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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 January 31, 2024
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.)
1400 Seaport Blvd
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 February 22, 2024, the registrant had outstanding 118,548,799 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, without limitation, 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 and C3 Generative AI Product Suite;
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;
the expected timing of our product releases;
our expectations regarding our pricing model;
our expectations regarding customer engagement;
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 macroeconomic uncertainties;
our ability to compete effectively with existing competitors and new market entrants; and
the growth rates of the markets in which we compete.
3

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.
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, or 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 X (formerly Twitter) (@C3_AI), and LinkedIn (@C3-AI-Enterprise-AI) 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 history of losses, we anticipate our operating expenses will continue to increase in the future, and we may not be able to achieve or maintain profitability in the future.
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 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.
Macroeconomic uncertainties have had, and could continue to have, an adverse impact on our business, our operations, and the markets and communities in which we, our partners, and users operate.
We are subject to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies, self-regulatory schemes, standards and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
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.
Issues raised by the use of artificial intelligence, or AI, including machine learning, or ML, in our C3 AI Platform may result in reputational harm or liability or otherwise adversely affect our business, financial condition and results of operations.
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
We may have exposure to greater than anticipated tax liabilities, which could harm our business.
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 constituent documents and 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)
January 31, 2024April 30, 2023
Assets
Current assets
Cash and cash equivalents$114,561 $284,829 
Marketable securities
608,761 446,155 
Accounts receivable, net of allowance of $359 and $359 as of January 31, 2024 and April 30, 2023, respectively(1)
173,478 134,586 
Prepaid expenses and other current assets(2)
29,227 23,309 
Total current assets926,027 888,879 
Property and equipment, net91,003 84,578 
Goodwill625 625 
Long-term marketable securities
 81,418 
Other assets, non-current(3)
46,334 47,528 
Total assets$1,063,989 $1,103,028 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable(4)
$19,845 $24,610 
Accrued compensation and employee benefits37,822 46,513 
Deferred revenue, current(5)
39,121 47,846 
Accrued and other current liabilities(6)
12,391 17,070 
Total current liabilities109,179 136,039 
Deferred revenue, non-current2,183 4 
Other long-term liabilities54,632 37,320 
Total liabilities165,994 173,363 
Commitments and contingencies (note 6)
Stockholders’ equity
Class A common stock
118 110 
Class B common stock
3 3 
Additional paid-in capital1,914,450 1,740,174 
Accumulated other comprehensive income (loss)
430 (385)
Accumulated deficit(1,017,006)(810,237)
Total stockholders’ equity897,995 929,665 
Total liabilities and stockholders’ equity$1,063,989 $1,103,028 
(1)     Including amounts from a related party of $74,620 as of April 30, 2023.
(2)     Including amounts from a related party of $4,983 as of April 30, 2023.
(3)     Including amounts from a related party of $11,279 as of April 30, 2023.
(4)     Including amounts due to a related party of $2,200 as of April 30, 2023.
(5)     Including amounts from a related party of $249 as of April 30, 2023.
(6)     Including amounts due to a related party of $2,448 as of April 30, 2023.
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 January 31,Nine Months Ended January 31,
2024202320242023
Revenue
Subscription(1)
$70,400 $57,043 $198,201 $173,577 
Professional services(2)
8,001 9,626 25,791 20,808 
Total revenue78,401 66,669 223,992 194,385 
Cost of revenue
Subscription32,273 21,294 93,644 54,551 
Professional services841 977 3,399 6,878 
Total cost of revenue33,114 22,271 97,043 61,429 
Gross profit45,287 44,398 126,949 132,956 
Operating expenses
Sales and marketing(3)
57,140 43,497 150,920 131,420 
Research and development49,480 55,051 150,747 160,979 
General and administrative21,213 17,888 61,317 57,770 
Total operating expenses127,833 116,436 362,984 350,169 
Loss from operations(82,546)(72,038)(236,035)(217,213)
Interest income9,995 6,987 30,597 13,749 
Other income (expense), net
409 2,032 (468)66 
Loss before provision for income taxes(72,142)(63,019)(205,906)(203,398)
Provision for income taxes489 143 863 485 
Net loss$(72,631)$(63,162)$(206,769)$(203,883)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.60)$(0.57)$(1.75)$(1.87)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted120,486 110,735 118,259 108,869 
(1)    Including related party revenue of $10,581 and $55,884 for the nine months ended January 31, 2024 and 2023, respectively, and $20,316 for the three months ended January 31, 2023.
(2)    Including related party revenue of $5,804 and $8,749 for the nine months ended January 31, 2024 and 2023, respectively, and $8,599 for the three months ended January 31, 2023.
(3)    Including related party sales and marketing expense of $810 and $10,546 for the nine months ended January 31, 2024 and 2023, respectively, and $3,515 for the three months ended January 31, 2023.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended January 31,Nine Months Ended January 31,
2024202320242023
Net loss$(72,631)$(63,162)$(206,769)$(203,883)
Other comprehensive income
Unrealized gain on available-for-sale marketable securities, net of tax
1,205 1,770 815 1,113 
Comprehensive loss$(71,426)$(61,392)$(205,954)$(202,770)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended January 31, 2024
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of October 31, 2023119,653 $119 $1,856,307 $(775)$(944,375)$911,276 
Issuance of Class A common stock upon exercise of stock options, net of repurchases283 — 1,209 — — 1,209 
Vesting of early exercised Class A common stock options— — 112 — — 112 
Shares withheld related to net share settlement of equity awards(30)— (720)— — (720)
Vesting of restricted stock units1,721 2 13,004 — — 13,006 
Stock-based compensation expense— — 44,538 — — 44,538 
Other comprehensive income
— — — 1,205 — 1,205 
Net loss— — — — (72,631)(72,631)
Balance as of January 31, 2024121,627 $121 $1,914,450 $430 $(1,017,006)$897,995 
Nine Months Ended January 31, 2024
Common StockAdditional Paid-In Capital
Accumulated Other Comprehensive Income
Accumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of April 30, 2023113,943 $113 $1,740,174 $(385)$(810,237)$929,665 
Issuance of Class A common stock upon exercise of stock options, net of repurchases2,534 2 11,317 — — 11,319 
Vesting of early exercised Class A common stock options— — 406 — — 406 
Shares withheld related to net share settlement of equity awards(283)— (10,485)— — (10,485)
Vesting of restricted stock units5,004 5 34,470 — — 34,475 
Issuance of Class A common stock under employee stock purchase plan429 1 5,054 — — 5,055 
Stock-based compensation expense— — 133,514 — — 133,514 
Other comprehensive income— — — 815 — 815 
Net loss— — — — (206,769)(206,769)
Balance as of January 31, 2024121,627 $121 $1,914,450 $430 $(1,017,006)$897,995 
10

