Q3 2024 Planet Labs PBC Earnings Call
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Hello, everyone.
Thank you for attending today's planet Labs P. B C third quarter of fiscal 2024 earnings call.
My name is Sierra and I'll be your moderator today.
All lines will be muted during the presentation portion of the call what's the opportunity for questions and answers at the end.
If you'd like to ask a question press star one on your telephone keypad.
I would now like to pass the conference over to our host Christian you already VP of Investor Relations with Planet Labs PBC.
Please proceed.
Thanks, Operator, and Hello, everyone welcome to <unk> third 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 referenced qualified pipeline, which represents potential sale 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 plant of the 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 dot SEC 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 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 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 encourage I wonder if just the slides we have posted on our Investor Relations website, which are intended to accompany our prepared remarks.
For each of the customer contracts referenced during this call. Please note that the revenue figures. We site will generally be recognized over the term of the contract which can last multiple years further the terms of these contracts can vary and we may not realize all expected revenue.
At this time I would now like to turn the call over to well Marshalls planet CEO chairperson and cofounder over to you well.
Thanks, Chris and Hello, everyone. Thanks for joining the Cowen Stein.
For the third quarter of fiscal year 2024, we generated a record $55 $4 million in revenue, representing 11% year on year growth non-GAAP gross margins was 51, 5%, which is above the midpoint of our expected range.
Adjusted EBITDA loss for the quarter was $12 million $1 million better than our guidance range, driven by cost discipline, and reflecting our commitment to reaching adjusted EBITDA profitability by Q4 of next year.
Growth in the third quarter was driven by strength in the civil government and defense and intelligence market, both of which saw revenue increased more than 20% year over year, partially offset by continued macro headwinds in the commercial sector.
We've continued to add large seven and eight figure government opportunities across civil government and defense and intelligence markets to our qualified sales pipeline and while they take longer to close large government contracts can provide a reliable foundation of long term revenue streams with significant potential for expansion.
As our business mix shifts towards government opportunities our average sales cycles overall have naturally extended.
This is just the nature of government procurement processes.
In response, we have recently refocused our go to market strategy around those large opportunities and made additional improvements to support sales execution.
Let's quickly revisit the go to market improvements that we're implementing which align with what we outlined in our prior earnings call and Investor Day. These.
These include one focusing our sales force on our largest opportunities in our core markets to shifting smaller commercial opportunities in other market segments to our partner network and low touch channels, including our newly acquired central hub platform and.
And three streamlining and simplifying our sales processes.
These go to market improvements are aimed at supporting faster sales cycles customer adoption and expansions over time.
Expanding further on our growth plan in the near time, we see opportunities with several U S. Government entities is one of our primary near term growth drivers, it's worth noting that in our view our relationship with the U S. Government has never been stronger and we believe we are well positioned to significantly expand our work with this important customer in this next fiscal year.
In addition, we are encouraged by the diverse global pipeline of opportunities that we've been cultivating, particularly with civil government customers, we've seen solid year over year growth in the civil government vertical throughout this year. These.
These opportunities span all of our datasets and include additional services from our planetary variables, including a new carbon solutions and incremental capabilities provided by our acquisition of synergize.
Finally in spite of the current macroeconomic headwinds we continued to see the market opportunity in the commercial sector as a significant growth driver over the longer term.
Our strategy for the commercial sector is focused around partner led opportunities and efficient low touch sales motions we.
We see partners isn't a highly effective way of shortening sales cycles, and speed and customer time to value with solutions and services tailored to a specific geographic market or commercial use case.
And as mentioned a central hub platform enables smaller customers to purchase data from planet through a low touch channel.
Taking a step back our go to market strategy is built around our core value proposition, enabling broad area of management at a global scale not possible before.
Ability to understand change taking place in both areas of our planet is what differentiates us and fuel adoption of our solutions.
Through our recent customer highlights you'll hear how this is a common thread between customers across industries.
Let's turn now to some recent customer highlights starting with the civil government sector.
During the quarter, we closed a seven figure ACB contract with IAG AC that's contact graphic agency of Colombia.
The agency is a new customer and is using planet scope and sky is that data for a range of applications, including geographic studies professional training as well as improved land use planning and risk management across Colombia.
We expanded our contract with Australia based partner and Gis, who uses planet data provide critical geospatial services to Australia, and civil governments supporting resource management and natural disaster response from wildfires and floods.
