Q3 2023 Planet Labs PBC Earnings Call
Good afternoon, thanks for attending to Planet Labs P. B C 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'd like to queue for a question on today's call you can do so by dialing star one.
I would now like to pass the conference over to your host Mr. Christian <unk>, Vice President of Investor Relations. Thank you you May proceed.
Hello, and welcome to planets 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.
[noise] assumptions as detailed in our SEC filings, which can be found at www dot FCC dot 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 .
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 would like to incur.
Marriage, I want to reference the slides 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 well Marshalls planet CEO chairperson and cofounder over to you well, 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.
Our fiscal 2023.
Highlight some recent sales wins and talk through our progress on a number of strategic initiatives.
What was it 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, yes, another significant year over year increase.
We think this demonstrates the margin potential of planets one to many data subscription business model. We ended the quarter with 864 unique customers spanning a diverse range of industries.
So to sum 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 I'll 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 were three new and exciting strategic partnerships 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 planets high frequency satellite data with accenture industry and technology expertise to collaborate on an array of sustainability and impact initiatives, including <unk>.
<unk> supply chain strategy and database climate risk assessments to mitigate disruption across the global value chain. These are just our initial areas of focus we're thrilled to be working with Accenture and thank our partnership will drive greater awareness of our offerings and the benefits of our data to deliver organizations across many industry sectors.
During the quarter, we also expanded our work with Microsoft Azure.
19 Nations 20, twenty-two climate change conference also known as 27, we announced that we'll be supplying satellite data support African climate adaptation projects developed out of Microsoft first global expansion of its AI for good lives 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 Sage makeup, 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.
Stay different planets consistent daily scan of the Earth is and NASA is ready and ideal for developers to build on.
It's an exciting early stage go to market collaboration that amplifies the power of I'll say it was organization with a 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 plant as a natural consolidator and we're particularly interested in joining forces with teams that had potential take Saturday I'll put it roadmap.
And enhance our value proposition with this in mind, we're very excited to announce that we have signed an agreement to acquire silo Sciences, a small, California climate Tech company specialized in measuring us constantly changing ecosystems.
Since 2019, we partner with solo Sciences team to deliver insights. One example is the <unk>.
California first observatory.
Which dynamically maps first structure and vegetative fuel loads at the individual tree level across California.
Earlier this year, we partner to directly measure forests carbon and select areas around the world. We are planning to 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 solo Sciences products include a forest carbon measurement tool.
Powered by planet data that can help enable accountability tourists for climate policies and market first carbon inventories and storage and much more.
The next step is to extend the <unk> sciences products and reach and that's where <unk> comes in this acquisition ties a neatly with our board of planetary variable war, including developments from a previous acquisition of vantage that 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 [noise] tenants.
Turning to customer wins, let's start with the government sector.
Demand for our solutions with government customers, both civil and defense domestic and international is robust during the third quarter, we closed the 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 VK G.
Actually I 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 harness I've come out of the Brazil Nice program, which is the largest remote sensing project in Brazil.
Through this project Brazilian federal agencies are able to gain access to planet daily satellite imagery and changed a lot from our partner S. C, calling them a Brazilian company that develops and suppliers G O I T solutions with implementation of our joint solution. The Brazilian federal police have used our data to help address elisa activities in the region.
<unk> is an amazing example of capabilities of our products at scale and the potential to deliver huge value to customers.
The project Leverages planets monthly base maps and daily plants get data on planet analytics fees to scan for new roads and buildings across the country.
Then this feeds into specialized alerting software developed by S. Econ 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 $1 9 billion U S dollars in fines seize goods and frozen assets. Since 2020. Additionally over 3000 public agents were mobilized throughout the project and over 120 operations, we're proud to be able to support this.
A shift 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.
<unk> is providing this customer with high resolution imagery of remote energy facilities. I think he was being used in that digital platform for the display of greenhouse gas emissions measured by onsite sensus, helping to quantify prioritize and rectify emissions leaks quickly and efficiently as another example of how satellite and on the ground data can be combined.
Bind to solve critical issues.
In the insurance sector, we recently signed a deal with Zachary and reinsurance provided based in Nairobi, Kenya, Xactly is leveraging planet space maps to enhance drought risk protection in the horn of Africa.
Planet will deliver normalized difference vegetative index or N V. I time series data to measure vegetative house for an area of more than 600000 square kilometers.
