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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One) | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number: 001-39540
________________________________________________
Palantir Technologies Inc.
(Exact Name of Registrant as Specified in its Charter)
________________________________________________ | | | | | | | | |
| Delaware | | 68-0551851 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
1200 17th Street, Floor 15 Denver, Colorado | | 80202 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (720) 358-3679
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading
Symbol(s) | | Name of each exchange
on which registered |
| Class A Common Stock, par value $0.001 per share | | PLTR | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | |
| Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2024, there were 2,142,323,448 shares of the registrant’s Class A common stock outstanding, 96,125,336 shares of the registrant’s Class B common stock outstanding, and 1,005,000 shares of the registrant’s Class F common stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Palantir Technologies Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | |
| As of June 30, 2024 | | As of December 31, 2023 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 512,659 | | | $ | 831,047 | |
| Marketable securities | 3,485,800 | | | 2,843,132 | |
| Accounts receivable, net | 659,339 | | | 364,784 | |
| | | |
| Prepaid expenses and other current assets | 115,712 | | | 99,655 | |
| Total current assets | 4,773,510 | | | 4,138,618 | |
| Property and equipment, net | 43,483 | | | 47,758 | |
| | | |
| Operating lease right-of-use assets | 213,453 | | | 182,863 | |
| Other assets | 161,434 | | | 153,186 | |
| Total assets | $ | 5,191,880 | | | $ | 4,522,425 | |
| Liabilities and Equity | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 67,345 | | | $ | 12,122 | |
| Accrued liabilities | 195,489 | | | 222,991 | |
| Deferred revenue | 278,441 | | | 246,901 | |
| Customer deposits | 221,519 | | | 209,828 | |
| Operating lease liabilities | 44,125 | | | 54,176 | |
| Total current liabilities | 806,919 | | | 746,018 | |
| Deferred revenue, noncurrent | 15,649 | | | 28,047 | |
| Customer deposits, noncurrent | 1,527 | | | 1,477 | |
| | | |
| Operating lease liabilities, noncurrent | 214,334 | | | 175,216 | |
| Other noncurrent liabilities | 15,645 | | | 10,702 | |
| Total liabilities | 1,054,074 | | | 961,460 | |
| Commitments and Contingencies (Note 7) | | | |
| Stockholders’ equity: | | | |
Common stock, $0.001 par value: 20,000,000 Class A shares authorized as of June 30, 2024 and December 31, 2023; 2,140,809 and 2,096,982 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively; 2,700,000 Class B shares authorized as of June 30, 2024 and December 31, 2023; 96,125 and 102,141 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively; and 1,005 Class F shares authorized, issued, and outstanding as of June 30, 2024 and December 31, 2023 | 2,238 | | | 2,200 | |
| Additional paid-in capital | 9,463,178 | | | 9,122,173 | |
| Accumulated other comprehensive income (loss), net | (4,935) | | | 801 | |
| Accumulated deficit | (5,409,957) | | | (5,649,613) | |
| Total stockholders’ equity | 4,050,524 | | | 3,475,561 | |
| Noncontrolling interests | 87,282 | | | 85,404 | |
| Total equity | 4,137,806 | | | 3,560,965 | |
| Total liabilities and equity | $ | 5,191,880 | | | $ | 4,522,425 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palantir Technologies Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Revenue | $ | 678,134 | | | $ | 533,317 | | | $ | 1,312,472 | | | $ | 1,058,503 | |
| Cost of revenue | 128,562 | | | 106,899 | | | 244,818 | | | 214,544 | |
| Gross profit | 549,572 | | | 426,418 | | | 1,067,654 | | | 843,959 | |
| Operating expenses: | | | | | | | |
| Sales and marketing | 196,809 | | | 184,163 | | | 389,986 | | | 371,256 | |
| Research and development | 108,781 | | | 99,533 | | | 218,821 | | | 189,633 | |
| General and administrative | 138,643 | | | 132,648 | | | 272,627 | | | 268,881 | |
| Total operating expenses | 444,233 | | | 416,344 | | | 881,434 | | | 829,770 | |
| Income from operations | 105,339 | | | 10,074 | | | 186,220 | | | 14,189 | |
| Interest income | 46,593 | | | 30,310 | | | 89,945 | | | 51,163 | |
| Other income (expense), net | (11,173) | | | (10,341) | | | (24,680) | | | (14,477) | |
| Income before provision for income taxes | 140,759 | | | 30,043 | | | 251,485 | | | 50,875 | |
| Provision for income taxes | 5,189 | | | 2,171 | | | 9,844 | | | 3,852 | |
| Net income | 135,570 | | | 27,872 | | | 241,641 | | | 47,023 | |
| Less: Net income (loss) attributable to noncontrolling interests | 1,444 | | | (255) | | | 1,985 | | | 2,094 | |
| Net income attributable to common stockholders | $ | 134,126 | | | $ | 28,127 | | | $ | 239,656 | | | $ | 44,929 | |
| Net earnings per share attributable to common stockholders, basic | $ | 0.06 | | | $ | 0.01 | | | $ | 0.11 | | | $ | 0.02 | |
| Net earnings per share attributable to common stockholders, diluted | $ | 0.06 | | | $ | 0.01 | | | $ | 0.10 | | | $ | 0.02 | |
| Weighted-average shares of common stock outstanding used in computing net earnings per share attributable to common stockholders, basic | 2,231,592 | | | 2,131,224 | | | 2,222,569 | | | 2,119,567 | |
| Weighted-average shares of common stock outstanding used in computing net earnings per share attributable to common stockholders, diluted | 2,414,696 | | | 2,278,155 | | | 2,407,402 | | | 2,252,205 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palantir Technologies Inc.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Net income | $ | 135,570 | | | $ | 27,872 | | | $ | 241,641 | | | $ | 47,023 | |
| Other comprehensive income (loss) | | | | | | | |
| Foreign currency translation adjustments | 731 | | | 166 | | | (1,168) | | | 896 | |
Net unrealized loss on available-for-sale securities | (53) | | | (1,057) | | | (4,675) | | | (772) | |
Comprehensive income | 136,248 | | | 26,981 | | | 235,798 | | | 47,147 | |
| Less: Comprehensive income (loss) attributable to noncontrolling interests | 1,337 | | | (255) | | | 1,878 | | | 2,094 | |
| Comprehensive income attributable to common stockholders | $ | 134,911 | | | $ | 27,236 | | | $ | 233,920 | | | $ | 45,053 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palantir Technologies Inc.
