Third Bridge provides integrated research solutions for the world’s top investors and business leaders. Our expanding suites of products can help you drive change, putting crucial insights, value chain maps and experts at your fingertips.
The following transcript is generated from Third Bridge Forum, the biggest archive of high-quality expert interviews in the world, providing investors with critical knowledge to make smarter and faster decisions.
Submit your details to gain access to our premium content. If you would like to discuss our coverage of companies and sectors and how we can help you move faster and with greater conviction, please contact us today.
Specialist
Former VP at C3.ai
Agenda
- C3.ai’s overall operating environment including operational and leadership challenges
- Sales challenges, traction via cloud partnerships and demand outlook amid AI adoption tailwinds and macroeconomic headwinds
- Competitive dynamics across Palantir (NYSE: PLTR) and others as well as co-opetition with cloud vendors
- Consumption model transition and customer segment diversification
- Trends in technology, product roadmap and impact of generative AI
Questions
1.
Could you provide an overview of C3’s generative AI? Generative AI and ChatGPT are being introduced into C3’s platform, which is a departure from C3’s roots in more inferential or classic AI. What are your general thoughts on C3’s market opportunity with the generative AI boom?
2.
On 6 September, C3 released a new generative AI suite, and 140 qualified leads in gen AI were mentioned by management. The company has revised its guidance for attaining profitability, given the strategic pivot and capital needs for R&D, marketing, lead generation and customer success. Management maintains C3 has a significant advantage in this new market. How do you expect market adoption of C3’s generative AI suite to evolve over time, given how crowded and complex this growing market is becoming and C3’s position within that market today?
3.
That opportunity you’re characterising is more services-led, is that for this new generative AI opportunity for C3 specifically? Is this where C3 fits into the broader landscape when a customer is deciding what kind of vendor to approach?
4.
C3 generative AI is now available on AWS Marketplace and Google Cloud Marketplace. How will co-opetition evolve with the large cloud vendors, given the desire to drive compute vs the degree of competition from C3’s offering?
5.
Do you have any additional details on why the AWS relationship has been hot and cold? Do you have any thoughts on where it is currently?
6.
C3 closed 32 agreements during Q1 FY24, a 43% close rate, of which 20 were with partners. C3’s qualified pipeline with cloud partners grew by 61% from Q4 FY23 to Q1 FY24. What’s your impression of how partner-led and cloud-partner-led new logo growth is evolving?
7.
Where do you believe new agreements should have been for that quarter? Again, 32 were closed, 20 were closed through partners. What do you think would have been a rate that would indicate more success, or a number that would indicate more success at this point in time?
8.
What do you expect a post-pilot retention rate would be? Would it be 50%, or higher than that?
9.
The Baker Hughes partnership has had some sales challenges. A report flagged concerns around less transparent methods for counting sales team members at the Baker Hughes partnership and so on. What are your thoughts on the strength of that partnership and any challenges that have been faced in trying to sell through Baker Hughes?
10.
We’ve heard C3 has had some important challenges selling its product, given the complexity of the product and high cost of sale. The consumption model would alleviate some of this and sales cycles have decreased from around 13 months a few years ago to around four months now. What sales challenges do you believe C3 is facing and which are persisting today?
11.
Could you provide more details on C3’s operating model and operating environment? Are there any dysfunctionalities or any other inefficiencies that may be the subject of change in the future?
12.
Do you have any rough estimates of yearly attrition and an involuntary attrition rate?
13.
Do you have any thoughts on any of the public short reports that have been published around sales challenges or C3’s accounting practices?
14.
Could you talk about the value customers are seeing from C3’s product? C3 has some large lighthouse customers that are pulling ROI out of the product. Given the difficulty of sale and how intensive it is to deploy C3’s product through services, do you view this as being a persisting challenge for the company as more vendors start to enter the AI and AI services space?
15.
Q1 FY24, total revenue was USD 72.4m, a 11% growth YoY. Q4 FY23 revenue was USD 72.4m, just off by a few points, and Q3 FY23 revenue was USD 66.7m. FY24 guidance is 11-20% growth. How would you characterise C3’s recent performance considering the challenges you alluded to?
16.
FY24 guidance is 11-20% growth. What is your FY24 growth expectation?
17.
Do you have a rough estimate for the FY24 growth rate, you mentioned the lower end of that?
18.
Regarding growth contribution, what are your expectations on a split between net new logo and expansion revenue?
19.
What are the impacts of the macroeconomic climate on growth? How do you view that mixing in?
20.
Subscription revenue was USD 61.4m in Q1 FY24. How is the consumption model transition evolving? Are customers on track with increasing consumption? Do you expect consumption growth to be slower than expected?
21.
Generative AI pilots and trials have a greater industry diversity than C3’s revenue base and total new pilot diversity, but total new pilots are becoming more diverse also. How do you see vertical diversification trending at C3? Are there any verticals you would highlight as well-positioned for growth?
22.
Palantir is attempting to move towards a self-service offering in the commercial market, getting closer to C3’s typical market. Could you describe C3’s competitive positioning and differentiation vs Palantir today?
23.
Do you have a rough approximation of a win rate between C3 and Palantir when the vendors are up head-to-head and in evaluation?
24.
Are there any other competitors who represent an important competitive threat to C3 now or in the near future?
25.
Are there any other vendors that C3 is consistently seeing in evaluations that are showing up?
26.
Are there any acquisition targets that C3 could be considering? Do you view the company as an acquisition target and for what kind of acquirer?
27.
Do you have any further comments you’d like to share on C3?
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
