C3.AI, INC. DISCUSSION AND ANALYSIS OF MANAGEMENT’S FINANCIAL POSITION AND PERFORMANCE (Form 10-Q)

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, 2022 included in the Annual Report on Form 10-K
for the fiscal year ended April 30, 2022, which was filed with the Securities
and Exchange Commission, or SEC, on June 23, 2022. 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 application software company.

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

•The C3 AI Platform, our core technology, is a comprehensive 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 Platform 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 Platform, include a large and growing
family of industry-specific and use-case-specific pre-built AI applications,
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 CRM solutions that combine data from CRM systems, other enterprise systems and exogenous data sources to enable accurate demand forecasting, customer churn forecasting, cross-selling recommendations and other AI-enabled sales, marketing and service processes.

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

These solutions and our patented model-driven architecture enable organizations to simplify and accelerate the development, deployment, and management 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 95% and 81% of our total revenue in the three months ended October 31, 2022
and 2021, respectively, and 91% and 85% of our total revenue in the six months
ended October 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-cancellable and
non-refundable.

We define a Customer-Entity as each entity that is the ultimate parent of a
party contracting with us. 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 Platform 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. Our Customer count was 236
and 203 as of October 31, 2022 and 2021, respectively.

We primarily recognize revenue from subscriptions on a ratable basis over the
contract term or on a usage basis for consumption-based arrangements. In
addition, customers typically pay a usage-based runtime fee for production use
of our C3 AI Software for specified levels of capacity. 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.

We also generate revenue from professional services, which primarily include
implementation services, training and prioritized engineering services.
Professional services revenue represented 5% and 19% of our total revenue for
the three months ended October 31, 2022 and 2021, respectively, and 9% and 15%
of our total revenue in the six months ended October 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 $62.4 million and $127.7 million
for the three and six months ended October 31, 2022, representing a 7% and 15%
increase compared to the same periods last year, respectively. Our subscription
revenue grew to $59.5 million and $116.5 million for the three and six months
ended October 31, 2022, representing a 26% and 25% increase compared to the same
periods last year.

Go-to-Market Strategy

Our go-to-market strategy has been 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. As a result, we have a customer base of a
relatively small number of large organizations that generate high average total
subscription contract value, but we expect that, over time, as more customers
adopt our technology based on the proof points provided by these lighthouse
customers, the revenue represented by these customers will decrease as a
percentage of total revenue. As our C3 AI Platform and much of our other C3 AI
Software is industry agnostic, we also expect to expand into other industries as
we grow.

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In the second quarter of fiscal year 2023, we announced a change to our
go-to-market strategy. The change includes a way for new customers to utilize
our products at a smaller initial contract size and pay for services based on
their monthly consumption of vCPU hours. Customers will begin with a
two-quarter-long pilot which includes the necessary resources required to
introduce the C3 AI Platform, C3 AI Applications and a desired product into
their environment and receive necessary training to operate and maintain the
product in production. Following the pilot period, customers will pay a minimum
monthly fee and overage charges on a metered basis using vCPU hours as the
metric to derive payment. Customers will be able to secure lower vCPU rates per
hour by choosing a one, two or three year deal term. Customers will be able to
realize business value immediately after the conclusion of the pilot and grow at
their pace over subsequent quarters. We expect that total revenue growth for
fiscal year 2023 will be lower than historical rates until a meaningful number
of customers have concluded pilots and ongoing revenue driven by consumption.

Acquiring new customers and expanding our business with our existing customers
is the intent of our go-to-market effort and is what drives our growth. Making
new and existing customers successful is critical to our long-term success.
After we help our customers solve their initial use cases, they typically
identify incremental opportunities within their operations and expand their use
of our products. The increased engagement is measured by a combination of
increased vCPU usage, increased C3 AI Software subscriptions and through
subscription to the C3 AI Platform for in-house AI application development.

The size and sophistication of our customers' businesses demonstrate the
flexibility, speed, and scale of our products, and maximize the potential value
to our customers. 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 work with recognized market leaders in their respective industries such as: Baker HughesFidelity National Information Services or FIS and Raytheon to develop, market and sell solutions natively built on or tightly integrated with the C3 AI platform.

•Hyperscale Cloud and Infrastructure. We have formed global strategic
go-to-market alliances with hyperscale cloud providers including Amazon Web
Services, Microsoft Azure, and Google Cloud. In addition, we have strategic
alliances with leading hardware infrastructure providers to deliver our software
optimized for their technology. These partners include Hewlett Packard
Enterprise and Intel. 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.