Condensed Consolidated Statements of Equity
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss, Net | | Accumulated Deficit | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount | | | | | | |
| Balance as of March 31, 2024 | 2,226,963 | | | $ | 2,227 | | | $ | 9,322,803 | | | $ | (5,720) | | | $ | (5,544,083) | | | $ | 3,775,227 | | | $ | 85,945 | | | $ | 3,861,172 | |
| Issuance of common stock from the exercise of stock options | 3,394 | | | 4 | | | 16,026 | | | — | | | — | | | 16,030 | | | — | | | 16,030 | |
| Issuance of common stock upon release of restricted stock units (“RSUs”) and performance-based RSUs (“P-RSUs”) | 8,369 | | | 8 | | | (8) | | | — | | | — | | | — | | | — | | | — | |
| Repurchases of common stock | (787) | | | (1) | | | (17,698) | | | — | | | — | | | (17,699) | | | — | | | (17,699) | |
| Stock-based compensation | — | | | — | | | 142,055 | | | — | | | — | | | 142,055 | | | — | | | 142,055 | |
| Other comprehensive income (loss) | — | | | — | | | — | | | 785 | | | — | | | 785 | | | (107) | | | 678 | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | — | | | 134,126 | | | 134,126 | | | 1,444 | | | 135,570 | |
| Balance as of June 30, 2024 | 2,237,939 | | | $ | 2,238 | | | $ | 9,463,178 | | | $ | (4,935) | | | $ | (5,409,957) | | | $ | 4,050,524 | | | $ | 87,282 | | | $ | 4,137,806 | |
| | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Accumulated Deficit | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount | | | | | | |
| Balance as of December 31, 2023 | 2,200,128 | | | $ | 2,200 | | | $ | 9,122,173 | | | $ | 801 | | | $ | (5,649,613) | | | $ | 3,475,561 | | | $ | 85,404 | | | $ | 3,560,965 | |
| Issuance of common stock from the exercise of stock options | 20,876 | | | 21 | | | 99,849 | | | — | | | — | | | 99,870 | | | — | | | 99,870 | |
| Issuance of common stock upon release of RSUs and P-RSUs | 18,090 | | | 18 | | | (18) | | | — | | | — | | | — | | | — | | | — | |
| Repurchases of common stock | (1,155) | | | (1) | | | (26,698) | | | — | | | — | | | (26,699) | | | — | | | (26,699) | |
| Stock-based compensation | — | | | — | | | 267,872 | | | — | | | — | | | 267,872 | | | — | | | 267,872 | |
| Other comprehensive loss | — | | | — | | | — | | | (5,736) | | | — | | | (5,736) | | | (107) | | | (5,843) | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | — | | | 239,656 | | | 239,656 | | | 1,985 | | | 241,641 | |
| Balance as of June 30, 2024 | 2,237,939 | | | $ | 2,238 | | | $ | 9,463,178 | | | $ | (4,935) | | | $ | (5,409,957) | | | $ | 4,050,524 | | | $ | 87,282 | | | $ | 4,137,806 | |
| | | | | | | | | | | | | | | |
Palantir Technologies Inc.
Condensed Consolidated Statements of Equity
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss, Net | | Accumulated Deficit | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount | | | | | | |
| Balance as of March 31, 2023 | 2,117,730 | | | $ | 2,117 | | | $ | 8,568,570 | | | $ | (4,318) | | | $ | (5,842,636) | | | $ | 2,723,733 | | | $ | 79,460 | | | $ | 2,803,193 | |
| Issuance of common stock from the exercise of stock options | 19,062 | | | 19 | | | 90,330 | | | — | | | — | | | 90,349 | | | — | | | 90,349 | |
| Issuance of common stock upon vesting of RSUs | 13,188 | | | 13 | | | (13) | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation | — | | | — | | | 114,156 | | | — | | | — | | | 114,156 | | | — | | | 114,156 | |
| Other comprehensive loss | — | | | — | | | — | | | (891) | | | — | | | (891) | | | — | | | (891) | |
| Other, net | — | | | — | | | — | | | — | | | — | | | — | | | 459 | | | 459 | |
| Net income | — | | | — | | | — | | | — | | | 28,127 | | | 28,127 | | | (255) | | | 27,872 | |
| Balance as of June 30, 2023 | $ | 2,149,980 | | | $ | 2,149 | | | $ | 8,773,043 | | | $ | (5,209) | | | $ | (5,814,509) | | | $ | 2,955,474 | | | $ | 79,664 | | | $ | 3,035,138 | |
| | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss, Net | | Accumulated Deficit | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount | | | | | | |
| Balance as of December 31, 2022 | 2,099,075 | | | $ | 2,099 | | | $ | 8,427,998 | | | $ | (5,333) | | | $ | (5,859,438) | | | $ | 2,565,326 | | | $ | 77,111 | | | $ | 2,642,437 | |
| Issuance of common stock from the exercise of stock options | 24,443 | | | 24 | | | 116,249 | | | — | | | — | | | 116,273 | | | — | | | 116,273 | |
| Issuance of common stock upon vesting of RSUs | 26,462 | | | 26 | | | (26) | | | — | | | — | | | — | | | — | | | — | |
| Stock-based compensation | — | | | — | | | 228,822 | | | — | | | — | | | 228,822 | | | — | | | 228,822 | |
| Other comprehensive loss | — | | | — | | | — | | | 124 | | | — | | | 124 | | | — | | | 124 | |
| Other, net | — | | | — | | | — | | | — | | | — | | | — | | | 459 | | | 459 | |
| Net income | — | | | — | | | — | | | — | | | 44,929 | | | 44,929 | | | 2,094 | | | 47,023 | |
| Balance as of June 30, 2023 | 2,149,980 | | | $ | 2,149 | | | $ | 8,773,043 | | | $ | (5,209) | | | $ | (5,814,509) | | | $ | 2,955,474 | | | $ | 79,664 | | | $ | 3,035,138 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palantir Technologies Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
| Operating activities | | | |
| Net income | $ | 241,641 | | | $ | 47,023 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 16,494 | | | 16,719 | |
| Stock-based compensation | 267,415 | | | 228,915 | |
| Noncash operating lease expense | 22,439 | | | 22,724 | |
| Unrealized and realized (gain) loss from marketable securities, net | 20,042 | | | 11,078 | |
| Noncash consideration | (26,484) | | | (20,166) | |
| Other operating activities | (11,088) | | | (17,817) | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable, net | (298,311) | | | (113,663) | |
| Prepaid expenses and other current assets | (2,774) | | | 1,091 | |
| Other assets | 5,571 | | | (3,485) | |
| Accounts payable | 53,372 | | | (39,057) | |
| Accrued liabilities | (30,548) | | | 13,780 | |
| Deferred revenue, current and noncurrent | 21,463 | | | 115,868 | |
| Customer deposits, current and noncurrent | 11,806 | | | 40,144 | |
| Operating lease liabilities, current and noncurrent | (23,778) | | | (25,603) | |
| Other noncurrent liabilities | 6,506 | | | 17 | |
| Net cash provided by operating activities | 273,766 | | | 277,568 | |
| Investing activities | | | |
| Purchases of property and equipment | (5,543) | | | (8,689) | |
| Purchases of marketable securities | (1,784,115) | | | (2,936,939) | |
| Proceeds from sales and redemption of marketable securities | 1,133,535 | | | 948,866 | |
| | | |
| | | |
| | | |
| | | |
| Proceeds from sales of alternative investments | — | | | 51,072 | |
| | | |
| Other investing activities | (4,000) | | | — | |
| Net cash used in investing activities | (660,123) | | | (1,945,690) | |
| Financing activities | | | |
| | | |
| | | |
| | | |
| Proceeds from the exercise of common stock options | 99,870 | | | 116,273 | |
| Repurchases of common stock | (26,699) | | | — | |
| Other financing activities | 102 | | | 394 | |
| Net cash provided by financing activities | 73,273 | | | 116,667 | |
| Effect of foreign exchange on cash, cash equivalents, and restricted cash | (4,948) | | | (1,855) | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (318,032) | | | (1,553,310) | |
| Cash, cash equivalents, and restricted cash - beginning of period | 850,107 | | | 2,627,335 | |
| Cash, cash equivalents, and restricted cash - end of period | $ | 532,075 | | | $ | 1,074,025 | |
| | | |
| | | |
| | | |
| | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization
Palantir Technologies Inc. (including its subsidiaries, “Palantir” or the “Company”) was incorporated in Delaware on May 6, 2003. The Company builds and deploys software platforms that serve as the central operating systems for its customers.
2. Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The accompanying condensed consolidated financial statements include the accounts of Palantir Technologies Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities where the Company holds at least a 20% ownership interest and has the ability to exercise significant influence over, but does not control, the investee are accounted for using the equity method of accounting. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, income from operations, net income, or cash flows. The Company's fiscal year ends on December 31.
The unaudited condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis. In management’s opinion, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets and statements of operations, comprehensive income, stockholders’ equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period.
These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes included in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.
Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, the identification of performance obligations in customer contracts, the valuation of deferred tax assets and uncertain tax positions, and the collectability of contract consideration, including accounts receivable. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could affect the Company’s financial position and results of operations.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 2. Significant Accounting Policies in the notes to consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024. There have been no significant changes to these policies during the six months ended June 30, 2024, except for the changes noted below.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents primarily consist of amounts invested in money market funds and available-for-sale debt securities.
Restricted cash primarily consists of cash and certificates of deposit that are held as collateral against letters of credit and guarantees that the Company is required to maintain for operating lease agreements, certain customer contracts, and other guarantees and financing arrangements.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):
| | | | | | | | | | | |
| As of June 30, |
| 2024 | | 2023 |
| Cash and cash equivalents | $ | 512,659 | | | $ | 1,055,923 | |
| Restricted cash included in prepaid expenses and other current assets | — | | | 5,999 | |
| Restricted cash included in other assets | 19,416 | | | 12,103 | |
| Total cash, cash equivalents, and restricted cash | $ | 532,075 | | | $ | 1,074,025 | |
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses. The Company generally grants non-collateralized credit terms to its customers. Allowance for credit losses is based on the Company’s best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on expectations of the customer’s ability to pay by considering factors such as customer type (commercial or government), historical experience, financial position of the customer, age of the accounts receivable, current economic conditions, and reasonable and supportable forward-looking factors about its portfolio and future economic conditions. Accounts receivable are written-off and charged against an allowance for credit losses when the Company has exhausted collection efforts without success. Based upon the Company’s assessment as of June 30, 2024 and December 31, 2023, the Company recorded an allowance for credit losses of $2.8 million and $10.5 million, respectively.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, accounts receivable, marketable securities, and privately-held equity securities. Cash equivalents primarily consist of money market funds and U.S. treasury securities with original maturities of three months or less, which are invested primarily with U.S. financial institutions. Cash deposits with financial institutions, including restricted cash, generally exceed federally insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.
The Company is exposed to concentrations of credit risk with respect to accounts receivable presented on the condensed consolidated balance sheets. The Company’s accounts receivable balances as of June 30, 2024 and December 31, 2023 were $659.3 million and $364.8 million, respectively. Customer I represented 32% and 15% of total accounts receivable as of June 30, 2024 and December 31, 2023, respectively, and no other customer represented more than 10% of total accounts receivable as of June 30, 2024 or December 31, 2023.
For the three and six months ended June 30, 2024, no customer represented more than 10% of total revenue. For the three and six months ended June 30, 2023, Customer K, which is in the government operating segment, represented 10% of total revenue. No other customer represented more than 10% of total revenue for the three and six months ended June 30, 2023.
Share Repurchase Program
Share repurchases are recorded at trade date and the repurchase price is inclusive of any related fees and commissions. Upon retirement, the par value of the Class A common stock repurchased is deducted from common stock with the excess of repurchase price recorded to additional paid-in capital on the Company’s condensed consolidated balance sheets.
Stock-Based Compensation
The Company accounts for stock-based compensation expense in accordance with the fair value recognition and measurement provisions of GAAP, which require compensation cost for the grant-date fair value of stock-based awards to be recognized over the requisite service period. The Company determines the fair value of stock-based awards granted or modified on the grant date or modification date using appropriate valuation techniques. The Company recognizes forfeitures as they occur.
Service-Based Vesting
The Company grants RSUs and stock option awards that vest based upon the satisfaction of only a service condition. The Company determines the grant-date fair value of the RSUs based on the fair value of the Company’s common stock on the grant date. The Company records stock-based compensation expense for stock options and RSUs that vest based upon the
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
satisfaction of only a service condition on a straight-line basis over the requisite service period, which is generally up to four years. For stock option awards, the Company uses the Black-Scholes option pricing model to determine the fair value of the stock options granted. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of the common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the option awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.
Performance-Based Vesting
The Company also grants awards, including RSUs, that vest upon the satisfaction of both a service condition and a performance condition. The Company determines the grant-date fair value of RSUs with both a service-based vesting condition and a performance-based vesting condition based on the fair value of the Company’s common stock on the grant date and records stock-based compensation expense using the accelerated attribution method over the service period. The performance-based vesting condition for the RSUs granted prior to September 30, 2020, the date the Company completed a direct listing of its Class A common stock on the New York Stock Exchange (the “Direct Listing”) was satisfied upon the occurrence of the Company’s Direct Listing. For P-RSUs granted after the Direct Listing, the Company recognizes expense for the number of P-RSUs expected to vest, determined based on the level of achievement against certain performance conditions, over the requisite service period when it is probable that the performance condition will be achieved.
Market-Based Vesting
The Company grants awards, including stock appreciation rights (“SARs”), that vest upon the satisfaction of market-based vesting conditions. The Company estimates the fair value of the awards granted and the corresponding derived service period using a Monte Carlo simulation model, which requires the use of various assumptions including the contractual term, expected stock price volatility, risk-free interest rate, suboptimal exercise factor, annual post-vest termination rate, and cost of capital as of the grant date. Stock-based compensation expense for these awards is recognized straight-line over the estimated derived service period. If the market condition is achieved earlier than its estimated derived service period, the stock-based compensation expense will be accelerated, and a cumulative catch-up expense will be recorded during the period in which the market condition is met. Once the derived service period is complete, previously recognized stock-based compensation expense related to market-based SARs will not be reversed even if the specified market condition is not achieved.
