Palantir Technologies Inc. (PLTR) on Q1 2022 Results - Earnings Call Transcript
Operator: Good morning. Welcome to Palantir's First Quarter 2022 Earnings Call. We'll be discussing the results announced in our press release issued prior to the market open and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our second quarter and fiscal 2022 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed prior to market open today and in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition, to, not as a substitute for or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation and SEC filings are available on our Investor Relations website at investors.palantir.com. Joining me today on today's call are Alex Karp, Chief Executive Officer; Shyam Sankar, Chief Operating Officer; Dave Glazer, Chief Financial Officer; and Kevin Kawasaki, Global Head of Business Development. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. I'll turn the call over to Alex. Alex Karp: Welcome to our earnings. We are in London. In past earnings calls and over the course of 2 decades, we've been involved in many of the most important things that have affected Western society. But what makes these times special is the trends that we believed would happen are happening at an accelerating rate. And what's super interesting is why is the broader world so late in recognizing how these things are accelerating. What's happening? What is the genesis of the escapism that our broader: institutions; financial; cultural; legal; technical, why are they escaping to the Metaverse or faculty lounge jargon or political structures that are clearly not solving problems where inputs and outports are totally anti, if at all, correlated. Why is it that we are unable to see the violence that is occurring as truly something that it will be part of our ongoing future and not as episodic? Why do we describe these things as uncertainty when they are certain and are happening? Why is it that our institutions are not even pretending that they will be able to hold the center while simultaneously pretending the center will coagulate to a center independent of new structures, new ways of doing things of new products, new institutions, new ideas? Part of that is we have theology -- theological structures around how we build, for example, in our space products. The theology presupposes that the world will be stable. So specialized things we build for both commercial and, for example, special forces, things that are powering current events now were built over the last 2 decades precisely because if you are in the periphery doing the most sensitive and important work in the world as you need to be able to interact with your software in a way where it's disconnected and reconnects simple problem. Normal software sucks at it. You need a very specialized product. We've been supplying this to the world's most important elite soldiers for nearly a decade under the context of what we call, Nexus Peering. You need an ability to interact with space where you solve compute and involving the reduction of data using colloquially defined AI tuned by Foundry getting that to the soldier. You need to be able to, in the context of commercial entities, rebuild the supply chain because there's war. Obviously, there's going to be food shortages. There's disruptions. You can no longer get certain resources from countries. You have to get them from others overnight. The system literally presuppose that will never happen, and therefore, fall completely apart when it does happen. There is no plan for when it doesn’t happen. This is why even though we've been completely focused product company that is only focused on these building products and we have new products coming and not as focused on actually convincing people that we're right, they still sell because the other products are not built for this world. You have a financial context. It's like we have raging inflation, we are very likely to see this will increase. The risk of a nuclear event is so much higher than it's being presented in the public world, that it’s almost surreal to watch the coverage. And yet, there's really no idea of what you would do with evaluating the quality of revenue. So that Palantir, for example, we're a company to thrive in good times and we thrive in bad times. We are not built in the way the theologians of our financial institutions would love us to be built. So that you're built exactly like if we had listened to them, we would only be growth and no free cash flow. We're a company that throws off free cash flow. We're a company that expected inflation. We're obviously super committed to the mission. But it was obvious to us even at inception in bad times, the quality of government revenues would be crucial because other revenues would be -- would suffer from inflation. They would have a lower quality, they'd be less sticky. We built these products for the right reasons. And we're not ashamed to say that we're winning maybe because we were right. We didn't want to be right. But some of this stuff was so obvious. It was obvious that these institutions -- the theology of how we model these things in every context is just corrosive. So you end up with the wrong products, the wrong quality of revenue. So you have growth without free cash flow or free cash flow without growth. You have products that work now that can be hyped up with sales, but clearly are not going to work the day after tomorrow. No ability to build new products. Why would you build new products? You're going to have this perfectly tinkered model, get the institutions to invest in you and acquire all these companies that actually build product. Yes, but it's nearly impossible to build products for tomorrow. There aren't companies to acquire. You actually have to do it yourself. Sure, here and there, you can look for things to accelerate. Palantir has done that. So we -- you have to -- we at Palantir are not fleeing to a different world, whether it's the Meta-world or a theological world or a financial version of theological world or a grad school version of theological world, which isn't even actually academic because academic presupposes interacting with the object from a theoretical perspective, differentiate from the object, not importing a theological preconceived version of the object onto the theory and reimporting that onto the object. Products don't work like that. Reality doesn't work like that. Palantir, we are playing a critical, crucial and much bigger role than we're allowed to mention or would ever discuss in public and current events. Obviously, commercially, because our partners and other future partners are being disrupted. Their supply chains are disrupted. There's a threat of a disruption in the broader economy. And we are -- and they -- many realize that the reality of a truly monumental, epic and horrific disruption in the form of a nuclear attack is much higher than