C3.AI, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q and our audited consolidated financial statements
and the related notes and the discussion under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
the fiscal year ended April 30, 2021 included in the Annual Report on Form 10-K
for the fiscal year ended April 30, 2021, which was filed with the Securities
and Exchange Commission, or SEC, on June 25, 2021. This discussion, particularly
information with respect to our future results of operations or financial
condition, business strategy and plans, and objectives of management for future
operations, includes forward-looking statements that involve risks and
uncertainties as described under the heading "Special Note Regarding
Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should
review the disclosure under the heading "Risk Factors" in this Quarterly Report
on Form 10-Q for a discussion of important factors that could cause our actual
results to differ materially from those anticipated in these forward-looking
statements. Unless the context otherwise requires, all references in this report
to "C3.ai," "C3 AI," the "Company", "we," "our," "us," or similar terms refer to
C3.ai, Inc. and its subsidiaries.

Overview

C3 AI is an enterprise AI software company.


We have built an integrated family of software applications that enables our
customers to rapidly develop, deploy, and operate large-scale Enterprise AI
applications across any infrastructure. Customers can deploy C3 AI solutions on
all major public cloud infrastructures, private cloud or hybrid environments, or
directly on their servers and processors. We provide five primary families of
software solutions, which we collectively refer to as our C3 AI Software:

•The C3 AI Suite, our core technology, is a comprehensive application
development and runtime environment that is designed to allow our customers to
rapidly design, develop, and deploy Enterprise AI applications of any type. Our
C3 AI Suite enables developers to rapidly build applications by using conceptual
models of all the elements required by an Enterprise AI application instead of
having to write complex, lengthy, structured programming code to define,
control, and integrate the many requisite data and microservices components to
work together.

•C3 AI Applications, built using the C3 AI Suite, include a large and growing
family of industry-specific and application-specific turnkey AI solutions, ready
for installation and deployment.

•C3 AI Ex Machina, our no-code solution that provides secure, easy access to
analysis-ready data, and enables business analysts without data science training
to rapidly perform data science tasks such as building, configuring, and
training AI models.

•C3 AI CRM is a family of fully AI-enabled, industry-specific CRM solutions that
combine the CRM technology leadership and market reach of our partner ecosystem.
The C3 AI CRM product family includes sales, marketing, and customer service
functionality. The products are available in vertical market-specific offerings
specifically designed to meet the needs of industries such as financial
services, healthcare, telecommunications, oil and gas, manufacturing, utilities,
aerospace, automotive, public sector, defense, and intelligence.

•C3 AI Data Vision allows analysts to visualize, understand and leverage the
hidden relationships between data entities. This product unifies data from
across systems to enable deep exploration and insights in near real-time,
enabling collaborative data analysis using interactive, intuitive graph network
visualizations.

These solutions, along with our patented model-based architecture, enable organizations to simplify and accelerate the development, deployment and administration of Enterprise AI applications. We greatly reduce the effort and complexity of the AI ​​software engineering problem.

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How we generate revenue


We generate revenue primarily from the sale of subscriptions, which accounted
for 82% and 87% of our total revenue in the three months ended January 31, 2022
and 2021, respectively, and 83% and 87% of our total revenue in the nine months
ended January 31, 2022 and 2021, respectively. Our cloud-native software
offerings allow us to manage, update, and monitor the software regardless of
whether the software is deployed in our public cloud environment, in our
customers' self-managed private or public cloud environments, or in a hybrid
environment. Our subscription contracts are generally non-cancelable and
non-refundable.

We define a customer entity as each entity that is the ultimate parent of a contracting party with us.

Our number of client-entities is as follows:

                                        January 31, 2021             April 30, 2021             July 31, 2021              October 31, 2021             January 31, 2022
Customer-Entities                                        39                         32                         44                           53                           50


We commonly enter into enterprise-wide agreements with Customer-Entities that
include multiple operating units or divisions. We count as a Customer each
distinct division, department, business unit, or group within a Customer-Entity
that uses our product(s). In situations where our Customer (or Customer-Entity)
has developed software using our C3 AI Suite or developed derivative works of
our C3 AI Applications and has sold that software or service to its end
customer(s), we also include such end customers in our Customer count. In
addition, where our software is sold to a third-party under a reseller
arrangement, we include the end customer of such arrangement in our Customer
count. We only count Customers and Customer-Entities for which there is revenue
in the period through a Customer-Entity contract. We exclude free trials from
both our Customer-Entity and Customer counts.

During the period ended January 31, 2022, we performed an analysis of our
Customer-Entity usage. We found that despite the definition our previous
Customer count did not capture all the distinct divisions, departments, business
units, or groups that were using our software or services. We also identified
that while our previous Customer count included situations where (i) our
Customer (or Customer-Entity) had developed software using our C3 AI Suite or
derivative works of our C3 AI Applications and had sold that software or service
to its end customer(s), and (ii) our software or services were sold to a
third-party under a reseller arrangement, our previously stated definition did
not explicitly include those scenarios.

Based on the revised approach, our best estimate of Customer count is as
follows:

                                        January 31, 2021             April 30, 2021             July 31, 2021              October 31, 2021             January 31, 2022
Customer count
Revised calculation                                     120                        151                        180                          203                          218

Based on the previous calculation, our historical number of customers is as follows:


                                       January 31, 2021             April 30, 2021             July 31, 2021              October 31, 2021             January 31, 2022
Customer count
Prior calculation                                       75                         89                         98                          104                          110


For clarity, we have provided our Customer count historically using both the
prior and current methodology. We intend to only present the revised calculation
of Customer on a go-forward basis, as we believe it is a more accurate
representation.

Due to the revisions reflected in the above definitions, the Customer-Entity and
Customer count data included above is not comparable to the historical customer
count data included in our previously filed Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Form S-1 Registration Statements, outside of
the quarterly data included in the table above.

We primarily recognize revenue from subscriptions over the contract term on a
ratable basis. In addition, customers typically pay a usage-based runtime fee
for production use of our C3 AI Software for specified levels of capacity.
Customers who choose to run the software in our cloud environment pay the
hosting costs charged by our cloud providers. Our subscriptions also include our
maintenance and support services. Additionally, we offer premium stand-ready
support services through our C3 AI Center of Excellence, or COE, which are
included as part of the subscription when purchased.