Three Months Ended January, 2023
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’
Equity
SharesAmount
Balance as of October 31, 2022110,101 $110 $1,637,980 $(2,805)$(682,119)$953,166 
Issuance of Class A common stock upon exercise of stock options, net of repurchases180 — 590 — — 590 
Vesting of early exercised Class A common stock options— — 286 — — 286 
Tax withholding related to net share settlement of equity awards(115)— (1,440)— — (1,440)
Vesting of restricted stock units1,843 2 10,253 — — 10,255 
Stock-based compensation expense— — 45,905 — — 45,905 
Other comprehensive income
— — — 1,770 — 1,770 
Net loss— — — — (63,162)(63,162)
Balance as of January 31, 2023112,009 $112 $1,693,574 $(1,035)$(745,281)$947,370 
Nine Months Ended January, 2023
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 repurchases747 1 2,386 — — $2,387 
Vesting of early exercised Class A common stock options— — 842 — — $842 
Tax withholding related to net share settlement of equity awards(336)— (4,815)— — $(4,815)
Vesting of restricted stock units5,373 5 23,923 — — $23,928 
Stock-based compensation expense— — 138,321 — — $138,321 
Other comprehensive income
— — — 1,113 — $1,113 
Net loss— — — — (203,883)$(203,883)
Balance as of January 31, 2023112,009 $112 $1,693,574 $(1,035)$(745,281)$947,370 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11

C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended January 31,
20242023
Cash flows from operating activities:
Net loss$(206,769)$(203,883)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization9,469 3,257 
Non-cash operating lease cost656 5,820 
Stock-based compensation expense159,032 168,474 
Accretion of discounts on marketable securities
(13,238)(1,990)
Other110 211 
Changes in operating assets and liabilities
Accounts receivable(1)
(38,892)(63,609)
Prepaid expenses, other current assets and other assets(2)
(3,379)(7,745)
Accounts payable(3)
(4,945)(26,250)
Accrued compensation and employee benefits171 1,069 
Operating lease liabilities14,330 (3,296)
Other liabilities(4)
6,296 (4,606)
Deferred revenue(5)
(6,546)(10,197)
Net cash used in operating activities
(83,705)(142,745)
Cash flows from investing activities:
Purchases of property and equipment(22,718)(59,767)
Capitalized software development costs
(2,750)(1,000)
Purchases of marketable securities
(657,431)(497,288)
Maturities and sales of marketable securities
590,299 674,440 
Net cash (used in) provided by investing activities(92,600)116,385 
Cash flows from financing activities:
Proceeds from issuance of Class A common stock under employee stock purchase plan5,055  
Proceeds from exercise of Class A common stock options11,379 2,364 
Taxes paid related to net share settlement of equity awards(10,397)(4,815)
Net cash provided by (used in) financing activities6,037 (2,451)
Net decrease in cash, cash equivalents and restricted cash(170,268)(28,811)
Cash, cash equivalents and restricted cash at beginning of period297,395 352,519 
Cash, cash equivalents and restricted cash at end of period$127,127 $323,708 
Cash and cash equivalents$114,561 $311,142 
Restricted cash included in other assets, non-current12,566 12,566 
Total cash, cash equivalents and restricted cash$127,127 $323,708 
Supplemental disclosure of cash flow information—cash paid for income taxes$760 $219 
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities$2,475 $12,618 
Right-of-use assets obtained in exchange for lease obligations (including remeasurement of right-of-use assets and lease liabilities due to changes in the timing of receipt of lease incentives)$1,858 $2,033 
Unpaid liabilities related to intangible purchases$ $1,500 
Vesting of early exercised stock options$406 $842 
(1)Including changes in related party balances of $12,444 and $46,295 for the nine months ended January 31, 2024 and 2023, respectively.
(2)Including changes in related party balances of $(810) and $(3,525) for the nine months ended January 31, 2024 and 2023, respectively.
(3)Including changes in related party balances of $248 and $(18,549) for the nine months ended January 31, 2024 and 2023, respectively.
(4)Including changes in related party balances of $(2,448) and $(2,510) for the nine months ended January 31, 2024 and 2023, respectively.
(5)Including changes in related party balances of $(46) and $186 for the nine months ended January 31, 2024 and 2023, respectively.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12