is being reported. But also in the government context where we are playing an outsized role, and we're very proud of that and we're proud of the people we're able to support. And we're also eager to continue to help to support them. I must also say the people who've watching this, many of whom share our belief, that the future is to be won by people who accept the reality of what it is and not what it ought to be. That you can only change the ought by accepting what is. That you've stuck with us and I hope will stick with us, and we are going to continue supplying the world's most important products to the most interesting, creative and effectual people in the world and continue to thrive as this hybrid company that is both bull and baron, comes into full stride in both environments. But in absolutely anomalous stride when times are rough and people are hiding, Palantir's products are on the absolute front line and you see them in the news every day. And we would love someday to discuss exactly what we're doing. But we are playing a good role in your support and buying into the world as it is, is enormously important to us. Thank you. Shyam Sankar : In Q1, revenue grew 31%. Commercial revenue grew 54%, accelerating for the fifth quarter in a row. U.S. commercial revenue grew 136%, also accelerating for the fifth quarter in a row. We added 40 new customers, growing customer count 86% year-over-year. We had GAAP operating margins of negative 9% versus negative 33% a year ago, reflecting our continued march to GAAP profitability. And we had adjusted operating margins of 26%. We have been building our company and our products for this world. The stability on which so many models that purported to explain the world rely, it's vanished, if it ever existed at all. We have built a company for the world that is not the world that ought to be. And it is instability, not its absence that makes our software all the more essential. As our customers confront an extraordinarily significant and rapidly escalating conflict in Eastern Europe, runaway inflation disrupted supply chains and a new wave of refugees, our products have become more essential than ever. At our last earnings call, the invasion of Ukraine had not yet occurred. From the moment those tanks rolled into Ukraine, we have been delivering our capabilities to the front. We have been continuously shipping innovation over the course of the conflict to provide western militaries the software that they need to fulfill their missions. Every product and capability has been employed by our customers from Gaia, Gotham, Edge AI, Foundry, Nexus Peering and more. And the newest of them, MetaConstellation, continues to deliver value in making space-based collection truly operational, delivering significant mission outcomes. And we have been working across Poland, Lithuania, the U.K. and other nations to power refugee relief operations. Our software is powering the World Food Programs, Ukraine response, getting aid as Far East as possible. And across our commercial customers, we are powering resilience to a whole new set of supply chain shocks. Real-world events are driving enormous and long-term opportunities for growth. We are on the front lines, seeing what needs to exist, hearing from commanders and users and building now what is needed and what will power the next decade of U.S. and allied defense programs. We did this a decade ago in Afghanistan with Nexus Peering. We did this a year ago with MetaConstellation whose impact writes headlines in The New York Times, and we will continue building this offer of the future, ramping our investment heavily across the business in the face of these Palantir-shaped macro conditions. This focus has delivered tremendous depth in our R&D and our full stack IP. We now have this opportunity, in addition to releasing new products at pace to bring an increasing amount of that innovation to market. And that's what you're seeing with Apollo. We believe Apollo will fundamentally change how software is deployed, anticipating a future where multi-tenant SaaS is dead and is clearly dying in the present, a trend that is accelerated by geopolitical events. Every software company will need to be able to deploy their software into their customers' environments, requiring them to manage fleets of heterogeneous environments across public clouds, on-premises, sovereign clouds and growing data jurisdictional boundaries and to do all of that seamlessly. Apollo will take customers from a world of continuous deployment to autonomous deployment. And we have been pleased with the market reception to Apollo in our Demo Day event, really being received by a completely new buying audience. We are also now offering Nexus Peering as a stand-alone capability for customers to build their own data fabrics on top of. Over a decade ago, we pioneered a technology that enabled Gotham to reason about the causality of a distributed system of many, many different Gotham nodes. These nodes could all have independent concurrent edits to the same objects and Nexus Peering meant that we could synchronize these edits across the network, either in real time with consistent comps as well as across unreliable intermittent and disconnected environments. Nexus Peering means that you have a distributed data fabric that is survivable and resilient. The loss of any number of nodes or facilities won't impact the whole. This is a core and fundamental hard technology breakthrough that has powered Gotham's unique success across coalition information sharing for defense and intelligence agencies. And by enabling Nexus Peering to be sold as a separate capability we can enable every program in the Department of Defense to leverage this distributed data synchronization and data fabric as we further demonstrate our own commitment to DoD's modular open systems approach. The greatest opportunity for Foundry continues to be the application development infrastructure platform. We believe that Foundry will become the place that you go to build the applications of the future. With AWS or Azure with their highly unopinionated collection of services, most of the work remains in front of you to get to value. And all of that onus is on you, the customer, to get to that value. With Foundry, you're 90% of the way there on day 1. Software-defined data integration, native multi-tenancy for your applications, the OPIs, version pipelines, applications, artifacts, to just name some of the components, that make Foundry work from the start. That's why U.S. Space Forces’, Kobayashi Maru factory realized their ambition, building 13 operationally accepted applications on top of Foundry in months while sunsetting legacy $100 million-plus programs. That's why Airbus rolled out an internally developed supply chain network control tower, a suite built on top of Foundry's application development infrastructure. And this set of applications, it mitigates supply