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We also generate revenue from professional services, which primarily include
implementation services, training and prioritized engineering services.
Professional services revenue represented 18% and 13% of our total revenue for
the three months ended January 31, 2022 and 2021, respectively, and 17% and 13%
of our total revenue for the nine months ended January 31, 2022 and 2021,
respectively. Our professional services are provided both onsite and remotely,
and can include training, application design, project management, system design,
data modeling, data integration, application design, development support, data
science, and application and C3 AI Software administration support. Professional
services fees are based on the level of effort required to perform the specified
tasks and the services are typically provided under a fixed-fee engagement with
defined deliverables and a duration of less than 12 months. We recognize revenue
from our professional services over the period of delivery as services are
performed.

We are growing rapidly, with total revenue of $69.8 million and $180.4 million
for the three and nine months ended January 31, 2022, respectively, representing
a 42% and 38% increase compared to the same periods last year. Our subscription
revenue grew to $57.1 million and $150.6 million for the three and nine months
ended January 31, 2022, respectively, representing a 34% and 32% increase
compared to the same periods last year.

Marketing strategy


Our go-to-market strategy is focused on large organizations recognized as
leaders in their respective industries or public sectors, and who are attempting
to solve complicated business problems by digitally transforming their
operations. These large organizations, or lighthouse customers, include
companies and public agencies within the oil and gas, power and utilities,
aerospace and defense, industrial products, life sciences, and financial
services industries, among others. This has resulted in C3 AI powering some of
the largest and most complex Enterprise AI applications worldwide. These
lighthouse customers serve as proof points for other potential customers in
their particular industries. Today, we have a customer base of a relatively
small number of large organizations that generate high average total
subscription contract value, but we expect that, over time, as more customers
adopt our technology based on the proof points provided by these lighthouse
customers, the revenue represented by these customers will decrease as a
percentage of total revenue. As our C3 AI Suite and much of our other C3 AI
Software is industry agnostic, we also expect to expand into other industries as
we grow.

Acquiring new customers and expanding our business with our existing customers
is the intent of our go-to-market effort and drivers of our growth. Making new
and existing customers successful is critical to our long-term success. After we
help our customers solve their initial use cases, they typically identify
incremental opportunities within their operations and expand their use of our
products by either purchasing additional C3 AI Software or by subscribing to the
C3 AI Suite to develop their own AI applications.

The size and sophistication of our customers' businesses demonstrate the
flexibility, speed, and scale of our products, and maximize the potential value
to our customers. To be a credible partner to our customers, who often are
industry leaders, we deploy a motivated and highly educated team of C3 AI
personnel and partners. We go-to-market primarily leveraging our direct sales
force. We also complement and supplement our sales force with a number of
go-to-market partners.

• Industry partners. We have developed an alliance program to partner with recognized leaders in their respective industries, such as hugue bakerFidelity National Information Services, or FIS, and Raytheon, to develop, market and sell solutions natively built or tightly integrated with the C3 AI suite.

• Advice and Service Partners. We partner with a number of systems integrators who specialize in enterprise AI implementations.


•Hyperscale Cloud and Infrastructure. We have formed global strategic
go-to-market alliances with hyperscale cloud providers including Amazon, FIS,
Google, and Microsoft. In addition, we have strategic alliances with leading
hardware infrastructure providers to deliver our software optimized for their
technology. These partners include Hewlett Packard Enterprise and Intel. These
partners supply infrastructure solutions, data management and processing
services, or hardware and networking devices (e.g., IoT gateways) to support
C3.ai product implementations and complement C3 AI's products.

•Independent Software Vendors. We partner with Independent Software Vendors who
develop, market, and sell application solutions that are natively built on or
tightly integrated with the C3 AI Suite.

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Key business metric


We monitor remaining performance obligations, or RPO, as a key metric to help us
evaluate the health of our business, identify trends affecting our growth,
formulate goals and objectives, and make strategic decisions. RPO is not
necessarily indicative of future revenue growth because it does not account for
the timing of customers' consumption or their consumption of more than their
contracted capacity. Moreover, RPO is influenced by several factors, including
the timing of renewals, the timing of purchases of additional capacity, average
contract terms, and seasonality. Due to these factors, it is important to review
RPO in conjunction with revenue and other financial metrics disclosed elsewhere
in this Quarterly Report on Form 10-Q. RPO was $469.3 million and $293.8 million
as of January 31, 2022 and April 30, 2021, respectively. We may experience
variations in our RPO from period to period, but RPO has generally increased
over the long term as a result of contracts with new customers and increasing
the value of contracts with existing customers. These increases are partially
offset by revenue recognized on existing contracts during the period.

RPO represents the amount of our contracted future revenue that has not yet been
recognized, including both deferred revenue and non-cancelable contracted
amounts that will be invoiced and recognized as revenue in future periods. Our
RPO as of January 31, 2022 is comprised of $59.4 million related to deferred
revenue and $409.8 million of commitments from non-cancellable contracts. Our
RPO as of April 30, 2021 is comprised of $75.2 million related to deferred
revenue and $218.6 million of commitments from non-cancellable contracts.

RPO excludes amounts related to performance obligations and usage-based
royalties that are billed and recognized as they are delivered. This primarily
consists of monthly usage-based runtime and hosting charges in the duration of
some revenue contracts. RPO also excludes any future resale commitments by our
strategic partners until those end customer contracts are signed. Cancellable
backlog, not included in RPO, was $67.5 million and $51.3 million as of
January 31, 2022 and April 30, 2021, respectively.

Factors affecting our performance


We believe that our future success and financial performance depend on a number
of factors that present significant opportunities for our business but also pose
risks and challenges, including those discussed below and in the section of this
Quarterly Report on Form 10-Q in Part II, Item 1A titled "Risk Factors", that we
must successfully address to sustain our growth, improve our results of
operations, and establish and maintain profitability.

Acquisition, retention and expansion of customers


We are focused on continuing to grow our customer base, retaining existing
customers and expanding customers' usage of our C3 AI Software by addressing new
use cases across multiple departments and divisions, adding users, and
developing and deploying additional applications. All of these factors increase
the adoption and relevance of our C3 AI Software to our customers' business and,
as an outcome, increases their runtime usage.

