Planet Labs PBC

Good afternoon. Thank you for attending today's Planet Labs PBC fiscal second quarter 2023 earnings call. My name is Hannah, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Chris Genualdi, Vice President, Investor Relations. Please go ahead.

Hello, and welcome to Planet's second quarter of fiscal year 2023 earnings call. Before we begin today's call, we'd like to remind everyone that we may make forward-looking statements related to future events or our financial outlook. 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 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 provided a number of key performance indicators used by management and often used by our competitors in the industry. These and other key performance indicators are discussed in more detail in our press release. On today's call, we will also be discussing our backlog of contracted revenue. Although our backlog reflects business that our management considers to be firm, please note it is also a forward-looking metric, and any termination, amendment, or cancellation of contracts or awards may occur, which could result in a reduction in our backlog. Before we jump in, I'd like to encourage everyone to reference the slides we have posted on our investor relations website, 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. Thanks, Chris, and hi, everyone.

I'm glad that you could join us today. I'm excited to share our results for the second quarter of fiscal 2023, as well as our broader perspective on the market, detail on our recent wins, and our outlook for the third quarter and the fiscal year. Kicking off with a summary of our Q2 results, We generated $48.5 million in revenue during the quarter, which represents a 59% year-over-year growth. We believe this substantive step up in growth rates reflects the robust market demand for our mission-critical solutions. We saw strong growth from existing customers in the government and agriculture sectors, as well as some exciting new customer additions. Non-GAAP gross margins expanded to 52% up from 36% a year ago, another significant year-over-year uptick, which we believe is strongly indicative of the margin potential of Planet's one-to-many data subscription business model. We added a number of great new customers to the Planet platform during the quarter and ended Q2 with 855 unique customers. I'm clearly thrilled with our revenue and gross margin expansion for the quarter, but I'm also excited to see that our retention rates are improving, showing that our investments in customer success as well as product fundamentals are yielding great results. Executing for our customers and growing within these accounts is a key component of accelerating growth. Ashley will share more on that in a moment. To sum it up, Q2 came in above our expectations across the board. We're pleased with the momentum that we're seeing in our sales and product organizations. and we're continuing to invest across our teams, and our margin performance shows we're progressing with both strong growth and to profitability. Now, let me take you through some of the details. As shared on our last earnings call, we're seeing significant demand for data across both government and commercial markets, and we believe this reflects both the usability and critical nature of the solutions we're providing. Customers across our largest vertical markets agriculture, defense and intelligence, and civil government are using our data to better measure, monitor, and manage land and other critical resources as they tackle pressing sustainability and security issues, issues that, I'll note, persist despite the economic climate. Last quarter, we shared the exciting news that Planet has been awarded a $145.9 million multi-year contract as part of the National Reconnaissance Office's Electro-Optical Commercial Layer, EOCL. Today, I'm pleased to share with you that our service for the NRO has ramped up quickly and our team's execution has been excellent. Our ability to hit the ground running on this landmark contract contributed to the strength of our results in the quarter. We are proud to be able to serve our partners in the US government with our powerful and differentiated geospatial data, and we're excited to continue to expand this relationship in the years to come. Turning to the civil government side, Digital transformation initiatives continue to drive demand at both the national and local levels. For example, during Q2, we announced that we are providing the German Federal Agency for Cartography and Geodesy, BKG, with daily high resolution satellite data for a huge variety of use cases, including crisis response, environmental management, and nature conservation, as well as forest and agricultural monitoring. This is a pioneering contract because it is a country-wide partnership through which employees of more than 400 German federal institutions can gain access to PLANETS data to help promote public and civil safety throughout the entire Federal Republic of Germany. This engagement follows an assessment by the central government that determined that PLANETS data can help address the needs of the entire federal government. There is the potential for expansion with this contract and, importantly, this represents an example that other countries may look to follow. We also highlighted in Q2 the expansion of our relationship with the New Mexico State Land Office. Using PLANET's road detection analytics, the Land Office has been able to detect roads that were created on protected land and have identified up to $1 million in trespass violation fines thus far. After the beginning of the devastating 2022 wildfire season, The land office is using SkySat to monitor burn scars and severity, allowing the state to plan for potential flooding and debris flows, along with mitigation efforts to restore the land. This is an example of how both digital transformation and recent climate events are driving demands for our solutions. Shifting gears to commercial applications. The agricultural vertical is a top market for planning, and our data is used across a range of applications in industry value chain. Many of these applications either increase yields, and therefore revenues, or increase