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 other parts 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, 2023, which was filed with the SEC on June 22, 2023.
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 January 31, 2024 and the results of operations for the three and nine months ended January 31, 2024. The results of operations for the three and nine months ended January 31, 2024 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, 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.
13

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, 2023, which was filed with the SEC on June 22, 2023. There have been no significant changes to these policies during the three and nine months ended January 31, 2024.
Recently Issued Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve the disclosures regarding a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The Company is required to adopt the guidance in the fourth quarter of fiscal 2025, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”) to provide disaggregated income tax disclosures on rate reconciliation and income taxes paid. The Company is required to adopt the guidance in the fourth quarter of fiscal 2026, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.
2.Revenue
Disaggregation of Revenue
The following table presents revenue by geographical region (in thousands):
Three Months Ended January 31,Nine Months Ended January 31,
2024202320242023
North America (1)
$68,356 $55,254 $191,247 $155,108 
Europe, the Middle East and Africa (1)
9,040 9,546 29,205 32,138 
Asia Pacific (1)
952 1,801 2,877 6,603 
Rest of World (1)
53 68 663 536 
Total revenue$78,401 $66,669 $223,992 $194,385 
__________________
(1)The United States comprised 86% and 83% of the Company’s revenue for the three months ended January 31, 2024 and 2023, respectively, and 85% and 80% of the Company’s revenue for the nine months ended January 31, 2024 and 2023, respectively. No other country comprised 10% or greater of the Company’s revenue for the three and nine months ended January 31, 2024 or 2023.
Deferred Revenue
As of January 31, 2024 and April 30, 2023, the Company’s deferred revenue balances were $41.3 million and $47.9 million, respectively. Revenue of $46.3 million and $45.6 million was recognized during the nine months ended January 31, 2024 and 2023, respectively, that was included in the deferred revenue balances as of April 30, 2023 and 2022, 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 $286.9 million as of January 31, 2024, of which $172.0 million is expected to be recognized over the next 12 months and the remainder thereafter.
14

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Customer Concentration and Accounts Receivable
A majority of the Company’s Customer-Entities consist of corporate and governmental entities. A Customer-Entity is defined as each entity that is the ultimate parent of a party contracting with the Company. 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 the accounts receivable balance. Two separate Customer-Entities accounted for 25% and 12%, respectively, of revenue for the three months ended January 31, 2024. One Customer-Entity accounted for 45% of revenue for the three months ended January 31, 2023. Two separate Customer-Entities accounted for 27% and 13%, respectively, of revenue for the nine months ended January 31, 2024. One Customer-Entity accounted for 34% of revenue for the nine months ended January 31, 2023. Two separate Customer-Entities accounted for 18% and 14%, respectively, of accounts receivable at January 31, 2024. Two separate Customer-Entities accounted for 20% and 18%, respectively, of accounts receivable at April 30, 2023.
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 allowance for credit losses is based on the Company’s assessment of the collectability of accounts receivable by considering various factors, including the age of each outstanding invoice, customer type, the collection history of each customer, historical write-off experience, current and near-term macroeconomic conditions and uncertainties. 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. Accounts receivable included unbilled receivables as of January 31, 2024 and April 30, 2023 of $102.6 million and $77.6 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 January 31, 2024As of April 30, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents:
Money market funds$78,747 $ $ $78,747 $75,293 $ $ $75,293 
Certificates of deposit 3,500  3,500  2,000  2,000 
Commercial paper 8,925  8,925  112,851  112,851 
Corporate debt securities 1,893  1,893     
Available-for-sale marketable securities:
U.S. treasury securities 7,455  7,455  27,397  27,397 
Certificates of deposit 65,514  65,514  61,025  61,025 
U.S. government agencies securities 57,763  57,763  75,674  75,674 
Commercial paper 161,222  161,222  184,230  184,230 
Corporate debt securities 316,807  316,807  179,247  179,247 
Total cash equivalents and available-for-sale marketable securities$78,747 $623,079 $ $701,826 $75,293 $642,424 $ $717,717 
15

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
4.Cash Equivalents and Marketable Securities
The following table summarizes the Company’s cash equivalents and available-for-sale marketable securities (in thousands):
As of January 31, 2024As of April 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash equivalents:
Money market funds$78,747 $ $ $78,747 $75,293 $ $ $75,293 
Certificates of deposit3,500   3,500 2,000   2,000 
Commercial paper8,925   8,925 112,851   112,851 
Corporate debt securities1,893   1,893     
Available-for-sale marketable securities:
U.S. treasury securities7,454 1  7,455 27,445 1 (49)27,397 
Certificates of deposit65,514   65,514 61,025   61,025 
U.S. government agencies securities57,629 147 (13)57,763 75,650 111 (87)75,674 
Commercial paper161,222   161,222 184,230   184,230 
Corporate debt securities316,512 450 (155)316,807 179,608 115 (476)179,247 
Total cash equivalents and available-for-sale marketable securities$701,396 $598 $(168)$701,826 $718,102 $227 $(612)$717,717 
The Company considers all of its marketable securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classifies these securities within current assets on the Condensed Consolidated Balance Sheet as of January 31, 2024.
The following table summarizes the Company’s available-for-sale marketable securities by contractual maturity (in thousands):
As of January 31, 2024As of April 30, 2023
Amortized CostFair ValueAmortized CostFair Value
Within one year$518,581 $518,683 $446,629 $446,155 
After one year through five years89,750 90,078 81,329 81,418 
Total$608,331 $608,761 $527,958 $527,573 
16

