Planet Labs PBC

Good afternoon. Thank you for attending the Planet Labs PPC third quarter of fiscal 2023 earnings 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 queue for a question on today's call, you can do so by dialing star 1. I would now like to pass the conference over to your host, Mr. Chris Genwaldi, Vice President of Investor Relations. Thank you. You may proceed.

Hello. And welcome to Planet's third 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 gap 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. 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 hello, everyone. We're glad you could join us. I'm pleased to share with you today our results for the third quarter of fiscal 2023, highlight some recent sales wins, and talk through our progress on a number of strategic initiatives. I'll also provide a perspective on the demand environment and our outlook for the remainder of the year. So let's dive in. In Q3, we generated $49.7 million in revenue, representing 57% year-over-year growth. Non-GAAP gross margins expanded to 54%. up from 35% a year ago, yet another significant year-over-year increase. We think this demonstrates the margin potential of Planet's one-to-many data subscription business model. We ended the quarter with 864 unique customers spanning a diverse range of industries. So to sum it up, We delivered another quarter of solid results in the face of an uncertain macro environment, which is testament to the strong execution across the company and the mission-critical nature of Planet Solutions. Now to take you through some highlights. As we discussed at our investor day in October, we're increasingly focused on building partnerships to accelerate growth of our ecosystem of customers and users. There are three new and exciting strategic partnerships that I'd like to discuss first here today. The first of which is that last week we announced a collaborative agreement with Accenture. We are combining planet's high-frequency satellite data with Accenture's industry and technology expertise to collaborate on an array of sustainability and impact initiatives, including traceable supply chain strategy and data-based climate risk assessments to mitigate disruption across global value chains. These are just our initial areas of focus. We're thrilled to be working with Accenture and think our partnership will drive great awareness of our offerings and the benefits of our data to deliver to organizations across many industry sectors. During the quarter, we also expanded our work with Microsoft At the United Nations 2022 Climate Change Conference, also known as COP27, we announced that we'll be supplying satellite data to support African climate adaptation projects developed out of Microsoft's first global expansion of its AI for Good lab into Nairobi, Kenya, and Cairo, Egypt. This work builds on prior projects, including the Global Renewables Watch, which is mapping the world's utility-scale solar and wind installations, and the creation of an important building damage assessment tool of Ukraine for the United Nations. Our partnership with Microsoft demonstrates how the combination of AI and satellite data is a powerful tool for helping to address some of the world's most complex and critical challenges. Finally, I'd like to highlight our partnership with Amazon Web Services, which we just announced today. We are directly embedding planet data into AWS SageMaker, enabling data scientists and machine learning engineers to acquire global daily satellite data through the platform. This partnership helps customers build, train, and deploy machine learning models on geospatial data with greater efficiency. The data from planets' consistent daily scan of the Earth is analysis-ready and ideal for developers to build on. is an exciting early stage go-to-market collaboration that amplifies the power of our sales organization with the significant potential given the large customer base of AWS. This new collaboration with AWS supports our go-to-market strategy to accelerate data access within geospatial tools and cloud platforms. Shifting gears to M&A. As you know, we view Planet as a natural consolidator and we're particularly interested in joining forces with teams that have potential to accelerate our product roadmap and enhance our value proposition. With this in mind, we're very excited to announce that we have signed an agreement to acquire Salo Sciences, a small California climate tech company specialized in measuring Earth's constantly changing ecosystems. Since 2019, we've partnered with Salo Sciences' team to deliver insights. One example is their California Forest Observatory, which dynamically maps forest structure and vegetative fuel loads at the individual tree level across California. Earlier this year, we partnered to directly measure forest carbon in select areas around the world. We at Planet see a planetary variable for carbon as a key element for the global sustainability transition in general and the carbon offsetting market in particular. Today, Salo Sciences products include a forest carbon measurement tool powered by Planet data that can help enable accountability tools for climate policies and markets. forest carbon inventories and storage, and much more. The next step is to extend the Salo Sciences products and reach, and that's where Planet comes in. This acquisition ties in neatly with our board of planetary variable work, including developments from our previous acquisition of Vanasat. I'm very excited what we can accomplish together. This deal is signed and subject to closing conditions. We expect to close early next year. We look forward to sharing more at that time. Turning to customer wins, let's start with the government sector. Demand for our solutions with the government customers, both civil and defense, domestic and international, is robust. During the third quarter, we closed a renewal and expansion contract worth more than $10 million over the next 12 months with an International