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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-39744
C3.ai, Inc.
(Exact name of registrant as specified in its charter)

Delaware26-3999357
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1300 Seaport Blvd,Suite 500
Redwood City,CA94063
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (650) 503-2200
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareAINew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes     No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  
As of December 2, 2022, the registrant had outstanding 106,751,070 shares of Class A common stock and 3,499,992 shares of Class B common stock.
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TABLE OF CONTENTS
Page
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, plans and objectives of management for future operations, and the benefits and timing of the rollout of new technology, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
our expectations regarding our revenue, expenses, and other operating results, including statements relating to the portion of our remaining performance obligations that we expect to be recognized as revenue in future periods;
our ability to acquire new customers and successfully retain existing customers;
our ability to increase usage of our C3 AI Software, which includes our C3 AI Platform, C3 AI Applications, C3 AI Ex Machina, C3 AI CRM and C3 AI Data Vision;
our ability to achieve or sustain profitability;
future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
the costs and success of our sales and marketing efforts, and our ability to promote our brand;
our growth strategies for our C3 AI Software;
our expectations regarding our C3 AI Software;
the estimated addressable market opportunity for our C3 AI Software;
our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;
our ability to effectively manage our growth, including any international expansion;
our ability to protect our intellectual property rights and any costs associated therewith;
the effects of the ongoing coronavirus, or COVID-19, pandemic or other public health crises;
our ability to compete effectively with existing competitors and new market entrants; and
the growth rates of the markets in which we compete.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
3

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
Where You Can Find More Information
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://ir.c3.ai), our filings with the Securities and Exchange Commission (SEC), our website, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.
We may also use our Twitter, LinkedIn, and Facebook accounts as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts, in addition to following our SEC, our website, webcasts, press releases, and conference calls. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q. These channels may be updated from time to time on our investor relations website.


4

SELECTED RISKS AFFECTING OUR BUSINESS
Investing in our Class A common stock involves numerous risks, including the risks described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Below is a summary of some of the risks and uncertainties as of the date of the filing of this Quarterly Report on Form 10-Q, any one of which could materially adversely affect our business, financial condition, operating results, and prospects. You should read this summary together with the more detailed description of each risk factor contained below.
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.
Historically, a limited number of customers have accounted for a substantial portion of our revenue. If existing customers do not renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
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.
We have a history of operating losses and may not achieve or sustain profitability in the future.
We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations.
Our sales cycles can be long and unpredictable, particularly with respect to large subscriptions, and our sales efforts require considerable time and expense.
If the market for our C3 AI Software fails to grow as we expect, or if businesses fail to adopt our C3 AI Software, our business, operating results, and financial condition could be adversely affected.
If we fail to respond to rapid technological changes, extend our C3 AI Software, or develop new features and functionality, our ability to remain competitive could be impaired.
If we were to lose the services of our Chief Executive Officer, or CEO, or other members of our senior management team, we may not be able to execute our business strategy.
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.
We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could adversely affect our financial results or financial condition.
5

Risks Related to Our International Operations
We are continuing to expand our operations outside the United States, where we may be subject to increased business and economic risks that could harm our business.
We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we are not in compliance with applicable laws.
Risks Related to Taxes
Our results of operations may be harmed if we are required to collect sales or other related taxes for our subscriptions in jurisdictions where we have not historically done so.
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.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets.
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.
Risks Related to Ownership of Our Class A Common Stock
The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
The dual class structure of our common stock has the effect of concentrating voting control with the holders of our Class B common stock, limiting your ability to influence corporate matters.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result.
General Risks
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
Our business could be disrupted by catastrophic events.
6

