Palantir (PLTR) 7 Aug 232023 Q2 Earnings call transcript

Good afternoon. I’m Ana Soro from Palantir’s finance team and I’d like to welcome you to our Second Quarter 2023 Earnings Call. We’ll be discussing the results announced in our press release issued after the market close 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 third quarter and fiscal 2023 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. is market our our closed risks distributed press SEC those the after today concerning available earnings in release filings. Information and in as no by undertake obligation update statements, We to law. except forward-looking required

adjusted addition course isolation of from or measures we to non-GAAP Further, during as financial considered a today’s These in the measures. be in not will GAAP call, refer measures. certain to, should for financial substitute

in GAAP our non-GAAP these including of measures measures, presentation is comparable today. included release Additional information about provided press non-GAAP reconciliation investor and to

Our are press Relations investors.palantir.com. SEC release, investor presentation available website and filings Investor on our at

Over the year-over-year of call, reflect comparisons discussing when to we will stated. course growth rates various rates the business. unless These our otherwise refer

Chief Officer; Taylor, Officer. Chief Executive Officer; on me Chief Officer Joining Shyam Dave and Ryan Chief Karp, Technology Financial Chief Officer; Revenue Legal and today’s call Alex Glazer, Sankar, are

I’ll now Alex remarks. opening turn over it for to

earnings. Welcome to our

unique we are is period PG, years, the Foundry, XX at a the world, one our the product last Through Palantir. of offerings interesting, the built selection Apollo. in We impactful at most platform, course what target arguably in of

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you thank us being And for today. with

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peers. interviewed now AI leveraging our they the an advantage calls CEO within forward the lake are to that was discussing company, data Novartis’ The recently partnership quickly we created Novartis over move CEO on CNBC of fundamental in integrated which quote its which

XX new them customers launched longest how We can capabilities we’re seeing is causing as and weeks unprecedented they conversations interest. just already our are AIP tenured inbound also the opening AIP to ago our largest, with use expansion reimagine software.

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effect multiplicative. expansion the expect be to We

including industries. and In many same different transportation, construction, time, across in the seeing goes of pharmaceuticals, across commercial society. staples, U.S. automotive, in QX, industries different consumer list core success at industries, we’re today’s utilities, infrastructure, the XX the institutions spans energy, and At deals closed we on healthcare, roughly

relationships. growth of While industries spanning in have we growth, industries, immense customer through within for we breadth our still both our existing these expansion see opportunity the software and

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schedules facilities at Foundry placements, numerous forecast healthcare among other patient to used generate nurse and being is applications.

has the to has patient from month just instead accept Tampa transfers to a Cleveland has of generates in managing XX times X with example, nurse in schedules Foundry, XX% launch. HCA reduced General hour hold since For now XX%. able XX. months and spent patient by Clinic in four each time X.X% in patient reduction increase And hospitals other an placements been seen

from $X to customers. continue those newest increase with the of U.S. of continue seeing also expansion our XX% customers. contracts we excluding breadth had beginning We customers all that revenue we’re U.S. revenue, quarter customers, than growth alone in during across commercial While XXXX each existing from outsized growth strategic from dozen million industries, we brought commercial year-over-year the our more coming and and grow nearly in two at commercial customers have started since our that last is over of same to the

to continue. We expect this trend

pockets our investing Korea, in We of within Japan, targeted business, such the Canada the opportunities other East, Middle are across among and as international momentum world. commercial

in onboarding lead Fujitsu longstanding time, against we household through name with same all challenging recent new seen success At climate. customers example, the eight go-to-market For AIP customers. largest our of the Europe, seeing partnership, large-cap Japanese conversations our has to are backdrop today’s expansion

the and our our Defense, a government Government U.K. organizations such particularly work side, of business in strong On with Navy. the Royal of U.K. NHS result the as including QX international was as Ministry

results to in of disappointing, are pipeline through U.S. core converting QX deals our strength business, mission. long-term the business. which in Within growing revenue they significant are remain our while the the We existing focused contracts on government Government we the belie and

Lab the Space with worth to to for CENTCOM. starting multiyear secured new from contract & $XXX million of $XXX Forces Research In of million, the U.S. term conversion funding QX, Command contract work with Army a and we Special award COCOMs, longer awards Operations up R&D Air

