Palantir Technologies Inc.

Good morning. Welcome to Palantir's first quarter 2022 earnings call. We'll be discussing the results announced in our press release issued prior to the market open and posted on our investor relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our second quarter and fiscal 2022 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees. and are subject to risks and uncertainties which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed prior to market open today and in our SEC filings. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation, and SEC filings are available on our investor relations website at investors.palantir.com. Joining me today on today's call are Alex Karp, Chief Executive Officer, Shyam Sankar, Chief Operating Officer, Dave Glazer, Chief Financial Officer, and Kevin Kawasaki, Global Head of Business Development. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. I'll turn the call over to Alex.

Welcome to our earnings. We are in London. In past earnings calls and over the course of two decades, we've been involved in many of the most important things that have affected Western society. But what makes these times special is the trends that we believed would happen are happening at an accelerating rate. And what's super interesting is why is the broader world so late in recognizing how these things are accelerating, what's happening? What is the genesis of the escapism that are broader institutions, financial, cultural, legal, technical, why are they escaping to the metaverse or faculty lounge jargon or political structures that are clearly not solving problems where inputs and outputs are totally anti, if at all, correlated? Yeah. Why is it that we are unable to see the violence that is occurring as truly something that will be part of our ongoing future and not as episodic? Why do we describe these things as uncertainty when they are real? certain and are happening? Why is it that our institutions are not even pretending that they will be able to hold the center while simultaneously pretending the center will coagulate to a center independent of new structures, new ways of doing things, of new products, new institutions, new ideas? Part of that is we have theology theological structures around how we build, for example, in our space products. And that theology presupposes that the world will be stable. So specialized things we built for both commercial and, for example, special forces, things that are powering current events now were built Over the last two decades, precisely because if you are in the periphery doing the most sensitive, important work in the world, as you need to be able to interact with your software in a way where it's disconnected and then reconnects, simple problem, normal software sucks at it. You need a very specialized product. We've been supplying this to the world's most important elite soldiers for nearly a decade under the context of what we call a nexus peering. You need an ability to interact with space where you solve certain problems online. involving compute and involving the reduction of data using colloquially defined AI tuned by foundry, getting that to the soldier. You need to be able to, in the context of commercial entities, rebuild the supply chain because there's war. There's obviously going to be food shortages. There's disruptions. You can no longer get certain resources. from countries. You have to get them from others overnight. The systems literally presuppose that will never happen and therefore fall completely apart when it does happen. There is no plan for when it doesn't happen. This is why even though we've been a completely focused product company that is only focused on building these products and we have new products coming and not as focused on actually convincing people that we're right, they still sell. Because the other products are not built for this world. You have a financial context. It's like we have raging inflation. We are very likely to see this war increase. The risk of a nuclear event is so much higher than is being presented in the public world that it's almost surreal to watch the coverage. And yet, you know, there's really no idea of what you would do with evaluating the quality of revenue. So that, you know, Palantir, for example, We are a company to thrive in good times, and we thrive in bad times. We are not built in the way the theologians of our financial institutions would love us to be built, so that you're built exactly like if we had listened to them, we would only be growth and no free cash flow. We're a company that throws off free cash flow. We're a company that expected inflation. We obviously super committed to the mission, but it was obvious to us, even at inception in bad times, the quality of government revenues would be crucial because other revenues would suffer from inflation. They would have a lower quality. They'd be less sticky. We built these products for the right reasons, and we're not ashamed to say that we're winning maybe because we were right. We didn't want to be, right? But some of this stuff was so obvious. It was obvious that these institutions, the theology of how we model these things in every context is just corrosive. So you end up with the wrong products, the wrong quality of revenue. So you have growth without free cash flow or free cash flow without growth. You have products that work now that can be hyped up with sales but clearly are not going to work the day after tomorrow. No ability to build new products. Why would you build new products? You're going to have this perfectly tinkered model get – get the institutions to invest in you and acquire all these companies that actually build products. Yeah, but it's nearly impossible to build products for tomorrow. There aren't companies to acquire. You actually have to do it yourself. Sure, here and there you can look for things to accelerate. Palantir has done that. So we at Palantir are not fleeing to a different world, whether it's the meta world or a theological world or a financial version of theological world or a grad school version of theological world, which isn't even actually academic because academic presupposes interacting with the object from a theoretical perspective, differentiated from the object, not importing information. a theological preconceived version of an object onto the theory and re-importing that onto the object. Products don't work like that. Reality doesn't work like that. Palantir, we are playing a critical, crucial, and much bigger role than we're allowed to mention or would ever discuss in public in current events, obviously commercially because our partners and other future partners are being their supply chains are disrupted, there's a threat of a disruption in the broader economy, and many realize that the reality of a truly monumental, epic, and horrific disruption in the form of a nuclear attack is much higher than is being reported. But also in the government context where we are playing an outsized role And we're very proud of that, and we're proud of the people we're able to support. And we're also eager to continue to help to support them. I must also say the people who are watching this, many of whom share our belief that the future is – to be won by people who accept the reality of what it is and not what it ought to be, that you can only change the ought by accepting what is, that you've stuck with us and I hope will stick with us. And we are going to continue supplying the world's most important products to the most interesting, creative, and effectual people in the world and continue to thrive as this hybrid company that is both bull and bear. comes into full stride in both environments, but in absolutely anomalous stride when times are rough and people are hiding. Palantir's products are on the absolute front line, and you see them in the news every day. And we would love someday to discuss exactly what we're doing, but we are playing a good role, and your support and buying into the world as it is is enormously important to us. Thank you.

