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What changed in C3.ai, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of C3.ai, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+496 added−431 removedSource: 10-K (2024-06-18) vs 10-K (2023-06-22)

Top changes in C3.ai, Inc.'s 2024 10-K

496 paragraphs added · 431 removed · 359 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

101 edited+30 added−33 removed71 unchanged
Biggest changeWe offer four primary families of software solutions, which we collectively refer to as our C3 AI Software: • C3 AI Platform, our core technology, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications of any type. • C3 AI Applications, built using the C3 AI Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific SaaS Enterprise AI applications that can be rapidly installed and deployed. • C3 Generative AI Product Suite , our latest innovation, enables customers to leverage LLMs to rapidly locate, retrieve, and present information across disparate data stores, applications, and enterprise information systems. • C3 AI Ex Machina is a no-code, machine learning, or ML, solution that empowers citizen data scientists with cloud-native, complete end-to-end capabilities, connecting to diverse data sources and types, and that enables business analysts to rapidly perform data science tasks such as building, configuring, training, and visualizing AI models.
Biggest changeWe offer three primary families of software solutions, which we collectively refer to as our C3 AI software: • The C3 AI Platform , our core technology, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications of any type. • C3 AI Applications , built using the C3 AI Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific SaaS Enterprise AI applications that can be rapidly installed and deployed. • C3 Generative AI , combines the utility of large language models, generative AI, reinforcement learning, natural language processing, and the C3 AI Platform to rapidly locate, retrieve, and present information, disparate data stores, applications, and enterprise information systems.
Our Chief Executive Officer, Tom Siebel—a recognized technology thought leader and author of the 2019 Wall Street Journal best seller, Digital Transformation: Survive and Thrive in an Era of Mass Extinction —is a frequent industry keynote speaker and is often interviewed by leading media, including The Wall Street Journal, Financial Times, The Economist, Fortune, Forbes , CNBC , BloombergTV , and Yahoo!
Our Chief Executive Officer, Tom Siebel — a recognized technology thought leader and author of the 2019 Wall Street Journal best seller, Digital Transformation: Survive and Thrive in an Era of Mass Extinction — is a frequent industry keynote speaker and is often interviewed by leading media, including The Wall Street Journal, The Financial Times, The Economist, Fortune, Forbes , CNBC , BloombergTV , and Yahoo!
Just as happened with the introduction of RDBMS, ERP, and CRM software in prior innovation cycles, the initial reaction of many IT organizations is to try to internally develop a general-purpose Enterprise AI and IoT platform, using open source software with a combination of microservices from cloud providers like AWS and Google Cloud.
Just as happened with the introduction of ERP and CRM software in prior innovation cycles, the initial reaction of many IT organizations is to try to internally develop a general-purpose Enterprise AI and IoT platform, using open source software with a combination of microservices from cloud providers like AWS and Google Cloud.
The C3 AI Platform enables us and our customers to develop Enterprise AI applications by using conceptual models of all the elements required by the application—e.g., data objects (customer, order, contract, etc.), computing resources (database, storage, messaging), data processing services (stream processing, batch processing, etc.), AI and ML services (model training, model pipeline management, etc.)—instead of having to write complex, lengthy code.
The C3 AI Platform enables us and our customers to develop Enterprise AI applications by using conceptual models of all the elements required by the application — including data objects (e.g., customer, order, contract), computing resources (e.g., database, storage, messaging), data processing services (e.g., stream processing, batch processing), AI and ML services e.g., (model training, model pipeline management) — instead of having to write complex, lengthy code.
Our patent portfolio covers the key capabilities of our model-driven architecture that are the foundation of our highly differentiated technology. This includes methods, systems, and devices for data aggregation and unification, times-series data processing, data abstraction, ML implementation, and much more.
Our patent portfolio covers the key capabilities of our model-driven architecture that are the foundation of our highly differentiated technology. This includes methods, systems, and devices for data aggregation and unification, times-series data processing, data abstraction, ML implementation, generative AI and much more.
We attract exceptionally talented, highly educated, experienced, motivated employees. 14 Table of Contents We have built a culture of high performance based on four core values: • Drive and Innovation Propelling Growth. We self-select for people who love to work hard, think with rigor, speak with purpose, and act to achieve great things. • Natural Curiosity to Solve the Impossible.
We attract exceptionally talented, highly educated, experienced, motivated employees. We have built a culture of high performance based on four core values: • Drive and Innovation Propelling Growth. We self-select for people who love to work hard, think with rigor, speak with purpose, and act to achieve great things. • Natural Curiosity to Solve the Impossible.
Our professional services strategy is to quickly train our customers to develop, customize, and deploy applications independently of us, rapidly making them self-sufficient. C3 AI Implementation Services help ensure successful customer outcomes throughout the application development and deployment phases, including setup and configuration, ML model development and tuning, and integration of multiple complex source systems.
Our professional services strategy is to quickly train our customers to develop, customize, and deploy applications independently of us, rapidly making them self-sufficient. 14 Table of Contents C3 AI Implementation Services help ensure successful customer outcomes throughout the application development and deployment phases, including setup and configuration, ML model development and tuning, and integration of multiple complex source systems.
The complexity of such a system is much greater than developing a CRM or ERP system. There are a number of problems with this approach: • Complexity. Using structured programming, the number of software API connections that one needs to establish, harden, test, and verify for a complex system can, in our estimation, approach the order of 10 13 .
The complexity of such a system is much greater than developing a CRM or ERP system. There are a number of problems with this approach: • Complexity . Using structured programming, the number of software API connections that one needs to establish, harden, test, and verify for a complex system can, in our estimation, approach the order of 1013.
These prebuilt, extensible models encompass a vast range of business objects (customer, order, contract, etc.), physical systems and subsystems (engine, boiler, chiller, compressor, etc.), computing resources and services (database, stream processing, etc.)—virtually anything an application requires can be represented as a model in our model-driven architecture.
These prebuilt, extensible models encompass a vast range of business objects (e.g., customer, order, contract), physical systems and subsystems (e.g., engine, boiler, chiller, compressor), computing resources and services (e.g., database, stream processing) — virtually anything an application requires can be represented as a model in our model-driven architecture.
Strategic Competitive IP Advantage We enjoy a rich patent portfolio that is a substantial competitive advantage, both offensive and defensive, in the Enterprise AI market—most notably, U.S. patents (No. 10,817,530 and No. 10,824,634) which were granted for systems and methods for data processing and enterprise AI applications.
Strategic Competitive IP Advantage We enjoy a rich patent portfolio that is a substantial competitive advantage, both offensive and defensive, in the Enterprise AI market - most notably, U.S. patents (No. 10,817,530, No. 10,824,634 and No. 11,954,112) which were granted for systems and methods for data processing and enterprise AI applications.
This helps to further build the community of C3 AI users and to establish C3 AI as the standard for developing and deploying large-scale Enterprise AI applications to solve the world’s hardest problems. 22 Table of Contents Government Regulation Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations.
This helps to further build the community of C3 AI users and to establish C3 AI as the standard for developing and deploying large-scale Enterprise AI applications to solve the world’s hardest problems. Government Regulation Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations.
To ensure ongoing operability of our thousands of prebuilt and extensible models on different underlying infrastructure (e.g., AWS, Microsoft Azure, etc.), our automated testing continuously executes approximately 60,000 tests and security scans with each change or update we make to our software or infrastructure.
To ensure ongoing operability of our thousands of prebuilt and extensible models on different underlying infrastructure (e.g., AWS, Google Cloud, Microsoft Azure), our automated testing continuously executes approximately 60,000 tests and security scans with each change or update we make to our software or infrastructure.
By contrast, our model-driven architecture provides an “abstraction layer,” that allows our partners and our customers, as well as our internal C3 AI developers, to build or customize Enterprise AI applications by using conceptual models of all the elements an application requires.
By contrast, our model-driven architecture provides an abstraction layer, that allows our partners and our customers, as well as our internal C3 AI developers, to build or customize Enterprise AI applications by using conceptual models of all the elements an application requires.
This model typically begins with a pilot phase which includes unlimited developer access to C3 AI Platform, one C3 AI Application and COE support services.
This model typically begins with a pilot phase which includes unlimited developer access to C3 AI Platform, one C3 AI Application or C3 Generative AI and COE support services.
Recognized Enterprise AI Industry Leadership We believe we are broadly recognized as a leader in Enterprise AI with many other industry recognitions, including CNBC Disruptor 50 (2020, 2019, 2018), BloombergNEF Pioneer (2020), Forbes Cloud 100 (2020, 2019, 2018, 2017), The Financial Times’ The Americas’ Fastest Growing Companies (2023, 2022, 2021), Deloitte Technology Fast 500 (2019), and EY Entrepreneur of the Year (2018, 2017) and have been named to the Constellation ShortList for Artificial Intelligence & Machine Learning Cloud Platforms (2022, 2020), a leader by Forrester Wave: AI/ML Platforms, Q3 2022, and Forrester Wave: Industrial IoT Software Platforms (2019, 2018), and IDC MarketScape: Solutions for Industrial Platforms and Applications in Energy (2021).
Recognized Enterprise AI Industry Leadership We believe we are broadly recognized as a leader in Enterprise AI with many other industry recognitions, including Fortune 50 AI Innovators (2023), CNBC Disruptor 50 (2020, 2019, 2018), BloombergNEF Pioneer (2020), Forbes Cloud 100 (2020, 2019, 2018, 2017), The Financial Times’ The Americas’ Fastest Growing Companies (2024, 2023, 2022, 2021), Deloitte Technology Fast 500 (2019), and EY Entrepreneur of the Year (2018, 2017) and have been named to the Constellation ShortList TM for Cloud-Based Data Science & Machine Learning Platforms (2024), Constellation ShortList™ for Artificial Intelligence & Machine Learning Cloud Platforms (2023, 2022, 2020), a leader by Forrester Wave: AI/ML Platforms (Q3 2022), and Forrester Wave: Industrial IoT Software Platforms (2019, 2018), and IDC MarketScape: Solutions for Industrial Platforms and Applications in Energy (2021).
The C3 AI Platform, C3 AI Applications, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration.
The C3 AI Platform and C3 AI Applications — built with our patented model-driven architecture — enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration.
Two applications comprise the C3 AI Sustainability Suite: • C3 AI ESG lets companies measure, monitor, report, and improve their ESG performance, including scope 1, 2, and 3 emissions data. 9 Table of Contents • C3 AI Energy Management helps operations teams achieve targets for energy cost, GHG emissions, water consumption, and waste reduction.
Two applications comprise the C3 AI Sustainability Suite: • C3 AI ESG lets companies measure, monitor, report, and improve their ESG performance, including scope 1, 2, and 3 emissions data. • C3 AI Energy Management helps operations teams achieve targets for energy cost, GHG emissions, water consumption, and waste reduction.
Consequently, every application that was built on the platform will likely need to be reprogrammed in order to function correctly. This may take months to years. 19 Table of Contents • Data Integration. An integrated, federated common object data model is absolutely necessary for this application domain.
Consequently, every application that was built on the platform will likely need to be reprogrammed in order to function correctly. This may take months to years. • Data Integration . An integrated, federated common object data model is absolutely necessary for this application domain.
Additionally, C3 AI can continue to support our customers as needed with our software and COE support services. Partner Model C3 AI’s Enterprise AI expertise and technology combined with our partners’ deep domain expertise enhances our solutions to joint customers. In fiscal year 2023, we made significant progress establishing and extending productive partnerships.
Additionally, C3 AI can continue to support our customers as needed with our software and COE support services. 12 Table of Contents Partner Model C3 AI’s Enterprise AI expertise and technology combined with our partners’ deep domain expertise enhances our solutions to joint customers. In fiscal year 2024, we made significant progress establishing and extending productive partnerships.
We continually review our development efforts to assess the existence and patentability of new intellectual property. 16 Table of Contents Intellectual property is important to the success of our business.
We continually review our development efforts to assess the existence and patentability of new intellectual property. Intellectual property is important to the success of our business.
Competition Our main sources of current and potential competition fall into several categories: • Corporate IT organizations that attempt to develop internal solutions for their enterprises; • commercial enterprise and point solution software providers; • open source software providers with data management, ML, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, ML, and analytics functionality; • system integrators that develop and provide custom software solutions; • legacy data management product providers; and • strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who may offer a substantially similar solution based on a competitor’s technology or internally developed technology that is competitive with ours. 21 Table of Contents Our primary competition is largely do-it-yourself, custom-developed, company-specific AI platforms and applications developed by internal IT organizations.
Competition Our main sources of current and potential competition fall into several categories: • Corporate IT organizations that attempt to develop internal solutions for their enterprises; • commercial enterprise and point solution software providers; • open source software providers with data management, ML, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, ML, and analytics functionality; • system integrators that develop and provide custom software solutions; • legacy data management product providers; and • strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who may offer a substantially similar solution based on a competitor’s technology or internally developed technology that is competitive with ours.
Our partner ecosystem is increasingly effective at opening new doors with new customers and expanding product offerings with existing customers. In fiscal year 2023, we closed 71 agreements with and through our partner network, which includes Google Cloud, AWS, Microsoft, Baker Hughes, and Booz Allen.
Our partner ecosystem is increasingly effective at opening new doors with new customers and expanding product offerings with existing customers. In fiscal year 2024, we closed 115 agreements with and through our partner network, which includes Google Cloud, AWS, Microsoft Azure, Baker Hughes, Booz Allen, and others.
We are individuals with exceptional education and professional backgrounds. We are uncompromising in the quality of our work product. We build relationships with our customers grounded upon the highest levels of business ethics and professionalism, with a laser focus on customer success. We execute with precision.
Our people are domain experts in their respective fields. We are individuals with exceptional education and professional backgrounds. We are uncompromising in the quality of our work product. We build relationships with our customers grounded upon the highest levels of business ethics and professionalism, with a laser focus on customer success. We execute with precision.
This is a level-zero requirement. The C3 AI Platform has been refined, tested, and proven in some of the most demanding industries and production environments—electric utilities, manufacturing, oil and gas, and defense—comprising petabyte-scale datasets from thousands of vastly disparate source systems, massive volumes of high-frequency time series data from millions of devices, and hundreds of thousands of ML models.
This is a level-zero requirement. 18 Table of Contents The C3 AI Platform — built with model-driven architecture — has been refined, tested, and proven in some of the most demanding industries and production environments from electric utilities and manufacturing to oil and gas and defense, comprising petabyte-scale datasets from thousands of vastly disparate source systems, massive volumes of high-frequency time series data from millions of devices, and hundreds of thousands of ML models.
Using this type of structured programming, API-driven architecture may require hundreds of person-years to develop an integrated data model for any large corporation. This is the primary reason why tens to hundreds of millions of dollars are spent, and several years later, no applications are deployed. The Fortune 500 is littered with such disaster stories.
Using this type of structured programming, API-driven architecture may require hundreds of person-years to develop an integrated data model for any large corporation. This is the primary reason why tens to hundreds of millions of dollars are spent, and several years later, no applications are deployed.
C3 AI Reliability Suite The C3 AI Reliability Suite drives enterprise asset performance, reduces downtime, and improves process efficiency. C3 AI customers use the C3 AI Reliability Suite to identify and predict asset performance risks, intervene before downtime occurs, and maximize asset performance. The C3 AI Reliability Suite offers a flexible and scalable AI approach with better precision than alternatives.
C3 AI customers use the C3 AI Reliability Suite to identify and predict asset performance risks, intervene before downtime occurs, and maximize asset performance. The C3 AI Reliability Suite offers a flexible and scalable AI approach with better precision than alternatives.
Professional Services Our professional services primarily include implementation services, training and prioritized engineering services. We maintain a professional services organization that offers resources, methodologies, and experience to help customers develop and deploy enterprise-scale AI applications. Our services are complemented by those of our partners.
We maintain a professional services organization that offers resources, methodologies, and experience to help customers develop and deploy enterprise-scale AI applications. Our services are complemented by those of our partners.
We announce material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, our website (c3.ai), the investor relations section of our website (ir.c3.ai), our Twitter account, our LinkedIn page, and our Facebook account.
We announce material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, our website (c3.ai), the investor relations section of our website (ir.c3.ai), X (formerly Twitter) (@C3_AI), and LinkedIn (@C3-AI-Enterprise-AI) accounts.
We engage the market through digital, print, and social media, virtual and physical events, including our C3 AI Transform annual customer conference, and livestreamed events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI, ML, and data science.