chain issues and is working towards saving hundreds of millions of euros annually by speeding up production against existing fixed capacity and reducing inventory across all parts. What AWS was in the last decade, Foundry will be in the next. Turning to the highlights in our commercial business. We added 37 net new customers in Q1. We saw continued growth in automotive, in financial services, in energy, including a new super major customer, and in life sciences. In April, we closed a renewal with a major U.S. Fortune 100 company for over $150 million. This customer hosted a hackathon with over 600 participants featuring applications built in under 4 days across finance, build planning, network resiliency and customer experience. This was a good and telling example of how scaled customers built better on Palantir as application development infrastructure. Last quarter, we saw continued interest in our modular offerings. Hospitals need to improve operational efficiencies surrounding patient flow and staffing processes in order to decrease the length of stay and ensure patients have access to proper care. Palantir's hospital operation suite has proven a unique ability to solve these problems through collaborative decision-making based on real-time data with targeted, event-driven notifications and actionable AI. Palantir's hospital operations suite is now used by hospitals covering over 37,000 beds across the U.S., up from just over 1,000 on January 1. Turning to government. As instability in the world increases, we continue to double down on our support of the missions of the West's most critical foundational institutions. Our ambition is to be the sixth prime contractor for the U.S. Federal Government, a trusted partner to deliver complex end-to-end integrated hardware and software solutions, building on the legacy of programs that we prime today. But we seek to be the first company to do this as a software prime, using software innovation and our unmatched expertise to deliver new integrated hardware software capabilities faster than the pace of conflict. In Q1, we launched our U.S. Federal Advisory Board, an important milestone in this journey. The war is not just happening on the ground in Ukraine, but also in space. And accordingly, our opportunities in the space universe continue to expand. U.S. Space Force continues to deliver new operational capabilities to America's Space Guardians who have set the gold standard for allies. This is leading to substantial interest in U.S. Space Force's Warp Core platform, which was built on Foundry amongst allied nations. At Space Symposium in Colorado Springs to an audience of U.S. and allied governments, Peter Marquez, the former Head of Space Policy at the National Security Council and the Head of Space policy at AWS, presented Project Argus, a new space situational awareness platform built on Foundry. We closed a GBP 10 million enterprise expansion with the U.K. Royal Navy. Palantir's software is used by the Royal Navy across a broad spectrum of areas from strategic workforce planning to supply chain management. And world events have accelerated our opportunity in Western and Northern Europe. In Germany, we were awarded a framework agreement for state and federal Government organizations to purchase Gotham and Foundry with an initial order coming from the Bavarian police, adding to our existing German security customers in North Rhine-Westphalia and Hesha. Our government health care business grew with an expansion with the Centers for Disease Control and Prevention. The growth of the work is reflected in the doubling of the run rate. Over the past year, while continuing to deliver on the CDC's food-borne pathogen program, which we have been powering since 2009, the CDC expanded Foundry's pathogen surveillance and response work and deployed generalized modules built on top of a common Foundry ontology against new pathogens, including measles, mumps, Legionella and novel flu. The CDC is also using Foundry to process genetic sequence data derived from wastewater samples. On the other side of the Atlantic, our continued investments in software-defined data integration with our newest pipeline builder product continues to pay off at the NHS where they were able to roll out Foundry to 38 hospitals, integrating hundreds of data sets in March alone to enable them to work through the national care backlog. I'll turn it over to Dave to take us through the financials. Dave Glazer: As Alex and Shyam highlighted, we are uniquely positioned for unstable times. We work with some of the most crucial and important institutions in the world. The U.S. government was 42% of our first quarter revenue and has been a leading driver of growth for 8 years with a 30% CAGR from 2013 to 2021, which we view as a long-term trend. More fundamentally, we believe supplying our products to the U.S. government and her allies is a core pillar of our business. As Alex mentioned, in the face of substantial macroeconomic and geopolitical challenges and uncertainty, the quality of our revenue as viewed through growth, margin performance and durability and especially resilience is unique to Palantir. As Alex wrote in his letter, we combine the resilience of the defense industrial sector with the growth of a software company. In the face of our customers' challenges, we have and will continue to incur expenses prior to having contracts in the delivery of mission-critical capabilities. Following these investments, we expect acceleration of our U.S. government revenue into the second half of the year. In Q2 to date, we've already seen the reacceleration of U.S. government revenue and expect acceleration of the overall government segment to follow in the next quarter or shortly thereafter. I'll now review our first quarter performance, followed by our outlook. First quarter revenue grew 31% year-over-year, ahead of our prior guidance to $446 million. Overall net dollar retention was 124%. Commercial revenue growth accelerated for the fifth consecutive quarter. First quarter commercial revenue increased 54% year-over-year to $205 million, up from a 47% increase in the fourth quarter. Commercial growth continues to be driven by our U.S. business as U.S. commercial revenue growth accelerated to 136% in the first quarter, up from 132% in Q4. International commercial revenue growth accelerated in Q1 to 24% year-over-year, up from 22% in Q4 and 7% a year ago. Our U.S. business revenue grew 38% versus the year ago period. Government revenue increased 16% versus the year ago period to $242 million. Adjusted operating margin was 26%, ahead of our prior guidance by roughly 300 basis points. Our customer acquisition continues to accelerate. We added 40 net new customers in the first quarter, up from 34 in the fourth quarter. We had our strongest quarter of net commercial customer adds, adding 37 commercial net adds, which equals 25% sequential growth and 207% year-over-year