Planet Labs PBC (NYSE:PL) Q4 2024 Earnings Call Transcript

Planet Labs PBC (NYSE:PL) Q4 2024 Earnings Call Transcript March 28, 2024

Planet Labs PBC beats earnings expectations. Reported EPS is $-0.11, expectations were $-0.13.
PL isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon. Thank you for attending the Planet Labs PBC Fiscal Fourth Quarter and Full Year 2024 Earnings Call. My name is Victoria and I’ll be your moderator today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the call over to your host, Chris Genualdi, VP of Investor Relations. Thank you. You may proceed, Chris.

Chris Genualdi: Thanks, operator, and hello, everyone. This is Chris Genualdi, Vice President of Investor Relations at Planet Labs PBC. Welcome to Planet’s fiscal fourth quarter and full year 2024 earnings call. I’m joined today by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook, as well as Kevin Weil, who is joining us for the Q&A portion of today’s call. We encourage everyone to please reference the earnings press release, 8-K filing and earnings update presentation for today’s call, which are available on our Investor Relations website. Before we begin, we’d like to remind everyone that we may make forward-looking statements related to future events or our financial outlook.

We reference qualified pipeline which represents potential sales leads that have not yet executed contracts. For the customer contracts referenced during this call, please note that the revenue figures we cite will generally be recognized over the term of the contract, which can last multiple years. Further, the terms of these contracts can vary and we may not realize all expected revenue. Any forward-looking statements are based on management’s current outlook, plans, estimates, expectations, and projections. The inclusion of such forward-looking information should not be regarded as a representation by Planet, that future plans, estimates, or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties, and assumptions as detailed in our SEC filings, which can be found at www.sec.gov.

Our actual results or performance may differ materially from those indicated by such forward-looking statements and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss historic and forward-looking non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making.

For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier this afternoon. Further, throughout this call, we provide a number of key performance indicators used by management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks. At this time, I’d now like to turn the call over to Will Marshall, Planet’s CEO, Chairperson and Co-Founder. Over to you, Will.

Will Marshall: Thanks Chris, and hello, everyone. Thanks for joining the call today. Planet delivered a strong fourth quarter to cap off the year. For the full fiscal year 2024, we generated a record $220.7 million in revenue, representing 15% year-on-year growth. Non-GAAP gross margin for the full year was 54% and adjusted EBITDA loss was $55.3 million. We continue to make progress towards our target of reaching adjusted EBITDA profitability by Q4 of this fiscal year. We also surpassed 1,000 customers during the fourth quarter of fiscal 2024, an exciting milestone for Planet. Growth for the year was led by the government sector, during fiscal 2024, our revenue in the Defense & Intelligence vertical grew over 30% year-over-year, while revenue in the Civil Government vertical saw solid growth as well.

In the near-term, we expect growth will continue to be driven by government sector, particularly during the period of heightened security, increased sustainability priorities and climate risks. In the Defense & Intelligence market, our businesses has historically been led by our differentiated high resolution tasking fleet, a business which continues to grow year-over-year. However, recently we’ve seen increased demand from defense customers for our PlanetScope daily scanning capabilities, particularly when enhanced by AI-enabled partner solutions. While the unique value of our PlanetScope daily scan has always been clear, recent advances in AI are leading to new solutions that extract critical value from our proprietary dataset. We are seeing new scan and search capabilities developed based on our proprietary daily scan, which enable critical applications such as broad area threat monitoring for NASA security purposes.

These AI-based solutions help lower customer barriers to entry and speed customer time-to-value. This shift is just beginning, but we’re already starting to see it in our bookings and pipeline. As an example, we were recently awarded a competitive seven figure ACV contract by the U.S. Navy’s Naval Information Warfare Center, NIWC Pacific for vessel detection and monitoring over key areas throughout the Pacific Ocean. NIWC Pacific will integrate Planet data and AI capabilities from our partner SynMax into their SeaVision platform to help improve maritime domain awareness and support broad area monitoring throughout the region. Planet is a prime contract for the award and SynMax is a Houston-based satellite analytics and intelligence companies whose advanced AI solutions do vessel monitoring and classification.

As you may recall, we previously partnered with SynMax to provide energy and maritime intelligence solutions, and we recently expanded our strategic partnership with SynMax, increasing the breadth of opportunities we can pursue together, and we are already seeing demand from other governments for our combined capabilities. Additionally, we have multiple seven-figure pilot programs in flight or in procurement with forward-leaning defense agencies, which if successful, have the potential to scale significantly. Similar to the NIWC Pacific award, these pilots include AI-based partner solutions sold alongside our data enabling broad area monitoring applications. These pilots are primarily focused on monitoring land-based locations. This is part of a growing trend that signals increased customer interest in purchasing insights with our data.

