Planet Labs PBC

Good afternoon. Thank you for attending today's Planet Labs PBC first quarter of fiscal 2024 earnings call. My name is Anna 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 one. I would now like to pass the conference over to our host, Christian Ualdi, Vice President of Investor Relations. You may go ahead.

Thanks, Operator, and hello, everyone. Welcome to Planet's first quarter of 2024 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. We also reference qualified pipeline, which represents potential sales leads that have not yet executed contracts. 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. 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 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. Finally, for each of 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 several years. Further, the terms of these contracts can vary, and many of these contracts can be terminated by Planet or our customer prior to their maturity. As a result, we may not realize the total revenue expected for each such contract. 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. Thanks for joining the call today. Our first quarter financial results were solid. We generated $52.7 million in revenue, representing a 31% year-over-year growth, in line with our guidance. Non-GAAP gross margins expanded to 56%, up from 45% in the prior year, an 11 percentage point increase, showing the ability for our one-to-many data business model to drive significant margin expansion as revenue scales. We ended the first quarter with over 900 unique customers spanning across government and commercial markets. While our Q1 results were in line with our expectations, we faced some recent headwinds in April and May, which inform our guidance for the year. And I'll address this in a moment. Before that, I do want to underscore our sustained confidence in the market opportunity. In Q1, we saw the largest quarter for pipeline generation in the company's history. We saw rapid advancements in AI that are unlocking new possibilities with our data set. And we saw our products that are enabling our customers to address some of their most pressing security and sustainability challenges. That is all to say we continue to see strong demand for our solutions. Let me now address our update to guidance for this year. The primary driver is that sales bookings came in lighter than we expected. In recent weeks, we observed a combination of factors coming together, including extended sales cycles as well as some of our larger deal opportunities closing with smaller values than anticipated. We believe these recent changes reflect hesitation from customers as they enter a year with heightened budget uncertainty, as well as government procurement cycles taking longer than we expected. Because of our data subscription business model, lighter bookings in the beginning of the year have a more significant impact on the full year revenue forecast than bookings in later quarters. Furthermore, because we believe this customer behavior may continue, we are revising our guidance, presuming these trends go on for the remainder of the fiscal year. To maintain our path to profitability at this lower assumed revenue growth rate, we are adjusting our expense plan. We have significantly throttled back our headcount expansion plans, which generate savings in the current year, but more importantly, we estimate these changes will reduce our annual run rate expenses by more than $35 million going into next fiscal year. We believe this adjustment to our expense plan supports our standing objective to be adjusted EBITDA profitable no later than Q4 of next year. In scaling back our spend, we're prioritizing investments that support revenue for our core business and our path to profitability. We're focusing our resources on our highest ROI customers and opportunities, as well as looking at additional ways to optimize expenses. We are fortunate to have high gross margins and the operational levers in the business that enable us to do this. I'd like to emphasize that through this, we continue to believe we have sufficient capital on our balance sheet to capture the market opportunity drive strong growth and achieve cash flow break even without needing to raise further capital. As I stated earlier, our conviction in the opportunity for our business over the long term remains strong. Let me expand on some of the recent deals and other signals that give us confidence. Firstly, on demand. As mentioned, we generated a record amount of qualified pipeline opportunities in Q1. It was more than double the quarterly average of the prior year. For some additional color, let me mention that we added five new eight-figure potential customer opportunities to the pipeline for FY24 during this first quarter. We've never seen anything like the scale of these large opportunities. Generating qualified pipeline lays the foundation for future growth year on year. Now it's up to us to convert that pipeline into bookings and revenue. Secondly, on AI. The recent advances in AI and the potential that generative AI and large language models in particular have to unlock value in our data is a further catalyst to our existing tailwinds. On our last call, we shared how our partner, Synthetic, ran AI models on our data archive to track the Chinese high-altitude balloon to its origin point. Synthetic's analytics, when combined with the PlanetScope archive, function almost like a time machine for the Earth, allowing users to scalably search data back through time, going back six years. We've added a video to our investor relations website under the Videos tab that shows Synthetic's model running on Planet data and extracting insights. Their solution automates the analysis of large unstructured data sets like ours so that even a non-technical user can detect objects in minutes or train and deploy AI models radically faster than even traditional AI approaches. It's hard to overstate the power of this. Being able to search the world for objects on demand has huge value for defense and intelligence customers, civil governments, and for sustainability applications too. It's been inspiring to watch the reaction of customers and prospects when they see the value that the combined capabilities of these models and our proprietary data unlock. Similarly, we also signed a partnership with South Korea-based AI company SI Analytics. SI Analytics plans to use planet data for a North Korea ballistic missile operations search project with the goal of enhancing global risk management and mitigating tensions in Asia and beyond. If you joined us in our user conference in April, you would have seen our demonstration of Queerable California, which you