EX-99.1 2 ex991-fy23xq4earnings.htm EX-99.1 Document

C3 AI Announces Fiscal Fourth Quarter and Full Year Fiscal 2023 Financial Results
Generative AI Changes Everything

REDWOOD CITY, Calif. - May 31, 2023 - C3.ai, Inc. (NYSE: AI), the Enterprise AI application software company, today announced financial results for its fiscal fourth quarter and full fiscal year ended April 30, 2023.

Fiscal Fourth Quarter 2023 Financial Highlights
Revenue: Total revenue for the quarter was $72.4 million.
Subscription Revenue: Subscription revenue for the quarter was $56.9 million, constituting 79% of revenue.
Gross Profit: GAAP gross profit for the quarter was $47.5 million, representing a 66% gross margin. Non-GAAP gross profit for the quarter was $53.9 million, representing a 74% non-GAAP gross margin.
Remaining Performance Obligations (“RPO”): GAAP RPO was $381.4 million.
Current RPO: Current RPO of $186.3 million.
Net Loss per Share: GAAP net loss per share was $(0.58). Non-GAAP net loss per share was $(0.13).
Cash Balance: $812.4 million in cash, cash equivalents, and investments.
Free Cash Flow: Positive free cash flow $16.3 million.

Full Year Fiscal 2023 Financial Highlights
Revenue: Total revenue for the fiscal year was $266.8 million, an increase of 5.6% compared to FY 22.
Subscription Revenue: Subscription revenue for the fiscal year was $230.4 million, constituting 86% of revenue, representing 11.4% growth over FY 22.
Gross Profit: GAAP gross profit for the fiscal year was $180.5 million, representing 68% gross margin. Non-GAAP gross profit was $205.2 million, representing 77% non-GAAP gross margin.
Net Loss per Share: GAAP net loss per share was $(2.45). Non-GAAP net loss per share was $(0.42).

Overall Business Results:
We believe it is generally agreed today that the market for enterprise AI applications is substantially larger and growing at a much greater growth rate than experts predicted. C3 AI has been at the vanguard of the enterprise AI market for over a decade as that market has developed from its roots in IoT, to unsupervised learning, supervised learning, NLP, deep learning, reinforcement learning, and now generative AI.
The interest in applying AI to business processes is more active than we've ever seen.

C3 AI Applications:
As the enterprise AI market develops, it appears that the bulk of the demand is increasingly for turnkey enterprise AI applications, rather than development tools. An evaluation of our bookings for the past fiscal year indicates that 83% of our bookings were driven by application sales. 17% of our bookings were driven by sales of the C3 AI Platform.

C3 AI delivers over 40 enterprise AI applications today.




We are seeing increasing diversity in the industries we serve. For FY 23, an analysis of our bookings includes:
Oil & Gas33.8 %
Federal, Defense & Aerospace28.9 %
High Tech13.2 %
Energy & utilities11.4 %
Manufacturing4.2 %
Food Processing2.0 %
Chemicals1.8 %
Life sciences1.5 %
Other3.2 %