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the fair values and unrealized losses of the Company’s available-for-sale marketable securities classified by length of time that the securities have been in a continuous unrealized loss position but were not deemed to be other-than-temporarily impaired, as of January 31, 2024 (in thousands):
As of January 31, 2024
Less Than 12 Months12 Months or GreaterTotal
Unrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair Value
U.S. government agencies securities$(9)$17,968 $(4)$2,362 $(13)$20,330 
Commercial paper 5,953    5,953 
Corporate debt securities(133)120,053 (22)10,710 (155)130,763 
Total$(142)$143,974 $(26)$13,072 $(168)$157,046 
As of January 31, 2024, the Company had 130 marketable securities in an unrealized loss position. As of April 30, 2023, the Company had 119 marketable securities that were in an unrealized loss position. The Company considers factors such as the duration, the magnitude and the reason for the decline in value, the potential recovery period, creditworthiness of the issuers of the securities and its intent to sell. For marketable securities, it also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by the Company. Based on the Company’s review of these securities, including the assessment of the duration and severity of the unrealized losses and the Company’s ability and intent to hold the marketable securities until maturity, there were no other-than-temporary impairments for these marketable securities at January 31, 2024.
5. Balance Sheet Details
Property and Equipment, Net
Property and equipment consisted of the following at January 31, 2024 and April 30, 2023 (in thousands):
Useful LifeAs of January 31,As of April 30,
(in months)20242023
Leasehold improvements*$71,703 $66,522 
Computer equipment365,620 4,901 
Office furniture and equipment6014,494 14,343 
Capital in progressNA12,042 3,140 
Property and equipment, gross103,859 88,906 
Less: accumulated depreciation and amortization(12,856)(4,328)
Property and equipment, net$91,003 $84,578 
__________________
*Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the remaining lease term.
NA = Not Applicable
Capital in progress primarily consisted of costs related to various leasehold improvements in connection with leased space that is not considered available for use and has not yet been placed into service.
Depreciation and amortization expense related to property and equipment was $2.9 million and $0.5 million for the three months ended January 31, 2024 and 2023, respectively, and $8.5 million and $2.4 million for the nine months ended January 31, 2024 and 2023, respectively.
17

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accrued Compensation and Employee Benefits
Accrued compensation and employee benefits consisted of the following at January 31, 2024 and April 30, 2023 (in thousands):
As of January 31,As of April 30,
20242023
Accrued stock-settled bonus$21,522 $32,414 
Accrued bonus296 186 
Accrued vacation3,948 4,602 
Accrued payroll taxes and benefits3,166 3,975 
Accrued commissions
3,181 2,889 
Accrued salaries414 206 
ESPP contributions4,383 1,339 
Other912 902 
Accrued compensation and employee benefits$37,822 $46,513 
Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following at January 31, 2024 and April 30, 2023 (in thousands):
As of January 31,As of April 30,
20242023
Liability for common stock exercised prior to vesting$385 $799 
Accrued general expenses3,131 5,541 
Operating lease liabilities, current2,936 2,339 
Accrued professional services2,286 2,889 
Commissions payable to a related party 2,448 
Other3,653 3,054 
Accrued and other current liabilities$12,391 $17,070 
6.Commitments and Contingencies
Non-cancellable Purchase Commitments
The Company entered into a non-cancellable arrangement with a cloud services provider in July 2022. Under the arrangement, the Company committed to spend an aggregate of at least $100.0 million for a period of three years beginning July 2022, on services with this vendor. The Company has incurred costs totaling $7.7 million and $2.3 million during the three months ended January 31, 2024 and 2023, respectively, and $23.5 million and $3.9 million during the nine months ended January 31, 2024 and 2023, respectively, under the arrangement.
The Company entered into a non-cancellable arrangement with a professional services provider in October 2023. Under the arrangement, the Company committed to purchase an aggregate of $15.0 million of professional services for a period of 18 months beginning October 2023. The Company has incurred costs totaling $0.2 million and $0.2 million during the three and nine months ended January 31, 2024, respectively, under the arrangement.
The Company entered into a non-cancellable arrangement with a professional services provider in January 2024. Under the arrangement, the Company committed to purchase an aggregate of $13.0 million of professional services for a period of one year beginning January 2024. The Company has incurred costs totaling $0.7 million and $1.2 million during the three and nine months ended January 31, 2024, respectively, under the arrangement.
18