We engage the market through digital, print, and social media, virtual and physical events, including C3 Transform, our annual international user, executive, and AI thought leadership conference, and other livestreamed events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI, ML, and data science.
An AI and IoT platform must support all of these tools—including, for example, the Eclipse IDE, VI, Visual Studio, React, Angular, R Studio, and Jupyter—or it will be rejected as unusable by the IT development teams. • Open, Extensible, Future-Proof. The current pace of software and algorithm innovation is accelerating.
An AI and IoT platform must support all of these tools — including Visual Studio, Jupyter Lab, JetBrains IDEs, React, Angular, and VueJS — or it will be rejected as unusable by the IT development teams. • Open, Extensible, Future-Proof. The current pace of software and algorithm innovation is accelerating.
C3 AI CRM does not compete with core CRM systems (e.g., Salesforce); rather, it provides complementary AI-driven insights across revenue operations and intelligence and sales engagement.
C3 AI CRM does not replace existing CRM systems but significantly improves their utility. C3 AI CRM does not compete with core CRM systems (e.g., Salesforce); rather, it provides complementary AI-driven insights across revenue operations and intelligence and sales engagement.
We are unaware of any end-to-end Enterprise AI development platforms that are directly competitive with the C3 AI Platform. The commercial product offerings that were formerly positioned as functionally equivalent to C3 AI were GE Predix and IBM Watson, both multibillion-dollar software engineering efforts backed by massive promotional campaigns; we no longer encounter them in competitive situations.
The commercial product offerings that were formerly positioned as functionally equivalent to C3 AI were GE Predix and IBM Watson, both multibillion-dollar software engineering efforts backed by massive promotional campaigns; we no longer encounter them in competitive situations.
As of April 30, 2023, our technology is protected by a broad patent portfolio, with 16 issued patents in the United States, 12 issued counterpart patents in a number of international jurisdictions, over 37 patent applications pending in the United States, and 70 patent applications pending internationally. Our issued patents expire beginning in 2033 through 2039.
As of April 30, 2024, our technology is protected by a broad patent portfolio, with 23 issued patents in the United States, 15 issued counterpart patents in a number of international jurisdictions, over 45 patent applications pending in the United States, and 85 patent applications pending internationally. Our issued patents expire beginning in 2033 through 2039.
AWS, Microsoft Azure, and Google Cloud each offer an elastic cloud computing platform and an increasingly innovative library of microservices that can be used for data aggregation, ETL, queuing, data streaming, MapReduce, continuous analytics processing, ML services, data visualization, etc.
AWS, Microsoft Azure, and Google Cloud each offer an elastic cloud computing platform and an increasingly innovative library of microservices that can be used for data aggregation, ETL, queuing, data streaming, MapReduce, continuous analytics processing, ML services, and data visualization. An array of open source software offerings cater to data management, machine learning services, and analytics.
Central to a model-driven architecture is the concept of a “model” that serves as an abstraction layer to simplify the programming problem.
The C3 AI Platform is designed and built with a model-driven architecture. Central to a model-driven architecture is the concept of a “model” that serves as an abstraction layer to simplify the programming problem.
Our subscriptions also include our maintenance and support services, which include critical and continuous updates to the software that are integral to maintaining the intended utility of the software over the contractual term. Within subscription revenue, we include revenue from our consumption-based pricing model.
Customers pay a usage-based runtime fee for our C3 AI Software for specified levels of capacity. Our subscriptions also include our maintenance and support services, which include critical and continuous updates to the software that are integral to maintaining the intended utility of the software over the contractual term. Within subscription revenue, we include revenue from our consumption-based pricing model.
Three discrete applications comprise the C3 AI Financial Services Suite: • C3 AI Anti-Money Laundering helps detect suspicious financial activity, identify fraudulent transactions, and flag bad actors with superior detection accuracy while reducing the false alerts for AML investigators. • C3 AI Smart Lending drives productivity and customer satisfaction within the credit application and approval process, providing credit officers with contextualized insights that reduce processing timelines and increase approval precision. • C3 AI Cash Management proactively monitors client treasury activity and preemptively predicts potential deposit churn to prevent balance attrition, helping increase customer retention and grow deposit balances.
With flexible deployment options across public/private cloud or on-premise, its secure architecture, and open ML and AI framework, the C3 AI Financial Services Suite is uniquely positioned to drive significant business value for customers. 10 Table of Contents Three discrete applications comprise the C3 AI Financial Services Suite: • C3 AI Anti-Money Laundering helps detect suspicious financial activity, identify fraudulent transactions, and flag bad actors with superior detection accuracy while reducing the false alerts for AML investigators. • C3 AI Smart Lending drives productivity and customer satisfaction within the credit application and approval process, providing credit officers with contextualized insights that reduce processing timelines and increase approval precision. • C3 AI Cash Management proactively monitors client treasury activity and preemptively predicts potential deposit churn to prevent balance attrition, helping increase customer retention and grow deposit balances.
The data aggregated and processed includes every type of structured and unstructured data imaginable. Personally identifiable information, census data, images, text, video, telemetry, voice, network topologies. There is no “one size fits all” database that is optimized for all of these data types.
The data aggregated and processed includes every type of structured and unstructured data imaginable, including personally identifiable information, images, text, video, telemetry, voice, and network topologies. As there is no one size fits all database optimized for all these data types, there is a need for a multiple database technologies. • Platform Services .
These lighthouse customers served as proof points for other potential customers in their particular industries. We have established intimate strategic relationships with our customers, including a number of large multinational corporations and government entities. We commonly enter into enterprise-wide agreements with entities that include multiple operating units or divisions.
We have established intimate strategic relationships with our customers, including a number of large multinational corporations and government entities. We commonly enter into enterprise-wide agreements with entities that include multiple operating units or divisions.
Three core applications comprise the C3 AI Defense & Intelligence Suite: • C3 AI Readiness , today configured across over 15 aircraft platforms, applies AI and advanced ML to help reduce unscheduled maintenance, pre-position spare parts, and increase mission capability. • C3 AI Intelligence Analysis accelerates investigative timelines with encrypted, obfuscated, federated search on people and relationships leveraging near real time, configurable machine learning pipelines for entities and sentiments. • C3 AI Decision Advantage improves domain awareness and force management by synthesizing multiple intelligence sources in near real-time and enabling commanders and other decision makers with AI insights.
Three core applications comprise the C3 AI Defense & Intelligence Suite: • C3 AI Readiness , today configured across over 15 aircraft platforms, applies AI and advanced ML to help reduce unscheduled maintenance, preposition spare parts, and increase mission capability. • C3 AI Intelligence Analysis accelerates investigative timelines with encrypted, obfuscated, federated search on people and relationships leveraging near real time, configurable machine learning pipelines for entities and sentiments. • C3 AI Decision Advantage improves domain awareness and force management by synthesizing multiple intelligence sources in near real-time and enabling commanders and other decision makers with AI insights. 9 Table of Contents C3 AI State and Local Government Suite C3 AI State and Local Government Suite brings the power of Enterprise AI to state and local governments and law enforcement agencies, helping maximize tax revenues by providing highly precise property appraisals and enhancing public safety with AI-powered intelligence analysis.
In the third quarter of fiscal year 2023, AWS funded C3 AI to enhance C3 AI Law Enforcement optimized for AWS, integrating Amazon OpenSearch and AWS ML services to enhance the speed and quality of analysis for state and local agencies using the application on AWS. 12 Table of Contents C3 AI and Azure first partnered in 2018 to co-develop products and services for enterprise customers running on the Azure Infrastructure.
In the third quarter of fiscal year 2023, AWS funded C3 AI to enhance C3 AI Law Enforcement optimized for AWS, integrating Amazon OpenSearch and AWS ML services to enhance the speed and quality of analysis for state and local agencies using the application on AWS.
An effective AI and IoT platform needs to support them all. • Data Visualization Tools. Any viable AI architecture needs to enable a rich and varied set of data visualization tools including Excel, Tableau, Qlik, Spotfire, Oracle BI, Business Objects, Domo, Alteryx, and others. • Developer Tools and UI Frameworks.
An effective AI and IoT platform needs to support them all. • Data Visualization Tools . Any viable AI architecture needs to enable a rich and varied set of data visualization tools including Microsoft Power BI, Google Data Studio, Looker, Tableau, and others. • Developer Tools and UI Frameworks .
As of April 30, 2023, we had 914 full-time employees, with 746 based in the United States and 168 in our international locations. Our Culture of High Performance We are dedicated to achieving our mission to accelerate digital transformation of organizations globally by enabling the deployment of Enterprise AI at scale. Our people are domain experts in their respective fields.
As of April 30, 2024, we had 891 full-time employees, with 710 based in the United States and 181 in our international locations. 15 Table of Contents Our Culture of High Performance We are dedicated to achieving our mission to accelerate digital transformation of organizations globally by enabling the deployment of Enterprise AI at scale.
Examples include access control, data encryption in motion, encryption at rest, ETL, queuing, pipeline management, autoscaling, multitenancy, authentication, authorization, cybersecurity, time-series services, normalization, data privacy, GDPR privacy compliance, NERC-CIP compliance, and SOC2 compliance. • Analytics Processing.
A myriad of sophisticated platform services are necessary for any Enterprise AI or IoT application. Examples include access control, data encryption in motion, encryption at rest, ETL, queuing, pipeline management, autoscaling, multitenancy, authentication, authorization, cybersecurity, time-series services, normalization, data privacy, GDPR privacy compliance, NERC-CIP compliance, and SOC2 compliance. • Analytics Processing .
Customers can deploy C3 AI Software on major public cloud infrastructures, private cloud or hybrid environments, or directly on their servers and processors. We provide our customers and partners with an antidote to AI vendor lock-in.
Enterprise AI Software Solutions We have built a solution that enables our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications. Customers can deploy C3 AI software on major public cloud infrastructures, private cloud or hybrid environments, or directly on their servers and processors. We provide our customers and partners with an antidote to AI vendor lock-in.
The core of this strategy has been to rapidly deliver high-value outcomes at large scale, across multiple industries, including banking, manufacturing, defense, oil and gas, and utilities.
The core of this strategy has been to rapidly deliver high-value outcomes at large scale, across multiple industries, including banking, manufacturing, defense, oil and gas, and utilities. We then use these use cases and outcomes to initiate discussions at numerous leading companies in each sector.
This is the fastest-growing enterprise software market in history and represents an entire replacement market for enterprise application software. Today the market is awash in AI solutions that provide component parts to design, develop, provision, and operate Enterprise AI applications, including Cassandra, Cloudera, DataStax, AWS IoT, and Hadoop.
Awash in “AI Platforms” Today the market is awash in AI solutions that provide component parts to design, develop, provision, and operate Enterprise AI applications, including Cassandra, Cloudera, DataStax, AWS IoT, and Hadoop.
While these products are useful, we believe that none offers the scope of utility necessary and sufficient to rapidly design, develop and deploy Enterprise AI applications. 18 Table of Contents “Do It Yourself” Enterprise AI? Software innovation cycles follow a typical pattern.
While these products are useful, we believe that none offers the scope of utility necessary and sufficient to rapidly design, develop and deploy Enterprise AI applications. “Do It Yourself” Enterprise AI? Software innovation cycles follow a typical pattern. Early in the cycle, companies often take a do-it-yourself approach and try building the new technology themselves.
The whole point of these systems is to enable data scientists to develop and deploy ML models. There is a range of tools necessary to enable that, including Jupyter Notebooks, Python, DIGITS, R, and Scala. Increasingly important is an extensible curation of ML libraries such as TensorFlow, Caffe, Torch, Amazon ML, and AzureML.
The whole point of these systems is to enable data scientists to develop and deploy ML models. There is a range of tools necessary to enable that, including Jupyter Notebooks, R Studio, Azure ML, Amazon Sagemaker, and Google Vertex AI. Increasingly important is an extensible curation of ML libraries such as PyTorch, TensorFlow, Keras, Hugging Face transformers, and XGBoost.
A powerful feature of a model-driven architecture is that as new open source or proprietary solutions become available, the object model library can simply be extended to incorporate that new feature. 20 Table of Contents Another important capability of the C3 AI Platform enabled by its model-driven architecture is that the applications developed on the platform are future-proofed: due to the modular nature of the model-driven architecture, new, upgraded, or enhanced services can be easily integrated with the C3 AI Platform.
Another important capability of the C3 AI Platform enabled by its model-driven architecture is that the applications developed on the platform are future-proofed: due to the modular nature of the model-driven architecture, new, upgraded, or enhanced services can be easily integrated with the C3 AI Platform.
Our C3 AI Software platform also enables developers to rapidly build applications by using conceptual models of all the elements required by an Enterprise AI application instead of having to write complex, lengthy, structured programming code to define, control, and integrate the many requisite data and microservices components to work together.
Our C3 AI software platform also enables developers to rapidly build applications without having to write complex, lengthy, structured programming code to define, control, and integrate the many requisite data and microservices components to work together; we significantly reduce the effort and complexity of the Enterprise AI software engineering problem.
C3 AI Platform: A Tested, Proven, and Patented AI Suite The model-driven approach to developing Enterprise AI applications using the C3 AI Platform has been tested and proven in dozens of large-scale, real-world deployments at some of the world’s largest organizations.
C3 AI Platform: A Tested, Proven, and Patented AI Suite The model-driven approach to developing Enterprise AI applications using the C3 AI Platform has been tested and proven in dozens of large-scale, real-world deployments at some of the world’s largest organizations. 20 Table of Contents C3 AI provides a powerful platform enabling these and other leading organizations to develop and operate Enterprise AI applications at scale, with a fraction of the effort and resources required by other approaches.
We then use these use cases and outcomes to initiate discussions at numerous leading companies in each sector. 11 Table of Contents Consumption Pricing Model In the first quarter of fiscal year 2023, we announced our transition to a consumption-based pricing model to adapt to more challenging macro-economic conditions, and better meet the needs of customers.
Consumption Pricing Model In the first quarter of fiscal year 2023, we announced our transition to a consumption-based pricing model to adapt to more challenging macro-economic conditions, and better meet the needs of customers.
The content of or accessible through our websites or our social media channels are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites or social media channels are inactive textual references only.
Further, corporate governance information, including our corporate governance guidelines, code of business conduct and ethics, and committee charters, is also available on our investor relations website. 22 Table of Contents The content of or accessible through our websites or our social media channels are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites or social media channels are inactive textual references only.
The application solves complex problems across bookings forecasting and opportunity scoring using differentiated capabilities to (1) integrate a comprehensive set of external data feeds (market data, news, firmographic information, etc.), (2) provide industry-specific data models, (3) apply best-in-class algorithms on each opportunity and stage, and (4) supports generative AI for enterprise search. 10 Table of Contents C3 AI Financial Services Suite The C3 AI Financial Services Suite helps minimize compliance risks, improve balance attrition, increase customer satisfaction, reduce customer churn, identify fraud, and drive employee productivity with workflow-enabled AI applications.
The application solves complex problems across bookings forecasting and opportunity scoring using differentiated capabilities to (1) integrate a comprehensive set of external data feeds (market data, news, firmographic information, etc.), (2) provide industry-specific data models, (3) apply best-in-class algorithms on each opportunity and stage, and (4) supports generative AI for enterprise search.
Three discrete applications comprise the C3 AI Reliability Suite: • C3 AI Reliability increases operations, process, and equipment uptime by anticipating equipment risks and failures. 8 Table of Contents • C3 AI Process Optimization improves production rate and product quality with AI-optimized process control parameters in complex batch, semi-batch, or process manufacturing. • C3 AI Production Optimization enhances upstream oil and gas production, reduces operational expenses, and improves operational visibility.
Three discrete applications comprise the C3 AI Reliability Suite: • C3 AI Reliability increases operations, process, and equipment uptime by anticipating equipment risks and failures. • C3 AI Process Optimization improves production rate and product quality with AI-optimized process control parameters in complex batch, semi-batch, or process manufacturing. 8 Table of Contents • C3 AI Energy Management helps operations teams achieve targets for energy cost, GHG emissions, water consumption, and waste reduction.
After our pivot to a consumption-based pricing model, mapping our capabilities to customer use cases frequently leads to a paid pilot for the C3 AI Platform, a C3 AI Application, and C3 AI Center of Excellence (COE) including support services that lasts up to six months.
After mapping our capabilities to customer use cases, we typically sign a paid pilot for the C3 AI Platform, a C3 AI Application, and C3 AI Center of Excellence (COE) including support services that lasts up to six months. During that period, we work with the customer to deploy a production-level C3 AI Application.