•Advice and service partner. We work with a number of system integrators who specialize in enterprise AI implementations.

•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 Platform.

Important 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 $417.3 million and $477.4 million
as of October 31, 2022 and April 30, 2022, respectively. We successfully
completed our transition from a subscription-based pricing model to a
consumption-based pricing model for new customers. While the immediate-term
effect of this transition lowers revenue growth and decreases RPO, we believe
the medium and long term effect provides a substantial accelerator to revenue
growth and RPO.

RPO represents the amount of our contracted future revenue that has not yet been
recognized, including both deferred revenue and non-cancellable contracted
amounts that will be invoiced and recognized as revenue in future periods. Our
RPO as of October 31, 2022 is comprised of $30.6 million related to deferred
revenue and $386.7 million of commitments from non-cancellable contracts. Our
RPO as of April 30, 2022 is comprised of $49.1 million related to deferred
revenue and $428.3 million of commitments from non-cancellable contracts.

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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 $36.2 million and $39.4 million as of
October 31, 2022 and April 30, 2022, 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.

Customer acquisition, retention and expansion

We are focused on continuing to grow our customer base, retaining existing
customers and expanding customers' usage of our C3 AI Software by addressing new
use cases across multiple departments and divisions, adding users, and
developing and deploying additional applications. 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 Platform. 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.

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.

Going forward, we expect to attract new customers who prefer to subscribe to the
C3 AI Platform and Applications with a consumption-based pricing model.
Customers can get started at a lower initial price point to start a two quarter
pilot and then have the ability to manage their expenses as consumption grows
over time. This arrangement is similar to the pricing a customer would expect to
see from other software vendors and cloud providers. As customers subscribe to
new C3 AI products and build their own products, we expect to see increases in
overall vCPU consumption and related revenue growth.

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technology 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 Platform, 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 Platform. Research
and development spending has fueled enhancements to our existing C3 AI Platform.

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 market for AI
enabled digital transformation. We spent significantly on brand awareness over
the past few years to great success. We have reduced our spend on brand
awareness, but continue to invest in market education, strategic paid media, and
thought leadership. We engage the market through digital, radio, outdoor,
airport, and print advertising; virtual and physical events, including our C3
Transform annual user conference; and C3 AI Live, a series of livestreamed
events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI,
machine learning, and data science.

In the near term, we expect marketing spend to decline as a percent of total
revenue as we make ongoing progress in establishing C3 AI's brand and reputation
and as our business scales.

Expand 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, Microsoft, and Google. Each
strategic partner is a leader in its industry, with a substantial installed
customer base and extensive marketing, sales, and services resources that we can
leverage to engage and serve customers anywhere in the world. Using our C3 AI
Platform as the development suite, we leverage our model-driven architecture to
efficiently build new cross-industry and industry-specific applications based on
identifying requirements across our customer base of industry leaders and
through our industry partners. Our strategy with strategic partners is to
establish a significant use case and prove the value of our C3 AI Platform with
a flagship customer in each industry in which we participate. 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 Platform for their own
operations (which we refer to below as direct subscription fees), the exclusive
right for Baker Hughes to resell our offerings worldwide in the oil and gas
industry, and the non-exclusive right to resell our offerings in other
industries. Under the arrangement, Baker Hughes made minimum, non-cancellable,
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 the fiscal year ending April 30,
2023, $110.0 million in the fiscal year ending April 30, 2024, and $125.0
million in the fiscal year ending April 30, 2025, and to revise the structure of
the arrangement to further incentivize Baker Hughes' sales of our products and
services. Beginning in the fiscal year ending April 30, 2023, Baker Hughes'
annual commitments will be reduced by any revenue we generate from certain
customers. The revenue recorded for Baker Hughes will be reviewed quarterly and
adjusted, as needed, to reflect our current assumptions.

Pursuant to the revised arrangement, we acknowledged that Baker Hughes had met
its minimum annual revenue commitment for the fiscal year ended April 30, 2022
and recognized $16.0 million of sales commission as deferred costs during the
fiscal quarter ended October 31, 2021 related to this arrangement, which will be
amortized over an expected period of five years.

