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What changed in C3.ai, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of C3.ai, Inc.'s 2022 and 2023 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 2023 report.

+493 added−539 removedSource: 10-K (2023-06-22) vs 10-K (2022-06-23)

Top changes in C3.ai, Inc.'s 2023 10-K

493 paragraphs added · 539 removed · 348 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

96 edited+67 added−91 removed42 unchanged
Biggest changeCompared to traditional structured programming, our model-driven architecture and declarative programming shorten time to value and reduce total cost of ownership by: • Enabling developers to build Enterprise AI applications 26 times faster and with up to 99% less code than with other technologies, by using conceptual models (including tens of thousands of C3 AI’s prebuilt models). • Reducing the resources required to build Enterprise AI applications. • Making developers more productive by allowing them to ramp quickly on new application projects, through reuse of models across applications and reduced coding requirements. • Decreasing application operating and maintenance requirements. • Accelerating the ability to enhance applications with new features. 14 Table of Contents We believe our model-driven architecture and declarative programming approach provides significant competitive advantage both by enabling our customers and partners to successfully develop and deploy Enterprise AI applications faster, and by providing the foundation for C3 AI to rapidly extend our portfolio of cross-industry and industry-specific applications.
Biggest changeWe believe our model-driven architecture and declarative programming approach provides significant competitive advantage both by enabling our customers and partners to successfully develop and deploy Enterprise AI applications faster, and by providing the foundation for C3 AI to rapidly extend our portfolio of cross-industry and industry-specific applications.
The C3 AI Application 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, C3 AI Applications, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration.
C3 AI Ex Machina can be used as a standalone application—providing a modern, cloud-native, highly scalable replacement for last-generation tools—and with the C3 AI Application Platform, typically as the primary tool used by non-developer business analysts to build, train, and tune models on the C3 AI Application Platform. C3 AI Ex Machina is targeted at the ‘citizen’ data scientist.
C3 AI Ex Machina can be used as a standalone application—providing a modern, cloud-native, highly scalable replacement for last-generation tools—and with the C3 AI Platform, typically as the primary tool used by non-developer business analysts to build, train, and tune models on the C3 AI Platform. C3 AI Ex Machina is targeted at the ‘citizen’ data scientist.
An AI application built with the C3 AI Application Platform might include a model called relational database, that in turn serves as a placeholder that might incorporate any relational database system like Oracle, Postgres, Aurora, Spanner, or SQL Server. A key-value store model might contain Cassandra, HBase, Cosmos DB, or DynamoDB.
An AI application built with the C3 AI Platform might include a model called relational database, that in turn serves as a placeholder that might incorporate any relational database system like Oracle, Postgres, Aurora, Spanner, or SQL Server. A key-value store model might contain Cassandra, HBase, Cosmos DB, or DynamoDB.
C3 AI Reduces Complexity, Simplifies Development With its model-driven architecture, the C3 AI Application Platform provides an abstraction layer and semantics to represent the application. This frees the programmer from having to worry about data mapping, API syntax, and the mechanics of myriad computational processes such as ETL, queuing, pipeline management, encryption, etc.
C3 AI Reduces Complexity, Simplifies Development With its model-driven architecture, the C3 AI Platform provides an abstraction layer and semantics to represent the application. This frees the programmer from having to worry about data mapping, API syntax, and the mechanics of myriad computational processes such as ETL, queuing, pipeline management, encryption, etc.
Applications built with the C3 AI Application Platform are flexible, easily upgraded, and can be ported across different cloud platforms with little or no modification, providing a solution that future-proofs customers’ investment in Enterprise AI and IoT application development.
Applications built with the C3 AI Platform are flexible, easily upgraded, and can be ported across different cloud platforms with little or no modification, providing a solution that future-proofs customers’ investment in Enterprise AI and IoT application development.
Relational databases, key-value stores, graph databases, distributed file systems, and blobs are all important to organizing and linking data across these divergent technologies. Reference Enterprise AI Software Platform The problems that have to be addressed to enable today’s Enterprise AI and IoT applications are nontrivial. Massively parallel elastic computing and storage capacity are prerequisite.
Relational databases, key-value stores, graph databases, distributed file systems, and blobs are all important to organizing and linking data across these divergent technologies. Reference Enterprise AI Software Platform The problems that have to be addressed to enable today’s Enterprise AI applications are nontrivial. Massively parallel elastic computing and storage capacity are prerequisite.
This approach vastly reduces technical complexity for developers and the amount of code they need to write. The C3 AI Application Platform provides comprehensive capabilities to rapidly develop, deploy, and operate Enterprise AI applications at scale, including: • Data Integration and Management Services.
This approach vastly reduces technical complexity for developers and the amount of code they need to write. The C3 AI Platform provides comprehensive capabilities to rapidly develop, deploy, and operate Enterprise AI applications at scale, including: • Data Integration and Management Services.
Using the C3 AI Application Platform and its model-driven architecture, virtually anything can be represented as a model—even, for example, applications, including databases, natural language processing engines, and image recognition systems. Models also support a concept called inheritance.
Using the C3 AI Platform and its model-driven architecture, virtually anything can be represented as a model—even, for example, applications, including databases, natural language processing engines, and image recognition systems. Models also support a concept called inheritance.
Growth Strategy We are substantially investing in the expansion of our direct enterprise sales and service organization both geographically and across vertical markets to expand the use of C3 AI solutions within existing customers and establish new customer relationships.
Growth Strategy We are investing in the expansion of our direct enterprise sales and service organization both geographically and across vertical markets to expand the use of C3 AI solutions within existing customers and establish new customer relationships.
C3 AI provides a powerful platform enabling these and other leading organizations to develop and operate Enterprise AI and IoT applications at scale, with a fraction of the effort and resources required by other approaches.
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.
Our Chief Executive Officer, Tom Siebel—a recognized technology thought leader and author of the 2019 Wall Street Journal and Amazon 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 , 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, Financial Times, The Economist, Fortune, Forbes , CNBC , BloombergTV , and Yahoo!
Compared to the structured programming approach that most organizations typically attempt, our model-driven architecture with declarative programming speeds development by a factor of 26, while reducing the amount of code that must be written by up to 99%. The big data and application demands of enterprise-scale AI applications require numerous underlying interdependent elements.
Compared to the structured programming approach that most organizations typically attempt, our model-driven architecture with declarative programming accelerates development by a factor of 26, while reducing the amount of code that must be written by up to 99%. The big data and application demands of enterprise-scale AI applications require numerous underlying interdependent elements.
These services are provided today at increasingly low cost by AWS, Microsoft Azure, and others. The elastic cloud is a major breakthrough that has dramatically transformed modern computing. In addition to the cloud, multiple data services are necessary to develop, provision, and operate Enterprise AI and IoT applications.
These services are provided today at increasingly low cost by Google Cloud, AWS, Microsoft Azure, and others. The elastic cloud is a major breakthrough that has dramatically transformed modern computing. In addition to the cloud, multiple data services are necessary to develop, provision, and operate Enterprise AI applications.
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. 18 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. 19 Table of Contents • Data Integration. An integrated, federated common object data model is absolutely necessary for this application domain.
The next step is to assemble hundreds to thousands of programmers, frequently distributed around the world, using structured programming and application programming interfaces, or APIs, to attempt to stitch these various programs, data sources, sensors, machine learning models, development tools, and user interface paradigms together into a unified, functional, seamless whole that will enable the organization to excel at designing, developing, provisioning, and deploying numerous enterprise scale AI and IoT applications.
The next step is to assemble hundreds to thousands of programmers, frequently distributed around the world, using structured programming and application programming interfaces, or APIs, to attempt to stitch these various programs, data sources, sensors, ML models, development tools, and user interface paradigms together into a unified, functional, seamless whole that will enable the organization to excel at designing, developing, provisioning, and deploying numerous enterprise scale AI and IoT applications.
Rapid Time to Value The key to our market success to date and our primary competitive differentiator is our ability to leverage the C3 AI Application Platform and C3 AI Applications to bring high-value Enterprise AI applications into production use rapidly. We have deployed Enterprise AI applications into production use in as little as four weeks.
Rapid Time to Value The key to our market success and our primary competitive differentiator is our ability to leverage the C3 AI Platform and C3 AI Applications to bring high-value Enterprise AI applications into production use rapidly. We have deployed Enterprise AI applications into production use in as little as four weeks.
C3 AI Application Platform: A Tested, Proven, and Patented AI Suite The model-driven approach to developing Enterprise AI and IoT applications using the C3 AI Application 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.
The C3 AI Application 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 machine learning 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—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.
Today’s data velocities are dramatic, requiring the ability to ingest and aggregate data from hundreds of millions of endpoints at very high frequency, sometimes exceeding 1,000 Hz cycles. The data need to be processed at the rate they arrive, in a highly secure and resilient system that addresses persistence, event processing, machine learning, and visualization.
Today’s data velocities are dramatic, requiring the ability to ingest and aggregate data from hundreds of millions of endpoints at very high frequency, sometimes exceeding 1,000 Hz cycles. The data need to be processed at the rate they arrive, in a highly secure and resilient system that addresses persistence, event processing, ML, and visualization.
These include enterprise data, extraprise data, sensor data, data persistence services, data streaming services, messaging services, analytics services, machine-learning services, security services, data visualization, application development services, application monitoring services, and scores to hundreds more. With a traditional structured programming approach, developers spend significant time and effort to write extensive code to define, manage, connect, and control each element.
These include enterprise data, extraprise data, sensor data, data persistence services, data streaming services, messaging services, analytics services, ML services, security services, data visualization, application development services, application monitoring services, and scores to hundreds more. With a traditional structured programming approach, developers spend significant time and effort to write extensive code to define, manage, connect, and control each element.