Ministry of Defense customer. We've worked with this customer for over three years, and we're proud to continue to support them. On the civil government side, during the last month, we expanded our contract with the German Federal Agency for Cartography and Geodesy, also known as BKG. As shared previously, this pioneering countrywide partnership is providing access to planet data for over 400 German federal institutions to help promote public and civil safety and many other use cases. We see this as an innovative model that has the potential to be repeated in other countries. I'd like to take a moment to share some of the recent highlights that have come out of the Brazil MICE program, which is the largest remote sensing project in Brazil. Through this project, Brazilian federal agencies are able to gain access to Planit's daily satellite imagery and change alerts from our partner, SCCon, a Brazilian company that develops and supplies geo-IT solutions. With the implementation of our joint solution, the Brazilian federal police have used our data to help address illicit activities in the region. It's an amazing example of capabilities of our products at scale and the potential to deliver huge value to customers. The project leverages Planit's monthly base maps and daily PlanetScope data, and Planet's analytics feeds to scan for new roads and buildings across the country. Then this feeds into specialized alerting software developed by SDCon to bring the right information to the end customer. The project has already yielded significant benefits, including helping the Brazilian government collect the equivalent of over US$1.9 billion in fines, seized goods, and frozen assets since 2020. Additionally, over 3,000 public agents were mobilized throughout the project in over 120 operations. We're proud to be able to support this initiative with our partners in Brazil. Turning to the commercial side of the market, during the quarter we signed a deal with a Fortune 500 global energy services company. Planet is providing this customer with high-resolution imagery of remote energy facilities. Our data is being used in their digital platform for the display of greenhouse gas emissions measured by on-site sensors, helping to quantify, prioritize, and rectify emissions leaks quickly and efficiently. It's another example of how satellite and on-the-ground data can be combined to solve critical issues. In the insurance sector, we recently signed a deal with Zetri, a reinsurance provider based in Nairobi, Kenya. ZEPRI is leveraging PLANET's basemaps to enhance drought risk protection in the Horn of Africa. PLANET will deliver Normalized Difference Vegetative Index, or NDVI, time series data to measure vegetative health for an area of more than 600,000 square kilometers. ZEPRI also plans to use PLANET data as their independent calculation agent to quantify conditions and provide metrics to measure drought. Working with Planet, they aim to expand their insurance program from supporting 150,000 to over 250,000 pastoralists. In the process, Zepri is seeking to generate a drought index, which can be customized to locations to determine payer amounts, generate premium rates, and enable faster claims. We're also expanding our partnership with Swiss Re. In the last year, we have provided index insurance services with Swiss Re in 14 countries, providing drought cover for organizations and farmers around the globe, leveraging the planetary variables from the Vandasat acquisition, most notably the global soil moisture product. This is a very valuable and unique application of our data that we are seeing scaled across global markets. In other developments, we launched this quarter a non-profit and NGO program to provide access to planet imagery and support services specifically for these types of organizations. This program enables NGOs to get up and running with standard pricing and packaging and customer onboarding. It's a seed investment at this stage, but over time, we hope it will foster similar benefits to those we've seen with our successful education research program, which is an important contributor to our sales top of funnel as it cultivates new applications for our data that can later be commercialized. Let me end with some perspectives that we are seeing in the market today. Demand, pipeline, win rates, and our sales team execution all continue to be strong despite the economic backdrop. The pace at which our reps are signing new and expansion business remains healthy, and our average deal size continues to increase as our reps are focusing on those opportunities with the strongest product to market fit. As you've heard, the government segment of the market, both domestic and international, continues to be especially robust. On the commercial side of the market, we are seeing some customers become more cautious as they navigate the current economic environment, leading to increased scrutiny of spend. This market dynamic will require continued focus on these opportunities where our data can drive proven economic outcomes for commercial customers. Fortunately, we believe the secular tailwinds driving adoption of our solutions, digital transformation and sustainability transition, the need for greater peace and security, remain top priorities for countries and companies alike, and our sales team continue to systematically execute and win in the market. In summary, Q3 was another truly excellent quarter, and I'm proud of the team's execution. I'm particularly proud of the sales deals, such as those that I've just touched upon, and the burgeoning strategic partnerships. It's exciting to see global technology leaders leveraging planet solutions to helping new capabilities to their customers and users. I'm also excited about the signed acquisition agreement with Salo Sciences. We see a planetary variable for carbon as a key element for the global sustainability transition. With that, I'll now turn over to Ashley, after which we'll have some time for Q&A.