Turning to defense and intelligence market during the quarter, we saw a seven figure ACB expansion with an Asian Ministry of defense customer for a high resolution sky that task and capabilities.
It was great to see the customers data consumption grow as we had expected.
In Latin America, where you've added a government intelligence agency as a new customer.
They are using our planet scrape and Sky is that data for board area monitoring.
We also closed a new contract with ESI analytics, a south Korean based AI company and we are using our solutions to do anomaly detection and North Korea.
<unk> analytics originally started as a planet partner is now a customer as well.
Analytics use there's plenty of scope to run analytics for defense and intelligence customers.
More broadly we are seeing growing interest from defense and intelligence customers globally.
Capabilities unlocked when combining our deep data archive with artificial intelligence. We think of this combination is an incredibly powerful tool to scan search and monitor.
Enable them to rapidly find new threats monitor them on an ongoing basis and acts as a powerful time machine for forensics of what happened in the past.
All over large geographic areas of land or sea.
Turning to agricultural solutions, we recently renewed and expanded our seven figure contract with BSS digital farming, the European based multinational chemical producer.
They are using planet scope and our plans are variable solutions for board area management to deliver targeted and timely agronomic advice for their customers.
We also signed a new contract with the Usda's Foreign agricultural service Fas Lynx U S agriculture to the world to enhance export opportunities and global food security.
Plan to use a broad area of management solutions to support the production of type maps and area estimates overseas.
Also on the commercial vertical we recently announced the addition of on X maps as a new customer they are using planets base maps to provide outdoor enthusiasts with up to date imagery of outdoor recreation landscapes.
Great example of how planet States is making its way into the hands of consumers.
<unk> was recognized by time magazine for having one of the best inventions of 2023, the recent imagery product, which leverages planets data one of the outdoors category.
Turning to product updates, while we've had three key launches firstly on November 11th we successfully launched 36, <unk> and our first pelican demo into orbit on border Spacex Falcon nine rocket.
We establish contact with all of the satellites within just a few hours of the launch I'm pleased to report that the on all of our testing we're conducting with the Pelican Tech demo is going well, providing valuable insights and learnings about this new spacecraft design.
This marks our 30 <unk> successful launch and a 569 satellite successfully launched and deployed.
I'd like to note that while we often take these accomplishments for granted what our team does here is nothing short of remarkable plant's ability to rapidly build satellites affordably and at scale is truly exceptional.
I'd like to thank all of the team at planning for their hard work and dedication in making this latest launch a success.
Secondly, it was already mentioned, we launched planet data and services on a central hub platform with transparent pricing and packaging, enabling low touch or self service sales for small deals and giving partners what they need to more flexibly and rapidly build solutions on top of our data.
Finally last month, we launched our new forests carbon product.
Tenure data archive of global forests, carbon is accurate affordable and scalable helping to solve longstanding challenges associated with measuring forests carbon stocks.
We've launched the forests carbon solution with opened an affordable pricing to support faster customer adoption and early market capture.
We're pleased with the early demand building for this new product and we were very excited to win our first customer B zero carbon. These there is a carbon ratings agency and they have adopted this groundbreaking solution to help their clients make more informed carbon credit investments.
We're seeing strong interest in the carbon project developers carbon marketplaces standard setting bodies and others across the carbon value chain.
In summary during Q3, we saw solid growth in our civil government and defense and intelligence market.
We focused on efficiency in our go to market execution as outlined in our Investor day.
We also had a great product quarter, launching 37, sidelines, bringing a new forest carbon product to market and enabling low touch access the planet data by a central hub.
The pace of innovation and development of planet is truly incredible and.
And we're doing all this while maintaining disciplined spending to support our path to adjusted EBITDA profitability.
Overall, our conviction and a significant opportunity for our solutions remains firm.
Ability to understand change taking place in both areas of our planet is what differentiates us I feel as adoption of our solutions. We continue to see the market for our solutions is enormous driven by the tailwind from security sustainability and digitalization worldwide.
I'll now turn to Ashley for review of our financials and our outlook over to you asked me.
Thanks, Tom and thanks, everyone for joining today as.
As will mentioned our revenue for the third quarter of fiscal 'twenty four and then October 31st came in at a record $55 $4 million, which represents 11% ERP aircrafts.
This was driven by strength in the civil government and defense and intelligence markets, both of which grew more than 20% year over year, partially offset by the continued headwinds we've seen in the commercial market.
I'm a geographic perspective, we continue to see a strong diversification of our customer base.