An important leading indicator of our increasing industry diversity is evidenced by the trial and pilot agreements closed in Q4 FY 23:
Federal, Defense & Aerospace36.8 %
Manufacturing15.8 %
High Tech10.5 %
Oil & Gas10.5 %
Agriculture5.3 %
State and Local5.3 %
Chemicals5.3 %
Energy & utilities5.3 %
Financial Services5.3 %
As a result of increasing market demand for enterprise AI -- and from our adoption of consumption-based pricing -- we are seeing a substantial increase in opportunities and shorter sales cycles.
In the fourth quarter of FY 23, the company closed 43 agreements, including 19 pilots. The number of qualified enterprise opportunities targeted for closure within 12 months in our sales pipeline has increased by more than 100% in the past year. During FY 23, we closed 126 agreements, up from 83 the prior year. The average sales cycle for agreements in Q4 FY 23 was 3.7 months, down from 5 months in Q4 FY 22.
An examination of the composition of our pilot account profile suggests there is significant opportunity for growth as these accounts convert to consumption pricing. Of the 19 pilot accounts signed in Q4 FY 23:
PilotsAccount size in revenue
7> $100 billion
7$10 - $100 billion
4$1 - $10 billion
0$100 million - $1 billion
1< $100 million
In FY 23, C3 AI expanded its application footprint at Shell, Koch Industries, U.S. Air Force Rapid Sustainment Office (“RSO”), PwC, Ball, ExxonMobil, Con Edison, Defense Counterintelligence and Security Agency (“DCSA”), Baker Hughes, New York Power Authority, Duke Energy, ATB, Defense Innovation Unit, Roche, Cargill, and Engie, among others.
In FY 23, we established new customer relationships with Department of Defense – Common DoD Artificial Intelligence Office; Daly City, CA; DOW; ExxonMobil; Flex; General Mills; Hexagon; Nucor; O-I; Pantaleon; Riverside County, CA; Stark County, Ohio; Telus; DoD-SOCOM; DoD-TRANSCOM; ESAB, and others. Many of these also expanded their C3 AI engagements during the year.



C3 AI Partner Network
C3 AI's partner ecosystem is increasingly effective at opening new doors, providing prospects the assurance of success, and providing customers with the highest quality service. In FY 23, we closed 71 agreements with and through our partner network including Google Cloud, AWS, Microsoft, Baker Hughes, Booz Allen, and others. C3 AI has grown its qualified 12-month opportunity pipeline with AWS by over 24% in the last quarter, with particular focus on state and local government. With Google Cloud, our joint qualified 12-month opportunity pipeline grew from 25 opportunities at the end of FY 22 to 140 opportunities at the end of FY 23, a 460% increase. We closed 10 new oil & gas accounts in the year with Baker Hughes including ExxonMobil, ADNOC, ENI, and others.

C3 Generative AI:
In Q4 we released the C3 Generative AI solution to the market. It is distinguished from other GPT/LLM solutions in the market in that – leveraging the capabilities of the C3 AI Platform -- it 1) allows enterprises access to all their enterprise data and open source data – ERP, CRM, SCADA, text, PDFs, Excel, PowerPoint, sensor data, open source, etc.; 2) provides traceable, deterministic, consistent answers; 3) enforces corporate information access controls and security protocols, 4) has no risk of LLM-caused data or IP exfiltration; and 5) is hallucination-free.
We rapidly closed three C3 Generative AI application agreements in the quarter with large enterprises, including Georgia Pacific, Flint Hills Resources, and the U.S. Department of Defense Missile Defense Agency (MDA). These applications are expected to be live in Q1 FY 24. We are currently working a substantial pipeline of additional C3 Generative AI opportunities with large corporations. The C3 Generative AI application is now available on both the AWS and Google Cloud marketplaces. It is difficult to estimate the size of the addressable market for these solutions, but it appears extraordinarily large.

C3 AI Federal Momentum:
The U.S. Federal Sector represented 29% of our bookings in FY 23.
The U.S. Air Force selected C3 AI as the System of Record for AI-enabled predictive maintenance. C3 AI’s predictive maintenance solution, Predictive Analytics & Decision Assistant (“PANDA”), has been in production use for several years at the USAF Rapid Sustainment Office (“RSO”). This designation expands C3 AI’s opportunity to all predictive maintenance applications in the U.S. Air Force.

Plan for Profitability
The company continues on-track with its plan for profitability, with the goal of achieving a sustainably non-GAAP profitable business by the end of fiscal year 2024, ending April 30, 2024. Positive results to date, including $16.3 million positive free cash flow from business operations in Q4 FY 23.