The whole point of these systems is to enable data scientists to develop and deploy machine learning 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 machine learning libraries such as TensorFlow, Caffe, Torch, Amazon Machine Learning, 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, Python, DIGITS, R, and Scala. Increasingly important is an extensible curation of ML libraries such as TensorFlow, Caffe, Torch, Amazon ML, and AzureML.
If one developer introduces a bug into any one of the open source components, all applications developed with that platform may cease to function. • Future Proof. As new libraries, faster databases, and new machine learning techniques become available, those new utilities need to be available within the platform.
If one developer introduces a bug into any one of the open source components, all applications developed with that platform may cease to function. • Future Proof. As new libraries, faster databases, and new ML techniques become available, those new utilities need to be available within the platform.
An effective AI and IoT platform needs to support them all. 16 Table of Contents • 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 Excel, Tableau, Qlik, Spotfire, Oracle BI, Business Objects, Domo, Alteryx, and others. • Developer Tools and UI Frameworks.
Prerequisite to machine learning 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. • Data Persistence.
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.
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, machine learning 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, and much more.
Customers can deploy C3 AI applications on all 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.
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.
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, instead of writing lengthy code.
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.
Awash in “AI Platforms” Industry analysts estimate that organizations will invest $500 billion annually in AI software by 2024. According to a leading consulting firm, companies will generate $15 trillion annually in added value by 2030 from the use of these new technologies.
Awash in “AI Platforms” Industry analysts estimate that organizations will invest almost $800 billion annually in AI software by 2026. According to a leading consulting firm, companies will generate $15 trillion annually in added value by 2030 from the use of these new technologies.
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.
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.
As of April 30, 2022, we had 704 full-time employees, with 586 based in the United States and 118 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, 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, 2022, our technology is protected by a broad patent portfolio, with 12 issued patents in the United States, 10 issued counterpart patents in a number of international jurisdictions, over 30 patent applications pending in the United States, and over 50 patent applications pending internationally. Our issued patents expire beginning in 2033 through 2039.
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.
Our Secret Sauce: The C3 AI Model-Driven Architecture Over the last four decades, the information technology industry has grown from about $120 billion globally in 1980 to more than $3.0 trillion today. During this time, the IT industry has experienced the transition from mainframe computing to minicomputers, to personal computing, to internet computing, and to handheld computing.
The C3 AI Model-Driven Architecture Over the last four decades, the information technology industry has grown from about $120 billion globally in 1980 to almost $8.0 trillion today. During this time, the IT industry has experienced the transition from mainframe computing to minicomputers, to personal computing, to internet computing, and to handheld computing.
AWS, Microsoft Azure, and Google Cloud, each of which offer an elastic cloud computing platform. In addition, each offers an increasingly innovative library of microservices that can be used for data aggregation, ETL, queuing, data streaming, MapReduce, continuous analytics processing, machine learning 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, data visualization, etc.
The array of capabilities and services necessary for building and operating Enterprise AI and IoT applications at scale represents a development problem on the order of magnitude of a relatively simple enterprise software application such as CRM. This is not a trivial problem. Consider just a few of these requirements. • Data Integration.
The array of capabilities and services necessary for building and operating Enterprise AI and IoT applications at scale represents a development problem on the order of magnitude of a relatively simple enterprise software application such as CRM. Consider just a few of these requirements. • Data Integration. This problem has haunted the computing industry for decades.
Hundreds of person-years and hundreds of millions of dollars were spent on those projects. A few years later, a new CIO would install a working commercial system. Some of the most technologically astute companies—including Hewlett-Packard, IBM, and Compaq—repeatedly failed at internally developed CRM projects. All ultimately became successful Siebel Systems CRM customers.
A few years later, a new CIO would install a working commercial system. Some of the most technologically astute companies—including Hewlett-Packard, IBM, and Compaq—repeatedly failed at internally developed CRM projects. All ultimately became successful Siebel Systems CRM customers.
C3 AI delivers a family of fully integrated products including the C3 AI Application Platform, an end-to-end platform for developing, deploying, and operating enterprise AI applications, and C3 AI Applications, a portfolio of industry-specific software-as-a-service, or SaaS, enterprise AI applications that enable the digital transformation of organizations globally.
C3 AI delivers a family of fully integrated products including the C3 AI Platform, an end-to-end platform for developing, deploying, and operating Enterprise AI applications, C3 AI Applications, a portfolio of industry-specific software-as-a-service, or SaaS, Enterprise AI applications that enable the digital transformation of organizations globally, and C3 Generative AI, a suite of large artificial intelligence, or AI, transformer models for enterprise.
The C3 AI Application 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 machine learning models.
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 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 Platforms” that purport to be solutions sufficient to design, develop, provision, and operate Enterprise AI applications, including Cassandra, Cloudera, DataStax, AWS IoT, and Hadoop.
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.
The content of or accessible through our websites 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 are intended to be inactive textual references only. 24 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.
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, methods, and devices for an enterprise AI and internet-of-things platform.
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.
Finance . Professional 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.
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.
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 (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 (2020) and a leader by Forrester Wave: Industrial IoT Software Platforms (2019, 2018) and IDC MarketScape: Solutions for Industrial Platforms and Applications in Energy (2021). 13 Table of Contents Additionally, 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.
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).
We engage the market through digital, radio, television, outdoor, airport, social media and print advertising; 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, machine learning, and data science.
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.
Competition 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, machine learning, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, machine learning, 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.
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.
C3 AI provides a library of tens of thousands of prebuilt conceptual models, growing by more than 4,000 per year, that can be easily modified and extended, and developers can efficiently create their own models as well.
C3 AI provides a library of tens of thousands of prebuilt conceptual models that can be easily modified and extended, and developers can efficiently create their own models as well.
All the applications deployed previously using Oracle as the RDBMS will continue to run without modification after that replacement. This enables organizations to immediately and easily take advantage of new and improved product offerings as they become available.
All the applications deployed previously using Oracle as the RDBMS will continue to run without modification after that replacement. This enables organizations to immediately and easily take advantage of new and improved product offerings as they become available. Platform Independence: Multi-Cloud and Polyglot Cloud Deployment Enterprises today often have a multi-cloud strategy.
We believe the unity of our team is substantially greater than the sum of its parts. Through our C3 AI Management Development Series, we train our managers to motivate and lead their teams by setting clear objectives with an outcomes-based approach. Our C3 AI Leadership Development Program equips aspiring managers with skills for future leadership roles.
Through our C3 AI Management Development Series, we train our managers to motivate and lead their teams by setting clear objectives with an outcomes-based approach. Our C3 AI Leadership Development Program equips aspiring managers with skills for future leadership roles.
Government Regulation Our business activities are subject to various federal, state, local, and foreign laws, rules, and regulations. Compliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
Compliance with these laws, rules, and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods.
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. In the 1980s, for example, when Oracle first introduced relational database management system, or RDBMS, software to the market, interest was high.
Early in the cycle, companies often take a “do it yourself” approach and try building the new technology themselves. In the 1980s, for example, when Oracle first introduced relational database management system, or RDBMS, software to the market, interest was high. RDBMS technology offered dramatic cost economies and productivity gains in application development and maintenance.
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.
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.
Most C3 AI customers enjoy a rapid time to value from their investments in our offerings. C3 AI Sales Cycle Our typical sales cycle begins with one or more product and technical presentations about C3 AI, leading to a mapping of our capabilities to customer use cases.
C3 AI Sales Cycle Our typical sales cycle begins with one or more product and technical presentations about C3 AI, leading to a mapping of our capabilities to customer use cases.
While this technique is appropriate for many classes of applications, it breaks down with the complexity and scale of the requirements for a modern Enterprise AI or IoT application, resulting in a Gordian knot.
Structured programming remains the state of the art for many applications today, and has dramatically simplified the process of developing and maintaining computer code. While this technique is appropriate for many classes of applications, it breaks down with the complexity and scale of the requirements for a modern Enterprise AI or IoT application, resulting in a Gordian knot.
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. Each of these transitions represented a replacement market for its predecessor.
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.
When those efforts failed, the CIO was replaced and the organization installed a commercial RDBMS. When enterprise applications including ERP and CRM were introduced to the market in the 1990s, the primary competitors included Oracle, SAP, and Siebel Systems. But in the early years of that innovation cycle, many CIOs attempted to develop these complex enterprise applications internally.
When enterprise applications including ERP and CRM were introduced to the market in the 1990s, the primary competitors included Oracle, SAP, and Siebel Systems. But in the early years of that innovation cycle, many CIOs attempted to develop these complex enterprise applications internally. Hundreds of person-years and hundreds of millions of dollars were spent on those projects.
We offer five (5) primary families of software solutions, which we collectively refer to as our C3 AI Software: • C3 AI Application 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 Application Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific SaaS enterprise AI applications that can be immediately installed and deployed. • C3 AI Ex Machina is a no-code, machine learning (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. • C3 AI CRM is a enterprise-class, AI-first customer relationship management (CRM) solution that lets customers apply to their existing CRM. • C3 AI Data Vision allows analysts to visualize, understand, and leverage relationships between data entities and enables complex AI-driven knowledge graphs for advanced data visualization.
We 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.
Another important capability of the C3 AI Application 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 Application Platform.
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.
The C3 AI Application Platform uses a unique model-driven architecture to accelerate delivery and reduce the complexities of developing enterprise AI applications. The C3 AI model-driven architecture provides an “abstraction layer,” that allows developers to build enterprise AI applications by using conceptual models of all the elements an application requires, instead of writing lengthy code.
