To The Moon

Get to know C3.AI by Q&A!

It took only 2 months for ChatGPT to achieve 100 million users, which made market insane on AI. Since OpenAI, parent company of ChatGPT has not been listed, investors are persuing C3. AI whose ticker is simply "AI" .

How did C3.AI get this AI code?

Generally, companies will apply for "symbol reservation" with the exchange in advance under the conditions of listing, spin-off, SPAC listing, code change, etc. Managed by National Market System Symbology Plan for the selection and use of 1-5 character root symbols, as governed by ISRA, the Intermarket Symbols Reservation Authority. The issuer must reasonably expect to use the symbol within 24 months of reservation.

C3. ai obviously made a clever chose.

What kind of company is C3. AI?

C3. AI is an enterprise AI application software company, providing a series of fully integrated products. Its C3 AI application platform is an end-to-end platform for developing, deploying and operating enterprise AI applications. Its C3 AI application is an industry-specific SaaS enterprise AI application portfolio, which enables the digital transformation of global organizations.

What are the customers of C3. AI?

At present, the company has built a series of 42 enterprise applications to provide predictive analysis for natural gas, utilities, health care manufacturing, aerospace, defense intelligence and other industries.

The reason why customers are concentrated in these industries instead of software and consumer industries is that companies (customers) in these industries prefer to use off-the-shelf applications instead of building their own AI applications.

In other words, Service provided by C3. AI are not universally unique. Big techs tend to self-research, while other companies more efficient to buy from others.

What is the relationship between C3. AI's new products and ChatGPT?

The C3 Generative AI product suite launched by the company at the end of January includes C3 Generative AI for Enterprise Search for Enterprise Search.

The C3 Generative AI Product Suite integrates the latest AI capabilities from organizations such as Open AI, Google, and academia, and the most advanced models, such as ChatGPT and GPT-3 into C3 AI’s enterprise AI products

In other words, C3. AI plays an "intermediary"  role to these cores products.

Of course, the embedded suite of these AI applications will inevitably accelerate the ability of customers to utilize these models in their value chain.

How does C3 AI make money?

C3. ai was founded in 2009, firstly by selling software, and then, like other software companies, turned to "subscription" aka, SaaS mode.

In addition to the basic services of direct subscription, the company also has Professional Service for non-users, which accounts for about one sixth to one fifth of the revenue.

How's C3. AI's performance?

C3. AI has changed its income mode from subscription-based mode to consumption-based mode, so needs to provide more pilots to satisfy users, which is also the key to future performance.

In 23FQ2 ended in October 31st, the company added 13 new pilots, beats the previous expectation of 5.

In terms of the number of customers, 23Q2 added 8 customers, reaching 236.

At the same time, the gross profit of previous trials and pilot combinations has been declining for 22 years, and the cost of ensuring customers' success in the early participation stage is higher.

Operating margins have also gone up in recent quarters, as well as a shift in pricing models, sales staff spending is also key. Due to the transition of consumption-based pricing model, the short-term situation of the company is complicated, and the performance in the next few quarters will be unstable. This trend is expected to end in mid-2024.

C3. Gross profit margin of AI

What are the weaknesses of C3. AI?

1. Huge operating losses, and no hope of profit at present

The explosive growth of most SaaS companies before 2021 has been recognized by the market and is popular. Although the vast majority of companies have recorded large operating losses, this is acceptable as long as it can effectively generate potentially sticky revenue growth.

However, the monthly revenue growth rate of C3. AI has been declining since 2022. The revenue of 23FQ2 has increased by only 7% year-on-year, and it is expected to be-8% in the next quarter.

The operating profit rate of 23Q2 is-118%, of which R&D expenditure accounts for about 80%, and stock compensation accounts for a high proportion, so even if the stock price rises in the future, shareholders' equity is likely to be diluted.

Whether it is due to the change of income structure or the blow of macro environment, this growth rate obviously cannot meet the market expectation of an AI SaaS company, so the company's share price has dropped from the highest $200 after IPO to the lowest $10 by the end of 2022.

2. Revenue depends on big customers

C3. AI has a high customer concentration, and about 32% of subscription revenue comes from related parties, most of which comes from $Baker Hughes(BKR)$ . At the same time, customers in many industries have close relations with the government.

C3.ai’s sales teams are currently actively co-selling to over 300 accounts globally. Bookings diversity continues to improve, with the Federal, aerospace and defense sectors performing well.

What is the valuation of C3. AI?

Within the surge, the trailing 12 months of PS reached 13.2 times, far beyond peers average of 5.1

If the annual revenue in fiscal year 2023 is finally US $260 million (corresponding to a year-on-year growth rate of 5%), the growth rate in 2024 will reach 30%, and the revenue will be US $340 million.  current market value is $3.03 billion, which means the PS is still as much as 10 times.

It is overvalued now.

What does surge of C3. AI mean?

Obviously, the theme of hype AI is capital interest, which is the same as metaverse, blockchain and NFT before. Compared with them, C3. AI has more specific business and corresponding technology support.

However, it is inevitable that it will eventually become a meme stock, and going through a wave of madness.

After that, performance decides.