CEO Comments:
“As we began the fiscal year on May 1, the company has never been better positioned,” said Thomas M. Siebel, C3 AI CEO. “I believe we now have broad consensus that the addressable market for Enterprise AI is extraordinarily large and rapidly growing; we have nearly 1,000 talented, dedicated employees; the C3 AI Platform is increasingly recognized as the gold-standard in enterprise AI; we have over 40 production enterprise AI applications that offer the market rapid time to value; our C3 Generative AI offerings are being enthusiastically received; our growing market-partner ecosystem provides us extraordinary reach; with our tried, tested, and proven management team, our strong work ethic, and armed with $812 million in cash – we are well positioned to accelerate growth, gain market share, attain sustainable non-GAAP profitability, and establish a market-leading position globally in enterprise AI. FY 2024 will be exciting.”





Financial Outlook:
The Company’s guidance includes GAAP and non-GAAP financial measures.

The following table summarizes C3 AI’s guidance for the first quarter of fiscal 2024 and full-year fiscal 2024:

(in millions)
First Quarter Fiscal 2024
Guidance
Full Year Fiscal 2024 Guidance
Total revenue$70.0 - $72.5$295.0 - $320.0
Non-GAAP loss from operations($25.0) - ($30.0)($50.0) - ($75.0)

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. Stock-based compensation expense-related charges, including employer payroll tax-related items on employee stock transactions, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP results included in this press release. Our fiscal year ends April 30, and numbers are rounded for presentation purposes.

C3 AI Investor Day – June 22, 2023
C3 AI will be hosting an Investor Day in New York City to provide C3 AI investors a company update, additional information about our product roadmap; product demonstrations; direct access to the C3 AI Executive team; updates on the partner eco-system; C3 Generative AI demonstrations; and additional company developing news. The event will be broadcast to the investor community at large via live webcast.



Conference Call Details

What:C3 AI Fourth Quarter Fiscal 2023 Financial Results Conference Call
When:Wednesday, May 31, 2023
Time:2:00 p.m. PT / 5:00 p.m. ET
Participant Registration:
https://register.vevent.com/register/BI82803676bd9a45f486a3df9d2260d9a6 (live call)
Webcast:
https://edge.media-server.com/mmc/p/4mip8zax (live and replay)
Investor Presentation Details

An investor presentation providing additional information and analysis can be found at our investor relations page at ir.c3.ai.
Statement Regarding Use of Non-GAAP Financial Measures

The Company reports the following non-GAAP financial measures, which have not been prepared in accordance with generally accepted accounting principles in the United States (GAAP), in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP loss from operations, and non-GAAP net loss per share. Our non-GAAP gross profit, non-GAAP gross margin, non-GAAP loss from operations, and non-GAAP net loss per share exclude the effect of stock-based compensation expense-related charges and employer payroll tax expense related to employee stock-based compensation. We believe the presentation of operating results that exclude these non-cash items provides useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.

Free cash flow. 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 provided by (used in) operating activities less purchases of property and equipment and capitalized software development costs. 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.

We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP to non-GAAP financial measures.



Use of Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical facts, including our market leadership position, anticipated benefits from our partnerships and investments, financial outlook, our expectations relating to our new consumption-pricing model and the impact to our results of operations, our expectation to be operating profitably on a non-GAAP basis by the end of fiscal 2024, the expected benefits of our offerings, our business strategies, plans, and objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including difficulties in evaluating our prospects and future results of operations given our limited operating history, our dependence on a limited number of existing customers that account for a substantial portion of our revenue, our ability to attract new customers and retain existing customers, market awareness and acceptance of enterprise AI solutions in general and our products in particular, and our history of operating losses. Some of these risks are described in greater detail in our filings with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q for the fiscal quarters ended July 31, 2022, October 31, 2022 and January 31, 2022, and other filings and reports we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the fiscal year ended April 30, 2023, although new and unanticipated risks may arise. The future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Except to the extent required by law, we do not undertake to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations.



About C3.ai, Inc.
C3.ai, Inc. (NYSE:AI) is the Enterprise AI application software company. C3 AI delivers a family of fully integrated products including the C3 AI Application Platform, an end-to-end platform for developing, deploying, and operating enterprise AI applications and C3 AI Applications, a portfolio of industry-specific SaaS enterprise AI applications that enable the digital transformation of organizations globally, and C3 Generative AI, a suite of large AI transformer models for the enterprise.