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
C3.ai Digital Transformation Institute Grants
In February 2020, the Company entered into an agreement establishing the C3.ai Digital Transformation Institute (“C3.ai DTI”), a program established to attract many of the world’s leading research institutions to join in a coordinated and innovative effort to advance the digital transformation of business, government, and society. As part of the agreement, the Company has agreed to issue grants to C3.ai DTI, which are subject to compliance with certain obligations. The grants shall be paid by the Company over five years in the form of cash, publicly traded securities, or other property of equivalent net value. As of January 31, 2024 and April 30, 2023, the total potential remaining contributions are $31.6 million and $31.6 million, respectively. The future grant payments are conditional in nature and subject to execution of the program in line with specific requirements.
Leases
On August 25, 2021, the Company entered into a new lease to acquire approximately 283,015 square feet of office space in several phases in Redwood City, California. The lease commencement date of the first two phases was determined to have occurred in the quarter ended January 31, 2022, when the landlord delivered the leased space to the Company. The lease commencement date of the third phase was determined to have occurred in the quarter ended October 31, 2022, when the landlord delivered the leased space to the Company. During the quarter ended July 31, 2023, there was a remeasurement of right-of-use assets and lease liabilities related to the third phase of the lease due to changes in the timing of receipt of lease incentives. As a result, the lease liability was reduced to $2.0 million and corresponding right-of-use asset was reduced to $1.7 million. The lease commencement date of the fourth phase was determined to have occurred in the quarter ended April 30, 2023, when the landlord delivered the leased space to the Company. The lease commencement date of the fifth phase was determined to have occurred in the quarter ended July 31, 2023, when the landlord delivered the leased space to the Company. The Company recorded $1.6 million of lease liability in other long-term liabilities and corresponding right-of-use asset in other assets, non-current in the condensed consolidated balance sheets related to the fifth phase of the lease. During the quarter ended January 31, 2024, there was a remeasurement of right-of-use assets and lease liabilities related to phases one to five of the lease due to changes in the timing of receipt of lease incentives. As a result, the lease liability for these phases was reduced to $47.4 million and corresponding right-of-use asset for these phases was reduced to $17.2 million. The lease commencement date of the sixth phase was determined to have occurred in the quarter ended January 31, 2024, when the landlord delivered the leased space to the Company. The Company recorded $1.7 million of lease liability in other long-term liabilities and corresponding right-of-use asset in other assets, non-current in the condensed consolidated balance sheets related to the sixth phase of the lease. The lease commencement date of the seventh phase will be determined when the landlord delivers the applicable leased space to the Company.
Legal Proceedings
Securities Litigation
On March 4, 2022, a putative securities class action complaint (captioned The Reckstin Family Trust v. C3.ai, Inc. et al., 22-cv-01413-HSG) was filed in the U.S. District Court for the Northern District of California against the Company, and certain current and former officers and directors. On December 12, 2022, the court appointed a lead plaintiff and lead counsel. On February 15, 2023, the lead plaintiff and three additional named plaintiffs filed an amended complaint. The amended complaint names as defendants the Company, four current and former officers and directors, the underwriters in the Company’s initial public offering (“IPO”), and Baker Hughes Company (“Baker Hughes”). The amended complaint generally alleges that the defendants made material misstatements or omissions about the Company’s partnership with Baker Hughes and the Company’s own salesforce. The amended complaint alleges that defendants made these misstatements or omissions in connection with the Company’s IPO in violation of Sections 11 and 15 of the Securities Act of 1933 and between December 9, 2020 and December 2, 2021, inclusive, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The amended complaint further alleges that certain defendants engaged in insider trading in violation of Section 20A of the Securities Exchange Act of 1934. Plaintiffs seek unspecified damages, interest, fees and costs. All defendants moved to dismiss Plaintiffs’ amended complaint on May 1, 2023. On June 30, 2023, Plaintiffs voluntarily dismissed the underwriter defendants. On February 22, 2024, the Court granted the motion to dismiss on all claims except for portions of the alleged violations of Section 11 and Section 15. Plaintiffs have until March 14, 2024 to amend their complaint.
19

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three putative shareholder derivative actions have been filed: (1) Suri v. Siebel et al. (22-cv-03031) filed on May 23, 2022 in the U.S. District Court for the Northern District of California; (2) Rabasca v. Siebel et al. (23-cv-1566) filed on April 3, 2023 in the U.S. District Court for the Northern District of California; and (3) Vo v. Siebel et al. (23-cv-428) filed on April 19, 2023 in the U.S. District Court for the District of Delaware. In these cases, the plaintiffs assert claims on the Company’s behalf against certain of the Company’s current and former officers and directors for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, gross mismanagement, corporate waste, abuse of control, unjust enrichment, and violations of the Securities Exchange Act of 1934 based on allegations similar to those in the securities class action. In all three cases, the Company is named as a nominal defendant. The derivative complaints seek unspecified damages, disgorgement of profits from board member stock sales, an award of costs and expenses, including reasonable attorneys’ fees, and corporate governance reforms. On September 7, 2022, Suri was stayed pending resolution of the Reckstin case. On August 3, 2023, Vo was transferred to the U.S. District Court for the Northern District of California (3:23-cv-03895), and on August 30, 2023 the Vo action was stayed on the same terms as the Suri action. On December 4, 2023, the parties in Rabasca filed a stipulation to consolidate the Rabasca action with the Suri action, and to stay the Rabasca action on the same terms as the Suri action. The Company has not yet been required to answer the Complaints in Suri, Rabasca and Vo.
As of the date of this report, the Company does not believe it is probable that these cases will result in an unfavorable outcome; however, if an unfavorable outcome were to occur in these cases, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.
In addition, from time to time, the Company is involved in various other legal proceedings arising in the ordinary course of business. Apart from the foregoing, the Company is not presently a party to any other such litigation the outcome of which, the Company believes, if determined adversely to the Company, would individually, or taken together, have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition.
7.    Stockholders’ Equity
Preferred Stock
The Company has authorized 200,000,000 shares of undesignated preferred stock with a par value of $0.001 per share with rights and preferences, including voting rights, designated from time to time by the board of directors. As of January 31, 2024, there were no shares of Preferred Stock issued or outstanding.
Common Stock
The Company has authorized 1,000,000,000 shares of Class A common stock and 3,500,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 50 votes. Class A and Class B common stock have a par value of $0.001 per share and are referred to as common stock throughout the notes to the unaudited condensed consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.
Shares of Class B common stock may be converted to Class A common stock at any time at the option of the stockholder. Each share of Class B common stock will be automatically converted into one share of Class A common stock upon the earliest of the following: (i) the date that is six months following the death or incapacity of Mr. Siebel; (ii) the date that is six months following the date that Mr. Siebel is no longer providing services to the Company as an officer, employee, director, or consultant; (iii) December 11, 2040, which is the twentieth anniversary of the completion of the IPO; or (iv) the date specified by the holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class. Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock.
20