We also have plans to use planet data as the independent calculation agent to quantify conditions and provide metrics to measure drought welcoming tenant they aim to expand their insurance program from supporting 150000 to over 250000 pastoral lists and the process separately is seeking to generate a drought index, which can be customized to locate.
And as to determine payout amounts Jeremy premium rates and enable faster claims were 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 of farmers around the globe leveraging the planetary variables for Nevada acquisition, most notably the.
Global soil moisture put out there is a very valuable and unique application of our data that we have seen scout across global markets and other developments, we launched this quarter, a nonprofit and N. G O program to provide access to plenty of imagery and support services specifically for these types of organizations. This program enables Ngos to get up and running with standard pricing.
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 massage program.
Which is an important contribution to our sales top of funnel as it cultivates new applications for data that can later be commercialized, let me and made some perspective that we are seeing in the market today.
Demand pipeline win rates and our sales team execution will continue to be strong despite the economic backdrop, the pace at which our reps assigning 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 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 tailwind is driving adoption of our.
<unk> digital transformation and the sustainability of that transition.
The need for greater patient 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 south deals such that those I've just touched upon and the burgeoning strategic partnerships is exciting to see global technology leaders.
Leveraging patent solutions to help bring new capabilities to their customers and users.
I'm also excited about the signed acquisition agreement with Taylor Sciences.
We see a planetary variable for carbon is a key element for the global sustainability transition with that I'll now turn it over to Ashley after which we will 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 'twenty three ending October 31st came in at $49 seven.
Which represents 57% year over year growth.
It's worth calling out at $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.
Yeah.
Our end of period customer count grew to 864 customers, which represents 16% Euro V aircrafts and as 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 had 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 tolerant tension right at the end of Q3 was 123% and net dollar retention rate with win backs with 125%. This represents significant year over year improvement, primarily driven by renewals and expansions in government in agriculture.
This is down slightly quarter over quarter due to the timing of a renewal with a large international government customer in Asia.
<unk> 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-GAAP gross margin to 54% for the third quarter of fiscal 'twenty three compared to 35% in the prior year 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.
<unk> 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 planets commitment to our mission technology and market leadership and the strength of our global organization, our 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 continued 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 Rps, where approximately $131 million of which approximately 81% applied to the next 12 months and 96% applied to the next two years sequential.
Sequential or P. O growth was impacted by the previously mentioned government customer in Asia that renewed their large multiyear contracts. Shortly after the quarter end as I've explained before Rps will fluctuate quarter to quarter as multiyear contracts come up for renewal on it.
Finally, please keep in mind that our reported Rps excluded the value associated with the shell 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.
Every year at the midpoint we.
We expect non-GAAP gross margin for Q4 of 56% to 59% up from 42% in Q4 fiscal 'twenty two.
Our adjusted EBITDA loss for the fourth quarter is expected to be between negative 21 or negative $16 million, we expect capital expenditures of approximately $4 million to $6 million, which represents 8% 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 topline 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.
Adjusted EBITDA loss is expected to be between negative $60 million and negative $56 million.
We expect capex to be approximately $15 million 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 a longer lead time components.
To close I'd, just like to say it was another great quarter I'm proud of our planet tiers around the globe and the contributions they make to building such an incredible company.
We are executing against our plan and a challenging macroeconomic environment and that's due to the focus and collaboration across our global teams.
We remain confident in the market demand for our unique datasets 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.
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We will pause here briefly to allow questions to generate in Q.
The first question is from the line of Michael J Latimore with Northland You May proceed.
Great. Thanks, very much and congrats on the strong results here.
So I guess I just wanted to touch on one of the.
Climate from Alaska apologies Mr. Latimore. Your line is now open.
Yeah.
Great Alright excellent.
Very strong results.
I guess I just wanted to touch on one other topic really from last last quarter, where you had had several customers I think they used up their annual commitments early and there was.
Are you ready to evaluate.
<unk> got a good stand are we knew early or do they kind of hold the pattern with that annual commitment can you provide any color on how that's played out in the last quarter.
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 contacts 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 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 which is great.
Okay.
And then on the use of partners can you elaborate a little bit more on how influential they are to bring new bookings and expansions that may be.
Segment, a little bit between the sort of the maybe traditional software kind of a size like accenture versus tech.