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
C3.AI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
October 31, 2022April 30, 2022
Assets
Current assets
Cash and cash equivalents$277,622 $339,528 
Short-term investments562,448 620,633 
Accounts receivable, net of allowance of $337 and $157 as of October 31, 2022 and April 30, 2022, respectively(1)
94,759 80,271 
Prepaid expenses and other current assets(2)
25,239 20,004 
Total current assets960,068 1,060,436 
Property and equipment, net61,724 14,517 
Goodwill625 625 
Long-term investments18,686 32,086 
Other assets, non-current(3)
59,502 63,218 
Total assets$1,100,605 $1,170,882 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable(4)
$30,662 $54,218 
Accrued compensation and employee benefits37,728 32,223 
Deferred revenue, current(5)
30,380 48,854 
Accrued and other current liabilities(6)
19,885 14,874 
Total current liabilities118,655 150,169 
Deferred revenue, non-current228 288 
Other long-term liabilities(7)
28,556 30,948 
Total liabilities147,439 181,405 
Commitments and contingencies (note 6)
Stockholders’ equity
Class A common stock, $0.001 par value. 1,000,000,000 shares authorized as of October 31, 2022 and April 30, 2022; 106,600,493 and 102,725,041 shares issued and outstanding as of October 31, 2022 and April 30, 2022, respectively
107 103 
Class B common stock, $0.001 par value; 3,500,000 shares authorized as of October 31, 2022 and April 30, 2022; 3,499,992 and 3,499,992 shares issued and outstanding as of October 31, 2022 and April 30, 2022, respectively
3 3 
Additional paid-in capital1,637,980 1,532,917 
Accumulated other comprehensive loss(2,805)(2,148)
Accumulated deficit(682,119)(541,398)
Total stockholders’ equity953,166 989,477 
Total liabilities and stockholders’ equity$1,100,605 $1,170,882 
(1)     Including amounts from a related party of $53,871 and $35,848 as of October 31, 2022 and April 30, 2022, respectively.
(2)     Including amounts from a related party of $4,862 and $4,862 as of October 31, 2022 and April 30, 2022, respectively.
(3)     Including amounts from a related party of $13,710 and $16,141 as of October 31, 2022 and April 30, 2022, respectively.
(4)     Including amounts from a related party of $2,153 and $18,549 as of October 31, 2022 and April 30, 2022, respectively.
(5)     Including amounts from a related party of $387 and $132 as of October 31, 2022 and April 30, 2022, respectively.
(6)     Including amounts from a related party of $2,448 and $2,510 as of October 31, 2022 and April 30, 2022, respectively.
(7)     Including amounts from a related party of nil and $2,448 as of October 31, 2022 and April 30, 2022, respectively.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended October 31,Six Months Ended October 31,
2022202120222021
Revenue
Subscription(1)
$59,508 $47,408 $116,534 $93,530 
Professional services(2)
2,900 10,855 11,182 17,139 
Total revenue62,408 58,263 127,716 110,669 
Cost of revenue
Subscription(3)
19,165 11,392 33,257 20,605 
Professional services1,587 4,579 5,901 8,391 
Total cost of revenue20,752 15,971 39,158 28,996 
Gross profit41,656 42,292 88,558 81,673 
Operating expenses
Sales and marketing(4)
44,936 46,166 87,923 82,988 
Research and development50,051 36,523 105,928 63,235 
General and administrative18,635 15,279 39,882 27,643 
Total operating expenses113,622 97,968 233,733 173,866 
Loss from operations(71,966)(55,676)(145,175)(92,193)
Interest income4,224 322 6,762 667 
Other (expense) income, net(945)(1,372)(1,966)(2,271)
Loss before provision for income taxes(68,687)(56,726)(140,379)(93,797)
Provision for income taxes163 13 342 401 
Net loss$(68,850)$(56,739)$(140,721)$(94,198)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.63)$(0.55)$(1.30)$(0.91)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted108,876 103,746 107,885 103,058 
(1)    Including related party revenue of $19,238 and $10,012 for the three months ended October 31, 2022 and 2021, respectively, and $35,568 and $20,220 for the six months ended October 31, 2022 and 2021, respectively.
(2)    Including related party revenue of $21 and $5,924 for the three months ended October 31, 2022 and 2021, respectively, and $150 and $7,998 for the six months ended October 31, 2022 and 2021, respectively.
(3)    Including related party cost of revenue of nil and $80 for the three months ended October 31, 2022 and 2021, respectively, and nil and $197 for the six months ended October 31, 2022 and 2021, respectively.
(4)    Including related party sales and marketing expense of $3,531 and $131 for the three months ended October 31, 2022 and 2021, respectively, and $7,031 and $192 for the six months ended October 31, 2022 and 2021, respectively.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended October 31,Six Months Ended October 31,
2022202120222021
Net loss$(68,850)$(56,739)$(140,721)$(94,198)
Other comprehensive loss
Unrealized loss on available-for-sale marketable securities, net of tax(457)(427)(657)(321)
Comprehensive loss$(69,307)$(57,166)$(141,378)$(94,519)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended October 31, 2022
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of July 31, 2022108,344 $108 $1,594,487 $(2,348)$(613,269)$978,978 
Issuance of Class A common stock upon exercise of stock options, net of repurchases289  697 — — 697 
Vesting of early exercised Class A common stock options— — 219 — — 219 
Tax withholding related to net share settlement of equity awards(221)— (3,375)— — (3,375)
Vesting of restricted stock units1,689 2 — — — 2 
Stock-based compensation expense— — 45,952 — — 45,952 
Other comprehensive loss— — — (457)— (457)
Net loss— — — — (68,850)(68,850)
Balance as of October 31, 2022110,101 $110 $1,637,980 $(2,805)$(682,119)$953,166 
Six Months Ended October 31, 2022
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of April 30, 2022106,225 $106 $1,532,917 $(2,148)$(541,398)$989,477 
Issuance of Class A common stock upon exercise of stock options, net of repurchases568 1 1,799 — — 1,800 
Vesting of early exercised Class A common stock options— — 551 — — 551 
Tax withholding related to net share settlement of equity awards(221)— (3,375)— — (3,375)
Vesting of restricted stock units3,529 3 13,669 — — 13,672 
Stock-based compensation expense— — 92,419 — — 92,419 
Other comprehensive loss— — — (657)— (657)
Net loss— — — — (140,721)(140,721)
Balance as of October 31, 2022110,101 $110 $1,637,980 $(2,805)$(682,119)$953,166 