We have built a customer-focused culture and have implemented proactive programs
and processes designed to drive customer success. These include a robust
customer support and success function. For example, as part of our subscription
offerings, we provide our customers with the ability to establish a COE,
accessing our experienced and specialized resources in key technical areas like
application development, data integration, and data science to accelerate and
ensure our customers' success developing applications on our C3 AI Suite. We
closely monitor the health and status of every customer account through multiple
activities, including real-time monitoring, daily and weekly reports to
management, as well as quarterly reviews with our customers.

We also intend to attract new customers across multiple industries where we have
limited meaningful presence today, yet represent very large market opportunities
such as telecommunications, pharmaceuticals, smart cities, transportation, and
healthcare, among others.

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Historically, we have had a relatively small number of customers with large
total subscription contract values. As a result, revenue growth can vary
significantly based on the timing of customer acquisition, changes in product
mix, and contract durations, renewals, or terminations. We expect the number of
customers to increase compared to prior fiscal years as organizations address
the importance of digital transformation. The average total subscription
contract value as well as the revenue represented by our lighthouse customers as
a percentage of total revenue is decreasing and we expect them to continue to
decrease as we have restructured our sales organization and expanded our
market-partner ecosystem to effectively address small, medium, and large
enterprise sales opportunities.

Technological innovation


We intend to continue to invest in our research and development capabilities to
extend our C3 AI Software, to expand within existing accounts, and to gain new
customers. Our investments in research and development drive core technology
innovation and bring new products to market. Our model-driven architecture
enables us and our customers to rapidly address new use cases by building new
applications and extending and enhancing the features and functionality of
current C3 AI Software. By investing to make it easier to develop applications
on our C3 AI Suite, our customers have become active developers. With our
support, our customers have developed and deployed almost two-thirds of the
applications currently in production and running on the C3 AI Suite. Research
and development spending has fueled enhancements to our existing C3 AI Suite.

We expect to maintain high levels of investment in product innovation over the
coming years as we continue to introduce new applications which address new
industry use cases, and new features and functionality for the C3 AI Software.
As our business scales over a longer-term horizon, we anticipate research and
development spend as a percent of total revenue to decline.

Brand awareness


We believe we are in the early stages of a large and expanding new market for AI
enabled digital transformation. As a result, we intend to continue to invest in
brand awareness, market education, and thought leadership. We engage the market
through digital, radio, outdoor, airport, and print advertising; virtual and
physical events, including our C3 AI Transform annual customer conference; and
C3 AI Live, a series of livestreamed events featuring C3 AI customers, C3 AI
partners, and C3 AI experts in AI, machine learning, and data science.

We anticipate continuing to make significant investments in marketing over the
next several years. Over the long term we expect marketing spend to decline as a
percent of total revenue as we make ongoing progress establishing C3 AI's brand
and reputation and as our business scales.

Develop our go-to-market and partnership ecosystem


In addition to the activities of our field sales organization, our success in
attracting new customers will depend on our ability to expand our ecosystem of
strategic partners and the number of industry verticals that they serve. Our
strategic go-to-market alliances vastly extend our reach globally. Some of our
most notable partners include Baker Hughes, FIS, Infor, and Microsoft. Each
strategic partner is a leader in its industry, with a substantial installed
customer base and extensive marketing, sales, and services resources that we can
leverage to engage and serve customers anywhere in the world. Using our C3 AI
Suite as the development suite, we leverage our model-driven architecture to
efficiently build new cross-industry and industry-specific applications based on
identifying requirements across our customer base of industry leaders and
through our industry partners. Our strategy with strategic partners is to
establish a significant use case and prove the value of our C3 AI Suite with a
flagship customer in each industry in which we participate. We have done this
with our strategic vertical industry partner in oil and gas, Baker Hughes, as
well as with our iconic global customers, some of whom are deploying C3 AI
technology to optimize thousands of critical assets globally across their
upstream, midstream, and downstream operations. We establish formal sales and
marketing plans with each partner, including specific sales goals and dedicated
budgets, and we work closely with these partners to identify specific target
accounts. We intend to grow the business we do with each partner and to add more
partners as we expand the vertical markets we serve. We also offer revenue
generating trials of our applications as part of our customer acquisition
strategy.

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In June 2019, we entered into a three-year arrangement with Baker Hughes as both
a leading customer and as a partner in the oil and gas industry. This
arrangement included a subscription to our C3 AI Suite for their own operations
(which we refer to below as direct subscription fees), the exclusive right for
Baker Hughes to resell our offerings worldwide in the oil and gas industry, and
the non-exclusive right to resell our offerings in other industries. Under the
arrangement, Baker Hughes made minimum, non-cancelable, total revenue
commitments to us of $50.0 million, $100.0 million, and $170.0 million, for each
of the fiscal years ending April 30, 2020, 2021, and 2022, respectively. Baker
Hughes revenue commitments were inclusive of their direct subscription fees of
$39.5 million per year with the remainder to be generated from the resale of our
solutions by the Baker Hughes sales organization. During the fiscal year ended
April 30, 2020, we recognized as revenue the full value of the first year of the
direct subscription agreement and the value of deals brought in by Baker Hughes
through the reseller arrangement. This arrangement was revised in June 2020 to
extend the term by an additional two years, for a total of five years, with an
expiration date in the fiscal year ending April 30, 2024 and to modify the
annual amount of Baker Hughes' commitments to $53.3 million, $75.0 million,
$125.0 million, and $150.0 million, over the fiscal years ending April 30, 2021,
2022, 2023, and 2024, respectively. We are obligated to pay Baker Hughes a sales
commission on subscriptions to our products and services offerings it resells in
excess of these minimum revenue commitments.

We and Baker Hughes further revised these agreements in October 2021 to extend
the term by an additional year, for a total of six years, with an expiration
date in the fiscal year ending April 30, 2025, to modify the amount of Baker
Hughes' annual commitments to $85.0 million in 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 further incentivize Baker Hughes' sales of our
products and services. Beginning in fiscal year 2023, Baker Hughes' annual
commitments will be reduced by any revenue we generate from certain customers.
The revenue recorded for Baker Hughes will be reviewed quarterly and adjusted,
as needed, to reflect our current assumptions.

Pursuant to the revised arrangement, we acknowledged that Baker Hughes had met
its minimum annual revenue commitment for the current fiscal year 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.