We are pursuing many of these large pilots this year. I’ll turn now to the Civil Government vertical, where we are also seeing solid traction for solutions sold alongside our data. Solutions for this vertical include those built by customers leveraging our internally developed Planetary Variables product line, as well as solutions developed by partners. In Q4, we closed over 50 new and expansion opportunities in the quarter with governments ranging from large federal agencies to state and local governments, which is more civil government opportunities than in any quarter during fiscal 2024. Recent wins include an expansion with Bolivia’s Institute of National Agrarian Reform, which is expanding its use of Planetary Variables and our Sentinel Hub platform to manage public land and enforce property titling regulations, and an expansion with the Ministry of Natural Resources and Environmental Sustainability of Malaysia, which is using PlanetScope and SkySat data to monitor large forested areas for policy, planning and management purposes.

As you recall from our Investor Day last October, the Civil Government market makes up a significant portion of the six-figure opportunities and the majority of the seven-figure opportunities in our qualified pipeline. It’s a large and reliable stream of opportunities for our sales team to close. As we previously shared, the ROI for Civil Government customers can be many multiples greater than their investment in our data, such as the Indian state of Odisha, which saved over $200 million through fraud elimination in their first year, and Brazil’s government, which has collected billions of dollars in fines, seized goods and assets frozen, aided by Planet’s data. With both in-house and partner developed solutions as well as Sentinel Hub’s platform capabilities, we see opportunity to unlock additional segments of the Civil Government market by speeding time-to-value and driving expansions with existing customers looking to enhance their ability to manage broad areas of land.

Shifting to the commercial vertical, during the fourth quarter, we signed expansions with large customers in the agriculture and energy sectors. However, budget constraints and the completion of the large legacy contract, which we’ve previously discussed on prior calls resulted in an overall year-over-year decrease in revenue from this vertical. During Q1 of fiscal 2025, we will lap the difficult year-over-year comparison, but continue to anticipate that the commercial market will be slower to develop based on budgetary constraints, particularly in the ag sector. Our strategy for the commercial sector is centered around partner-led opportunities and our efficient platform sales. We see strong indications that this is the best way to serve commercial customers and grow the addressable market for our solutions.

To highlight some of our recent wins in the commercial sector, we closed a three-year expansion with Swiss Re. Swiss Re continues to be a great partner and we’re proud of how our relationship is growing. The expansion adds Planet’s land surface temperature of Planetary Variable to Swiss Re’s tool belt, in addition to our soil water content Planetary Variable, which they already use. These tools support Swiss Re’s parametric insurance products by feeding pricing models, validating claims and credit, forecasting potential risk, and identifying opportunities within new markets. We also closed a large new multiyear deal with an agriculture focused insurance company in Canada, which is leveraging Planet’s broad area monitoring solutions and Planetary Variables to modernize its drought insurance program and for crop insurance claim validation.

We also announced that PlanetScope data is now available on Google Cloud Marketplace, allowing GCP’s existing customers to purchase Planet data using GCP credits so that they can easily onboard and analyze, process, and derive meaningful insights from our data at scale. We’ve already had a customer in the commercial sector make a purchase for a seven-figure renewal through the marketplace. Shifting gears to share a business update that spans across verticals. As you may have seen at the press release this afternoon, we recently signed an eight-figure data license agreement with Carbon Mapper to provide hyperspectral core imagery to the nonprofit and its partners until 2030. As a reminder, Carbon Mapper has been a key partner for Planet in developing the Tanager hyperspectral constellation.

This contract is an extension of an existing arrangement, and we would expect revenue under this contract to begin in 2026. Importantly, this agreement demonstrates our shared confidence around the program and our shared mission to improve understanding and accelerate reductions in global methane and carbon dioxide emissions. We continue to expect to launch the first Tanager satellite later this year. Now let me turn to product updates. Our first Pelican tech demo, which we launched in November, continues to perform excellently. The hundreds of system tests that we’ve conducted over the 10 subsystems of the satellite have gone well. We are gaining valuable on-orbit learnings and making solid progress towards operationalizing the Pelican platform.

