All right, great. Okay, so why don't we go ahead and get started? So look, we're just delighted to have Tom Siebel, the founder and CEO of C3 AI , joining us at the Citizens Technology Conference. Tom has graced us with his presence at this conference, I don't know, how many times, Tom?
A bunch of times.
A whole bunch of times.
I enjoy it every time, and thank you for including us.
Yeah. And so we'll talk about how business is going. C3 just reported last week. They have an incredible partnership going on with Microsoft. We'll talk about that. And then Tom, if it's okay, Tom suffered a health setback last week, which he posted a note about on his site, and he would normally be here in person sitting next to me, but that's why he's doing it, is a Zoom. So Tom, let's start at the top. How's business?
Business is great.
Is it?
The last three years, come on. Growth rate has gone from what, 6%- 16%, and this year we're looking at 25% growth. We've seen worse, so we're quite pleased with the growth acceleration that we're seeing returned to the C3 AI story.
And what is driving it? Highest level. For people who don't know what C3 AI does, which is, you know, it's partially the name, but it is the enterprise AI company in terms of if you think about applications that utilize AI to drive significant results. This is the company, but help people understand a little bit, Tom, how C3 is different than the other companies out there.
Pat, you were here, and you were here in 2009, okay, when we got started, okay, and we believed the next generation of computing was going to be about elastic cloud computing, big data, Internet of Things, predictive analytics. We spent the next 15 years, and I think, you know, maybe in excess of $3 billion, building a software platform that would enable people to build, you know, massive scale predictive analytics enterprise AI applications. We did this, we started this work before AWS existed, okay, before the GPU, before Azure, okay, before any of these things, okay, and before anybody even heard of generative AI. And we believed that this was going to be a large addressable market today, I mean, a large addressable market. In fact, we believed it was going to be the largest addressable market in the history of enterprise application software.
And so we began work, and when we get into, we worked in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017. Come on, Pat, we were the only people in the world talking about enterprise AI. And we're doing a smart grid analytics, we're doing oil field optimization operations, predictive analytics for the Air Force, intelligence analysis for the intelligence community, and nobody was talking about enterprise AI except C3 AI and Tom Siebel, 2016, 2017, 2018, 2019, 2020, into 2021, 2022. Hello, November 2022, now it's generative AI, and now that's all anybody can talk about is enterprise AI, and we're here, we're now. I have 131 turnkey enterprise applications to bring to market, and which I think is maybe 128 more than anybody else in the world, so we're pretty well positioned, and that is the story.
That's awesome. Okay, and so what does the competitive environment look like right now, so if you're talking to a large energy company or a large oil and gas company or, you know, a large entertainment company or a bank, right, how do your sales cycles, where do they start? Is there an RFP, you know, and then how do they play out in terms of who you partner with, who you compete with?
So imagine a slide that I'm building before you if I were there, okay, that looks like an AI stack, okay, at the bottom we have silicon, you know, AMD, NVIDIA, what have you. On top of that we have infrastructure, Azure, AWS. On top of that we have foundation models, everybody knows what foundation models are. On top of that we have a box, the rectangle on top of that, a stack of rectangles are bright shiny objects that do things like persistence or, you know, Snowflake, Databricks, DataRobot, Data this, Data that, whatever the hell it might be, okay.
So the competition is that organizations, the CIO at name of the company, ExxonMobil, Shell, United States Air Force units, Central Intelligence Agency, Cargill, okay, will try to take that stack of stuff, of silicon, of foundation models, of bright shiny objects, and cobble them together into an application that does something useful for an enterprise. What's useful for an enterprise as it relates to AI? Stochastic optimization of supply chain, supply network risk, predictive maintenance, fraud detection, things like this. And it's really, really, really hard. And so there's no organization that is our customer today, and we have hundreds, okay, that hasn't failed at this four times, Shell, Exxon, Air Force, CIA, you name it. So that is the competition.