growth. We expect continued growth in commercial customer acquisition throughout the year. Our growth with existing customers remains strong. Trailing 12-month revenue from our top 20 customers increased 24% year-over-year to nearly $45 million. First quarter billings were $490 million, up 35% year-over-year. First quarter ACV close increased 35% year-over-year on the back of 208 deals versus 81 deals in the year ago period. First quarter TCV closed was $248 million. The U.S. government's businesses TCV has been impacted by the continuing resolution. But now that a new budget has been passed, we're already seeing Q2 U.S. government revenue reaccelerate. Additionally, with the geopolitical landscape outlined by Alex, we expect government bookings activity to increase for the remainder of the year, resulting in stronger government revenue growth in the second half of 2022. We ended the first quarter with $3.5 billion in total remaining deal value, up 26% year-over-year, while duration shortened 4% over the same period. We ended the first quarter with $1.2 billion in remaining performance obligations, up 86% year-over-year. As a reminder, RPO is primarily comprised of our commercial business as it does not take into account contracts with an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses, both of which are common in our government business. Margins and expenses are on an adjusted basis, which excludes stock-based compensation. Adjusted gross margin was 81%. Contribution margin was 57%. First quarter adjusted income from operations, excluding stock-based compensation and related employer payroll taxes was $117 million, representing an adjusted operating margin of 26%, ahead of our prior guidance of 23%. First quarter adjusted expenses were $329 million, up 7% sequentially. We are spending to position the company and our customers to win in the current geopolitical environment. These investments in product and our customers will continue over the balance of 2022. First quarter adjusted earnings per share were $0.02, which includes a negative $0.02 impact driven primarily by unrealized losses on marketable securities. We generated $35 million in cash from operations and $30 million in adjusted free cash flow. Cash flows vary quarter-to-quarter, but it's worth noting the $66 million increase in our accounts receivable balance. At the end of Q1, we had a very strong war chest, $2.3 billion in cash and no debt. In march, we expanded our revolving credit facility to $500 million, up from $400 million previously. And our credit facility remains entirely undrawn. Our balance sheet leaves us ideally positioned to take advantage of the opportunities that may arise from further deterioration of global conditions. Turning to our outlook. We are guiding to a base case of $470 million in revenue for Q2. There's a wide range of potential upside above our guidance, including those driven by our role in responding to developing geopolitical events. We expect second quarter adjusted operating margin of 20% in the base case as we accelerate investments to support our customers' mission in advance of anticipated contract awards and continue to expect full year adjusted operating margin of 27%. We expect and are already seeing an acceleration of our U.S. government revenue resulting from these investments. Continuing to execute the guidance strategy set forth by our CEO, Alex Karp, in our year-end 2020 earnings call with regard to long-term revenue guidance, we are providing and will continue to provide guidance of 30% or greater revenue growth for this year and the next 3 years at each earnings call. With that, I'll turn the call over to Rodney to open up Q&A. A - Rodney Nelson: Thanks, Dave. Joining me for Q&A are Shyam Sankar, Dave Glazer and Kevin Kawasaki. Shyam, this first question is for you, Kernish P. asks, are there any new products you're looking to launch in the near future? Shyam Sankar: Thank you, Kernish. We have released so much new product. Pipeline Builder has improved data integration productivity 2 to 3x at the NHS, autonomous sales and operation planning and execution, the hospital operation suite, MetaConstellation, Edge AI and Edge stream. And beyond new product, we are bringing to market 15 years of deep tech that we built to power Gotham and Foundry. Nexus Peering, our distributed data fabric is going to power the next decade of DoD programs. Apollo is going to take our customers from continuous deployment to autonomous deployment. And this is what we're focused on. Everything else, financials, performance, those are the consequences of our execution on this focus. We build software the world needs before the world knows it needs it. The prescience of our software arises from a deep love and respect for the institutions that are acquired for the world to function and a deep understanding of the macro and geopolitical shifts that some might say are coming, but we would say have already arrived. And the practicality of our software arises from the deep love of our users, the humans who are at the coal face who do the hard work day in and day out from the factory floors of Detroit to the cold concrete floors that refugees are sleeping on in Warsaw. We build software for the world as it is today to help our customers and their humans manage to get to the world that ought to be. Rodney Nelson: Thanks, Shyam. Dave, this next question is for you. Daniel L. asks, what is Palantir doing to reduce share dilution? Dave Glazer : Thank you, Daniel. This is actually something that is repeatedly misunderstood. If you take a look at last year, we only added 0.004% in fully diluted shares outstanding in the entire year. If you flip to the first quarter of this year, that fully diluted number actually declined for the quarter. So you literally ended Q1 with fewer shares than when it started. Rodney Nelson: Thanks, Dave. Shyam, this next question is for you. Noah A. asks, Alex Karp said bad times are good for Palantir. What is Palantir doing during this time of war, inflation and hyperpartisanship to back up Karp's words? How is Palantir solving the world's current greatest problems? Shyam Sankar: Thanks, Noah. This question is really important. The answer to it is literally Palantir. It is the reason that we exist. As Alex has mentioned many times, we have been building our company and our products for this world. As our customers confront rapidly escalating conflict in Eastern Europe, runaway inflation, disrupted supply chains and a new wave of refugees, our products have become more essential than ever. I've already talked about how we are helping governments respond to Russia's invasion and the resulting humanitarian disaster from MetaConstellation and Edge AI to powering refugee and relief operations. But it's also important to understand that a chain of events has been set in motion, a Rube Goldberg like set of bangs, boings and ricochets that extend