Palantir Q4 2020

Investment Analysis Clubs Saul’s Investing Discussions
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This is my first attempt to analyze a company. This effort has made it clear to me why I am such a terrible investor. While Saul and others go directly to the relevant numbers, I flounder around trying to make clear connections.

https://s26.q4cdn.com/381064750/files/doc_presentations/2021…

The PDF.

https://www.sec.gov/cgi-bin/viewer?action=view&cik=13216…

Interactive 10-Q at the Edgar Database

This a new public company so the Year over Year metrics are not extremely clear.

In 2020 the revenue is up about 47% year over year. With a market cap near 60 billion dollars; the price to sales is about 60. This is about what Crowd Strike is.

There are three main products that Palantir has.

Foundry - think commercial
Gotham - think government.

The third is an operating system that was built to make the other two work. It is Apollo. It has not been monetized yet. If there is a reason to take a flyer on this company, it is Apollo.

Foundry just launched in 2020 and is now 44 percent of the revenue.
Gotham is the legacy software and is 56 percent of the revenue.

I get confused here.

Foundry grew at 107 percent and Gotham grew at 77 percent yet the total revenue growth of the company is 47 percent.

It gets even more confusing! Revenue per customer was up 41 percent, yet we are supposed to think there was a large growth in customers and we get a 47 percent growth in revenue. I am scratching my head now. Not only that, we the growth in the 4th quarter at 40 percent year over year. It does not seem like we are getting a big increase quarter over quarter. Maybe I am seeing this wrong. I have played with this in a spreadsheet and I am always disappointed.

Finally, the 2020 revenue was right at 1 billion dollars, this makes me think that this was a target and a lot of things were stretched to get there.

They are showing an adjusted gross margin of 84 percent, but I am not seeing anything about recurring revenue.

I will keep my position small and may reduce it.

Cheers
Qazulight

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2

This is just a quick thought, not a detailed analysis.

Palantir’s product (big data fusion and AI analysis of that data) is not unique. Lots of companies can and do do that.

What they have that others may not have is a Top Secret corporate security clearance and employees who have Top Secret clearances. Their customers allow them to know and process intelligence and defense information that is not allowed to be known outside of a small circle. 30 years ago, it cost your employer $100,000 (est) for the background checks to get a Top Secret clearance. Someone with that clearance is an attractive employee if they have any kinds of skills. A vendor with that clearance is on a small list and can charge accordingly.

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Some key things to put into perspective is stock comp which is high which is ok. The employees are very vested in PLTR succeeding in terms of financial performance.

Stock-based Compensation in $M
Year 2019: 241,970
Year 2020: 1,270,702

Gross Profit in $M excluding stock based compensation
Year 2019: 528,086
Year 2020: 879,753

Gross Margin excluding ding stock based compensation
Year 2019: 71%
Year 2020: 81%

Reconciliation of Loss from Operations to Contribution Margin
Contribution Margin:
Year 2019: 21%
Year 2020: 54%

Foundry just launched in 2020 and is now 44 percent of the revenue.
Gotham is the legacy software and is 56 percent of the revenue.

I get confused here.

Foundry grew at 107 percent and Gotham grew at 77 percent yet the total revenue growth of the company is 47 percent.

Foundry was launched in 2016 , 2020 was the upgrade aka - foundry 21

In Jan around the demo day period of palantir:
“Apollo ensures Foundry and Gotham can be used by customers in any environment. In Q4 2020, Apollo managed 150,000+ upgrades per week across environments, up from 40,000+ upgrades per week in Q2 2020.”

The existing customers upgrading to Foundry21

Foundry grew at 107 percent and Gotham grew at 77 percent yet the total revenue growth of the company is 47 percent.

I think you mean to say: In 2020, we generated 107% revenue growth from
our U.S. commercial customers. In 2020, we generated 77% revenue growth from
our government customers

Of that growth, as a % of total revenue, 56% is government, 44% is commercial, so last year commercial was roughly ~21% for example.

Revenue per customer was up 41 percent, yet we are supposed to think there was a large growth in customers and we get a 47 percent growth in revenue. I am scratching my head now. Not only that, we the growth in the 4th quarter at 40 percent year over year. It does not seem like we are getting a big increase quarter over quarter. Maybe I am seeing this wrong. I have played with this in a spreadsheet and I am always disappointed.

The customers acquired in the year ended December 31, 2020
were not in a cohort as of December 31, 2019, and will be assigned
a cohort as of December 31, 2020.

This is not going to count new customers as part of that average revenue growth.

i.e. This:
In addition, we generated $42 million
in 2020 revenue from new customers
acquired in 2020, up from $12 million
in 2019 revenue generated by
customers acquired in 2019.

Yes, Palantir more than tripled new customer revenue in a pandemic year. That is amazing. And most of that is in commercial.