In Q1, revenue grew 31%. Commercial revenue grew 54%, accelerating for the fifth quarter in a row. U.S. commercial revenue grew 136%, also accelerating for the fifth quarter in a row. We added 40 new customers, growing customer count 86% year over year. We had GAAP operating margins of negative 9% versus negative 33% a year ago, reflecting our continued march to GAAP profitability. And we had adjusted operating margins of 26%. We have been building our company and our products for this world. The stability on which so many models that purported to explain the world rely, it's vanished, if it ever existed at all. We have built a company for the world that is, not the world that ought to be. And it is instability, not its absence, that makes our software all the more essential. As our customers confront an extraordinarily significant and rapidly escalating conflict in Eastern Europe, runaway inflation, disrupted supply chains, and a new wave of refugees, our products have become more essential than ever. At our last earnings call, the invasion of Ukraine had not yet occurred. From the moment those tanks rolled into Ukraine, we have been delivering our capabilities to the front. We have been continuously shipping innovation over the course of the conflict to provide Western militaries the software that they need to fulfill their missions. Every product and capability has been employed by our customers from Gaia, Gotham, Edge AI, Foundry, Nexus Pairing, and more. And the newest of them, MetaConstellation, continues to deliver value in making space-based collection truly operational, delivering significant mission outcomes. And we have been working across Poland, Lithuania, the UK, and other nations to power refugee relief operations. Our software is powering the World Food Program's Ukraine response, getting aid as far east as possible. And across our commercial customers, we are powering resilience to a whole new set of supply chain shocks. Real-world events are driving enormous and long-term opportunities for growth. We are on the front lines, seeing what needs to exist, hearing from commanders and users, and building now what is needed and what will power the next decade of U.S. and allied defense programs. We did this a decade ago in Afghanistan with Nexus Peering. We did this a year ago with Metaconstellation, whose impact writes headlines in the New York Times. And we will continue building the software of the future, ramping our investment heavily across the business in the face of these palantir-shaped macro conditions. This focus has delivered tremendous depth in our R&D and our full stack IP. We now have this opportunity, in addition to releasing new products at pace, to bring an increasing amount of that innovation to market. And that's what you're seeing with Apollo. We believe Apollo will fundamentally change how software is deployed, anticipating a future where multi-tenant SaaS is dead and is clearly dying in the present, a trend that is accelerated by geopolitical events. Every software company will need to be able to deploy their software into their customers' environments, requiring them to manage fleets of heterogeneous environments across public clouds, on-premises, sovereign clouds, and growing data jurisdictional boundaries, and to do all that seamlessly. Apollo will take customers from a world of continuous deployment to autonomous deployment. And we have been pleased with the market reception to Apollo and our Demo Day event really being received by a completely new buying audience. We are also now offering Nexus Peering as a standalone capability for customers to build their own data fabrics on top of. Over a decade ago, we pioneered a technology that enabled Gotham to reason about the causality of a distributed system of many, many different Gotham nodes. These nodes could all have independent concurrent edits to the same objects, and Nexus Peering meant that we could synchronize these edits across the network, either in real time with consistent comms, as well as across unreliable, intermittent, and disconnected environments. Nexus peering means that you have a distributed data fabric that is survivable and resilient. The loss of any number of nodes or facilities won't impact the whole. This is a core and fundamental hard technology breakthrough that has powered Gotham's unique success across coalition information sharing for defense and intelligence agencies. And by enabling Nexus Peering to be sold as a separate capability, we can enable every program in the Department of Defense to leverage this distributed data synchronization and data fabric as we further demonstrate our own commitment to DoD's modular open systems approach. The greatest opportunity for Foundry continues to be the application development infrastructure platform. We believe that Foundry will become the place that you go to build the applications of the future. With AWS or Azure, with their highly unopinionated collection of services, most of the work remains in front of you to get to value. And all of that onus is on you, the customer, to get to that value. With