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the to Turning back overall business.

opportunities excited vast ahead. in the our quarters about We are

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over I’ll Shyam. to turn it now

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inclusive to coalition continue the against our through adversaries. AI-enabled We in hide integrated chain, strength rather capabilities, of more bide deterrents the lot but here, a kill There’s time the say deterrent. delivering and invest next to our level an of I’d

big lever about We It continue as excited to to very a be a market Palantir as well continues for internally, Apollo. be opportunity. massive

allowed has without up for the Over scale XX high-side to our to last XX few Apollo years, us managing scaling stacks internally team.

stands to VC investment are the regulated believe credit cheapest as born with delivering surge the capabilities In as and more to space, the startups in market, we defense path in of environments. the Apollo the fastest new

customers And into their itself manage in and the QX, we move burden. want started they risk seeing demand own from to services government to reduce as a FedStart operating customer. USG compliance existing

of we I’ll binge our after ideas. annual all I’m Week. from the from forward Hack this further compelling internally. looking very submissions the much Right closing, wrapped be just up to roadmaps watching call, acceleration our In teams new

through I’ll turn Dave the it over walk to to financials.

Thanks, Shyam.

The strong. quarter exceptionally was XXXX second of

million profitability, expanding our highlighting third report consecutive to generating leverage business. proud our consecutive operating of quarter second the We’re adjusted $XX and GAAP $XX also million operating of consecutive operating GAAP This of margins, net third marked of in of operating income. profitability quarter quarter the and income

revenue We again. for our surpassed the of from guidance operations and adjusted yet high end income both

profitability We surpassing in make us of this a the basis a inclusion committed in $X revenue in significant of also S&P growth achieved following year, expectation each milestone, profitable QX reaffirm time. driving GAAP our trailing we results. which revenue our We and for to the first XX-month billion would XXX quarter remain on eligible for

XX% sequentially, of to guidance. end our in range global results. the $XXX exceeding year-over-year prior revenue, topline million X% of the generated and Turning up our We high

and from Excluding of X% the revenue grew XX% sequentially. year-over-year total contracts, revenue commercial strategic impact

our per sequentially continues from customers XX-month largest and year-over-year in to customer grew customers. our XX% Trailing $XX demonstrating momentum XXX expand. XX% increased from year-over-year customers, revenue to our X% to XX account new Revenue Customer million top customer. customers to the onboard and convert ability per

commercial our to segment. moving Now

XX% million, commercial grew X% challenging to as $XX sequential compare quarter to million year-over-year in Second sequentially decline strategic revenue the revenue due and commercial contracts. anticipated declined from a $XXX

XX% contracts, commercial sequentially. impact grew Excluding strategic revenue and commercial year-over-year X% the from

U.S. in $XXX sequentially quarter XX% commercial the declined revenue year-over-year and second million. to grew X%

year-over-year a strategic when sequentially, Excluding commercial quarter. saw revenue contracts, compounded X% even XX% XX% we result with U.S. and the more from sequential growth that commercial impressive last revenue is grew

count wins Our and seeing where consecutive grew U.S. year-over-year significant growth. expansions. customer velocity XX% This customer commercial U.S. we’re commercial business, the sequentially, X% new driving highlights XXth of our sequential the and are in marking quarter we

Our grew international enterprises, remain growth flat year-over-year with targeted remained commercial muted growth of although commercial the to U.S., we business internationally. see Relative to sequentially. opportunities European to $XXX X% continue more and there million

strategic from $XX commercial quarter. million compared in $XX contracts Revenue million, to prior was the

decline and revenue trend fourth quarter revenue $XX We to to third we to continue million, $XX expect to quarter these to customers from anticipate between million down.

year, we expect total revenue. year be to customers approximately For the full X% revenue full these of for

XX% to Turning to X% segment. sequentially $XXX year-over-year declined grew U.S. sequentially $XXX Government XX% to Government million. year-over-year government and revenue our grew revenue and X% million.

