Palantir Technologies Inc. [PLTR] Filings

10-Q 1 pltr-20230630.htm 10-Q pltr-20230630

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, 2023


☐			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, 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, 2023, there were 2,047,249,237 shares of the registrant’s Class A common stock outstanding, 103,571,141 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


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	88

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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, 2023		As of December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,055,923	$	2,598,540
Marketable securities	2,047,329		35,135
Accounts receivable, net	375,756		258,346

Prepaid expenses and other current assets	97,906		149,556
Total current assets	3,576,914		3,041,577
Property and equipment, net	54,097		69,170

Operating lease right-of-use assets	199,661		200,240
Other assets	149,592		150,252
Total assets	$	3,980,264	$	3,461,239
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	4,613	$	44,788
Accrued liabilities	184,617		172,715
Deferred revenue	260,335		183,350
Customer deposits	183,964		141,989
Operating lease liabilities	51,855		45,099
Total current liabilities	685,384		587,941
Deferred revenue, noncurrent	50,408		9,965
Customer deposits, noncurrent	3,099		3,936

Operating lease liabilities, noncurrent	194,134		204,305
Other noncurrent liabilities	12,101		12,655
Total liabilities	945,126		818,802
Commitments and Contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.001 par value: 20,000,000 Class A shares authorized as of June 30, 2023 and December 31, 2022; 2,045,404 and 1,995,414 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; 2,700,000 Class B shares authorized as of June 30, 2023 and December 31, 2022; 103,571 and 102,656 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; and 1,005 Class F shares authorized, issued, and outstanding as of June 30, 2023 and December 31, 2022	2,149		2,099
Additional paid-in capital	8,773,043		8,427,998
Accumulated other comprehensive loss, net	(5,209)		(5,333)
Accumulated deficit	(5,814,509)		(5,859,438)
Total stockholders’ equity	2,955,474		2,565,326
Noncontrolling interests	79,664		77,111
Total equity	3,035,138		2,642,437
Total liabilities and equity	$	3,980,264	$	3,461,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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,
	2023		2022		2023		2022
Revenue	$	533,317	$	473,010	$	1,058,503	$	919,367
Cost of revenue	106,899		102,224		214,544		196,627
Gross profit	426,418		370,786		843,959		722,740
Operating expenses:
Sales and marketing	184,163		168,875		371,256		329,360
Research and development	99,533		88,171		189,633		176,772
General and administrative	132,648		155,485		268,881		297,792
Total operating expenses	416,344		412,531		829,770		803,924
Income (loss) from operations	10,074		(41,745)		14,189		(81,184)
Interest income	30,310		1,472		51,163		2,019
Interest expense	(1,317)		(670)		(2,592)		(1,264)
Other income (expense), net	(9,024)		(135,798)		(11,885)		(195,668)
Income (loss) before provision for income taxes	30,043		(176,741)		50,875		(276,097)
Provision for income taxes	2,171		2,588		3,852		4,611
Net income (loss)	27,872		(179,329)		47,023		(280,708)
Less: Net income (loss) attributable to noncontrolling interests	(255)		—		2,094		—
Net income (loss) attributable to common stockholders	$	28,127	$	(179,329)	$	44,929	$	(280,708)
Net earnings (loss) per share attributable to common stockholders, basic	$	0.01	$	(0.09)	$	0.02	$	(0.14)
Net earnings (loss) per share attributable to common stockholders, diluted	$	0.01	$	(0.09)	$	0.02	$	(0.14)
Weighted-average shares of common stock outstanding used in computing net earnings (loss) per share attributable to common stockholders, basic	2,131,224		2,054,799		2,119,567		2,045,604
Weighted-average shares of common stock outstanding used in computing net earnings (loss) per share attributable to common stockholders, diluted	2,278,155		2,054,799		2,252,205		2,045,604

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Palantir Technologies Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	27,872	$	(179,329)	$	47,023	$	(280,708)
Other comprehensive income (loss)
Foreign currency translation adjustments	166		(2,630)		896		(4,325)
Net unrealized loss on available-for-sale securities	(1,057)		—		(772)		—
Comprehensive income (loss)	26,981		(181,959)		47,147		(285,033)
Less: Comprehensive income (loss) attributable to noncontrolling interests	(255)		—		2,094		—
Comprehensive income (loss) attributable to common stockholders	$	27,236	$	(181,959)	$	45,053	$	(285,033)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Palantir Technologies Inc.

