I’m the ticker guide for Palantir and would like to offer my opinion on a few points made here.
I’ll start off with the news cycle bear points then go into some comments I see regularly about Palantir that I think aren’t correct and offer a viewpoint on how to think about Palantir.
bear point #1: Valuation. Well given the sell off this thesis is getting quite weaker compared to what it was just a few months ago. However, many comparisons I see from Palantir to other companies and valuations tended to be very skewed. Palantir is technically profitable if you excuse SBC and their expenditures are very well aligned with their product roadmap. Is valuation still high? Sure. But compared to whom or what metric?
You’d be wrong comparing Palantir to a SaaS company. Palantir is NOT a SaaS type company. They are a platform and are more akin to a baby box shape sorter for data. (Platform/Infrastructure as a Service).
bear point #2: Stock based compensation. This was addressed almost a year ago from the earnings call. It outlined that Alex Karp will be exercising expiring options and be selling a healthy amount.
And the lack of research from many that make the SBC case is astounding because no one has dug into the S-1.
On page F-42
Palantir Technologies Inc.
Notes to Consolidated Financial Statements (continued)
(information as of June 30, 2020 and for the six months ended June 30, 2019 and 2020 is unaudited)
During the six months ended June 30, 2020, the Company sold a total of 118,220,954 shares of its Class A common stock at a price of $4.65 per share, for aggregate proceeds of $537.8 million, net of issuance costs of $11.9 million. Included in these sales were 19,354,838 common shares sold to SOMPO, a partner investor in the Company’s equity method investee, Palantir Japan.
On May 28, 2020, the Company’s Board of Directors approved an amendment to the Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A common stock and total shares authorized to be issued by 65,000,000 shares. The amendment was effective as of June 5, 2020. On June 14, 2020, the Board of Directors approved an additional amendment to increase the number of authorized shares of Class A common stock and total shares authorized to be issued by an additional 86,000,000 shares, for a total of 2,351,000,000 shares of Class A common stock authorized to be issued. The amendment was effective as of June 22, 2020.
The following represented the total authorized, issued, and outstanding shares for each class of common stock:
As of DEC 31, 2019 As of June 30, 2020
Authorized 2,200,000,000 2,351,000,000
issued: 315,615,753 441,008,749
outstanding: 309,223,182 441,008,749
authorized: 1,800,000,000 1,800,000,000
issued: 272,273,934 295,625,852
outstanding: 272,273,934 295,625,852
In summary, if we are to believe management, which they have addressed since their first earnings call, the selling should stop. They also issued more RSUs that are vested in 2030 I believe. But as of last Q, the selling has gone down significantly.
I did write a post about my breakdown of the recent Reagan cybersecurity conference here: https://medium.com/@ghengisahn/my-review-of-the-reagan-cyber…
It was also shared on the premium side of the boards.
Regarding “Scalability & understanding of the product”
-I think the best metaphor I can use is the childrens shape sorting toy box. Palantir’s Gotham and Foundry is the platform play where they organize data from many different systems and allow them to mesh together. The go into very good detail in their Palantir blogs and some key word searches you can do is Software Defined Data Integration (SDDI).
The BLUF is that whether you’re on legacy systems and new systems, across different platforms and software’s, if you allow Palantir to get integrated into your systems they can make them all mesh together on a single view.
The other advantage is giving the average worker the ability to perform developer like tasks by harnessing intuitive low and no code UIs.
I bring this up because their Forward Deployed Engineers (FDEs) play an extremely critical role. Here I think people also get confused about Palantir being a consulting company. I don’t think that’s the correct thought process. I again refer back to their S1, where there goal is to:
Orchestrate, Don’t Replace. Our customers already have many of the tools they need to keep their institutions running. These tools, however, are limited to the essentials required for daily operations instead of helping our customers differentiate themselves from their competitors. Rather than replace these tools, our software serves as a substrate, binding an enterprise’s IT landscape together. By orchestrating and augmenting the operations of packaged and bespoke technologies, our software maximizes their value.
-I am trying to remember where I saw this statement, but essentially the role of the Forward deployed Engineer is to be “in the trenches” with the ground worker, see what problems need solving and integrate that customized solution. The people focused on their work aren’t developers, aren’t software engineers but need their capabilities to accelerate their work and make it scalable.
The FDE’s also have to back brief to Palantir what was done and how, and that turns into a knowledge module for use again. Here is a quote from an FDE, " Around the time I started my job search, I heard about Palantir from a friend. Honestly, it couldn’t have been a better match. The company, itself impressive, was doing exciting work with real impact across various industries. But the icing on the cake for me was the Forward Deployed Software Engineer role. A position where I could build right next to the customer, build for more than one customer, and apply myself in areas outside core software development?