Foundry, you're 90% of the way there on day one. Software-defined data integration, native multi-tenancy for your applications, the OPIs, version pipelines, applications, artifacts, just name some of the components that make Foundry work from the start. That's why U.S. Space Force's Kobayashi Maru software factory realized their ambition, building 13 operationally accepted applications on top of Foundry in months while sunsetting legacy $100 million-plus programs. That's why Airbus rolled out an internally developed supply chain network control tower. a suite built on top of Foundry's application development infrastructure. And this set of applications, it mitigates supply chain issues and is working towards saving hundreds of millions of euros annually by speeding up production against existing fixed capacity and reducing inventory across all parts. What AWS was in the last decade, Foundry will be in the next. Turning to the highlights in our commercial business, we added 37 net new customers in Q1. We saw continued growth in automotive, in financial services, in energy, including a new super major customer, and in life sciences. In April, we closed a renewal with a major U.S. Fortune 100 company for over $150 million. This customer hosted a hackathon with over 600 participants featuring applications built in under four days across finance, build planning, network resiliency, and customer experience. This was a good and telling example of how scaled customers built better on Palantir as application development infrastructure. Last quarter, we saw continued interest in our modular offerings. Hospitals need to improve operational efficiencies surrounding patient flow and staffing processes in order to decrease the length of stay and ensure patients have access to proper care. Palantir's Hospital Operations Suite has proven a unique ability to solve these problems through collaborative decision-making based on real-time data with targeted, event-driven notifications and actionable AI. Palantir's Hospital Operations Suite is now used by hospitals covering over 37,000 beds across the U.S., up from just over 1,000 on January 1st. Turning to government, as instability in the world increases, we continue to double down on our support of the missions of the West's most critical foundational institutions. Our ambition is to be the sixth prime contractor for the U.S. federal government, a trusted partner to deliver complex end-to-end integrated hardware and software solutions, building on the legacy of programs that we prime today. But we seek to be the first company to do this as a software prime, using software innovation and our unmatched expertise to deliver new integrated hardware software capabilities faster than the pace of conflict. In Q1, we launched our U.S. Federal Advisory Board, an important milestone in this journey. The war is not just happening on the ground in Ukraine, but also in space. And accordingly, our opportunities in the space universe continue to expand. U.S. Space Force continues to deliver new operational capabilities to America's space guardians who have set the gold standard for allies. This is leading to substantial interest in U.S. Space Force's Warp Corps platform, which was built on Foundry amongst allied nations. At Space Symposium in Colorado Springs to an audience of U.S. and allied governments, Peter Marquez, the former head of space policy at the National Security Council and the head of space policy at AWS, presented Project Argus, a new space situational awareness platform built on Foundry. we closed a £10 million enterprise expansion with the UK Royal Navy. Palantir software is used by the Royal Navy across a broad spectrum of areas, from strategic workforce planning to supply chain management. And world events have accelerated our opportunity in Western and Northern Europe. In Germany, we were awarded a framework agreement for state and federal government organizations to purchase Gotham and Foundry with an initial order coming from the Bavarian police, adding to our existing German security customers in North Rhine-Westphalia and Hesse. Our government healthcare business grew with an expansion with the Centers for Disease Control and Prevention. The growth of the work is reflected in the doubling of the run rate. Over the past year, while continuing to deliver on the CDC's foodborne pathogen program, which we have been powering since 2009, the CDC expanded Foundry's pathogen surveillance and response work and deployed generalized modules built on top of a common Foundry ontology against new pathogens, including measles, mumps, legionella, and novel flu. The CDC is also using Foundry to process genetic sequence data derived from wastewater samples. On the other side of the Atlantic, our continued investments in software-defined data integration with our newest Pipeline Builder product continues to pay off at the NHS, where they were able to roll out Foundry to 38 hospitals, integrating hundreds of data sets in March alone to enable them to work through the national care backlog. I'll turn it over to Dave to take us through the financials.