The best way to think about C3s performance is through “Remaining Performance Obligations”, or RPOs.
RPO shows how much outstanding revenue C3 has to collect from deferred / non-cancelable contracts.
As of Oct. 2020 C3 had $267M in RPOs
14/ C3 Financials
C3 had -$70M OI on $157M in revenues
This makes sense as they spent 60% of revs on sales & marketing. Then another 40% on R&D.
These % should decline over time, showing operating leverage.
They also have $114M in cash vs. $121M in liabilities on BS.
15/ IPO Potential Pricing
C3s offering 15.5M shares at $31-$34/share. That brings total shares to ~97.4M.
At $31-$34/share you’re looking at an estimated market cap of $3B – $3.3B and ~$2.9B EV ($109M net cash).
Or 19x sales … Welcome to 2020
But let's think 5-10 years out.
16/ What Does C3 Look Like In 2025?
The company’s grown revenues at a 94% CAGR since 2017.
If we assume the company grows revenue at a 50% CAGR for the next five years we get $1.4B in revenues by 2025.
Will it get there? Who knows.
17/ Thinking About Valuation
At $1.4B that’s ~2.15x EV/Sales for the following:
- Fast-growing
- First-mover
- High switching cost business
- Led by one of the sharpest founders in the game.
Given some SaaS valuation, a 5-7x multiple on sales seems cheap. Yet thats $7-$10B
18/ Risks
There’s a few main risks:
- Execution risk from Siebel (voting power)
- Customer concentration (should reduce over time)
- No brand recognition (vs. AMZN or MSFT offerings)
- CIOs developing in-house versions of platform (more expensive/time consuming)
19/ Concluding Thoughts
C3 has everything we want in a high conviction bet:
- A+ Founder/CEO with ample skin in the game
- Fantastic culture
- Dedicated Employees
- High switching cost product
- Pick-and-shovel business for a massive digital transformation
Thanks for reading!
20/ While you're at it, give @TomSiebel a follow and let him know I want to get him on my podcast :)
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