I bring this up because it’s important to know why they can’t have that SaaS like approach and their sales cycle is long, the lift is very hard and the costs are taken on by Palantir to the point where they don’t realize positive income until they expand.
This isn’t giving someone microsoft word to work on their mac; they are making all data inputs/outputs mesh together and make it actionable across the force.
The key word to understand an implement is Disparate. I have a unique job, but I am pretty sure that bad communication and organization exists across every sector and industry. The Palantir play is to be agnotic across the region and make all data orchestrated and actional up and down the chain as well as across the industry.
“Focusing on Customer Outcomes
Deltas are first and foremost focused on customer outcomes, an aspect that appealed to me as a prospective employee as did Palantir’s wide array of customers and penchant for solving complex problems. Initially, I expected a ‘customer outcome focus’ would translate to building all kinds of cool solutions for all the cool companies in the world. While it’s true we do cool things, the real impact comes from putting the customer first, not the technology. Keeping that prioritization clear has helped me shift my focus from technical contributions to business outcomes.”
(Source for the above: https://blog.palantir.com/who-wants-to-be-a-delta-8d2ea94803…)
So how does Palantir scale? By merging the top and the bottom.
I will point to two well known use cases but two misunderstood: Airbus & NCATS by NIH, rather what happened without Palantir.
Microsoft & Boeing try to make a digital aviation platform: https://news.microsoft.com/transform/boeing-and-microsoft-ta…
fast forward to 2021, not much improvement, in fact we know what happened with Boeings scandals: https://www.datacenterdynamics.com/en/news/amazon-microsoft-…
Palantir and Airbus meanwhile rolled out Skywise.
Big improvement and many are flocking over to Skywise. They created a platform for big data in the aerospace industry.
NCATS is even more interesting to me, given silly things like HIPAA and how nail pulling excruciating it is when it comes to anything close to healthcare and data. But for those that don’t know, NCATS is a program under NIH which single handedly organized the globes COVID-19 data, across disparate systems, languages & products, harmonized them using Foundry, then pushed that data back out to the field for use. The cycle kept repeating, even tracking down vaccine shots.
NCATS could never had pulled this off, nor did I see any of the other tech titans pull anything remotely close to this, during a global pandemic when businesses were shuttered in.
Another point regarding scale, their SPAC investments, foundry for builders and everything else their plowing their income back into, isn’t just blind spac investing. They’re literally using startups as their next phase for live R&D . When I look at how Palantir structures their FDEs and what their first principles are as outlined in their S1, it’s pretty clear to me how they got to where they are at now and why they can offer foundry at even a faster pace than just a few years ago.
Gotham R&D led to Foundry. Foundry R&D led to building block solutions that allows faster integration. And it doesn’t matter if they’re working with older companies with legacy systems or nimble startups that need a platform to scale their hypergrowth into; Palantir’s platform can cover it. It totally makes sense why they have to have FDEs go out and be with their clients to provide client specific solutions. It’s not just about that specific client; it’s about figuring out what the problem is, addressing it, making it a knowledge node then have it as an SDDI.
SaaS plays at the lower hanging fruit, the immediate use case.
Platforms build forward looking.
Last point regarding scale: Apollo is their IaaS play. 5G and the ability to gather more sensor data at the point of incident is going to strengthen Palantir’s offerings.
Detailed reading on Apollo: https://blog.palantir.com/palantir-apollo-powering-saas-wher…
"Today, Apollo brings the same SaaS-style management to all of our platforms. It runs nearly everywhere that our software is deployed — cloud, on-prem, and classified networks — and has transformed the way that our software scales. Apollo orchestrates updates across heterogeneous deployment targets, unlocking fleet-wide autonomous management that has been a step-change in the efficiency of our operations.
Palantir’s Apollo is where I think could have clashes with Snowflake. But snowflake is designed to have their customers use data because they run the meter. Clients have already had to buy more data from Snowflake.
I think another way to compare other big data companies to Palantir is how focused is the products on valuing customers time and data usage. Does snowflake purposefully make customers data usage intuitive, faster, meaningful even if it cuts into customer use of snowflake and thus help save on data spend?.
Other than that, I don’t really compare Palantir to much other companies. I am really intrigued with the way they are harmonizing data at a level that moves across companies (if the tentpole company allows others to come onto the platform via agreement) and industries.
Foolish ticker guide for:
Amwell (AMWL), Broadcom (AVGO), Coupang (CPNG), Everbridge (EVBG), Latch (LTCH), Lumentum (LITE), NetEase (NTES), nCino (NCNO), PagerDuty (PD), Palantir Technologies (PLTR), Transmedics (TMDX), Trimble (TRMB)
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