Condensed Consolidated Statements of Stockholders’ 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 restricted stock units (“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 income	—	—		—		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

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Palantir Technologies Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of March 31, 2022	2,045,876	$	2,046	$	7,953,856	$	(4,044)	$	(5,587,112)	$	2,364,746
Issuance of common stock from the exercise of stock options	4,780	5		20,311		—		—		20,316
Issuance of common stock upon vesting of RSUs	12,085	12		(12)		—		—		—
Stock-based compensation	—	—		145,721		—		—		145,721
Other comprehensive loss	—	—		—		(2,630)		—		(2,630)
Net loss	—	—		—		—		(179,329)		(179,329)
Balance as of June 30, 2022	2,062,741	$	2,063	$	8,119,876	$	(6,674)	$	(5,766,441)	$	2,348,824

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2021	2,027,474	$	2,027	$	7,777,085	$	(2,349)	$	(5,485,733)	$	2,291,030
Issuance of common stock from the exercise of stock options	11,434	12		47,529		—		—		47,541
Issuance of common stock upon vesting of RSUs	23,833	24		(24)		—		—		—
Stock-based compensation	—	—		295,286		—		—		295,286
Other comprehensive loss	—	—		—		(4,325)		—		(4,325)
Net loss	—	—		—		—		(280,708)		(280,708)
Balance as of June 30, 2022	2,062,741	$	2,063	$	8,119,876	$	(6,674)	$	(5,766,441)	$	2,348,824

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Palantir Technologies Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net income (loss)	$	47,023	$	(280,708)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	16,719		9,207
Stock-based compensation	228,915		295,092

Noncash operating lease expense	22,724		20,246
Unrealized and realized (gain) loss from marketable securities, net	11,078		201,341
Noncash consideration	(20,166)		(4,600)
Other operating activities	(17,817)		(623)
Changes in operating assets and liabilities:
Accounts receivable, net	(113,663)		(75,739)
Prepaid expenses and other current assets	1,091		(34,820)
Other assets	(3,485)		8,087
Accounts payable	(39,057)		(19,985)
Accrued liabilities	13,780		28,850
Deferred revenue, current and noncurrent	115,868		(11,681)
Customer deposits, current and noncurrent	40,144		(19,314)
Operating lease liabilities, current and noncurrent	(25,603)		(17,331)
Other noncurrent liabilities	17		(114)
Net cash provided by operating activities	277,568		97,908
Investing activities
Purchases of property and equipment	(8,689)		(20,673)
Purchases of marketable securities	(2,936,939)		(89,500)
Proceeds from sales and redemption of marketable securities	948,866		19,009




Proceeds from sales of alternative investments	51,072		—


Net cash used in investing activities	(1,945,690)		(91,164)
Financing activities



Proceeds from the exercise of common stock options	116,273		47,541
Other financing activities	394		307
Net cash provided by financing activities	116,667		47,848
Effect of foreign exchange on cash, cash equivalents, and restricted cash	(1,855)		(6,341)
Net decrease in cash, cash equivalents, and restricted cash	(1,553,310)		48,251
Cash, cash equivalents, and restricted cash - beginning of period	2,627,335		2,366,914
Cash, cash equivalents, and restricted cash - end of period	$	1,074,025	$	2,415,165

The accompanying notes are an integral part of these condensed consolidated financial statements.

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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 (loss) from operations, net income (loss), or cash flows. The Company's fiscal year ends on December 31.

The unaudited condensed consolidated balance sheet as of December 31, 2022 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 (loss), 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, 2022, which was filed with the SEC on February 21, 2023.