Thank you, Will, and thanks everyone for joining today. As Will mentioned, our revenue for the third quarter of fiscal 23, ending October 31st, came in at $49.7 million, which represents 57% year-over-year growth. It's worth calling out that $1.5 million of the upside this quarter came in the form of one-time revenue associated with an option renewal by a European customer focused on climate and environmental monitoring. We're proud to continue to support this partnership and I'm especially proud of the strong execution of our global teams who are delivering results for our customers. Our end-of-period customer count grew to 864 customers, which represents 16% year-over-year growth and is an indicator of the broader adoption of our platform. Our end of period customer count has grown quarter over quarter for every quarter in the last three years. We're pleased with our new logo additions in Q3, which showed continued momentum with large accounts. We've seen the average annual contract value of our customers grow year over year during the last four quarters as our sales teams are prioritizing higher value accounts with opportunity to expand over time. Net dollar retention rate at the end of Q3 was 123%, and net dollar retention rate with windbacks was 125%. This represents significant year-over-year improvement, primarily driven by renewals and expansions in government and agriculture. This is down slightly quarter-over-quarter due to the timing of a renewal with a large international government customer in Asia, which was signed shortly after the end of our quarter. We remain focused on driving higher retention through our investments in product and customer success. Turning to gross margin we expanded our non gap gross margin to 54% for the third quarter of fiscal 23 compared to 35% in the prior year. The expansion of gross margins continues to be driven by the growth of revenue, the efficiency in our industry leading agile aerospace approach and the fundamentals of our one to many data subscription business model. Adjusted EBITDA loss was $12.4 million for the quarter, better than we had expected, driven by revenue upside, effective cost management, and the timing of some expenses, which we expect will incur in the coming quarters. We have been disciplined in our pace and quality of hiring as we continue to invest in our teams across Planet to meet the growing demand for our solutions. We believe that Planet's commitment to our mission, technology, and market leadership, and the strength of our global organization, are competitive advantages in the market for talent. Turning to the balance sheet, we ended the quarter with $425 million in cash, cash equivalents, and short-term investments, which we continue to believe provides us with sufficient capital to invest behind our growth-accelerating initiatives without needing to raise additional capital. We also continue to have no debt outstanding. Capital expenditures for the quarter, including capitalized software development, were $3 million, or approximately 6% of revenue, which is lower than we had anticipated, primarily due to the timing of procurements. We anticipate these expenses will catch up in subsequent quarters. At the end of Q3, our remaining performance obligations, or RPOs, were approximately $131 million, of which approximately 81% apply to the next 12 months and 96% apply to the next two years. Sequential RPO growth was impacted by the previously mentioned government customer in Asia that renewed their large multi-year contract shortly after the quarter end. As I've explained before, RPOs will fluctuate quarter to quarter as multi-year contracts come up for renewal. Additionally, please keep in mind that our reported RPOs exclude the value associated with the EOCL contract, as well as other contracts that include a termination for convenience clause, which is common in our federal contracts. Looking ahead to the fourth quarter, we expect revenue to come in between 50 and $54 million, which represents growth of approximately 40% year over year at the midpoint. we expect non-GAAP gross margin for Q4 of 56 to 59%, up from 42% in Q4 fiscal 22. Our adjusted EBITDA loss for the fourth quarter is expected to be between negative 21 and negative $16 million. We expect capital expenditures of approximately four to $6 million, which represents eight to 11% of revenue. For the fiscal year ending January 31st, 2023, We now expect revenue to be between $188 and $192 million, representing 43 to 47% year over year growth. The midpoint of this guidance reflects revenue growth of approximately 45%, which would be a significant top line acceleration on a year over year basis. We expect our non-GAAP gross margin to be between 52 and 53%, an improvement of approximately 15 percentage points year over year. Our adjusted EBITDA loss is expected to be between negative $60 million and negative $56 million. We expect CapEx to be approximately $15 to $17 million, which would be roughly 8% to 9% of revenue. The lower CapEx guidance is attributable to more measured procurement of ground stations for our future fleets and adjustments in our procurement schedule for our longer lead time components. To close, I'd just like to say it was another great quarter. I'm proud of our plan of tears around the globe and the contributions they make to building such an incredible company. We are executing against our plan and a challenging macro economic environment. And that's due to the focus and collaboration across our global teams. We remain confident in the market demand for our unique data sets and believe we're well positioned to continue to capture the opportunity ahead of us operator that concludes our comments. We can now take questions.