The C3 AI model-driven architecture provides an “abstraction layer,” that allows developers to build Enterprise AI applications by using conceptual models of all the elements an application requires, instead of writing lengthy code. This provides significant benefits, including: Scale AI Across the Business.
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) and the investor relations section of our website (ir.c3.ai). We use these channels to communicate with investors and the public about our company, our products and services and other matters.
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.
Services to easily and automatically ingest and aggregate massive volumes of diverse data from numerous internal and external sources and unify the data in a common and extensible data image. • AI Application Development and Operationalization Services.
Services to readily ingest and aggregate massive volumes of diverse data from numerous internal and external sources and unify the data in a common and extensible data image. • AI Application Development and Operationalization Services. Software services to explore data, build and train AI models, and operationalize AI models and applications at enterprise scale. • Operational and Security Services.
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.
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.
The early competitors in the RDBMS market included Oracle, IBM (DB2), Relational Technology (Ingres), and Sperry (Mapper). But the primary competitor to Oracle was not any of these companies. It was in many cases the CIO, who attempted to build the organization’s own RDBMS with IT personnel, offshore personnel, or the help of a systems integrator.
But the primary competitor to Oracle was not any of these companies. It was in many cases the CIO, who attempted to build the organization’s own RDBMS with IT personnel, offshore personnel, or the help of a systems integrator. When those efforts failed, the CIO was replaced and the organization installed a commercial RDBMS.
Based on experience and expertise, we believe that enterprise-scale AI and IoT applications generally share a set of demanding requirements as described in greater detail below. 15 Table of Contents 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.
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.
C3 AI Application Platform We believe the C3 AI Application Platform offers the only end-to-end platform-as-a-service allowing customers to design, develop, provision, and operate Enterprise AI applications at scale. Our customers can use the C3 AI Application Platform to build and operate their own custom Enterprise AI applications and to customize, operate, and manage C3 AI Applications.
C3 AI Platform We believe the C3 AI Platform offers the only end-to-end platform-as-a-service that allows customers to rapidly design, develop, provision, and operate Enterprise AI applications at scale.
RDBMS technology offered dramatic cost economies and productivity gains in application development and maintenance. We believe it proved an enabling technology for the next generation of enterprise applications that followed, including material requirements planning, or MRP, enterprise resource planning, or ERP, customer relationship management, or CRM, manufacturing automation, and others.
We believe it proved an enabling technology for the next generation of enterprise applications that followed, including material requirements planning, or MRP, ERP, customer relationship management, or CRM, manufacturing automation, and others. The early competitors in the RDBMS market included Oracle, IBM (DB2), Relational Technology (Ingres), and Sperry (Mapper).
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. We form specific sales targets and goals with each partner, enabling us to quickly and efficiently engage in customer accounts.
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.
At some companies, based on feedback and other information provided from our customers, we estimate our solutions have returned hundreds of millions of dollars in economic benefit. We estimate, based on our C3 AI production roadmaps, that we may enable billions of dollars in annual economic benefit for many customers.
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.
C3.ai DTI focuses research on the intersection of artificial intelligence, machine learning, internet of things, cloud computing, big data analytics, organizational behavior, public policy, and ethics. Specifically, C3.ai DTI supports the development of machine learning algorithms, data security, and cybersecurity techniques to address and advance solutions related to predictive analytics, resilient operation under faults and cyberattack, and assured system security.
Specifically, C3.ai DTI supports the development of ML algorithms, data security, and cybersecurity techniques to address and advance solutions related to predictive analytics, resilient operation under faults and cyberattack, and assured system security.
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.
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.
The core of this strategy is to rapidly deliver high-value outcomes at large scale, that are broadly deployed into many industry leaders, including those in banking, oil and gas, utilities, defense, and manufacturing.
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.
Applications developed with the C3 AI Application Platform can run without modification on any cloud and on bare metal behind the firewall in a hybrid cloud environment. 20 Table of Contents A final requirement for the new AI technology stack—that the C3 AI Application Platform delivers—is polyglot cloud deployment capability: the ability to mix various services from multiple cloud providers and to easily swap and replace those services.
A requirement for the new AI technology stack—that the C3 AI Platform delivers—is polyglot cloud deployment capability: the ability to mix various services from multiple cloud providers and to easily swap and replace those services.
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, ready-to-use, cross-industry and industry-specific Enterprise AI applications that address a range of mission-critical, high-value use cases. With C3 AI Applications, organizations can typically deploy production AI applications in one to six months.
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.
Automated services to explore data, build and train AI models, and operationalize AI models and applications at enterprise scale. • Operational and Security Services. 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).
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.
Lighthouse Customers 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 serve as proof points for other potential customers in their particular industries.
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.
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 do not encounter them in competitive situations. 21 Table of Contents Sales Alliances Strategic partnerships are core to our growth strategy with market-leading companies offering highly leveraged distribution channels to various markets.
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.
Model-driven architecture provides the knife to cut the Gordian knot of structured programming for highly complex problems. The C3 AI Application 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.
Central to a model-driven architecture is the concept of a “model” that serves as an abstraction layer to simplify the programming problem.
Our primary competition is largely do-it-yourself, custom-developed, company-specific AI platforms and applications developed by internal IT organizations. Such efforts usually involve the integration of internally developed tools, open source solutions, and point solutions offered by independent software vendors, and/or components offered in the AWS, Microsoft Azure, or Google Cloud platforms.
Such efforts usually involve the integration of internally developed tools, open source solutions, and point solutions offered by independent software vendors, and/or components offered in the AWS, Microsoft Azure, or Google Cloud platforms. Frequently these efforts will be managed as professional service projects by organizations like Accenture or Lockheed Martin.
Our product roadmap includes a wide range of new functions and products to be released in the coming years that we expect to contribute to revenue growth with both new and existing customers. 22 Table of Contents University Relations: C3.ai Digital Transformation Institute Established in February 2020, the C3.ai Digital Transformation Institute, or C3.ai DTI, is a research consortium dedicated to accelerating the benefits of artificial intelligence for business, government, and society.
Our product roadmap includes a wide range of new functions and products to be released in the coming years that we expect to contribute to revenue growth with both new and existing customers.
We then use these cases and outcomes to initiate discussions at numerous leading companies in each sector. 10 Table of Contents 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.
We believe this will lead to a greater number of customers and substantially greater revenue growth. 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.
Therefore, we encourage investors, the media and others interested in our company to review the information we make public in these locations, as such information could be deemed to be material information. 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.
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.

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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; 28 Table of Contents • 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.
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.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party business partners or intermediaries, representatives, and agents from authorizing, offering, or providing, directly or indirectly, improper payments or other benefits, directly or indirectly, to government officials or others in the private sector in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business.
Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, and their third-party business partners or intermediaries, representatives, and agents from authorizing, offering, or providing, directly or indirectly, improper payments or other benefits to government officials or others in the private sector in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business.
From time to time, are subject to litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. As we face increasing competition and gain an increasingly high profile, the possibility of intellectual property rights claims, commercial claims, and other assertions against us grows.
From time to time, we are subject to litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. As we face increasing competition and gain an increasingly high profile, the possibility of intellectual property rights claims, commercial claims, and other assertions against us grows.
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; • 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; 50 Table of Contents • 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; 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.
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), 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, advanced persistent threat intrusions, 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 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.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, or the certificate of incorporation or the amended and restated bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (3) any action asserting a claim against us arising under any provision of the Delaware General Corporation Law, or the certificate of incorporation or the amended and restated bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Our C3 AI Software processes our customers’ proprietary and sensitive data, potentially including personal information, confidential information, protected health information, financial data, intellectual property, and trade secrets. Our C3 AI Software is built to be available on the infrastructure of third-party public cloud providers such as AWS, Microsoft Azure, and Google Cloud Platform.
Our C3 AI Software processes our customers’ proprietary and sensitive data, potentially including personal information, confidential information, protected health information, financial data, intellectual property, and trade secrets. Our C3 AI Software is built to be available on the infrastructure of third-party public cloud providers such as AWS, Microsoft Azure, and Google Cloud.
Preparing for and complying with these obligations requires significant resources and 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 that process personal data on our behalf.
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 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 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.
Factors that could cause fluctuations in the trading price of our Class A common stock include the risk factors set forth in this section as well as the following: • price and volume fluctuations in the overall stock market from time to time; • high volume retail trading by participants connected in a social network; • volatility in the trading prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; 58 Table of Contents • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors, particularly in light of the significant portion of our revenue derived from a limited number of customers; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; • announcements by us or our competitors of new products, applications, features, or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or data security incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, applications, products, services, or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • general political and economic conditions and slow or negative growth of our markets; and • technical factors in the public trading market for our stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and other technical trading factors.
Factors that could cause fluctuations in the trading price of our Class A common stock include the risk factors set forth in this section as well as the following: • price and volume fluctuations in the overall stock market from time to time; • high volume retail trading by participants connected in a social network; • volatility in the trading prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders; 54 Table of Contents • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors, particularly in light of the significant portion of our revenue derived from a limited number of customers; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; • announcements by us or our competitors of new products, applications, features, or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry, which may include short seller reports; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or data security incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, applications, products, services, or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • general political and economic conditions and slow or negative growth of our markets; and • technical factors in the public trading market for our stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and other technical trading factors.
We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “Process”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, protected health information, and financial data.
We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, Process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, protected health information, and financial data.
A number of factors could cause our growth rate to be adversely impacted, including any reduction in demand for 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.
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.
We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could seriously harm our business. 57 Table of Contents If open source software programmers, many of whom we do not employ, or our own internal programmers do not continue to develop and enhance open source technologies, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for innovation, quality and price.