Our RPO related to Baker Hughes, which includes both direct subscriptions and
reseller arrangements, is comprised of $2.3 million related to deferred revenue
and $234.9 million of commitments from non-cancellable contracts as of
January 31, 2022 and $8.5 million related to deferred revenue and $95.5 million
from non-cancellable contracts as of April 30, 2021.

As of January 31, 2022, the total estimated amount of Baker Hughes' commitments
not yet contracted under the direct subscription fee or reseller arrangement
under the entire arrangement was $46.4 million.

As of October 31, 2021, July 31, 2021 and April 30, 2021, the total remaining
amount of Baker Hughes' minimum revenue commitments not yet contracted under the
direct subscription fee or reseller arrangement, and thus subject to the
shortfall annual provisions, under the entire arrangement was $23.7 million,
$204.4 million and $219.3 million, respectively.

We purchase services from Baker Hughes from time to time to support our end
customers in relation to our contracts with those customers. These costs are
recorded as cost of subscription revenue in the condensed consolidated statement
of operations.

International Expansion

The international market opportunity for Enterprise AI software is large and
growing, and we believe there is a significant opportunity to continue to grow
our international customer base. We believe that the demand for our C3 AI
Software will continue growing as international awareness of the benefits of
digital transformation and Enterprise AI software grows. We plan to continue to
make investments to expand geographically by increasing our direct sales team in
international markets and supplementing the direct sales effort with strategic
partners to significantly expand our reach and market coverage. We derived
approximately 19% and 40% of our total revenue for the three months ended
January 31, 2022 and 2021, respectively, and 24% and 35% of our total revenue
for the nine months ended January 31, 2022 and 2021, respectively, from
international customers.

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Impact of COVID-19


The ongoing COVID-19 pandemic has caused general business disruption worldwide
beginning in January 2020. The full extent to which the COVID-19 pandemic will
directly or indirectly impact our business, results of operations, cash flows,
and financial condition will depend on future developments that are uncertain.
As a result of global business disruption, the COVID-19 pandemic had a
significant adverse impact on our conclusion of new and additional business
agreements in 2021 and 2020 and may continue to pose challenges until the
effects of the pandemic abate.

As a result of the COVID-19 pandemic, we temporarily closed our headquarters and
other offices, required our employees and contractors to work remotely, and
implemented travel restrictions, all of which represented a significant change
in how we operate our business. The operations of our partners and customers
have likewise been altered. While the duration and extent of the COVID-19
pandemic depends on future developments that cannot be accurately predicted at
this time, such as the extent and effectiveness of containment actions, the
emergence and spread of current and future variants of the COVID-19 virus, and
the effectiveness, acceptance, and availability of vaccines against the COVID-19
virus and its variants, the COVID-19 pandemic has already had an adverse effect
on the global economy and the ultimate societal and economic impact of the
COVID-19 pandemic remains unknown. In particular, the conditions caused by this
pandemic are likely to affect the rate of global IT spending and could adversely
affect demand for our C3 AI Software, lengthen our sales cycles, reduce the
value or duration of subscriptions, reduce the level of subscription renewals,
negatively impact collections of accounts receivable, reduce expected spending
from new customers, cause some of our paying customers to go out of business,
limit the ability of our direct sales force to travel to customers and potential
customers, and affect contraction or attrition rates of our paying customers,
all of which could adversely affect our business, results of operations, and
financial condition during fiscal 2022 and potentially future periods.

We will continue to evaluate the nature and extent of the impact of the COVID-19
pandemic on our business. For further discussion of the potential impacts of the
ongoing COVID-19 pandemic on our business, operating results, and financial
condition, see the section titled "Risk Factors" included in Part II, Item 1A of
this Quarterly Report on Form 10-Q. Other factors affecting our performance are
discussed below, although we caution you that the ongoing COVID-19 pandemic may
also further impact these factors.

Components of operating results

Income


Subscription Revenue. Our subscription revenue is primarily comprised of term
licenses, stand-ready COE support services, trials of our applications, and
software-as-a-service offerings. Sales of our term licenses grant our customers
the right to use our software, either on their own cloud instance or their
internal hardware infrastructure, over the contractual term. We also offer a
premium stand-ready service through our COE. Sales of our software-as-a-service
offerings include a right to use our software over the contractual term. Our
subscription contracts are generally non-cancelable and non-refundable, and we
recognize revenue over the contract term on a ratable basis. In addition,
customers pay a usage-based runtime fee for our C3 AI Software for specified
levels of capacity. Our subscriptions also include our maintenance and support
services, which include critical and continuous updates to the software that are
integral to maintaining the intended utility of the software over the
contractual term. Our software subscriptions and maintenance and support
services are highly interdependent and interrelated and represent a single
distinct performance obligation within the context of the contract. We currently
have a small number of public utility customers that license our offerings under
a perpetual license model, and we expect that may continue for the foreseeable
future for certain customers due to their specific contracting requirements.

Professional Services Revenue. Our professional services revenue primarily
includes implementation services, training and prioritized engineering services.
We offer a complete range of professional service support both onsite and
remotely, including training, application design, project management, system
design, data modeling, data integration, application design, development
support, data science, and application and C3 AI Software administration
support. Professional services fees are based on the level of effort required to
perform the specified tasks and are typically a fixed-fee engagement with
defined deliverables and a duration of less than 12 months. We recognize revenue
for our professional services over the period of delivery as services are
performed.

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Revenue cost


Cost of Subscription Revenue. Cost of subscription revenue consists primarily of
costs related to compensation, including salaries, bonuses, benefits,
stock-based compensation and other related expenses for the production
environment, support and COE staff, hosting of our C3 AI Software, including
payments to outside cloud service providers, and allocated overhead and
depreciation for facilities.

Cost of Professional Services Revenue. Cost of professional services revenue
consists primarily of compensation, including salaries, bonuses, benefits,
stock-based compensation and other related costs associated with our
professional service personnel, third-party system integration partners, and
allocated overhead and depreciation for facilities.