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; the collectability of contract consideration, including accounts receivable; the useful lives of intangible assets; and the valuation of assets acquired and liabilities assumed from business combinations, including intangible assets and goodwill. 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, 2022, which was filed with the SEC on February 21, 2023. There have been no significant changes to these policies during the six months ended June 30, 2023, 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.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

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,
	2023		2022
Cash and cash equivalents	$	1,055,923	$	2,358,393
Restricted cash included in prepaid expenses and other current assets	5,999		28,125
Restricted cash included in other assets	12,103		28,647
Total cash, cash equivalents, and restricted cash	$	1,074,025	$	2,415,165

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, including the COVID-19 pandemic, 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, 2023 and December 31, 2022, the Company recorded an allowance for credit losses of $9.6 million and $10.1 million, respectively.

Debt Securities

Debt securities are primarily comprised of U.S. treasury securities. The debt securities are classified as available-for-sale at the time of purchase and are reevaluated as of each balance sheet date. The Company considers the majority of its available-for-sale debt securities as available for use in current operations and may sell these securities at any time, and therefore classifies these securities as current assets in its condensed consolidated balance sheets. Debt securities included in marketable securities on the condensed consolidated balance sheets consist of U.S. treasury securities with original maturities of greater than three months at the time of purchase, and the remaining U.S. treasury securities are included in cash and cash equivalents. Interest income on debt securities is included in other income (expense), net on the condensed consolidated statements of operations.

The majority of the Company’s available-for-sale securities are recorded at fair value each reporting period using quoted prices of similar instruments and are classified within Level 2 of the fair value hierarchy. The Company evaluates investments with unrealized loss positions for other than temporary impairment by assessing if they are related to deterioration in credit risk and whether it expects to recover the entire amortized cost basis of the security, the Company’s intent to sell, and whether it is more likely than not that the Company will be required to sell the securities before the recovery of their cost basis. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized in other income (expense), net in the condensed consolidated statements of operations. Unrealized gains and non-credit related losses are reported as a separate component of accumulated other comprehensive loss, net in the condensed consolidated balance sheets until realized. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the condensed consolidated statements of operations.

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, and marketable 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, 2023 and December 31, 2022 were

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

$375.8 million and $258.3 million, respectively. Customer I represented 19% of total accounts receivable as of June 30, 2023 and no other customer represented more than 10% of total accounts receivable as of June 30, 2023. No customer represented more than 10% of total accounts receivable as of December 31, 2022.

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. For the three and six months ended June 30, 2022, no customer represented more than 10% of total revenue.

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, 2023 and December 31, 2022, the Company's contract liability balances were $497.8 million and $339.2 million, respectively. Revenue of $270.2 million and $299.2 million was recognized during the six months ended June 30, 2023 and 2022, respectively, that was included in the contract liability balances as of December 31, 2022 and 2021, 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 $967.6 million as of June 30, 2023, of which the Company expects to recognize approximately 58% as revenue over the next 12 months, 36% 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):


	As of June 30, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents:
Money market funds	$	625,336	$	625,336	$	—	$	—

Certificates of deposit	938		—		938		—
Prepaid expenses and other current assets and other assets:
Certificates of deposit	10,378		—		10,378		—
Marketable securities:
U.S. treasury securities	2,030,815		—		2,030,815		—
Publicly-traded equity securities	16,514		16,514		—		—
Total	$	2,683,981	$	641,850	$	2,042,131	$	—

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements


	As of December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents:
Money market funds	$	1,149,302	$	1,149,302	$	—	$	—
Certificates of deposit	6,791		—		6,791		—
Prepaid expenses and other current assets and other assets:
Certificates of deposit	18,707		—		18,707		—
Marketable securities:
Publicly-traded equity securities	35,135		35,135		—		—
Total	$	1,209,935	$	1,184,437	$	25,498	$	—

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, 2023, debt securities consisted of the following (in thousands):


	As of June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. treasury securities included in marketable securities	$	2,031,587	$	145	$	(917)	$	2,030,815
Total debt securities	$	2,031,587	$	145	$	(917)	$	2,030,815

The Company did not sell any debt securities during the three months ended June 30, 2023. The Company sold $694.6 million of 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 as of June 30, 2023. As of June 30, 2023, available-for-sale debt securities of $1.1 billion 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, 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, 2023. All of the Company’s U.S. treasury securities had contractual maturities due within one year.