While renewals, associated our growth the contract of USG uncertainties sequentially. Government we a maintain expansions XXX% remain TCV business, bookings of we that acknowledge with grew U.S. are timing particularly the in as strong opportunities of and and confident pipeline there

by reacceleration XX% international XX% year-over-year Government to grew our government The U.K. million. and sequentially $XX revenue was in government International work. our driven business

contract U.K. over our remain nature Government government we the of that the business long-term. continue work cycles, the will sees confident to While our to expand funding generally fluctuations and with due

million $XXX year-over-year. value $XXX booked up quarter billion sequentially. deal TCV in remaining obligations. was in $X.X with XX% total ended second to XX% Turning was million, the bookings. up remaining and Billings performance $XXX We million,

take contractual of of months as than an contracts primarily is our most XX and of RPO termination both initial clauses, which convenience government that fall obligations with of commercial less reminder, into our in business. it account a not are beyond business comprised for does As common term

gross compensation which expense was stock-based payroll taxes from employer XXX related margins. $XXX expense adjusted was Adjusted of XX%, XX% for operations, million, and excludes third points of which representing quarter. and prior adjusted margin end Turning margin income of and consecutive high to compensation excludes the stock-based expense. margin, guidance Adjusted basis operating operating an our expanding quarter marking ahead of the the

year-over-year million, These quarter growth drive of $XXX revenue ability second costs adjusted efficiently X% to our managing results expense down demonstrate while sequentially. only up with and

We on calibrating our G&A, by growth. driving in world-class continue to of technical investments in and headcount growth strategic prior capitalizing third cloud primarily see with new quarter to leverage increase grad cohort of we our as we an in the efficiencies Consistent talent. expense in expect manage key areas onboard years, expenses

have quarters, GAAP we past committed few As fiercely stated are we profitability. over the to sustained

of while an the GAAP from midpoint income adjusted margins, of and to same expanding million range. we prior dedicated consecutive $XX back increase net resources quarters AIP, On at new three of of guidance year investments operations an excess above increasing million, increasing full $XXX our time, of our income product, the the and our operating are to

the we resourcing even to specific growth half focused remain revenue invest year, of the to second increase world. and ahead and investment the Looking growth, on geographies AIP around below calibrating we in as expense

income. GAAP our of We million, second generated income from consecutive quarter operating operations $XX of

We to stock-based manage compensation. continue our

As mentioned half through to year. we the back expect last trend quarter, the of it up

operating on focused laser and remain net we profitability. income However, GAAP

shareholder employee future compensation the and compensation to equity success about are of think equity it linking the we to AIP. process we of aligning value, As in

earnings our Turning earnings GAAP share profitability. GAAP Adjusted quarter $X.XX. net GAAP share of per was was and $XX income. consecutive was to million, net income $X.XX per third

and margin revenue combined adjusted XX%. our operating Additionally, growth was

for the to the executing to Rule return half in of expect access XX year. the second of We of

cash flow, year, of of margin cash of generated Through margin free flow. the $XX $XXX our generated and in in a the margin million of representing $XX adjusted XX%. We to cash first flow, operations, representing from million Turning in million XX% representing a cash adjusted a XX%. free half we

which $XXX and We of additional equivalents ended $X.X U.S. revolving remains access up our million to credit facility, through cash, the quarter cash entirely in undrawn. We retain bills. second with billion liquidity treasury short-term to

Now outlook. turning to our

we adjusted $XXX net expect $XXX million and of income. $XXX and operations XXXX, of from revenue QX and million $XXX For GAAP between million, income between million

our XXXX, raising of year full $X.XXX we revenue to For are excess billion. an guidance

from million $XXX GAAP income are We in guidance quarter. excess of our expect to continue raising and operations income net adjusted each an we to

authorized quarter our billion of to see free our profitability, back adjusted has of On repurchase of This million our our the half and of in Directors in the reflects value $XXX the third sheet, $X.X the balance our cash we up program first business stock GAAP conviction year the in flow of of over consecutive $X Board in a trajectory program our stock. and on billion.