Our RPO related to Baker Hughes, which includes both direct subscriptions and
reseller arrangements, is comprised of $0.4 million related to deferred revenue
and $184.5 million of commitments from non-cancellable contracts as of
October 31, 2022 and $2.3 million related to deferred revenue and $212.9 million
from non-cancellable contracts as of April 30, 2022.

away October 31, 2022 and April 30, 2022the estimated total of Baker Hughes’ Commitments not already made under the Direct Subscription Fee or the Reseller Agreement under the Agreement as a whole $36.4 million and
$49.3 millionrespectively.

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 23% and 25% of our total revenue for the three months ended
October 31, 2022 and 2021, respectively, and 22% and 28% of our total revenue
for the six months ended October 31, 2022 and 2021, respectively, from
international customers.

Effects of the ongoing COVID-19 pandemic

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 2022, 2021 and 2020 and may continue to pose challenges until the
effects of the pandemic abate.

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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. We have undertaken effort to return our
employees to their offices, subject to local laws and regulations and, as of the
date of this report, our employees have returned to the office and such travel
restrictions have been relaxed. The operations of our partners and customers
have likewise been altered and may continue to be disrupted. 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 the fiscal year 2023 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 the earnings situation

revenue

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-cancellable and non-refundable, and we
recognize revenue over the contract term on a ratable basis. In addition,
customers pay a usage-based runtime fee for our C3 AI Software for specified
levels of capacity. Our 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.

cost of sales

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.

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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 expect to hire additional sales personnel to increase sales
coverage of target industry vertical and geographic markets. We have reduced our
spend on brand awareness, but continue to invest in market education, strategic
paid media, and thought leadership. Consequently, we anticipate that sales and
marketing expense as a percent of total revenue to decline over time.

Research and Development. Our research and development efforts are aimed at
continuing to develop and refine our C3 AI Software, including adding new
features and modules, increasing functionality and speed, and enhancing the
usability of our C3 AI Software. 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.

We expect our general and administrative expense to increase in absolute dollars
as we continue to grow our business. 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.

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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 (expense) income, net

Other (expense) income, 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.

operating results

The following tables present our condensed consolidated income statement for the periods presented:

                                             Three Months Ended October 31,             Six Months Ended October 31,
                                                2022                2021                  2022                   2021
                                                     (in thousands)                            (in thousands)
Revenue
Subscription                                $   59,508          $  47,408          $        116,534          $  93,530
Professional services                            2,900             10,855                    11,182             17,139
Total revenue                                   62,408             58,263                   127,716            110,669
Cost of revenue
Subscription (1)                                19,165             11,392                    33,257             20,605
Professional services (1)                        1,587              4,579                     5,901              8,391
Total cost of revenue                           20,752             15,971                    39,158             28,996
Gross profit                                    41,656             42,292                    88,558             81,673
Operating expenses
Sales and marketing (1)                         44,936             46,166                    87,923             82,988
Research and development (1)                    50,051             36,523                   105,928             63,235
General and administrative (1)                  18,635             15,279                    39,882             27,643
Total operating expenses                       113,622             97,968                   233,733            173,866
Loss from operations                           (71,966)           (55,676)                 (145,175)           (92,193)
Interest income                                  4,224                322                     6,762                667
Other (expense) income, net                       (945)            (1,372)                   (1,966)            (2,271)
Net loss before provision for income taxes     (68,687)           (56,726)                 (140,379)           (93,797)
Provision for income taxes                         163                 13                       342                401
Net loss                                    $  (68,850)         $ (56,739)         $       (140,721)         $ (94,198)


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________________________________________________________________________________________________________________________________

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

                                             Three Months Ended October 31,          Six Months Ended October 31,
                                                2022                2021               2022                2021
                                                     (in thousands)                         (in thousands)
Cost of subscription                        $    5,486          $   2,364          $    9,758          $   3,185
Cost of professional services                      479                685               1,550              1,287
Sales and marketing                             19,080             13,555              35,859             19,690
Research and development                        23,905             10,256              49,122             13,014
General and administrative                       7,063              5,680              16,354              9,276

Total stock-based compensation expense $56,013 $32,540

$112,643 $46,452


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 October 31,              Six Months Ended October 31,
                                                   2022                  2021                 2022                  2021