We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could seriously harm our business. 53 Table of Contents If open source software programmers, many of whom we do not employ, or our own internal programmers do not continue to develop and enhance open source technologies, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for innovation, quality and price.
We have limited experience with implementing the systems and controls that necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies.
We have limited experience with implementing the systems and controls necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies.
For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition. 54 Table of Contents Risks Related to Our Intellectual Property We are currently, and may be in the future, party to intellectual property rights claims and other litigation matters, which, if resolved adversely, could harm our business.
For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition. 50 Table of Contents Risks Related to Our Intellectual Property We are currently, and may be in the future, party to intellectual property rights claims and other litigation matters, which, if resolved adversely, could harm our business.
In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation will further provide that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
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, machine learning, and analytics offerings; • public cloud providers offering discrete tools and micro-services with data management, machine learning, 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 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.
These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related 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); additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials.
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. 55 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. 51 Table of Contents Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets.
In particular, we intend to continue to expend significant funds to further develop our C3 AI Software and business, including: • investments in our research and development team and in the development of new features and enhancements of our C3 AI Software, including the hiring of additional development staff, and fees paid to third parties for related enhancements; 27 Table of Contents • investments in sales, marketing, and services, including expanding our sales force and our customer service team, increasing our customer base, increasing market awareness of our C3 AI Software, and development of new technologies; • expanding our operations and infrastructure; and • hiring additional employees.
In particular, we intend to continue to expend significant funds to further develop our C3 AI Software and business, including: • investments in our research and development team and in the development of new features and enhancements of our C3 AI Software, including the hiring of additional development staff, and fees paid to third parties for related enhancements; • investments in sales, marketing, and services, including expanding our sales force and our customer service team, increasing our customer base, increasing market awareness of our C3 AI Software, and development of new technologies; • expanding our operations and infrastructure; and • hiring additional employees.
Our performance metrics, including data regarding customer counts, 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 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.
Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, 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, loss of data and income, reputational harm, and diversion of funds.
We can be held liable for the corrupt or other illegal activities of our third-party business partners or intermediaries, our employees, representatives, contractors, and agents, even if we do not explicitly authorize such activities. 52 Table of Contents These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.
We can be held liable for the corrupt or other illegal activities of our third-party business partners or intermediaries, our employees, representatives, contractors, and agents, even if we do not explicitly authorize such activities. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.
We recognize revenue from subscriptions to our C3 AI Software over the terms of these subscriptions. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern. We recognize revenue from subscriptions to our C3 AI Software over the terms of these subscriptions.
We generally recognize revenue from subscriptions to our C3 AI Software over the terms of such subscriptions. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern. We generally recognize revenue from subscriptions to our C3 AI Software over the terms of these subscriptions.
Any of these events would harm our business. 56 Table of Contents Our use of third-party open source software could negatively affect our ability to offer and sell subscriptions to our C3 AI Software and subject us to possible litigation.
Any of these events would harm our business. 52 Table of Contents Our use of third-party open source software could negatively affect our ability to offer and sell subscriptions to our C3 AI Software and subject us to possible litigation.
As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. An individual sale typically represents a large proportion of our overall sales during any given period, which impacts our ability to plan and manage cash flows and margins.
As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. 28 Table of Contents An individual sale typically represents a large proportion of our overall sales during any given period, which impacts our ability to plan and manage cash flows and margins.
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.
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.
Any provision in our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock. 61 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for certain disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.
Any provision in our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock. 57 Table of Contents Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.
In such event, the market price of our Class A common stock could decline, and you could lose all or part of your investment. Risks Related to Our Business and Our Industry We have a limited operating history, which makes it difficult to evaluate our prospects and future results of operations. We were founded in 2009.
In such event, the market price of our Class A common stock could decline, and you could lose all or part of your investment. 23 Table of Contents Risks Related to Our Business and Our Industry We have a limited operating history, which makes it difficult to evaluate our prospects and future results of operations. We were founded in 2009.
If we are not permitted or able to integrate with these and other third-party applications in the future, our business, results of operations, and financial condition would be harmed. 35 Table of Contents Our ability to sell subscriptions to our C3 AI Software could be harmed by real or perceived material defects or errors in our C3 AI Software.
If we are not permitted or able to integrate with these and other third-party applications in the future, our business, results of operations, and financial condition would be harmed. Our ability to sell subscriptions to our C3 AI Software could be harmed by real or perceived material defects or errors in our C3 AI Software.
As a result, we may be required to reduce our prices, offer shorter contract durations or offer alternative pricing models, any of which could adversely affect our business. 30 Table of Contents We have limited experience with respect to determining the optimal prices for subscriptions for our C3 AI Software.
As a result, we may be required to reduce our prices, offer shorter contract durations or offer alternative pricing models, any of which could adversely affect our business. We have limited experience with respect to determining the optimal prices for subscriptions for our C3 AI Software.
A substantial majority of our revenue has come from sales of our subscription-based software products, which we expect to continue for the foreseeable future. Although demand for data management, machine learning, and analytics platforms and applications has grown in recent years, the market for these platforms and applications continues to evolve.
A substantial majority of our revenue has come from sales of our subscription-based software products, which we expect to continue for the foreseeable future. Although demand for data management, ML, and analytics platforms and applications has grown in recent years, the market for these platforms and applications continues to evolve.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the event of a disaster or emergency, our business would be harmed. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the event of a disaster or emergency, our business would be harmed. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 60 Table of Contents
One of our U.S. government contracts requires our employees to maintain security clearances, and also requires us to comply with 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.
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.
We may share or receive sensitive information with or from third parties. 42 Table of Contents Cyberattacks, 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) and other malicious internet-based activity are prevalent in our industry and our customers’ industries and such attacks continue to increase.
This could result in a temporary or permanent revenue shortfall and adversely affect our business. 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. 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.
Any failure to offer high-quality maintenance and support services for our customers may harm our relationships with our customers and, consequently, our business. Once our C3 AI Software is deployed, our customers depend on our maintenance and support teams to resolve technical and operational issues relating to our C3 AI Software.
Any failure to offer high-quality maintenance and support services for our customers may harm our relationships with our customers and, consequently, our business. Once our C3 AI Software is deployed, our customers depend on our maintenance and support teams to resolve technical and operational issues and provide critical updates relating to our C3 AI Software.
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, contracts, and other obligations that govern the processing of personal data by us and on our behalf.
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.
If we do not succeed in identifying suitable strategic partners or maintain our relationships with such partners, our business, operating results, and financial condition may be adversely affected. 31 Table of Contents Moreover, we cannot guarantee that the partners with whom we have strategic relationships will continue to devote the resources necessary to expand our reach and increase our distribution.
If we do not succeed in identifying suitable strategic partners or maintain our relationships with such partners, our business, operating results, and financial condition may be adversely affected. Moreover, we cannot guarantee that the partners with whom we have strategic relationships will continue to devote the resources necessary to expand our reach and increase our distribution.
We have Customer-Entities in more than 15 countries, and 22% of our revenue for the fiscal year ended April 30, 2022 was generated from customers outside of North America. As of April 30, 2022, 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 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.
The timing of our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our subscriptions is approximately five months but can vary substantially from customer to customer and can extend over a number of years for some customers.
The timing of our sales is difficult to predict. The length of our sales cycle, from initial evaluation to payment for our subscriptions is approximately 3.7 months but can vary substantially from customer to customer and can extend over a number of years for some customers.
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 • general political, economic, and market conditions. 37 Table of Contents Our performance metrics, data regarding customer counts 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.
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.
In particular, we compete with many other companies for employees with high levels of expertise in designing, developing and managing platforms and applications for data management, machine learning, and analytics technologies, as well as for skilled data scientists, sales, and operations professionals.
In particular, we compete with many other companies for employees with high levels of expertise in designing, developing and managing platforms and applications for data management, ML, and analytics technologies, as well as for skilled data scientists, sales, and operations professionals.
As a result, the trading price and volume of our Class A common stock could be adversely affected. Substantial future sales of shares of our Class A common stock and Class B common stock by existing holders in the public market could cause the market price of our Class A common stock to decline.
As a result, the trading price and volume of our Class A common stock could be adversely affected. 56 Table of Contents Substantial future sales of shares of our Class A common stock and Class B common stock by existing holders in the public market could cause the market price of our Class A common stock to decline.
Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise. 59 Table of Contents Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws (e.g. Section 5 of the Federal Trade Commission Act).
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).
Our customers may require features and capabilities that our current C3 AI Software do not have or may face use cases that our current C3 AI Software do not address.
Our customers may require features and capabilities that our current C3 AI Software does not have or may face use cases that our current C3 AI Software does not address.
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, 2022, 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, 2023, Mr.
There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business. 53 Table of Contents We may have exposure to greater than anticipated tax liabilities, which could harm our business.
There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business. We may have exposure to greater than anticipated tax liabilities, which could harm our business.
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.
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.
Any security breach of our C3 AI Software, our operational systems, our physical facilities, or the systems or facilities of our partners, or the perception that one has occurred, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities and damage to our business.
Any actual or potential security breach of our C3 AI Software, our operational systems, our physical facilities, or the systems or facilities of our partners, or the perception that one has occurred, could result in adverse consequences, such as litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities and damage to our business.
We have spent, and intend to keep spending, considerable resources to educate potential customers about digital transformation, artificial intelligence, and machine learning in general and our C3 AI Software in particular. However, we cannot be sure that these expenditures will help our C3 AI Software achieve any additional market acceptance.
