Palantir Technologies Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The unaudited filing describes Palantir’s software platforms—Gotham, Foundry and Apollo—and reports Government and Commercial operating segments.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $473.0M | $375.6M | $919.4M | $716.9M |
| Gross profit / margin | $370.8M / 78% | $284.7M / 76% | $722.7M / 79% | $551.8M / 77% |
| Operating loss | $(41.7)M | $(146.1)M | $(81.2)M | $(260.2)M |
| Net loss | $(179.3)M | $(138.6)M | $(280.7)M | $(262.1)M |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $97.9M | $139.6M |
- Q2 revenue grew 26% year over year; six-month revenue grew 28%. Government revenue rose 13% in Q2 and 15% for six months; Commercial revenue rose 46% and 50%, respectively.
- Q2 GAAP gross margin improved 2 percentage points year over year. Management reported non-GAAP gross margin excluding stock-based compensation of 81% in Q2 and 81% for six months, versus 82% and 83% a year earlier.
- GAAP operating losses narrowed, but the company remained loss-making. Management’s non-GAAP adjusted operating income—excluding stock-based compensation and related employer payroll taxes—was $107.8M for Q2 and $225.2M for six months, versus $116.7M and $233.3M, respectively. These are non-GAAP measures and do not replace GAAP results.
- Stock-based compensation was $145.8M in Q2 and $295.1M for six months, down 37% and 31% year over year. The filing reports substantial unrecognized compensation expense on outstanding options and RSUs.
- Net loss included other expense of $135.8M in Q2 and $195.7M for six months, primarily reflecting realized and unrealized losses on investments in marketable securities. Six-month unrealized losses were $174.7M and realized losses were $26.6M.
Liquidity, debt and commitments
- At June 30, cash and cash equivalents were $2.36B; cash, cash equivalents and restricted cash totaled $2.42B. Marketable securities were $99.2M.
- Six-month operating cash flow was $97.9M. Investing activities used $91.2M, including $89.5M of marketable-security purchases; financing activities provided $47.8M, primarily from option exercises. The filing does not separately state quarterly cash flow.
- No debt was outstanding at June 30. The revolving credit facility had $500M of undrawn commitments, a March 2027 maturity and a minimum-liquidity covenant; the company reported compliance with its covenants.
- After quarter-end, a July amendment added a delayed-draw term loan facility of up to $450M, available through July 1, 2023. Together with the revolving facility, total available commitments were up to $950M; no amount had been drawn as of the filing date.
- Remaining performance obligations were $1.2B at June 30; the company expected to recognize approximately 44% within 12 months and 43% over the subsequent 13–36 months. These are noncancelable contracted amounts, not a guarantee of future revenue.
- A cloud-hosting agreement requires at least $1.49B of purchases over six contract years. By June 30, the company had met $157.3M of the $167.0M commitment for the contract year ending September 30, 2022.
Changes, management commentary and risks
- Commercial growth outpaced Government growth. In the first half, Government contributed 55% of revenue and Commercial 45%. U.S. revenue accounted for 61% of first-half sales, versus 56% in the prior-year period.
- Management attributed gross-margin improvement to deployment efficiencies and lower growth in costs, including lower stock-based compensation. It expects cost of revenue, sales and marketing, R&D, and G&A to increase in absolute dollars as the business grows and investments continue.
- Management said operating cash flows, cash and available financing were expected to meet anticipated operating needs for at least the next 12 months, while cautioning that cash-flow projections are uncertain. The filing provides no specific revenue or earnings guidance for the remainder of 2022.
- Revenue from commercial contracts associated with strategic investment agreements was $31.4M in Q2 and $70.6M for six months. The total stated value of those commercial contracts was $754.9M, including contractual options; many have termination provisions. A $35M investment commitment remained contingent on a proposed business combination.
- The company settled the KT4 litigation in June and recorded the settlement amount in accrued liabilities, with an estimated insurance recovery in prepaid expenses and other current assets. It reported no known pending legal matter expected to materially adversely affect the financial statements.
- Principal risks include continued operating losses and uncertain profitability, customer concentration and termination-for-convenience clauses, long and unpredictable sales cycles, government budget and procurement uncertainty, competition, cybersecurity and data-protection exposure, and volatility in strategic investments. The company also cited inflation, rising interest rates, COVID-19 and the Russian invasion of Ukraine as macroeconomic uncertainties.
- Management stated disclosure controls and procedures were effective at a reasonable assurance level at quarter-end and reported no material change in internal control over financial reporting during the period.
Important facts for investors to verify
- Whether revenue growth—particularly the faster-growing Commercial segment—continues, and how much comes from existing customers versus investment-linked commercial contracts.
- Whether operating cash flow remains positive and whether GAAP operating losses narrow without relying on declining stock-based compensation expense.
- How marketable-security valuations and realized or unrealized investment losses affect future reported earnings and cash flows.
- Whether customers exercise contract options or terminate agreements, and how the $1.2B of remaining performance obligations converts to revenue.
- Use and terms of the $950M total credit commitments, and progress against the cloud-hosting purchase commitment.
- Potential dilution and future compensation expense from outstanding options and RSUs, alongside the company’s multi-class voting structure.