Palantir Technologies Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Palantir develops software platforms for government and commercial customers, including Gotham, Foundry, Apollo, and its Artificial Intelligence Platform (AIP). Figures below are in U.S. dollars; financial-statement amounts are converted from thousands to millions.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $634.3 million | $525.2 million | +21% |
| Gross profit / margin | $518.1 million / 82% | $417.5 million / 80% | Margin +2 percentage points |
| Operating income / margin | $80.9 million / 13% | $4.1 million / 1% | Improved |
| Net income | $106.1 million | $19.2 million | Improved |
| Net income attributable to common stockholders | $105.5 million | $16.8 million | Improved |
| Diluted earnings per share | $0.04 | $0.01 | Improved |
| Cash provided by operating activities | $129.6 million | $187.4 million | Down $57.8 million |
- Revenue from government customers was $335.4 million, up 16%; commercial revenue was $299.0 million, up 27%. U.S. commercial revenue rose 40% to $149.7 million. Government and commercial customers accounted for 53% and 47% of revenue, respectively.
- Management reported non-GAAP adjusted operating income of $226.5 million, excluding stock-based compensation and related employer payroll taxes, versus $125.1 million. Non-GAAP contribution margin was 60%, versus 53%; gross margin excluding stock-based compensation was 83%, versus 81%.
- Stock-based compensation was $125.7 million, up 10%. These non-GAAP measures exclude significant costs and should be considered alongside GAAP results.
Liquidity, balance sheet, and cash flow
- At March 31, 2024, cash and cash equivalents were $520.4 million and marketable securities were $3.35 billion, primarily short-term U.S. Treasury securities. Management described cash, cash equivalents, and short-term Treasuries available as approximately $3.9 billion.
- Total assets were $4.81 billion; total liabilities were $945.9 million; total equity was $3.86 billion. Accumulated deficit was $5.54 billion.
- No debt was outstanding. The company had $500 million of undrawn revolving credit commitments, with a March 2027 maturity, and reported compliance with facility covenants.
- Operating cash flow declined year over year, which management attributed mainly to the timing of vendor payments and customer collections, partly offset by higher interest income. Investing activities used $511.2 million, primarily reflecting net purchases of marketable securities. Cash, cash equivalents, and restricted cash totaled $539.7 million at quarter-end.
- Accounts receivable were $487.0 million, up from $364.8 million at year-end 2023; one customer represented 22% of receivables. Contract liabilities were $477.2 million. Remaining performance obligations were $1.3 billion; the company expected to recognize approximately 53% over the next 12 months.
Changes, outlook, and material items
- Revenue growth accelerated in the commercial segment relative to government. Gross and operating margins improved as revenue grew faster than costs; operating expenses increased 6%, including a 22% rise in research and development.
- Interest income increased to $43.4 million from $20.9 million, primarily due to higher interest rates and interest-bearing balances. Other expense was $13.5 million, primarily reflecting realized and unrealized losses on equity securities.
- The filing provides no specific numerical revenue or earnings guidance. Management said available liquidity and financing sources should meet anticipated operating cash needs for at least the next 12 months, while noting that future cash needs and cash flows are uncertain. It expects cost of revenue and operating expenses to rise in absolute dollars as the business grows and investments continue.
- Management highlighted AIP and broader customer adoption as business priorities. It also cautioned that government budgets and award timing, long sales cycles, customer contract cancellations, macroeconomic conditions, and foreign exchange can affect results. Many customer contracts permit termination for convenience.
- The company repurchased 368,225 shares for $9.0 million under its $1.0 billion share repurchase authorization; approximately $991 million remained. It also committed to at least $1.95 billion of cloud-hosting spend over ten contract years through September 2033. The filing says $90.5 million of a $154.0 million commitment for contract year three had been satisfied by March 31, 2024.
- A securities class action was dismissed without prejudice on March 31, 2024. Related derivative matters remained; the company said it could not estimate a reasonably possible loss or range, if any, because they were in early stages. It reported no pending legal matter expected to have a material adverse impact on the financial statements.
- Other notable risks include cybersecurity and data privacy, AI-related legal and reputational exposure, reliance on third-party cloud providers, customer and investment exposure to early-stage companies, and concentrated founder voting control. The company reported disclosure controls effective at a reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether commercial growth, including U.S. commercial growth, continues and converts into durable customer expansion and recognized revenue.
- Whether operating cash flow recovers from the year-over-year decline, given receivables growth and payment-timing effects.
- How much reported profitability depends on stock-based compensation and related exclusions in management’s non-GAAP measures.
- Whether customer concentration, termination rights, and the $1.95 billion cloud-hosting commitment affect future collections, margins, or flexibility.
- Developments in the derivative litigation, strategic commercial contracts and investments, cybersecurity and AI risks, and the company’s founder-controlled voting structure.