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Common Stock Subject to Repurchase
Under the Company’s Amended and Restated 2012 Equity Incentive Plan (the “2012 Incentive Plan”) and the Company’s Amended and Restated 2020 Equity Incentive Plan (the “2020 Incentive Plan”), certain optionholders are allowed to exercise stock options to purchase Class A common stock prior to vesting. The Company has the right to repurchase at the original purchase price any unvested but outstanding shares of common stock upon termination of service of the optionholder. The consideration received for an early exercise of a stock option is considered to be a deposit of the exercise price and the related amount is recorded as a liability. There have been no net proceeds from the early exercise of such options during the three and nine months ended January 31, 2024 and 2023. The liability is reclassified into equity on a ratable basis as the stock options vest. Unvested Class A common stock of 65,730 and 148,239 shares as of January 31, 2024 and April 30, 2023, respectively, were subject to such repurchase right and are legally issued and outstanding as of each period presented. See Note 8. Stock-Based Compensation for more information.
Stock Repurchase Program
In December 2021, the Company’s board of directors approved a stock repurchase program for the repurchase of up to $100.0 million of the Company’s outstanding shares of Class A common stock for the 18 months following the date of such approval. Under the program, the Company 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 March 2022, the Company repurchased and immediately retired 0.7 million shares of its Class A common stock for an aggregate amount of $15.0 million. The Company had not repurchased any shares of its Class A common stock under this program during the fiscal year 2024. The stock repurchase program expired in June 2023.
8.    Stock-Based Compensation
On November 27, 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Incentive Plan, which became effective in connection with the IPO. The 2020 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, performance awards and other equity awards.
On August 15, 2023 and August 21, 2023, respectively, the Company’s compensation committee and our board of directors adopted, and on October 4, 2023, its stockholders approved, the amendment of the 2020 Incentive Plan to increase the maximum number of shares of Class A common stock that may be automatically added to the share reserve of the 2020 Incentive Plan on May 1 of each year from May 1, 2024 until (and including) May 1, 2030 pursuant to the “evergreen” provision of the 2020 Incentive Plan from five percent (5%) to seven percent (7%) of the total number of shares of the Company’s Class A common stock and Class B common stock outstanding on April 30 of the immediately preceding fiscal year. Prior to the adoption and approval of such amendment, there was an automatic annual increase on May 1, 2023 in the number of shares reserved for future issuance pursuant to the 2020 Incentive Plan in an amount equal to five percent (5%) of the total number of shares of the Company’s Class A common stock and Class B common stock outstanding as of April 30, 2023.
Stock Options
Stock options generally expire 10 years from the date of grant, or earlier if services are terminated. Generally, each stock option for common stock is subject to a vesting schedule such that one fifth of the award vests after the first-year anniversary and one-sixtieth of the award vests each month thereafter over the remaining four years, subject to continuous service.
21

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of the Company’s option activity during the nine months ended January 31, 2024 is as follows:
Options Outstanding
Number of
Stock Options
Outstanding
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
(in thousands)(in thousands)
Balance as of April 30, 202334,696 $12.75 6.45$175,907 
Options granted829 30.11 
Options exercised(2,535)34.48 
Options cancelled(953)10.74 
Balance as of January 31, 202432,037 $13.91 5.90$348,241 
Vested and exercisable as of January 31, 202423,395 $10.30 5.42$338,766 
Vested and expected to vest as of January 31, 2024(1)
32,103 $13.91 5.90$348,956 
__________________
(1)     The number of options vested and expected to vest as of January 31, 2024 includes early exercised, unvested Class A common stock. Refer to Note 7. Stockholders’ Equity for more information.

As of January 31, 2024, there was $90.8 million of unrecognized compensation cost related to stock options which is expected to be recognized over an estimated weighted-average period of 2.5 years.
The grant-date fair value of the options issued for the nine months ended January 31, 2024 is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The weighted average assumptions underlying the fair value estimation are provided in the following table:
Nine Months Ended January 31,
20242023
Valuation assumptions:
Expected dividend yield % %
Expected volatility63.5 %46.2 %
Expected term (years)6.06.5
Risk-free interest rate3.9 %3.8 %
Restricted Stock Units
The Company’s RSUs include time-based RSUs and performance-based RSUs with market conditions (“PRSUs”).
Time-based RSUs
The time-based RSUs are typically subject to service-based vesting conditions satisfied over five years with one-fifth of the award vesting after the first-year anniversary and one-twentieth of the award vesting quarterly thereafter. The related stock-based compensation is recognized on a straight-line basis over the requisite service period.
22