Absolutely. We will now begin the Q&A session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue.

The first question is from the line of Michael J. Lattimore with Northland. You may proceed. Apologies, Mr. Lattimore.

Your line is now open.

Great. All right, excellent. Yeah, thanks. Very, very strong results. I guess I just want to touch on one of the topics really from last quarter where you had had several customers, I think, that used up their annual commitments early and there was some, you know, you sort of evaluate, did they kind of expand or renew early or did they kind of, you know, hold the pattern with that annual commitment? Can you provide any color on how that's played out in the last quarter? Sure.

Yeah, I'd say it's, as we expected, there are some customers that have engaged with us on, you know, either early renewals or expansions to their contracts based on their higher consumption levels. And we've had others that continue to manage to the overall annual size that they have for their contract. So, you know, obviously, we came in at the high end. We came in above our guidance range. And so we definitely continue to see strong consumption patterns, which is great.

And then on the use of partners, can you elaborate a little bit more on how influential they are to the new bookings and expansions and maybe segment a little bit between the, you know, sort of the maybe traditional software kind of SIs like Accenture versus you know, tech partners here and how influential they are on, you know, leads and bookings at this point?

That's a great question. So we have both direct sales business and via partners. We've always used partners quite a bit, but we are seeing it as a very strong go-to-market approach. And the strategic partners that you saw, I think it really is a great sign that those three large entities, AWS, Accenture, and Microsoft are leaning in It's obviously, from my perspective, demonstrating that they see the big value of geospatial data to their markets. And it's mostly commercial markets that they have in mind, by the way. And it's great to see them see that big opportunity. They don't lean in for small opportunities, so these organizations. And so that's really great. And we have a number of solution partners as well, where they're adding capabilities on top of our data that enable solutions and use cases that our solutions don't directly handle. And that's important to the market, too. So we definitely are leaning into partners. We've done it before, but we're leaning in stronger and stronger into partners as a rich market.

Okay, very good. Thanks a lot.

Thank you.

Thank you, Mr. Lattimore. The next question is from the line of Edison Yu with Deutsche Bank. You may proceed.

Hey, thanks, and congratulations on the quarter. I had a question on the acquisition announced. If we think about the context of your pyramid, I think I heard that this kind of falls under the planetary variables piece. Do you foresee kind of doing some more scouting in this area, or are you starting to think about kind of moving up to insights?

That's a great question. I mean, we're very excited by this acquisition. Let me just speak a little bit broadly, firstly, to planetary variables and the sustainability business, because I think that the sustainability transition is desperately in need of really good scientific measures. And a planetary variable on carbon in particular is critical to our carbon offsetting strategy as a species. So that's really exciting. Salo have great forests. use of to make good forest measurement techniques and translating that into not just forest cover but to forest carbon that's essential ground preparation for that sort of move and And, of course, we've worked with them for some years through the California Forest Observatory work and other pieces, so we've had a good relationship with that team, so it's a really good cultural fit and everything. And it does, as you were pointing out, fit into the broader planetary variable strategy that we're embarking upon. We really started in earnest with the acquisition this time last year of Bandersat, and they neatly fit into that as as a piece of work. And this is continuing us up the stack. I mean, the planetary variables are a really important piece of it, and I think that's where the bigger focus is right now than the insights and indicators that might come beyond that. But they're the critical horizontal component that we need to be building up today.