Revenue growth was especially strong in Q3 up almost 70% year over year, while revenue in both Asia Pacific and Latin America grew more than 20% year over year.
North American revenue decreased by 11% on a year over year basis, primarily impacted by the discontinuation of the legacy contract we've discussed previously.
As will mentioned, we've seen multiple significant growth opportunities with various U S government entities in the near term and we continue to build out our partner ecosystem to address the longer term opportunity, we see in the commercial markets.
As of the end of Q3, our end of period customer Count was 976 discount does not include customers who are exclusively self serve users on our central hub platform, which we acquired with the synergize business.
Recurring ACB or annual contract value was 94% of our book of business and over 90% of our ACD book of business consists of annual or multiyear contracts.
Our average contract length continues to be approximately two years weighted on an ACB basis.
Year to date net dollar retention rate was 104%.
Net dollar retention rate with win backs was 105% that's up slightly from the prior quarter.
Increases in net retention rate are typically driven by the timing of large expansion contracts with existing customers and as we mentioned on the last call we've seen longer sales cycles with some of our larger expansion opportunities.
These opportunities remain active and our go to market changes are focused on capturing this business and improving our sales cycles.
As a reminder, as detailed in our quarterly earnings Investor presentation. Our net dollar retention rate starts on day, one of each fiscal year at 100% then develops through the course of the year towards our final full year results.
Turning to gross margin our non-GAAP gross margin for the third quarter of fiscal 'twenty four was 51, 5%.
Similar to the prior quarter non-GAAP gross margin during Q3 was impacted by the accelerated depreciation of <unk> satellites.
Impacted Q3, non-GAAP gross margin by approximately six percentage points.
This accelerated depreciation expense will continue at a lower level in Q4 and reach completion by the end of this fiscal year.
Adjusted EBITDA loss was $12 million for the quarter better than our guidance and marking another consecutive quarter of narrowing losses, driven by cost management and our commitment to reaching adjusted EBITDA profitability by Q4 of next fiscal year.
During Q3, we incurred a nonrecurring restructuring charge of approximately $7 $3 million.
Net by a $1 $5 million benefit and stock based compensation all related to our head count reduction in August and.
In addition, we incurred a $2 3 million nonrecurring charge in the quarter, primarily impacting R&D related to the acquisition of Synergize. These expenses are excluded from adjusted EBITDA.
Capital expenditures, including capitalized software development were $8 $6 million for the quarter or approximately 16% of revenue.
Turning to the balance sheet, we ended the quarter with $315 million of cash cash equivalents and short term investments, which we continue to believe provides us with sufficient capital to invest behind our core growth accelerating initiatives and achieve cash flow breakeven without needing to raise additional capital and we still have no debt outstanding.
At the end of Q3, our remaining performance obligations or Rps, where approximately $153 million of which approximately 82% applied to the next 12 months and 97% to the next two years.
Please keep in mind that Rps can fluctuate quarter to quarter as multiyear contracts come up for renewal.
Also remember that our reported Rps exclude the value associated with the <unk> contract as well as other contracts that include a termination for convenience clause, which is common in our U S federal contracts and occasionally found another customer contracts as well.
For the fourth quarter of fiscal 'twenty, four we're expecting revenue to be between 56% and $59 million, which represents growth of approximately 6% to 11% year over year.
We expect non-GAAP gross margin for Q4 to be between 52 and 56% we.
We expect our adjusted EBITDA loss for the fourth quarter to be between negative 12 and negative $9 million.
We are planning for capital expenditures of approximately $14 million to $16 million.
For the full fiscal year ending January 31, 2024, we expect revenue to be between 218 in $221 million or growth of 14% to 16% year over year.
We expect our non-GAAP gross margin to be between 53, and 54% we expect adjusted EBITDA loss to be between negative <unk> 58, a negative $55 million and.
And we expect capital expenditures to range between 46% and $48 million.
In summary, we're in a period of transition as we focus our go to market resources around the largest opportunities in front of us, which we expect in the near term to be predominantly in the government sectors on a dollar weighted basis we.
We are expanding our partner ecosystem to continue to develop opportunities in the commercial markets as the macro tailwind of Digitization and sustainability continue to see new opportunities for our data and analytics each day.
We are aligning our investments to drive growth in the near term, while carefully managing expenses and continuously exploring opportunities for greater internal efficiencies that we believe will make it easier to work with planet as well as at planet.
As always I want to thank our planet tiers around the globe for their continued execution and commitment.