As of December 31, 2022, the Company held an immaterial amount of debt securities.

Equity Securities

Equity securities primarily consist of shares held in publicly-traded companies, which are recorded at fair market value each reporting period in marketable securities on the condensed consolidated balance sheets. Additionally, we have accepted, and may continue to accept, securities as noncash consideration. Realized and unrealized gains and losses are recorded in other income (expense), net on the condensed consolidated statements of operations. During the three and six months ended June 30, 2022, the Company recorded net unrealized losses of $122.8 million and $174.7 million, respectively, and realized losses of $15.7 million and $26.6 million, respectively, within other income (expense), net on the condensed consolidated statements of operations. For the three months ended June 30, 2023 and 2022, net unrealized losses from publicly-traded equity securities held at the end of each period were $0.6 million and $134.4 million, respectively. For the six months ended June 30, 2023 and 2022, net unrealized losses from publicly-traded equity securities held at the end of each period were $7.0 million and $189.5 million, respectively.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Investments

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”). During the year ended December 31, 2022, the Company purchased shares for a total investment of $124.5 million. No Investments were purchased under such Investment Agreements during the six months ended June 30, 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 terms of such contracts, including contractual options, range from two to seven years and are subject to termination for cause provisions.

The Company assesses the concurrent agreements under the noncash consideration paid or 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. As currently assessed, the total value of such Strategic Commercial Contracts with Investees or associated entities was $395.4 million as of June 30, 2023, which is inclusive of $43.7 million of contractual options. The Company performs ongoing assessments of customers’ financial condition, including the consideration of such 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. As of June 30, 2023, the cumulative amount of revenue recognized from Strategic Commercial Contracts was $219.4 million, of which $19.4 million and $52.8 million of revenue was recognized during the three and six months ended June 30, 2023, respectively.

Alternative Investments

During the year ended December 31, 2021, the Company purchased $50.9 million in 100-ounce gold bars. During the six months ended June 30, 2023, the Company sold all of its gold bars for total proceeds of $51.1 million and recorded an immaterial realized gain within other income (expense), net on the condensed consolidated statements of operations.

5. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	As of June 30, 2023		As of December 31, 2022
Leasehold improvements	$	83,074	$	80,378
Computer equipment, software, and other	46,713		52,688
Furniture and fixtures	13,823		13,010
Construction in progress	918		5,506
Total property and equipment, gross	144,528		151,582
Less: accumulated depreciation and amortization	(90,431)		(82,412)
Total property and equipment, net	$	54,097	$	69,170

Depreciation and amortization expense related to property and equipment, net was $6.0 million and $4.5 million for the three months ended June 30, 2023 and 2022, respectively, and $11.9 million and $8.4 million for the six months ended June 30, 2023 and 2022, respectively.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	As of June 30, 2023		As of December 31, 2022
Accrued payroll and related expenses	$	68,052	$	43,495
Accrued taxes	39,257		41,326
Accrued other liabilities	77,308		87,894
Total accrued liabilities	$	184,617	$	172,715

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, 2023, the 2014 Credit Facility allowed for the drawdown of up to $950.0 million to fund working capital and general corporate expenditures, which includes total revolving commitments of $500.0 million and a delayed draw term loan (“DDTL”) commitment of $450.0 million, each with a maturity date of March 31, 2027. The DDTL commitment was available to draw upon through July 1, 2023, on which date it expired undrawn.