We have spent, and intend to keep spending, considerable resources to educate potential customers about digital transformation, AI, and ML in general and our C3 AI Software in particular. However, we cannot be sure that these expenditures will help our C3 AI Software achieve any additional market acceptance.
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. 38 Table of Contents Health epidemics, including 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. 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.
We sell to customers globally and have international operations primarily in Europe. As we continue to expand our international operations, we will become more exposed to the effects of fluctuations in currency exchange rates.
We may face exposure to foreign currency exchange rate fluctuations. We sell to customers globally and have international operations primarily in Europe. As we continue to expand our international operations, we will become more exposed to the effects of fluctuations in currency exchange rates.
For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. There is increasing U.S. and foreign activity in the regulation of artificial intelligence (“AI”) and other similar uses of technology.
For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. 38 Table of Contents There is increasing U.S. and foreign activity in the regulation of AI and other similar uses of technology.
This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations. 25 Table of Contents Our business depends on our ability to attract new customers and on our existing customers purchasing additional subscriptions from us and renewing their existing subscriptions.
This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations. Our business depends on our ability to attract new customers and on our existing customers purchasing additional subscriptions from us and renewing their existing subscriptions. To increase our revenue, we must continue to attract new customers.
For the fiscal years ended April 30, 2022 and 2021, 13% and 25% of our revenue, respectively, were denominated in currencies other than U.S. dollars. For the fiscal years ended April 30, 2022 and 2021, 5% and 9% of our expenses, respectively, were denominated in currencies other than U.S. dollars.
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.
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 Application Platform, C3 AI Applications, C3 AI Ex Machina, C3 AI CRM and C3 AI Data Vision), 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, C3 Generative AI Product Suite and C3 AI Ex Machina), reputation, brand, financial condition, results of operations, and prospects.
Siebel and related entities beneficially owned approximately 87.8% of our Class B common stock and approximately 28.7% of our outstanding Class A common stock, resulting in beneficial ownership of capital stock representing approximately 58.8% 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 21.8% 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.
For example, the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information and the California Consumer Privacy Act of 2018 (“CCPA”) imposes obligations on covered businesses, including, but not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data.
For example, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes specific requirements relating to the privacy, security and transmission of individually identifiable health information and the California Consumer Privacy Act of 2018, or CCPA, applies to personal information of consumers, business representatives and employees, and imposes obligations on covered businesses, including, but not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data.
As of April 30, 2022, we have 12 issued patents in the United States, 10 issued counterpart patents in a number of international jurisdictions, over 30 patent applications pending in the United States, and 50 patent applications pending internationally. Our issued patents expire beginning in 2033 through 2039.
As of April 30, 2023, we have 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.
We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and update the systems and process documentation necessary to perform the evaluation needed to comply with Section 404.
We currently have an external audit group and have hired additional accounting and financial staff. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and update the systems and process documentation necessary to perform the evaluation needed to comply with Section 404.
Any disruptions, outages, defects, and other security performance and quality problems with our C3 AI Software or with the public cloud and internet infrastructure on which it relies, or any material change in our contractual and other business relationships with our public cloud providers, could result in reduced use of our C3 AI Software, increased expenses, including significant, unplanned capital investments and/or service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition, reputation and results of operations. 45 Table of Contents Our application for a PPP Loan could in the future be determined to have been impermissible, which could result in damage to our reputation or adversely impact our business.
Any disruptions, outages, defects, and other security performance and quality problems with our C3 AI Software or with the public cloud and internet infrastructure on which it relies, or any material change in our contractual and other business relationships with our public cloud providers, could result in reduced use of our C3 AI Software, increased expenses, including significant, unplanned capital investments and/or service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition, reputation and results of operations.
As of April 30, 2022, we had net operating loss carryforwards, or NOLs, for U.S. federal and state purposes of $486.2 million and $180.4 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, 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.
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 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.
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.
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.
Siebel is a recognized leader in information technology and is critical to the continued development of our C3 AI Software. All of our executive officers are at-will employees, and we do not maintain any key person life insurance policies.
Siebel, is critical to our overall management, sales strategy, culture, strategic direction, engineering, and operations. In addition, Mr. Siebel is a recognized leader in information technology and is critical to the continued development of our C3 AI Software. All of our executive officers are at-will employees, and we do not maintain any key person life insurance policies.
We generated net losses of approximately $192.1 million and $55.7 million for the fiscal years ended April 30, 2022 and 2021, respectively. As a result, we had an accumulated deficit of $541.4 million as of April 30, 2022. We expect to continue to incur net losses for the foreseeable future.
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.
Companies that must comply with the GDPR or the UK data protection regime 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.
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.
If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions.
If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face significant adverse consequences, including the interruption or degradation of our operations, increased exposure to regulatory actions, substantial fines and penalties, and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions.
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.
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.
While we have been successful in preventing such unauthorized access and disruption in the past, we may not continue to be successful against these or other attacks in the future. We have contractual and legal obligations to notify relevant stakeholders of security breaches.
While we have been successful in preventing such unauthorized access and disruption in the past, we may not continue to be successful against these or other attacks in the future.
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.
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.
To increase our revenue, we must continue to attract new customers. Our success will depend to a substantial extent on the widespread adoption of our C3 AI Software. Although demand for data management, machine learning, analytics, and artificial intelligence platforms and applications has grown in recent years, the market for these platforms and applications continues to evolve.
Our success will depend to a substantial extent on the widespread adoption of our C3 AI Software. Although demand for data management, ML, analytics, and AI platforms and applications has grown in recent years, the market for these platforms and applications continues to evolve.
If our efforts to expand our relationships with our customers are not successful, our business, financial condition, and results of operations may be harmed. 26 Table of Contents 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 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.
For example, in June 2019, we entered into a strategic collaboration with Baker Hughes whereby Baker Hughes operates as the exclusive channel partner and reseller of our C3 AI Software in the oil and gas industry and a non-exclusive reseller in other industries. This arrangement was most recently revised in October 2021 and now continues until April 30, 2025.
For example, in June 2019, we entered into a strategic collaboration with Baker Hughes whereby Baker Hughes operates as the exclusive channel partner and reseller of our C3 AI Software in the oil and gas industry and a non-exclusive reseller in other industries.
In addition, any failure by our partners to comply with applicable law or regulations could result in proceedings against us by governmental entities or others, with further financial, operational, and reputational damage. Any of the previously identified or similar threats could cause a security incident or other interruption.
In addition, any failure by our partners to comply with applicable law or regulations could result in proceedings against us by governmental entities or others, with further financial, operational, and reputational damage.
We also have strategic relationships with AWS, Fidelity National Information Services, Google Cloud, Microsoft, and Raytheon. We plan to continue to establish and maintain similar strategic relationships in certain industry verticals and otherwise, and we expect our channel partners to become an increasingly important aspect of our business.
We plan to continue to establish and maintain similar strategic relationships in certain industry verticals and otherwise, and we expect our channel partners to become an increasingly important aspect of our business.
In addition, as of April 30, 2022, there were 30,359,954 shares of Class A common stock subject to outstanding options under our Amended and Restated 2012 Equity Incentive Plan and 18,087,190 shares of Class A common stock subject to equity awards outstanding under our 2020 Equity Incentive Plan.
In addition, as of April 30, 2023, there were 28,432,805 shares of Class A common stock subject to outstanding options under our Amended and Restated 2012 Equity Incentive Plan and 27,408,618 shares of Class A common stock subject to equity awards outstanding under our 2020 Equity Incentive Plan.
A security incident or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe lease commencement date of other phases of the new lease will be determined when the landlord delivers the additional leased space to us. 64 Table of Contents We lease 13 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; and Guadalajara, Mexico.
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.
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 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.
ITEM 2. PROPERTIES Our current principal executive office is located in Redwood City, California and, as of April 30, 2022, consists of approximately 99,560 square feet of space under a lease that expires in December 2022.
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.
Removed
On August 25, 2021, we entered into a new lease that expires in March 2033 to acquire approximately 283,015 square feet of office space in several phases in Redwood City, California. We have previously acquired 171,380 square feet of space under this new lease.
Added
The lease commencement date of other phases of this lease will be determined when the landlord delivers the additional leased space to us.
Removed
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 changeMINE SAFETY DISCLOSURES None. 65 Table of Contents PART II
Biggest changeMINE SAFETY DISCLOSURES None. 61 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchase 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, 2022 (in thousands, except for share and per share amounts). 67 Table of Contents Total 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, 2022 — $ — — $ 100,000 March 1 - March 31, 2022 738,278 20.43 720,972 $ 85,000 April 1 - April 30, 2022 8,398 4.62 — $ 85,000 Total 746,676 $ 20.26 720,972 (1) Includes (i) 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 and (ii) shares repurchased under our board approved stock repurchase program.
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.
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. 66 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. 62 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, 2022.
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.
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, 2022, there were 173 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 6, 2023, there were 140 stockholders of record of our Class A common stock.
Stockholders’ Equity for further information. 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.
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.
In the case of former employees, 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.
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.
As of April 30, 2022, $85.0 million remained available for future repurchases under the program. ITEM 6. [RESERVED] 68 Table of Contents
As of April 30, 2023, $85.0 million remained available for future repurchases under the program. ITEM 6. [RESERVED] 63 Table of Contents
Removed
Use of Proceeds On December 11, 2020, we completed our initial public offering, or IPO, in which we issued and sold 17,825,000 shares of our Class A common stock at $42.00 per share, which included 2,325,000 shares issued upon the exercise of the underwriters’ over-allotment option to purchase additional shares.
Added
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).
Removed
We received net proceeds of $694.6 million after deducting underwriting discounts and other offering expenses.