As we shared previously, our agile aerospace approach with rapid iteration of capabilities in orbit enables fast improvement cycles to our spacecraft designs. We expect to launch additional Pelicans, including the first production satellite during the next 12 months. Turning now to software and platform updates. Similar to our approach in spacecraft, we practice rapid iteration and constant improvements of our software products as well. We recently launched Field Boundaries analytics, which is the latest addition to our suite of Planetary Variable Solutions. Field Boundaries provides the spatial context necessary to better understand planted acres for different crop types and growth throughout agricultural season, enabling more accurate yield estimation for our customers at a global level.

We’ve also recently upgraded our Crop Biomass Planetary Variable with PlanetScope data as well as made meaningful improvements to our Road and Building Detection solution. Consistent improvements in our AI powered analytics solutions are helping make our data more accessible and speed customer time to value. In summary, demand in the government sector is very strong. We are seeing a shift in our business towards selling solutions alongside our data. AI is enabling broad area search atop our unique daily scan and is opening use cases and markets with exciting early traction in the defence and intelligence vertical. We are prioritizing investment behind these areas. I want to emphasize that we remain committed to striking the right balance between growth initiatives and operational discipline so that we can achieve our adjusted EBITDA profitability by Q4 of this year, which is an important milestone on the path to building a high margin sustainable cash flow generating business.

Growth for fiscal 2025 will be driven by closing the large deals in front of us and scaling our platform and solutions partners globally across vertical markets. Our product and engineering teams continue to make incredible strides on both our agile space technologies and equally agile software stack and I couldn’t be more excited about the developments here and there is more to come. We are hosting a milestone platform launch, which will be webcast virtually on April 11, so I encourage you to tune in. Before I hand the mic over to Ashley, I’d like to discuss the management transition announced earlier today. As we shared, Kevin Weil’s role is evolving to be an Advisor to Planet Labs PBC and a Member of the Planet Federal Board. And Ashley will be taking on the role of President.

I first want to express my thanks to Kevin who is here on the call with us today for all of his impact at Planet and I look forward to continuing to work with him. I’m very glad that Planet will continue to benefit from his partnership and guidance in this new way. I’d like to congratulate and recognize Ashley here for the expanded role that she will be taking on at Planet. I’m pleased to share that she will be assuming the responsibilities of leading our go-to-market and business strategy as President and CFO. I’m excited about her taking on this new role because as you know, Ashley’s leadership and depth of experience are an incredible asset to Planet. She has over 20 years of experience scaling technology businesses, driving financial performance and building operational excellence at global organizations.

Her results driven focus and deep understanding of Planet make her the right person to lead our go-to-market and business execution during this next chapter. Additionally, Robert Cardillo, Chair of Planet Federal and the former head of the National Geospatial-Intelligence Agency, who continues to bring a wealth of knowledge, understanding and relationships in the national security domain, is taking on a larger role overseeing strategy for our Defense and Intelligence business globally. I’ll now turn it over to Ashley for a review of the financials and our outlook. Over to you, Ashley.

Ashley Johnson: Thanks Will. I really appreciate the kind remarks. I’m truly honored to take on this new role, excited to partner with the global go-to-market and product leaders and ready to build on this incredible foundation for my next chapter with Planet. I’m also pleased to report that all of our results for the fourth quarter and full year fiscal 2024 were in line with or better than the guidance we provided on our last earnings call. Revenue for the quarter ending January 31st came in at a record $58.9 million, which represents 11% year-over-year growth. Growth in the fourth quarter was led by the defense and intelligence vertical, which grew over 20% year-over-year, driven by the NIWC Pacific win and expansions with customers in both domestic and international markets.

We also saw solid year-over-year growth in the civil government vertical where our broad area management capabilities and solutions are supporting strong customer adoption and expansion. From a geographic perspective, during the fourth quarter, EMEA revenue grew more than 20% year-over-year, Latin America grew more than 30% year-over-year and Asia Pacific grew over 15% year-over-year. North America revenues stayed roughly flat on a year-over-year basis, primarily impacted by the discontinuation of the legacy contract that we’ve discussed previously. For the full fiscal year, EMEA revenue grew more than 50% year-over-year, Latin America grew more than 20%, Asia Pacific in the mid-single digits, while North America revenue grew less than 5% year-over-year.