and will continue to extend into every facet of the world. Food is short and prices are exploding. The availability of fertilizer required to grow more food is disrupted. Commodity prices are sky rocketing. Neon gas, CF46, palladium, all disrupted, all crucial in the semiconductor supply chain. Ukraine is a major regional center for clinical trials. All of those trials and the life-saving medicines behind them are now disrupted. Simple, but essential automotive components like wiring harnesses and seat belts are disrupted. All of this is coming on the back of a set of dynamic disturbances from COVID and the resulting supply and demand shocks people are still coping with and the emergent wave of shocks that will come from extended and severe lockdowns in China. To solve these problems, you cannot operate on software that was built to assume a stable world. In the stable world you can make plans and you edit it occasionally. The plan is static. The assumptions are fixed and immutable. In the real world, in this world, you only make a plan so you can change it. You need all of your data ontologized into your digital twin, flowing into dynamically delivered applications that connect to each other. You need your AI to move faster than the rate of disruption. When something goes wrong, it needs to tell the person at the coal face what to do next. Inflation flowing through your supply chain means you need an entirely different approach to manage suppliers, logistics, production and S&OP. Our work with Tyson Foods is delivering $10 million of value realization every week by moving them from legacy approaches like integrated business planning to autonomous sales and operations execution by moving from a static plan that was assumed to be right to autonomously planning where you go turn by turn as they are dynamically updated to navigate around unforeseen obstacles. Literally, every function of every business is breaking under the stress of these events, events where the aftershocks are strong and more profound than the initial earthquake. And Foundry was built for this. Rodney Nelson: Dave, this next question is for you. Deepak C. asks, when is the company targeting to be GAAP profitable? Dave Glazer : Thank you, Deepak. We had a negative 9% GAAP operating margin in Q1, an improvement from negative 14% in Q4 and from negative 33% in Q1 2021. So we're making significant progress. And Q1 was our strongest gap quarter-to-date. And not to mention, last year, for the full year, we posted $424 million in adjusted free cash flow with a 31% adjusted operating margin. And we're already off to a strong start this year. But with that said, we're preparing for a world that has the highest chance of a nuclear war in my lifetime, let alone since my parents were kids. And as Alex discussed, the quality of our government revenue as viewed through growth margin performance, durability and resilience is unique to Palantir. We think this uniqueness will be incredibly important in the quarters to come. Rodney Nelson: Thanks, Dave. Kevin, this next is for you. Jackson K. asks, can you comment on the SPAC partnership strategy and its impact on the financials? Kevin Kawasaki: Sure. Thanks, Jackson. Revenue from these contracts has peaked in Q1 at around $39 million. And we will not have additional new customers from this program as we've wound the program down. Going forward, expect about $30 million of revenue per quarter from these customers. Revenue in Q1 is higher as a result of some catch-up of about $9 million recognized in the quarter, reflecting work we started last year. We also saw roughly a negative $0.02 impact on earnings per share from the marketable securities. When you look at this by geography, you'll see continued strength and growth in the U.S. business, ex-SPACs, growing at 65% year-over-year and 9% sequentially quarter-over-quarter. We had our strongest quarter for winning new commercial customers overall. Commercial customer count up 25% sequentially and up 207% from a year ago. And in the United States, commercial customer count grew 368%. We expect continued growth in commercial customer acquisition. And as Alex mentioned, we see a path to double our U.S. commercial revenue again. Rodney Nelson: Great. Thanks, Kevin. Shyam, one more for you before we open up the call. Michael P. asks, in the FY 2021 business update, there was a reference to Ops PI as a Foundry capability or perhaps module. Could you elaborate on the problem this solves and what value it delivers to Foundry users? Shyam Sankar: Thanks, Michael. When you think about Foundry, there are really 3 high-level massively differentiated capabilities. The first is that Foundry makes the marginal cost of data integration approach zero, with software to solve data integration, with pipeline builder, with all this data integration technology, we have software that writes its own data pipelines for you. This gets you to the starting line quickly. It helps you answer the question, how am I going to bring all my data together? How long is that going to take? And how do I deal with the fact that there's new types of data created every single day? The second capability is that Foundry makes the marginal cost of application development approach 0, no code, WYSIWYG application builders for robust interconnected applications. Importantly, these are not dashboards. These are applications that read and write to your existing enterprise transactional systems like your ERP, your general ledger, your warehouse management system. And third, Foundry has native modeling and simulation capability that lets you interact with the digital twin of your enterprise. So yes, you can compute something like an optimized production plan. But even much more importantly, you can respond to real-world surprises in real time. The best analogy I have for this is that current technology is like most people are using something like MapQuest where you put in a destination and then you print out the map. Foundry is like Waze where, yes, you put in the destination, but we are dynamically computing the best way to get there all the time, turn by turn based on the ever-changing facts on the ground: traffic, construction, accidents, road closures. While the competition is stuck in the traffic jam, you're raising across the finish line. So all of this is possible because Foundry is a digital twin of your business, and that is powered by Foundry's ontology. So with our ontology, we're modeling not just the nouns, but also the verbs of your business, the actions that you can take. So that means you cannot only realize that there is a's problem with your production plan based on real-time data, but also compute the correct answer, the correct plan and push that transaction to your ERP system. And all of that amazing capability has historically only been available for applications built inside of Foundry. The OPIs, they change all of that. The power of