Outstanding balances under the 2014 Credit Facility would incur interest at the Secured Overnight Financing Rate (“SOFR”) as administered by the Federal Reserve Bank of New York, or a successor administrator of the SOFR (or the applicable benchmark replacement), plus 2.00% or a base rate plus 1.00%, subject to certain adjustments. The Company incurs a commitment fee of 0.30% assessed on the daily average undrawn portion of revolving and DDTL commitments. Applicable interest and commitment fees are payable quarterly or more or less frequently in certain circumstances. The 2014 Credit Facility also allows for an incremental loan facility of additional term loans or revolving loans in an aggregate principal amount up to the amount and upon the terms and conditions set forth therein with one or more existing or new lenders upon mutual agreement between the Company and such lenders.

As of June 30, 2023, the Company had no outstanding debt balances and an aggregate of $950.0 million undrawn of revolving and DDTL commitments under the 2014 Credit Facility.

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, 2023.

7. Commitments and Contingencies

Purchase Commitments

In December 2019, the Company entered into, and subsequently amended, a minimum annual commitment to purchase cloud hosting services of at least $1.49 billion over six contract years, with an optional carryover period through September 30, 2029, in exchange for various discounts on such services. If the spend does not meet the minimum annual commitment each year or at the end of the term, the Company is obligated to make a return payment. If the difference is greater than $30.0 million for each of the first three contract years or $50.0 million for each of the contract years thereafter (“relief amounts”), the Company has the option to pay the respective relief amount for that year for services to be utilized in the future and the excess amount of the difference above the relief amount would be added to the minimum annual commitment of the following year through the end of the contract. As of June 30, 2023, the Company satisfied $124.2 million of its $199.0 million commitment for contract year three ending September 30, 2023.

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

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 November 21, 2022 and January 13, 2023, stockholder derivative actions were filed in the United States District Court for the District of Colorado, captioned Li v. Karp, et al., Case No. 22-cv-3028 and Parmenter v. Karp, et al., Case No. 23-cv-118, 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. 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, 2023, 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.

Letters of Credit and Guarantees

The Company had irrevocable standby letters of credit and guarantees, including bank guarantees, outstanding in the amounts of $18.1 million and $28.8 million as of June 30, 2023 and December 31, 2022, respectively, which were fully collateralized. The Company is required to maintain these letters of credit and guarantees primarily in connection with operating lease agreements, certain customer contracts, and other guarantees and financing arrangements. As of June 30, 2023, these letters of credit and guarantees had expiration dates through August 2031.

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, 2023 and December 31, 2022.

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 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, 2023 and December 31, 2022.

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

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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, 2023.

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, 2023.

The following represented the total authorized, issued, and outstanding shares for each class of common stock (in thousands):


	As of June 30, 2023		As of December 31, 2022
	Authorized	Issued and Outstanding	Authorized	Issued and Outstanding
Class A Common Stock	20,000,000	2,045,404	20,000,000	1,995,414
Class B Common Stock	2,700,000	103,571	2,700,000	102,656
Class F Common Stock	1,005	1,005	1,005	1,005
Total	22,701,005	2,149,980	22,701,005	2,099,075

9. Stock-Based Compensation

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2023 (in thousands, except per share amounts):


	Options Outstanding	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Balance as of December 31, 2022	326,913	$	8.05	8.33	$	272,603

Options exercised	(24,443)	4.76
Options canceled and forfeited	(1,336)	4.99
Balance as of June 30, 2023	301,134	$	8.33	8.01	$	2,108,191
Options vested and exercisable as of June 30, 2023	172,000	$	6.18	7.21	$	1,573,350

As of June 30, 2023, the total unrecognized stock-based compensation expense related to options outstanding was $654.8 million, which is expected to be recognized over a weighted-average service period of seven years.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

RSUs

The following table summarizes the RSU activity for the six months ended June 30, 2023 (in thousands, except per share amounts):


	RSUs Outstanding	Weighted Average Grant Date Fair Value per Share
RSUs unvested and outstanding as of December 31, 2022	126,426	$	10.07
RSUs granted	11,634	7.75
RSUs vested and converted to shares	(26,462)	9.57
RSUs canceled	(5,491)	10.66
RSUs unvested and outstanding as of June 30, 2023	106,107	$	9.85

As of June 30, 2023, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $624.7 million, which the Company expects to recognize over a weighted-average service period of three years.