As a result of our partnership with Baker Hughes, joint selling, and the credibility it has brought us in the market, C3 AI has closed several deals in the oil and gas and Chemical industry, including LyondellBasell, Shell, ExxonMobil, Petronas, ENI, Aramco, Qatar Gas, ADNOC, PTTGC, Yokogawa, Braskem, and others.
As a result of our partnership with Baker Hughes, joint selling, and the credibility it has brought us in the market, C3 AI has closed several deals in the oil and gas and Chemical industry, including LyondellBasell, Shell, ExxonMobil, Petronas, ENI, Aramco, Qatar Gas, ADNOC, PTTGC, Yokogawa, Braskem, and others. 13 Table of Contents C3 AI and Fractal first partnered in 2019, through the now-acquired Neal Analytics, and during the second quarter of fiscal year 2023, we significantly expanded our services and go-to-market partnership.
Subscriptions Our subscription revenue is primarily comprised of term agreements, stand-ready COE support services, trials and pilots of our applications, and software-as-a-service offerings. Sales of our term licenses grant our customers the right to use our software, either on their own cloud instance or their internal hardware infrastructure, over the contractual term.
Sales of our software licenses grant our customers the right to use our software, either on their own cloud instance or their internal hardware infrastructure, over the contractual term. We offer a premium stand-ready service through our COE. Sales of our software-as-a-service offerings include a right to use our software over the contractual term.
Sustainable Competitive Advantage: C3 AI Model-Driven Architecture Our core technology is a cohesive family of integrated software services developed over a decade, engineered with a proprietary model-driven architecture, that provides all the software services and microservices necessary and sufficient to rapidly develop and deploy Enterprise AI applications. 15 Table of Contents AI applications developed with the C3 AI Platform can leverage any open source software solutions and all of the cloud services of AWS, Microsoft Azure, Google Cloud, and can operate on any of these cloud platforms, on-premises, or in a hybrid cloud.
Sustainable Competitive Advantage: C3 AI Model-Driven Architecture Our core technology is a cohesive family of integrated software services developed over a decade, engineered with a proprietary model-driven architecture, that provides all the software services and microservices necessary and sufficient to rapidly develop and deploy Enterprise AI applications.
C3 Generative AI is also available as a standalone capability deployable against customer datasets and software applications enabling customers to leverage large language models (LLMs) and pretrained generative transformers (GPTs) to transform enterprise search. Enterprise AI Software Solutions We have built a solution that enables our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications.
C3 Generative AI is built natively into the C3 AI Platform and available with every C3 AI Application. C3 Generative AI is also available as a standalone capability deployable against customer datasets and software applications enabling customers to leverage large language models (LLMs) and pretrained generative transformers (GPTs) to transform enterprise search.
This has become common for enterprise software companies and is aligned with the models of some of our biggest partners, such as Google Cloud, Microsoft Azure, Amazon Web Services, or AWS, and Baker Hughes. With the consumption-based pricing model, customers pay based on vCPU usage, making it faster and more efficient for companies to run pilots with C3 AI.
This has become common for enterprise software companies and is aligned with the models of some of our biggest partners, such as Google Cloud, Microsoft Azure, Amazon Web Services, or AWS, and Baker Hughes.
Prerequisite to ML and AI at industrial scale is the availability of a unified, federated image of all the data contained in the multitude of (1) enterprise information systems—ERP, CRM, SCADA, HR, MRP—typically thousands of systems in each large enterprise; (2) sensor IoT networks—SIM chips, smart meters, programmable logic arrays, machine telemetry, bioinformatics; and (3) relevant extraprise data—weather, terrain, satellite imagery, social media, biometrics, trade data, pricing, market data, etc. 17 Table of Contents • Data Persistence.
A prerequisite to AI at industrial scale is the availability of a unified, federated image of all the data contained in the multitude of (1) internal data, including enterprise information systems (e.g., ERP, CRM, SCADA, HR, MRP) and sensor IoT networks; and (2) external data, including weather, terrain, satellite imagery, social media, trade data, biometrics, pricing, and market data. • Data Persistence .
Cohesive core platform services (e.g., access control, data encryption, cybersecurity, time-series services, normalization, data privacy, etc.). • C3 AI Integrated Development Studio (C3 AI IDS). A low-code/no-code visual toolkit for developing, deploying, and operating Enterprise AI applications.
Cohesive core platform services (e.g., access control, data encryption, cybersecurity, time-series services, normalization, data privacy). • C3 AI Studio. A low-code/no-code visual toolkit for developing, deploying, and operating Enterprise AI applications. C3 AI Applications C3 AI Applications is an expanding portfolio of turnkey and ready-to-use suite of Enterprise AI applications that address a range of high-value use cases.
C3 Generative AI Product Suite Generative AI models have attracted attention in recent months due to capability improvements published by OpenAI, Google, and academic researchers. These new breed of transformer-based models are proving valuable at parsing, understanding, and generating natural language and images.
C3 Generative AI Generative AI models have attracted significant attention in the last year due to capability improvements published by OpenAI, Google, Anthropic, Meta, Mistral, and others. These transformer-based models are proving valuable at parsing, understanding, and generating natural language, images, videos, and other forms of content.
Requirements of the Model-Driven Architecture To develop an effective Enterprise AI application, it is necessary to aggregate data from a variety of enterprise information systems, suppliers, distributors, markets, products in customer use, and sensor networks, in order to provide a view of the extended enterprise.
To develop an effective Enterprise AI application, it is necessary to ingest and aggregate data from a variety of enterprise information systems, sensors, markets, and products to provide a complete view of the enterprise.
The companies have collaborated to conduct co-marketing and co-selling strategies that rapidly scale distribution globally for their joint customers. In the third quarter of fiscal year 2023, the companies collaborated to close a global U.S. Energy company and a European technology company serving the construction and mining sectors.
C3 AI and Microsoft Azure first partnered in 2018 to co-develop products and services for enterprise customers running on the Azure Infrastructure. The companies have collaborated to conduct co-marketing and co-selling strategies that rapidly scale distribution globally for their joint customers. In the third quarter of fiscal year 2023, the companies collaborated to close a global U.S.
Multi-cloud deployment is therefore an additional requirement of a modern model-driven software platform that is fully supported by the C3 AI Platform. Applications developed with the C3 AI Platform can run without modification on any cloud and on bare metal behind the firewall in a hybrid cloud environment.
Applications developed with the C3 AI Platform can run without modification on any cloud and on bare metal behind the firewall in a hybrid cloud environment.
We significantly reduce the effort and complexity of the Enterprise AI software engineering problem. The C3 Generative AI Product Suite provides enterprise users with a transformative user experience using a natural language interface to rapidly locate, retrieve, and present relevant data across the entire corpus of an enterprise’s information systems.
C3 Generative AI provides enterprise users with a transformative user experience using a natural language interface to rapidly locate, retrieve, and present relevant data from across the entire corpus of an enterprise’s information systems. C3 Generative AI enables rapid access to information, analyses, and predictive analytics associated with and derived from enterprise and external systems while respecting access controls.
The application models energy efficiency and emissions at every level of industrial processes from the individual equipment up to the facility as well as SKU-level product carbon footprints. C3 AI Defense & Intelligence Suite C3 AI Defense & Intelligence Suite helps maximize mission capabilities. C3 AI customers span the U.S.
The application models energy efficiency and emissions at every level of industrial processes from the individual equipment up to the facility as well as SKU-level product carbon footprints. C3 AI Supply Chain Suite The C3 AI Supply Chain Suite significantly improves supply chain resiliency and efficiency with proactive risk mitigation and advanced optimization.
During that period, we work with the customer to deploy a production-level C3 AI Application. After completing a successful pilot, our customers will commonly continue to license the C3 AI Application and the C3 AI Platform for a consumption-based fee.
After completing a successful pilot, our customers will commonly continue to license the C3 AI Application and the C3 AI Platform for a consumption-based fee or enter into a time-certain multi-period commitment that may include consumption charges.
Con Edison’s work with C3 AI was recognized in the IDC Future Enterprise Best in Future of Intelligence North America Awards (2022) and the U.S. Air Force’s use of the C3 AI Readiness solution as a platform of choice was recognized in the Constellation SuperNova Awards (2021).
Air Force’s use of the C3 AI Readiness solution as a platform of choice was recognized in the Constellation SuperNova Awards (2021).
We form specific sales targets and goals with each partner, enabling us to quickly and efficiently engage in customer accounts. Early on, we focused on the oil and gas, aerospace, defense, utilities, manufacturing, and financial services sectors, as those industries were early adopters in Enterprise AI.
Early on, we focused on the oil and gas, federal, aerospace and defense, energy and utilities, manufacturing, and financial services sectors, as those industries were early adopters in Enterprise AI.
Customers can sign up online and immediately begin using the product, including paid subscriptions and an initial no cost offering. Lighthouse Customers Historically, our market-entry strategy has been to establish high-value customer engagements with large global early adopters, or lighthouse customers, in Europe, Asia, and the United States across a range of industries.
Lighthouse Customers Historically, our market-entry strategy has been to establish high-value customer engagements with large global early adopters, or lighthouse customers, in Europe, Asia, and the United States across a range of industries. These lighthouse customers served as proof points for other potential customers in their particular industries.
We have a highly leveraged go-to-market model comprised of a global field sales force combined with significant alliance partnerships. Each of our strategic partners—including AWS, Baker Hughes, ENGIE, FIS, Google Cloud, Microsoft, and Raytheon—has a large installed customer base with strong, established relationships, and a large global sales force that vastly extends our market coverage.
Each of our strategic partners-including AWS, Baker Hughes, Google Cloud, and Microsoft - has a large installed customer base with strong, established relationships, and a large global sales force that vastly extends our market coverage. We form specific sales targets and goals with each partner, enabling us to quickly and efficiently engage in customer accounts.
The C3 AI generative application is available on both AWS Marketplace and the Google Cloud Marketplace. We continue to invest heavily in research and development to maintain technology leadership.
We closed 13 agreements for C3 Generative AI in the fourth quarter of fiscal year 2024 with large enterprises, and are working through a substantial pipeline of C3 Generative AI opportunities. The C3 AI generative application is available on both AWS Marketplace and the Google Cloud Marketplace. We continue to invest heavily in research and development to maintain technology leadership.
The software industry has transitioned from custom applications based on mainframe standards such as MVS, VSAM, and ISAM, to applications developed on a relational database foundation, to enterprise application software, to SaaS and mobile apps, and now to the AI-enabled enterprise. The internet and the iPhone changed everything. Generative AI is now poised to lead to another major shift.
During this time, the IT industry has transitioned from mainframe computing to handheld computing. The software industry has transitioned from custom applications based on mainframe standards to applications developed on a relational database foundation, to enterprise application software, to SaaS and mobile apps, and now to the AI-enabled enterprise.
At some companies, based on feedback and other information provided from our customers, we estimate our solutions have helped return billions of dollars in economic benefit.
High-Value Outcomes We are enabling the digital transformation of many of the world’s leading organizations and, in the process, helping them to attain short time-to-value and exceptionally high economic returns. At some companies, based on feedback and other information provided from our customers, we estimate our solutions have helped return billions of dollars in economic benefit.
We cooperated to deliver a highly successful pilot engagement to a large U.S. Defense Agency. All C3 AI Applications are available in the Azure Marketplace. C3 AI and Booz Allen established a strategic partnership in fiscal year 2023 focused on providing strategic solutions into the Government, Defense, and Intelligence sectors.
Energy company and a European technology company serving the construction and mining sectors. We cooperated to deliver a highly successful pilot engagement to a large U.S. Defense Agency. All C3 AI Applications are available in the Azure Marketplace.
C3 AI Applications C3 AI Applications is an expanding portfolio of turnkey and ready-to-use suite of Enterprise AI applications that address a range of high-value use cases. With C3 AI Applications, organizations can typically deploy enterprise-scale production AI applications in one to six months. Each of these applications is extensible and customizable to meet customer requirements.
With C3 AI Applications, organizations can typically deploy enterprise-scale production AI applications in one to six months. Each of these applications is extensible and customizable to meet customer requirements. C3 AI Reliability Suite The C3 AI Reliability Suite drives enterprise asset performance, reduces downtime, and improves process efficiency.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMany of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as: • greater name recognition, longer operating histories, and larger customer bases; • larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; • broader, deeper, or otherwise more established relationships with technology, channel, and distribution partners and customers; • wider geographic presence or greater access to larger customer bases; • greater focus in specific geographies or industries; • lower labor and research and development costs; • larger and more mature intellectual property portfolios; and • substantially greater financial, technical, and other resources to provide support, make acquisitions, hire talent, and develop and introduce new products. 27 Table of Contents Some of our larger competitors have substantially broader and more diverse platform and application offerings and may be able to leverage their relationships with distribution partners and customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages potential customers from subscribing to our C3 AI Software, including by selling at zero or negative margins, bundling with other offerings, or offering closed technology platforms.
Biggest changeMany of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as: • greater name recognition, longer operating histories, and larger customer bases; • larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; • broader, deeper, or otherwise more established relationships with technology, channel, and distribution partners and customers; • wider geographic presence or greater access to larger customer bases; • greater focus in specific geographies or industries; • lower labor and research and development costs; • larger and more mature intellectual property portfolios; and • substantially greater financial, technical, and other resources to provide support, make acquisitions, hire talent, and develop and introduce new products.
Companies that must comply with the GDPR or the UK GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements, with violations potentially resulting in an order prohibiting the processing of personal data and/or fines of up to the greater of €20 million or 4% of the annual global revenues of the noncompliant company in the European Union, and up to the greater of GBP 17.5 million or 4% annual global revenues in the UK; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements, with violations potentially resulting in an order prohibiting the processing of personal data and/or fines of up to the greater of €20 million or 4% of the annual global revenues of the noncompliant company in the European Union, and up to the greater of GBP 17.5 million or 4% of the annual global revenues in the UK; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach may cause us to breach customer contracts.
Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach and may cause us to breach customer contracts.
If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our C3 AI Software, brand, and other intangible assets may be diminished, and competitors may be able to more effectively replicate our C3 AI Software.
If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our C3 AI Software, brand, and other intangible assets may be diminished, and competitors may be able to replicate our C3 AI Software more effectively.
We cannot guarantee that the recovery systems, security protocols, network protection mechanisms and other security measures that we have integrated into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches, or those of our vendors and business partners, will be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences.
We cannot guarantee that the recovery systems, security protocols, network protection mechanisms and other security measures that we have integrated into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches and vulnerabilities, or those of our vendors and business partners, will be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences.
Our business will be harmed if any provider of such software systems: • discontinues or limits our access to its software; • modifies its terms of service or other policies, including fees charged to, or other restrictions on us, or other platform and application developers; • changes how information is accessed by us or our customers; • establishes more favorable relationships with one or more of our competitors; or • develops or otherwise favors its own competitive offerings over our C3 AI Software. 33 Table of Contents Third-party services and products are constantly evolving, and we may not be able to modify our C3 AI Software to assure their compatibility with that of other third parties as they continue to develop or emerge in the future or we may not be able to make such modifications in a timely and cost-effective manner.
Our business will be harmed if any provider of such software systems: • discontinues or limits our access to its software; • modifies its terms of service or other policies, including fees charged to, or other restrictions on us, or other platform and application developers; • changes how information is accessed by us or our customers; • establishes more favorable relationships with one or more of our competitors; or • develops or otherwise favors its own competitive offerings over our C3 AI Software. 32 Table of Contents Third-party services and products are constantly evolving, and we may not be able to modify our C3 AI Software to assure their compatibility with that of other third parties as they continue to develop or emerge in the future or we may not be able to make such modifications in a timely and cost-effective manner.
In addition, at some time in the future it is possible that the license terms under which important components of the open source projects in our C3 AI Software is distributed may be modified, which could, among other consequences, negatively impact our continuing development or distribution of the software code subject to the new or modified license.
In addition, at some time in the future it is possible that the license terms under which important components of the open source projects in our C3 AI Software are distributed may be modified, which could, among other consequences, negatively impact our continuing development or distribution of the software code subject to the new or modified license.
Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations that govern the processing of personal data by us and on our behalf.
Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations that govern the processing of personal data by us and on our behalf.
In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. European and other data protection laws, including the GDPR and UK GDPR also restrict the ability of companies to transfer personal data to the United States and other countries.
In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. European and other data protection laws, including the GDPR also restrict the ability of companies to transfer personal data to the United States and other countries.