the ontology can now be used by any application in the enterprise, whether it's first-party apps developed by IT or third-party apps developed by IT suppliers and independent software vendors. The OPIs are clean, syntactically sugary sets of restful APIs. I like to think about it as serverless enterprise orchestration. It's Lambda, but for your enterprise, simple abstractions that make the authentic complexity of the real-world businesses manageable and programmable. Rodney Nelson: Thanks, Shyam. Our next question comes from Brent Thill with Jefferies. Brent Thill : Regarding the government business, can you talk to the acceleration that you're seeing in the business? And I think you called out the United States as where you're seeing the reacceleration. Can you also speak to the rest of the world and what you're seeing there? Shyam Sankar: Absolutely. Thanks, Brent. We've been working with the U.S. government for 15 years. And over the last decade, we've seen a 30% CAGR, and that covers times at peace and times of conflict. And I've already talked about our involvement with current events and the role that we're playing there. And you can kind of see the reacceleration starting to happen with the wins. The work that we're doing with DSG CD2, which was literally built for a land war in Europe. The expansion of the work that we have with the U.K. Royal Navy, the framework agreement that we have in Germany with state and local police covering Bavaria, North Rhine-Westfalia, Hesha, the work that we're doing in space with U.S. Space Comm and Warp Core, but really the knock-on opportunities that creates for us with allies as they approach space. And so the end result of this is that in Q2, we've started to see the U.S. government business reaccelerate. We're doing a substantial amount of work right now where we are investing in our customers, and we expect that work to have both short term but also longer-term payouts. We're doing work now that matters and will likely be contracted. But we're also doing work that is defining the requirements for defense procurements over the decades to come here. Rodney Nelson: Thanks, Shyam. Our next question comes from Brad Zelnick with Deutsche Bank. Brad Zelnick: I'm hoping that you can. I think you guys might have come -- cut out on me. But I wanted to double-click on the range of upside that you referred to in your Q2 guidance. How much of that variability is coming from commercial versus government? And how should we think about the variability and what it means for your 30% revenue and 27% margin guide for the full year? Dave Glazer : Thank you. So in this macro environment, we feel very well positioned for the full year and beyond. Our U.S. government revenue represented 42% of our Q1 revenue, and a significant amount of this is in the defense space. Our commercial business has been outpacing the government business, accelerating in each of the last 5 quarters to a 54% growth rate in Q1. And as Shyam just mentioned, in Q2, we've already seen some reacceleration in the U.S. government business, which we think is a long-term trend and expect acceleration of the overall government segment this quarter or shortly after. Rodney Nelson: Great. Thanks, Kevin. Our next question comes from Mark Cash with Morningstar. Mark, you can go ahead. Our next question comes from Rishi Jaluria with RBC. Rishi Jaluria: I really appreciate it. Maybe I just wanted to go a little bit more into understanding the range of outcomes in Q2. You talked about maybe where you can get a little bit more upside. Can you walk us through maybe a full set of assumptions there? And more importantly, when there's a base case and you're hinting at a bull case, what is a potential bear case that you would be thinking about in Q2, just given everything that you're seeing going on from a macro perspective? Shyam Sankar: Look, the base case is really establishing how we're thinking about the visibility that we have. The upside is quite large. I mean a lot of this comes down to contract timing and the acceleration of events. There's a fair amount of work that's in flight here. The way that we engage with customers is we're not going to deprive you of help in your moments of greatest need when you're at war because paperwork isn't in yet. And so we think we have visibility into the upside. We're not going to comment on the specifics of it, but it's meaningful. But it's also hard to predict. And what we need to be focused on right now is just delivering not only because of what implies for this quarter, the next quarter and this full year, but what it implies for the long-term growth of the business and the relevance we have to solving the most important problems in the world. Rodney Nelson: Great. Thanks, Shyam. That concludes Q&A on today's call. I'll turn the call back over to Shyam Sankar for closing remarks. Shyam Sankar: Thank you, Rodney. Look, we feed our culture every day through the direct exposure that we have to our mission from the factory floors of European manufacturers to the cold concrete floors that so many refugees are sleeping on. In Q1, many of our people had the chance to go to Poland, Romania and Lithuania to stand up the software infrastructure to power refugee operations, processing nearly 100,000 people a day. And we are involved in supporting the military as they execute their sacred duty. Much as we positioned the entire company around COVID and delivered outsized impact to global health agencies and health delivery organizations, as we stabilize production and supply chains now, we will throw our entire company behind the most significant set of geopolitical and macroeconomic situations and generations. Our company was built for this. Our software was built for this. Back to work.
BofA Raises Palantir Price Target to $75 Amid Accelerated Growth
BofA Securities analysts increased their price target for Palantir Technologies (NYSE:PLTR) from $55 to $75, maintaining their Buy rating. The upgrade reflects expectations of accelerated growth in the U.S. and a strengthening competitive position.
Palantir’s penetration in both government and commercial sectors was described as being in the early stages, with expanding use cases and enhanced interoperability driving further adoption and upselling opportunities. The analysts highlighted the company’s ability to operationalize generative AI through its complex Ontology, addressing challenges in security, governance, and data robustness. This positions Palantir as a key player in enabling businesses to enhance margins through software and AI rather than relying solely on fixed asset scale.
Software has become increasingly critical in industrial production, representing 17% of U.S. nonresidential private fixed investments in 2023, compared to 11% in 2005. This trend supports Palantir’s long-term growth prospects as organizations prioritize automation, real-time data analysis, and process control.