Gross profit and gross margin


Gross profit is total revenue less total cost of revenue. Gross margin is gross
profit expressed as a percentage of total revenue. Our gross margin has
fluctuated historically and may continue to fluctuate from period to period
based on a number of factors, including the timing and mix of the product
offerings we sell as well as the geographies into which we sell, in any given
period. Our gross margins are lower when we provide hosting services to our
customers as compared to when a customer hosts our software in their
self-managed private or public cloud environments. Our subscription gross margin
may experience variability over time as we continue to invest and continue to
scale our business. Our professional services gross margin may also experience
variability from period to period due to the use of our own resources and
third-party system integration partners in connection with the performance of
our fixed price agreements.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development,
and general and administrative expenses. We expect our operating expenses as a
percentage of total revenue to increase as we continue to invest to grow our
business. Over the long-term, we expect those percentages to stabilize and then
move lower as our business matures.

Sales and Marketing. Sales and marketing expenses consist of expenditures
related to advertising, media, marketing, promotional events, brand awareness
activities, business development, customer success and corporate partnerships.
Sales and marketing expenses also include employee-related costs, including
salaries, bonuses, benefits, stock-based compensation, and commissions for our
employees engaged in sales and marketing activities, and allocated overhead and
depreciation for facilities.

We expect our sales and marketing expenses will increase in absolute dollar
amounts as we continue to invest in brand awareness and programmatic spend to
generate demand. We also expect to hire additional sales personnel to increase
sales coverage of target industry vertical and geographic markets. Consequently,
sales and marketing expense as a percent of total revenue will remain high in
the near-term. As our business scales through customer expansion and market
awareness, we anticipate that sales and marketing expense as a percent of total
revenue to decline over time.

Research and Development. Our research and development efforts are aimed at
continuing to develop and refine our C3 AI Software, including adding new
features and modules, increasing functionality and speed, and enhancing the
usability of our C3 AI Software. Research and development expenses consist
primarily of employee-related costs, including salaries, bonuses, benefits, and
stock-based compensation for our employees associated with research and
development related activities. Research and development expenses also include
cloud infrastructure costs related to our research and development efforts, and
allocated overhead and depreciation for facilities. Research and development
costs are expensed as incurred.

We expect research and development expense to increase in absolute dollars as we
continue to invest in our existing and future product offerings. We may
experience variations from period to period with our total research and
development expense as a percentage of revenue as we develop and deploy new
applications targeting new use cases and new industries. Over a longer horizon,
we anticipate that research and development expense as a percent of total
revenue to decline.

General and Administrative. General and administrative expense consists
primarily of employee-related costs, including salaries, bonuses, benefits,
stock-based compensation and other related costs associated with administrative
services such as executive management and administration, legal, human
resources, accounting, and finance. General and administrative expense also
includes facilities costs, such as depreciation and rent expense, professional
fees, and other general corporate costs, including allocated overhead and
depreciation for facilities.

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We expect our general and administrative expense to increase in absolute dollars
as we continue to grow our business. As a result of the closing of our IPO, we
have incurred and expect to continue to incur additional expenses as a result of
operating as a public company, including expenses necessary to comply with the
rules and regulations applicable to companies listed on a national securities
exchange and related to compliance and reporting obligations pursuant to the
rules and regulations of the SEC, as well as higher expenses for general and
director and officer insurance, investor relations, and professional services.
We expect that general and administrative expense as a percent of total revenue
will decline over the long-term as we benefit from the scale of our business
infrastructure.

Interest Income

Interest income consists primarily of interest income earned on our cash, cash
equivalents, and available-for-sale marketable securities. It also includes
amortization of premiums and accretion of discount related to our
available-for-sale marketable securities. Interest income varies each reporting
period based on our average balance of cash, cash equivalents, and
available-for-sale marketable securities during the period and market interest
rates.

Other income (expenses), net


Other income (expense), net consists primarily of foreign currency exchange
gains and losses, gains from legal settlements, losses from impairment of
investments, and realized gains and losses on sales of available-for-sale
marketable securities. Our foreign currency exchange gains and losses relate to
transactions and asset and liability balances denominated in currencies other
than the U.S. dollar. We expect our foreign currency gains and losses to
continue to fluctuate in the future due to changes in foreign currency exchange
rates.

Provision for Income Taxes

Our income tax provision consists of an estimate of federal, state, and foreign
income taxes based on enacted federal, state, and foreign tax rates, as adjusted
for allowable credits, deductions, uncertain tax positions, changes in the
valuation of our deferred tax assets and liabilities, and changes in tax laws.
We maintain a full valuation allowance on our federal and state deferred tax
assets as we have concluded that it is not more likely than not that the
deferred tax assets will be realized.

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Operating results

The following tables present our condensed consolidated statements of earnings for the periods presented:


                                             Three Months Ended January 31,            Nine Months Ended January 31,
                                                2022                2021                  2022                   2021
                                                     (in thousands)                            (in thousands)
Revenue
Subscription                                $   57,084          $  42,699          $        150,614          $ 114,248
Professional services                           12,689              6,410                    29,828             16,685
Total revenue                                   69,773             49,109                   180,442            130,933
Cost of revenue
Subscription (1)                                12,275              7,023                    32,880             22,694
Professional services (1)                        5,079              5,203                    13,470             10,113
Total cost of revenue                           17,354             12,226                    46,350             32,807
Gross profit                                    52,419             36,883                   134,092             98,126
Operating expenses
Sales and marketing (1)                         43,146             28,450                   126,134             64,898
Research and development (1)                    40,931             18,748                   104,166             48,145
General and administrative (1)                  15,748              8,184                    43,391             21,433
Total operating expenses                        99,825             55,382                   273,691            134,476
Loss from operations                           (47,406)           (18,499)                 (139,599)           (36,350)
Interest income                                    410                129                     1,077                997
Other income (expense), net                      7,742              1,721                     5,471              4,163
Net loss before provision for income taxes     (39,254)           (16,649)                 (133,051)           (31,190)
Provision for income taxes                         193                203                       594                456
Net loss                                    $  (39,447)         $ (16,852)         $       (133,645)         $ (31,646)


__________________

(1)Includes stock-based compensation expense as follows:

                                             Three Months Ended January 31,            Nine Months Ended January 31,
                                                2022                2021                  2022                  2021
                                                     (in thousands)                           (in thousands)
Cost of subscription                        $    2,639          $     214          $         5,824          $     557
Cost of professional services                      704                164                    1,991                301
Sales and marketing                              8,850              2,790                   28,540              5,835
Research and development                        12,846                846                   25,860              1,952
General and administrative                       6,322              2,575                   15,598              5,625