Government entities routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government entity refusing to renew its subscription to our C3 AI Software, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities. 30 Table of Contents If the market for our C3 AI Software fails to grow as we expect, or if businesses fail to adopt our C3 AI Software, our business, operating results, and financial condition could be adversely affected.
Government entities routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government entity refusing to renew its subscription to our C3 AI Software, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities. 29 Table of Contents If the market for our C3 AI Software fails to grow as we expect, or if businesses fail to adopt our C3 AI Software, our business, operating results, and financial condition could be adversely affected.
Our customers’ renewal and expansion commitments may decline or fluctuate as a result of a number of factors, including, but not limited to, their satisfaction with our C3 AI Software and our customer support, the frequency and severity of software and implementation errors or other reliability issues, the pricing of our subscriptions or competing solutions, changes in their IT budget, the effects of global economic conditions, and our customers’ financial circumstances, including their ability to maintain or expand their spending levels or continue their operations.
Our customers’ renewal and expansion commitments may decline or fluctuate as a result of a number of factors, including, but not limited to, their satisfaction with our C3 AI Software and our customer support, the frequency and severity of software and implementation errors or other reliability issues, the pricing of our subscriptions or competing solutions, changes in their IT budget, the effects of global economic conditions, and our customers’ financial circumstances, including their ability to maintain or expand their spending levels.
Operating internationally subjects us to new risks and may increase risks that we currently face, including risks associated with: • recruiting and retaining talented and capable employees outside the United States and maintaining our company culture across all of our offices; • potentially different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues; • compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, data protection, and consumer protection, and the risk of penalties to us and individual members of management or employees if our practices are deemed to be out of compliance; • management of an employee base in jurisdictions that may not give us the same employment and retention flexibility as does the United States; • operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States and the practical enforcement of such intellectual property rights outside of the United States; 46 Table of Contents • foreign government interference with our intellectual property that resides outside of the United States, such as the risk of changes in foreign laws that could restrict our ability to use our intellectual property; • integration with partners outside of the United States; • securing our locally operated systems and our data and the data of our customers and partners accessible from such jurisdictions; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, anti-money laundering laws and other regulatory limitations on our ability to provide our C3 AI Software in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political and economic instability, including military actions affecting Russia, Ukraine and/or surrounding regions; • COVID-19 or any other pandemics or epidemics that could result in decreased economic activity in certain markets, decreased use of our C3 AI Software, or in our decreased ability to import, export, or sell our C3 AI Software to existing or new customers in international markets; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes, and other trade barriers; • generally longer payment cycles and greater difficulty in collecting accounts receivable; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.
Operating internationally subjects us to new risks and may increase risks that we currently face, including risks associated with: • recruiting and retaining talented and capable employees outside the United States and maintaining our company culture across all of our offices; • potentially different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues; • compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, data protection, and consumer protection, and the risk of penalties to us and individual members of management or employees if our practices are deemed to be out of compliance; • management of an employee base in jurisdictions that may not give us the same employment and retention flexibility as does the United States; • operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States and the practical enforcement of such intellectual property rights outside of the United States; • foreign government interference with our intellectual property that resides outside of the United States, such as the risk of changes in foreign laws that could restrict our ability to use our intellectual property; • working with partners outside of the United States; • securing our locally operated systems and our data and the data of our customers and partners accessible from such jurisdictions; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, anti-money laundering laws and other regulatory limitations on our ability to provide our C3 AI Software in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political and economic instability, including military actions affecting the Middle East, Russia, Ukraine and/or surrounding regions; • pandemics or epidemics that could result in decreased economic activity in certain markets, decreased use of our C3 AI Software, or in our decreased ability to import, export, or sell our C3 AI Software to existing or new customers in international markets; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes, and other trade barriers; 47 Table of Contents • generally longer payment cycles and greater difficulty in collecting accounts receivable; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.
If our marketing and sales efforts are not effective, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed. 32 Table of Contents If we fail to develop, maintain, and enhance our brand and reputation cost-effectively, our business and financial condition may be adversely affected.
If our marketing and sales efforts are not effective, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed. 31 Table of Contents If we fail to develop, maintain, and enhance our brand and reputation cost-effectively, our business and financial condition may be adversely affected.
Moreover, the proceeds from our recent initial public offering could create disparities in wealth among our employees, which may harm our culture and relations among employees and our business. 34 Table of Contents If we fail to attract new personnel or to retain our current personnel, our business would be harmed.
Moreover, the proceeds from our recent initial public offering could create disparities in wealth among our employees, which may harm our culture and relations among employees and our business. 33 Table of Contents If we fail to attract new personnel or to retain our current personnel, our business would be harmed.
These service providers may process personal information, protected health information, or other confidential information of our employees, partners or customers in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email and payroll, content delivery to customers, and other functions.
These third parties may process personal information, protected health information, or other confidential information of our employees, partners or customers in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, encryption and authentication technology, employee email and payroll, content delivery to customers, and other functions.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages and supply chain disruptions, inflation, bank failures and monetary supply shifts, as well as recession risks, which may continue for an extended period and which could result in our customer prospects and our existing customers experiencing slowdowns in their businesses, which in turn may result in reduced demand for our C3 AI Software, lengthening of sales cycles, loss of customers, and difficulties in collections.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages and supply chain disruptions, inflation, interest rate fluctuations, bank failures and monetary supply shifts, as well as recession risks, which may continue for an extended period and which could result in our customer prospects and our existing customers experiencing slowdowns in their businesses, which in turn may result in reduced demand for our C3 AI Software, lengthening of sales cycles, loss of customers, and difficulties in collections.
This could result in a temporary or permanent revenue shortfall and adversely affect our business. 31 Table of Contents Any failure of our C3 AI Software to operate effectively with future infrastructure platforms and technologies could reduce the demand for our C3 AI Software.
This could result in a temporary or permanent revenue shortfall and adversely affect our business. 30 Table of Contents Any failure of our C3 AI Software to operate effectively with future infrastructure platforms and technologies could reduce the demand for our C3 AI Software.
Our performance metrics, including data regarding customer engagement, and other operational data may involve judgement and therefore may not reflect our actual performance, and investors should consider these metrics in light of the assumptions used in calculating such metrics and limitations as a result thereof.
Our performance metrics, including data regarding customer engagement, and other operational data may involve judgment and therefore may not reflect our actual performance, and investors should consider these metrics in light of the assumptions used in calculating such metrics and limitations as a result thereof.
We may share or receive sensitive information with or from third parties. 39 Table of Contents Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing) and other malicious internet-based activity are prevalent in our industry and our customers’ industries and such attacks continue to increase.
We may share or receive sensitive information with or from third parties. 39 Table of Contents Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing), online and offline fraud and other malicious internet-based activity are prevalent in our industry and our customers’ industries and such attacks continue to increase.
If we are not able to attract new customers, it will have an adverse effect on our business, financial condition and results of operations. 24 Table of Contents In addition, our future success depends on our ability to sell additional subscriptions for our C3 AI Software to our existing customers, and our customers renewing their subscriptions when the contract term expires.
If we are not able to attract new customers, it will have an adverse effect on our business, financial condition and results of operations. In addition, our future success depends on our ability to sell additional subscriptions for our C3 AI Software to our existing customers, and our customers renewing their subscriptions when the contract term expires.
Therefore, if expectations for our business are not accurate, we may not be able to adjust our cost structure on a timely basis, and our margins and cash flows may differ from expectations. Certain revenue metrics such as net dollar-based retention rate or annual recurring revenue may not be accurate indicators of our future financial results.
Therefore, if expectations for our business are not accurate, we may not be able to adjust our cost structure on a timely basis, and our margins and cash flows may differ from expectations. 27 Table of Contents Certain revenue metrics such as net dollar-based retention rate or annual recurring revenue may not be accurate indicators of our future financial results.
For example, on June 29, 2020, the Governor of California signed into law the 2020 Budget Act which temporarily suspends the utilization of NOLs and limits the utilization of research credits to $5.0 million annually for 2020, 2021, and 2022.
For example, on June 29, 2020, the Governor of California signed into law the 2020 Budget Act which temporarily suspended the utilization of NOLs and limits the utilization of research credits to $5.0 million annually for 2020, 2021, and 2022.
Additionally, companies that transfer personal data outside of the EEA and UK to other jurisdictions, particularly the United States, are subject to increased scrutiny form regulators, individual litigants and activist groups.
Additionally, companies that transfer personal data outside of the EEA and UK to other jurisdictions, particularly the United States, are subject to increased scrutiny from regulators, individual litigants and activist groups.
Although we currently anticipate that our existing cash and cash equivalents and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing.
Although we currently anticipate that our existing cash, cash equivalents and marketable securities and cash flow from operations will be sufficient to meet our cash needs for the foreseeable future, we may require additional financing.
We recently completed our initial public offering and potential candidates may not perceive our compensation package, including our equity awards, as favorably as employees hired prior to our initial public offering. In addition, our recruiting personnel, methodology, and approach may need to be altered to address a changing candidate pool and profile.
We completed our initial public offering in December 2020 and potential candidates may not perceive our compensation package, including our equity awards, as favorably as employees hired prior to our initial public offering. In addition, our recruiting personnel, methodology, and approach may need to be altered to address a changing candidate pool and profile.
We rely on third-party service providers to host and deliver our C3 AI Software, and any interruptions or delays in these services could impair our C3 AI Software and harm our business. We currently serve our customers from third-party data center hosting facilities located in the United States, Asia, and Europe.
We utilize third-party service providers to host and deliver our C3 AI Software, and any interruptions or delays in these services could impair our C3 AI Software and harm our business. We currently serve our customers from third-party data center hosting facilities located in the United States, Asia, and Europe.
Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations. 51 Table of Contents Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets.
Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations. Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets.
In particular, our U.S. headquarters are located in the San Francisco Bay Area, a region known for seismic activity and wild fires, and our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster.
In particular, our U.S. headquarters are located in the San Francisco Bay Area, a region known for seismic activity and wildfires, and our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster.
Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. Some of our competitors have made or could make acquisitions of businesses that allow them to offer more competitive and comprehensive solutions.
Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. 26 Table of Contents Some of our competitors have made or could make acquisitions of businesses that allow them to offer more competitive and comprehensive solutions.
To the extent macroeconomic uncertainties and the prolonged COVID-19 pandemic continue to adversely affect our business, financial condition, and results of operations, many of the other risks described in this “Risk Factors” section could be exacerbated, including but not limited to, those related to our ability to increase sales to existing and new customers, develop and deploy new offerings and applications and maintain effective marketing and sales capabilities.
To the extent macroeconomic uncertainties continue to adversely affect our business, financial condition, and results of operations, many of the other risks described in this “Risk Factors” section could be exacerbated, including but not limited to, those related to our ability to increase sales to existing and new customers, develop and deploy new offerings and applications and maintain effective marketing and sales capabilities.
One of our U.S. government contracts requires our employees to maintain security clearances, and also requires us to comply with the DoD security rules and regulations. The DoD has strict security clearance requirements for personnel who perform work in support of classified programs.
One of our U.S. government contracts requires our employees to maintain security clearances, and also requires us to comply with the U.S Department of Defense, or DoD, security rules and regulations. The DoD has strict security clearance requirements for personnel who perform work in support of classified programs.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. 41 Table of Contents If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. 41 Table of Contents If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class action claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials.
We have Customer-Entities in more than 15 countries, and 21% of our revenue for the fiscal year ended April 30, 2023 was generated from customers outside of North America. As of April 30, 2023, we had ten international sales locations, and we plan to add local sales support in further select international markets over time.
We have Customer-Entities in more than 15 countries, and 14% of our revenue for the fiscal year ended April 30, 2024 was generated from customers outside of North America. As of April 30, 2024, we had ten international sales locations, and we plan to add local sales support in further select international markets over time.
In the European Economic Area, or EEA, we are subject to the European General Data Protection Regulation, or GDPR, and in the United Kingdom, or UK, we are subject to the UK data protection regime, or UK GDPR.
In the European Economic Area, or EEA, we are subject to the European General Data Protection Regulation, or GDPR, and in the United Kingdom, or UK, we are subject to the UK data protection regime, or UK GDPR (EU GDPR and UK GDPR, collectively GDPR).
Further, due to political uncertainty and military actions involving Russia, Ukraine, and surrounding regions, we and the third parties upon which we rely may be vulnerable to a heightened risk of security breaches, computer malware, social-engineering attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our C3 AI Software.
Further, due to political uncertainty and military actions involving Russia, Ukraine, and surrounding regions, we and the third parties with whom we work may be vulnerable to a heightened risk of security breaches, computer malware, social-engineering attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, and other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our C3 AI Software.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information, or our technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information, or our technology systems, or those of the third parties with whom we work.
We may face increased compliance burdens regarding such requirements from regulators and customers regarding our products and services and also incur additional costs for oversight and monitoring of security risks relating to our own supply chain. For example, we have contractual and legal obligations to notify relevant stakeholders of security breaches.
We may face increased compliance burdens regarding such requirements from regulators and customers regarding our products and services and also incur additional costs for oversight and monitoring of security risks relating to our own supply chain. For example, we have contractual and legal obligations to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security breaches.
Any failure to maintain high-quality maintenance and support services, a failure of channel parties to maintain high-quality maintenance and support services or a market perception that we do not maintain high-quality maintenance and support services for our customers, would harm our business. 36 Table of Contents Macroeconomic uncertainties and the COVID-19 pandemic, have had, and could continue to have, an adverse impact on our business, our operations, and the markets and communities in which we, our partners, and users operate.
Any failure to maintain high-quality maintenance and support services, a failure of channel parties to maintain high-quality maintenance and support services or a market perception that we do not maintain high-quality maintenance and support services for our customers, would harm our business. 35 Table of Contents Macroeconomic uncertainties have had, and could continue to have, an adverse impact on our business, our operations, and the markets and communities in which we, our partners, and users operate.
Our Class B common stock has 50 votes per share, and our Class A common stock has one vote per share. As of April 30, 2023, Mr.
Our Class B common stock has 50 votes per share, and our Class A common stock has one vote per share. As of April 30, 2024, Mr.
As we increase our international sales and business, our risks under these laws may increase. 48 Table of Contents As we increase our international sales and business and sales to the public sector, we may engage with third-party business partners and intermediaries to market our C3 AI Software and to obtain necessary permits, licenses, and other regulatory approvals.
As we increase our international sales and business, our risks under these laws may increase. As we increase our international sales and business and sales to the public sector, we may engage with third-party business partners and intermediaries to market our C3 AI Software and to obtain necessary permits, licenses, and other regulatory approvals.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, C3 AI Software (which includes our C3 AI Platform, C3 AI Applications, C3 Generative AI Product Suite and C3 AI Ex Machina), reputation, brand, financial condition, results of operations, and prospects.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, C3 AI Software (which includes our C3 AI Platform, C3 AI Applications and C3 Generative AI), reputation, brand, financial condition, results of operations, and prospects.
The CCPA calls for statutory fines for noncompliance (up to $7,500 per violation) and allows private litigants affected by certain data breaches to recover significant statutory damages.
The CCPA provides for statutory fines for noncompliance (up to $7,500 per intentional violation) and allows private litigants affected by certain data breaches to recover significant statutory damages.
A claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position, and results of operations.
A claim brought against us that is uninsured or under insured could result in unanticipated costs, potentially harming our business, financial position, and results of operations.
Occurrence of any catastrophic event, including earthquake, fire, flood, tsunami, or other weather event (many of which are becoming more acute and frequent as a result of global climate change), power loss, telecommunications failure, software or hardware malfunctions, pandemics (such as the COVID-19 pandemic), political unrest, geopolitical instability, cyberattack, war, or terrorist attack, could result in lengthy interruptions in our service.
Occurrence of any catastrophic event, including earthquake, fire, flood, tsunami, or other weather event (many of which are becoming more acute and frequent as a result of global climate change), power loss, telecommunications failure, software or hardware malfunctions, political unrest, geopolitical instability, cyberattack, war, or terrorist attack, could result in lengthy interruptions in our service.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
If our information technology systems or data, or those of third parties with whom we work, are or were compromised, we could experience adverse consequences resulting from such compromise, including, but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
Because we derive substantially all of our revenue from our C3 AI Software, failure of Enterprise AI solutions in general and our C3 AI Software in particular to satisfy customer demands or to achieve increased market acceptance would adversely affect our business, results of operations, financial condition, and growth prospects.
