1/
I'm not sure about this C3.ai one.
Just because it got the "AI" ticker doesn't mean it should be up 124%!
The last 4 quarters (in mils):
$41.0
$41.6
$40.5
$41.3
Pretty much 0 sequential growth in almost one year...
I'm not sure about this C3.ai one.
Just because it got the "AI" ticker doesn't mean it should be up 124%!
The last 4 quarters (in mils):
$41.0
$41.6
$40.5
$41.3
Pretty much 0 sequential growth in almost one year...
2/
Three customers (Engie, Caterpillar, and Baker Hughes) make up 44% of revenue.
Very high customer concentration.
In fact, there are only 64 total customers.
These are some ENTERPRISE deals. Long sales cycles.
Three customers (Engie, Caterpillar, and Baker Hughes) make up 44% of revenue.
Very high customer concentration.
In fact, there are only 64 total customers.
These are some ENTERPRISE deals. Long sales cycles.
3/
Each of the top 3 customers makes up more than 10% of revenue.
If we split the 44% by 3 ways, the average contract value for these customers is $24 million.
The ACV for the remaining 61 customers is $1.5 million.
Each of the top 3 customers makes up more than 10% of revenue.
If we split the 44% by 3 ways, the average contract value for these customers is $24 million.
The ACV for the remaining 61 customers is $1.5 million.
4/
Obviously, this company is very dependent on those 3 customers.
YoY subscription revenue growth for last 6 quarters:
71%
80%
69%
79%
15%
6%
Pretty steep drop-off.
Why?
"a decrease in revenue of $7.2 million related to the Baker Hughes contract modification."
Obviously, this company is very dependent on those 3 customers.
YoY subscription revenue growth for last 6 quarters:
71%
80%
69%
79%
15%
6%
Pretty steep drop-off.
Why?
"a decrease in revenue of $7.2 million related to the Baker Hughes contract modification."
5/
And Baker Hughes isn't just a customer. They are also a partner. They are the exclusive C3.ai reseller in the oil and gas industry.
They have standardized on C3.ai for all internal AI applications.
Not a good sign they are pulling back.
And Baker Hughes isn't just a customer. They are also a partner. They are the exclusive C3.ai reseller in the oil and gas industry.
They have standardized on C3.ai for all internal AI applications.
Not a good sign they are pulling back.
6/
Ok, let's say that all of the $7.2 million was missing from the latest quarter (which it wasn't, it was spread over the year).
Anyway, let's be conservative.
Revenue growth would be 26% instead of 6%. Much better but certainly not world-class.
Ok, let's say that all of the $7.2 million was missing from the latest quarter (which it wasn't, it was spread over the year).
Anyway, let's be conservative.
Revenue growth would be 26% instead of 6%. Much better but certainly not world-class.
7/
Guess what the valuation is?
I have 96 million shares at $94/share, and after subtracting net cash, the EV is around $8.3 billion.
On $165 million in trailing sales, growing 6% in the latest quarter.
50x sales because "AI" is the ticker.
Guess what the valuation is?
I have 96 million shares at $94/share, and after subtracting net cash, the EV is around $8.3 billion.
On $165 million in trailing sales, growing 6% in the latest quarter.
50x sales because "AI" is the ticker.
8/
Tom Siebel (yes, that Tom Siebel) owns 33% of the shares.
His dollar share of the company now stands at roughly $3 billion.
Tom Siebel (yes, that Tom Siebel) owns 33% of the shares.
His dollar share of the company now stands at roughly $3 billion.
End/
So what do we have?
A company growing 6%, still very unprofitable, 44% of the revenue base is from 3 incredibly capital intensive customers, and it trades for 50x sales.
Let's just say I won't be buying this one...
Would love to hear the other side though!
So what do we have?
A company growing 6%, still very unprofitable, 44% of the revenue base is from 3 incredibly capital intensive customers, and it trades for 50x sales.
Let's just say I won't be buying this one...
Would love to hear the other side though!
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