3. Contract Liabilities and Remaining Performance Obligations
Contract Liabilities
The Company’s contract liabilities consist of deferred revenue and customer deposits. As of June 30, 2024 and December 31, 2023, the Company's contract liability balances were $517.1 million and $486.3 million, respectively. Revenue of $362.4 million and $270.2 million was recognized during the six months ended June 30, 2024 and 2023, respectively, that was included in the contract liability balances as of December 31, 2023 and 2022, respectively.
Remaining Performance Obligations
The Company’s arrangements with its customers often have terms that span over multiple years. However, the Company allows many of its customers to terminate contracts for convenience prior to the end of the stated term with less than twelve months’ notice. Revenue allocated to remaining performance obligations represents noncancelable contracted revenue that has not yet been recognized, which includes deferred revenue and, in certain instances, amounts that will be invoiced. The Company has elected the practical expedient allowing the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancelable contracted revenue, which includes customer deposits, is not considered a remaining performance obligation.
The Company’s remaining performance obligations were $1.4 billion as of June 30, 2024, of which the Company expects to recognize approximately 50% as revenue over the next 12 months, 39% as revenue over the subsequent 13 to 36 months, and the remainder thereafter.
Disaggregation of Revenue
See Note 12. Segment and Geographic Information for disaggregated revenue by customer segment and geographic region.
4. Investments and Fair Value Measurements
The following tables present the Company’s assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation (in thousands):
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2024 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash and cash equivalents: | | | | | | | |
| Money market funds | $ | 263,215 | | | $ | 263,215 | | | $ | — | | | $ | — | |
| | | | | | | |
| | | | | | | |
| Prepaid expenses and other current assets and other assets: | | | | | | | |
| Certificates of deposit | 4,802 | | | — | | | 4,802 | | | — | |
| Marketable securities: | | | | | | | |
| U.S. treasury securities | 3,477,167 | | | — | | | 3,477,167 | | | — | |
| Publicly-traded equity securities | 8,633 | | | 8,633 | | | — | | | — | |
| Total | $ | 3,753,817 | | | $ | 271,848 | | | $ | 3,481,969 | | | $ | — | |
| | | | | | | |
| As of December 31, 2023 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash and cash equivalents: | | | | | | | |
| Money market funds | $ | 576,565 | | | $ | 576,565 | | | $ | — | | | $ | — | |
| U.S treasury securities | 10,079 | | | — | | | 10,079 | | | — | |
| Certificates of deposit | 938 | | | — | | | 938 | | | — | |
| Prepaid expenses and other current assets and other assets: | | | | | | | |
| Certificates of deposit | 4,777 | | | — | | | 4,777 | | | — | |
| Marketable securities: | | | | | | | |
| U.S. treasury securities | 2,824,861 | | | — | | | 2,824,861 | | | — | |
| Publicly-traded equity securities | 18,271 | | | 18,271 | | | — | | | — | |
| Total | $ | 3,435,491 | | | $ | 594,836 | | | $ | 2,840,655 | | | $ | — | |
Certificates of Deposit
The Company’s certificates of deposit are Level 2 instruments. The fair value of such instruments is estimated based on valuations obtained from third-party pricing services that utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable either directly or indirectly. These inputs include interest rate curves, foreign exchange rates, and credit ratings.
Debt Securities
As of June 30, 2024, available-for-sale debt securities, all of which are included in marketable securities on the condensed consolidated balance sheet, consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2024 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| U.S. treasury securities | $ | 3,480,199 | | | $ | 41 | | | $ | (3,073) | | | $ | 3,477,167 | |
| Total debt securities | $ | 3,480,199 | | | $ | 41 | | | $ | (3,073) | | | $ | 3,477,167 | |
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
As of December 31, 2023, available-for-sale debt securities consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
| U.S. treasury securities | $ | 2,831,505 | | | $ | 4,520 | | | $ | (1,085) | | | $ | 2,834,940 | |
| Total debt securities | $ | 2,831,505 | | | $ | 4,520 | | | $ | (1,085) | | | $ | 2,834,940 | |
| Included in cash and cash equivalents | $ | 10,078 | | | $ | 1 | | | $ | — | | | $ | 10,079 | |
| Included in marketable securities | $ | 2,821,427 | | | $ | 4,519 | | | $ | (1,085) | | | $ | 2,824,861 | |
The Company did not sell any available-for-sale debt securities during the three and six months ended June 30, 2024 or for the three months ended June 30, 2023. The Company sold $694.6 million of available-for-sale debt securities during the six months ended June 30, 2023 and immediately reinvested such proceeds into additional debt securities. The realized gains and losses from those sales were immaterial. No credit or non-credit losses related to debt securities were recorded during the three and six months ended June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, available-for-sale debt securities of $3.1 billion and $236.0 million, respectively, were in an unrealized loss position primarily due to unfavorable changes in interest rates subsequent to initial purchase. None of the available-for-sale debt securities held as of June 30, 2024 or December 31, 2023 were in a continuous unrealized loss position for greater than 12 months. The decline in fair value below amortized cost basis was not considered other than temporary as it is more likely than not that the Company will hold the securities until maturity or a recovery of the cost basis, and no credit-related impairment losses were recorded as of June 30, 2024 or December 31, 2023. All of the Company’s U.S. treasury securities had remaining contractual maturities due within one year as of June 30, 2024.
Equity Securities
The Company holds equity securities in publicly-traded companies, which are recorded at fair market value each reporting period in marketable securities on the condensed consolidated balance sheets. Realized and unrealized gains and losses are recorded in other income (expense), net on the condensed consolidated statements of operations. For the three months ended June 30, 2024 and 2023, net unrealized losses from publicly-traded equity securities held at the end of each period were $6.6 million and $0.6 million, respectively. For the six months ended June 30, 2024 and 2023, net unrealized losses from publicly-traded equity securities held at the end of each period were $12.2 million and $7.0 million, respectively.
The Company also holds equity securities in privately-held companies without readily determinable fair values that are recorded using the measurement alternative. As of June 30, 2024 and December 31, 2023, the total amount of privately-held equity securities included in other assets on the consolidated balance sheets was $49.9 million and $32.6 million, respectively. The Company classifies these fair value measurements as Level 3 within the fair value hierarchy. The Company did not record any material adjustments or impairments for the privately-held equity securities held during the three and six months ended June 30, 2024 and 2023.
Additionally, we have accepted, and may continue to accept, securities as noncash consideration. Total equity securities received as noncash consideration was $30.3 million and $14.5 million during the six months ended June 30, 2024 and 2023, respectively.
Strategic Commercial Contracts
From 2021 through 2022, the Company approved and entered into certain agreements (“Investment Agreements”) to purchase shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, the “Investments”). No Investments were purchased under such Investment Agreements during the six months ended June 30, 2024 or the fiscal year ended December 31, 2023.