Because we derive substantially all of our revenue from subscriptions to our C3 AI Software and Center of Excellence support services, failure of Enterprise AI solutions in general and our C3 AI Software in particular to satisfy customer demands or to achieve increased market acceptance would adversely affect our business, results of operations, financial condition, and growth prospects.
Under the Tax Cuts and Jobs Act of 2017, or the Tax Act, as modified by the CARES Act, federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020 is limited to 80% of taxable income.
Under the Tax Cuts and Jobs Act of 2017, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020 is limited to 80% of taxable income.
Ransomware attacks, including by organized criminal threat actors, nation-states, nation-state-supported actors, and “hacktivists,” are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
Ransomware attacks, including by organized criminal threat actors, nation-states, nation-state-supported actors, and “hacktivists,” are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, ability to provide our products or services, loss of data and income, reputational harm, and diversion of funds.
Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or that of the third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory and other cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory and other cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
We derive and expect to continue for the foreseeable future to derive substantially all of our revenue from our C3 AI Software. As such, the market acceptance of Enterprise AI solutions in general, and our C3 AI Software in particular, are critical to our continued success.
We derive and expect to continue for the foreseeable future to derive substantially all of our revenue from subscriptions to our C3 AI Software and Center of Excellence support services. As such, the market acceptance of Enterprise AI solutions in general, and our C3 AI Software in particular, are critical to our continued success.
However, given our large average subscription contract value and our dependence on a small number of high-value customer contracts, these metrics are not accurate indicators of future revenue for any given period of time because the gain or loss of even a single high-value customer contract could cause significant volatility in these metrics.
However, due to our dependence on a small number of high-value customer contracts, these metrics are not accurate indicators of future revenue for any given period of time because the gain or loss of even a single high-value customer contract could cause significant volatility in these metrics.
The risk of unauthorized circumvention of our security measures or those of our third-party providers, clients and partners has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including without limitation, the theft or misuse of personal and financial information, counterfeiting, “phishing” or social engineering incidents, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks, malware, fraudulent payment and identity theft.
The risk of unauthorized circumvention of our security measures or those of the third parties with whom we work, has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including without limitation, the theft or misuse of personal and financial information, counterfeiting, “phishing” or social engineering incidents, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks, malware, fraudulent payment and identity theft.
A license to continue such practices may not be available to us at all, and we may be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative, non-infringing technology or practices could require significant effort and expense. Our business could be harmed as a result.
A license to continue such practices may not be available to us at all, and we may be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative, non-infringing technology or practices could require significant effort and expense.
As a result, operating our business or offering our services in Europe or other countries with similar data protection laws would subject us to substantial compliance costs and potential liability and may require changes to the ways we collect and use personal data.
As a result, operating our business or offering our services in Europe or other countries with similar data protection laws would subject us to substantial compliance costs and potential liability and may require changes to the ways we collect and use personal data. We may also become subject to new laws that regulate non-personal data.
Siebel and related entities beneficially owned approximately 87.8% of our Class B common stock and approximately 21.8% of our outstanding Class A common stock, resulting in beneficial ownership of capital stock representing approximately 56.2% of the voting power of our outstanding capital stock. Therefore, Mr.
Siebel and related entities beneficially owned approximately 87.8% of our Class B common stock and approximately 21.3% of our outstanding Class A common stock, resulting in beneficial ownership of capital stock representing approximately 54.4% of the voting power of our outstanding capital stock. Therefore, Mr.
We or our vendors and business partners may experience social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, unavailable systems, unauthorized access or disclosure due to employee or other theft or misuse, denial-of-service attacks, sophisticated attacks by nation-state and nation-state supported actors, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
We or our vendors and business partners may experience social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, unavailable systems, unauthorized access or disclosure due to employee or other theft or misuse, denial-of-service attacks, sophisticated attacks by nation-state and nation-state supported actors, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by AI, and other similar threats.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
Factors that may cause fluctuations in our annual or quarterly results of operations and key metrics include, without limitation, the risk factors listed elsewhere in this section and the factors listed below: • our ability to generate significant revenue from new offerings; • our ability to expand our number of partners and distribution of our C3 AI Software; • our ability to hire and retain employees, in particular those responsible for the selling or marketing of our C3 AI Software; • our ability to develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • changes in the way we organize and compensate our sales teams; • the timing of expenses and recognition of revenue; • our ability to increase sales to large organizations as well as increase sales to a larger number of smaller customers; • the length of sales cycles and seasonal purchasing patterns of our customers; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure, as well as international expansion and entry into operating leases; • timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new platforms, applications, features, and functionality by us or our competitors; • failures or breaches of security or privacy by us or our suppliers and business partners, and the costs associated with remediating any such failures or breaches; • changes in the competitive dynamics of our industry, including consolidation among competitors; • changes in laws and regulations that impact our business; • any large indemnification payments to our users or other third parties; • the timing of expenses related to any future acquisitions; • health epidemics or pandemics, such as the coronavirus, or COVID-19, pandemic; • the impact of any applicable changes in accounting standards or management assumptions, estimates or judgments on complex accounting matters, including estimates associated with variable consideration calculations for our arrangement with Baker Hughes; • civil unrest and geopolitical instability; and 35 Table of Contents • general political, economic, and market conditions.
Factors that may cause fluctuations in our annual or quarterly results of operations and key metrics include, without limitation, the risk factors listed elsewhere in this section and the factors listed below: • our ability to generate significant revenue from new offerings; • our ability to expand our number of partners and distribution of our C3 AI Software; • our ability to hire and retain employees, in particular those responsible for the selling or marketing of our C3 AI Software; • our ability to develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • changes in the way we organize and compensate our sales teams; • the timing of expenses and recognition of revenue; • our ability to increase sales to large organizations as well as increase sales to a larger number of smaller customers; • the length of sales cycles and seasonal purchasing or consumption patterns of our customers; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure, as well as international expansion and entry into operating leases; • timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new platforms, applications, features, and functionality by us or our competitors; • failures or breaches of security or privacy by us or our suppliers and business partners, and the costs associated with remediating any such failures or breaches; • changes in the competitive dynamics of our industry, including consolidation among competitors; • changes in laws and regulations that impact our business; • any large indemnification payments to our users or other third parties; • the timing of expenses related to any future acquisitions; • the impact of any applicable changes in accounting standards or management assumptions, estimates or judgments on complex accounting matters; • civil unrest and geopolitical instability; and • general political, economic, and market conditions. 34 Table of Contents Our performance metrics, data regarding customer engagement and certain other operational data in this report are subject to assumptions and limitations and may not provide an accurate indication of our future or expected results.
We generated net losses of approximately $268.8 million and $192.1 million for the fiscal years ended April 30, 2023 and 2022, respectively. As a result, we had an accumulated deficit of $810.2 million as of April 30, 2023. We expect to continue to incur net losses for the foreseeable future.
We generated net losses of approximately $279.7 million, $268.8 million, and $192.1 million for the fiscal years ended April 30, 2024, 2023, and 2022 respectively. As a result, we had an accumulated deficit of $1,089.9 million as of April 30, 2024. We expect to continue to incur net losses for the foreseeable future.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform.
A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our platform.
For the fiscal years ended April 30, 2023 and 2022, 8% and 13% of our revenue, respectively, were denominated in currencies other than U.S. dollars. For the fiscal years ended April 30, 2023 and 2022, 5% and 5% of our expenses, respectively, were denominated in currencies other than U.S. dollars.
For the fiscal years ended April 30, 2024 and 2023, 6% and 8% of our revenue, respectively, were denominated in currencies other than U.S. dollars. For the fiscal years ended April 30, 2024 and 2023, 7% and 5% of our expenses, respectively, were denominated in currencies other than U.S. dollars.
As of April 30, 2023, we had net operating loss carryforwards, or NOLs, for U.S. federal and state purposes of $487.6 million and $187.8 million, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2029.
As of April 30, 2024, we had net operating loss carryforwards, or NOLs, for U.S. federal and state purposes of $599.3 million and $249.3 million, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2029.
Preparing for and complying with these obligations requires significant resources, which may necessitate changes to our information technologies, systems, and practices, including our C3 AI Software, possibly limiting our ability to develop new applications and features, and to those of any third parties that process personal data on our behalf.
Preparing for and complying with these obligations requires significant resources, which may necessitate changes to our information technologies, systems, and practices, including our C3 AI Software, possibly limiting our ability to develop new applications and features, and to those of any third parties with whom we work.
A number of factors could cause our growth rate to be adversely impacted, including any reduction in demand for our C3 AI Software, reduction in consumption of our C3 AI Software, increased competition, contraction of our overall market, our inability to accurately forecast demand for our C3 AI Software, or our failure, for any reason, to capitalize on growth opportunities.
Further, in future periods, our revenue growth may be adversely impacted due to a number of factors, including a reduction in demand for our C3 AI Software, reduction in consumption of our C3 AI Software, increased competition, contraction of our overall market, our inability to accurately forecast demand for our C3 AI Software, or our failure, for any reason, to capitalize on growth opportunities.
Our sales efforts involve educating our customers about the use, technical capabilities, and benefits of our C3 AI Software. Customers often undertake a prolonged evaluation process, which frequently involves not only our C3 AI Software but also those of other companies. In addition, the size of potential customers may lead to longer sales cycles.
Customers often undertake a prolonged evaluation process, which frequently involves not only our C3 AI Software but also those of other companies. In addition, the size of potential customers may lead to longer sales cycles.
We seek to grow our partner ecosystem as a way to grow our business. We anticipate that we will continue to establish and maintain relationships with third parties, such as channel partners, resellers, OEMs, system integrators, independent software and hardware vendors, and platform and cloud service providers.
We anticipate that we will continue to establish and maintain relationships with third parties, such as channel partners, resellers, OEMs, system integrators, independent software and hardware vendors, and platform and cloud service providers.
We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies, self-regulatory schemes, standards and other obligations related to data privacy and security.
We and the third parties with whom we work are subject to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies, self-regulatory schemes, standards and other obligations related to data privacy and security.
We may also be subject to additional tax liabilities due to changes in non-income based taxes resulting from changes in federal, state, or international tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, results of tax examinations, settlements, or judicial decisions, changes in accounting principles, changes to our business operations, including acquisitions, as well as the evaluation of new information that results in a change to a tax position taken in a prior period.
We may also be subject to additional tax liabilities due to changes in non-income based taxes resulting from changes in federal, state, local, or international tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, results of tax examinations, settlements, or judicial decisions, changes in accounting principles, changes to our business operations, including acquisitions, as well as the evaluation of new information that results in a change to a tax position taken in a prior period. 50 Table of Contents Our ability to use our net operating losses and certain other tax attributes to offset future taxable income or taxes may be subject to certain limitations.
Finally, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers or from existing customers that increase their use of our C3 AI Software must be recognized over the applicable subscription term. These risks are further exacerbated by our dependence on high-value customer contracts.
Finally, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional subscription sales in any period, as revenue from new customers or from existing customers that increase their use of our C3 AI Software must be recognized over the applicable subscription term.
If we are unable to achieve and sustain such increased levels of liquidity, we may suffer adverse consequences including reduced investment in our C3 AI Software, difficulties in executing our business plan and fulfilling our obligations, and other operational challenges.
If we are unable to achieve and sustain such increased levels of liquidity, we may suffer adverse consequences including reduced investment in our C3 AI Software, difficulties in executing our business plan and fulfilling our obligations, and other operational challenges. Any of these developments could adversely affect our business, operating results and financial position.
We may be subject to liabilities on past sales for taxes, surcharges, and fees. We currently collect and remit applicable sales tax in jurisdictions where we, through our employees, have a presence and where we have determined, based on legal precedents in the jurisdiction, that sales of our C3 AI Software are classified as taxable.
We currently collect and remit applicable sales tax in jurisdictions where we, through our employees, have a presence and where we have determined, based on legal precedents in the jurisdiction, that sales of our C3 AI Software are classified as taxable.
While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
While we may be entitled to damages if the third parties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Historically, a limited number of customers have accounted for a substantial portion of our revenue. If existing customers do not renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
If existing customers do not renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
In addition, within each quarter or year, it is difficult to project when a deal will close. Therefore, it is difficult to determine whether we are achieving our quarterly or annual expectations until near the end of the applicable quarter or year. Most of our expenses are relatively fixed or require time to adjust.
Therefore, it is difficult to determine whether we are achieving our quarterly or annual expectations until near the end of the applicable quarter or year. Most of our expenses are relatively fixed or require time to adjust.
Following the recent U.S. Supreme Court decision in South Dakota v. Wayfair, Inc. , states are now free to levy taxes on sales of goods and services based on an “economic nexus,” regardless of whether the seller has a physical presence in the state.
Wayfair, Inc. , states are now free to levy taxes on sales of goods and services based on an “economic nexus,” regardless of whether the seller has a physical presence in the state.
Our main sources of current and potential competition fall into several categories: • internal IT organizations that develop internal solutions and provide self‑support for their enterprises; • commercial enterprise and point solution software providers; • open source software providers with data management, ML, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, ML, and analytics functionality; • system integrators that develop and provide custom software solutions; • legacy data management product providers; and • strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who may offer a substantially similar solution based on a competitor’s technology or internally developed technology that is competitive with ours.
If we are unable to anticipate or effectively react to these competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate and revenue that could adversely affect our business and results of operations. 25 Table of Contents Our main sources of current and potential competition fall into several categories: • internal IT organizations that develop internal solutions and provide self‑support for their enterprises; • commercial enterprise and point solution software providers; • open source software providers with data management, ML, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, ML, and analytics functionality; • system integrators that develop and provide custom software solutions; • legacy data management product providers; and • strategic and technology partners who may also offer our competitors’ technology or otherwise partner with them, including our strategic partners who may offer a substantially similar solution based on a competitor’s technology or internally developed technology that is competitive with ours.
In the event that our data center arrangements are terminated, or if there are any lapses of service or damage to a center, we could experience lengthy interruptions in our C3 AI Software as well as delays and additional expenses in making new arrangements. 42 Table of Contents We designed our system infrastructure and procure and own or lease the computer hardware used for our C3 AI Software.
In the event that our data center arrangements are terminated, or if there are any lapses of service or damage to a center, we could experience lengthy interruptions in our C3 AI Software as well as delays and additional expenses in making new arrangements.
The pending patent applications are presently undergoing examination or expected to undergo examination in the near future. These patents and patent applications seek to protect our proprietary inventions relevant to our business, in addition to other proprietary technologies which are maintained as trade secrets.
We continually review our development efforts to assess the existence and patentability of new intellectual property. The pending patent applications are presently undergoing examination or expected to undergo examination in the near future. These patents and patent applications seek to protect our proprietary inventions relevant to our business, in addition to other proprietary technologies which are maintained as trade secrets.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease 14 other offices around the world for our employees, including in Tysons, Virginia; New York City, New York; Chicago, Illinois; Houston, Texas; Atlanta, Georgia; Sydney, Australia; Paris, France; Munich, Germany; Rome, Italy; Amsterdam, Netherlands; Singapore; London, UK; Guadalajara, Mexico; and Bengaluru, India. We lease all of our facilities and do not own any real property.
Biggest changeWe lease 17 other offices around the world for our employees, including in Tysons, Virginia; Houston, Texas; New York City, New York; Atlanta, Georgia; Chicago, Illinois; Huntsville, Alabama; Boston, Massachusetts; Minneapolis, Minnesota; London, UK; Sydney, Australia; Paris, France; Bengaluru, India; Singapore, Amsterdam, Netherlands; Rome, Italy; Guadalajara, Mexico; and Munich, Germany.
ITEM 2. PROPERTIES Our current principal executive office is located in Redwood City, California, which consists of approximately 283,015 square feet of space under a lease that expires in March 2033. As of April 30, 2023, we have acquired 217,522 square feet of space under this lease in several phases.
ITEM 2. PROPERTIES Our current principal executive office is located in Redwood City, California, which consists of approximately 283,015 square feet of space under a lease that expires in March 2033. As of April 30, 2024, we have acquired 262,276 square feet of space under this lease in several phases.
We intend to procure additional space in the future as we continue to add employees and expand geographically. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Added
We lease all of our facilities and do not own any real property. We intend to procure additional space in the future as we continue to add employees and expand geographically.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, depending on the nature and timing of a given dispute, an unfavorable resolution could materially affect our current or future results of operations or cash flows. For a description of our legal proceedings, refer to Note 7. Commitments and Contingencies—Legal Proceedings in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. ITEM 4.