Tech partners here and how much.
Influential there on leads and bookings at this point.
Yes, great question.
We have both direct sales business and via partners. It's always we've always used partners quite a bit but we are seeing is is that very strong go to market approach and.
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.
Honestly from my perspective are demonstrating that they see the big value of geospatial data to the markets and it's mostly commercial market 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 opportunity. So these organizations and so that's really great and we have a number of solution partners as well.
They're adding capabilities onto lavazza that enable solutions and use cases are.
Solutions that directly handle and that broadens the market too. So we definitely are leaning into partners.
We've done it before but we were leaning into stronger and stronger into partners as a route to market.
Okay very good.
Thanks, a lot.
Okay.
Thank you.
Thank you Mr Latimore.
The next question is from the line of Edison Chu with Deutsche Bank You May proceed.
Yeah.
Hey, Thanks, and congratulations on the quarter.
On the acquisition.
If we think about the context of your peer have and I think I heard that just kind of falls under the <unk>.
Planetary variables.
T D.
For sea kind of doing some more scouting in this area or are you starting to think about kind of moving up to insights.
Yeah.
It's great question I mean, we were very excited by this.
Let me just speak a little bit broadly firstly to the plan, so variable and the sustainability business because I think that the sustainability transition is desperately in need of really good scientific messages and our planetary variable on carbon in particular is critical to our carbon offsetting.
Strategy as it is the species. So that's really exciting and I say that has great first use it for our satellite data to make good forest measurement techniques and translating that into not just for us to cover the first carbon that is essential ground Ah Ah.
Preparation for that sort of mood.
And and they of course, we've worked with them for some years.
Cook, California first observatory work and other pieces. So it would be very good a good relationship with that team. So it was really good and good cultural fits and everything.
And it does as youre pointing out fit into the board of planetary viable strategy.
We are embarking upon really started in earnest with the with the world with the acquisition. This time last year of Vanda stat, and they neatly fit into that as a as a piece of work so and.
And this is this is continuing us up the stack I mean, the country variable was 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 are but they're there the critical horizontal component that we need to be building up today.
Okay.
Understood and just a follow up actually.
Separate question on the financials, obviously very very strong flow through I know you said you mentioned that part of it was what was kind of a one one time upside I think early renewal or something could you maybe just give us a sense of I guess.
What happened there why wouldn't wouldn't kind of repeats.
And then I think you also mentioned that there was a.
A deal that kind of slipped.
After the quarter end 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 the onetime revenue that I referenced in my remarks, and that was at a four year deal that had a couple of first of all option after year, two and year three.
And just based on the accounting treatment as it relates to the contract that 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 I'm not an accountant by background, but and the team.
<unk> worked with the auditors to do an analysis on on where we are in that it resulted in a onetime revenue recognition in the quarter on a net basis. It was about a million and a huh.
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. So.
That was that's what I was referencing in that part of the remarks with respect to the delayed renewal and then also as you as you know had the opposite impact in the quarter, where when a renewal comes in late and that's revenue that we that we miss out on.
So how'd that come in on time, obviously net dollar retention rate would have been higher in the quarter Rps would've been higher in revenue would have been higher and so that's.
That underscores the importance of on time renewals.
Saying that we're very focused on internally.
Awesome, Thanks for the color.
Great.
Thank you Mr Yu.
The next question is from the line of Josh Sullivan with the Benchmark Company you May proceed.
Hi, good evening nice quarter here.
Hey, Amy Thank you.
Yeah, we can.
As far as the net dollar retention just given the comments around.
More customers scrutiny of spend do you think you'll be able to sustain this kind of idea or level or do you think we might see some of those newer renewables extend more often.
Yeah, I mean, I think across the board the broader customer success team and investments we have made and have given us really good visibility into both the renewals and the ability to drive expansion.
And we aim to be a business that operates in kind of the best in class net dollar retention rate levels, then north of 120% right now where.
And we think that the investments that we've been making both of the product and usability of our products as well as with the teams that are working with our customers to drive that value proposition and its having that impact and it should be sustainable and.
In terms of you know the cautionary note about the headwind basically enough to say, we're not immune to the macro economic environment and so we are working with our customers to understand you know whether there is.
Are there ways to scope them.
The scope of our relationships with them to continue to drive value.