In connection with signing the Investment Agreements, each Investee or an associated entity and the Company entered into a commercial contract for access to the Company’s products and services (collectively, the “Strategic Commercial Contracts”). The Company assessed the concurrent agreements under the noncash consideration and consideration payable to a customer guidance within Accounting Standards Codification 606, Revenue from Contracts with Customers, as well as the commercial substance of each arrangement considering the customer’s ability and intention to pay as well as the Company’s obligation to perform under each contract. The Company performs ongoing assessments of customers’ financial condition, including the consideration of customers’ ability and intention to pay, and whether all or some portion of the value of such contracts continue to meet the criteria for revenue recognition, among other factors. During the three months ended June 30, 2024 and 2023, revenue recognized from Strategic Commercial Contracts was $9.2 million and $19.4 million, respectively. During the six
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
months ended June 30, 2024 and 2023, revenue recognized from Strategic Commercial Contracts was $33.1 million and $52.8 million, respectively.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
| | | | | | | | | | | |
| As of June 30,
2024 | | As of December 31,
2023 |
| Leasehold improvements | $ | 84,407 | | | $ | 83,139 | |
| Computer equipment, software, and other | 53,899 | | | 50,844 | |
| Furniture and fixtures | 13,894 | | | 13,834 | |
| Construction in progress | 3,171 | | | 2,099 | |
| Total property and equipment, gross | 155,371 | | | 149,916 | |
| Less: accumulated depreciation and amortization | (111,888) | | | (102,158) | |
| Total property and equipment, net | $ | 43,483 | | | $ | 47,758 | |
Depreciation and amortization expense related to property and equipment, net was $6.0 million and $6.0 million for the three months ended June 30, 2024 and 2023, respectively, and $12.1 million and $11.9 million for the six months ended June 30, 2024 and 2023, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| As of June 30,
2024 | | As of December 31,
2023 |
| Accrued payroll and related expenses | $ | 61,986 | | | $ | 83,094 | |
| Accrued taxes | 40,429 | | | 47,257 | |
| Accrued other liabilities | 93,074 | | | 92,640 | |
| Total accrued liabilities | $ | 195,489 | | | $ | 222,991 | |
6. Debt
2014 Credit Facility
In October 2014, the Company entered into an unsecured revolving credit facility, which has been subsequently secured by substantially all of the Company’s assets and amended from time to time (as amended, the “2014 Credit Facility”). As of June 30, 2024, the Company had no outstanding debt balances and had undrawn revolving commitments of $500.0 million available to fund working capital and general corporate expenditures under the 2014 Credit Facility, which has a maturity date of March 31, 2027.
The 2014 Credit Facility contains customary representations and warranties, and certain financial and nonfinancial covenants, including but not limited to maintaining minimum liquidity of $50.0 million, and certain limitations on liens and indebtedness. The Company was in compliance with all covenants associated with the 2014 Credit Facility as of June 30, 2024.
7. Commitments and Contingencies
Purchase Commitments
The Company has commitments with various third parties to purchase cloud hosting services. In September 2023, the Company amended one of its third-party cloud hosting services agreements. Under this amendment, the Company has committed to spend at least $1.95 billion over ten contract years through September 30, 2033, as well as certain additional minimum usage commitments, among other things. As of June 30, 2024, the Company satisfied $144.9 million of its $154.0 million commitment for the contract year beginning October 1, 2023 and ending September 30, 2024. Additionally, as of June 30, 2024, there were no material changes outside the ordinary course of business of the Company’s commitments, as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Litigation and Legal Proceedings
From time to time, third parties may assert patent infringement claims against the Company. In addition, from time to time, the Company may be subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, and other intellectual property rights; employment claims; securities claims; investor claims; corporate claims; class action claims; and general contract, tort, or other claims. The Company may from time to time also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, allegations, or investigations related to warranty; refund; breach of contract; breach, leak, or misuse of personal data or confidential information; employment; government procurement; intellectual property; government regulation or compliance (including but not limited to anti-corruption requirements, export or other trade controls, data privacy or data protection, cybersecurity requirements, or antitrust/competition law requirements); securities; investor; corporate; or other matters. The Company establishes an accrual for loss contingencies when the loss is both probable and reasonably estimable.
On September 15, 2022, October 25, 2022, and November 4, 2022, putative securities class action complaints were filed in the United States District Court for the District of Colorado, captioned Cupat v. Palantir Technologies Inc., et al., Case No. 1:22-cv-02384, Allegheny County Employees’ Retirement System v. Palantir Technologies, Inc., et al., Case No. 1:22-cv-02805, and Shijun Liu, Individually and as Trustee of the Liu Family Trust 2019 v. Palantir Technologies Inc., et al., Case No. 1:22-cv-02893, respectively, naming the Company and certain current and former officers and directors as defendants. The suits allege false and misleading statements about our business and prospects, and purport to allege claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended (the “Securities Act”), and seek unspecified damages and remedies under Sections 10(b), 20(a), and 20(A) of the Exchange Act and Sections 11 and 15 of the Securities Act. These three actions subsequently were consolidated as Cupat v. Palantir Technologies Inc., et al., Lead Civil Action No. 1:22-cv-02834-CNS-SKC, consolidated with civil actions 1:22-cv-02805-CNS-SKC and 1:22-cv-02893-CNS-SKC. On March 31, 2024, the Court dismissed the Cupat matter without prejudice. On May 24, 2024, plaintiffs filed a second amended complaint. On November 21, 2022 a stockholder derivative action was filed in the United States District Court for the District of Colorado, captioned Li v. Karp, et al., Case No. 22-cv-3028 and on January 27, 2023, a stockholder derivative action was filed in the United States District Court for the District of Delaware, captioned Miao v. Karp, et al., Case No. 1:23-cv-00103-MN, each against certain current and former officers and directors asserting breach of fiduciary duty and related claims relating to the allegations of the securities class action complaints and seek unspecified damages and injunctive remedies under Section 14(a) of the Exchange Act and Delaware law. On August 22, 2023, a stockholder derivative action was filed in the Court of Chancery of the State of Delaware captioned Central Laborers’ Pension Fund v. Karp, et al., Case No. 2023-0864 against certain current and former officers and directors asserting breach of fiduciary duty and related claims relating to the allegations of the securities class action complaints and seeks unspecified damages and injunctive relief under Delaware law. Because the litigation is in early stages, the Company is unable to estimate the reasonably possible loss or range of loss, if any, that may result from these matters.
As of June 30, 2024, the Company was not aware of any currently pending legal matters or claims, individually or in the aggregate, that were expected to have a material adverse impact on its condensed consolidated financial statements.