11

Three Months Ended October 31, 2021
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of July 31, 2021103,868 $104 $1,430,296 $187 $(386,792)$1,043,795 
Issuance of Class A common stock upon exercise of stock options, net of repurchases974 1 6,491 — — 6,492 
Vesting of early exercised Class A common stock options— — 849 — — 849 
Vesting of restricted stock units29 — — — — — 
Stock-based compensation expense— — 32,540 — — 32,540 
Other comprehensive loss— — — (427)— (427)
Net loss— — — — (56,739)(56,739)
Balance as of October 31, 2021104,871 $105 $1,470,176 $(240)$(443,531)$1,026,510 
Six Months Ended October 31, 2021
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of April 30, 2021102,167 $102 $1,410,325 $81 $(349,333)$1,061,175 
Issuance of Class A common stock upon exercise of stock options, net of repurchases2,667 3 11,491 — — 11,494 
Vesting of early exercised Class A common stock options— — 1,908 — — 1,908 
Vesting of restricted stock units37 — — — — — 
Stock-based compensation expense— — 46,452 — — 46,452 
Other comprehensive loss— — — (321)— (321)
Net loss— — — — (94,198)(94,198)
Balance as of October 31, 2021104,871 $105 $1,470,176 $(240)$(443,531)$1,026,510 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended October 31,
20222021
Cash flows from operating activities:
Net loss$(140,721)$(94,198)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization2,413 2,364 
Non-cash operating lease cost1,101 1,100 
Stock-based compensation expense112,643 46,452 
Other(396)(538)
Changes in operating assets and liabilities
Accounts receivable(1)
(14,668)39,047 
Prepaid expenses, other current assets and other assets(2)
(3,204)(15,074)
Accounts payable(3)
(28,197)(1,682)
Accrued compensation and employee benefits(1,050)(5,351)
Operating lease liabilities650 (1,214)
Other liabilities(4)
(882)13,564 
Deferred revenue(5)
(18,534)(2,346)
Net cash used in operating activities(90,845)(17,876)
Cash flows from investing activities:
Purchases of property and equipment(39,978)(1,429)
Capitalized software development costs
(1,000)(500)
Purchases of investments(384,024)(388,870)
Maturities and sales of investments455,534 461,648 
Net cash provided by investing activities30,532 70,849 
Cash flows from financing activities:
Payment of deferred offering costs (105)
Proceeds from exercise of Class A common stock options1,782 11,305 
Taxes paid related to net share settlement of equity awards(3,375) 
Net cash (used in) provided by financing activities(1,593)11,200 
Net (decrease) increase in cash, cash equivalents and restricted cash(61,906)64,173 
Cash, cash equivalents and restricted cash at beginning of period352,519 116,255 
Cash, cash equivalents and restricted cash at end of period$290,613 $180,428 
Cash and cash equivalents$277,622 $167,436 
Restricted cash included in other assets, non-current12,566 12,567 
Restricted cash included in prepaid expenses and other current assets425 425 
Total cash, cash equivalents and restricted cash$290,613 $180,428 
Supplemental disclosure of cash flow information—cash paid for income taxes$136 $625 
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities$18,361 $52 
Unpaid liabilities related to intangible purchases$1,500 $2,500 
Vesting of early exercised stock options$561 $1,908 
(1)Including changes in related party balances of $18,023 and $(5,796) for the six months ended October 31, 2022 and 2021, respectively.
(2)Including changes in related party balances of $(2,431) and $15,323 for the six months ended October 31, 2022 and 2021, respectively.
(3)Including changes in related party balances of $(16,396) and $28 for the six months ended October 31, 2022 and 2021, respectively.
(4)Including changes in related party balances of $(2,510) and $12,598 for the six months ended October 31, 2022 and 2021, respectively.
(5)Including changes in related party balances of $255 and $9,819 for the six months ended October 31, 2022 and 2021, respectively.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
13