Biggest changeCommitments and Contingencies - Legal Proceedings in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Company is not presently a party to any other such litigation the outcome of which, the Company believes, if determined adversely to the Company, would individually, or taken together, have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition.
MINE SAFETY DISCLOSURES None. 61 Table of Contents PART II
ITEM 4. MINE SAFETY DISCLOSURES None. 62 Table of Contents PART II
ITEM 3. LEGAL PROCEEDINGS We are subject to various legal proceedings and claims that arise in the ordinary course of our business.
ITEM 3. LEGAL PROCEEDINGS From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Except as disclosed in Note 7.
Removed
Although the outcome of these and other claims cannot be predicted with certainty, we do not believe the ultimate resolution of the current matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (2) February 1 - February 28, 2023 — $ — — $ 85,000 March 1 - March 31, 2023 3,884 4.56 — $ 85,000 April 1 - April 30, 2023 9,315 10.56 — $ 85,000 Total 13,199 $ 9.59 — (1) Includes shares of unvested Class A common stock that were repurchased by us from former employees upon termination of employment in accordance with the terms of the employees’ stock option agreements.
Biggest changeTotal Number of Shares Purchased (1) Average Price Paid per Share February 1 - February 28, 2024 3,321 $ 4.56 March 1 - March 31, 2024 — — April 1 - April 30, 2024 — — Total 3,321 $ 4.56 (1) Includes shares of unvested Class A common stock that were repurchased by us from former employees upon termination of employment in accordance with the terms of the employees’ stock option agreements.
The initial public offering price of our Class A common stock, which had a closing stock price of $92.49 on December 9, 2020, was $42.00 per share. The returns shown are based on historical results and are not intended to suggest future performance. 62 Table of Contents Unregistered Sales of Equity Securities None.
The initial public offering price of our Class A common stock, which had a closing stock price of $92.49 on December 9, 2020, was $42.00 per share. The returns shown are based on historical results and are not intended to suggest future performance. 63 Table of Contents Unregistered Sales of Equity Securities None.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index at the market close on December 9, 2020, and its relative performance is tracked through April 30, 2023.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index at the market close on December 9, 2020, and its relative performance is tracked through April 30, 2024.
Issuer Purchases of Equity Securities The following table contains information relating to the repurchases of our Class A common stock made by us in the three months ended April 30, 2023 (in thousands, except for share and per share amounts).
Issuer Purchases of Equity Securities The following table contains information relating to the repurchases of our Class A common stock made by us in the three months ended April 30, 2024 (in thousands, except for share and per share amounts).
Siebel is no longer providing services to the Company as an officer, employee, director, or consultant; (iii) December 11, 2040, which is the twentieth anniversary of the completion of the IPO; or (iv) the date specified by the holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class.
Siebel is no longer providing services to the Company as an officer, employee, director, or consultant; (iii) December 11, 2040, which is the twentieth anniversary of the completion of the initial public offering, or IPO; or (iv) the date specified by the holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our Class A common stock is traded on The New York Stock Exchange (the “NYSE”) under the symbol “AI.” The shares of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our Class A common stock is traded on The New York Stock Exchange, or NYSE, under the symbol “AI.” The shares of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock. Refer to Note 9.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock. Refer to Note 8.
Stockholders’ Equity , in the Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” , of this Form 10-K for a discussion of our conversion of Class B common stock. Holders of Record As of June 6, 2023, there were 140 stockholders of record of our Class A common stock.
Stockholders’ Equity , in the Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” , of this Form 10-K for a discussion of our conversion of Class B common stock. Holders of Record As of June 12, 2024, there were 123 stockholders of record of our Class A common stock.
Removed
We purchased the shares from the former employees at the respective original exercise prices. (2) In December 2021, our board of directors approved a stock repurchase program for the repurchase of up to $100.0 million of outstanding shares of Class A common stock over the course of 18 months. See Note 9. Stockholders’ Equity for further information.
Added
We purchased the shares from the former employees at the respective original exercise prices. ITEM 6. [RESERVED] 64 Table of Contents
Removed
Under the program, we may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions.
Removed
As of April 30, 2023, $85.0 million remained available for future repurchases under the program. ITEM 6. [RESERVED] 63 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following tables set forth our consolidated statements of operations for the periods presented: Fiscal Year Ended April 30, 2023 2022 2021 (in thousands) Revenue Subscription $ 230,443 $ 206,916 $ 157,366 Professional services 36,352 45,843 25,851 Total revenue 266,795 252,759 183,217 Cost of revenue Subscription (1) 78,423 45,838 31,315 Professional services (1) 7,914 17,875 13,204 Total cost of revenue 86,337 63,713 44,519 Gross profit 180,458 189,046 138,698 Operating expenses Sales and marketing (1) 183,121 173,584 96,991 Research and development (1) 210,660 150,544 68,856 General and administrative (1) 77,170 61,040 33,109 Total operating expenses 470,951 385,168 198,956 Loss from operations (290,493) (196,122) (60,258) Interest income 21,979 1,827 1,255 Other income (expense), net 350 3,019 4,011 Net loss before provision for income taxes (268,164) (191,276) (54,992) Provision for income taxes 675 789 704 Net loss $ (268,839) $ (192,065) $ (55,696) __________________ (1) Includes stock-based compensation expense as follows: Fiscal Year Ended April 30, 2023 2022 2021 (in thousands) Cost of subscription $ 21,417 $ 8,638 $ 828 Cost of professional services 2,220 2,710 376 Sales and marketing 71,389 40,344 9,080 Research and development 90,217 39,200 2,950 General and administrative 31,299 22,549 8,506 Total stock-based compensation expense $ 216,542 $ 113,441 $ 21,740 73 Table of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods presented: Fiscal Year Ended April 30, 2023 2022 2021 Revenue Subscription 86 % 82 % 86 % Professional services 14 18 14 Total revenue 100 100 100 Cost of revenue Subscription 29 18 17 Professional services 3 7 7 Total cost of revenue 32 25 24 Gross profit 68 75 76 Operating expenses Sales and marketing 69 69 53 Research and development 79 60 38 General and administrative 29 24 18 Total operating expenses 177 153 109 Loss from operations (109) (78) (33) Interest income 8 1 1 Other income (expense), net — 1 2 Net loss before provision for income taxes (101) (76) (30) Provision for income taxes — — — Net loss (101) % (76) % (30) % Comparison of the Fiscal Years Ended April 30, 2023 and 2022 Revenue Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Revenue Subscription $ 230,443 $ 206,916 $ 23,527 11 % Professional services 36,352 45,843 (9,491) (21) % Total revenue $ 266,795 $ 252,759 $ 14,036 6 % Subscription revenue accounted for 86% and 82% of our total revenue for the fiscal years ended April 30, 2023 and 2022, respectively.
Biggest changeResults of Operations The following tables set forth our consolidated statements of operations for the periods presented: Fiscal Year Ended April 30, 2024 2023 2022 (in thousands) Revenue Subscription $ 278,104 $ 230,443 $ 206,916 Professional services 32,478 36,352 45,843 Total revenue 310,582 266,795 252,759 Cost of revenue Subscription (1) 128,469 78,423 45,838 Professional services (1) 3,553 7,914 17,875 Total cost of revenue 132,022 86,337 63,713 Gross profit 178,560 180,458 189,046 Operating expenses Sales and marketing (1) 214,167 183,121 173,584 Research and development (1) 201,365 210,660 150,544 General and administrative (1) 81,370 77,170 61,040 Total operating expenses 496,902 470,951 385,168 Loss from operations (318,342) (290,493) (196,122) Interest income 40,079 21,979 1,827 Other (expense) income, net (641) 350 3,019 Net loss before provision for income taxes (278,904) (268,164) (191,276) Provision for income taxes 792 675 789 Net loss $ (279,696) $ (268,839) $ (192,065) __________________ (1) Includes stock-based compensation expense as follows: Fiscal Year Ended April 30, 2024 2023 2022 (in thousands) Cost of subscription $ 34,032 $ 21,417 $ 8,638 Cost of professional services 1,288 2,220 2,710 Sales and marketing 71,751 71,389 40,344 Research and development 72,036 90,217 39,200 General and administrative 36,654 31,299 22,549 Total stock-based compensation expense $ 215,761 $ 216,542 $ 113,441 77 Table of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods presented: Fiscal Year Ended April 30, 2024 2023 2022 Revenue Subscription 90 % 86 % 82 % Professional services 10 14 18 Total revenue 100 100 100 Cost of revenue Subscription 41 29 18 Professional services 1 3 7 Total cost of revenue 43 32 25 Gross profit 57 68 75 Operating expenses Sales and marketing 69 69 69 Research and development 65 79 60 General and administrative 26 29 24 Total operating expenses 160 177 153 Loss from operations (102) (109) (78) Interest income 13 8 1 Other (expense) income, net — — 1 Net loss before provision for income taxes (90) (101) (76) Provision for income taxes — — — Net loss (90) % (101) % (76) % Comparison of the Fiscal Years Ended April 30, 2024 and 2023 Revenue Fiscal Year Ended April 30, $ Change % Change 2024 2023 (in thousands) Revenue Subscription $ 278,104 $ 230,443 $ 47,661 21 % Professional services 32,478 36,352 (3,874) (11) % Total revenue $ 310,582 $ 266,795 $ 43,787 16 % Subscription revenue accounted for 90% and 86% of our total revenue for the fiscal years ended April 30, 2024 and 2023, respectively.
As a result, we have a customer base of a relatively small number of large organizations that generate high average total subscription contract value, but we expect that, over time, as more customers adopt our technology based on the proof points provided by these lighthouse customers, the revenue represented by these customers will decrease as a percentage of total revenue.
As a result, we have a customer base of a relatively small number of large organizations that generate high average total subscription contract value, but we expect that, over time, as more customers adopt our technology based on the proof points provided by these lighthouse customers, the revenue represented by these lighthouse customers will decrease as a percentage of total revenue.
You should review the disclosure under the heading “Risk Factors" under Part I, Item 1A in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
You should review the disclosure under the heading “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
These large organizations, or lighthouse customers, include companies and public agencies within the oil and gas, power and utilities, aerospace and defense, industrial products, life sciences, and financial services industries, among others. This has resulted in C3 AI powering some of the largest and most complex Enterprise AI applications worldwide.
These large organizations, or lighthouse customers, include companies and public agencies within the oil and gas, power and utilities, aerospace and defense, industrial products, life sciences, and financial services industries, among others. This has resulted in C3 AI powering some of the largest and most complex Enterprise AI applications.
We and Baker Hughes further revised and expanded this arrangement in January 2023. Pursuant to this revised arrangement, the frequency of payments due from Baker Hughes to us is accelerated, Baker Hughes obtained expanded reseller rights and we will provide additional products and services.
We and Baker Hughes further revised and further expanded this arrangement in January 2023. Pursuant to this revised arrangement, the frequency of payments due from Baker Hughes is accelerated, Baker Hughes obtained expanded reseller rights and we will provide additional products and services.
We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. 72 Table of Contents Provision for Income Taxes Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.
We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. 76 Table of Contents Provision for Income Taxes Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.
For example, as part of our subscription offerings, we provide our customers with the ability to establish a COE, accessing our experienced and specialized resources in key technical areas like application development, data integration, and data science to accelerate and ensure our customers’ success developing applications on our C3 AI Platform.
For example, as part of our subscription offerings, we provide our customers with the ability to establish a COE utilizing our experienced and specialized resources in key technical areas like application development, data integration, and data science to accelerate and ensure our customers’ success developing applications on our C3 AI Platform.
The subscription margin for the fiscal year ended April 30, 2023 decreased due to higher personnel-related costs as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, compared to the prior fiscal year.
The subscription margin for the fiscal year ended April 30, 2024 decreased due to higher personnel-related costs as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, compared to the prior fiscal year.
We commonly enter into enterprise-wide agreements with Customer-Entities that include multiple operating units or divisions. Our customer composition is diverse and includes various customer segments with different purchasing decisions and pricing models. We offer a wide range of products and services, which results in a complex sales tapestry.
We commonly enter into enterprise-wide agreements with Customer-Entities that include multiple operating units or divisions. Our customer composition is diverse and includes various customer segments with discrete purchasing decisions and pricing models. We offer a wide range of products and services, which results in a complex sales tapestry.
All of these factors increase the adoption and relevance of our C3 AI Software to our customers’ business and, as an outcome, increases their runtime usage. We have built a customer-focused culture and have implemented proactive programs and processes designed to drive customer success. These include a robust customer support and success function.
All of these factors increase the adoption and relevance of our C3 AI Software to our customers’ business and, as an outcome, increases their runtime usage. We have built a high-performance, customer-focused culture and have implemented proactive programs and processes designed to drive customer success. These include a robust customer support and success function.
We partner with Independent Software Vendors who develop, market, and sell application solutions that are natively built on or tightly integrated with the C3 AI Platform. Customer Count and Product Adoption We define a Customer-Entity as each entity that is the ultimate parent of a party contracting with us.
We partner with Independent Software Vendors who develop, market, and sell application solutions that are natively built on or tightly integrated with the C3 AI Platform. Customer Engagement and Product Adoption We define a Customer-Entity as each entity that is the ultimate parent of a party contracting with us.
In certain cases, customers seeking increased utility from their C3 AI Suite or C3 AI Application subscriptions and engineering services are prioritized to develop and modify software features, which are typically part of our product roadmap, but on an accelerated basis. Cost of Revenue Cost of Subscription Revenue.
In certain cases, customers seeking increased utility from their C3 AI Suite or C3 AI Application subscriptions can procure prioritized engineering services to develop and modify software features, which are typically part of our product roadmap, but on an accelerated basis. Cost of Revenue Cost of Subscription Revenue.
We currently have a small number of public utility customers that license our offerings under a perpetual license model, and we expect that may continue for the foreseeable future for certain customers due to their specific contracting requirements. Professional Services Revenue. Our professional services revenue primarily includes implementation services, training and prioritized engineering services.
We currently have a small number of customers that license our offerings under a perpetual license model, and we expect that may continue for the foreseeable future for certain customers due to their specific contracting requirements. Professional Services Revenue. Our professional services revenue primarily includes implementation services, training and prioritized engineering services.
Over the long-term, we expect those percentages to stabilize and then move lower as our business matures. 71 Table of Contents Sales and Marketing. Sales and marketing expenses consist of expenditures related to advertising, media, marketing, promotional events, brand awareness activities, business development, customer success and corporate partnerships.
Over the long-term, we expect those percentages to stabilize and then move lower as our business matures. 75 Table of Contents Sales and Marketing. Sales and marketing expenses consist of expenditures related to advertising, media, marketing, promotional events, brand awareness activities, business development, customer success and corporate partnerships.
This arrangement included a subscription to our C3 AI Platform for their own operations (which we refer to below as direct subscription fees), the exclusive right for Baker Hughes to resell our offerings worldwide in the oil and gas industry, and the non-exclusive right to resell our offerings in other industries.
This arrangement included a subscription to our C3 AI Platform and C3 AI Applications for their own operations (which we refer to below as direct subscription fees), the co-exclusive right for Baker Hughes to resell our offerings worldwide in the oil and gas industry, and the non-exclusive right to resell our offerings in other industries.
Our subscriptions also include our maintenance and support services. Additionally, we offer premium stand-ready support services through our C3 AI COE which is included as part of the subscription when purchased. We also generate revenue from professional services, which primarily include implementation services, training and prioritized engineering services.
Additionally, we offer premium stand-ready support services through our C3 AI COE which is included as part of the subscription when purchased. We also generate revenue from professional services, which primarily include implementation services, training and prioritized engineering services.
Impact of Macroeconomic Conditions and COVID-19 Pandemic Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties, including labor shortages, supply chain disruptions, inflation, higher interest rates, and fluctuations or volatility in capital markets, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.
Impact of Macroeconomic Conditions Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties, including labor shortages, supply chain disruptions, inflation, higher interest rates, and fluctuations or volatility in capital markets, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.
We determine revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; 79 Table of Contents • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation.
We determine revenue recognition through the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; 83 Table of Contents • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation.
Other Income (Expense), Net Other income (expense), net consists primarily of foreign currency exchange gains and losses, gains from legal settlements, losses from impairment of investments, and realized gains and losses on sales of available-for-sale marketable securities. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar.
Other (Expense) Income, Net Other (expense) income, net consists primarily of foreign currency exchange gains and losses, losses from impairment of marketable securities, and realized gains and losses on sales of available-for-sale marketable securities. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar.