can find online. This is a proof-of-concept project from our ongoing collaboration with Microsoft. The Queerable California demo aims to show how next-generation AI can make satellite data more accessible by making it searchable, conversational, and context-aware. While only the video is available in your browser today, it's a glimpse of what's possible when you combine our proprietary data with industry-leading AI capabilities. It's another milestone in our journey towards building a queryable Earth, a vision I outlined five years ago at TED 2018. These AI-centered partnerships are just the beginning. We see AI as a catalyst to help unlock the full potential of our deep data archive, which has the depth and consistency that others in the industry can't match, enabled by a unique Earth scanning constellation. AI models themselves hold little or no value without data to run on. But Planet data and AI is an incredibly powerful combination. In short, Planet sits on a treasure trove of real-time and archived data that is an incredible asset for this AI revolution. Thirdly, I'd like to share some additional business highlights that represent the pressing issues that our solutions are helping customers address. In the last month, we closed two multi-year deals with international customers centered around defense and intelligence applications, one in eight figures to a partner and one in seven figures. Overall, in a world of heightened global tensions, the need for greater security and transparency is clear. Recent global events are driving elevated interest in our capabilities amongst the defense and intelligence community. Turning to commercial clients, we extended our strategic partnership with AXA Climate, which I previewed on our prior call. AXA is a leading provider of consultancy services, helping clients adapt to climate change and biodiversity loss. The partnership aims to offer continued satellite data-driven insights for the development of parametric insurance products. In Q1, we also closed a seven-figure multi-year renewal and expansion with Syngenta, which will enable their use of Planetscope to globally set the foundation for growth, new applications, and R&D in precision agriculture. Syngenta's existing work with Planet over the last several years has included using SkySat for monitoring corn and soy, as well as plot verification. Turning to climate and sustainability, we have a few partnerships to mention here. The United Arab Emirates is hosting this year's Climate Conference COP28. With this context, we recently signed a partnership with the UAE Space Agency to build a regional satellite data-driven loss and damage atlas for climate change resilience. The initiative aims to provide our data to countries facing high degrees of climate risk so that they can better respond, make informed policy decisions, and enable financial programs for climate adaptation and mitigation. We are also seeing that sustainability regulation in various geographies is a significant catalyst for wide-scale adoption by civil government. Let me mention a few examples. Europe's Common Agriculture Policy, or CAP, drives the need for governments in Europe to monitor for compliance. Together with our partner NEO, we closed a new deal with a Dutch paying agency. We're delivering Planet Fusion as part of the area monitoring system provided to the Netherlands by NEO as part of their efforts in turn to increase automation of their monitoring. Relatedly, Planet won a multi-year seven-figure open tender award from the Welsh Government to support the design and implementation of the rural investment schemes and the sustainable farming scheme. Similar to Kat, coming down the pipe, we expect the newly adopted and far-reaching EU regulation on deforestation-free products to be a driver. It forces companies bringing any of seven commodities into the EU to prove that they did not cause deforestation, all starting next year. In our view, satellite data is the scalable solution for monitoring to ensure compliance. Turning to South America, we recently signed a seven-figure multi-year contract with Bolivia's Institute for National Agrarian Reform, or INRA. It's our largest deal in a Spanish-speaking country. INRA is using PlanetScript and Skysat to map the country and monitor for good stewardship of public lands and title enforcement. They're also using our archive to gain insight into previous land use. Planet data has proven more cost-effective than the alternative of flying airplanes to capture imagery for INRA. Finally, on the sustainability thread, the Environmental Resources Management, or EIM, a global sustainability consultancy, also became a planet partner. EIM brings deep subject matter expertise to clients across industries, contributing to more than 20,000 sustainability-related projects each year. The partnership is designed to expand their imagery, use cases, applications, and reporting capabilities, helping enable decision makers to address their operational and sustainability goals. These recent wins are indicative of a diversity of customers we can serve and critical needs that our data address. Now to give a brief update on the M&A front. This last week, we launched Planetary Variables live on Planet's subscription API, enabled through the Vanderstat acquisition. These products have opened new opportunities for us in markets like insurance. We've also been pleased with our recent acquisition of Salo Sciences. The integration is going well, and they have been successfully executing to plan. At our Planet Explorer conference, we announced that we would add new planetary variables building on that team's work, and they have already delivered on multiple sales opportunities for Planet. Meanwhile, in Q1, we announced our intention to acquire the business of Synergize, and I'm pleased to say that it's still on track to close this quarter. We view the synergized acquisition as a key part of our strategy to bring the power of Earth observation to the mainstream and to position us to support regulatory programs such as the EU's Common Agricultural Policy that I mentioned earlier. To summarize, we delivered solid Q1 results and had our strongest pipeline generation quarter in the company's history. Bookings came in lighter than we expected, with some sales taking longer than expected and others landing at smaller values than anticipated. We're responding by adjusting our spending plans, prioritizing our investments on customers and opportunities where we see the highest ROI, and as a result, we are maintaining our profitability objective for next year. Our conviction in the significant scale of the opportunity for our business remains strong. And with that, I'll turn it over to Ashley.