Planet Labs PBC — Form 10-Q Summary
Business context and reporting period
For the three and six months ended July 31, 2022 (fiscal second quarter and first half of fiscal 2023). Planet operates a satellite-imagery and analytics platform, primarily selling recurring and usage-based data licenses. It reported 855 end-of-period customers, up 17% year over year; 93.0% of its ACV book of business was recurring.
Financial performance and liquidity
| Metric | Three months ended July 31, 2022 | Six months ended July 31, 2022 |
|---|---|---|
| Revenue | $48.5 million; +59% year over year | $88.6 million; +42% |
| Gross profit / gross margin | $23.5 million / 48% | $40.0 million / 45% |
| Operating loss | $42.6 million | $90.4 million |
| Net loss | $39.5 million | $83.9 million |
| Adjusted EBITDA, non-GAAP | $(10.5) million | $(26.7) million |
| Cash used in operating activities | Not presented separately for the quarter | $28.8 million |
Quarterly revenue growth reflected $7.7 million of net expansion from existing customer contracts and $10.4 million from increased customer count; management also cited higher customer usage. Six-month revenue growth reflected $14.0 million of existing-customer expansion and $12.1 million from more customers. GAAP gross margin increased from 35% to 48% in the quarter and from 38% to 45% in the first half.
Operating expenses rose sharply: quarterly research and development increased 115%, sales and marketing 84%, and general and administrative 68%. For the first half, total operating expenses were $130.3 million, up 98%. Management attributed much of the increase to hiring and stock-based compensation, including expense recognition for earn-out shares and restricted stock units. First-half stock-based compensation was $40.4 million, versus $8.0 million a year earlier.
At July 31, Planet had $262.1 million of cash and cash equivalents and $195.6 million of short-term investments, totaling $457.7 million, plus $5.7 million of restricted cash. It reported no debt outstanding. Management said cash on hand and anticipated operating cash flows should cover obligations for the next 12 months, while cautioning that additional financing could be needed if resources prove insufficient. First-half investing cash outflow was $203.2 million, mainly reflecting $195.1 million of purchases of available-for-sale securities; capital expenditures were $7.8 million.
Changes versus the prior comparable period
- Quarterly net loss widened to $39.5 million from $20.4 million; first-half net loss widened to $83.9 million from $49.6 million, as operating expenses grew faster than revenue.
- First-half operating cash use increased to $28.8 million from $8.3 million. Cash and cash equivalents declined from $490.8 million at January 31 to $262.1 million at July 31, partly because cash was shifted into short-term investments.
- Interest expense was zero in 2022 periods, versus $2.6 million for the quarter and $5.1 million for the first half of 2021, following repayment of debt in the December 2021 business combination. Fair-value changes in warrants and, in the prior period, convertible notes affected reported earnings.
- Net dollar retention was 124.8%, versus 89.5% a year earlier; including winbacks, it was 126.7%, versus 96.2%. Management cited larger government contract renewals and expansion by large agricultural customers.
Outlook, commentary, risks and unusual items
- No specific revenue, profit, or cash-flow guidance was provided. Management expects continued investment in research and development, sales and marketing, customer success, software analytics and satellite technology; it expects near-term losses and negative operating cash flows and anticipates costs and capital needs will increase.
- Remaining performance obligations were $130.5 million at July 31, including $52.1 million of deferred revenue and $78.4 million of contracted amounts to be invoiced later. Planet expects to recognize approximately 72% within 12 months and 94% within 24 months; these amounts exclude certain options and cancellable or unfunded contracts.
- Google is a significant related party: it accounted for $3.4 million of quarterly and $6.4 million of first-half revenue. Planet also recorded $11.6 million of Google hosting expense in the first half and had $166.98 million of future minimum hosting purchase commitments through January 2028.
- Other commitments include $7.5 million of operating lease liabilities and $1.1 million of noncancelable satellite launch commitments at July 31. In August, Planet agreed to extend certain U.S. office leases, adding $18.0 million of payments over the extended term. Also in August, it entered into NASA-related subcontract agreements providing aggregate funding of $40.5 million, payable as milestones are completed.
- Key risks include customer retention and contract renewals, government procurement and regulatory approvals, dependence on limited satellite launch providers, satellite or cybersecurity failures, competition, inflation and economic disruption, and potential impairment or liquidity risks in its investment portfolio. Two customers represented 24% and 12% of accounts receivable at July 31; one customer contributed 19% of quarterly revenue.
- Planet reported no material legal proceedings and no material changes to previously disclosed risk factors other than investment-portfolio impairment risk. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether customer growth and elevated retention persist, and whether recurring revenue converts into recognized revenue and cash collection.
- Whether revenue growth can outpace hiring, stock-based compensation and other operating-cost growth, improving operating losses and cash burn.
- The composition, maturities, credit quality and fair-value exposure of the $195.6 million investment portfolio, and the resulting liquidity available for operations.
- The scale and economics of Google-related revenue, hosting costs and long-term purchase commitments, alongside customer and receivables concentration.
- Execution and funding terms for the NASA agreements, and the cash impact of the additional office lease commitment and other contractual obligations.