Unpacking the C3.ai IPO filing

The last thing I recall thinking about C3.ai (C3) was seeing its billboards outside San Francisco and asking myself what the hell the company actually did and how much it was spending on huge outdoor advertisements.

So much for what I know. The company filed to go public on Friday, and instead of being a cash-burning, buzzwordy mess, C3 is actually in pretty good financial shape, generating both growing recurring software revenues and cash in some quarters.

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C3’s growth is not as regular as some investors might like, but the company has an attractive gross margin profile and even the occasional bit of net income to point to. Its financial picture is therefore generally likable, with a few caveats that we’ll explore.

But what does C3 do, who backed it, and what can we learn from drilling into its numbers? I am glad you asked, because those were precisely the questions that I had going into its filing.

Pull up the document here, and let’s get into the numbers.

Inside the guts of a modern AI company

First, what is C3? The former startup calls itself an enterprise artificial intelligence (AI) company, selling software services that help big companies build AI apps “of extraordinary scale and complexity that offer significant social and economic benefit,” according to its S-1.

The company sells its software in two forms: as a developer environment that lets customers design, build and deploy their AI apps on their cloud of choice, and as a group of pre-built apps users can spin up quickly. If C3 were a startup, I’d ask at this point how efficacious its AI tooling really is, but as this unicorn is worth $3.3 billion and has nine-figure revenue, it must have come up with something that works.

A host of venture capital firms have invested in C3, with the company raising more than $360 million during its lifetime, according to PitchBook data. BlackRock led its Series H, FS Investors led its Series G, its $100 million Series F was led by TPG, Breyer Capital led its Series E, TPG Growth led its Series D, while its Series C and before are a little harder to parse, but it appears that Makena Capital Management and Interwest Partners were active at that stage.

Looking to ownership, founder and entrepreneur Thomas Siebel owns just under 34%, TPG owns 22.6% and Baker Hughes owns around 15%. The company’s voting power rests in its Class B stock, which Siebel effectively controls.

Right now, is the business itself any damn good?

The numbers

C3 has an annoying fiscal year, a twelve-month period that ends on April 30. So, when we discuss its most recent two fiscal years, we’re chatting about the four quarter periods that ended on April 30, 2019 and April 30, 2020. Afterward, we’ll drill into the July 31 quarter, the most recent period for which we have data.