But the relationships remain strong and obviously the results in the quarter are speaking for themselves and that's yeah. No I can I could just add that you know, yes, that's right, we're seeing a little bit more but its tightening and but also at the same time in some of our commercial clients that is and but at the same time, we just highlighted a bunch of new commercial sign ups. So is it the mill.
<unk> story there.
Oh, we're continuing to grow even on the commercial side year on year, and and if I step back a little bit more.
There's still the secular tailwind for digital transformation and sustainability transformation really driving excitement here and so I remain bullish on the commercial potential in the long term.
No matter, what and and.
And you can see by these three strategic partners leaning in another example of.
Again, they wouldn't do that if this was if they thought this is a small example of a small opportunity they only lean in with his significant one so I think that's a recognition of the opportunity from them as well. So yes, we remain bullish on this in the long run.
Great.
And then just the comment the comment on the timing of procurements in the quarter, how should we think of the cadence of those Larry backend.
You're talking about on the sand side.
Yes, I believe you made a comment just on the there was some timing of procurements in the quarter.
Just curious how we should expect those those coming back.
Yeah, I mean, as I said, I I anticipate that well will catch up over the next couple of quarters.
We are working closely with the teams to understand which are the you know and 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 until we want to mitigate.
To mitigate any risks in the future and which of those where we're actually feeling quite comfortable that that procurement will not be problematic when we need it.
We prepare to operate they actually as it relates to procurement so that we can.
Petri dishes with our spend and our vertical integration actually gives us a lot of flexibility on that front.
But the the lower spend in the quarter, we do anticipate will catch up in the next couple of quarters.
Got it thank you for the time.
Thank you.
Thank you Mr. Sullivan.
The next question is from the line of Jeff Van <unk> with Craig Hallum. You May proceed.
Great. Thanks for taking my questions actually with great job good job to the team loved the gross margins I'm sure you're pretty satisfied with a lot of what you're looking at here on the pipeline I just to two quick questions on the pipeline.
Can you quantitatively.
Talk I mean, I'd love some sense of 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 of who those.
Both on the commercial and the government side.
I've never quite so seeing so many big deals.
To be honest I think we counted over 40 deals greater than $1 million in our pipeline.
It's pretty amazing.
Never seen quite that many so.
Of course these are big deals so they can take some time.
So this may not have and know where overnight, but over all of the demand is incredibly strong. So we're feeling good about it.
How rare or eight figure deal is going to be.
[laughter] Oh, we have them.
What you know.
They are happening so I mean, what were these actually how would you answer that.
Yeah, how would I answer that I would say that the good news is we see them and obviously the challenge with eight figure deals as they tend to be longer procurement cycles, and they can cause variability quarter to quarter on the on the bookings, but the fact that we.
See them in our pipeline and in our clothing that is really fantastic and quite often we see these as multiyear procurements, which is also very helpful to us to them.
I know that these are relationships that are signed.
Signed up at the outset for the long term.
Yeah makes sense with the partners and then just one other question on the partner front I mean, obviously AWS, Microsoft Accenture I mean, a lot of heavy weight names right, there and I guess, you've already had meaningful partner influences from a quantitative way how how are you going to measure. It I mean are you already measuring partner in <unk>.
Fluids, you know partner led partner influenced deals do you have any numbers you can share.
Yeah.
And in fact quite a large number of our deals are partner influenced fewer of them our partner led.
But in a lot of cases, we're bringing a partner and particularly what we call. Our solution partners that are building that kind of last mile interface. That's specific to the customer use cases use case or the customer or geography or both.
So we do have a robust partner ecosystem as we think about these larger partnerships.
We're making fewer bed with those partners that views us as a really strategic opportunity and we're early days in them. So you know 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 tailwind sue to sustainability and digitalization of our economy have anything you want to add there, but nothing that's great.
Yeah, Yeah, good great. Congrats again, thanks for taking the questions.
That's helpful. Thank you.
Thank you Mr Van <unk>.
Again to ask a question press star one.
The next question is from the line of Greg <unk> with West Park Capital You May proceed.
Yes. Thank you question on your <unk>.
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.
Significant ramping your sales force.
And given the fact that you're focusing your incremental wins on partnerships.
Now how salesforce 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 as you point out we've been investing significantly in our sales infrastructure.
We talked about before we before we went public that have a large reason for raising the capital was wanting to have more feet on the street.
