We sent a letter today to C3.ai’s signing audit partner and the head of the U.S. audit & assurance practice at Deloitte & Touche LLP regarding serious accounting and disclosure issues we have identified in C3.ai’s SEC public financial statements. Our letter can be found here.

C3’s fiscal year ends on April 30, and we have asked Deloitte to review our letter in anticipation of its upcoming work conducting the company’s year-end audit. In the letter, we discuss:

• The highly conspicuous growth in unbilled receivables to levels we’ve never before seen in software companies
• Opaque, confusing and highly concerning disclosures and financials related to the company’s related party and very large customer, Baker Hughes
• Efforts to inflate gross profit margins by reclassifying costs of revenue as research and development expenses
• Classification of significant revenue as subscription revenue that in actuality is services- or consulting-oriented revenue
• Significant turnover in chief financial officers, and the appointment of successively less qualified CFOs over time

We hope that our letter will bring to light various highly misleading accounting methodologies that we believe the company utilizes in order to inflate revenue and certain profit metrics, and to conceal deterioration in its underlying business.