I understand. Just a follow-up, actually, a separate question on the financials. Obviously, very, very strong flow-through. I know you said you mentioned that part of it was kind of a one-time upside, I think early renewal or something. Could you maybe just give us a sense of, I guess, what happened there? Why would it kind of repeat? And then I think you also mentioned that there was a deal that kind of slipped after the quarter and any sense of what the rates would have looked like if that actually fell in the quarter? Thanks.

Yeah. So in terms of the one-time revenue that I referenced in my remarks, that was a four-year deal that had a couple of renewal options after year two and year three. And just based on the accounting treatment as it relates to the contract, it required analyzing the revenue recognition over the term and understanding where we are on that revenue recognition versus the full contract size. So I'm not an accountant by background, but the team worked with the auditors to do an analysis on where we are in that. It resulted in a one-time revenue recognition in the quarter. On a net basis, it was about a million and a half. impact to revenue. So obviously that's significant, so I wanted to make sure to call that out. Even without that, obviously, we would have come in at the high end or just above the high end of our range. But that's what I was referencing in that part of the remarks with respect to the delayed renewal. That also, as you note, had the opposite impact on the quarter where when a renewal comes in late, then that's revenue that we miss out on. So had that come in on time, obviously, net dollar retention rate would have been higher in the quarter, RPOs would have been higher, and revenue would have been higher. And so that underscores the importance of on-time renewals, and it's something that we're very focused on internally.

Awesome. Thanks for the call.

Great. Thank you, Mr. Yu. The next question is from the line of Josh Sullivan with the Benchmark Company. You may proceed.

Good evening. Nice quarter here. Hey, can you hear me? We can. As far as the net dollar retention, just given the comments around more customer scrutiny of spend, do you think you'll be able to sustain this kind of IDR level, or do you think we might see some of those newer customers renewals extend more often?

Yeah, I mean, I think across the board, the broader customer success team investments we have made have given us really good visibility into both the renewals and the ability to drive expansions. And we aim to be a business that operates in kind of the best-in-class net dollar retention rate level, so north of 120%. Right now, we're on track for that and we think that the investments that we've been making, both in the product and usability of our products as well as with the teams that are working with our customers to drive that value proposition is having that impact and it should be sustainable. In terms of, you know, the cautionary note about the headwinds, it's basically a note to say we're not immune to the macroeconomic environment and so we are working with our customers to understand whether there are other ways to scope our relationships with them to continue to drive value. but the relationships remain strong and obviously the results and the quarter are speaking for themselves.

I could just add that we're seeing a little bit more budget tightening, but also at the same time, in some of our commercial clients that is, but at the same time we just highlighted a bunch of new commercial sign-ups. So it's a mixed story there. But overall, we're continuing to grow even on the commercial side year on year. And if I step back a little bit more, there's still these secular tailwinds of digital transformation and sustainability transformation that are really driving excitement here. And so I remain bullish on the commercial potential in the long term no matter what. And you can see by these three strategic partners leaning in, another example of, again, they wouldn't do that if they thought this was a small opportunity. They only lean in when there's a significant one. So I think that's a recognition of the opportunity from them as well. So, yeah, remain bullish on this in the long run.

Great. And then just the comment on the timing of procurements in the quarter, how should we think of the cadence of those layering backends?

You're talking about on the spend side?

Yeah, I believe you made a comment just on there was some timing of procurements in the quarter. I'm just curious how we should expect those coming back.

Yeah, I mean... As I said, I anticipate that we'll catch up over the next couple of quarters. We are working closely with the teams to understand which are the, you know, we've talked about this a bit at our analyst day, which are those long lead time items where we see there could be risk, and so we want to mitigate any risk in the future, and which are those where we're actually feeling quite comfortable that procurement will not be problematic when we need it. We prefer to operate very agilely as it relates to procurement so that we can be judicious with our spend. And our vertical integration actually gives us a lot of flexibility on that front. But the lower spend in the quarter, we do anticipate we'll catch up in the next couple of quarters.

Thank you for the time. Thank you.

Thank you, Mr. Sullivan. The next question is from the line of Jeff Van Rie with Craig Hallam. You may proceed.

Great. Thanks for taking my questions, Ashley. Well, great job. Great job to the team. Love the gross margins. I'm sure you're pretty satisfied with a lot of what you're looking at here. On the pipeline, just two quick questions. On the pipeline, can you quantitatively talk – I mean, I'd love some sense of the overall growth in pipeline year over year – And if you can't quantitatively, qualitatively, just what's really standing out in terms of the pipeline build?