Because there were there were a number of geographies, where we werent even vertically aligned in our sales organization because we just didn't have enough. He's on the ground to do so so we've been adding on that front and with that comes the support infrastructure that you that you need to make a rep successful so everything from our sales ops teams to our S. D R.
And sales engineers and we've also been investing in customer success, and making sure. When we sign these customers, we're getting them to value as early and that on ramping process as possible that goal now is to 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 onramp and to.
Make it lighter touch for the customer success teams. So they can they can cover a broader customer base.
The other way is through partnership program. So right now I would say most if not the vast majority of our partners still have.
A planet wrap involved in the sales process.
And ultimately as the products become more advanced again on the customer Onboarding et cetera, we can be a lighter touch with our rep involvement in the sales process. So.
And we've been scaling rapidly over the last year will obviously be focusing on making sure we get operational scale them over the coming years.
Great and it sounds from what you are saying that given the scale of the business there.
We could expect Saar rate of growth in sales and marketing to.
Taper off a little at some point.
Yeah.
We provided our long term operating targets to sales and marketing as a percentage of revenue continued to drop it.
Obviously, we said we needed the 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 target margins.
Thank you for that.
Okay.
Okay.
Yeah.
Thank you Mr. Messina.
The next question is from the line of Harry Wilmar thing with Needham and company you May proceed.
Hi, Thanks for taking the time just a quick question on customer adds they were lighter sequentially in the first half of the year, although it looks like <unk> is typically seasonally light any changes to call out on converting that give customers in the quarter and also how are you thinking about customer growth as we enter the next year.
So it was the first of all on customer growth would you say your customer count yeah, well I mean, that's been primarily dominated by smaller accounts and so.
You know the rats are mainly focused on the large accounts and they are being very strategic and focused and disciplined about that so.
So the Samsung deal isn't there was there's a few in education 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 it's still.
Good.
In revenue sensors is the main thing that we're focused on.
Yes, it does.
To underscore obviously, we've added some really nice large customer wins and I know that that is where we're focusing our sales reps are those opportunities, where we see an opportunity to really land and expand them on the smaller account basis as well as pointed out in education and research as you can see some projects that will cause you know numbers to go up and down.
There may be some seasonality with that.
He caught up you know last year.
So on the smaller deal size, it's it's less of a concern on the on the numerical numbers, what we're really numerical counts what we're really focused on is the quality of the deals that we're bringing on board and really seeing them well NPS scores across the board improving yeah.
Great. Thank you.
Thank you.
Again to ask a question dial star one.
The next question is from the line of 10 best marker with Edison Investment Research you May proceed.
Thank you for taking my questions first congratulations on the three announcements one accenture in AWS and Microsoft.
So how should we think about the 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 so how might that time I'll look.
Okay.
I would just say like as you mentioned that these are nascent partnerships, but the fact that they're leaving and 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, but in that year, but but we're definitely seeing this lean in and it just it neighbors after <unk>.
<unk> in a different way, but they have a lot of industry expertise they have a lot of it.
Huge.
And as a stack of customers that are where our data is relevant and so going to market together with them. It makes a huge amount of sense.
We've got incredibly exciting dataset that can help solve their customers' challenges that you've got the scale of.
Oh, the confusion or the industry knowledge.
Do that so that's the way I think about it is that makes sense.
Uh-huh definitely definitely thank you and second looking at gross margins.
The increase this quarter.
That's great news and and you know how would you say planet is mitigating the impact of inflation you know you touched earlier on macro and microeconomic 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.
Majority of that expense relates to either depreciation and amortization, which is a fixed takes 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.
And many of which were able to locate and geographies outside of the United States. So we can service customers that are 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 where we're very focused and thoughtful about our hiring plans in our spending plans I highlighted at the analyst day, how we think about you know the procurements and where there might be supply can't.
Hi chain constrained sites, where inflation could have a higher impact in maybe getting in front of some of those with earlier and bulk procurement. So.
I guess the net answer is we're we're watching closely what's going on and making sure that we're thoughtful about our our spending and budgeting.
Great.
I had one more follow up on the Accenture AWS Microsoft.
You know you look at marketing will well those three groups be looking into when they're doing a lot of marketing for you or will it be mostly directed by plan. It I'm just trying to get a good feel for.
We've got the only doing she afterwards.