Removed
Immediately following completion of our IPO, we also completed a concurrent private placement immediately subsequent to the closing of the IPO, in which we issued and sold 2,380,952 and 1,190,476 shares of the Company’s Class A common stock at $42.00 per share to Spring Creek Capital LLC, an affiliate of Koch Industries, Inc., and Microsoft Corporation, respectively.
Removed
We received aggregate proceeds of $150.0 million and did not pay underwriting discounts with respect to the shares of Class A common stock that were sold in these private placements. The sale of securities in these private placements were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act.
Removed
There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on December 9, 2020, pursuant to Rule 424(b)(4) of the Securities Act.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. 77 Table of Contents Results of Operations The following tables set forth our consolidated statements of operations for the periods presented: Fiscal Year Ended April 30, 2022 2021 2020 (in thousands) Revenue Subscription $ 206,916 $ 157,366 $ 135,394 Professional services 45,843 25,851 21,272 Total revenue 252,759 183,217 156,666 Cost of revenue Subscription (1) 45,838 31,315 31,479 Professional services (1) 17,875 13,204 7,308 Total cost of revenue 63,713 44,519 38,787 Gross profit 189,046 138,698 117,879 Operating expenses Sales and marketing (1) 173,584 96,991 94,974 Research and development (1) 150,544 68,856 64,548 General and administrative (1) 61,040 33,109 29,854 Total operating expenses 385,168 198,956 189,376 Loss from operations (196,122) (60,258) (71,497) Interest income 1,827 1,255 4,251 Other income (expense), net 3,019 4,011 (1,752) Net loss before provision for income taxes (191,276) (54,992) (68,998) Provision for income taxes 789 704 380 Net loss $ (192,065) $ (55,696) $ (69,378) __________________ (1) Includes stock-based compensation expense as follows: Fiscal Year Ended April 30, 2022 2021 2020 (in thousands) Cost of subscription $ 8,638 $ 828 $ 370 Cost of professional services 2,710 376 122 Sales and marketing 40,344 9,080 3,074 Research and development 39,200 2,950 1,223 General and administrative 22,549 8,506 3,521 Total stock-based compensation expense $ 113,441 $ 21,740 $ 8,310 78 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, 2022 2021 2020 Revenue Subscription 82 % 86 % 86 % Professional services 18 14 14 Total revenue 100 100 100 Cost of revenue Subscription 18 17 20 Professional services 7 7 5 Total cost of revenue 25 24 25 Gross profit 75 76 75 Operating expenses Sales and marketing 69 53 61 Research and development 60 38 41 General and administrative 24 18 19 Total operating expenses 153 109 121 Loss from operations (78) (33) (46) Interest income 1 1 3 Other income (expense), net 1 2 (1) Net loss before provision for income taxes (76) (30) (44) Provision for income taxes — — — Net loss (76) % (30) % (44) % Comparison of the Fiscal Years Ended April 30, 2022 and 2021 Revenue Fiscal Year Ended April 30, $ Change % Change 2022 2021 (in thousands) Revenue Subscription $ 206,916 $ 157,366 $ 49,550 31 % Professional services 45,843 25,851 19,992 77 % Total revenue $ 252,759 $ 183,217 $ 69,542 38 % Subscription revenue accounted for 82% and 86% of our total revenue for the fiscal years ended April 30, 2022 and 2021, respectively.
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.
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 Application Platform.
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.
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 an 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 a decrease in related party balances of $3.4 million and a decrease in lease liabilities of $3.3 million.
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.
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 Application Platform. • Hyperscale Cloud and Infrastructure.
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 a small number of customers who have perpetual licenses, which we recognize ratably given the critical nature of the required continuous maintenance and support provided. We generate additional runtime subscription fees for the use of our C3 AI Application Platform, a type of consumption billing based on computing and storage resources required to run our software.
We have a small number of customers who have perpetual licenses, which we recognize ratably given the critical nature of the required continuous maintenance and support provided. We generate additional runtime subscription fees for the use of our C3 AI Platform, a type of consumption billing based on computing and storage resources required to run our software.
Subscription Revenue. Our subscription revenue is primarily comprised of term licenses, stand-ready COE support services, trials 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 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.
Some of our most notable partners include Baker Hughes, FIS, and Microsoft. 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, 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.
Our model-driven architecture enables us and our customers to rapidly address new use cases by building new applications and extending and enhancing the features and functionality of current C3 AI Software. By investing to make it easier to develop applications on our C3 AI Application Platform, our customers have become active developers.
Our model-driven architecture enables us and our customers to rapidly address new use cases by building new applications and extending and enhancing the features and functionality of current C3 AI Software. By investing to make it easier to develop applications on our C3 AI Platform, our customers have become active developers.
Investing Activities. Net cash provided by investing activities of $317.0 million for the fiscal year ended April 30, 2022 was primarily attributable to the maturities and sales of investments of $1,117.8 million, partially offset by purchases of investments of $796.5 million and capital expenditures of $4.3 million.
Net cash provided by investing activities of $317.0 million for the fiscal year ended April 30, 2022 was primarily attributable to the maturities and sales of investments of $1,117.8 million, partially offset by purchases of investments of $796.5 million and capital expenditures of $4.3 million. Financing Activities.
This arrangement included a subscription to our C3 AI Application 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 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.
Using our C3 AI Application Platform as the development suite, we leverage our model-driven architecture to efficiently build new cross-industry and industry-specific applications based on identifying requirements across our customer base of industry leaders and through our industry partners.
Using our C3 AI Platform as the development suite, we leverage our model-driven architecture to efficiently build new cross-industry and industry-specific applications based on identifying requirements across our customer base of industry leaders and through our industry partners.
We purchase services from Baker Hughes from time to time to support our end customers in relation to our contracts with those customers. These costs are recorded as cost of subscription revenue in the condensed consolidated statement of operations.
We purchase services from Baker Hughes from time to time to support our end customers in relation to our contracts with those customers. These costs are recorded as cost of subscription revenue in the consolidated statement of operations.
Baker Hughes revenue commitments were inclusive of their direct subscription fees of $39.5 million per year with the remainder to be generated from the resale of our solutions by the Baker Hughes sales organization.
Baker Hughes’ revenue commitments were inclusive of their direct subscription fees of $39.5 million per year with the remainder to be generated from the resale of our solutions by the Baker Hughes sales organization.
Our strategy with strategic partners is to establish a significant use case and prove the value of our C3 AI Application 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 with a flagship customer in each industry in which we participate.
Pursuant to the revised arrangement, we acknowledged that Baker Hughes had met its minimum annual revenue commitment for the fiscal year ended April 30, 2022 and recognized $16.0 million of sales commission as deferred costs during the fiscal quarter ended October 31, 2021 related to this arrangement, which will be amortized over an expected period of five years.
We acknowledged that Baker Hughes had met its minimum annual revenue commitment for the fiscal year ended April 30, 2022 and recognized $16.0 million of sales commission as deferred costs during the fiscal quarter ended October 31, 2021 related to this arrangement, which will be amortized over an expected period of five years.
Today, 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 customers will decrease as a percentage of total revenue.
Professional services revenue represented 18%, 14% and 14% for the fiscal years ended April 30, 2022, 2021 and 2020, 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.
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.
We also offer revenue generating trials 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. 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.
Cost of subscription revenue consists primarily of costs related to compensation, including salaries, bonuses, benefits, stock-based compensation and other related expenses for the production environment, support and COE staff, hosting of our C3 AI Software, including payments to outside cloud service providers, and allocated overhead and depreciation for facilities. 75 Table of Contents Cost of Professional Services Revenue.
Cost of subscription revenue consists primarily of costs related to compensation, including salaries, bonuses, benefits, stock-based compensation and other related expenses for the production environment, support and COE staff, hosting of our C3 AI Software, including payments to outside cloud service providers, and allocated overhead and depreciation for facilities. Cost of Professional Services Revenue.
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 is presented below.
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, 2021 compared to the fiscal year ended April 30, 2020 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, 2021, filed with the Securities and Exchange Commission, or SEC, on June 25, 2021.
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.
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; • 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; • 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.
How We Generate Revenue We generate revenue primarily from the sale of subscriptions, which accounted for 82%, 86% and 86% of our total revenue in the fiscal years ended April 30, 2022, 2021 and 2020, respectively.
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.
In reaching our conclusion, we considered the nature of our promise to provide the customer real time analytics and machine learning algorithms that require regular re-training to maintain and improve prediction accuracy.
In reaching our conclusion, we considered the nature of our promise to provide the customer real time analytics and ML algorithms that require regular re-training to maintain and improve prediction accuracy.
Professional services fees are based on the level of effort required to perform such tasks and are typically a fixed-fee engagement with a duration of less than 12 months. We recognize revenue for our professional services over time on an input basis as the performance obligations are satisfied. 84 Table of Contents Contracts with Multiple Performance Obligations .
Professional services fees are based on the level of effort required to perform such tasks and are typically a fixed-fee engagement with a duration of less than 12 months. We recognize revenue for our professional services over time on an input or output basis as the performance obligations are satisfied. Contracts with Multiple Performance Obligations .
General and administrative expense also includes facilities costs, such as depreciation and rent expense, professional fees, and other general corporate costs, including allocated overhead and depreciation for facilities. 76 Table of Contents We expect our general and administrative expense to increase in absolute dollars as we continue to grow our business.
General and administrative expense also includes facilities costs, such as depreciation and rent expense, professional fees, and other general corporate costs, including allocated overhead and depreciation for facilities. We expect our general and administrative expense to increase in absolute dollars as we continue to grow our business.