With the over start that, Ana I’ll turn to it to Q&A.

from few shareholders a Thanks, before the We’ll Dave. up questions we call. begin with our open

from of Our who advantages companies can Gaurav of are Palantir some is first asks, other the AI none what question has [ph] the that with? compete

people I’ll The to value the the one. who because for going the accrete going own software. the who Palantir take optimally workflow, to It’s own is that positioned accrete the incumbents. is to AI, to

case, So, matter. today. do problems of experience the the just to customers have our we we in it’s future customers. ability It’s the that years have that that XX solving acquire our It’s not

to and The problem substantially knowledge you with in valuable solving you before can LMs quickly. of other be problems same need should if them. two be with of have enterprise, we should it the haven’t not the those changed. solve The decades experience LLMs had you really be means In that and we you write want infrastructure profits solving problems for that poems built more applying your to you and words, the we’ve LLM

time accelerating XX doing we’ve the our are to copilots. in Excel there that and incredible. like been building way been last here. And the is, to not value going truly and been in field to more here make Excel. I we’ve LLM with LLMs our useful. I’ve out They’re going replace valuable is the think everything about The The think one customers It’s with LLM this Excel, XX can you customers, we that weeks, over deployed

positioning about good really feel I So the there.

because lead the to one it’s about of line of KLM them, been And of to problems, roughly we’ve lot technical at a a think decades it’s But AIPCon(X). two of share ridge next us which given kernel. preview ahead, to I the hope lot really

are like stochastic I Why not They’re mad you these on one talked calculus. LLMs question in KLLMs. how scientists. earth you earlier statistics, the when remarks ask would to a LLM, going ask about of

And honors answers, you priors. there that reality I really isn’t here, committee this fundamental need when think the a answer you to an have that that are stochastic question, especially there don’t

use to actually wheel you when can advantage the have these framework. operational decisive enterprise LLMs sort And you in this this of for

So September, this. AIPCon(X), stay talk more tuned about till we’ll

Thanks, Shyam.

is question is how from more internal and products Has IT LLMs departments? less sales from benefited finding the of Our asks, cycle? and brought [ph] Are Patrick AI it resistance awareness use the to next Palantir you who solutions?

Great. Thanks, Patrick.

mentioned, So, ago. XX launched as I we weeks AIP just

to from existing looking unprecedented customers and We’re new offering. of from who both with the customers top are seeing funnel already expand interest AIP

engagement emergence solution. momentum impact organizations effectively against safely capabilities, those and are within And the what at Jacobs and real we’re so You’ve Powers, looking to among organizations to are Engineering, having deploy missions Novartis, few. AI seeing a heard ways of that very and LMMs name and examples their we we’re do securely of from their others, and and J.D. it operators is with with

able and do years our experience safely the in XX of have deploying We being securely. and that we products and to product the to that, have enterprise do

we now trying they’re in sometimes fully aligned past, have misalignment what we’re the departments, may So with had while achieve. to with IT

cycles So in we’re sales shorten. short, seeing

at We’re expecting continue speed. and we’re full to to that accelerate and that run going

misaligned -- we a to we the manage setting. had believe and clients. reality, and -- ontology data resistance both large-scale the ideas how sets market, of to our was products algorithm for in of in branching built a U.S. should reasons But And and how look, enterprise work. there then classified We we an were especially lot of Foundry lots with

Ryan with quite saying is you’re by is what forces and Shyam community, models thick the now they at seeing you supported And by frankly, six saying, capital thin what with is been of industry for kind really iterations, understood. sales if five, what has look technologies, that have done American looking analysts venture often and

company begun no Foundry. went all building these We now that’s which one into logical AIP. technologies of extension deep that, technology, that built We the understood. went precursor on a We deep that on we’ve is

And taking the very and focused that in deep the an and playbook playbook, a looks products we of the not that’s being insurmountable fact, of does culture. playbook exactly exist, are advantage that that we against the now are is like just it. our And advantage went -- built reflection on

Thanks, Ryan and Alex.

shareholders Our next Emo growth, long-term keep and question needed while invested? are performance for you confident balancing the how and investments is from to [ph] asks, delivering who also profit

I’ll take that…

We are.

Yeah.

was look coming. GAAP profitability. now Emo. quarters, profitability GAAP people quarters consecutive three QX example it last of if We’ve you Thanks, to guided And we of are. We QX on two and delivered have then issues before And I think thought one of GAAP this three we the to is, profitability.