Stock-based Compensation Expense

Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	8,004	$	11,211	$	17,181	$	22,888
Sales and marketing	38,131		49,405		77,666		98,677
Research and development	23,192		24,978		43,116		51,883
General and administrative	44,874		60,175		90,952		121,644
Total stock-based compensation expense	$	114,201	$	145,769	$	228,915	$	295,092

10. Income Taxes

The Company recorded a provision for income taxes of $2.2 million and $2.6 million for the three months ended June 30, 2023 and 2022, respectively, and a provision for income taxes of $3.9 million and $4.6 million for the six months ended June 30, 2023 and 2022, 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, 2023 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. There was no material change in the provision for income taxes for the three and six months ended June 30, 2023 compared to the same periods in 2022.

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 believes that it is more likely than not that its U.S. and U.K. deferred tax assets will not be fully realized. Accordingly, the Company has maintained a full valuation allowance on its U.S. and U.K. deferred tax assets as of June 30, 2023.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

11. Net Earnings (Loss) Per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net earnings (loss) per share attributable to common stockholders (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator
Net income (loss) attributable to common stockholders for diluted net earnings (loss) per share	$	28,127	$	(179,329)	$	44,929	$	(280,708)
Denominator
Weighted-average shares used in computing net earnings (loss) per share:
Basic	2,131,224		2,054,799		2,119,567		2,045,604
Effect of dilutive shares	146,931		—		132,638		—
Diluted	2,278,155		2,054,799		2,252,205		2,045,604
Net earnings (loss) per share
Net earnings (loss) per share attributable to common stockholders:
Basic	$	0.01	$	(0.09)	$	0.02	$	(0.14)
Diluted	$	0.01	$	(0.09)	$	0.02	$	(0.14)

The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net earnings (loss) 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,
	2023	2022	2023	2022
Options issued and outstanding	162,000	336,576	162,000	336,576
RSUs outstanding	11,840	134,761	16,535	134,761
Warrants to purchase common stock	13,042	13,042	13,042	13,042
Total	186,882	484,379	191,577	484,379

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 certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level. These unallocated costs include stock-based compensation expense, research and development expenses, and general and administrative expenses.

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Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Financial information for each reportable segment was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue:
Government	$	301,505	$	262,998	$	590,575	$	504,788
Commercial	231,812		210,012		467,928		414,579
Total revenue	$	533,317	$	473,010	$	1,058,503	$	919,367


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Contribution:
Government	$	174,230	$	153,642	$	340,463	$	293,452
Commercial	114,160		108,885		227,087		221,493
Total contribution	$	288,390	$	262,527	$	567,550	$	514,945

The reconciliation of contribution to income (loss) from operations is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income (loss) from operations	$	10,074	$	(41,745)	$	14,189	$	(81,184)
Research and development expenses (1)	76,341		63,193		146,517		124,889
General and administrative expenses (1)	87,774		95,310		177,929		176,148
Total stock-based compensation expense	114,201		145,769		228,915		295,092
Total contribution	$	288,390	$	262,527	$	567,550	$	514,945

—————

(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,
	2023				2022				2023				2022
	Amount		%		Amount		%		Amount		%		Amount		%
Revenue:
United States	$	328,012	62	%	$	290,223	61	%	$	664,857	63	%	$	563,136	61	%
United Kingdom	63,229		12	%	52,140		11	%	112,808		11	%	102,042		11	%
Rest of world (1)	142,076		26	%	130,647		28	%	280,838		26	%	254,189		28	%
Total revenue	$	533,317	100	%	$	473,010	100	%	$	1,058,503	100	%	$	919,367	100	%

—————

(1) No other country represents 10% or more of total revenue for the three and six months ended June 30, 2023 or 2022.