Total stock-based compensation expense $31,361 $6,589

       $        77,813          $  14,270


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The following table sets forth our condensed consolidated statements of
operations data expressed as a percentage of revenue for the periods indicated:

                                                 Three Months Ended January 31,             Nine Months Ended January 31,
                                                   2022                  2021                 2022                  2021

Revenue
Subscription                                            82  %                87  %                 83  %                87  %
Professional services                                   18                   13                    17                   13
Total revenue                                          100                  100                   100                  100
Cost of revenue
Subscription                                            18                   14                    18                   17
Professional services                                    7                   11                     8                    8
Total cost of revenue                                   25                   25                    26                   25
Gross profit                                            75                   75                    74                   75
Operating expenses
Sales and marketing                                     62                   58                    70                   50
Research and development                                59                   38                    58                   37
General and administrative                              23                   17                    25                   16
Total operating expenses                               144                  113                   153                  103
Loss from operations                                   (69)                 (38)                  (77)                 (28)
Interest income                                          1                    -                     1                    1
Other income (expense), net                             11                    4                     3                    3
Net loss before provision for income taxes             (57)                 (34)                  (73)                 (24)
Provision for income taxes                               -                    -                     -                    -
Net loss                                               (57) %               (34) %                (73) %               (24) %

Comparison of the three and nine month periods ended January 31, 2022 and 2021


Revenue

                              Three Months Ended January 31,                                                 Nine Months Ended January 31,
                                  2022              2021            $ Change           % Change                 2022                  2021            $ Change           % Change
                                               (in thousands)                                                                (in thousands)
Revenue
Subscription                  $  57,084          $ 42,699          $ 14,385                  34  %       $       150,614          $ 114,248          $ 36,366                  32  %
Professional services            12,689             6,410             6,279                  98  %                29,828             16,685            13,143                  79  %
Total revenue                 $  69,773          $ 49,109          $ 20,664                  42  %       $       180,442          $ 130,933          $ 49,509                  38  %


Subscription revenue accounted for 82% and 87% of our total revenue for the
three months ended January 31, 2022 and 2021, respectively. Subscription revenue
increased by $14.4 million, or 34%, for the three months ended January 31, 2022,
compared to the same period last year, predominantly driven by revenue growth of
$14.4 million from new customers or expanding relationships with existing C3 AI
customers.

Subscription revenue accounted for 83% and 87% of our total revenue for the nine
months ended January 31, 2022 and 2021, respectively. Subscription revenue
increased by $36.4 million, or 32%, for the nine months ended January 31, 2022,
compared to the same period last year, predominantly driven by revenue growth of
$36.4 million from new customers or expanding relationships with existing C3 AI
customers.

Professional services revenue increased by $6.3 millionor 98%, for the three months ended January 31, 2022compared to the same period last year, mainly due to the timing and mix of service projects for new and existing C3 AI customers.

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Professional services revenue increased by $13.1 millionor 79%, for the nine months ended January 31, 2022compared to the same period last year, mainly due to the timing and mix of service projects for new and existing C3 AI customers.


Cost of Revenue

                              Three Months Ended January 31,                                             Nine Months Ended January 31,
                                  2022              2021            $ Change           % Change              2022              2021            $ Change           % Change
                                               (in thousands)                                                             (in thousands)
Cost of revenue
Subscription                  $  12,275          $  7,023          $  5,252                  75  %       $  32,880          $ 22,694          $ 10,186                  45  %
Professional services             5,079             5,203              (124)                 (2) %          13,470            10,113             3,357                  33  %

Total revenue cost $17,354 $12,226 $5,128

                  42  %       $  46,350          $ 32,807          $ 13,543                  41  %


The increase in the cost of subscription revenue for the three months ended
January 31, 2022 compared to the same period last year was mainly attributable to the increase in personnel costs of $3.8 millionhigher outsourcing costs of $0.9 millionand higher overhead $0.2 million.

The increase in the cost of subscription revenue for the nine months ended
January 31, 2022 compared to the same period last year was mainly attributable to the increase in personnel costs of $7.7 millionand higher outsourcing costs of $2.7 millionpartially offset by a decrease in general expenses of
$0.5 million.


The decrease in cost of professional services revenue for the three months ended
January 31, 2022 compared to the same period last year was primarily due to
lower third-party outsourcing costs of $0.5 million, partially offset by higher
overhead costs of $0.4 million.

The increase in cost of professional services revenue for the nine months ended
January 31, 2022 compared to the same period last year was primarily due to
higher overhead costs of $1.6 million, higher third-party outsourcing costs of
$1.3 million, and higher personnel-related costs of $0.5 million.

Gross profit and gross margin

                               Three Months Ended January
                                          31,                                                          Nine Months Ended January 31,
                                 2022             2021            $ Change           % Change             2022              2021            $ Change           % Change
                                              (in thousands)                                                           (in thousands)
Gross profit                  $   52,419       $    36,883       $ 15,536                  42  %       $   134,092       $    98,126       $ 35,966                  37  %
Gross margin
Subscription                       78  %            84   %                                                   78  %            80   %
Professional services              60  %            19   %                                                   55  %            39   %
Total gross margin                 75  %            75   %                                                   74  %            75   %


The increases in gross profit was primarily driven by revenue growth from new
and existing contracts. Overall, total gross margins were flat for the three
months ended January 31, 2022 compared to the same period last year, and
decreased for the three and nine months ended January 31, 2022 compared to the
same periods last year, due to higher personnel-related costs.

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Operating Expenses

                                   Three Months Ended January 31,                                                 Nine Months Ended January 31,
                                       2022              2021            $ Change           % Change                 2022                  2021             $ Change           % Change
                                                    (in thousands)                                                                 (in thousands)
Operating expenses
Sales and marketing                $  43,146          $ 28,450          $ 14,696                  52  %       $       126,134          $  64,898          $  61,236                  94  %
Research and development              40,931            18,748            22,183                 118  %               104,166             48,145             56,021                 116  %
General and administrative            15,748             8,184             7,564                  92  %                43,391             21,433             21,958                 102  %
Total operating expenses           $  99,825          $ 55,382          $ 44,443                  80  %       $       273,691          $ 134,476          $ 139,215                 104  %


Sales and Marketing. The increase in sales and marketing expense for the three
months ended January 31, 2022 compared to the same period last year was
primarily due to higher personnel-related costs as a result of headcount growth
of $8.8 million, and higher advertising spend of $5.3 million.