The competition is, you know, the IT manager who is maybe moderately trained to like figure out how to manage a $1 billion SAP upgrade or try to figure out how to get single sign-on to work or install Salesforce. These are trivial problems. You're building an enterprise AI application is a non-trivial problem, and what we have done is we have taken all that stack, we've taken that whole stack we utilize in something we call the C3 Agentic AI Platform, something that we've patented, and rather than use it as a tool set to build custom applications, we've used this as a tool set to build turnkey applications to address the needs of banking, to address the needs of defense, intelligence, consumer packaged goods, insurance, automotive, aerospace, what have you.
So we're in the business of building turnkey enterprise applications that deliver, you know, very real economic benefit. So what's the pitch? Okay, what does the sales pitch look like at Dow? Okay, what does the sales pitch look like at Cargill? What does the sales pitch look like at a Holcim, which is a cement manufacturer in Germany? We'll go into your business process. Cargill, for example, is involved in distribution of, I think, $100 billion worth of protein. Enormous supply chain issues, demand forecasting issues. Dow is, of course, a famous chemical company, iconic chemical company. One of the things they make is polyethylene. And we'll go to Dow and say, we'll come in, we'll come in with our partners from Microsoft or our partners from McKinsey, and we'll come in and we'll go to the people who are running the polyethylene facility at Dow.
By the way, we're normally dealing with the people who run the business, not IT, okay? We'll say, we will build predictive maintenance for your polyethylene facility. We'll build a production predictive maintenance application for a polyethylene facility, which is something the size of a football field that's got a furnace, a coking furnace the size of this building that we're in, okay? By the way, if that furnace fails, Dow misses their quarter. That's how big it, that's how expensive it is. We'll build a predictive maintenance application. I'll have it live in six months. I'll do it for $500,000. If you like it, keep it. $500,000, okay? Six months live, okay? They have certain, so then after that we do 16 more, okay?
The CEO featured this in his, that was one of his top featured items in his annual report to his shareholders of the economic return they got from C3 applications and polyethylene. Now we'll be perpetuating, when we're done, we'll be perpetuating C3 across Dow with the purpose of generating $1.5 billion in economic benefit a year. That's the pitch. We're coming in, we're bringing the application live in six months. Not six years. This is not like IBM Watson, okay? This is not Accenture sends you 500 people, you know, for four years, for $300 million. Six months, $500,000 is live, and then we go.
Awesome. Okay, so when did you announce the partnership with Microsoft? Last quarter.
Yes, the Microsoft announcement was made on November 20th, which was the date of their Ignite forum in Chicago, their international users group forum. We were the only partner on the main stage to announce that with them, with Judson and I and Melanie Kalmar from Dow. We understand then that, you know, Microsoft's quarters ended in December 31st, as you know. So we didn't do a lot of coordination between the middle of November and then into December, and then into the new year. So it was probably January 15th when we really started work, okay? Today I think it's March 3rd, okay? And we are engaged, we have met with the CEO of Microsoft Europe, the CEO of Microsoft France, the CEO of Microsoft Germany, the CEO of Microsoft UK, okay? The CEO of Microsoft Federal.
Today we are engaged in over 600 teaming agreements around the world with Microsoft, where C3 AI is the preferred enterprise AI solution, okay? Microsoft Azure is the preferred platform. Basically team agreements, I think it's 620 accounts today, Pat, that we're involved in. This is.
I mean, it's crazy, yeah. So it's been six weeks, right? And there's.
Bingo.
Yeah, yeah, and there's 600 agreements going. How?
How?
Just like operationally, how do you do that?
We have quarterly executive reviews. We have almost daily sales reviews. We have weekly sales executive reviews. And we are, you know, on the feet, at the account. You know, we were in Detroit last week. We're in Paris today. We're in London today. We're doing joint sales, joint demos, joint value propositions, and making a very, very, and you know, Microsoft like AWS is, you know, bringing their balance sheet to bear to make it easy for customers to do this. And so it's, we're moving.
Tom, is the benefit of this partnership already baked into your guidance for the year?
Absolutely.