efficiency, and therefore profits, which is especially important to today's economic environment. A new customer in agriculture that I'd like to highlight this quarter is Organic Valley, the organic food brand and independent cooperative of farmers. During Q2, we announced that we had completed a successful pilot program with them which utilizes our technology to efficiently measure pasture health on dairy farms. With our near daily satellite images, participating organic valley farmers access reports created by the cooperative regarding their pastures, which help them assess pasture quality, thereby support herd nutrition and contributing to sustainable agriculture practices like regenerative rotational grazing. I'm pleased to share that the program is set to expand five-fold this year following the successful pilot. To spotlight another commercial win, in July, we announced that Planet Data would be made available through Turbine Hub's Esri ArcGIS-based platform. The Turbine Hub is a wind energy-focused data and geospatial company that provides critical insights to the asset and investment management communities. With Turbine Harvest Imagery Analysis Service, developers can access both PlanetScope and SkySat data to better inform their wind energy investment decisions. And customers can easily track onshore and offshore wind development using their proprietary asset tracking capabilities. This is both a sustainability and economic-driven example of our data at work. I'd like to turn for a moment to Ukraine. As we have previously shared, we are supporting critical efforts in multiple areas by providing imagery to governments, aid and relief organizations, think tanks, and the media. We continued that important work in Q2, and NASA Harvest and Wynwood are a couple of partners I'd like to highlight who are using our data in response to recent events. The team at NASA Harvest NASA's food security and agricultural program recently used that planet data to do a countrywide assessment of the health of grain in every field across Ukraine and its effect on global suppliers. As of August 2022, the harvest team found that more cropland than was initially expected had been harvested and planted along both the Russian-occupied and Ukrainian-held territories. The team is also currently estimating a higher production out of the region than other publicly sourced estimates. Such analysis is important as Ukraine is a breadbasket of Europe and has important implications for supply chains generally and for the poorest countries in particular, since an estimated 40% of grain used by the World Food Programme comes from Ukraine. Another example of our data at work in Ukraine is how maritime AI company Wynwood, when combining their AI-powered behavioural analytics models with planet's daily imagery, found vessels engaging in dark activities and ship-to-ship operations in the kursh strait in june as part of what appeared to be the coordinated effort to launder grain allegedly stolen from ukraine the report found a 160 percent increase in dark activity in the black sea year on year with 73 of those cases occurring after the war started we are constantly inspired by the innovation and passion of our customers and partners to use our solutions to solve big important problems Planet's daily scan of the Earth generated by our SuperDove fleet especially lends itself to this cultivation of innovative applications thanks to its unique, always-on, non-tasking architecture. The work of our users and the impact that they have with our data on a daily basis is what motivates us to continue building Planet's Earth data platform into a more powerful and easier-to-use solution for our customers. With that, let's turn to some product updates. Development of our next generation Pelican fleet has been progressing as planned, and we continue to expect to launch the first two satellites towards the beginning and end of next calendar year, respectively. One of the critical design components of our new fleet is a significant reduction in latency of the constellation, that is, reducing the time between a customer ordering and receiving our data. Our customers want our data as close to real time as possible, So our teams have designed a leading-edge approach to satellite-to-satellite communications, enabling downlink via other satellites to reduce latency. To this end, we were excited to share in Q2 that Planet was selected as a partner by two companies, SES Government Solutions and Telesat Government Solutions, to demonstrate real-time connectivity solutions from low-Earth orbit satellites to other in-space communications satellites as part of the NASA-funded Communications Services Project, or CSP. NASA's goal with the project is to develop a next generation system for near earth in space communications that leverages private sector capabilities. Planet's goal is to bring our next generation technologies to market faster and at a lower cost than it would have been possible otherwise. These are win-win partnerships. Furthermore, we continue to innovate on our existing fleets as well. As we have previously shared, we made improvements to our SkySat tasking systems that have driven substantive increases in our high-resolution capacity and efficiency. We have demonstrated that we can rapidly improve the capabilities of our hardware through iterative software upgrades and algorithmic improvements. These efforts continue to bear fruit, and the customers are benefiting from enhanced reliability, improved quality, and faster delivery as a result, and we are also able to support more customers. These improvements ultimately make our high-resolution fleet more one-to-many in nature and contribute to our operational efficiency, the strength of our results, and our market lead. In summary, Q2 was an excellent quarter, exceeding our targets across the board, further bolstering our confidence not only in planet's growth opportunity, but also our ability to capture it. We continue to see growing demand for our solutions across the end markets, driven by broad secular tailwinds, and we're executing well both commercially and technically. With that, I'd now like to turn over to Ashley, after which we'll have some time for Q&A.