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PRSUs
In July 2022, the compensation committee of the board of directors (the “Compensation Committee”) approved the grant of a maximum of 1,700,000 performance-based restricted stock units (the “PRSU Award”) to the CEO pursuant to the 2020 Incentive Plan, subject to and conditioned upon the subsequent determination by the board of directors of performance metrics upon the achievement of which the PRSU Award would vest. In August 2022, the board of directors approved performance metrics in concept, subject to further action by the Compensation Committee. In December 2022, the Compensation Committee: (a) determined and approved the performance metrics, which are based on the achievement of certain total shareholder return results, as measured against certain stock price hurdles (the “Market Condition”); and (b) extended the vesting period of the PRSU Award through December 31, 2027. As an additional condition to vesting of each tranche of the PRSU Award, Mr. Siebel must remain in continuous service to the Company through a minimum service date that applies to such tranche or, if later, the date the applicable performance metric is achieved (the “Service Condition”). The grant date of the PRSU Award was established in December 2022.
Stock-based compensation expense associated with the PRSU Award will be recognized over the longer of the expected achievement period for the Market Condition or the Service Condition. For the nine months ended January 31, 2024, the Company recorded stock-based compensation expense of $4.1 million related to the PRSU Award.
The Company determined the grant date fair value of the PRSU Award using a Monte Carlo simulation model with the following assumptions: stock price of $12.90, risk-free interest rate of 3.7%, dividend yield of 0% and expected volatility of 51.4%.
A summary of the Company’s RSU activity during the nine months ended January 31, 2024 is as follows:
RSUs Outstanding
Number of RSUsWeighted Average
Grant Date Fair Value
Per Share
(in thousands)
Unvested Balance as of April 30, 202321,146 $21.32 
RSUs granted7,974 33.67 
RSUs vested(5,004)25.27 
RSUs forfeited(3,208)25.72 
Unvested Balance as of January 31, 202420,908 $24.83 
As of January 31, 2024, there was $469.3 million of unrecognized stock-based compensation expense related to outstanding RSUs granted to employees that is expected to be recognized over a weighted-average period of 3.9 years.
In June 2023 and 2022, the Compensation Committee approved the payment of fiscal year 2023 and 2022 bonuses, respectively, under the Company’s annual bonus program in the form of fully vested RSUs covering shares of Class A common stock to employees. The Company issued 532,842 and 811,790 shares of Class A common stock pursuant to this program in the nine months ended January 31, 2024 and 2023, respectively.
Shares issued in settlement of fully vested RSUs granted under this bonus program were issued from the 2020 Incentive Plan and reduced the shares available for issuance under the 2020 Incentive Plan.
23

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Employee Stock Purchase Plan
On November 27, 2020, the Company’s board of directors also adopted, and its stockholders also approved, the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective immediately prior to the IPO. The 2020 ESPP authorizes the issuance of shares of Class A common stock pursuant to purchase rights granted to employees. A total of 3,000,000 shares of Class A common stock were initially reserved for future issuance under the 2020 ESPP. The number of shares of Class A common stock reserved for issuance under the 2020 ESPP is subject to automatic evergreen increases annually through (and including) May 1, 2030 pursuant to the terms of the 2020 ESPP. There was an automatic annual increase on May 1, 2023 in the number of shares reserved for future issuance pursuant to the 2020 ESPP in an amount equal to one percent (1%) of the total number of shares of the Company’s Class A common stock and Class B common stock outstanding on April 30, 2023. The 2020 ESPP permits participants to purchase shares of Class A common stock in an amount not exceeding 15% of their earnings during the relevant offering period. The offering dates and purchase dates for the 2020 ESPP are determined at the discretion of the Company’s board of directors.
Except for the initial offering period under the 2020 ESPP, which commenced on October 16, 2022 and ends on September 15, 2024, the 2020 ESPP provides for 24-month offering periods beginning September 15 and March 15 of each year, with each offering period consisting of four six-month purchase periods. The 2020 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock, subject to purchase limits of 2,500 shares during each six-month period or $25,000 worth of stock for each calendar year, through payroll deductions at price per share equal to 85% of the lesser of the fair market value of the Company’s Class A common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. If the price per share of the Company’s Class A common stock on any purchase date in the offering period is lower than the price per share of the Company’s Class A common stock price on the enrollment date of that offering period, the offering period will immediately reset after the purchase of shares on such purchase date and automatically roll into a new 24-month offering period.
The Company uses a Black-Scholes-Merton option pricing model to determine the fair value of employee stock purchase rights granted under the 2020 ESPP.
The following assumptions were used to calculate the fair value of shares to be granted under the 2020 ESPP during the period:
Nine Months Ended January 31,
20242023
Valuation assumptions:
Expected dividend yield % %
Expected volatility
64.0 - 70.1%
47.8 - 61.4%
Expected term (years)
0.5 - 2.0
0.4 - 1.9
Risk-free interest rate
5.0 - 5.5%
4.3 - 4.5%
During the nine months ended January 31, 2024 and 2023, the Company recognized $4.3 million and $2.0 million, respectively, of stock-based compensation expense related to 2020 ESPP. As of January 31, 2024, there was $3.1 million of unrecognized stock-based compensation expense that is expected to be recognized over the remaining term of the respective offering periods.
24