Revenue
Subscription                                            95  %                81  %                 91  %                85  %
Professional services                                    5                   19                     9                   15
Total revenue                                          100                  100                   100                  100
Cost of revenue
Subscription                                            31                   20                    26                   19
Professional services                                    2                    8                     6                    8
Total cost of revenue                                   33                   27                    31                   26
Gross profit                                            67                   73                    69                   74
Operating expenses
Sales and marketing                                     72                   79                    69                   75
Research and development                                80                   63                    83                   57
General and administrative                              30                   26                    32                   25
Total operating expenses                               183                  168                   184                  157
Loss from operations                                  (116)                 (96)                 (114)                 (83)
Interest income                                          7                    1                     5                    1
Other (expense) income, net                             (2)                  (2)                   (2)                  (2)
Net loss before provision for income taxes            (111)                 (97)                 (109)                 (85)
Provision for income taxes                               -                    -                     -                    -
Net loss                                              (111) %               (97) %               (109) %               (85) %

Comparison of the completed three and six months October 31, 2022 and 2021

Revenue

                              Three Months Ended October 31,                                                 Six Months Ended October 31,
                                  2022              2021            $ Change           % Change                 2022                  2021            $ Change           % Change
                                               (in thousands)                                                                (in thousands)
Revenue
Subscription                  $  59,508          $ 47,408          $ 12,100                  26  %       $       116,534          $  93,530          $ 23,004                  25  %
Professional services             2,900            10,855            (7,955)                (73) %                11,182             17,139            (5,957)                (35) %
Total revenue                 $  62,408          $ 58,263          $  4,145                   7  %       $       127,716          $ 110,669          $ 17,047                  15  %


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Subscription revenue accounted for 95% and 81% of our total revenue for the
three months ended October 31, 2022 and 2021, respectively. Subscription revenue
increased by $12.1 million, or 26%, for the three months ended October 31, 2022,
compared to the same period last year. Approximately 17% and 14%, respectively,
of the total subscription revenue was attributable to growth from new customers,
and the remaining 83% and 86%, respectively, was attributable to net growth from
existing customers for the three months ended October 31, 2022 and 2021,
respectively. The net growth from existing customers included an increase in
revenue of $9.2 million related to the Baker Hughes arrangement for the three
months ended October 31, 2022, compared to the same period last year.

Subscription revenue accounted for 91% and 85% of our total revenue for the six
months ended October 31, 2022 and 2021, respectively. Subscription revenue
increased by $23.0 million, or 25%, for the six months ended October 31, 2022,
compared to the same period last year. Approximately 15% and 12%, respectively,
of the total subscription revenue was attributable to growth from new customers,
and the remaining 85% and 88%, respectively, was attributable to net growth from
existing customers for the six months ended October 31, 2022 and 2021,
respectively. The net growth from existing customers included an increase in
revenue of $15.3 million related to the Baker Hughes arrangement for the six
months ended October 31, 2022, compared to the same period last year.

Professional services revenue decreased by $8.0 million, or 73%, for the three
months ended October 31, 2022, compared to the same period last year,
predominantly due to decrease in revenue of $5.9 million related to the Baker
Hughes arrangement mainly driven by the decline in prioritized engineering
services, and the timing and mix of service projects for existing C3 AI Platform
and C3 AI Applications customers.

Professional services revenue decreased by $6.0 million, or 35%, for the six
months ended October 31, 2022, compared to the same period last year,
predominantly due to decrease in revenue of $7.8 million related to the Baker
Hughes arrangement mainly driven by the decline in prioritized engineering
services, partially offset by increase in professional services to other
customers due to the timing and mix of service projects for existing C3 AI
Platform and C3 AI Applications customers.

Cost of Revenue

                              Three Months Ended October 31,                                              Six Months Ended October 31,
                                  2022              2021            $ Change           % Change              2022              2021            $ Change           % Change
                                               (in thousands)                                                             (in thousands)
Cost of revenue
Subscription                  $  19,165          $ 11,392          $  7,773                  68  %       $  33,257          $ 20,605          $ 12,652                  61  %
Professional services             1,587             4,579            (2,992)                (65) %           5,901             8,391            (2,490)                (30) %
Total cost of revenue         $  20,752          $ 15,971          $  4,781                  30  %       $  39,158          $ 28,996          $ 10,162                  35  %


The increase in cost of subscription revenue for the three months ended
October 31, 2022 compared to the same period last year was primarily due to
higher personnel related costs of $4.6 million as a result of increased
headcount and overall costs to support the growth in our business, and increased
stock-based compensation primarily related to additional equity awards granted
to current and new employees, higher third-party outsourcing costs of
$1.0 million, higher amortization of capitalized software costs of $1.0 million,
and higher overhead costs of $0.9 million.