Well, I'm feeling really good about our pipeline overall. Both on the commercial and the government side, in fact, I've never quite seen so many big deals, to be honest. I think we counted over 40 deals greater than a million dollars in our pipeline, which is Pretty amazing. I've never seen quite that many. So, of course, fees are big deals, so they can take some time. So this may not happen all overnight, but overall the demand is incredibly strong. So feeling good about it.

How rare are eight-figure deals going to be?

Well, we have them a lot, you know. They are happening. So, I mean, what would you say, Ashley? How would you answer that?

Yeah, how would I answer that? I would say that the good news is we see them. Obviously, the challenge with eight-figure deals is they tend to be longer procurement cycles, and they can cause variability quarter to quarter on the bookings. But the fact that we see them in our pipeline and are closing them is really fantastic for the business. And quite often, we see these as multi-year procurements, which is also very helpful to us. to know that these are relationships that are signed up at the outset for the long term.

Yeah, makes sense. With the partners, and just one other question on the partner front, I mean, obviously AWS, Microsoft, Accenture, I mean, a lot of heavyweight names right there. And I guess, you know, you've already had meaningful partner influences. From a quantitative way, you know, how – How are you going to measure it? I mean, are you already measuring partner influence, you know, partner-led, partner-influenced deals? Do you have any numbers you can share? Yeah.

In fact, quite a large number of our deals are partner-influenced. Few of them are partner-led. But in a lot of cases, we're bringing a partner in, particularly what we call our solution partners that are building that kind of last mile interface that's specific to the customer use case or the customer geography or both. So we do have a robust partner ecosystem. As we think about these larger partnerships, we're making fewer bets with those partners that view this as a really strategic opportunity. We're early days in them, so we'll be able to report on the progress of these relationships over time. But what's exciting is you see these big names at very high levels thinking of this as a very strategic opportunity, which signals that we're not alone in seeing these tailwinds due to sustainability and digitization of economies. Anything you want to add there, Will?

No, I think it's great. Yeah, good. Great. Congrats again. Thanks for taking the questions.

Thank you. Thank you, Mr. VanRee. Again, to ask a question, press star 1. The next question is from the line of Greg Mazniak with West Park Capital. You may proceed.

Yes, thank you. Question on your sales and marketing expense levels. Can you give us a little bit of color and guidance on what to expect going forward. I know you've had a pretty significant ramp in your sales force and given the fact that you're focusing your incremental wins on partnerships, how sales force intensive are those wins and how do you see the ramp in sales people continuing as you win more deals? Do you see that slowing down? Do you see it accelerating? I know you didn't give any guidance on sales and marketing, but your number was up, non-GAAP sales and marketing was up pretty significantly year over year at just over $16 million for this quarter. Thanks.

Sure. Thanks for the question. And yes, as you point out, we've been investing significantly in our sales infrastructure. We talked about before we went public that a large reason for raising the capital was wanting to have more feet on the street because there were a number of geographies where we weren't even vertically aligned in our sales organization because we just didn't have enough AEs on the ground to do so. So we've been adding on that front, and with that comes the support infrastructure that you need to make a rep successful, so everything from our sales ops teams to our SDRs and sales engineers. And we've also been investing in customer success. So making sure when we sign these customers, we're getting them to value as early in that on-ramping process as possible. The goal now is to make that scalable. And there are multiple ways to scale the sales infrastructure. One of them is through the continued automation that we're building into the product to make it easier for customers to on-ramp and to make it lighter touch for the customer success team so they can cover a broader customer base. The other way is through partnership programs. So right now I would say most if not the vast majority of our partners still have a Planet rep involved in the sales process. Ultimately, as the products become more advanced, again, on the customer onboarding, et cetera, we can be lighter-touch with our rep involvement in the sales process. So we've been scaling rapidly over the last year. We'll obviously be focusing on making sure we get operational scale over the coming year.

Great. And it sounds, from what you're saying, that given the scale in the business – We could expect the rate of growth in sales and marketing to taper off a little at some point.