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Summary of Business and Significant Accounting Policies
Business
C3.ai, Inc. (including its subsidiaries, “C3 AI” or “the Company”) is an enterprise artificial intelligence (“AI”) software provider. The Company’s C3 AI Platform supports accelerating digital transformation in various industries with prebuilt and configurable C3 AI Applications for business use cases including predictive maintenance, fraud detection, sensor network health, supply network optimization, energy management, anti-money laundering, and customer engagement. The Company supports customers in the United States, Europe, and the rest of the world. The Company was initially formed as a limited liability company in Delaware on January 8, 2009 and converted to a Delaware corporation in June 2012.
Basis of Presentation and Principles of Consolidation
The Company prepares its unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2022, which was filed with the SEC on June 23, 2022.
In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of October 31, 2022 and the results of operations for the three and six months ended October 31, 2022. The results of operations for the three and six months ended October 31, 2022 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results and outcomes could differ significantly from the Company’s estimates, judgments, and assumptions. Significant estimates include, but are not limited to, determining standalone selling price for performance obligations in contracts with customers and estimating variable consideration, the estimated expected benefit period for deferred contract acquisition costs, the useful lives of long-lived assets, the incremental borrowing rate for operating leases and other assumptions used to measure stock-based compensation, and the valuation of deferred income tax assets and uncertain tax positions. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.
Fiscal Year
The Company’s fiscal year ends on April 30.
14

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 1. Summary of Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the fiscal year ended April 30, 2022, which was filed with the SEC on June 23, 2022. There have been no significant changes to these policies during the three and six months ended October 31, 2022.
2.Revenue
Disaggregation of Revenue
The following table presents revenue by geographical region (in thousands):
Three Months Ended October 31,Six Months Ended October 31,
2022202120222021
North America (1)
$47,916 $43,697 $99,854 $80,149 
Europe, the Middle East and Africa (1)
11,889 12,789 22,592 25,008 
Asia Pacific (1)
2,435 1,777 4,802 5,512 
Rest of World (1)
168  468  
Total revenue$62,408 $58,263 $127,716 $110,669 
__________________
(1)The United States comprised 77% and 75% of the Company’s revenue for the three months ended October 31, 2022 and 2021, respectively, and 78% and 72% of the Company’s revenue for the six months ended October 31, 2022 and 2021, respectively. France comprised 12% of the Company’s revenue for the three months ended October 31, 2021, and 12% of the Company’s revenue for the six months ended October 31, 2021. No other country comprised 10% or greater of the Company’s revenue for the three and six months ended October 31, 2022 or 2021.
Deferred Revenue
As of October 31, 2022 and April 30, 2022, the Company's deferred revenue balances were $30.6 million and $49.1 million, respectively. Revenue of $39.5 million and $56.9 million was recognized during the six months ended October 31, 2022 and 2021, respectively, that was included in the deferred revenue balances as of April 30, 2022 and 2021, respectively.
Remaining Performance Obligation
Remaining performance obligations are committed and represent non-cancellable contracted revenue that has not yet been recognized and will be recognized as revenue in future periods. Some contracts allow customers to cancel the contracts without a significant penalty, and the cancellable amount of contract value is not included in the remaining performance obligations.
The Company excludes amounts related to performance obligations and usage-based royalties that are billed and recognized as they are delivered or billed and recognized in the same period. This primarily consists of monthly usage-based runtime and hosting charges in the duration of some revenue contracts.
Revenue expected to be recognized from remaining performance obligations was approximately $417.3 million as of October 31, 2022, of which $164.5 million is expected to be recognized over the next 12 months and the remainder thereafter.
Customer Concentration and Accounts Receivable
All of the Company’s Customer-Entities consist of corporate and governmental entities. A limited number of Customer-Entities have accounted for a large part of the Company’s revenue and accounts receivable to date. For the purpose of determining customer concentration and accounts receivable, unbilled receivables have been excluded from accounts receivable balance. One Customer-Entity accounted for 32% of revenue for the three months ended October 31, 2022. Two separate Customer-Entities accounted for 28% and 11%, respectively, of revenue for the three months ended October 31, 2021. One Customer-Entity accounted for 29% of revenue for the six months ended October 31, 2022. Two separate Customer-Entities accounted for 25% and 12%, respectively, of revenue for the six months ended October 31, 2021. Two separate Customer-Entities accounted for 26% and 11%, respectively, of accounts receivable at October 31, 2022. Three separate Customer-Entities accounted for 32%, 13% and 12%, respectively, of accounts receivable at April 30, 2022. A Customer-Entity is defined as each entity that is the ultimate parent of a party contracting with the Company.
15

