Specialist
Former Group VP at C3.ai Inc
Agenda
- C3.ai’s (NYSE: AI) operating environment and competitive dynamics across Palantir Technologies (NYSE: PLTR), Alteryx (NYSE: AYX), Dataiku and others
- Macroeconomic impact on CAC (customer acquisition cost), RPO (remaining performance obligation) deceleration and risks and opportunities related to C3.ai’s transition to consumption pricing
- Product roadmap and key opportunities for end-to-end vendors of AI and machine learning products, including platform products and verticalised solutions
- Growth outlook, adoption trends given TCO (total cost of ownership) and path to non-GAAP (generally accepted accounting principles) profitability by the end of FY24
- Industry consolidation, M&A opportunities and 2023 outlook
Questions
1.
Could you describe C3.ai as a company, including its value proposition, core offerings and use cases across its application platform, applications and Ex Machina products?
2.
What are the differences in C3.ai’s three product categories? Could you provide any rough estimate for the revenue contribution of each of these offerings?
3.
Could you highlight 2-3 key trends impacting C3.ai or that will soon impact it?
4.
The global AI market size is projected to grow to USD 1.394tn in 2029 from USD 387bn in 2022 at a 20% CAGR. C3.ai CEO Tom Siebel recently estimated the company’s TAM to be nearly USD 600bn. How should we think about sizing TAM for the company across the key markets it participates in? What’s your estimate of the assessment for it?
5.
C3.ai recently shifted its business model from subscription- to consumption-based. As a result of that transition, revenue growth has slowed to just 7% at USD 62m as of Q2 FY23. Management reported that the transition to the consumption model is now complete, moving it to its second stage. However, decreased growth is likely to continue for a few quarters. How do you characterise the company’s growth in this transitory period? What are the most serious execution risks as it’s trying to move over to consumption?
6.
Could you expand on the shift to a consumption model, given the market interest around this right now? On what timeline is that likely? What is the opportunity to drive consumption based off of C3.ai’s products and where do you see that opportunity as greatest?
7.
In C3.ai’s previous subscription model, its largest spend was on the application platform with applications themselves being less expensive comparatively. Moving to the consumption model, might there be areas where enterprises may no longer be interested in continuing to create applications, given the spend is more heavily weighted towards applications? Are there any areas that perhaps were less business-critical or delivering lower ROI that may no longer be of interest to these companies?
8.
What are your expectations if we enter a recession in 2023 and 2024? How could this impact C3.ai? Might moving into a recession expose the company to reduced consumption and is there any area in particular you would anticipate that?
9.
How sticky are C3.ai’s products? What are the most common reasons cited by customers related to churn?
10.
In C3.ai’s recent earnings, it was reported that gross margin fell 122bps to 76.6%, primarily due to a higher mix of trials. Could you discuss the opportunities to drive down CAC [customer acquisition cost] and how this varies by SMB and enterprise, given the introduction of consumption pricing?
11.
Is C3.ai doing a good job at gaining traction with its no-code offering, Ex Machina? Why or why not?
12.
What should we expect from C3.ai’s product roadmap? Are there any gaps or inadequacies in the company’s offering that customers or prospects were mentioning?
13.
Could you describe C3.ai’s competitive positioning and differentiation vs Palantir? When C3.ai wins or loses vs this competitor in a head-to-head comparison, what are the 2-3 primary factors driving that outcome? What would your estimate of win rate be?
14.
Could you describe who you see as C3.ai’s primary competitors in the market and the company’s differentiation and positioning vs them?
15.
As C3.ai attempts to move downmarket, do you believe it sees machine learning and analytics vendors such as Databricks, Dataiku or DataRobot as posing a threat, and why or why not?
16.
Could you describe C3.ai’s competitive positioning differentiation vs Alteryx? How often would the company run up against Alteryx in the market and what is your perception of its positioning?
17.
What’s your opinion on the competition posed by hyperscalers as they continue to build out their own AI platform offerings? GCP [Google Cloud Platform] has been in the news recently for developing a number of machine learning offerings that seem to at least somewhat overlap with what C3.ai does.
18.
Do you have any additional commentary on the competitive risks posed to C3.ai, its current positioning or any potential competitors we haven’t yet mentioned?
19.
C3.ai’s revenue by industry verticals seems to be diversifying away from O&G [oil and gas], primarily towards federal aerospace and defence, however O&G still makes up a very sizeable percentage. How do you characterise the changing mix of primary customer verticals? Are there any end markets or adjacent market opportunities for the company to pursue growth?
20.
C3.ai and Booz Allen Hamilton recently announced a strategic alliance to accelerate adoption of enterprise AI by federal agencies. There have also been a number of recent wins in this area. How large do you see the federal market opportunity for the company?
21.
Do you have any analysis on the risks related to US federal budgets for C3.ai as it moves more into the segment?
22.
How would you characterise C3.ai’s revenue split or mix across customer segments? As revenue mix shifts to SMB, given the company’s consumption model and Ex Machina use cases, how do you see SMBs revenue mix evolving?
23.
How does pricing and TCO [total cost of ownership] factor into customer purchasing decisions? How would you describe the customer perception of the company’s TCO relative to peers’?
24.
What’s your outlook on industry consolidation and your view on C3.ai as a potential take-out target?
25.
What’s your view on acquisition opportunities for C3.ai in the mid-to-long term? What company profile would represent an attractive M&A target and why?
26.
What would you say are C3.ai’s 2-3 top spending and investment priorities?
27.
Can you comment on C3.ai’s sales team efficiency? Does the company have the right headcount incentive and quota mix to support future growth?
28.
Do you have any other thoughts on C3.ai’s recent financial or operational performance? Was there anything that surprised you or that you found particularly noteworthy?
29.
What is the importance of C3.ai’s cloud partnerships in other channel and reseller partnerships? What share of revenue is being generated through the channel or indirect sales?
30.
C3.ai expects to be operating profitably by the end of FY24. What’s the biggest risk in achieving that goal? What’s the biggest opportunity if successful? Do you have any other commentary on this announcement?
31.
What are your thoughts on C3.ai’s management team, its current strategy and the corporate culture?
32.
C3.ai is in a very interesting position in the market. The market itself is starting to turn greater interest towards AI solutions, and the company seems to be well-positioned here. What are your concluding thoughts on where it is today, its future opportunity and anything else you’d like to share that we haven’t yet covered?
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