Yeah. Can I ask, how did you, so what was the background to this partnership? Like how did you decide that it was going to be with Microsoft? You know, do you, I mean, is there like an RFP sort of like process? And you used to have one with Google, right? Does the Google one still exist?
Originally, we had one with AWS, okay? That would get us back to almost 2016, 2017, 2018, okay, with Andy, okay, when he was running AWS. But people were just kind of dabbling then, okay? And then Microsoft came in, and we did a lot of work with Microsoft, okay? And then Google came in, okay? And we did a lot of work in the last three years with Google. But basically what we did is we put out an RFP. And we said, guys, I have 131 turnkey applications. This is what I have to offer, okay? Who wants to go to town, okay? And we entertained RFP responses from the usual suspects. And we have reached agreements with Microsoft, AWS, GCP, and we were very, they're all great partners. Now Microsoft would be the largest software company in the world.
And so, you know, they're pretty hard not to like. And so, but we go to market with all three of them. We go to market now with McKinsey, QuantumBlack, that's a big deal. That's the, you know, the fourth piece of this quadrifecta. And so I would say the work that we've done in the third quarter of this year fundamentally changes the nature of C3 AI's competitive position in enterprise AI. And I think it fundamentally changes the competitive dynamics of the enterprise AI market indelibly.
Okay, but so it's not exclusive to Microsoft. You're still partnering with the other ones as well.
Yes, it is not exclusive. But that said, let me be clear, when we do a teaming agreement with Microsoft in the name of the account, it is co-exclusive.
For those accounts.
Yes. When we do a teaming agreement with AWS, where we've agreed to teaming agreement, it is co-exclusive. And so they don't have any fear of that we're changing horses or they're changing horses. We're all committed that we're living and dying together.
All right, great. And so let's talk about the, and we only have nine minutes. Tom, can we do, so I'm so sorry about your health setback. We're all praying for you and we're all rooting for you. Can you talk a little bit about how you're going to run things operationally at C3 going forward in terms of Mr. Snabe's role and other things that.
Yes, thank you for your.
Thank you for your thoughts. I contracted some sort of weird autoimmune disease, okay, that is, has yet really been unidentified, okay? But the net of it is it attacked my eye and did a lot of damage to my optical nerve. And so my sight, I have significant visual impairment right now, okay? And due to they don't want me at altitude for a little while, so I'm kind of grounded. I can't, you know, so I can't travel a lot, okay? So what we've done is, you know, we're very fortunate in both the leadership that we have in the company and the leadership we have in the board of directors, not the least of whom, you know, is Jim Snabe, formerly or current Chairman Siemens, Chairman Maersk, Chairman Allianz, co-CEO SAP, and one of the most highly respected business people on the planet, okay?
Jim, I have asked Jim, okay? Jim has agreed to assume the role as, you know, special advisor to the CEO, okay? He is advising me. He is advising the management team. He's also filling in for a lot of the events that I would normally do, like go to Paris and speak at VivaTech or, you know, testify before Congress or whatever it might be. Jim becomes a, you know, a more important part of the picture. I would say as it relates to the management team, we've always engaged in, you know, exacting, okay, management processes here where it's kind of old school Andy Grove, High Output Management MBOs where everybody knows exactly what their job is, where they fit in, what their roles are, how they interact with other legal, finance, HR, sales, support, service, products, what have you.
And so it's a very rich, well-designed tapestry where everybody participates. But I say now that, you know, Tom serves. It's very clear. And this is a transition that we've been making over the last six months. And we've now accelerated it dramatically. Is that while you know, you know me and you know my, you know, I'm generally familiar with the details of this business and the details of the products and the deals of what's going on at customer sites because I pay attention to that stuff. But it's very clear that Tom's role is now much, much less supervisory, okay? And so now we're, you know, C3 AI is hitting the big time, okay? Where we're delegating the responsibility, okay? We're just delegating the authority, okay? And we're delegating to the management team to do their jobs. They know what their jobs are.
They have the resources to do their jobs. When they need help, they know where to get help. So that is how we are managing the business.