Operator that concludes our comments, we can now take questions.
Absolutely.
We will now begin the Q&A session.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
If you'd like to remove your question press star followed by two.
And if youre using a speakerphone please pick up your handset before asking your question.
We will pause briefly ask questions are registered.
My first question today comes from Jason Gursky with Citi.
Please proceed.
Great Good afternoon, everybody.
I just wanted to dive a little bit more into the go to market strategy.
And have you.
<unk> a little bit about this idea of <unk> and.
Going after really really large contracts.
Kind of curious if there are any you are talking about seven figure.
<unk> potential contracts out there, but are there any eight or nine.
Figure contracts that you have the opportunity to go after here and maybe just talk a little bit about where you're seeing the greatest opportunities from a geographic perspective. Thank you.
Yes, Great question, Yeah, we have a number of eight figure deals I think.
We have previously mentioned that we've continued to bring in more eight figure deals and seven figure deals through the year.
And what we might be seeing them as in defense and intelligence that it was a civil government, we've got real opportunities, both and geographically I would say a lot of it is in the U S. But we do have a number of these big deals and the rest of the world as well.
And so it was primarily in those two sectors.
To answer your question.
Yes, I'm, sorry, I'm at an airport I'm going to leave it there I appreciate you guys chicken.
Okay No worries.
Our next question comes from Trevor Walsh with JMP Securities. Please proceed.
Yeah.
Great Hi team. Thanks for taking my questions and congrats on a solid set of results well I'll start with you if I can congrats on the successful launch of Pelican and it sounds like the.
Michelle on demo.
It's helping you guys gave some good lessons learned just curious if I know on the last earnings call, you reiterated or confirm that theres not necessarily a revenue opportunity driving from this pelican one satellite, but can you maybe help us understand a little bit better as to what the uplift potential within current accounts might be from the new.
Set of spacecraft just being that they are in fact have just hire as higher revisit all of the kind of technical abilities that are added or better with pelikan and then also the low cost like just kind of how from the topline perspective that might.
How are you guys looking at global prices increase potentially there around those capabilities is how will customers kind of CLI I guess in terms of what they're what they're paying currently versus later thanks.
Yeah, Great question, so, especially with very very happy with the telecom space cost it is going really well.
All of the commissioning is going well and we're learning a huge amount of very very good so far and.
It is a tech demo. So yes. This is going to be revenue producing just to confirm what you said.
<unk>, yes, so it's going to be better multiple axes at high resolution.
We took about 30 centimeters.
Higher revisit rates.
Ultimately you get a full fleet be higher revisit rates than our present attending today youre going up towards 30 per day.
But the probably the biggest substantive increase is the fact that as we add satellite to satellite communications on these vehicles. It enables us to lower latency and to your final point.
Lower latency is something very differentiated and high value and so you can definitely charge more so you can talk more of a higher resolution you can charge more for lower licensee and I think that the.
Global agencies, almost a 10 X improvement on our current system. So that is a big deal.
Getting sub.
Uh huh.
You can see the answer your question.
Or did you have another one yeah, absolutely I appreciate the color.
And then if I could just one follow up maybe for actually have although we'll feel free to chime in too.
Good good work on.
New customer count accelerating kind of in the quarter.
Just to go at least as we look at it in our model it looks like the revenues for average number of customers may have kicked down.
And just wondering if that's a result of maybe.
A larger number of smaller customers kind of entering the cohort this quarter and if.
And if that is the right way to look at it is that kind of a signal of some of your go to market improvement efforts around whether it's the self serve platform or some of the partner led motion is kind of bearing fruit and bringing some.
A smaller smaller groups.
While our customers into the into the mix this quarter. Thanks.
Yes. Thanks for the question I'd have to look at it a little bit more closely to to answer.
On the revenue per customer a question more specifically, but I would say is yes, we do has more customers coming on board through the central hub platform now that the center guys acquisition is closed and that is.
<unk> for us to really scale up low touch.
Customer onboarding.
And also.
Enable.
Partners to create solutions on top of our data more easily through those Apis.
So in terms of deal sizes, that's actually.
So I would suspect if I were to dig into the details behind.
The average revenue per customer with what we're probably seeing is a little bit of the impact from bringing on the synergize customers, but I'd have to get back to you.
So looking at that more specifically and if I can just add a tiny thing on the prior question I forgot to mention of course, it wasn't us telecom. The relaunch. We also launched 36 super dose, although we take that sort of for granted because that's primarily <unk>.