And on company, heavily we’re focused billion both we’re the we’re really on. across doing through we’re both that resources AIP. We’re here sheet $X.X the with this in investing money, all and doing while very with and balance

world. S&P show it that be we because the about it Well, I do some the because like profitability delivered to us are in leading care power care are that mean, positions They about people care Why time. industries the We We ahead profitability? footing. profitability on we indexes it we we’re in that enterprises most about that years of because it on of steady the care of we important We serious. one about we shows the care world.

we’ve with our belief S&P. why authorized in of aligns our to is desire which be ourselves, We this believe belief ourselves, buyback align on the in profitability with a to

range. a scale invest are billion $X small the We going in and in to not at ourselves lot

profitability, is these move much stability, world move company reflects most is important the company that are and linked. believe to all And will to in software very a we so, S&P, enterprise what which the we be,

Thank you both.

who this received [ph] the Jesse are defense policymakers pushing has in asks, software. community? question go know is I next X% spending to for How by to from been of you guys Our defense

talking the communities. there’s, U.S. views We various quite time allied And lot spend a defense and parts on of to of this. a frankly, varied

non-commercial -- is built commercial certain it’s it view Most product like that’s built and actually context for of purposes, most in used Our is America, commercially. a likely in product both the -- been attributes. software and sold has it’s the important

that rebuttable some than software portion It built product move it a is and actually institutions in defend somebody our program. large a more that is by certain for to presumption not of that the imperative country bought has America, to us besides that a likely

it’s agree surprising many with us. And how people

We’re of another this are a But that terms things view come our all as from with more the getting people as become ferry pass, state expense not getting coming as to our many that to off own they a we’re at of serious. college fact, more may done. adversaries in one that long in a people loving believe learned and have are adversaries aggressive, the in regress way fact going to our that to laughable we tail

to implement product a about going fantasies, give people you about that how a worked. somebody When never people it fantasies stop and how wanting you’re hire serious, that’s build you XX,XXX get more fantasies, to software ever they built company that’s about,

and getting much of Luckily happening -- see for people they country you our happening hopefully, West, and are us. the us, events serious is more but because that around just fast enough? that for And No.

If any you additions? have

said. Well No.

Alex. Thanks,

who Our the potential asks is S&P from next inclusion? question Mark what’s XXX latest [ph], Josh and

we’re we less a The latest to expect so report we’re after we to be quarter and away. say is proud eligible than QX

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Dave. Thanks,

who [ph], is question from priorities? current elaborate asks, Our capital allocation can on Sony you next

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inclusion. of with the goal billion just combine authorized that strong XXX buyback, AIP, profitability, flow, cash You a which aligns GAAP stock Board our $X S&P

in believe investing products -- acquiring as we companies. right is have we and/or build on will focused not are It very ourselves. we focused are on them. the We other We

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an really changing and ability actual hell. in us compensation and we’re our real showing running our to a attendees people sure world to by retain mission ourselves investment through it’s the our so making crazy belief And important is talent like on with and in that in the focused

Thank you both.

prompt from next your Wedbush. to your Our question please line. unmute you and camera then with turn Dan, receive is Dan on

Hello?

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and Alex Thanks, Shyam.

is of with on you prompt a your turn your Mariana, then Bank America. from question next line. unmute Our Mariana please will receive and camera to

Good afternoon, everyone.

Very see to nice you.

So about my question is going to be AIP.

having other the using are it XXX on How organizations about of versus the you now. than And ratio use more commercial? we’re like, those to many second, of How it organizations. XXX-plus and timing right mentioned thinking conversations You Foundry on are a old? platform with, willing

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Sure.

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a Another to way, pleasure see you. it’s

Finally.

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investors the other Are Thank there we Alex, share to end we a line. before you’d of the call? on thoughts always, any like you as both. lot have

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it, time. calling the understanding for you have testing general, American retail and way product, think and thank I everyone else are which from your the Our we actually looking been who in of spirit in investors ahead of profiting at innovation it, customers,

Thanks, Q&A for concludes That Alex. call. today’s