As of the end of Q4, our end of period customer count was 1,018 customers. Recurring ACV or annual contract value was 93% of our end of period ACV book of business and over 90% of our end of period ACV book of business consists of annual or multi-year contracts. Our average contract length continues to be approximately two years, weighted on an ACV basis. Net dollar retention rate at the end of FY2024 was 101% and net dollar retention rate with winbacks was 103%. During the year as Will noted, we saw strong expansions with government customers, partially offset by slower uptake in the budget constrained commercial vertical. New customer additions were stronger in FY2024 than we had previously expected and gross retention saw year-over-year improvement, reflecting the stickiness of our solutions.

Our lower than expected net dollar retention rate for fiscal 2024 primarily reflects less expansion than we had expected for the year, but it is not indicative of higher churn. Turning to gross margin. Non-GAAP gross margin for the fourth quarter of fiscal 2024 was 58% and for the full year was 54%. Adjusted EBITDA loss was $9.8 million for the quarter and for the full fiscal year was $55.3 million. Adjusted EBITDA losses narrowed quarter-over-quarter throughout the fiscal year 2024, driven by operational efficiency and focus across the company. Capital expenditures, including capitalized software development were $10.1 million for the quarter and $42.4 million for the year or approximately 17% of revenue for the quarter and 19% of revenue for the full year.

Turning to the balance sheet. We ended the quarter with $298.9 million of cash, cash equivalents and short-term investments, which we continue to believe provides us with sufficient capital to invest behind our core growth accelerating initiatives and achieve cash flow breakeven without needing to raise additional capital, and we still have no debt outstanding. At the end of Q4, our remaining performance obligations or RPOs were approximately $133 million, of which approximately 86% apply to the next 12 months and 98% to the next two years. Our backlog, which includes contracts with a termination for convenience clause, which is common in our U.S. federal contracts and occasionally found in other customer contracts, was approximately $242 million, of which approximately 67% applied to the next 12 months and 85% to the next two years.

Let me turn now to our guidance for the first quarter of fiscal 2025. We’re expecting revenue to be between $58 million and $61 million, which represents growth of approximately 10% to 16% year-over-year. We expect non-GAAP gross margin for Q1 to be between 50% and 52%. Gross margin for Q1 is expected to be impacted by the inclusion of partner solutions and some of our larger government sales, which we anticipate will have an approximately 3 percentage point impact during the quarter. Guidance also reflects an anticipated 5 percentage point impact from higher depreciation expense related to the shortened estimated useful life for the three SkySat satellites, which we expect to lower and re-enter the earth’s atmosphere within the fiscal year.

We expect our adjusted EBITDA loss for the first quarter to be between $11 million and $9 million. We are planning for capital expenditures of approximately $14 million to $17 million in Q1, reflecting our continued CapEx investments in next generation fleets as well as the maintenance CapEx for replenishment of our PlanetScope constellation. Turning to the year ahead, we recognize that we are seeing an increase in large contracts and partner solutions in our existing business and pipeline opportunities. As you’ve heard, we are pursuing many promising large government contracts, including multiple seven-figure pilots in flight or in procurement that have the potential to convert into very large operational contracts this year. In addition, we are seeing significant progress with new solutions that we are providing with partners enabled by recent advancements in AI.

The signals we are receiving from existing and potential customers give us confidence in the power of these solutions and our position to win. We believe these opportunities have the potential to drive significant scale and upside in our business. However, the timing, size and structure of such opportunities can be difficult to predict. That’s why we’re going to hold off on guiding for the full year until we gain more clarity on how these opportunities develop. As we gain visibility on these opportunities through the year, we will provide more color to our outlook. Our long-term financial targets for the business have not changed. Further, I’d like to emphasize our commitment to reaching our target of adjusted EBITDA profitability by the fourth quarter of this fiscal year.

As Will mentioned, we are prioritizing investment behind core areas to capture the market opportunity unfolding in front of us. In parallel, we will reduce expenses where necessary to deliver on adjusted EBITDA profitability, which we view as a key milestone on our journey to building a high margin, sustainable and cash flow generating business. In summary, the government sectors are strong and we are seeing demand shift to solutions alongside our data enabled by the revolution happening in AI. We are investing behind these trends to capture market share and drive customer adoption, while streamlining our cost base to ensure we deploy our cash efficiently and align our operations to profitable growth. Simultaneously, our engineering teams continue to make great progress toward launching our next-generation fleets and we have an exciting platform launch coming in just a few weeks.

I’m incredibly proud of the accomplishment of our teams around the globe in fiscal 2024 and even more excited for the year ahead. Operator that concludes our comments, we can now take questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Michael Latimore with Northland. Your line is now open.

Will Marshall: You there, Mike?