We expect that general and administrative expense as a percent of total revenue will decline over the long-term as we benefit from the scale of our business infrastructure. Interest Income Interest income consists primarily of interest income earned on our cash, cash equivalents, and available-for-sale marketable securities.
We expect that general and administrative expense as a percent of total revenue will decline over the long-term as we benefit from the economies of scale of our overall business. Interest Income Interest income consists primarily of interest income earned on our cash, cash equivalents, and available-for-sale marketable securities.
A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2023 compared to the fiscal year ended April 30, 2022 is presented below.
A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2024 compared to the fiscal year ended April 30, 2023 is presented below.
We also offer revenue generating pilots of our applications as part of our customer acquisition strategy. In June 2019, we entered into a three-year arrangement with Baker Hughes as both a leading customer and as a partner in the oil and gas industry.
We also offer revenue generating pilots of our applications as part of our customer acquisition strategy. 73 Table of Contents In June 2019, we entered into a three-year arrangement with Baker Hughes as both a leading customer and as a partner in the oil and gas industry.
A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2022 compared to the fiscal year ended April 30, 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, filed with the Securities and Exchange Commission, or SEC, on June 23, 2022.
A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2023 compared to the fiscal year ended April 30, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended April 30, 2023, filed with the Securities and Exchange Commission, or SEC, on June 22, 2023.
We also intend to attract new customers across multiple industries where we have limited meaningful presence today, yet represent very large market opportunities such as telecommunications, pharmaceuticals, smart cities, transportation, and healthcare, among others. Historically, we have had a relatively small number of customers with large total subscription contract values.
We intend to attract new customers across multiple industries where we have limited meaningful presence today, yet represent very large market opportunities such as telecommunications, pharmaceuticals, state and local government, smart cities, transportation, and healthcare, among others. Historically, we have had a relatively small number of customers with large total subscription contract values.
We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our principal uses of cash in recent periods have been funding our operations and investing in capital expenditures.
We also believe we will meet expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. Our principal uses of cash in recent periods have been funding our operations and investing in capital expenditures.
Go-to-Market Strategy Our go-to-market strategy has been historically focused on large organizations recognized as leaders in their respective industries or public sectors, and who are attempting to solve complicated business problems by digitally transforming their operations.
Go-to-Market Strategy Our go-to-market strategy has been historically focused on large organizations recognized as leaders in their respective industries or public sectors that are attempting to solve complicated business problems by digitally transforming their operations.
Some of our most notable partners include Baker Hughes, FIS, Microsoft, and Google. Each strategic partner is a leader in its industry, with a substantial installed customer base and extensive marketing, sales, and services resources that we can leverage to engage and serve customers anywhere in the world.
Some of our most notable partners include Baker Hughes, AWS, Microsoft, and GCP. Each strategic partner is a leader in its industry, with a substantial installed customer base and extensive marketing, sales, and services resources that we can leverage to engage and serve customers anywhere in the world.
We have formed global strategic go-to-market alliances with hyperscale cloud providers including Amazon Web Services, Microsoft Azure and Google Cloud. In addition, we have strategic alliances with leading hardware infrastructure providers to deliver our software optimized for their technology. These partners include Hewlett Packard Enterprise and Intel.
We have formed global strategic go-to-market alliances with hyperscale cloud providers including Amazon Web Services, or AWS, Microsoft Azure, and Google Cloud Platform, or GCP. In addition, we have strategic alliances with leading hardware infrastructure providers to deliver our software optimized for their technology. These partners include Hewlett Packard Enterprise and Intel.
Our strategy with strategic partners is to establish a significant use case and prove the value of our C3 AI Platform with a flagship customer in each industry in which we participate.
Our strategy with strategic partners is to establish a significant use case and prove the value of our C3 AI Platform, C3 Enterprise AI Applications, and C3 Generative AI with a flagship customer in each industry in which we participate.
The increased engagement is measured by a combination of increased vCPU usage, increased C3 AI Software subscriptions and subscriptions to the C3 AI Platform for in-house AI application development. 65 Table of Contents The size and sophistication of our customers’ businesses demonstrate the flexibility, speed, and scale of our products, and maximize the potential value to our customers.
The increased engagement is measured by a combination of increased vCPU/vGPU usage, increased C3 AI Software subscriptions and subscriptions to the C3 AI Platform for in-house AI application development. The size and sophistication of our customers’ businesses demonstrate the flexibility, speed, and scale of our products, and maximize the potential value to our customers.
Net cash provided by investing activities of $59.9 million for the fiscal year ended April 30, 2023 was primarily attributable to the maturities and sales of investments of $876.7 million, partially offset by purchases of investments of $745.2 million and capital expenditures of $71.5 million mainly related to the leasehold improvements associated with the additional leased space.
Net cash provided by investing activities of $59.9 million for the fiscal year ended April 30, 2023 was primarily attributable to the maturities and sales of marketable securities of $876.7 million, partially offset by purchases of investments of $745.2 million and capital expenditures of $71.5 million mainly related to the leasehold improvements associated with the new leased space. Financing Activities.
We will continue to evaluate the nature and extent of the impact of general macroeconomic conditions and the COVID-19 pandemic on our business. For further discussion, see the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K. 70 Table of Contents Components of Results of Operations Revenue Subscription Revenue.
We will continue to evaluate the nature and extent of the impact of general macroeconomic conditions on our business. For further discussion, see the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K. 74 Table of Contents Components of Results of Operations Revenue Subscription Revenue.
We and Baker Hughes revised this arrangement in October 2021 to extend the term by an additional year, for a total of six years, with an expiration date in the fiscal year ending April 30, 2025, to modify the amount of Baker Hughes’ annual commitments to $85.0 million in the fiscal year ending April 30, 2023, $110.0 million in the fiscal year ending April 30, 2024, and $125.0 million in the fiscal year ending April 30, 2025, and to revise the structure of the arrangement to incentivize Baker Hughes’ sales of our products and services.
We and Baker Hughes revised this arrangement in October 2021 to extend the term by an additional year, for a total of six years, with an expiration date in the fiscal year ending April 30, 2025, to modify the amount of Baker Hughes’ annual commitments to $85.0 million in the fiscal year ending April 30, 2023, $110.0 million in the fiscal year ending April 30, 2024, and $125.0 million in the fiscal year ending April 30, 2025, and to revise the structure of the arrangement to simplify the sales process for Baker Hughes.
Net cash provided by financing activities of $0.6 million for the fiscal year ended April 30, 2023 was due to $4.5 million of proceeds from the exercise of stock options for Class A common stock and $3.1 million of proceeds from the issuance of Class A common stock under the Employee Stock Purchase Plan (“ESPP”), partially offset by $6.9 million of taxes paid related to net share settlement of equity awards.
Net cash provided by financing activities of $0.6 million for the fiscal year ended April 30, 2023 was primarily due to $4.5 million of proceeds from the exercise of stock options for Class A common stock and $3.1 million of proceeds from the issuance of Class A common stock under the ESPP, partially offset by $6.9 million of taxes paid related to net share settlement of equity awards.
Subscription Revenue. Our subscription revenue is primarily comprised of term licenses, stand-ready COE support services, trials and pilots of our applications, and software-as-a-service offerings. Sales of our term licenses grant customers the right to use our functional intellectual property, either on their own cloud instance or internal hardware infrastructure, over the contractual term.
Subscription Revenue. Our subscription revenue is primarily comprised of software licenses, software-as-a-service offerings, stand-ready COE support services, pilots and trials of our C3 AI Applications or Generative AI, and consumption-based pricing. Sales of our software licenses grant customers the right to use our functional intellectual property, either on their own cloud instance or internal hardware infrastructure, over the contractual term.
Due to these factors, it is important to review RPO in conjunction with revenue and other financial metrics disclosed elsewhere in this Annual Report on Form 10-K. RPO was $381.4 million and $477.4 million as of April 30, 2023 and 2022, respectively.
Due to these factors, it is important to review RPO in conjunction with revenue and other financial metrics disclosed elsewhere in this Annual Report on Form 10-K. RPO was $244.3 million and $381.4 million as of April 30, 2024 and 2023, respectively.
Today, our relationships with customers take a myriad of different forms, ranging from $25 licenses of C3 AI Ex Machina to individual data scientists, to enterprise-level limited time trials and pilots, to multi-million-dollar long-term enterprise-wide agreements for C3 AI Applications and/or the C3 AI Platform.
Today, our relationships with customers take a myriad of different forms, ranging from free trials of C3 Generative AI on the AWS and GCP Marketplaces, $25 licenses of C3 AI Ex Machina to individual data scientists, to enterprise-level limited time trials and pilots, to multi-million-dollar long-term enterprise-wide agreements for C3 AI Applications and/or the C3 AI Platform.
How We Generate Revenue We generate revenue primarily from the sale of software subscriptions, which accounted for 86%, 82% and 86% of our total revenue in the fiscal years ended April 30, 2023, 2022 and 2021, respectively.
How We Generate Revenue We generate revenue primarily from the sale of subscriptions, which accounted for 90%, 86% and 82% of our total revenue in the fiscal years ended April 30, 2024, 2023 and 2022, respectively.
Beginning in the fiscal year ending April 30, 2023 and until the Baker Hughes arrangement were further revised in January 2023 as described below, Baker Hughes’ annual commitments were reduced by any revenue we generated from certain customers between October 2021 and January 2023.
Beginning in the fiscal year ended April 30, 2023 and until the agreements were further revised in January 2023 as described below, Baker Hughes’ annual commitments were reduced by any revenue we generated from certain customers between October 2021 and January 2023.
These lighthouse customers serve as proof points for other potential customers in their particular industries.
These lighthouse customers serve as proof points for other potential customers in their respective industries.
Furthermore, the number of individual departments and divisions within our customer base using our applications and/or applications they have built on our platform has also expanded. The move to our new consumption-based pricing model, while being the right model for our business evolution, adds yet another permutation to our customer relations.
The number of individual departments and divisions within our customer base using our applications and/or applications they have built on our platform continues to expand. The move to our new consumption-based pricing model, while being the right model for our business evolution, adds yet another permutation to our customer relations.
We derived approximately 21%, 22% and 35% of our total revenue for the fiscal years ended April 30, 2023, 2022 and 2021, respectively, from international customers.
We derived approximately 14%, 21% and 22% of our total revenue for the fiscal years ended April 30, 2024, 2023 and 2022, respectively, from international customers.
To be a credible partner to our customers, who often are industry leaders, we deploy a motivated and highly educated team of C3 AI personnel and partners. We go-to-market primarily leveraging our direct sales force. We also complement and supplement our sales force with a number of go-to-market partners. • Industry Partners.
To be a credible partner to our customers, who often are industry leaders, we deploy an experienced and highly educated team of C3 AI personnel and partners. We also complement and supplement our sales force with a number of go-to-market partners. • Industry Partners.
As a result of that review, we have decided to change our definition to better reflect the number and level of activity of our customers, which we now define as Customer Engagement: 66 Table of Contents 1.
As a result of that review, we previously decided to change our definition to better reflect the number and level of activity of our customers, which we now define as Customer Engagement: 1.
Overview C3 AI is an Enterprise AI application software company. We have built an integrated family of software applications that enables our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications across any infrastructure. Customers can deploy C3 AI solutions on all major public cloud infrastructures, private cloud or hybrid environments, or directly on their servers and processors.
Overview C3 AI is an Enterprise AI application software company. We have built a family of software applications that enable our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications. Customers can deploy C3 AI solutions on major public cloud infrastructures, private cloud or hybrid environments, or directly on their servers and processors.
This was partially offset by cash inflows related to an increase in lease liabilities of $13.6 million and an increase to accrued compensation and employee benefits of $3.2 million.
This was partially offset by cash inflows related to an increase in lease liabilities of $13.6 million and an increase to accrued compensation and employee benefits of $3.2 million. 82 Table of Contents Investing Activities.
We have developed an alliance program to partner with recognized leaders in their respective industries, such as Baker Hughes, Fidelity National Information Services, or FIS, and Raytheon, to develop, market, and sell solutions that are natively built on or tightly integrated with the C3 AI Platform. • Hyperscale Cloud and Infrastructure.
We have developed an alliance program to partner with recognized leaders in their respective industries, such as Baker Hughes, and Booz Allen, to develop, market, and sell solutions that are natively built on or tightly integrated with the C3 AI Platform. • Hyperscale Cloud and Infrastructure.
To help us better articulate the growth in our customer base and use cases, we retained external consultants to recommend a best-practice customer count methodology that is consistent and relies on system data and is reproducible.
To help us better articulate the growth in our customer base and use cases, we retained external consultants during the fiscal year ended April 30, 2023 to recommend a best-practice customer count methodology that is consistent and relies on system data and is reproducible.
We typically recognize the consumption or usage-based revenue upon occurrence and invoice in arrears, although customers may purchase blocks of runtime in advance. Professional Services Revenue. Professional services revenue primarily consists of implementation services and training. These services are distinct from our subscription revenue.
Customers may purchase blocks of runtime in advance. We typically recognize the consumption or usage-based revenue in excess of committed purchased runtime upon occurrence. Professional Services Revenue. Professional services revenue primarily consists of implementation services, training and prioritized engineering services. These services are distinct from our subscription revenue.
If applying the residual approach results in zero or very little consideration being allocated to the combined performance obligation, or to a bundle of goods or services, we will consider all reasonably available data to determine an appropriate allocation of the transaction price.
If applying the residual approach results in zero or very little consideration being allocated to a performance obligation, we consider all reasonably available data to determine an appropriate allocation of the transaction price. 84 Table of Contents
RPO represents the amount of our contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancellable contracted amounts that will be invoiced and recognized as revenue in future periods. Our RPO as of April 30, 2023 is comprised of $47.9 million related to deferred revenue and $333.5 million of commitments from non-cancellable contracts.
RPO represents the amount of our contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancellable contracted amounts that will be invoiced and recognized as revenue in future periods. Our RPO as of April 30, 2024 is comprised of $39.0 million related to deferred revenue and $205.3 million of commitments from non-cancellable contracts.
The decrease in cost of professional services revenue for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to lower personnel-related costs of $4.8 million due to a decrease in the number of service projects, lower third-party outsourcing costs of $2.9 million, and lower overhead costs of $2.3 million.
The decrease in cost of professional services revenue for the fiscal year ended April 30, 2024 compared to the prior fiscal year was primarily due to lower personnel-related costs of $2.9 million as a result of a decrease in the number of service projects, lower facilities costs of $0.5 million and lower overhead costs of $0.4 million, and lower third-party outsourcing costs of $0.1 million.
While this may seem inordinately complex, it is in fact appropriately complex. Our flexibility in customer arrangements speaks to our agility in working with our customers and providing value-add products and solutions through those contractual agreements and pricing arrangements most convenient to our customers, while also enabling profitability and growth for C3 AI.
Our flexibility in customer arrangements speaks to our agility in working with our customers and providing value-add products and solutions through those contractual agreements and pricing arrangements most convenient to our customers, while also enabling profitability and growth for C3 AI.
Our subscription revenue is primarily comprised of term licenses, stand-ready COE support services, trials and pilots of our applications, and software-as-a-service offerings. Sales of our term licenses grant our customers the right to use our software, either on their own cloud instance or their internal hardware infrastructure, over the contractual term.
Our subscription revenue is primarily comprised of software licenses, software-as-a-service offerings, stand-ready COE support services, pilots and trials of our C3 AI Applications or Generative AI, and hosting charges. Sales of our software licenses grant our customers the right to use our software, either on their own cloud instances or their internal hardware infrastructures, during the contractual term.
The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash used in operating activities for the periods presented: Fiscal Year Ended April 30, 2023 2022 (in thousands) Net cash used in operating activities $ (115,691) $ (86,462) Less: Purchases of property and equipment (70,518) (3,791) Capitalized software development costs (1,000) (500) Free cash flow $ (187,209) $ (90,753) Net cash provided by investing activities $ 59,946 $ 317,015 Net cash provided by financing activities $ 621 $ 5,711 Liquidity and Capital Resources Since inception, we have financed operations primarily through sales generated from our customers and sales of equity securities.
The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash used in operating activities for the periods presented: Fiscal Year Ended April 30, 2024 2023 (in thousands) Net cash used in operating activities $ (62,362) $ (115,691) Less: Purchases of property and equipment (25,256) (70,518) Capitalized software development costs (2,750) (1,000) Free cash flow $ (90,368) $ (187,209) Net cash (used in) provided by investing activities $ (66,615) $ 59,946 Net cash provided by financing activities $ 11,294 $ 621 Liquidity and Capital Resources Since inception, we have financed operations primarily through sales generated from our customers and sales of equity securities.