Yeah, we've provided our long-term operating targets, which would see sales and marketing as a percentage of revenue continue to drop. Obviously, we said we needed to first ramp it up, and then as we drive scale, we'll see that as a percentage of revenue start to taper down to our target margins.

Thank you for that.

Great.

Thank you, Mr. Mesnia. The next question is from the line of Harry Wilmerding with Needham and Company. You may proceed.

All right. Thanks for taking the time. Just a quick question on customer ads. They were lighter sequentially in the first half of the year. Although it looks like 3Q is typically seasonally light, any changes to our call out on converting prospective customers in the quarter? And also, how are you thinking about customer growth as we enter the next year?

So was that the first one on customer growth, would you say?

Customer growth.

Yeah, well, I mean, that's primarily dominated by small accounts. And so... you know, the reps mainly focus on the large accounts, and they're really very strategic and focused and disciplined about that. So, you know, some small deals, and there was a few in educational research that fell off, some added. We're not tracking that closely because that's not where the dominant revenue is. So the growth, I would say, is still good in revenue terms, which is the main thing that we're focused on.

Yeah, just to underscore, obviously, we've added some really nice large customer wins, and as Will said, that is where we're focusing the sales reps, is those opportunities where we see an opportunity to really land and expand. On the smaller account basis, as Will pointed out, in education and research, you can see some projects that will cause numbers to go up and go down. There may be some seasonality with that, which you called out last year. So on the The smaller deal size, it's less of a concern on the numerical numbers. Numerical counts, what we're really focused on is the quality of the deals that we're bringing on board and really seeing, well, NPS scores across the board improving.

Great. Thank you. Thank you. Again, to ask a question, dial star 1.

The next question is from the line of Ken Mestemacher with Edison Investment Research. You may proceed.

Thank you for taking my questions. First, congratulations on the three announcements on Accenture and AWS and Microsoft. So how should we think about their revenue opportunity and financial impact on the company? And tied in with that, based on your responses to some of my colleagues' earlier questions, Should we be thinking it would be more medium or long-term rather than something in the next year, or how might that timing look?

I would just say, like Ashley mentioned, that these are nascent partnerships, but the fact that they're leaning in again is a big sign of the scale of the opportunity that they see. I mean, I do think we'll see things in the next year. I don't know how meaningful it will change our revenue in that year, but But we're definitely seeing this lean in, and it enables us to scale in a different way. They have a lot of industry expertise. They have a huge stack of customers where our data is relevant. And so going to market together with them makes a huge amount of sense. We've got an incredibly exciting data set that can help solve their customers' challenges. they've got the scale or the compute or the industry knowledge to do that. So that's the way I think about it. Does that make sense?

Definitely, definitely. Thank you. And second, you know, looking at gross margins, you know, and the increase this quarter, you know, that's great news. And, you know, how would you say Planet is mitigating the impact of inflation? You know, you touched earlier on macroeconomic issues. but we keep seeing these wage increases and inflation, and other people are struggling. So how are you all mitigating that, especially in light of expecting it to increase to 56% to 59% next quarter?

Yeah, so I would say on the gross margin line, the majority of that expense relates to either depreciation and amortization, which is a fixed margin, fixed number, our hosting costs, which we have a long-term contract in place, and then to a much lesser degree, the cost of our professional services and customer success teams, many of which we're able to locate in geographies outside of the United States so we can service customers on a lower-cost basis. I wouldn't say that we're immune to inflation and cognizant of the impact that that has on our employees. So We are, I think what I would say is we're very focused and thoughtful about our hiring plans and our spending plans. I highlighted at the analyst day how we think about the procurements and where there might be supply chain constraints where inflation could have a higher impact and maybe getting in front of some of those with earlier and bulk procurements. I guess the net answer is we're watching closely what's going on and making sure that we're thoughtful about our spending and budgeting.

Great. I had one more follow-up on the Accenture AWS Microsoft. You look at marketing. Will those three groups be looking into doing a lot of marketing for you, or will it be mostly directed by Planet? Just trying to get a good feel for how we're going to reach customers.