Michael Latimore: Yes. On sales cycles and new deal sizes, how are they trending now versus four to five months ago?

Ashley Johnson: I’d say on sale sizes, we’re definitely seeing opportunities for sales – sales to – sorry, average sales sizes to increase. Just given what we alluded to with some of the larger contracts, some of which have been awarded, some have been awarded in the form of pilots with government contracts. As you know, those sales cycles tend to be longer, although on the pilot side, we can see shortened turnarounds. So, net-net, I’d say stable to seeing positive signals.

Michael Latimore: Got it. And then I think there was a eight-figure expansion deal that was kind of effectively in the pipeline last quarter. Any update on that one?

Ashley Johnson: Still in the pipeline, nothing to share.

Michael Latimore: Got it. And just last, do you have an updated net promoter score, NPS?

Ashley Johnson: Not at this time. We’ll have to circle back to you with that.

Michael Latimore: All right, great. Thanks a lot.

Ashley Johnson: Great. Thank you.

Operator: Thank you for your question. The next question comes from the line of Jason Gursky with Citigroup. Your line is now open.

Jason Gursky: Great. Thanks, everybody. Will, maybe this is a question for you. Talk a little bit about the SkySats and the transition to the Pelicans. If, for whatever reason, there’s a delay or gap in capability set that comes about as you retire some of these SkySats before the Pelicans get up there. Do you have any contracts that would be at risk today where you’re currently performing on a contract and if for whatever reason, there was a gap in that capability set that you would not be able to perform on?

Will Marshall: The short answer is no. So we have plenty of capacity to provide to our customers at the present time. We have seen some accelerated depreciation of those SkySats from the lower orbit, but generally that is sort of offset by the fact that actually we increase the capacity on those satellites routinely with software improvements. So just to give you a sense of that in the last year, we improved the capacity per satellite by 40%. And that built off more than doubling the prior year. And that’s all with software improvements. And the longevity of those satellites remaining in the higher orbit looks good. And Pelican is on track. I shared a little bit about Pelican and the tech demo, it’s going really well. We’re planning for the first operational satellites in the next 12 months, as I also mentioned, and I’m really pleased with the results so far and incredible work of that team that has pulled that all together because it’s an incredible mission.

Jason Gursky: Maybe ask that different way, same topic. How many SkySats after these three go retire we have left? And how many do you need to perform on your existing contracts?

Will Marshall: Yes, we’ll have approximately 15 remaining. And I think that’s plenty for the revenue. Not just the revenue that we have, but for the revenue to continue to grow. Again, with that sort of capacity improvements of the kind that I just said year-on-year and we still see potential growth in that. It’s not like it’s capped out. We’re going to continue to work on improving that further in this year. So, yes, we think 15 is plenty.

Jason Gursky: Okay, great. Thanks. And then, Ashley, a couple for you. Can you get to break – EBITDA breakeven with your current revenue run rate, what you’ve got here projected in the first quarter 2025?

Ashley Johnson: Yes. I’d say the way that we’re thinking about this year and obviously I alluded to the fact that there are a number of opportunities in flight that from very large deals and work with partners that are making full year guidance more difficult than usual. But I’d say generally it’s because of the fact that we do have so much opportunity that makes it hard, as opposed to the opposite. What I can share is that for our own internal and budgeting purposes, even though we’re very confident in our position to compete and win in these opportunities and we’re investing behind them, we’re not assuming acceleration in our year-over-year growth rate as we progress through the year and are aligning our costs accordingly.

Jason Gursky: But I guess the question is roughly $60 million a quarter. Can the business be EBITDA breakeven?

Ashley Johnson: There’s no reason why it couldn’t be.

Will Marshall: So, yes.

Jason Gursky: Yes. Okay. And then on cash flow, maybe talk a little bit about expectations around when the cash flow number gets to breakeven and turns positive, the timing and drivers of that.

Ashley Johnson: I guess the way that I talk to it is, we are balancing a number of different factors in managing our cash balance. So one is, we want to maintain a healthy balance sheet. We’ve got very large government customers that will look to us to sustain a nine-figure balance – cash balance on our books to know that they can continue to invest behind us as a key provider of the very critical services that we provide. So that’s one factor. The other is, we’re making investments in our next-generation fleets. We are in a, what we would call a growth CapEx mode, and we want to make sure that we continue to invest behind those so that we can sustain our space and data advantage. And all of that is combined with the operational efficiencies that we’ve continued to drive quarter-after-quarter.