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounts receivable includes billed and unbilled receivables, net of allowance of doubtful accounts. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The expectation of collectability is based on a review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. The Company regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice and the collection history of each customer to determine the appropriate amount of allowance for doubtful accounts. Accounts receivable included unbilled receivables as of October 31, 2022 and April 30, 2022 of $65.1 million and $19.9 million, respectively.
3.Fair Value Measurements
The Company’s financial instruments consist primarily of cash equivalents, restricted cash, available-for-sale marketable securities, accounts receivable, and accounts payable. Cash equivalents and available-for-sale marketable securities are reported at their respective fair values on the condensed consolidated balance sheets. The remaining financial instruments are reported on the condensed consolidated balance sheets at amounts that approximate current fair values.
The following table summarizes the types of assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
As of October 31, 2022As of April 30, 2022
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents:
Money market funds$160,068 $ $ $160,068 $107,726 $ $ $107,726 
Certificates of deposit     3,000  3,000 
Commercial paper79,664  79,664  142,511  142,511 
Corporate debt securities     8,884  8,884 
Available-for-sale marketable securities:
U.S. treasury securities12,326  12,326  12,763  12,763 
Certificates of deposit 90,481  90,481  97,205  97,205 
U.S. government agencies securities 23,836  23,836  13,890  13,890 
Commercial paper 184,185  184,185  241,132  241,132 
Corporate debt securities 270,306  270,306  287,729  287,729 
Total cash equivalents and available-for-sale marketable securities$160,068 $660,798 $ $820,866 $107,726 $807,114 $ $914,840 
The estimated fair value of securities classified as Level 2 financial instruments was determined based on third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. Inputs used for fair value measurement categorized as Level 2 include benchmark yields, reported trades, broker or dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.
16

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.Investments
Cash Equivalents and Available-for-Sale Marketable Securities
The following table summarizes the Company’s cash equivalents and available-for-sale marketable securities (in thousands):
As of October 31, 2022As of April 30, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$160,068 $ $ $160,068 $107,726 $ $ $107,726 
Certificates of deposit  3,000   3,000 
Commercial paper79,664   79,664 142,511   142,511 
Corporate debt securities    8,889  (5)8,884 
Available-for-sale marketable securities:
U.S. treasury securities12,381 1 (56)12,326 12,764  (1)12,763 
Certificates of deposit90,481   90,481 97,205   97,205 
U.S. government agencies securities24,217  (381)23,836 14,113  (223)13,890 
Commercial paper184,185   184,185 241,134  (2)241,132 
Corporate debt securities272,675 3 (2,372)270,306 289,646 20 (1,937)287,729 
Total cash equivalents and available-for-sale marketable securities$823,671