentioned renegotiated and reduced contracts with the Baker Hughes partnership. Is there anything about C3.ai – whether it be the offering or what the company is delivering – that you think may have been the reason for why there has been fewer users than Baker Hughes hoped for?
8.
There has been effort to try to make the sale easier with the consumption pricing, among other things. The short report I referenced also mentioned that the sale is going to be increasingly difficult in the middle market. What is C3.ai doing to make that sale easier, and do you think the transition will have an effective impact?
9.
We’ve typically heard that Palantir is the most similar competitor to C3.ai, but how is competition playing out with Databricks, DataRobot and Dataiku? Are these vendors coming up in direct bake-off situations or are they just incumbent and already being used by customers that decide not to go with C3.ai?
10.
We’ve typically heard that C3.ai is closer to an enterprise application SaaS-type company. Palantir is more of a services-oriented company, as you said, but it’s trying more of a self-serve model, which seems to imply to some extent that C3.ai made the better decision, at least for where the market is moving now. How would you say C3.ai and Palantir are positioned to grow in the commercial market where this type of self-service model is more preferable?
11.
When C3.ai and Palantir come up in a bake-off situation, what’s driving a win or loss for C3.ai in the commercial market?
12.
You mentioned TCO [total cost of ownership] as the primary driver in a bake-off between C3.ai and Palantir. How would you compare the two in terms of one being a percentage more or less than the other?
13.
Could you estimate a win rate between C3.ai and Palantir in the bake-off scenario?
14.
Do you have an approximation of a win rate in the government vertical? C3.ai has tried to move more into this market.
15.
You mentioned Databricks as a primary competitor, more so than AI-type platforms. How often would C3.ai find itself in a formal RFP [request for proposal] or bake-off situation with Databricks?
16.
Given it’s not a one-to-one comparison, do customers have a good sense of TCO for Databricks vs C3.ai? If so, how does that match up?
17.
I’d imagine this conversation is going on with a prospect where there is some kind of move for enterprises to try to consolidate their platform and understand that the value will be demonstrated differently and it’s going to come across as more pricey. Is that kind of messaging salient with customers or is C3.ai’s perceived higher price vs that of a player such as Databricks a persistent issue for the company?
18.
I’ve heard H2O.ai characterised as having a good, almost first-mover advantage a while ago, but it’s not innovating well and is being stuck on revenue with its current customer base, which is very sticky. How sticky are C3.ai’s products? If, in a worst-case scenario, the company gets out-innovated, will it be able to hold on to the large enterprise customers?
19.
Could you estimate a gross retention rate for C3.ai?
20.
Looking at other opportunities, C3.ai is moving out of O&G [oil and gas] towards defence, among other verticals. Do any verticals come to mind as being the best future opportunity for the company?
21.
We saw Oracle try to move into the healthcare space with the June 2022 acquisition of Cerner, and I think a large part of that had to do with potential AI deployments. Is there any partnership or anything else you might expect from C3.ai to move further into the healthcare vertical?
22.
You mentioned ChatGPT a few times. With the hype around generative AI, there has been a lot of interest in this space. C3.ai is somewhat uniquely positioned, at least as far as branding would have it, to be one of the only pure-play AI companies today that’s public. It was recently announced that there have been some ChatGPT integrations at the company for accelerating search. Could you help us separate the hype from reality for how generative AI will impact C3.ai, whether it be simply integrations for UX and UI or something around generating new revenue streams?
23.
Could you discuss the macroeconomic headwinds facing C3.ai and how you think the company is being affected? It has a desire to increase its customer count, given its transition to a consumption model, which can be exposed to more volatility in a tight macroeconomic climate.
24.
Could you estimate how growth breaks down between new logo and expansion revenue for C3.ai?
25.
Could you estimate a decrease in growth in the macroeconomic climate as a percentage?
26.
Let’s turn to C3.ai’s 13% customer count growth. Where do you think that growth should have been?
27.
In a recent auditor note, there were some questions around C3.ai’s recent financial and operating performance and some confusion around disclosures that were referenced. Do you have any comment on either the report or the company’s general performance recently? Do you think there might be any trouble in terms of how it’s operating?
28.
What is your assessment of C3.ai’s executive leadership team and its strengths and weaknesses?
29.
Do you have any comment on the current cost controls at C3.ai given the macroeconomic climate? Is there any area where you expect further cost controls, lay-offs or any other factors?
30.
Do you see C3.ai as a potential acquisition target? Do you have anything else to add on the company?
31.
Is C3.ai doing a good job of gaining traction for Ex Machina or is it having challenges here? This was mentioned as a potential issue in the short report.
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited