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United States securities and exchange commission logo
October 15, 2020
Thomas M. Siebel
Chief Executive Officer
C3.ai, Inc.
1300 Seaport Blvd, Suite 500
Redwood City, CA 94063
Re: C3.ai, Inc.
Draft Registration
Statement on Form S-1
Submitted September
18, 2020
CIK No. 0001577526
Dear Mr. Siebel:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Cover Page
1. We note that Mr. Siebel
and his affiliates currently control 97.88% of your outstanding
Class B common stock.
Please tell us if, after the offering, the company will be a
"controlled company"
under the definition of the stock exchange on which you plan to list
your Class A common
stock. If so, disclose this fact on the cover page and include
appropriate risk factor
disclosure, including a discussion of whether you intend to take
advantage of any
exemptions from the corporate governance rules that are available to a
controlled company.
Thomas M. Siebel
FirstName
C3.ai, Inc. LastNameThomas M. Siebel
Comapany
October 15,NameC3.ai,
2020 Inc.
October
Page 2 15, 2020 Page 2
FirstName LastName
Prospectus Summary, page 1
2. Please disclose your basis for the following claims made in this
section:
the estimate of your addressable market;
your significant first-mover advantage in Enterprise AI;
your solutions have returned hundreds of millions of dollars in
economic benefit
within one year;
your production C3.ai roadmaps are expected to return billions
of dollars in annual
economic benefit for many customers; and
your average new contract value in fiscal years 2019 and 2020
are a high-water mark
for the applications software industry.
Also, define "lighthouse customers" and discuss how they impact your
business and
whether they account for a material amount of your revenue
Risk Factors
Historically, a limited number of customers have accounted for a substantial
portion..., page 14
3. Please disclose the material terms of your agreement with Engie, which
accounted for
greater than 10% of your revenue for the year ended April 30, 2020,
including term and
termination provisions and any minimum commitments.
Our amended and restated certificate of incorporation will designate the Court
of Chancery of the
State of Delaware..., page 44
4. You indicate that that the U.S. federal courts will be the exclusive
forum for actions under
the Securities Act. Please revise your disclosure here and on page 122
to state that there is
uncertainty as to whether a court would enforce such provision and
that investors cannot
waive compliance with the federal securities laws and the rules and
regulations
thereunder.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
How We Generate Revenue, page 60
5. To the extent material, please quantify the amount of revenue
attributable to government
contracts or subcontracts. Refer to Item 101(c)(1)(ix) of Regulation
S-K.
Key Business Metric, page 61
6. You disclose that RPO is influenced by several factors, including the
timing of renewals,
the timing of purchases of additional capacity, average contract
terms, and seasonality and
due to these factors, it is important to review RPO in conjunction
with revenue and other
financial metrics disclosed elsewhere in this prospectus. Please tell
us, and revise
accordingly, what other operating metrics you regularly review and
what consideration
you gave to disclosing information about those metrics. We refer you
to Section III.B of
Thomas M. Siebel
FirstName
C3.ai, Inc. LastNameThomas M. Siebel
Comapany
October 15,NameC3.ai,
2020 Inc.
October
Page 3 15, 2020 Page 3
FirstName LastName
SEC Release No. 33-8350.
7. You disclose that the RPO metric includes non-cancellable contracted
amounts to be
invoiced and recognized in future periods. You also disclose on page
63 that Baker
Hughes has minimum, non-cancellable revenue contracts in material
amounts over a three
year period which appear to comprise a significant portion of your RPO
metric. Please
revise your RPO metric disclosures to reconcile or explain how much of
the RPO metric
composition and increase is attributable to each of the deferred
revenue and the non-
cancellable contract amounts as well as the portions attributable to
the materially
significant Baker Hughes arrangements.
Sales and Marketing, page 69
8. You disclose a material increase in sales and marketing for the fiscal
year ended April 30,
2020 that was due to a number of factors. Please revise to disclose
any continuing trends
among these factors and costs that are reasonably likely to materially
impact future results
of operations. See the Commissions Guidance Regarding Management
s Discussion and
Analysis of Financial Condition and Results of Operations Release
No. 33-8350.
Critical Accounting Policies and Estimates
Revenue Recognition, page 73
9. You disclose that sales of your perpetual and term licenses grant
customers the right to use
your functional intellectual property, either on their own cloud
instance or internal
hardware infrastructure, over the contractual term. Please provide us
with an analysis of
how you determined that the software and maintenance and support
services are highly
integrated and interrelated and therefore are accounted for as a
single performance
obligation. We refer you to ASC 606-10-25-21.
10. You disclose that you first allocate the transaction price to the
performance obligations
with established standalone selling prices then apply the residual
approach to allocate the
remaining transaction price to the license or subscription and bundled
maintenance and
support services. You also disclose that if applying the residual
approach results in zero
or very little consideration being allocated to the combined
performance obligation, you
will consider all reasonably available data to determine an
appropriate allocation of the
transaction price. Please tell us how you considered whether the
selling price of the
license or subscription and bundled maintenance and support services
is highly variable,
allowing for the use of the residual approach. In addition, describe
in more detail your
other allocation approaches to estimate standalone selling price to
the license or
subscription and bundled maintenance and support services. We refer
you to ASC 606-
10-32-34.
Large Total Addressable Market, page 80
11. Please identify the "leading research firm" that you refer to in this
section.
Thomas M. Siebel
C3.ai, Inc.
October 15, 2020
Page 4
Business
Rapid Time to Value, page 82
12. Please explain how you compiled these case studies, why you selected
the profiled clients,
and how these clients provide a meaningful representation of your user
base. Also,
disclose the time periods covered by the case studies, as well as any
limitations in using
these individual case studies.
Certain Relationships and Related Party Transactions
Transactions with Baker Hughes, page 112
13. Please clarify that Lorenzo Simmonelli, Chief Executive Officer of
Baker Hughes, was
appointed to your board as part of a strategic collaboration agreement
whereby Baker
Hughes had a right to appoint a director. Also, disclose the amount of
revenue that you
generated under the agreement with Baker Hughes in prior periods. We
note that Baker
Hughes was a significant customer that accounted for greater than 10%
of your revenue
for the year ended April 30, 2020. See Item 404(a)(3) of Regulation
S-K.
Description of Capital Stock, page 118
14. Please revise to provide a more detailed description of the material
voting rights of the
Class A common stockholders. For example, disclose the circumstances
under which the
Class A common stockholders are entitled to a separate class vote
under Delaware law.
Notes to Consolidated Financial Statements
2. Revenue, page F-19
15. You disclose that in addition to subscriptions, you also sell premium
stand-ready COE
support services, hosting services, and trials of your applications as
part of your customer
acquisition strategy that are distinct performance obligations. In
addition, you state that
your goal is to establish and maintain a global leadership position in
Enterprise AI across
FirstName LastNameThomas M. Siebel
all market segments including large enterprises, small and medium
businesses, and
Comapany NameC3.ai,
government Inc. Please tell us what consideration was given to
disaggregating
entities.
Octoberrevenue byPage
15, 2020 these4categories. We refer you to ASC 606-10-55-90 and
55-91.
FirstName LastName
Thomas M. Siebel
FirstName
C3.ai, Inc. LastNameThomas M. Siebel
Comapany
October 15,NameC3.ai,
2020 Inc.
October
Page 5 15, 2020 Page 5
FirstName LastName
General
16. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized
to do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
You may contact Amanda Kim, Staff Accountant, at (202) 551-3241 or Craig
Wilson,
Senior Advisor, at (202) 551-3226 if you have questions regarding comments on
the financial
statements and related matters. Please contact Matthew Crispino, Staff
Attorney, at (202) 551-
3456 or Jan Woo, Legal Branch Chief, at (202) 551-3453 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Calise Cheng