<unk> operations of that daily scan fleet.
Certainly that's our bedrock fleet and because the data sandwiches that are differentiated and secondly, we take for granted being able to.
Rapidly build and launch and operate large numbers of satellites like this but basically that's one of the very few companies in the world can do that and really.
We are incredibly.
Really strong differentiator that we sort of take for granted sometimes.
Great. Thank you both so much I appreciate it.
Thank you.
Our next question comes from Michael Latimore with Northland.
Please proceed.
Great, Yes, thanks very much.
What are you thinking about in terms of the NDA.
<unk> number for the fourth quarter.
Yeah, obviously, that's driven by the timing of when some of these larger expansions land that will impact where we ended up landing on that number for the year and so as I said in the prepared remarks.
Picked up quarter over quarter, and I feel very good about where we are and overall retention rates.
Just a matter of that endear are ultimately depends on some of the larger expansion opportunities and the timing of when they come in.
Got it yeah.
And then you're seeing.
Positive on the U S government opportunities in the pipeline.
Can you mention a use case or two that might be in the mix.
Yes, actually there are several I mean so.
We've got multiple opportunities both on the civil government side.
Expansions and new.
Pump chips there.
And on the defense and intelligence side.
And then it's also.
Both.
And our new new.
Parties, you get the U S government is not a monolith, it's really multiple agencies in both sectors that need our data.
We.
Are also and in addition to seeing a lot of there's a lot of pull from them for mainstream mainstay products, but we're also seeing a lot of new and heightened interest both in the U S government and international governments.
<unk> AI on top of our planet scape imagery that enables you to search and scan large areas.
New threats or emerging changes and that is proving to be a very strong pull as well and thats something thats only possible very lately because of the large language models on top of the planet's Skype imagery and so that's providing an extra pool as well.
But.
Yeah. The used cases vary a lot by the different agencies I can't speak to all of them right.
But but but it's strong pool in both sides.
Okay, great. Thanks, so much.
Okay.
Yeah.
Our next question comes from Ryan Koontz with Needham <unk> Company.
Please proceed.
Thanks for the question.
With Ashley can you unpack the step down in commercial we're seeing here.
You mentioned the legacy contract churn there.
The Prime reason here behind the step down are there other things going on and.
Is this is this does this quarter mark.
And does that impact or is it going to continue to linger on for future quarters on all that impact. Thanks.
Yes, Thanks Ryan.
The primary driver on the.
The revenue year over year comparison commercial is that legacy contract.
It came came to an end in Q1 really.
That was just a small tail so really as you as you pointed out Q4.
Is the end of that year over year compare headwind.
We did see.
Softness in some of the renewals a year ago, we talked about in the commercial market.
That also.
A secondary headwind coming into the year.
And commercial is continuing to see headwinds in terms of expanding those businesses. So.
We do anticipate a lot of the growth in the next year coming from the commercial government sector, but that said, we still are very big believers in the opportunity in the commercial space.
You'll see that as an opportunity that we will be pursuing with our partner ecosystem.
Got it that's great and just a couple quick product questions for will on the.
Forest carbon product can you kind of walk us through the business model and how you prioritize that for these.
Customers that that'd be really helpful. Thanks.
Yeah, absolutely. So that's one of our new plans are variables.
If it was a benefit.
It basically enables us to measure I mean, we've been doing deforestation monitoring and have been countries with that for a long time, but this actually gets at quantifying the amount of carbon stock in for us.
And initially at a 30 meter level and next year, we'll be launching a three meter level, which is almost an individual tree level.
I'm very excited by that and we've seen a lot of interest there.
Is that this will help underpin carbon markets, we've been very clear.
These clients by the amount of initial demand amongst both the sort of regulation side of this.
People that are checking the math, if you like on everyone's carbon trading as well as the marketplaces that we're trying to match make.
Between buyers and sellers of carbon which of course, both sides want to check the math as well and so on both fronts that we have seen demand and we were of course I mentioned in my prepared remarks that our first customer there.
Zero carbon which is the marketplace.
And we are very proud to be seeing that interest so early in that.
That new product.
Sorry zero carbon rating agency I can say is in the form category.
Got it really helpful. Thanks, so much that's all I have.
Okay.
Our next question comes from Noah <unk> with Goldman Sachs. Please proceed.
Hello, everyone.
Okay.
Yeah.
With the.
<unk>.
Expanding.
Defense, and Intel and civil government opportunities set that youre referencing.