And how's that going so far?
Going great, okay?
Is it? Oh, good.
The team, everybody is six inches taller than they used to be, okay? And their shoulders are about three inches broader. And they're stepping up their game. And they're behaving like consummate professionals. And it's, and you know, we're proud of them and they should be proud of themselves.
All right, we have about five minutes left. So let's take questions from our audience. I'm slightly blinded by the lights, just to let you know ahead of time. George, go ahead.
How do you see C3 AI's products evolving in the next three to five years?
Wow, okay.
Help me out with who's.
Yeah, I'm going to repeat the question for you.
I can't hear the question. I don't know who asked it. So if you can help me.
That was a young investor in the audience, and the question was, how is the C3 AI product going to evolve over the next three years? Long time in today's world.
Wow, well, for Agentic AI everywhere, we do have a patent on Agentic AI. You know this, right? Okay, dates to I think December 2023. And so C3 AI has the patent, okay? And you're talking to the primary inventor. So think Agentic AI, so all these people are yapping about it there who, you know, Agentic AI this, Agentic AI that, okay? And who are putting, you know, an Agentic AI sticker on the software stack that they wrote in, you know, 1999. Okay, that's all fine and dandy, but this is our IP, okay? And we think about Agentic AI everywhere. Agentic AI is huge. Think about kind of fundamental changes in the nature of the human-computer interaction model as it relates to these enterprise applications where they're much more visual and 3D and I think digital twin-like in nature.
So when we're looking at a factory floor, a refinery, a polyethylene plant, we're not looking at a number that turns red. We're looking at a valve that turns red. And when the valve turns red, we explode the valve and we see the ball bearing that exploded. We know where to place that part. And that happens in n-dimensional space. We're going to see a lot more work in. It'll be more applications. We have, you know, 131 turnkey enterprise applications today. Probably another 100 in the generative AI arena. Rough numbers, but you'll see, you know, as this market develops, travel, transportation, consumer packaged goods, lending, you know, there's no aspect, government services, huge, defense, intel, public benefits, CDC, even the IRS. Anyway, so you'll see, you know, more and more applications, more and more Agentic AI, and more usability.
You'll need to know less and less and less about AI to take advantage of these applications and do your jobs, okay? This idea that used to be kicked around a few years ago that in the future we all need to be data scientists or we're going to be unemployable, that's just a bunch of bunk, you guys, okay? Whether you're an investor, whether you're a lawyer, whether you're a physician, whether you're a dog trainer, whether you're an asparagus farmer, okay? You will, you know, the tools that you have, the AI will be embedded in these tools. It will be using very, very sophisticated technology to allow you to deliver higher quality products and they handle more satisfied customers at lower cost and lower environmental impact.
So that's where this goes and that's what we're doing.
Yeah. The point about it'll be much more visual in 3D is super interesting. I think we have time for one more.
When do you anticipate achieving sustained positive cash flow?
Oh, Tom, the question is, when do you anticipate achieving sustained positive free cash flow?
It's just kind of a matter of time. I mean, it's, you know, I mean, right now our revenue growth rates have been exceeding our expense growth rates. And so with scale, I mean, we're there. I mean, so it, you know, I'm not, I don't have a date for you, but it's not very far out. I think I have, I realized I read your sell-side, not yours, Pat, you know, some people's sell-side analyst reports about how we hemorrhage cash around here. Somehow every quarter I look at the bank and there's still $750 million cash. So we're trying to figure out how we're hemorrhaging it. And I think there's roughly, as of last quarter, $724 million cash. So there's no cash problem. And we will, you can take it to the bank, okay?
In the medium term, you're looking at a sustainably cash positive, profitable, rapidly growing leader in enterprise AI.
Awesome. Why don't we, why don't we stop there? I have it in fiscal 2027. We'll see. That's just me. Tom, thanks so much for joining us. It's great to have you. We really appreciate it.
Thank you, Pat. Thank you, everybody. Sorry I couldn't be there in person. Look forward to seeing you next time.
All right, take care.