The increase in sales and marketing expenses for the nine months ended
January 31, 2022 compared to the same period last year was mainly due to higher personnel costs due to the growth in the workforce of $33.9 millionand higher ad spend of $25.0 million.


Research and Development. The increase in research and development expense for
the three months ended January 31, 2022 compared to the same period last year
was primarily due higher personnel-related costs as a result of headcount growth
of $17.9 million, higher C3.ai DTI contributions of $2.9 million, and higher
overhead costs of $2.0 million.

The increase in research and development expense for the nine months ended
January 31, 2022 compared to the same period last year was primarily due higher
personnel-related costs as a result of headcount growth of $41.1 million, higher
C3.ai DTI contributions of $7.4 million, higher overhead costs of $4.9 million,
and higher cloud computing costs of $2.1 million.

General and Administrative. The increase in general and administrative expense
for the three months ended January 31, 2022 compared to the same period last
year was primarily due to higher personnel-related costs as a result of
headcount growth of $5.4 million, higher corporate insurance costs of
$0.9 million, and higher professional services costs of $0.6 million.

The increase in general and administrative expense for the nine months ended
January 31, 2022 compared to the same period last year was primarily due to
higher personnel-related costs as a result of headcount growth of $14.1 million,
higher corporate insurance costs of $4.6 million, and higher professional
services costs of $1.3 million.

Interest Income

                          Three Months Ended January                                                Nine Months Ended January
                                      31,                                                                      31,
                             2022             2021            $ Change           % Change              2022             2021           $ Change           % Change
                                          (in thousands)                                                           (in thousands)
Interest income           $    410          $  129          $     281                 218  %       $   1,077          $  997          $     80                   8  %


The increase in interest income for the three months ended January 31, 2022
compared to the same period last year was primarily due to an increase in volume
of investments, offset by investments that yielded lower returns such as money
market funds and government securities.

The increase in interest income for the nine months ended January 31, 2022
compared to the same period last year was primarily due to an increase in volume
of investments, offset by investments that yielded lower returns such as money
market funds and government securities.

Other Income (Expense), Net

                                   Three Months Ended January
                                               31,                                                          Nine Months Ended January 31,
                                      2022              2021           $ Change           % Change              2022              2021           $ Change           % Change
                                                  (in thousands)                                                            (in thousands)
Other income (expense), net       $   7,742          $ 1,721          $  6,021                 350  %       $   5,471          $ 4,163          $  1,308                  31  %


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The increase in other income (expense), net for the three months ended
January 31, 2022 compared to the same period last year was due to income from an
award of attorney's fees and costs in connection with a legal proceeding of
$9.4 million, partially offset by foreign currency losses on the remeasurement
of Euro-denominated cash and accounts receivable balances.

The increase in other income (expense), net for the nine months ended
January 31, 2022 compared to the same period last year was due to income from an
award of attorney's fees and costs in connection with a legal proceeding of
$9.4 million, partially offset by foreign currency losses on the remeasurement
of Euro-denominated cash and accounts receivable balances.

Provision for income taxes


                      Three Months Ended January                                                Nine Months Ended January
                                  31,                                                                      31,
                         2022             2021            $ Change           % Change             2022             2021            $ Change           % Change
                                      (in thousands)                                                           (in thousands)
Provision for income
taxes                 $    193          $  203          $     (10)                 (5) %       $    594          $  456          $     138                  30  %

The change in the provision for the nine months ended January 31, 2022 compared to the same period last year was mainly related to foreign and state tax expense.

Non-GAAP Financial Measure


In addition to our financial results determined in accordance with generally
accepted accounting principles in the United States, or GAAP, we believe free
cash flow, a non-GAAP financial measure, is useful in evaluating liquidity and
provides information to management and investors about our ability to fund
future operating needs and strategic initiatives. We calculate free cash flow as
net cash used in operating activities less purchases of property and equipment
and capitalized software development costs. Free cash flow has limitations as an
analytical tool, and it should not be considered in isolation or as a substitute
for analysis of other GAAP financial measures, such as net cash used in
operating activities. This non-GAAP financial measure may be different than
similarly titled measures used by other companies. Additionally, the utility of
free cash flow is further limited as it does not represent the total increase or
decrease in our cash balances for a given period. The following table provides a
reconciliation of free cash flow to the GAAP measure of net cash provided by
operating activities for the periods presented.

                                                   Nine Months Ended January 31,
                                                        2022                   2021
                                                          (in thousands)
Net cash used in operating activities       $       (73,300)                $  (5,828)
Less:
Purchases of property and equipment                  (2,183)                

(1,166)

Capitalized software development costs                 (500)                

Free cash flow                              $       (75,983)                $  (6,994)
Net cash provided by investing activities   $       155,339                 $  48,269
Net cash provided by financing activities   $        19,229                 

$884,977

Cash and capital resources


Since inception, we have financed operations primarily through sales generated
from our customers and sales of equity securities. As of January 31, 2022 and
April 30, 2021, we had $204.5 million and $115.4 million of cash and cash
equivalents and $764.1 million and $978.0 million of investments, respectively,
which were held for working capital purposes. In December 2020, we completed our
IPO, which resulted in aggregate net proceeds of $694.6 million, after
underwriting discounts and other offering expenses. We also received aggregate
proceeds of $150.0 million related to our Concurrent Private Placement and did
not pay any underwriting discounts or commissions with respect to the shares
that were sold in these private placements. Our investments generally consist of
high-grade U.S. treasury securities, certificates of deposit, U.S. government
agency securities, commercial paper and corporate debt securities. We have
generated operating losses from our operations as reflected in our accumulated
deficit of $483.0 million as of January 31, 2022. We expect to continue to incur
operating losses and may generate negative cash flows from operations for the
foreseeable future due to the investments we intend to make in our business, and
as a result we may require additional capital to execute on our strategic
initiatives to grow the business.