No there's definitely marketing as part of this and we're seeing their leadership of these companies lean in in and speak about planet and high level of forums and stuff so that in and of itself.
<unk> helps us yeah. So I think we will see them help and again, so you know it broadly expands our reach and.
And we're excited by.
By that yes, it really it really is expand our reach we have a number of initiatives to them through.
Through this quarter that expand our reach beyond that as well I mean I would note a couple of things that came out recently that most of the economists and Bloomberg leveraged our planetary variables and got them into the <unk>.
Hum.
Various magazines and notes and just incredibly important to see how these tend to be variable was the pairing in science into the finance sector and they are bringing awareness to our.
Products in that sense as well so.
He said I havent looked at that was quite cool to see how that should be and that's just the tip of the iceberg COVID-19. It starts with some of that marketing piece, but I think it's the tip of the iceberg with the potential.
Great. It's always good to have them do some marketing for us that that's the that's really exciting great news, sorry, again, congratulations well and another one was from <unk>.
Thank you.
Yeah, I was just going to add that we are on the front page of the New York Times again today is that 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.
Thank you Mr Metz democracy.
The next question is from the line of Noah <unk> with Goldman Sachs. You May proceed.
Hello.
Hello can you hear me.
We can.
Hey, How's it going on how's it going.
Thank you.
Thanks.
Okay, sorry about that sorry about that it wasn't it wasn't coming through but a nice to speak to them actually so.
You know last quarter, you had guidance for.
No revenue to grow sequentially, but EBITDA to be down a decent amount.
And the EBITDA didn't play out that way for.
For next quarter.
Same guidance revenue to be up sequentially.
EBITA to be down.
If I go into your revenue guidance range and your and your gross margin guidance range.
The operating costs between gross profit and EBITDA would have to be up.
Quite a lot sequentially to get into the EBITDA range. So.
What's the dynamic there and why would that actually happened in the fourth quarter.
So and 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 were there was timing of new hires and so some of that is is what you saw in Q3 and the anticipation is we'll be catching up.
Some of that spend and hiring in Q4 and so that's the that's the primary driver.
Okay.
That type of spending can bounce around that much.
Quarter to quarter I would think you would be laying that out.
Longer term planning basis that it would be smoother, but.
And it sounds like it could be pretty good.
Yeah.
Yeah on the on the space system side, when we do procurement, while we're in R&D mode for some of our newer fleets.
That gets expensed as incurred as opposed to being capitalized. So that's why you can see if we if we make a large procurement for ground stations or some of the other.
Space space craft purchases that we make.
And if those procurements come in later than that spend just moves from quarter to quarter. So yeah. So it's a little bit lumpier because of that dynamic well. While these fleets are in R&D mode.
It obviously will smooth out as we move out of R&D mode, and then to capitalizing those expenses and then it would just you know obviously the capitalized as capex in and run through DNA.
Primarily through gross margin in future years.
Okay.
Okay.
And then.
Two months through their quoting here are almost to your fiscal year end.
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.
And how are you feeling about.
The ability to March towards breakeven EBITDA.
But overall, we feel very good about the tail winds behind the company right now.
And I mentioned, just the demand the pipeline earlier for example is really strong.
Slightly more courses on the commercial segment.
For reasons, we discussed.
We are bullish on the government segment, both the civil and defense intelligence extremely pleased with the team's execution.
Across the board and product side, and the sales and marketing side and and so that feels like with is well set up similar to last year, we will provide guidance on the next.
Yeah.
Okay.
Alright, thanks very much.
Thank you.
Thank you.
Okay.
That concludes our Q&A session. There are no more questions and I'll turn it back to will Marshall for closing remarks.
Okay.
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 Q3 was also really strong underscoring the durability and demand for our mission critical solutions I'm very proud of ourselves to use those I touched upon and the strategic partnerships.
It's great to see those global technology leaders leaning into kind of tools and to develop new solutions to their clients.
I'm also excited by the acquisition of <unk> Sciences.
As I mentioned we.
C a carbon plant or a variable is a critical element to the sustainability of transition. So that's exciting.
And.
Finally, we remain confident in our opportunity. Despite the current macro economic environment and are continuing to invest in the long run while maintaining our focus on the path to profitability. So thanks, everyone for calling in today.
Yeah.
That concludes.
Today's conference call. Thank you for your participation. Please enjoy the rest of your day.
Yeah.