BofA also raised its three-year commercial growth forecast for Palantir to 34% from 32%, citing the company’s expanding commercial customer base, partnerships, and distribution channels.
Palantir Soars 13% After Boosting Full-Year Forecast Amid Surging AI Demand
Palantir Technologies (NYSE:PLTR) raised its full-year outlook following a stellar third-quarter performance fueled by a wave of new AI-driven business. The company’s stock surged over 13% in pre-market today.
For the quarter, Palantir reported adjusted earnings of $0.10 per share, beating Wall Street analyst expectations of $0.09. Revenue climbed 30% year-over-year to reach $725.5 million, surpassing the projected $703.4 million. The robust results were propelled by a 39% increase in customer count, as demand for AI solutions continued to accelerate.
The company’s momentum has led it to raise its full-year revenue guidance to a range of $2.805 billion to $2.809 billion, up from its previous range of $2.742 billion to $2.750 billion. For the fourth quarter, Palantir projected revenue between $767 million and $771 million, well above the consensus estimates of $742.3 million.
Bank of America Raises Palantir Price Target to $50, Sees Stock Poised for Significant Growth
Bank of America raised its price target for Palantir (NYSE:PLTR) to a Street-high of $50 per share, up from $30, reaffirming its Buy rating on the stock. The bank sees Palantir’s recent inclusion in the S&P 500 as a pivotal moment, prompting institutional investors to reassess the company's long-term growth potential, which has been widely underestimated.
Comparing Palantir’s current trajectory to the early days of mobile phones, Bank of America suggests that, just as the mobile revolution led to trillion-dollar companies, Palantir is similarly positioned for massive expansion. The analysts highlight Palantir's technological strengths, particularly its "Ontology" platform, which integrates data and automation for enhanced decision-making. This, they argue, makes Palantir a crucial player in the evolving landscape of machine learning, AI, and quantum computing.
What distinguishes Palantir, according to the note, is its unique sales strategy. Engineers collaborate directly with clients to develop tailored solutions, creating deeper, more valuable relationships and boosting the company’s pricing power. The bank also points to Palantir's 35% operating profit margin as evidence of this approach’s success in the competitive software market.
Overall, Bank of America believes Palantir's business model and technological prowess position it for substantial growth in the coming years.
Palantir Technologies Inc. (NYSE:PLTR) and Its Strategic Growth Insights
- Palantir's partnership with Microsoft could significantly impact its growth in the government sector.
- The company's high price-to-earnings (P/E) ratio of 176.96 and price-to-sales (P/S) ratio of 27.72 indicate market optimism about its future growth prospects.
- Palantir demonstrates strong liquidity with a current ratio of 5.92 and operates with minimal debt, having a debt-to-equity (D/E) ratio of 0.06.
Palantir Technologies Inc. (NYSE:PLTR) is a company that specializes in big data analytics, providing software and services that help organizations analyze large amounts of information to make better decisions. It operates primarily in two sectors: government and commercial. Palantir's partnership with Microsoft aims to push the boundaries of artificial intelligence (AI) applications within government agencies, a move that could significantly impact its growth in this sector. This collaboration is particularly noteworthy as Palantir's government business has been growing at a slower pace compared to its commercial operations.
The financial metrics of Palantir reveal a company that the market values highly despite its earnings. With a price-to-earnings (P/E) ratio of 176.96, investors are showing a willingness to pay a premium for Palantir's shares relative to its earnings. This high P/E ratio could be indicative of the market's optimism about Palantir's future growth prospects, especially in light of its strategic initiatives like the partnership with Microsoft.
Moreover, Palantir's price-to-sales (P/S) ratio of 27.72 and its enterprise value to sales (EV/Sales) ratio of 27.62 further underscore the market's high valuation of the company's sales. These ratios suggest that investors value each dollar of Palantir's sales at a premium, likely due to the unique technology and services it offers, as well as its potential for expansion in both the government and commercial sectors.
The company's financial health is also reflected in its liquidity and debt management. With a current ratio of 5.92, Palantir demonstrates a strong ability to meet its short-term obligations, indicating a solid liquidity position. Additionally, a debt-to-equity (D/E) ratio of 0.06 shows that Palantir operates with minimal debt, which is a positive sign for investors concerned about financial stability.
In summary, Palantir's partnership with Microsoft could be a pivotal move for its growth in the government sector, despite the current slower pace of expansion in this area compared to its commercial business. The company's financial metrics, including its high valuation ratios and strong liquidity position, reflect the market's optimism about its future. These factors combined suggest that Palantir is well-positioned to leverage its technological capabilities and strategic partnerships for further growth.
Mizuho Raises Palantir Price Target to $24 but Maintains Underperform Rating Despite Strong Q2
Mizuho increased the price target for Palantir Technologies Inc. (NYSE:PLTR) from $22.00 to $24.00, while maintaining an Underperform rating, after the company posted better-than-expected Q2 results, resulting in a stock price surge of more than 13% intra-day today.
The analysts acknowledged that Palantir delivered a strong quarter that exceeded expectations, driven by 27% revenue growth and significant large-deal momentum.