Investor Contact
ir@c3.ai

Press Contact
Lisa Kennedy
(415) 914-8336
pr@c3.ai

Source: C3.ai, Inc.



C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended April 30,Fiscal Year Ended April 30,
2023202220232022
Revenue
Subscription(1)
$56,866 $56,302 $230,443 $206,916 
Professional services(2)
15,544 16,015 36,352 45,843 
Total revenue72,410 72,317 266,795 252,759 
Cost of revenue
Subscription(3)
23,872 12,958 78,423 45,838 
Professional services1,036 4,405 7,914 17,875 
Total cost of revenue24,908 17,363 86,337 63,713 
Gross profit47,502 54,954 180,458 189,046 
Operating expenses
Sales and marketing(4)
51,701 47,450 183,121 173,584 
Research and development49,681 46,378 210,660 150,544 
General and administrative19,400 17,649 77,170 61,040 
Total operating expenses120,782 111,477 470,951 385,168 
Loss from operations(73,280)(56,523)(290,493)(196,122)
Interest income8,230 750 21,979 1,827 
Other income (expense), net284 (2,452)350 3,019 
Loss before provision for income taxes(64,766)(58,225)(268,164)(191,276)
Provision for income taxes190 195 675 789 
Net loss$(64,956)$(58,420)$(268,839)$(192,065)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.58)$(0.55)$(2.45)$(1.84)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted112,746 105,824 109,851 104,404 

(1)    Including related party revenue of $19,568 and $20,465 for the three months ended April 30, 2023 and 2022, respectively, and $75,452 and $60,425 for the fiscal years ended April 30, 2023 and 2022, respectively.
(2)    Including related party revenue of $8,025 and $3,982 for the three months ended April 30, 2023 and 2022, respectively, and $16,774 and $16,872 for the fiscal years ended April 30, 2023 and 2022, respectively.
(3)    Including purchases from related party included in cost of revenue of nil and $190 for the three months ended April 30, 2023 and 2022, respectively, and nil and $578 for the fiscal years ended April 30, 2023 and 2022, respectively.
(4)    Including related party sales and marketing expense of $3,416 and $5,639 for the three months ended April 30, 2023 and 2022, respectively, and $13,962 and $8,229 for the fiscal years ended April 30, 2023 and 2022, respectively.



C3.AI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
April 30, 2023April 30, 2022
Assets
Current assets
Cash and cash equivalents$284,829 $339,528 
Short-term investments446,155 620,633 
Accounts receivable, net of allowance of $359 and $157 as of April 30, 2023 and 2022, respectively(1)
134,586 80,271 
Prepaid expenses and other current assets(2)
23,309 20,004 
Total current assets888,879 1,060,436 
Property and equipment, net84,578 14,517 
Goodwill625 625 
Long-term investments81,418 32,086 
Other assets, non-current(3)
47,528 63,218 
Total assets$1,103,028 $1,170,882 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable(4)
$24,610 $54,218 
Accrued compensation and employee benefits46,513 32,223 
Deferred revenue, current(5)
47,846 48,854 
Accrued and other current liabilities(6)
17,070 14,874 
Total current liabilities136,039 150,169 
Deferred revenue, non-current288 
Other long-term liabilities(7)
37,320 30,948 
Total liabilities173,363 181,405 
Commitments and contingencies
Stockholders’ equity
Class A common stock, $0.001 par value. 1,000,000,000 shares authorized as of April 30, 2023 and 2022, respectively; 110,442,569 and 102,725,041 shares issued and outstanding as of April 30, 2023 and 2022 respectively
110 103 
Class B common stock, $0.001 par value; 3,500,000 shares authorized as of April 30, 2023 and 2022, respectively; 3,499,992 and 3,499,992 shares issued and outstanding as of April 30, 2023 and 2022, respectively
Additional paid-in capital1,740,174 1,532,917 
Accumulated other comprehensive loss(385)(2,148)
Accumulated deficit(810,237)(541,398)
Total stockholders’ equity929,665 989,477 
Total liabilities and stockholders’ equity$1,103,028 $1,170,882 
(1) Including amounts from a related party of $74,620 and $35,848 as of April 30, 2023 and 2022, respectively.
(2) Including amounts from a related party of $4,983 and $4,862 as of April 30, 2023 and 2022, respectively.
(3) Including amounts from a related party of $11,279 and $16,141 as of April 30, 2023 and 2022, respectively.
(4) Including amounts from a related party of $2,200 and $18,549 as of April 30, 2023 and 2022, respectively.
(5) Including amounts from a related party of $249 and $132 as of April 30, 2023 and 2022, respectively.
(6) Including amounts from a related party of $2,448 and $2,510 as of April 30, 2023 and 2022, respectively.
(7) Including amounts from a related party of nil and $2,448 as of April 30, 2023 and 2022, respectively.