Are there contract means you can cite that we can follow or is it some combination of small or classified or extension or REIT program dollars or.
Something that we cant fall.
I mean, most of them are public Kevin mechanisms you can follow I would just say that.
It takes a lot to fill it.
There's a lot of different.
Agencies that you have to track, but but noted that most of the public procurement Theres no huge one outstanding to just point out <unk> is of course, a mainstream mainstay contracted the endeavor.
And there is opportunities for expansion, there and you can watch that but.
There is no big are the ones that just pull out and identify for you right. This second but.
We certainly.
We're continuing to monitor all of those of course, that's all that's our job.
Can you name the one or two largest even understanding its maybe a pool.
With no single, one that's much larger than the others, but.
Whether it's size or just whats most exciting to you because of what it means for your future just.
Something we could track that would be helpful.
Yeah.
The two biggest ones that we presently have other errors ESTO and there's lots of expansion opportunity that that relationship is very good.
And the other is on the civil side with NASA.
Which is can see FDA and you can track that in the budget, so very healthy going into that.
So those are the two biggest ones I can name off the cough or we can try and get back to you. If you want further.
Tell us on that.
Okay.
Great.
On the commercial side actually you made a comment about working with your partner network kind of like while you wait for the end market to come back to you or the broader set of end markets to come back to you or I guess, maybe the macro to come back.
Can you expand on that what are you actually doing wire the wire the partner networks willing to do that how does that help you want.
Demand comes back.
I think it's more about the fact that the market on the commercial side, it's still relatively immature and especially when you think about the broader market opportunity.
And they will require solutions that incorporate our data and extract the value from the data for them because theyre unlikely for example to have geospatial analyst Scott.
So really it's about making it easier for our partners to develop those solutions that will effectively drive the value to the end customer.
That's effectively what I meant by really leaning in to that partner ecosystem to drive that ultimate value to the end customer in the commercial market to really get that market off the ground and if I can just add to key.
Sales reps focused on the big deal opportunities, which are primarily by the second in civil government and defense and intelligence. So we see a huge future in commercial I continue to see that and we continue to do deals I mentioned a few in my prepared remarks right.
But the biggest ones in defense and intelligence in civil government and so we are going to focus our energies on that so it's both because they need solutions is actually was saying, but also because we want to focus our attention on the type of opportunities and progressing them foods at close and that more into the civil government and defense and intelligence.
But there are there are commercial markets that are more advanced and will obviously continue to sell into them, including agriculture insurance for example, right.
Okay.
Okay, great. Thank you so much I appreciate it.
Great. Thank you.
Our next question comes from Edison Chu with Deutsche Bank.
Please proceed.
Thanks for taking my question wanted to ask about the cadence of growth.
The implied.
Okay.
That represents perhaps the bottom yet.
Some of the headwinds to go away.
In the first quarter going through that sort of a bottom in terms of year over year growth.
I think it's important to understand that.
One of the biggest headwinds that we had coming into this year was the legacy legacy contract that came to an end. So Q4 will mark the end of that headwind. We're obviously leaning into a lot of opportunity that we see and especially with large large expansions with existing customers leaning into the opportunity in the government sector and the timing of when that business land.
Lance obviously will determine ultimately how our growth accelerates going beyond Q4.
We remain very optimistic about the ability of our teams to execute in the market. That's there for US just based on the continued pull that we feel.
And we've had challenges this year with timing of bringing that new business in the longer sales cycles, but still remain very optimistic in our ability to reaccelerate growth anything to add there well yes.
Yes, I mean, I would say of course, we are not <unk>.
It is five but that sort of growth rate, we want to continue to.
Drive towards higher growth rates, we think that is possible I firmly convinced that that's possible and we've got this huge pipeline that we're working on.
We can we please tell you that it's progressing in stage moving things along and we're closing some deals it is still taking a bit too long and it's our job to go close it you heard how we're focused.
Efforts are really focused right now to improve the execution posting on the big deals trying to automate the small deals making it easy to work upon it just brings it trying to reduce the time to value for customers. So that we can land and expand them.
We're very focused on those efforts.
The areas are in our control.
To improve win rates and so on.
But that's where it has been our focus.
Certainly think it's possible to fix that out Greg.
Yeah.
Okay understood.
Longer term question in terms of the commercial market do you have a view on when that might turn.
Turnarounds I understand it's probably not any claim that near term.
A couple of years as its five years, just when when do you think that can kind of reaccelerate meaningfully.