Despite this positive performance, the analysts expressed continued caution, noting that Palantir's stock is now trading at 19-20 times its estimated revenue for calendar year 2025, based on low- to mid-20s expected growth. They emphasized the need for Palantir to consistently demonstrate stronger execution and growth to justify a significantly higher valuation. Due to the inherent unpredictability of Palantir's business, the analysts believe this will be challenging.
As a result, while acknowledging the upward revision of numbers, the analysts reiterated their Underperform rating.
Palantir Technologies Inc. (NYSE:PLTR) Earnings Report Analysis
- Revenue and Net Income: Palantir reported a revenue of $678.13 million and a net income of $134.13 million, indicating a healthy profit margin.
- Gross Profit and Cost Management: With a gross profit of approximately $549.57 million, Palantir demonstrates efficient cost management and financial stability.
- Operational Efficiency: Operating income and EBITDA figures of $105.34 million and $113.4 million respectively, showcase Palantir's operational efficiency and profitability.
Palantir Technologies Inc. (NYSE:PLTR) has been capturing the attention of investors and analysts alike, especially after its recent earnings report. As a company specializing in big data analytics, Palantir plays a crucial role in processing and analyzing large sets of data for both government and commercial clients. This unique positioning in the tech sector, combined with its innovative approach to data analysis, sets Palantir apart from its competitors. The optimism surrounding Palantir, as highlighted by The Motley Fool, stems from its financial performance and the potential for future growth.
In its latest quarterly financials, Palantir reported a revenue of $678.13 million, which is a significant figure that showcases the company's ability to generate income from its operations. This revenue, coupled with a net income of $134.13 million, indicates a healthy profit margin. Such financial health is a key factor that contributes to the optimistic sentiment among investors, supporting the belief that Palantir is on a trajectory for further growth and value creation.
Moreover, Palantir's gross profit of approximately $549.57 million further reinforces the company's financial stability. A gross profit at this level suggests that Palantir is efficiently managing its cost of revenue, which stood at about $128.56 million. Efficient cost management is crucial for maintaining profitability, especially in the competitive tech sector where innovation and investment are continuous.
The operating income and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) figures, at $105.34 million and $113.4 million respectively, provide insights into the company's operational efficiency. These metrics indicate that Palantir is not only generating significant income but is also managing its operational costs effectively, leading to a healthy bottom line. The earnings per share (EPS) of $0.0601, although modest, is a positive sign for investors, as it reflects the company's profitability on a per-share basis.
Finally, the income before tax of $140.76 million, after accounting for an income tax expense of approximately $5.19 million, highlights Palantir's financial strength. This financial performance is a testament to Palantir's robust business model and operational efficiency, laying the groundwork for the optimistic outlook shared by investors and analysts. As Palantir continues to innovate and expand its client base, the sentiment that "the best is yet to come" for the company seems well-founded.
Palantir Technologies Faces Modest Downside According to Mizuho Securities
On Tuesday, May 7, 2024, Gregg Moskowitz of Mizuho Securities set a price target of $21 for Palantir Technologies (PLTR:NYSE), slightly below its trading price at the time, which was approximately $21.60. This target, as reported by Benzinga, suggests a modest downside from the current level, reflecting a cautious outlook on the stock's future performance. The setting of this price target came in the wake of Palantir's first-quarter earnings announcement, which, despite showing strong financial results, did not prevent a decline in the stock's price.
Palantir Exceeds Q1 Expectations
Palantir Technologies Inc. (PLTR) reported first-quarter earnings that met and even surpassed analysts' expectations. The company achieved an earnings per share (EPS) of $0.08, aligning with estimates, and generated revenue of $643 million, exceeding the forecasted $614.88 million. This performance indicates a solid operational standing, as highlighted by the Schwab Network. However, despite these positive results, PLTR's stock experienced a downturn, shedding light on the market's reaction to more than just earnings figures.
Market Reaction and Investment Opportunities
The decline in PLTR's stock price, as noted by Seeking Alpha, was seen as a potential buying opportunity for long-term investors. This perspective is based on the company's ability to exceed top-line expectations and raise its full-year guidance, suggesting confidence in its future growth trajectory. Palantir's Advanced Information Processing (AIP) technology continues to attract new customers, bolstering its market position. Despite a 10% drop in its stock price, the company's fundamentals and growth prospects remain strong, presenting an attractive entry point for investors looking to capitalize on the current dip.
Palantir's Financial Highlights and Market Position
Moreover, Palantir's stock price fell to $21.55, a significant decrease from its previous close, despite outperforming first-quarter earnings and revenue expectations. The company reported a Q1 revenue of $634 million, surpassing the anticipated $615 million, and an adjusted EPS of 8.0 cents, slightly above the expected 7.9 cents. Additionally, its adjusted EBITDA of $234 million exceeded forecasts by a considerable margin. This paradoxical market reaction could be attributed to the management's cautious outlook, possibly due to uncertainties in the fiscal year's first quarter. Despite this, Palantir maintains an ambitious annual growth target of 25%, underscoring its confidence in its business model and future prospects.
Currently, PLTR is trading at $21.505, reflecting a decrease of approximately 14.7% from its previous levels. This fluctuation in stock price, ranging from a low of $21.35 to a high of $22.7 during the trading day, showcases the volatility and investor sentiment surrounding the stock. With a market capitalization of around $45.82 billion and a significant trading volume, Palantir remains a key player in the data analytics sector, navigating through market uncertainties with a focus on long-term growth and technological advancement.