C3.AI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Fiscal Year Ended April 30,
20232022
Cash flows from operating activities:
Net loss$(268,839)$(192,065)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization6,088 5,190 
Non-cash operating lease cost6,992 4,185 
Stock-based compensation expense216,542 113,441 
Other(4,309)1,601 
Changes in operating assets and liabilities
Accounts receivable(1)
(54,517)(14,156)
Prepaid expenses, other current assets and other assets(2)
(576)(14,578)
Accounts payable(3)
(22,041)34,481 
Accrued compensation and employee benefits3,193 10,394 
Operating lease liabilities13,641 (3,266)
Other liabilities(4)
(10,573)(5,604)
Deferred revenue(5)
(1,292)(26,085)
Net cash used in operating activities(115,691)(86,462)
Cash flows from investing activities:
Purchases of property and equipment(70,518)(3,791)
Capitalized software development costs
(1,000)(500)
Purchases of investments(745,249)(796,487)
Maturities and sales of investments876,713 1,117,793 
Net cash provided by investing activities59,946 317,015 
Cash flows from financing activities:
Repurchase and retirement of Class A Common stock— (15,000)
Payment of deferred offering costs— (105)
Proceeds from exercise of Class A common stock options4,468 20,816 
Proceeds from issuance of Class A common stock under employee stock purchase plan3,093 — 
Taxes paid related to net share settlement of equity awards(6,940)— 
Net cash provided by financing activities621 5,711 
Net (decrease) increase in cash, cash equivalents and restricted cash(55,124)236,264 
Cash, cash equivalents and restricted cash at beginning of period352,519 116,255 
Cash, cash equivalents and restricted cash at end of period$297,395 $352,519 
Cash and cash equivalents$284,829 $339,528 
Restricted cash included in prepaid expenses and other current assets— 425 
Restricted cash included in other assets, non-current12,566 12,566 
Total cash, cash equivalents and restricted cash$297,395 $352,519 
Supplemental disclosure of cash flow information—cash paid for income taxes$578 $939 
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities$13,814 $9,261 
Right-of-use assets obtained in exchange for lease obligations (including remeasurement of right-of-use assets and lease liabilities due to changes in the timing of receipt of lease incentives)$(5,589)$26,529 
Right-of-use assets obtained in exchange for lease obligations arising from lease modifications$3,093 $1,572 
Receivable from exercise of stock options included in prepaid expenses, other current assets and other assets$61 $29 
Unpaid liabilities related to intangible purchases$1,500 $2,500 
Vesting of early exercised stock options$1,006 $2,746 
(1)Including changes in related party balances of $38,772 and $20,668 for the fiscal years ended April 30, 2023 and 2022, respectively.
(2)Including changes in related party balances of $(4,741) and $12,739 for the fiscal years ended April 30, 2023 and 2022, respectively.
(3)Including changes in related party balances of $(16,349) and $18,493 for the fiscal years ended April 30, 2023 and 2022, respectively.
(4)Including changes in related party balances of $(2,510) and $(3,350) for the fiscal years ended April 30, 2023 and 2022, respectively.
(5)Including changes in related party balances of $117 and $(7,565) for the fiscal years ended April 30, 2023 and 2022, respectively.