Paul.
I would say say a few things.
Some of the headwinds we saw macro driven.
The agriculture market, where we saw some headwinds that is macro driven.
And so.
When that ends but I also think that we are continuing to see deals I mentioned.
Some of the deals that we did on the commercial side.
And as Ashley mentioned, we have a lot of opportunities to make tooling and simplified ability to access that we launched the central hub our platform enables low touch access so that people have.
Tools, so that they can start building products and services and we're working closely with partners that have good solutions for specific vertical market.
Finally, just like in the <unk>.
Mentioned earlier in the government sector AI is a strong tailwind I think the same is true here, it's going to help a lot in this because.
AI helps skip a bunch of steps and getting to answers. So you can clear it didnt get us closer to the vision that <unk> launched and Ted to now 2018.
Six years ago, five or six years ago, which.
Stroke that is critical to us and that's a bit of our ultimate vision here.
Any commercial client could ask any question of the data just like you can now ask questions about Texas, the Internet with chop GBT for that clear without vision is becoming a.
Closer to reality with these large language models, and we're really seeing that tick up.
You know a number of big companies from Microsoft or Google to others in releasing these multimodal Lodge language models with the step from them treating just text on the Internet to also treating images and videos and audio track and that plays to our strength enormously because we have.
This massive proprietary archive of imagery data so as those models get better at dealing with imagery and understanding the context in those images the faster we can leverage that.
To then provide answers to commercial clients, who don't have.
Big Geospatial expertise.
So we really again believe overall in the long term in the commercial market, it's a huge opportunity to go after.
Got it and just one last one from me housekeeping can you tell us what the remind us what is the contribution from synergize.
For the full year number at this point.
I think last quarter, we said, we expected it to be somewhere between four and $6 million on the year and I think we're in line with that expectation. It's small enough that we are breaking it out.
But generally it's performing in line with our expectations.
Okay. Okay.
Thank you.
Our next question comes from Jeff Van <unk> with Craig Hallum.
Please proceed.
Great. Thanks, just a couple of remaining here.
Sales changes any measurable evidence you can you can share with respect to the sales changes working either concrete improvements in cycles or other measurable as I know you're focusing on the big deals automation, making it easier to work with you, but but any any even if there are green shoots any concrete evidence that the changes are having positive impact.
As you can speak to that.
Yes, I'd say first of all obviously, it's still early days I would say the good news is we've seen a lot of those metrics really stabilize and we're not seeing sales cycles go longer than what we talked about before and obviously, we're focused on now bringing them in shorter.
Similarly, I talked about the fact that deal sizes have generally stabilized and as we lean into the larger deal opportunities. We would expect those to expand as well. So we're looking at the same types of metrics that you would expect us to be focused on making sure that we close the business. That's in front of us shorten our sales cycles going forward and as we.
<unk> said really make sure we drive that time to value for the customers. So that we continue to land and expand so that's where we're focused we're in a transition, but we feel really good about and what we've implemented so far and the early results we're seeing.
Okay.
And then one brief one on synergize I know you just touched on it the 4% to six for the year.
Just curious if you would expand or if theres any other color to provide there any behavioral clues that had been provided by the existing synergize base. The way they've reacted thus far any other indications of either upside or downside to what you thought you bought there.
Go ahead.
We feel very positive about the acquisition and how that team is performing.
We do see a lot of opportunities coming in related to the tools that they have a lot of it things like automating the onboarding of those sorts of new capabilities. So that we can scale to more.
As with any given solution so.
That's that's goodness as far as I'm concerned because that means the demand in pulp.
Yeah.
Very very pleased so far obviously, it's an incredible talent pool and a great platform.
We moved very quickly on the integration side to enable our customers to leverage those tools and their customers to access planet data through the platform and now we're we're continuing that integration process to create a more seamless experience across the user base.
To really push the the new capabilities and outdoor our sales teams.
Okay.
Okay fair enough. Thank you.
Thanks, Jeff.
Our last question today comes from Chris Quilty with Quilty space.
Please proceed.
Thank you.
I just wanted to follow up just a little bit on the Pelican. Congrats on that initial launch and obviously beyond the normal first light and calibration of the satellite you've also got a different element to it which is the altitude and altitude maintenance.
Do you have an idea of how long you expect to go through validation before you can sort of make the decision to pull the trigger on the bigger.
Commitment to the fleet.
Okay.
I mean, it takes normally a order months.
Fully understand these spacecraft in orbit.
Where we are.