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We believe that existing cash and cash equivalents and investments will be
sufficient to support working capital and capital expenditure requirements for
at least the next 12 months. Our principal uses of cash in recent periods have
been funding our operations and investing in capital expenditures. Our future
capital requirements will depend on many factors, including our revenue growth
rate, the timing and the amount of cash received from customers, the expansion
of sales and marketing activities, the timing and extent of spending to support
development efforts, expenses associated with our international expansion, the
introduction of C3 AI Software enhancements, and the continuing market adoption
of our C3 AI Software. In the future, we may enter into arrangements to acquire
or invest in complementary businesses, products, and technologies. We may be
required to seek additional equity or debt financing. If we require additional
financing, we may not be able to raise such financing on terms acceptable to us
or at all. If we are unable to raise additional capital or generate cash flows
necessary to expand our operations and invest in continued innovation, we may
not be able to compete successfully, which would harm our business, results of
operations, and financial condition.

The following table summarizes our cash flows for the periods presented:

Nine month period ended January 31,

                                                                              2022                  2021
                                                                                  (in thousands)
Cash used in operating activities                                      $       (73,300)         $  (5,828)
Cash provided by investing activities                                  $       155,339          $  48,269
Cash provided by financing activities                                  $        19,229          $ 884,977
Net increase in cash, cash equivalents, and restricted cash            $    

101 268 $927,418



Operating Activities. Net cash used in operating activities of $73.3 million for
the nine months ended January 31, 2022 was due to our net loss of $133.6 million
in addition to non-cash charges for stock-based compensation of $77.8 million,
depreciation and amortization of $3.8 million, and non-cash operating lease cost
of $2.4 million. The $23.9 million cash outflows related to changes in operating
assets and liabilities was primarily attributable to an increase in prepaid
expenses, other current assets and other assets of $21.1 million, a decrease to
deferred revenue of $15.8 million inclusive of a decrease in related party
balances of $7.1 million, a decrease in lease liabilities of $2.3 million and an
increase in accounts receivable of $2.0 million inclusive of an increase in
related party balances of $0.5 million. This was partially offset by cash
inflows related to an increase in other liabilities of $14.3 million, an
increase in accounts payable of $2.2 million and an increase to accrued
compensation and employee benefits of $0.8 million.

Net cash used in operating activities of $5.8 million for the nine months ended
January 31, 2021 was due to our net loss of $31.6 million in addition to
non-cash charges for stock-based compensation of $14.3 million, depreciation and
amortization of $3.2 million, and non-cash operating lease cost of $2.5 million.
The $6.0 million cash inflow related to changes in operating assets and
liabilities was primarily attributable to an increase to deferred revenue of
$2.0 million inclusive of an increase in related party balances of $7.9 million,
an increase to accrued compensation and employee benefits of $4.3 million, an
increase in other liabilities of $1.2 million and an increase in accounts
payable of $7.5 million. This was partially offset by cash outflows related to a
decrease in prepaid expenses, other current assets and other assets of
$6.9 million, a decrease in accounts receivable of $0.6 million inclusive of an
increase in related party balances of $0.8 million and a decrease in lease
liabilities of $2.6 million.

Investment activities. Net cash provided by investing activities of
$155.3 million for the nine months ended January 31, 2022 was primarily due to maturities and sales of investments of $698.3 millionpartially offset by purchases of equity interests of $540.3 million and the capital expenditure of $2.7 million.


Net cash provided by investing activities of $48.3 million for the nine months
ended January 31, 2021 was primarily attributable to the maturity and sale of
short-term investments of $281.0 million, partially offset by purchases of
investments of $232.3 million and capital expenditures of $1.2 million.

Financing Activities. Net cash provided by financing activities of $19.2 million
during the nine months ended January 31, 2022 was primarily due to $19.3 million
of proceeds from the exercise of stock options for Class A common stock.

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Net cash provided by financing activities of $884.9 million during the nine
months ended January 31, 2021 was primarily due to $851.9 million of net
proceeds from our initial public offering and concurrent private placements,
$26.0 million of proceeds from the repayment of the full recourse promissory
note due from our Chief Executive Officer, which was issued in connection with
our Series F preferred stock financing and $13.8 million of proceeds from the
exercise of stock options for Class A common stock, partially offset by the
payment of deferred offering costs related to our IPO of $6.7 million.

Contractual obligations and commitments


Our contractual obligations and commitments primarily consist of operating lease
commitments for our facilities and non-cancelable purchase commitments related
to third-party cloud hosting services.

For additional information, refer to Note 6. Commitments and Contingencies to
our unaudited condensed consolidated financial statements included elsewhere in
this Quarterly Report on Form 10-Q. Except as already disclosed in Note 6.
Commitments and Contingencies to our condensed consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q, there has been no
other material change in our contractual obligations and commitments other than
in the ordinary course of business since our fiscal year ended April 30, 2021.
See our Annual Report on Form 10-K for the fiscal year ended April 30, 2021,
which was filed with the SEC on June 25, 2021, for additional information
regarding our contractual obligations.

Significant Accounting Policies and Estimates


Our unaudited condensed consolidated financial statements and the accompanying
notes thereto included elsewhere in this Quarterly Report on Form 10-Q are
prepared in accordance with GAAP. The preparation of condensed consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, costs and expenses, and
related disclosures. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances. Actual results could differ significantly from our estimates. To
the extent that there are differences between our estimates and actual results,
our future financial statement presentation, financial condition, results of
operations, and cash flows will be affected.

There have been no material changes in our critical accounting policies and estimates from the critical accounting policies and estimates discussed in the Annual Report on Form 10-K for the year ended April 30, 2021which was filed with the SECOND to June 25, 2021.

Recently Adopted Accounting Pronouncements


See Note 1. Summary of Business and Significant Accounting Policies to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q for more information regarding recently issued
accounting pronouncements.

Emerging Growth Company Status


In April 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was
enacted. Section 107 of the JOBS Act provides that an "emerging growth company"
may take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. Therefore, an emerging growth company can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to use the extended transition
period under the JOBS Act until the earlier of the date we (1) are no longer an
emerging growth company or (2) affirmatively and irrevocably opt out of the
extended transition period provided in the JOBS Act. As a result, our condensed
consolidated financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective
dates.

Based on the market value of our Class A common stock held by non-affiliates as
of the last business day of our fiscal second quarter ended October 31, 2021, we
will cease to be an emerging growth company as of April 30, 2022 and will no
longer be able to take advantage of these various exemptions.

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