The increase in cost of subscription revenue for the six months ended
October 31, 2022 compared to the same period last year was primarily due to
higher personnel related costs of $8.1 million as a result of increased
headcount and overall costs to support the growth in our business, and increased
stock-based compensation primarily related to additional equity awards granted
to current and new employees, higher third-party outsourcing costs of
$1.6 million, higher amortization of capitalized software costs of $1.0 million,
and higher overhead costs of $1.1 million.

The decrease in cost of professional services revenue for the three months ended
October 31, 2022 compared to the same period last year was primarily due to
lower personnel related costs of $1.2 million, lower third-party outsourcing
costs of $1.1 million and lower overhead costs of $0.8 million.

The decrease in cost of professional services revenue for the six months ended
October 31, 2022 compared to the same period last year was primarily due to
lower third-party outsourcing costs of $1.9 million, and lower overhead costs of
$0.4 million.

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Gross Profit and Gross Margin

                               Three Months Ended October
                                          31,                                                             Six Months Ended October 31,
                                 2022             2021             $ Change           % Change               2022                2021            $ Change           % Change
                                              (in thousands)                                                              (in thousands)
Gross profit                  $   41,656       $    42,292       $    (636)                 (2) %       $        88,558       $    81,673       $  6,885                   8  %
Gross margin
Subscription                       68  %            76   %                                                        71  %            78   %
Professional services              45  %            58   %                                                        47  %            51   %
Total gross margin                 67  %            73   %                                                        69  %            74   %


The decrease in total gross margins for the three months ended October 31, 2022
compared to the same period last year was driven by decline in subscription
margin and professional service margin. The subscription margin for the three
months ended October 31, 2022 decreased due to higher personnel-related costs as
a result of increased headcount and overall costs to support the growth in our
business, and increased stock-based compensation primarily related to additional
equity awards granted to current and new employees, compared to the same period
last year. The professional service margin for the three months ended
October 31, 2022 decreased primarily due to the mix of professional services
provided, including a decrease in prioritized engineering services, which
generally have higher margins, compared to the same period last year.

The decrease in total gross margins for the six months ended October 31, 2022
compared to the same period last year was driven by decline in subscription
margin and professional service margin. The subscription margin for the six
months ended October 31, 2022 decreased due to higher personnel-related costs as
a result of increased headcount and overall costs to support the growth in our
business, and increased stock-based compensation primarily related to additional
equity awards granted to current and new employees, compared to the same period
last year. The professional service margin for the six months ended October 31,
2022 decreased primarily due to the mix of professional services provided,
including a decrease in prioritized engineering services, which generally have
higher margins, compared to the same period last year.

Operating Expenses

                                  Three Months Ended October 31,                                                  Six Months Ended October 31,
                                      2022               2021            $ Change           % Change                 2022                  2021            $ Change           % Change
                                                   (in thousands)                                                                 (in thousands)
Operating expenses
Sales and marketing               $   44,936          $ 46,166          $ (1,230)                 (3) %       $        87,923          $  82,988          $  4,935                   6  %
Research and development              50,051            36,523            13,528                  37  %               105,928             63,235            42,693                  68  %
General and administrative            18,635            15,279             3,356                  22  %                39,882             27,643            12,239                  44  %

business expenses $113,622 $97,968 $15,654

                  16  %       $       233,733          $ 173,866          $ 59,867                  34  %


Sales and Marketing. The decrease in sales and marketing expense for the three
months ended October 31, 2022 compared to the same period last year was
primarily due to lower advertising spend of $13.7 million, partially offset by
higher personnel-related costs as a result of $8.0 million as a result of
increased headcount and overall costs to support the growth in our business, and
increased stock-based compensation primarily related to additional equity awards
granted to current and new employees, higher marketing costs of $2.3 million,
higher overhead costs of $1.2 million and higher commission expense of
$0.8 million.

The increase in sales and marketing expense for the six months ended October 31,
2022 compared to the same period last year was primarily due to higher
personnel-related costs of $19.2 million as a result of increased headcount and
overall costs to support the growth in our business, and increased stock-based
compensation primarily related to additional equity awards granted to current
and new employees, higher marketing costs of $4.6 million, higher commission
expense of $1.6 million, and higher overhead costs of $1.3 million, partially
offset by lower advertising spend of $22.8 million.