The original bear thesis that Palantir can not transition into the commercial side is being broken. After this report I am more bullish and I added to my shares.

I have yet to do my full write up on Palantir but I see nothing wrong with this company. This is also not a recurring revenue company aka a true SAAS company either.

I hope this helps.

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TexasTitan,

Yes, Palantir more than tripled new customer revenue in a pandemic year. That is amazing. And most of that is in commercial.

The original bear thesis that Palantir can not transition into the commercial side is being broken. After this report I am more bullish and I added to my shares.

I have yet to do my full write up on Palantir but I see nothing wrong with this company. This is also not a recurring revenue company aka a true SAAS company either.

I hope this helps.

Yes is does. Still not sure about this company, but will hold onto what I have for now. I look forward to your full write up.

Thanks
Qazulight

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Hi, I am extremely new to this board and have read the entire sidebar. I am just getting started in this new world as I am coming from index investing only.

All that said. I read the Q4 report from Palantir. It seems to meet all of the metrics that I could find referenced by the multiple articles I have read. That said, maybe the problem is just the actual share price relative to value of the company?

I know that the literature on here says that we don’t worry about that.

Can anyone point me to a criteria of the company that doesn’t match the knowledge base on this board or other articles reference by Muji or the sidebar?

Thanks in advance. Always learning.

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I have a correction to my post above. I was a little doubting myself so looked back into the S1 and 8-K and did some due diligence.

In $M, Year.
**2018	   2019	   2020**
Government Rev	   255,131 345,521 610,000
Gov % Of Revenues  43%	   47%	   56%
Gov Y/Y Growth	           35%	   77%

Commercial Rev	   340,278 397,034 482,000
Com % Of Revenues  57%	   53%	   44%
Com Y/Y Growth	           17%	   21%

Total Revenues	   595,409 742,555 1,092,673
% y/y		           25%	   47%

A/R	           19.2	   50.3	   156.9

So I'm going to assume that the that the 107% Revenue growth for commercial must not be  talking about the Y/Y % in the Financial statements but the contract deals signed in 2019 vs 2020 that is yet to be recognized in total. I'll need to see if I can verify this.

**Also, per the S1 Foundry is also being used by government customers**
Foundry. Foundry transforms the ways organizations operate by creating a central operating system for their data. Individual users can integrate and analyze the data they need in one place. All of our commercial sector customers now use Foundry, **as do several of our government customers.**

Palantir is global, so I think a good portion of the government growth is coming from global from what has been announced - UK, Greece, possibly Japan etc.. Since most of the revenues are large contract multi year deals it is going to be more difficult to analyze the trends.
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Palantir signs another big Contract today! 3M has chosen to expand its use of Palantir’s Foundry platform to support its digital transformation, assisting in the build out of a dynamic supply chain that enables the global manufacturer to respond nimbly to changes in demand across tens of thousands of products.

Comments from 3M: “In an increasingly complex world, the success of our business depends on our ability to respond quickly to changing facts on the ground,” said Brig Knott, 3M’s Vice President, End to End Service, Operations & Lean Six Sigma. “In the midst of a global pandemic and significant changes to our demand across products, the Foundry platform enabled us to react quickly and effectively. We’re excited to expand this work across the 3M enterprise.”

Within the last 30 days Palantir has expanded contracts with BP, added new contracts with Rio Tinto, PG&E and Akin Gump Strauss Hauer & Feld LLP. Partnered with IBM: “consisting of IBM’s hybrid cloud data platform designed to deliver AI for business, with Palantir’s next generation operations platform for building applications. The product is expected to simplify how businesses build and deploy AI-infused applications with IBM Watson and help users access, analyze, and take action on the vast amounts of data that is scattered across hybrid cloud environments – without the need for deep technical skills.”
By doing this Palantir gains access to a sales team of more than 2,500 people, up from its current 30. Nice quote from their COO Sankar: “This is the biggest [partnership] we’ve announced – expect more,” Sankar said. He said he expects to triple Palantir’s direct-sales team to about 100 this year, a significant hike for a company whose management once prided itself on not employing a single salesperson." I feel this is promising considering they didn’t start building a salesforce until late 2018 early 2019.
Considering that they grew their business last year at 47% with such a sparse sales team and projecting 45% growth for the 1rst quarter 2021 is a strong indication of what is to come.
Some analysis didn’t like PLTR guidance for 2021(30%)/very conservative, but I think they don’t really care about what wall streets opinion is, hence the reason they went direct IPO. You really can’t blame any company discussed on this board on being conservative. Every time one doesn’t hit guidance my news feed is filled with about 5 law suites a day.
This company’s best days are ahead of them and I feel everybody needs to do more DD to really appreciate what this software is doing for big enterprise. Just research what Cathie Woods did last week. Added 5.27 million shares on top of her position.

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