Feeling very good about where we're at.
On that right now as I mentioned earlier.
Yes, and then as you say that helps the time instead of key decision points too then.
And then the rest of the fleet, we are already by the way ongoing.
And building a bunch of those.
The exact timing and we then pull in learnings.
Into that as we go the outflow of course, we've done of course send them the loan side before we really understood how that first one is working so.
But that construction Infosys is already ongoing for the next at the first one is what we call the space.
Spacecraft that overall I feel very good about.
The pace of that program right now.
Yeah.
Gotcha.
Yeah.
Yeah.
Oh, sorry.
Alright, thanks for the phone problems you still taking in new customers on the early access program and have you seen any growth in that pipeline.
You mean for tonnage.
Jim.
Yes, do you mean for the highest spec to mission yes.
I think it was a limited cohort maybe there's one or two that were added.
Scott.
We have they have been progressing use cases and.
And showing early demand.
Real deals.
Yeah.
And and.
And yes, so we said we feel good about that.
<unk> program, as well and and it's great that we've.
We had this JPL instruments in the lab and integrated into the spacecraft is very exciting to see the developments downstairs, there as well so yeah, feeling good about that program as well.
And did you provide.
<unk> capex on that program and over what timeframe in la.
Looking for first launch.
Okay.
And so that program is cat.
Categorized as an R&D program because it's the first time, we've launched a hyper spectral satellite.
So and that has been in partnership with and the team of our carbon map and NASA JPL.
We have funds that we've received for that program and those get recognized as revenue, but is excellent actually an offset to that contra R&D. So you don't really see that show up as capex on our balance sheet.
And as a company that does agile aerospace we're very different in that respect from what you might see from others, where you see a lot more CIP sitting on the balance sheet.
For a program like this.
In terms of the overall size of that fleet in that program and the timing we haven't given a lot of specifics because we are still in the R&D phase and as.
As we get closer to.
The launch of that fleet will share more details if I could just add one more thing.
Just like the carbon plenary variable I mentioned earlier that interest on both the regulatory side as well as the users that would use it to stop and get ahead of regulations to the commercial side if you like.
And on that point.
We've made a couple of announcements that comp.
The meeting is ongoing right now in Dubai relating to this because as we get better measurement of all of these.
<unk> emissions.
And we're getting indirectly right now and helping this organization climate trace which tracks over $350 million facilities globally.
Renewable energy facilities emitters with our visual data.
We'll then add to that to be able to have more quantified emission amounts that data, which is all feeds into if you like.
<unk> accountability and.
As we transition to a sustainable economy, it's a massive transition.
Many many tens of trillions of dollars as we transition to a sustainable economy, but theres no way that is going to be possible without the cash flow measurement as we've discussed before whether that's the first carbon piece. So the emission piece that we just talked about here. So.
Yeah.
We really care about it from a pure sustainability point of view it fits our mission, but there is a massive market opportunity as well.
And so we're going after that.
Okay.
Great and final question, just you talked about the latency with the RF cross links on the Pelican.
I think that was announced is C band Ses, but you also had an announcement with telesat in K a.
Can you just give any color on how that's proceeding and do you need.
Any specific FCC licenses to operate those cross links.
Yes.
We are pursuing two programs there.
One with Viasat, one with telesat.
Both.
Supported by NASA, Nasa's CSP program that helps fund that R&D.
They are both proceeding according to plan as far as I'm aware I think that <unk> been in the C band, but I missed it.
Yeah.
H B.
That doesn't mean, we can check for you and confirm the detail.
Yeah.
Great. Thanks.
Thanks, a bunch guys.
Okay.
Thank you.
Thank you all for your questions.
There are no questions waiting at this time, so I'll turn the conference over to Bill Marshall CEO for closing remarks.
But look overall I feel that we had solid growth in both our civil and defense markets as we've been talking to.
But very focused as a team on the go to market execution to close the opportunities in front of us to close faster.
<unk> successful.
Land and expand them.
We feel good about the multiple put up most milestones we mentioned, including the 37 sidelines. The pelican, we'd be speaking a fair bit about forest carbon and getting low touch access to plants data via the Centinela hub system and.
The new platform that we acquired from centralized over the summer. We also doing all of this.
Keeping a disciplined spending on our path to adjusted EBITDA profitability by Q4 of next year.
I will I would say our conviction remains.
Hi in the opportunity in front of us and so what that will.
I look forward to seeing you next time.
That will conclude today's conference call.