Palantir Technologies Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request refers to 2022 Q4, this filing is an annual report; the provided filing text does not state standalone fourth-quarter financial results. The company sells Gotham, Foundry, and Apollo software to government and commercial customers.
Key financial results and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $1.906 billion | $1.542 billion |
| Gross profit / GAAP gross margin | $1.497 billion / 79% | $1.202 billion / 78% |
| Operating loss | $161.2 million | $411.0 million |
| Net loss attributable to common stockholders | $373.7 million | $520.4 million |
| Net cash from operating activities | $223.7 million | $333.9 million |
- Revenue grew 24%. Government revenue rose 19% to $1.072 billion; commercial revenue rose 29% to $834.1 million. Government and commercial represented 56% and 44% of revenue, respectively.
- GAAP operating expenses totaled $1.659 billion, up 3%. Stock-based compensation was $564.8 million, down 27% from 2021.
- Management reported adjusted operating income of $420.8 million, excluding stock-based compensation and related employer payroll taxes, versus $473.5 million in 2021. Gross margin excluding stock-based compensation was 81%, versus 82%.
- Net loss included $272.1 million of realized and unrealized investment losses, partly offset by a $44.3 million gain from remeasuring Palantir Japan in a step acquisition. Interest income was $20.3 million; interest expense was $4.1 million.
- Cash and cash equivalents were $2.599 billion at year-end; operating cash flow was positive. The company had no debt outstanding and $950 million of undrawn revolving and delayed-draw term-loan commitments. Restricted cash totaled $28.8 million, current and noncurrent.
- Current assets were $3.042 billion and current liabilities were $587.9 million. Total liabilities were $818.8 million. The accumulated deficit was $5.859 billion.
Material changes versus FY 2021
- Revenue growth slowed to 24%; management attributed slower government growth in part to delays in the U.S. government budget process. U.S. revenue was $1.161 billion, up from $879.2 million.
- Operating loss narrowed from $411.0 million to $161.2 million, while net loss narrowed from $520.4 million to $373.7 million. The 2022 net loss nevertheless reflected substantially larger investment losses.
- Operating cash flow decreased by $110.1 million, primarily because of payment timing from customers and to vendors.
- Total remaining deal value was $3.7 billion, down 3%. Commercial remaining deal value declined 23% to $2.0 billion, while government remaining deal value increased 37% to $1.7 billion. These amounts assume options are exercised and contracts are not terminated; $2.8 billion of unfunded IDIQ awards was excluded.
- Customer count increased to 367 from 237. Average revenue from the top 20 customers rose to $49.4 million from $43.6 million. The top three customers generated 17% of 2022 revenue, versus 18% in 2021.
Outlook, commentary, risks, and unusual items
- The filing does not provide numerical forward-year revenue or earnings guidance. Management said cash, operating cash flows, and available financing were expected to cover anticipated needs for at least twelve months, while cautioning that future cash needs and flows were uncertain.
- Management described government customers, particularly in the United States, as a meaningful and resilient source of growth, but noted budget timing and spending priorities make awards difficult to predict. It also identified commercial expansion as a growth focus.
- Macroeconomic risks include inflation, higher interest rates, currency movements, the effects of COVID-19 and the Russia-Ukraine conflict, and weaker customer budgets or delayed purchasing. Management said the dollar’s strength had an unfavorable but not material 2022 revenue impact and did not expect the conflict to have a material impact at the filing date.
- Key business risks include lengthy sales cycles and costly pilots, customer concentration and contract termination rights, competition, implementation and service demands, cybersecurity and privacy exposure, evolving regulation, and dependence on third-party cloud providers. Government funding, contract options, and procurement delays are additional risks.
- Investments created earnings volatility: marketable-security losses were $272.1 million in 2022. The company also disclosed that some commercial contracts linked to investees may not be fully collectible; one early-stage investee filed for bankruptcy. The reported $492.7 million value of strategic commercial contracts excluded $262.2 million versus the amount reported at September 2022 after reassessments.
- Three securities class actions and related stockholder derivative actions were pending; the company said it could not estimate a reasonably possible loss or range because the cases were at an early stage. Management stated that it was not aware of pending legal matters expected to have a material adverse effect on the year-end financial statements.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The internal-control assessment excluded Palantir Japan, acquired in November 2022; the auditor also excluded that entity from its internal-control audit.
- The multi-class share structure concentrates voting power with the founders. The company did not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Review the audited statements and notes for the drivers, valuation, and potential future effects of the $272.1 million investment losses and the Japan step-acquisition gain.
- Assess whether revenue growth and cash generation can persist, particularly given slower government growth, lower commercial remaining deal value, and declining operating cash flow.
- Check contract renewal, cancellation, payment, and option-exercise terms underlying the $3.7 billion remaining deal value; distinguish it from the $972.7 million of remaining performance obligations disclosed under GAAP.
- Monitor stock-based compensation, dilution, and the substantial outstanding options and restricted stock units.
- Track investee customer credit quality, collections, and changes to strategic contract values, as well as the outcomes of pending securities and derivative litigation.
- Evaluate cloud-hosting purchase commitments, lease obligations, and the terms and covenants of the $950 million undrawn credit facilities.