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Research and Development. The increase in research and development expense for
the three months ended October 31, 2022 compared to the same period last year
was primarily due to higher personnel-related costs of $15.9 million as a result
of increased headcount and overall costs to support the growth in our business,
and increased stock-based compensation primarily related to additional equity
awards granted to current and new employees, and higher hosting costs of
$2.4 million, partially offset by lower C3.ai DTI contributions of $5.7 million.

The increase in research and development expense for the six months ended
October 31, 2022 compared to the same period last year was primarily due to
higher personnel-related costs of $40.1 million as a result of increased
headcount and overall costs to support the growth in our business, and increased
stock-based compensation primarily related to additional equity awards granted
to current and new employees, higher hosting costs of $5.6 million, and higher
facilities costs of $2.2 million, partially offset by lower C3.ai DTI
contributions of $5.6 million, and lower professional services costs of
$1.1 million.

General and Administrative. The increase in general and administrative expense
for the three months ended October 31, 2022 compared to the same period last
year was primarily due to higher personnel-related costs as a result of
headcount growth of $1.7 million as a result of increased headcount and overall
costs to support the growth in our business, and increased stock-based
compensation primarily related to additional equity awards granted to current
and new employees, higher professional services costs of $1.4 million, and
higher overhead costs of $0.3 million.

The increase in general and administrative expense for the six months ended
October 31, 2022 compared to the same period last year was primarily due to
higher personnel-related costs of $9.1 million as a result of increased
headcount and overall costs to support the growth in our business, and increased
stock-based compensation primarily related to additional equity awards granted
to current and new employees, higher professional services costs of
$1.9 million, and higher overhead costs of $0.7 million.

Interest Income

                           Three Months Ended October
                                      31,                                                          Six Months Ended October 31,
                              2022             2021           $ Change           % Change              2022             2021           $ Change           % Change
                                          (in thousands)                                                           (in thousands)
Interest income           $   4,224          $  322          $  3,902                1212  %       $   6,762          $  667          $  6,095                 914  %

The increase in interest income for the past three months October 31, 2022
compared to the prior-year period was primarily due to investments in securities with higher expected yields, such as corporate debt.

The increase in interest income for the past six months October 31, 2022
compared to the prior-year period was primarily due to investments in securities with higher expected yields, such as corporate debt.

Other (expense) income, net

                       Three Months Ended October
                                   31,                                                            Six Months Ended October 31,
                         2022              2021             $ Change           % Change              2022              2021             $ Change           % Change
                                       (in thousands)                                                             (in thousands)
Other (expense)
income, net           $   (945)         $ (1,372)         $     427                 (31) %       $  (1,966)         $ (2,271)         $     305                 (13) %

The decrease in other income (expense), net, for the past three months
October 31, 2022 compared to the prior-year period was mainly due to foreign currency losses from the revaluation of cash and receivables denominated in euros.

The decrease in other (expense) income, net for the six months ended October 31,
2022 compared to the same period last year was primarily due to foreign currency
losses on the remeasurement of Euro-denominated cash and accounts receivable
balances.

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Provision for income taxes

                       Three Months Ended October                                                Six Months Ended October
                                  31,                                                                       31,
                          2022             2021            $ Change           % Change             2022             2021            $ Change           % Change
                                      (in thousands)                                                            (in thousands)
Provision for income
taxes                 $     163          $   13          $     150                1154  %       $    342          $  401          $     (59)                (15) %

The accrual change for the three and six months ended October 31, 2022
compared to the same period of the previous year mainly related to foreign and state tax expenses.

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 below
provides a reconciliation of free cash flow to the GAAP measure of net cash used
in operating activities for the periods presented.

                                                                       Six Months Ended October 31,
                                                                         2022                   2021
                                                                              (in thousands)
Net cash used in operating activities                             $        (90,845)         $ (17,876)
Less:
Purchases of property and equipment                                        (39,978)            (1,429)
Capitalized software development costs                                      (1,000)              (500)
Free cash flow                                                    $       (131,823)         $ (19,805)
Net cash provided by investing activities                         $         30,532          $  70,849
Net cash (used in) provided by financing activities               $         

(1,593) $11,200

liquidity and capital resources

Since inception, we have financed operations primarily through sales generated
from our customers and sales of equity securities. As of October 31, 2022 and
April 30, 2022, we had $277.6 million and $339.5 million of cash and cash
equivalents and $581.1 million and $652.7 million of investments, respectively,
which were held for working capital purposes. Our short-term and long-term
investments generally consist of high-grade U.S. treasury securities,
certificates of deposit, U.S. government agency securities, commercial paper and
corporate debt securities. We have generated operating losses from our
operations as reflected in our accumulated deficit of $682.1 million as of
October 31, 2022 and negative cash flows from operations. We expect to continue
to incur operating losses and generate negative cash flows from operations for
the foreseeable future due to the investments we intend to make in our business,
and as a result we may require additional capital to execute on our strategic
initiatives to grow the business.