No, there's definitely marketing as part of this. And we're seeing their leadership of these companies lean in and speak about Planet in high-level forums and stuff. So that in and of itself helps us. Yeah, so I think we will see them help. And again, so it broadly expands our reach and reach. And we're excited by that. Yeah, it really is expand our reach. We have a number of initiatives through this quarter that expand our reach. Beyond that as well, I would note a couple of things that came up recently that both The Economist and Bloomberg leveraged our planetary variables and got them into their various magazines and notes and just incredibly important to see how these planetary variables are powering insights into the finance sector and they're bringing awareness to our products in that sense as well so I encourage you to have a look at those it's quite cool to see how that's been and that's just the tip of the iceberg it starts with some of that marketing piece but I think it's the tip of the iceberg of the potential Great

It's always good to have them do some marketing for us. That's really exciting news. So, again, congratulations.

Thank you. I was just going to add that we were on the front page of the New York Times again today. We get a lot of this sort of free advertising in a way.

Absolutely. That's great. Well, again, congrats on the quarter, and thank you for taking my questions.

No problem.

Thank you, Mr. Mestemacher. The next question is from the line of Noah Poppenach with Goldman Sachs.

You may proceed. Hello?

Hey, Noah.

Hello, can you hear me?

We can.

Hey, how's it going? How's it going? Thank you. Sorry about that. Sorry about that. It wasn't coming through, but nice to speak to you. Ashley, so last quarter you had guidance for revenue to grow sequentially, but EBITDA to be down a decent amount, and EBITDA didn't play out that way. For next quarter, you now have the same guidance, revenue to be up sequentially, EBITDA to be down. If I go into your revenue guidance range and your gross margin guidance range, the operating costs between gross profit and EBITDA have to be up quite a lot sequentially to get into the EBITDA range. So what's the dynamic there and why will that actually happen in the fourth quarter?

So as I mentioned on the The lower spend in Q3 on the R&D side, there was some timing of procurements, and I'd say across the board there was timing of new hires. So some of that is what you saw in Q3, and the anticipation is we'll be catching up to some of that spend and hiring in Q4. So that's the primary driver. Okay.

That type of spending can bounce around that much? I would think you would be laying that out on a longer-term planning basis and that it would be smoother, but it sounds like it could be pretty lumpy.

Yeah. On the space system side, when we do procurements while we're in R&D mode for some of our newer fleets, that gets expensed as incurred as opposed to being capitalized. That's why you can see if we make a large procurement for ground stations or for some of the other spacecraft purchases that we make, if those procurements come in later, then that spend just moves from quarter to quarter. So yeah, it's a little bit lumpier because of that dynamic while these fleets are in R&D mode. it obviously will smooth out as we move out of R&D mode and into capitalizing those expenses. And then it would just, you know, obviously be capitalized as CapEx and run through DNA, primarily through gross margin in future years.

Okay. And then two months through the quarter here, you're almost to your fiscal year end. I'm sure you're doing a lot of planning for next year. How are you feeling about how next year's total company organic revenue growth will compare to this year's? And how are you feeling about, you know, the ability to march towards breakeven EBITDA?

Well, overall, we feel very good about the tailwinds behind the company right now. And, you know, I mentioned just the demand on pipeline earlier, for example, is really strong. Slightly more cautious on the commercial segment for reasons we discussed. Very bullish on the government segment, both the civil and defense intelligence. Extremely pleased with the team's execution across the board, the product side and the sales and marketing side. And so that feels like we're well set up. Similar to last year, we'll provide guidance on the next earnings call for next year.

Okay.

All right. Thanks very much.

Thank you.

Thank you. That concludes our Q&A session. There are no more questions, and I will turn it back to Will Marshall for closing remarks.

Thanks, everyone. Thanks for joining the call today. I'd just like to emphasize just a couple of key points to conclude. So I think our Q3 results were really strong, underscoring the durability and demand for our mission-critical solutions. I'm very proud of our sales deals, those that I touched upon, and the strategic partnerships. It's great to see those global technology leaders leaning into planets, tools, and to develop new solutions for their clients. I'm also excited by the acquisition of Salo Sciences. As I mentioned, we see a carbon Planetary variable is a critical element to the sustainability transition, so that's exciting. And finally, we remain confident in our opportunity despite the current macroeconomic environment and continue to invest in the long run while maintaining our focus on the path to profitability. So thanks, everyone, for calling in today.

That concludes today's conference call. Thank you for your participation. Please enjoy the rest of your day.