Our subscriptions also include our maintenance and support services. Additionally, we offer premium stand-ready support services through our C3 AI Center of Excellence, or COE, which are 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.
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.
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 $477.4 million and $293.8 million as of April 30, 2022 and 2021, 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 $381.4 million and $477.4 million as of April 30, 2023 and 2022, respectively.
This was partially offset by cash inflows related to an increase in accounts payable of $34.5 million inclusive of an increase in related party balances of $18.5 million and an increase to accrued compensation and employee benefits of $10.4 million.
This was partially offset by cash inflows related to an increase in accounts payable of $34.5 million inclusive of an increase in related party balances of $18.5 million and an increase to accrued compensation and employee benefits of $10.4 million. 78 Table of Contents Investing Activities.
Our cloud-native software offerings allow us to manage, update, and monitor the software regardless of whether the software is deployed in our public cloud environment, in our customers’ self-managed private or public cloud environments, or in a hybrid environment. Our subscription contracts are generally non-cancellable and non-refundable.
Our cloud-native software offerings allow us to manage, update, and monitor the software regardless of whether the software is deployed in our public cloud environment, in our customers’ self-managed private or public cloud environments, or in a hybrid environment.
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: 81 Table of Contents Fiscal Year Ended April 30, 2022 2021 (in thousands) Net cash used in operating activities $ (86,462) $ (37,553) Less: Purchases of property and equipment (3,791) (1,628) Capitalized software development costs (500) — Free cash flow $ (90,753) $ (39,181) Net cash provided by (used in) investing activities $ 317,015 $ (767,152) Net cash provided by financing activities $ 5,711 $ 887,356 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, 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.
Our subscription contracts are generally non-cancellable and non-refundable, and we recognize revenue over the contract term on a ratable basis. In addition, customers pay a usage-based runtime fee for our C3 AI Software for specified levels of capacity.
Our subscription contracts are generally non-cancellable and non-refundable. 64 Table of Contents Historically we primarily recognize revenue from subscriptions on a ratable basis over the contract term or on a usage basis for consumption-based arrangements. In addition, customers typically pay a usage-based runtime fee for production use of our C3 AI Software for specified levels of capacity.
We are obligated to pay Baker Hughes a sales commission on subscriptions to our products and services offerings it resells in excess of these minimum revenue commitments. 73 Table of Contents We and Baker Hughes further revised these agreements 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 further 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 incentivize Baker Hughes’ sales of our products and services.
Net cash used in operating activities of $37.6 million for the fiscal year ended April 30, 2021 was due to our net loss of $55.7 million adjusted for certain non-cash items, primarily consisting of stock-based compensation of $21.7 million, depreciation and amortization of $4.3 million, and non-cash operating lease cost of $3.3 million.
Net cash used in operating activities of $115.7 million for the fiscal year ended April 30, 2023 was due to our net loss of $268.8 million adjusted for certain non-cash items, primarily consisting of stock-based compensation of $216.5 million, depreciation and amortization of $6.1 million, and non-cash operating lease cost of $7.0 million.
With our support, our customers have developed and deployed almost two-thirds of the applications currently in production and running on the C3 AI Application Platform.
With our support, our customers have developed and deployed almost two-thirds of the applications currently in production and running on the C3 AI Platform. Research and development spending has fueled enhancements to our existing C3 AI Platform.
Professional services fees are based on the level of effort required to perform the specified tasks and are typically a fixed-fee engagement with defined deliverables and a duration of less than 12 months. We recognize revenue for our professional services over the period of delivery as services are performed. Cost of Revenue Cost of Subscription Revenue.
Professional services fees are based on the level of effort required to perform the specified tasks and are typically a fixed-fee engagement with defined deliverables and a duration of less than 12 months.
We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic on our business. For further discussion of the potential impacts of the ongoing COVID-19 pandemic on our business, operating results, and financial condition, see the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.
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.
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. 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 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 also expect to hire additional sales personnel to increase sales coverage of target industry vertical and geographic markets.
We expect our sales and marketing expenses will increase in absolute dollar amounts as we expect to hire additional sales personnel to increase sales coverage of target industry vertical and geographic markets. We have reduced our spend on brand awareness, but continue to invest in market education, strategic paid media, and thought leadership.
Subscription revenue increased by $49.6 million, or 31%, for the fiscal year ended April 30, 2022, compared to the prior fiscal year.
Subscription revenue increased by $23.5 million, or 11%, for the fiscal year ended April 30, 2023, compared to the prior fiscal year.
The increase in cost of professional services revenue for the fiscal year ended April 30, 2022 compared to the prior fiscal year was primarily due to higher overhead costs of $1.9 million, higher personnel-related costs of $1.8 million, and higher third-party outsourcing costs of $0.9 million.
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 following table summarizes our cash flows for the periods presented: Fiscal Year Ended April 30, 2022 2021 (in thousands) Cash used in operating activities $ (86,462) $ (37,553) Cash provided by (used in) investing activities $ 317,015 $ (767,152) Cash provided by financing activities $ 5,711 $ 887,356 Net increase in cash, cash equivalents, and restricted cash $ 236,264 $ 82,651 82 Table of Contents Operating Activities.
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 $11.0 million cash outflow related to changes in operating assets and liabilities was primarily attributable to an increase in accounts receivable of $34.7 million inclusive of an increase in related party balances of $15.2 million, an increase in prepaid expenses, other current assets and other assets of $14.9 million inclusive of an increase in related party balances of $8.3 million and a decrease in lease liabilities of $3.6 million.
The $72.2 million cash outflow related to changes in operating assets and liabilities was primarily attributable to an increase in accounts receivable of $54.5 million inclusive of an increase in related party balances of $38.8 million, a decrease in accounts payable of $22.0 million inclusive of a decrease in related party balances of $16.3 million, a decrease in other liabilities of $10.6 million inclusive of a decrease in related party balances of $2.5 million, a decrease to deferred revenue of $1.3 million inclusive of an increase in related party balances of $0.1 million and an increase in prepaid expenses, other current assets and other assets of $0.6 million inclusive of an increase in related party balances of $4.7 million.
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. We also 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.
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.
We determine SSP using observable pricing when available, which takes into consideration market conditions and customer specific factors. When observable pricing is not available, we first allocate the transaction price to the performance obligations with established SSPs and then apply the residual approach to allocate the remaining transaction price to the subscription and bundled maintenance and support services.
When observable pricing is not available, we first allocate the transaction price to the performance obligations with established SSPs and then apply the residual approach to allocate the remaining transaction price to the subscription and bundled maintenance and support services. 80 Table of Contents
Our research and development efforts are aimed at continuing to develop and refine our C3 AI Software, including adding new features and modules, increasing functionality and speed, and enhancing the usability of our C3 AI Software.
Consequently, we anticipate that sales and marketing expense as a percent of total revenue to decline over time. Research and Development. Our research and development efforts are aimed at continuing to develop and refine our C3 AI Software, including adding new features and modules, increasing functionality and speed, and enhancing the usability of our C3 AI Software.
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. 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.
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.
Our professional services gross margin may also experience variability from period to period due to the use of our own resources and third-party system integration partners in connection with the performance of our fixed price agreements. Operating Expenses Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses.
Our subscription gross margin may experience variability over time as we continue to invest and continue to scale our business. Our professional services gross margin may also experience variability from period to period due to the use of our own resources and third-party system integration partners in connection with the performance of our fixed price agreements.
Sales and marketing expenses consist of expenditures related to advertising, media, marketing, promotional events, brand awareness activities, business development, customer success and corporate partnerships. 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.
Factors Affecting Our Performance We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “Risk Factors” Part I, Item 1A, that we must successfully address to sustain our growth, improve our results of operations, and establish and maintain profitability.
Factors Affecting Our Performance We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “Risk Factors” Part I, Item 1A, that we must successfully address to sustain our growth, improve our results of operations, and establish and maintain profitability. 67 Table of Contents Customer Acquisition, Retention, and Expansion We are focused on continuing to grow our customer base, retaining existing customers and expanding customers’ usage of our C3 AI Software by addressing new use cases across multiple departments and divisions, adding users, and developing and deploying additional applications.
Research and development spending has fueled enhancements to our existing C3 AI Application Platform. 72 Table of Contents We expect to maintain high levels of investment in product innovation over the coming years as we continue to introduce new applications which address new industry use cases, and new features and functionality for the C3 AI Software.
We expect to maintain high levels of investment in product innovation over the coming years as we continue to introduce new applications which address new industry use cases, and new features and functionality for the C3 AI Software. As our business scales over a longer-term horizon, we anticipate research and development spend as a percent of total revenue to decline.
We expect to continue to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments we intend to make in our business, and as a result we may require additional capital to execute on our strategic initiatives to grow the business.
We expect to continue to incur operating losses and generate negative cash flows from operations in the next few quarters due to the investments we intend to make in our business, and as a result we may require additional capital to execute on our strategic initiatives to grow the business, but continue on-track with our plan for profitability, with the goal of achieving a sustainable non-GAAP profitable business by the end of fiscal year 2024.
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 Application Platform.
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 base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
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.
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 RPO related to Baker Hughes, which includes both direct subscriptions and reseller arrangements, is comprised of $2.3 million related to deferred revenue and $212.9 million of commitments from non-cancellable contracts as of April 30, 2022 and $8.5 million related to deferred revenue and $95.5 million from non-cancellable contracts as of April 30, 2021.
We also provided Baker Hughes the option to extend the subscription term upon payment of a renewal fee. 69 Table of Contents Our RPO related to Baker Hughes, which includes both direct subscriptions and reseller arrangements, is comprised of $0.2 million related to deferred revenue and $161.9 million of commitments from non-cancellable contracts as of April 30, 2023 and $2.3 million related to deferred revenue and $212.9 million from non-cancellable contracts as of April 30, 2022.