Warranties and Indemnification
The Company generally provides a warranty for its software products and services and a service level agreement (“SLA”) for the Company’s performance of software operations. The Company’s products are generally warranted to perform substantially as described in the associated product documentation during the subscription term or for a period of up to 90 days where the software is hosted by the customer, and the Company includes operations and maintenance (“O&M”) services as part of its subscription and license agreements to support this warranty and maintain the operability of the software. The Company’s services are generally warranted to be performed in a professional manner and by an adequate staff with knowledge about the products. In the event there is a failure of such warranties, the Company generally is obligated to correct the product or service to conform to the warranty provision, or, if the Company is unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term). Due to the absence of historical warranty claims, the Company’s expectations of future claims related to products under warranty continue to be insignificant. The Company has not recorded warranty expense or related accruals as of June 30, 2024 and December 31, 2023.
The Company generally agrees to indemnify its customers against legal claims that the Company’s software products infringe certain third-party intellectual property rights and accounts for its indemnification obligations. In the event of such a claim, the Company is generally obligated to defend its customer against the claim and to either settle the claim at the Company’s expense or pay damages that the customer is legally required to pay to the third-party claimant. In addition, in the event of an infringement, the Company generally agrees to secure the right for the customer to continue using the infringing product; to modify or replace the infringing product; or, if those options are not commercially practicable, to refund the cost of the software, as prorated over the period. To date, the Company has not been required to make any payment resulting from
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
infringement claims asserted against its customers and does not believe that the Company will be liable for such claims in the foreseeable future. As such, the Company has not recorded a liability for infringement costs as of June 30, 2024 and December 31, 2023.
The Company has obligations under certain circumstances to indemnify each of the defendant directors and certain officers against judgments, fines, settlements, and expenses related to claims against such directors and certain officers and otherwise to the fullest extent permitted under the law and the Company’s Amended and Restated Bylaws and Amended and Restated Certificate of Incorporation.
8. Stockholders’ Equity
The Company’s Class A, Class B, and Class F common stock (collectively, the “common stock”) all have the same rights, except with respect to voting and conversion rights. Class A and Class B common stock have voting rights of 1 and 10 votes per share, respectively. The Class F common stock has the voting rights generally described herein, and each share of Class F common stock is convertible at any time, at the option of the holder thereof, into one share of Class B common stock. All shares of Class F common stock are held in a voting trust established by Stephen Cohen, Alexander Karp, and Peter Thiel (the “Founders”). The Class F common stock generally gives the Founders the ability to control up to 49.999999% of the total voting power of the Company’s capital stock, so long as the Founders and certain of their affiliates collectively meet a minimum ownership threshold, which was 100.0 million of the Company's equity securities as of June 30, 2024.
Holders of the common stock are entitled to dividends when, as, and if declared by the Company’s Board of Directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. No dividends have been declared as of June 30, 2024.
The following represented the total authorized, issued, and outstanding shares for each class of common stock (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2024 | | As of December 31, 2023 |
| Authorized | | Issued and Outstanding | | Authorized | | Issued and Outstanding |
| Class A Common Stock | 20,000,000 | | | 2,140,809 | | | 20,000,000 | | | 2,096,982 | |
| Class B Common Stock | 2,700,000 | | | 96,125 | | | 2,700,000 | | | 102,141 | |
| Class F Common Stock | 1,005 | | | 1,005 | | | 1,005 | | | 1,005 | |
| Total | 22,701,005 | | | 2,237,939 | | | 22,701,005 | | | 2,200,128 | |
Share Repurchase Program
In August 2023, the Company’s Board of Directors authorized a stock repurchase program of up to $1.0 billion of the Company’s outstanding shares of Class A common stock (the “Share Repurchase Program”). The Company may repurchase shares of its Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act in accordance with applicable securities laws and other restrictions. The timing and the amount of stock repurchases under the Share Repurchase Program will be determined by the Company’s management, based on its evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations. The Share Repurchase Program does not obligate the Company to repurchase any specific number of shares and may be discontinued at any time.
During the three and six months ended June 30, 2024, the Company repurchased and subsequently retired 0.8 million and 1.2 million shares, respectively, of its Class A common stock for an aggregate amount, including commissions, of $17.7 million and $26.7 million, respectively under the Share Repurchase Program. As of June 30, 2024, approximately $973.3 million of the originally authorized amount under the Share Repurchase Program remained available for future repurchases.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
9. Stock-Based Compensation
Stock Options and SARs
The following table summarizes stock option and SAR activity for the six months ended June 30, 2024 (in thousands, except per share amounts and years):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Options Outstanding | | SARs Outstanding |
| Number of Awards | | Weighted-Average Exercise Price Per Share | | Weighted-Average
Remaining Contractual Life (years) | | Aggregate Intrinsic Value | | Number of Awards | | Weighted-Average Exercise Price Per Share | | Weighted-Average
Remaining Contractual Life (years) | | Aggregate Intrinsic Value |
| Balance as of December 31, 2023 | 278,470 | | | $ | 8.62 | | | 7.6 | | $ | 2,381,172 | | | — | | | $ | — | | | 0.0 | | $ | — | |
| Granted | — | | | — | | | | | | | 44,593 | | | 50.00 | | | | | |
| Exercised | (20,876) | | | 4.78 | | | | | | | — | | | — | | | | | |
| Canceled and forfeited | (630) | | | 5.94 | | | | | | | (2,018) | | | 50.00 | | | | | |
| Balance as of June 30, 2024 | 256,964 | | | $ | 8.94 | | | 7.3 | | $ | 4,212,345 | | | 42,575 | | | $ | 50.00 | | | 39.5 | | $ | — | |
| Vested and exercisable as of June 30, 2024 | 149,463 | | | $ | 7.20 | | | 6.7 | | $ | 2,710,036 | | | — | | | $ | — | | | 0.0 | | $ | — | |
As of June 30, 2024, the total unrecognized stock-based compensation expense related to options and SARs outstanding was $548.8 million, and $128.6 million, respectively, which is expected to be recognized over a weighted-average service period of seven and four years, respectively.
During the six months ended June 30, 2024, the Company granted SARs that vest upon the achievement of a market-based vesting condition subject to continued service. The market-based vesting condition is satisfied when the price per share of the Company’s Class A common stock exceeds $50 (measured based on the closing price on the immediately prior trading day) (an “Above Price Day”). Following vesting, SARs may only be exercised on an Above Price Day which occurs within an open trading window. The maximum appreciation is up to $20 per SAR.
The Company determined the grant date fair value of SARs using a Monte Carlo simulation model which incorporates various assumptions including the contractual term, expected stock price volatility, risk-free interest rate, suboptimal exercise factor, annual post-vest termination rate, and cost of capital as of the grant date.