C3.AI, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)
(Unaudited)

Three Months Ended April 30,Fiscal Year Ended April 30,
2023202220232022
Reconciliation of GAAP gross profit to non-GAAP gross profit:
Gross profit on a GAAP basis$47,502$54,954$180,458$189,046
Stock-based compensation expense (1)
5,9723,53323,63711,348
Employer payroll tax expense related to employee stock-based compensation (2)
377411,150114
Gross profit on a non-GAAP basis$53,851$58,528$205,245$200,508
Gross margin on a GAAP basis66%76%68%75%
Gross margin on a non-GAAP basis74%81%77%79%
Reconciliation of GAAP loss from operations to non-GAAP loss from operations:
Loss from operations on a GAAP basis$(73,280)$(56,523)$(290,493)$(196,122)
Stock-based compensation expense (1)
48,06835,628216,542113,441
Employer payroll tax expense related to employee stock-based compensation (2)
1,6691785,8771,972
Loss from operations on a non-GAAP basis$(23,543)$(20,717)$(68,074)$(80,709)
Reconciliation of GAAP net loss per share to non-GAAP net loss per share:
Net loss on a GAAP basis$(64,956)$(58,420)$(268,839)$(192,065)
Stock-based compensation expense (1)
48,06835,628216,542113,441
Employer payroll tax expense related to employee stock-based compensation (2)
1,6691785,8771,972
Net loss on a non-GAAP basis$(15,219)$(22,614)$(46,420)$(76,652)
GAAP net loss per share attributable to common stockholders, basic and diluted$(0.58)$(0.55)$(2.45)$(1.84)
Non-GAAP net loss per share attributable to common stockholders, basic and diluted$(0.13)$(0.21)$(0.42)$(0.73)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted112,746 105,824 109,851 104,404 




(1)Starting fiscal year 2023, the Company records stock-based compensation associated with the Company’s annual bonus program that will be settled by shares of restricted common stock. Stock-based compensation expense for gross profits and gross margin includes costs of subscription and cost of professional services as follows. Stock-based compensation expense for loss from operations includes total stock-based compensation expense as follows:
Three Months Ended April 30,Fiscal Year Ended April 30,
2023202220232022
Cost of subscription$5,663 $2,814 $21,417 $8,638 
Cost of professional services309 719 2,220 — 2,710 
Sales and marketing17,214 11,804 71,389 — 40,344 
Research and development17,449 13,340 90,217 — 39,200 
General and administrative7,433 6,951 31,299 — 22,549 
Total stock-based compensation expense$48,068 $35,628 $216,542 $113,441 

(2)    Employer payroll tax expense related to employee stock-based compensation for gross profits and gross margin includes costs of subscription and cost of professional services as follows. Employer payroll tax expense related to employee stock-based compensation for loss from operations includes total employer payroll tax expense related to employee stock-based compensation as follows:

Three Months Ended April 30,Fiscal Year Ended April 30,
2023202220232022
Cost of subscription$357 $35 $1,003 $42 
Cost of professional services20 147 72 
Sales and marketing604 42 1,767 760 
Research and development576 72 2,523 509 
General and administrative112 23 437 589 
Total employer payroll tax expense$1,669 $178 $5,877 $1,972 

Reconciliation of free cash flow to the GAAP measure of net cash provided by (used in) operating activities:

The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash provided by (used in) operating activities for the periods presented:

Three Months Ended April 30,Fiscal Year Ended April 30,
2023202220232022
Net cash provided by (used in) operating activities$27,054 $(13,162)$(115,691)$(86,462)
Less:
Purchases of property and equipment(10,751)(1,608)(70,518)(3,791)
Capitalized software development costs— — (1,000)(500)
Free cash flow$16,303 $(14,770)$(187,209)$(90,753)