As our C3 AI Application Platform and much of our other C3 AI Software is industry agnostic, we also expect to expand into other industries as we grow. Acquiring new customers and expanding our business with our existing customers is the intent of our go-to-market effort and drivers of our growth.
As our C3 AI Platform and much of our other C3 AI Software is industry agnostic, we also expect to expand into other industries as we grow.
The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are uncertain.
The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The full extent to which the COVID-19 pandemic, including any new variants, may continue to directly or indirectly impact general market conditions or our business, results of operations, cash flows, and financial condition depends on future developments that are uncertain.
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes.
Summary of Business and Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes.
This product unifies data from across systems to enable exploration and insights, enabling collaborative data analysis using interactive, intuitive graph network visualizations. 69 Table of Contents These solutions, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration. We significantly reduce the effort and complexity of the AI software engineering problem.
These solutions, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration. We significantly reduce the effort and complexity of the AI software engineering problem.
As a result of global business disruption, the COVID-19 pandemic had a significant adverse impact on our conclusion of new and additional business agreements in 2022, 2021 and 2020 and may continue to pose challenges until the effects of the pandemic abate. 74 Table of Contents As a result of the COVID-19 pandemic, we temporarily closed our headquarters and other offices, required our employees and contractors to work remotely, and implemented travel restrictions, all of which represented a significant change in how we operate our business.
As a result of global business disruption, the COVID-19 pandemic had a significant adverse impact on our conclusion of new and additional business agreements in 2022, 2021 and 2020 and may continue to pose challenges as the effects of the pandemic continue to abate.
We derived approximately 22%, 35% and 22% of our total revenue for the fiscal years ended April 30, 2022, 2021 and 2020, respectively, from international customers. Impact of Ongoing COVID-19 Pandemic The ongoing COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020.
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.
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 by either purchasing additional C3 AI Software or by subscribing to the C3 AI Application Platform to develop their own AI applications.
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.
RPO excludes amounts related to performance obligations and usage-based royalties that are billed and recognized as they are delivered. This primarily consists of monthly usage-based runtime and hosting charges in the duration of some revenue contracts. RPO also excludes any future resale commitments by our strategic partners until those end customer contracts are signed.
Our RPO as of April 30, 2022 was comprised of $49.1 million related to deferred revenue and $428.3 million of commitments from non-cancellable contracts. RPO excludes amounts related to performance obligations and usage-based royalties that are billed and recognized as they are delivered. This primarily consists of monthly usage-based runtime and hosting charges in the duration of some revenue contracts.
Interest Income Fiscal Year Ended April 30, $ Change % Change 2021 2020 (in thousands) Interest income $ 1,827 $ 1,255 $ 572 46 % The increase in interest income for the fiscal year ended April 30, 2022 compared to the prior fiscal year was primarily due to an increase in volume of investments, offset by investments that yielded lower returns such as money market funds and government securities.
Interest Income Fiscal Year Ended April 30, $ Change % Change 2023 2022 (in thousands) Interest income $ 21,979 $ 1,827 $ 20,152 1103 % The increase in interest income for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to an increase in volume of investments and investments in higher expected returns securities such as corporate debt securities.
This was partially offset by cash inflows related to an increase to deferred revenue of $14.9 million inclusive of an increase in related party balances of $6.2 million, an increase in other liabilities of $11.5 million inclusive of an increase in related party balances of $8.3 million, increase to accrued compensation and employee benefits of $8.1 million and an increase in accounts payable of $7.5 million inclusive of an increase in related party balances of $0.1 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.
We expect our operating expenses as a percentage of total revenue to increase as we continue to invest to grow our business. Over the long-term, we expect those percentages to stabilize and then move lower as our business matures. Sales and Marketing.
Operating Expenses Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. We expect our operating expenses as a percentage of total revenue to increase as we continue to invest to grow our business.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. See Note 1. Summary of Business and Significant Accounting Policies to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies.
We believe that the following accounting policies involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. See Note 1.
We engage the market through digital, radio, outdoor, airport, and print advertising; virtual and physical events, including our C3 AI Transform annual customer conference; and C3 AI Live, a series of livestreamed events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI, machine learning, and data science.
We engage the market through digital, radio, outdoor, airport, and print advertising; virtual and physical events, including our C3 Transform annual user conference; and C3 AI Live, a series of livestreamed events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI, ML, and data science. 68 Table of Contents In the near term, we expect marketing spend to decline as a percent of total revenue as we make ongoing progress in establishing C3 AI’s brand and reputation and as our business scales.
The increase in general and administrative expense for the fiscal year ended April 30, 2022 compared to the prior fiscal year was primarily due to higher personnel-related costs as a result of headcount growth of $17.6 million, higher corporate insurance costs of $4.6 million, higher professional services costs of $2.1 million, and higher overhead costs of $1.1 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 sales and marketing expense for the fiscal year ended April 30, 2022 compared to the prior fiscal year was primarily due to higher personnel-related costs as a result of headcount growth of $45.2 million, higher advertising spend of $16.7 million, higher marketing events costs of $6.0 million and higher commission expense of $3.9 million. Research and Development.
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.
Our subscription revenue grew to $206.9 million for the fiscal year ended April 30, 2022, representing a 31% increase compared to the prior fiscal year. 70 Table of Contents Go-to-Market Strategy Our go-to-market strategy is 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, and who are attempting to solve complicated business problems by digitally transforming their operations.
The increase in research and development expense for the fiscal year ended April 30, 2022 compared to the prior fiscal year was primarily due to higher personnel-related costs as a result of headcount growth of $61.1 80 Table of Contents million, higher C3.ai DTI contributions of $8.7 million, higher overhead costs of $7.1 million, and higher cloud computing costs of $3.8 million.
The increase in research and development expense for the fiscal year ended April 30, 2023 compared to the prior fiscal year was primarily due to higher personnel-related costs of $58.0 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 cloud computing costs of $7.9 million and higher facilities costs of $3.6 million, partially offset by lower C3.ai DTI contributions of $11.5 million.
These increases are partially offset by revenue recognized on existing contracts during the period. 71 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.
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.
Net cash used in investing activities of $767.2 million for the fiscal year ended April 30, 2021 was primarily attributable to purchases of investments of $1,152.1 million and capital expenditures of $1.6 million, partially offset by maturities and sales of short-term investments of $385.9 million. Financing Activities.
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.
Key Business Metric We monitor remaining performance obligations, or RPO, as a key metric to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions.
Based on the new approach, our best estimate of Customer Engagement is as follows: April 30, 2022 July 31, 2022 October 31, 2022 January 31, 2023 April 30, 2023 Revised calculation 212 223 223 247 287 Based on the prior calculation methodology, our historical Customer count is as follows: April 30, 2022 July 31, 2022 October 31, 2022 January 31, 2023 April 30, 2023 Prior calculation 223 228 236 236 244 Key Business Metric We monitor remaining performance obligations, or RPO, as a key metric to help us evaluate the health of our business, identify trends affecting our growth, formulate goals and objectives, and make strategic decisions.
We are growing rapidly, with total revenue of $252.8 million for the fiscal year ended April 30, 2022, representing a 38% increase compared to the prior fiscal year.
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.
Beginning in the fiscal year ending April 30, 2023, Baker Hughes’ annual commitments will be reduced by any revenue we generate from certain customers. The revenue recorded for Baker Hughes will be reviewed quarterly and adjusted, as needed, to reflect our current assumptions.
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.
Other Income (Expense), Net Fiscal Year Ended April 30, $ Change % Change 2022 2021 (in thousands) Other income (expense), net $ 3,019 $ 4,011 $ (992) (25) % The decrease in other income (expense), net for the fiscal year ended April 30, 2022 compared to the prior fiscal year was due to foreign currency losses on the remeasurement of Euro-denominated cash and accounts receivable balances, partially offset by income from an award of attorney’s fees and costs in connection with a legal proceeding of $9.4 million.
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.
Our short-term investments generally consist of high-grade U.S. treasury securities, certificates of deposit, U.S. government agency securities, commercial paper and corporate debt securities. We have generated operating losses from our operations as reflected in our accumulated deficit of $541.4 million as of April 30, 2022 and negative cash flows from operations.
As of April 30, 2023 and 2022, we had $284.8 million and $339.5 million of cash and cash equivalents and $527.6 million and $652.7 million of investments, respectively, which were held for working capital purposes. Our short-term and long-term investments generally consist of high-grade U.S. treasury securities, certificates of deposit, U.S. government agency securities, commercial paper and corporate debt securities.

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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 changeTo 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. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Biggest changeA 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.
As of April 30, 2022, 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, 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.
Foreign Currency Risk Our functional currency is the U.S. dollar. For the fiscal years ended April 30, 2022, 2021 and 2020, approximately 13%, 25%, and 20% 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, 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.
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, 2022, we had cash, cash equivalents, and investments of $992.2 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, 2023, we had cash, cash equivalents, and investments of $812.4 million.
As of April 30, 2021, we had cash, cash equivalents, and short-term investments of $1,093.4 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 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.
Our foreign operating expenses are denominated in the local currencies of the countries in which we operate. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. A hypothetical 10% change in foreign currency exchange rates may not result in a material impact on our consolidated financial statements.
Our foreign operating expenses are denominated in the local currencies of the countries in which we operate. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.
Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. 86 Table of Contents
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.
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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. Our inability or failure to do so could harm our business, financial condition, or results of operations. 81 Table of Contents

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