For the awards granted during the six months ended June 30, 2024, the assumptions used in the Monte Carlo simulation model included the following:
| | | | | |
| Six Months Ended
June 30, 2024 |
| Expected volatility rate | 58.2% - 58.9% |
| Risk-free interest rate | 4.1% - 4.7% |
| Grant-date fair value per share | $3.30 - $4.61 |
The expected volatility rate is based on a combination of the Company’s implied volatility and the historical volatility of comparable publicly-traded companies. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The SARs granted during the six months ended June 30, 2024 had derived service periods of up to five years.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
RSUs and P-RSUs
The following table summarizes the RSU and P-RSU activity for the six months ended June 30, 2024 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| RSUs Outstanding | | Weighted Average Grant Date Fair Value per Share | | P-RSUs Outstanding | | Weighted Average Grant Date Fair Value per Share |
| Unvested and outstanding as of December 31, 2023 | 82,262 | | | $ | 10.71 | | | 1,976 | | | $ | 15.39 | |
| Granted | 3,520 | | | 19.90 | | | 2,862 | | | 18.84 | |
| Vested | (16,747) | | | 13.37 | | | (2,069) | | | 17.38 | |
| Canceled and forfeited | (2,428) | | | 13.13 | | | (477) | | | 9.58 | |
Adjustment for performance achievement(1) | — | | | — | | | (1,094) | | | 16.42 | |
| Unvested and outstanding as of June 30, 2024 | 66,607 | | | $ | 10.44 | | | 1,198 | | | $ | 21.59 | |
(1) This amount represents the difference between the maximum number of shares that could have been issued under the grant and the actual number of shares earned based on final performance.
As of June 30, 2024, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $430.3 million, which the Company expects to recognize over a weighted-average service period of three years. As of June 30, 2024, there was no unrecognized stock-based compensation expense related to the P-RSUs outstanding.
Stock-based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Cost of revenue | $ | 12,402 | | | $ | 8,004 | | | $ | 22,818 | | | $ | 17,181 | |
| Sales and marketing | 48,314 | | | 38,131 | | | 90,470 | | | 77,666 | |
| Research and development | 29,943 | | | 23,192 | | | 56,817 | | | 43,116 | |
| General and administrative | 51,105 | | | 44,874 | | | 97,310 | | | 90,952 | |
| Total stock-based compensation expense | $ | 141,764 | | | $ | 114,201 | | | $ | 267,415 | | | $ | 228,915 | |
10. Income Taxes
The Company recorded a provision for income taxes of $5.2 million and $2.2 million for the three months ended June 30, 2024 and 2023, respectively, and a provision for income taxes of $9.8 million and $3.9 million for the six months ended June 30, 2024 and 2023, respectively. The Company is subject to income tax in the U.S. as well as other tax jurisdictions in which it conducts business. The Company’s effective tax rate as of June 30, 2024 differs from the U.S. statutory rate primarily due to foreign income taxed at different rates, non-deductible stock-based compensation, other non-deductible expenses, and valuation allowances recorded on its deferred tax assets from the U.S., United Kingdom (“U.K.”), and other jurisdictions. The provision for income taxes increased by $3.0 million and $6.0 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 primarily related to increased foreign tax expense as a result of higher foreign taxable income and withholding taxes, as well as increases in state taxes.
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company assesses its ability to realize the deferred tax assets on a quarterly basis, and it establishes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. For example, due to the weight of objectively verifiable negative evidence, including its history of U.S. and U.K. net operating tax losses, the Company has maintained a full valuation allowance on its U.S. and U.K. deferred tax assets as of June 30, 2024. However, given the Company’s recent earnings and anticipated future earnings, there is a reasonable possibility that it will have sufficient positive evidence in the future to release all or a portion of the valuation allowance it recorded against its deferred tax assets.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On August 16, 2022, the Inflation Reduction Act was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on the value of net share repurchases. The Inflation Reduction Act became effective beginning in fiscal year 2023. Based on the Company’s current analysis of the provisions, the law has not had a material impact on the Company’s condensed consolidated financial statements.
11. Net Earnings Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net earnings per share attributable to common stockholders (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Numerator | | | | | | | |
| Net income attributable to common stockholders for diluted net earnings per share | $ | 134,126 | | | $ | 28,127 | | | $ | 239,656 | | | $ | 44,929 | |
| Denominator | | | | | | | |
| Weighted-average shares used in computing net earnings per share: | | | | | | | |
| Basic | 2,231,592 | | | 2,131,224 | | | 2,222,569 | | | 2,119,567 | |
| Effect of dilutive shares | 183,104 | | | 146,931 | | | 184,833 | | | 132,638 | |
| Diluted | 2,414,696 | | | 2,278,155 | | | 2,407,402 | | | 2,252,205 | |
| Net earnings per share | | | | | | | |
| Net earnings per share attributable to common stockholders: | | | | | | | |
| Basic | $ | 0.06 | | | $ | 0.01 | | | $ | 0.11 | | | $ | 0.02 | |
| Diluted | $ | 0.06 | | | $ | 0.01 | | | $ | 0.10 | | | $ | 0.02 | |
The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net earnings per share attributable to common stockholders for the periods presented due to their anti-dilutive effect (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Options issued and outstanding | — | | | 162,000 | | | — | | | 162,000 | |
| RSUs and P-RSUs outstanding | 787 | | | 11,840 | | | 787 | | | 16,535 | |
| Warrants to purchase common stock | — | | | 13,042 | | | — | | | 13,042 | |
| Total | 787 | | | 186,882 | | | 787 | | | 191,577 | |
For the three and six months ended June 30, 2024, the Company also excluded the impact of 42.6 million SARs that may settle in shares of Class A common stock from the computation of diluted net earnings per share because the exercise price of such SARs was greater than the average market price of the Class A common stock for the applicable period. When such SARs are vested, the maximum number of potentially dilutive Class A common shares is the fraction that equals the maximum appreciation divided by the Company’s Class A common stock price at that time.
12. Segment and Geographic Information
The following reporting segment tables reflect the results of the Company’s reportable operating segments consistent with the manner in which the chief operating decision maker (“CODM”) evaluates the performance of each segment and allocates the Company’s resources. The CODM does not evaluate the performance of the Company’s assets on a segment basis for internal management reporting and, therefore, such information is not presented.
Contribution is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. A segment’s contribution is calculated as segment revenue less the related costs of revenue and sales and marketing expenses. It excludes
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level or are noncash costs. These unallocated and noncash costs include stock-based compensation expense, research and development expenses, and general and administrative expenses.
Financial information for each reportable segment was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Revenue: | | | | | | | |
| Government | $ | 370,767 | | | $ | 301,505 | | | $ | 706,140 | | | $ | 590,575 | |
| Commercial | 307,367 | | | 231,812 | | | 606,332 | | | 467,928 | |
| Total revenue | $ | 678,134 | | | $ | 533,317 | | | $ | 1,312,472 | | | $ | 1,058,503 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Contribution: | | | | | | | |
| Government | $ | 231,394 | | | $ | 174,230 | | | $ | 430,782 | | | $ | 340,463 | |
| Commercial | 182,085 | | | 114,160 | | | 360,174 | | | 227,087 | |
| Total contribution | $ | 413,479 | | | $ | 288,390 | | | $ | 790,956 | | | $ | 567,550 | |
The reconciliation of contribution to income from operations is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Income from operations | $ | 105,339 | | | $ | 10,074 | | | $ | 186,220 | | | $ | 14,189 | |
Research and development expenses (1) | 78,838 | | | 76,341 | | | 162,004 | | | 146,517 | |
General and administrative expenses (1) | 87,538 | | | 87,774 | | | 175,317 | | | 177,929 | |
| Total stock-based compensation expense | 141,764 | | | 114,201 | | | 267,415 | | | 228,915 | |
| Total contribution | $ | 413,479 | | | $ | 288,390 | | | $ | 790,956 | | | $ | 567,550 | |
—————
(1) Excludes stock-based compensation expense.