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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. We believe we will meet longer-term expected future
cash requirements and obligations through a combination of cash flows from
operating activities and available cash balances. Our principal uses of cash in
recent periods have been funding our operations and investing in capital
expenditures. 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:

                                                                           Six Months Ended October 31,
                                                                              2022                  2021
                                                                                  (in thousands)
Cash used in operating activities                                      $       (90,845)         $ (17,876)
Cash provided by investing activities                                  $        30,532          $  70,849
Cash (used in) provided by financing activities                        $        (1,593)         $  11,200
Net (decrease) increase in cash, cash equivalents, and restricted cash $    

(61,906) $64,173


Operating Activities. Net cash used in operating activities of $90.8 million for
the six months ended October 31, 2022 was due to our net loss of $140.7 million
adjusted for certain non-cash items, primarily consisting of stock-based
compensation of $112.6 million, depreciation and amortization of $2.4 million,
and non-cash operating lease cost of $1.1 million. The $65.9 million cash
outflows related to changes in operating assets and liabilities was primarily
attributable to a decrease in accounts payable of $28.2 million, a decrease to
deferred revenue of $18.5 million inclusive of a decrease in related party
balances of $0.3 million, an increase in accounts receivable of $14.7 million
inclusive of an increase in related party balances of $18.0 million, an increase
in prepaid expenses, other current assets and other assets of $3.2 million, a
decrease in other liabilities of $0.9 million, and a decrease to accrued
compensation and employee benefits of $1.1 million. This was partially offset by
cash inflows related to an increase in lease liabilities of $0.7 million.

Net cash used in operating activities of $17.9 million for the six months ended
October 31, 2021 was due to our net loss of $94.2 million adjusted for non-cash
charges for stock-based compensation of $46.5 million, depreciation and
amortization of $2.4 million, and non-cash operating lease cost of $1.1 million.
The $26.9 million cash inflow related to changes in operating assets and
liabilities was primarily attributable to a decrease in accounts receivable of
$39.0 million inclusive of an increase in related party balances of
$5.8 million, and an increase in other liabilities of $13.6 million. This was
partially offset by cash outflows related to an increase in prepaid expenses,
other current assets and other assets of $15.1 million, a decrease to accrued
compensation and employee benefits of $5.4 million, a decrease to deferred
revenue of $2.3 million inclusive of an increase in related party balances of
$9.8 million, a decrease in accounts payable of $1.7 million, and a decrease in
lease liabilities of $1.2 million.

Investing Activities. Net cash provided by investing activities of $30.5 million
for the six months ended October 31, 2022 was primarily attributable to
maturities and sales of investments of $455.5 million, partially offset by
purchases of investments of $384.0 million and capital expenditures of
$41.0 million mainly related to the leasehold improvements associated with the
new leased space.

Net cash provided by investing activities of $70.8 million for the six months
ended October 31, 2021 was primarily attributable to the maturities and sales of
investments of $461.6 million, partially offset by purchases of investments of
$388.9 million and capital expenditures of $1.9 million.

Financing Activities. Net cash used in financing activities of $1.6 million
during the six months ended October 31, 2022 was due to $3.4 million of taxes
paid related to net share settlement of equity awards, partially offset by
$1.8 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 $11.2 million during the six months
ended October 31, 2021 was primarily due to $11.3 million of proceeds from the
exercise of stock options for Class A common stock.

Contractual Obligations and Commitments

Our contractual obligations and commitments primarily consist of operating lease
commitments for our facilities and non-cancellable 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, 2022.
See our Annual Report on Form 10-K for the fiscal year ended April 30, 2022,
which was filed with the SEC on June 23, 2022, for additional information
regarding our contractual obligations.

Critical 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 were no material changes to our critical accounting policies and estimates compared to the critical accounting policies and estimates discussed in the Annual Report on Form 10-K for the current fiscal year April 30, 2022which was submitted to the SEC on June 23, 2022.

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.

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