C3.AI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock-based Compensation Expense
The following table summarizes the effects of stock-based compensation on the Company’s condensed consolidated statements of operations (in thousands):
Three Months Ended January 31,Nine Months Ended January 31,
2024202320242023
Cost of subscription$8,674 $5,996 $25,244 $15,754 
Cost of professional services309 361 1,248 1,911 
Sales and marketing17,528 18,316 52,533 54,175 
Research and development18,757 23,646 52,475 72,768 
General and administrative9,715 7,512 27,532 23,866 
Total stock-based compensation expense$54,983 $55,831 $159,032 $168,474 
The Company records stock-based compensation associated with the Company’s annual bonus program and retention bonus program for certain employees, which may be paid out in fully vested RSUs that are settled in shares of Class A common stock. During the nine months ended January 31, 2024, the Company recognized $25.5 million of stock-based compensation expense associated with these programs. As of January 31, 2024, $21.5 million was reflected under accrued compensation and employee benefits in the consolidated balance sheets. Upon settlement, this amount will be reflected under common stock and additional paid-in capital in the condensed consolidated statements of stockholders’ equity.
9.    Income Taxes
Accounting for income taxes for interim periods generally requires the provision for income taxes to be determined by applying an estimate of the annual effective tax rate for the full fiscal year to income or loss before income taxes, adjusted for discrete items, if any, for the reporting period. The Company updates its estimate of the annual effective tax rate each quarter and makes a cumulative adjustment in such period.
The Company recorded income tax expense of $0.5 million and $0.1 million for the three months ended January 31, 2024 and 2023, respectively, and $0.9 million and $0.5 million for the nine months ended January 31, 2024 and 2023, respectively. Income tax expense consists primarily of income taxes in foreign jurisdictions in which the Company conducts business. Due to the Company’s history of losses in the United States, a full valuation allowance on substantially all of the Company’s deferred tax assets, including net operating loss carryforwards, research and development tax credits, and other book versus tax differences, was maintained.
10.    Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share was the same as diluted net loss per share for the periods presented because the Company was in a loss position for the three and nine months ended January 31, 2024 and 2023. For purposes of this calculation, stock options, RSUs, Class A common stock issuable in connection with the 2020 ESPP and early exercised stock options subject to repurchase are considered to be potential common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.
25


The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):
Three Months Ended January 31,Nine Months Ended January 31,
2024202320242023
Numerator
Net loss attributable to common stockholders$(72,631)$(63,162)$(206,769)$(203,883)
Denominator
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted120,486 110,735 118,259 108,869 
Basic and diluted net loss per share attributable to common stockholders
Basic and diluted net loss per Class A and Class B common shares
$(0.60)$(0.57)$(1.75)$(1.87)
The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have had an antidilutive effect were as follows (in thousands):
As of January 31,
20242023
Stock options32,103 35,774 
RSUs20,908 19,919 
ESPP1,102  
11.    Related Party Transactions
Revenue Transactions with Baker Hughes Company
In June 2019, the Company entered into multiple agreements with Baker Hughes under which Baker Hughes received a three-year subscription to use the Company’s software. This arrangement was revised in June 2020 to extend the term to five years and modify the subscription fees due. Under the agreements as revised in June 2020, Baker Hughes made minimum, non-cancellable revenue commitments, inclusive of their direct subscription fees and third-party revenue generated through a joint marketing arrangement with Baker Hughes in the amount of $46.7 million in fiscal year 2020, $53.3 million in fiscal year 2021, $75.0 million in fiscal year 2022, $125.0 million in fiscal year 2023, and $150.0 million in fiscal year 2024. The Company also agreed to pay Baker Hughes a sales commission on subscriptions and services offerings it resold in excess of the minimum revenue commitments.
The Company and Baker Hughes again 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 fiscal year 2023, $110.0 million in fiscal year 2024, and $125.0 million in fiscal year 2025, and to revise the structure of the arrangement to simplify the sales process for Baker Hughes. Beginning in the fiscal year ended April 30, 2023, Baker Hughes’ annual commitments were reduced by any revenue the Company generates from certain customers. Known and estimable revenue from certain customers related to the arrangement is a form of variable consideration, which was determined at contract inception and reduced the revenue recognized from the arrangement. The Company acknowledged that Baker Hughes had met its minimum annual revenue commitment for the fiscal year 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.
26


The Company and Baker Hughes again revised and expanded the agreements in January 2023. Pursuant to this revised arrangement, the frequency of payments due from Baker Hughes to the Company was accelerated, Baker Hughes obtained expanded reseller rights, and the Company agreed to provide additional products and services. This results in an increase of the overall transaction price of the arrangement by eliminating potential variable consideration attributable to any revenue the Company generated from certain customers. The amount of consideration to the Company may increase if Baker Hughes exceeds certain thresholds. The Company also provided Baker Hughes the option to extend the subscription term upon payment of a renewal fee. Pursuant to the January 2023 revised agreement, the transaction price of the Baker Hughes arrangement is not impacted by revenue the Company recognizes from certain customers in the oil and gas field.
Baker Hughes ceased to qualify as a related party of the Company as of June 30, 2023 and the amounts disclosed related to them are accordingly presented only for the periods in which they were considered a related party.
The Company recognized subscription revenue from direct subscription fees from Baker Hughes of $10.6 million and $55.9 million during the nine months ended January 31, 2024 and 2023, respectively, and $20.3 million during the three months ended January 31, 2023. The Company recognized professional services revenue from Baker Hughes of $5.8 million and $8.7 million during the nine months ended January 31, 2024 and 2023, respectively, and $8.6 million during