Geographic Information
Revenue by geography is based on the customer’s headquarters or agency location at the time of sale. Revenue is as follows (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Amount | | % | | Amount | | % | | Amount | | % | | Amount | | % |
| Revenue: | | | | | | | | | | | | | | | |
| United States | $ | 437,189 | | | 64 | % | | $ | 328,012 | | | 62 | % | | $ | 843,578 | | | 64 | % | | $ | 664,857 | | | 63 | % |
| United Kingdom | 76,991 | | | 11 | % | | 63,229 | | | 12 | % | | 140,192 | | | 11 | % | | 112,808 | | | 11 | % |
Rest of world (1) | 163,954 | | | 25 | % | | 142,076 | | | 26 | % | | 328,702 | | | 25 | % | | 280,838 | | | 26 | % |
| Total revenue | $ | 678,134 | | | 100 | % | | $ | 533,317 | | | 100 | % | | $ | 1,312,472 | | | 100 | % | | $ | 1,058,503 | | | 100 | % |
—————
(1) No other country represents 10% or more of total revenue for the three and six months ended June 30, 2024 or 2023.
Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
13. Intangible Assets
Intangible assets subject to amortization that are not fully amortized are as follows (in thousands, except years):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average useful life (years) | | As of June 30, 2024 | | As of December 31, 2023 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Customer relationships | 3.3 | | $ | 10,400 | | | $ | (3,467) | | | $ | 6,933 | | | $ | 10,400 | | | $ | (2,427) | | | $ | 7,973 | |
| Reacquired rights | 5.3 | | 17,618 | | | (4,195) | | | 13,424 | | | 17,618 | | | (2,936) | | | 14,682 | |
| Backlog | 0.3 | | 6,700 | | | (5,583) | | | 1,117 | | | 6,700 | | | (3,908) | | | 2,792 | |
| Other | 0.0 | | 4,225 | | | (4,225) | | | — | | | 4,225 | | | (3,770) | | | 455 | |
| Total intangible assets | | | $ | 38,943 | | | $ | (17,469) | | | $ | 21,474 | | | $ | 38,943 | | | $ | (13,041) | | | $ | 25,902 | |
Amortization expense of intangible assets was not material for the three and six months ended June 30, 2024 or 2023.
As of June 30, 2024, expected amortization expense for the unamortized finite-lived intangible assets is as follows (in thousands):
| | | | | |
| Year ended December 31, | Amount |
| Remainder of 2024 | $ | 3,416 | |
| 2025 | 4,597 | |
| 2026 | 4,597 | |
| 2027 | 4,250 | |
| 2028 | 2,517 | |
| Thereafter | 2,097 | |
| Total | $ | 21,474 | |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “can,” “would,” “intend,” “target,” “goal,” “outlook,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “future,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
•our expectations regarding financial performance and liquidity, including but not limited to our expectations regarding revenue, cost of revenue, operating expenses, stock-based compensation, our ability to achieve and maintain future profitability, and cash flows;
•our ability to successfully execute our business and growth strategy;
•the sufficiency of our cash and cash equivalents to meet our liquidity needs;
•the demand for our platforms in general;
•our ability to increase our number of customers and revenue generated from customers;
•our expectations regarding the future contribution margin of our existing and future customers;
•our expectations regarding our ability to quickly and effectively integrate our platforms for our existing and future customers;
•our ability to develop new platforms, and enhancements to existing platforms, and bring them to market in a timely manner;
•our market share, category positions, and market trends, including our ability to grow our business in large government and commercial organizations, including our expectations regarding the impact of Federal Acquisition Streamlining Act of 1994 (“FASA”);
•our ability to compete with existing and new competitors in existing and new markets and products;
•our expectations regarding anticipated technology needs and developments and our ability to address those needs and developments with our platforms;
•our expectations regarding litigation and legal and regulatory matters;
•our expectations regarding our ability to meet existing performance obligations and maintain the operability of our products;
•our expectations regarding the effects of existing and developing laws and regulations, including with respect to taxation, privacy, data protection, cybersecurity, and artificial intelligence (“AI”);
•our expectations regarding new and evolving markets, such as AI;
•our ability to develop and protect our brand;
•our ability to maintain the security and availability of our platforms;
•our expectations and management of future growth;
•our expectations concerning relationships with third parties, including our customers, equity method investment partners, and vendors;
•our expectations regarding our investments in, and enterprise agreements with, various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities;
•our ability to maintain, protect, and enhance our intellectual property;
•our expectations regarding the amount, timing, and manner of any stock repurchases;
•our expectations regarding our multi-class stock and governance structure and the benefits thereof;
•our expectations regarding macroeconomic conditions, including global political and economic uncertainty, heightened interest rates, or monetary policy changes;
•the impacts of catastrophic events, including natural disasters, global pandemics, geopolitical tensions, terrorism, or other events beyond our control, on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate;
•the impacts of the volatility and fluctuations in currency exchange rates, including an increase in the strength of the United States (“U.S.”) dollar, on the costs of our products outside of the United States and on customer demand; and
•the increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, restructurings, joint ventures, partnerships, channel sales relationships, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and the section titled “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
We build software that empowers organizations to effectively integrate their data, decisions, and operations at scale.
We were founded in 2003 and started building software for the intelligence community in the United States to assist in counterterrorism investigations and operations. We later began working with commercial enterprises, who often faced fundamentally similar challenges in working with data.
We have built four principal software platforms, Gotham, Foundry, Apollo, and our Artificial Intelligence Platform (“AIP”). Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations, and AIP leverages the power of our existing machine learning technologies alongside generative AI models, including large language models (“LLMs”), directly within Gotham and/or Foundry to help operationalize AI on enterprise data. For over a decade, Gotham has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond. Foundry is becoming a central operating system not only for individual institutions but also for entire industries. Apollo, which we began offering as a commercial solution in 2021, is a cloud-agnostic, single control layer that coordinates ongoing delivery of new features, security updates, and platform configurations, helping to ensure the continuous operation of critical systems. Apollo allows our customers to run their software in virtually any environment.
In 2023, we began deploying our newest offering, AIP, which is designed for customers across the commercial and government sectors, enabling them to derive value from recent breakthroughs in artificial intelligence via the combination of our existing software platforms with generative AI models, including LLMs. We believe AIP uniquely allows users to connect LLMs and other AI with their data and operations to facilitate decision-making within the legal, ethical, and security constraints that they require.