Approximately 9% and 7%, respectively, of the total subscription revenue was attributable to revenue from new customers, and the remaining 91% and 93%, respectively, was attributable to revenue related to net growth from existing customers for the fiscal year ended April 30, 2023 and 2022, respectively.
Approximately 13% and 9%, respectively, of the total subscription revenue for the fiscal year ended April 30, 2024 and 2023, respectively, was attributable to revenue from new customers, and the remaining 87% and 91%, respectively, was attributable to revenue from existing customers.
Customers generally begin with a two-quarter-long pilot which includes the necessary resources required to introduce the C3 AI Platform, C3 AI Applications and a desired product into their environment and receive necessary training to operate and maintain the product in production.
Customers generally begin with a one to two-quarter-long pilot which includes the necessary resources required to deploy the C3 AI Platform and/or C3 AI Applications and receive necessary training to operate and maintain the software in production use.
The increase in sales and marketing expense for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to higher personnel-related costs of $39.8 million as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher marketing costs of $4.4 million, higher marketing events costs of $3.8 million, higher travel and entertainment costs of $2.8 million, higher overhead costs of $2.3 million and higher commission expense of $1.6 million, partially offset by lower advertising spend of $45.1 million.
The increase in sales and marketing expense for the fiscal year ended April 30, 2024 compared to the prior fiscal year was primarily due to higher advertising spend of $9.0 million, higher marketing costs of $8.9 million, higher personnel-related costs of $5.8 million as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher marketing events costs of $5.1 million, and higher data center costs of $0.9 million.
Gross margin is gross profit expressed as a percentage of total revenue. Our gross margin has fluctuated historically and may continue to fluctuate from period to period based on a number of factors, including the timing and mix of the product offerings we sell as well as the geographies into which we sell, in any given period.
Our gross margin has fluctuated historically and may continue to fluctuate from period to period based on a number of factors, including the timing and mix of the product offerings we sell, size or nature of customer, size of contract, industry, and the geographies into which we sell, in any given period.
Other Income (Expense), Net Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Other income (expense), net $ 350 $ 3,019 $ (2,669) (88) % The decrease in other income (expense), net for the fiscal year ended April 30, 2023 compared to the prior fiscal year was due to foreign currency losses on the remeasurement of Euro-denominated cash and accounts receivable balances. 76 Table of Contents Provision for Income Taxes Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Provision for income taxes $ 675 $ 789 $ (114) (14) % The decrease in provision for income taxes was primarily related to foreign and state tax expense.
Other Income (Expense), Net Fiscal Year Ended April 30, $ Change % Change 2024 2023 (in thousands) Other (expense) income, net $ (641) $ 350 $ (991) (283) % The decrease in other (expense) income, net for the fiscal year ended April 30, 2024 compared to the prior fiscal year was due to foreign currency losses on the remeasurement of Euro-denominated cash and accounts receivable balances. 80 Table of Contents Provision for Income Taxes Fiscal Year Ended April 30, $ Change % Change 2024 2023 (in thousands) Provision for income taxes $ 792 $ 675 $ 117 17 % The increase in provision for income taxes was primarily related to foreign and state tax expense.
Acquiring new customers and expanding our business with our existing customers is the intent of our go-to-market effort and drives our growth. Making new and existing customers successful is critical to our long-term success. After we help our customers solve their initial use cases, they typically identify incremental opportunities within their operations and expand their use of our products.
Making new and existing customers successful is critical to our long-term success. After we help our customers solve their initial use cases, they frequently identify incremental opportunities within their operations and expand their use of our products.
Over a longer horizon, we anticipate that research and development expense as a percent of total revenue to decline. General and Administrative. General and administrative expense consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with administrative services such as executive management and administration, legal, human resources, accounting, and finance.
General and administrative expense consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with administrative services such as executive management and administration, legal, human resources, accounting, and finance.
Gross Profit and Gross Margin Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Gross profit $ 180,458 $ 189,046 $ (8,588) (5) % Gross margin Subscription 66 % 78 % Professional services 78 % 61 % Total gross margin 68 % 75 % The decrease in gross profit in the fiscal year ended April 30, 2023 was primarily driven by a decline in subscription margin, offset by an increase in professional services margin.
Gross Profit and Gross Margin Fiscal Year Ended April 30, $ Change % Change 2024 2023 (in thousands) Gross profit $ 178,560 $ 180,458 $ (1,898) (1) % Gross margin Subscription 54 % 66 % Professional services 89 % 78 % Total gross margin 57 % 68 % The decrease in gross profit in the fiscal year ended April 30, 2024 was primarily driven by a decline in subscription margin, offset by an increase in professional services margin.
Subscription revenue increased by $23.5 million, or 11%, for the fiscal year ended April 30, 2023, compared to the prior fiscal year.
Subscription revenue increased by $47.7 million, or 21%, for the fiscal year ended April 30, 2024, compared to the prior fiscal year.
The $18.8 million cash outflow related to changes in operating assets and liabilities was primarily attributable to a decrease to deferred revenue of $26.1 million inclusive of a decrease in related party balances of $7.6 million, an increase in prepaid expenses, other current assets and other assets of $14.6 million inclusive of an increase in related party balances of $12.7 million, an increase in accounts receivable of $14.2 million inclusive of an increase in related party balances of $20.7 million, a decrease in other liabilities of $5.6 million inclusive of an increase in related party balances of $3.4 million and a decrease in lease liabilities of $3.3 million.
The $5.2 million cash inflow related to changes in operating assets and liabilities was primarily attributable to an increase in lease liabilities of $17.3 million, an increase in other liabilities of $8.2 million, a decrease in accounts receivable of $4.5 million, and a decrease in prepaid expenses, other current assets and other assets of $3.2 million.
The increase in general and administrative expense for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to higher personnel-related costs of $11.0 million as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher professional services costs of $3.5 million, and higher facilities costs of $2.4 million.
The increase in general and administrative expense for the fiscal year ended April 30, 2024 compared to the prior fiscal year was primarily due to higher personnel-related costs of $3.7 million as a result of increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher professional services costs of $1.9 million, partially offset by lower corporate insurance costs of $1.7 million.
When appropriate, we determine SSP based on the price at which the performance obligation has previously been sold through past transactions, taking into account internally approved pricing guidelines related to the performance obligations.
When appropriate, we determine SSP based on the price at which the performance obligation has previously been sold through past standalone transactions.
Professional services revenue represented 14%, 18% and 14% for the fiscal years ended April 30, 2023, 2022 and 2021, respectively. Our professional services are provided both onsite and remotely, and can include training, application design, project management, system design, data modeling, data integration, application design, development support, data science, and application and C3 AI Software administration support.
Our professional services are provided both onsite and remotely, and can include training, application design, project management, system design, data modeling, data integration, application design, development support, data science, and application and C3 AI Software administration support.
The following table summarizes our cash flows for the periods presented: Fiscal Year Ended April 30, 2023 2022 (in thousands) Cash used in operating activities $ (115,691) $ (86,462) Cash provided by investing activities $ 59,946 $ 317,015 Cash provided by financing activities $ 621 $ 5,711 Net increase in cash, cash equivalents, and restricted cash $ (55,124) $ 236,264 Operating Activities.
The following table summarizes our cash flows for the periods presented: Fiscal Year Ended April 30, 2024 2023 (in thousands) Net Cash used in operating activities $ (62,362) $ (115,691) Net Cash (used in) provided by investing activities $ (66,615) $ 59,946 Net Cash provided by financing activities $ 11,294 $ 621 Net decrease in cash, cash equivalents, and restricted cash $ (117,683) $ (55,124) Operating Activities.
Net cash used in operating activities of $86.5 million for the fiscal year ended April 30, 2022 was due to our net loss of $192.1 million adjusted for certain non-cash items, primarily consisting of stock-based compensation of $113.4 million, depreciation and amortization of $5.2 million, and non-cash operating lease cost of $4.2 million.
Net cash used in operating activities of $62.4 million for the fiscal year ended April 30, 2024 was due to our net loss of $279.7 million adjusted for certain non-cash items, primarily consisting of stock-based compensation of $215.8 million, accretion of discounts on marketable securities of $17.2 million depreciation and amortization of $12.7 million, and non-cash operating lease cost of $0.7 million.
RPO is not necessarily indicative of future revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity. Moreover, RPO is influenced by several factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, and seasonality.
RPO is not necessarily indicative of future revenue growth because it is not applicable to pay-as-you go consumption pricing agreements. Moreover, RPO is influenced by several factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, and seasonality.
We provide four primary families of software solutions, which we collectively refer to as our C3 AI Software: • C3 AI Platform, our core technology, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications of any type. • C3 AI Applications, built using the C3 AI Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific SaaS Enterprise AI applications that can be rapidly installed and deployed. • C3 Generative AI Product Suite , our latest innovation, combines the utility of LLMs, generative AI, reinforcement learning, natural language processing, and the C3 AI Platform to rapidly locate, retrieve, and present information, disparate data stores, applications, and enterprise information systems. • C3 AI Ex Machina is a no-code, ML solution that empowers citizen data scientists with cloud-native, complete end-to-end capabilities, connecting to diverse data sources and types, enabling business analysts to rapidly perform data science tasks such as building, configuring, training, and visualizing AI models.
We provide three primary families of software solutions, which we collectively refer to as our C3 AI software: • The C3 AI Platform, our core technology, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications. • C3 AI Applications, built using the C3 AI Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific Enterprise AI applications that can be rapidly installed and deployed. • C3 Generative AI, combines the utility of large language models, or LLMs, generative AI, reinforcement learning, natural language processing, and the C3 AI Platform to rapidly locate, retrieve, and present information, disparate data stores, applications, and enterprise information systems.
Professional services revenue decreased by $9.5 million, or (21)%, for the fiscal year ended April 30, 2023, compared to the prior fiscal year, predominantly due to a decrease in other professional services by $10.4 million due to fewer service projects for C3 AI Platform and C3 AI Applications customers compared to the prior fiscal year, partially offset by an increase in prioritized engineering services by $1.5 million. 74 Table of Contents Cost of Revenue Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Cost of revenue Subscription $ 78,423 $ 45,838 $ 32,585 71 % Professional services 7,914 17,875 (9,961) (56) % Total cost of revenue $ 86,337 $ 63,713 $ 22,624 36 % The increase in cost of subscription revenue for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to higher personnel related costs of $20.1 million as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher data center costs of $4.0 million, higher third-party outsourcing costs of $3.5 million, higher overhead costs of $1.9 million, and higher facilities costs of $1.8 million.
Professional services revenue decreased by $3.9 million, or (11)%, for the fiscal year ended April 30, 2024, compared to the prior fiscal year, predominantly due to decrease in revenue from prioritized engineering services. 78 Table of Contents Cost of Revenue Fiscal Year Ended April 30, $ Change % Change 2024 2023 (in thousands) Cost of revenue Subscription $ 128,469 $ 78,423 $ 50,046 64 % Professional services 3,553 7,914 (4,361) (55) % Total cost of revenue $ 132,022 $ 86,337 $ 45,685 53 % The increase in cost of subscription revenue for the fiscal year ended April 30, 2024 compared to the prior fiscal year was primarily due to higher personnel-related costs of $31.4 million as a result of increased headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, higher data center costs of $9.0 million, higher third-party outsourcing costs of $4.7 million, increased depreciation costs of $1.6 million, higher facilities costs of $1.4 million, and higher overhead costs of $0.8 million.
Sales and marketing expenses also include employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and commissions for our employees engaged in sales and marketing activities, and allocated overhead and depreciation for facilities.
Sales and marketing expenses also include employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and commissions for our employees engaged in sales and marketing activities, and allocated overhead and depreciation for facilities. We expect our sales and marketing expenses will increase in absolute dollar amounts as we continue to invest in brand awareness and programmatic spend to generate demand.
We have generated operating losses from our operations as reflected in our accumulated deficit of $810.2 million as of April 30, 2023 and negative cash flows from operations.
We have generated operating losses from our operations as reflected in our accumulated deficit of $1,089.9 million as of April 30, 2024.
In the second quarter of fiscal year 2023, we announced a change to our go-to-market strategy including a way for new customers to utilize our products at a smaller initial contract size and pay for services based on their monthly consumption of vCPU and vGPU hours.
As our C3 AI Platform and much of our other C3 AI Software are industry agnostic, we also expect to expand into other industries. 69 Table of Contents In the first quarter of fiscal year 2023, we announced a change to our go-to-market strategy including a way for new customers to subscribe for our products at smaller initial contract sizes and pay for services based on their monthly consumption of vCPU and vGPU hours.
Our total revenue grew to $266.8 million for the fiscal year ended April 30, 2023, representing a 6% increase compared to the prior fiscal year. Our subscription revenue grew to $230.4 million for the fiscal year ended April 30, 2023, representing a 11% increase compared to the prior fiscal year.
Our total revenue was $310.6 million for the fiscal year ended April 30, 2024, representing a 16% increase compared to the prior fiscal year. Our subscription revenue grew to $278.1 million for the fiscal year ended April 30, 2024, representing a 21% increase compared to the prior fiscal year.
We also sell premium stand-ready COE support services, hosting services, and trials of our applications as part of our customer acquisition strategy. Sales of our software-as-a-service offerings include the right to use our software in a hosted environment over the contractual term. Our subscriptions include our software and our maintenance and support services.
Sales of our software-as-a-service offerings include the right to use our software in a hosted environment over the contractual term. Substantially all of our subscriptions offerings include our software and our maintenance and support services.
Our software subscriptions and maintenance and support services are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.
Our subscriptions also include our maintenance and support services, which include critical and continuous updates to the software that are integral to maintaining the intended utility of the software over the contractual term. Our software subscriptions and maintenance and support services are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.
This results in an increase of $32.5 million in the overall transaction price of the arrangement by eliminating potential variable consideration attributable to any revenue we generated from certain customers (the variable consideration was $49.3 million as of April 30, 2022). The amount of consideration may increase if Baker Hughes exceeds certain thresholds.
This resulted in an increase of $32.5 million in the transaction price by eliminating potential variable consideration attributable to any revenue we generated from certain customers. The amount of consideration may increase if Baker Hughes exceeds certain thresholds. We also provided Baker Hughes the option to extend the subscription term upon payment of a renewal fee.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf our costs were to become subject to significant inflationary pressures, including higher employee compensation costs, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, or results of operations. 81 Table of Contents
Biggest changeInflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. If our costs were to become subject to significant inflationary pressures, including higher employee compensation costs, we may not be able to fully offset such higher costs through price increases.
Foreign Currency Exchange Risk Our functional currency is the U.S. dollar. For the fiscal years ended April 30, 2023, 2022 and 2021, approximately 8%, 13%, and 25% of our sales were denominated in euros, respectively, and therefore our revenue, accounts receivable, and cash deposits are subject to foreign currency risk.
Foreign Currency Exchange Risk Our functional currency is the U.S. dollar. For the fiscal years ended April 30, 2024, 2023 and 2022, approximately 5%, 8%, and 13% of our sales were denominated in euros, respectively, and therefore our revenue, accounts receivable, and cash deposits are subject to foreign currency risk.
As of April 30, 2023, a hypothetical 10% relative change in interest rates would not have had a material impact on the value of our cash equivalents or investment portfolio. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity.
As of April 30, 2024, a hypothetical 10% relative change in interest rates would not have had a material impact on the value of our cash equivalents or marketable securities portfolio. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the marketable securities prior to maturity.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. Interest Rate Risk As of April 30, 2023, we had cash, cash equivalents, and investments of $812.4 million.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. Interest Rate Risk As of April 30, 2024, we had cash, cash equivalents, and marketable securities of $750.4 million.
As of April 30, 2022, we had cash, cash equivalents, and short-term investments of $992.2 million. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
As of April 30, 2023, we had cash, cash equivalents, and marketable securities of $812.4 million. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
A hypothetical 10% change in foreign currency exchange rates may result in a material impact on our consolidated financial statements. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Removed
A hypothetical 10% change in foreign currency exchange rates may result in a material impact on our consolidated financial statements. To date, we have not had a formal hedging program with respect to foreign currencies, but we may do so in the future if our exposure to foreign currencies should become more significant.
Added
Our inability or failure to do so could harm our business, financial condition, or results of operations. 85 Table of Contents

Other AI 10-K year-over-year comparisons