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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):


	Weighted average useful life	As of June 30, 2023						As of December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	4.33	$	10,400	$	(1,387)	$	9,013	$	10,400	$	(347)	$	10,053
Reacquired rights	6.33	17,618		(1,678)		15,941		17,619		(420)		17,199
Backlog	1.33	6,700		(2,233)		4,467		6,700		(558)		6,142
Other	0.77	4,225		(2,924)		1,300		5,717		(3,572)		2,145
Total intangible assets		$	38,943	$	(8,222)	$	30,721	$	40,436	$	(4,897)	$	35,539

Amortization expense of intangible assets was not material for the three and six months ended June 30, 2023 or 2022.

As of June 30, 2023, expected amortization expense for the unamortized finite-lived intangible assets is as follows (in thousands):


Year ended December 31,	Amount
Remainder of 2023	$	4,819
2024	7,844
2025	4,597
2026	4,597
2027	4,250
Thereafter	4,614
Total	$	30,721

14. Subsequent Events

In August 2023, our Board of Directors authorized a stock repurchase program of up to $1.0 billion of our outstanding shares of Class A common stock (the “Share Repurchase Program”). We may repurchase shares of 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 Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and the amount of stock repurchases in the Share Repurchase Program will be determined by Palantir’s management, based on its evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations.

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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 rising inflation and interest rates, monetary policy changes, or financial services sector instability;

•the impacts of the coronavirus (“COVID-19”) pandemic and the ongoing Russia-Ukraine conflict, including on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate;

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•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.

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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 three principal software platforms, Gotham, Foundry, and Apollo.

Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations. 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.

We are in the process of developing and releasing components of our newest offering, the Artificial Intelligence Platform (“AIP”). AIP 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 large language models (“LLMs”). We believe AIP uniquely allows users to connect LLMs with their data and operations to facilitate decision-making within the legal, ethical, and security constraints that they require.

While our focus in the short term remains on making our software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own.

We believe that every institution faces challenges that our platforms and products were designed to address. Our approach with all our clients is to establish a partnership that transforms the way they use data in pursuit of their goals.

We regularly evaluate partnerships and investment opportunities in complementary businesses, employee teams, technologies, and intellectual property rights in an effort to expand our product and service offerings.

Our Business

Our customers pay us to use the software platforms we have built. While we generally offer contract terms of one to five years in length, our customers sometimes enter into shorter-term contracts. Revenue is generally recognized ratably over the contract term. Many of our customer contracts contain termination for convenience provisions.

For the three months ended June 30, 2023, we generated $533.3 million in revenue, reflecting a 13% growth rate from the three months ended June 30, 2022 when we generated $473.0 million in revenue. For the six months ended June 30, 2023, we generated $1.1 billion in revenue, reflecting a 15% growth rate from the six months ended June 30, 2022 when we generated $919.4 million in revenue.

In the three months ended June 30, 2023, we generated income from operations of $10.1 million, or adjusted income from operations of $135.0 million when excluding stock-based compensation and related employer payroll taxes. In the three months ended June 30, 2022, we incurred losses from operations of $41.7 million, or generated adjusted income from operations of $107.8 million when excluding stock-based compensation and related employer payroll taxes. In the six months ended June 30,

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2023, we generated income from operations of $14.2 million, or adjusted income from operations of $260.1 million when excluding stock-based compensation and related employer payroll taxes. In the six months ended June 30, 2022, we incurred losses from operations of $81.2 million, or generated adjusted income from operations of $225.2 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended June 30, 2023, our gross profit was $426.4 million, reflecting a gross margin of 80%, or 81% when excluding stock-based compensation. In the three months ended June 30, 2022, our gross profit was $370.8 million, reflecting a gross margin of 78%, or 81% when excluding stock-based compensation. In the six months ended June 30, 2023, our gross profit was $844.0 million, reflecting a gross margin of 80%, or 81% when excluding stock-based compensation. In the six months ended June 30, 2022, our gross profit was $722.7 million, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.

For more information about our adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes; and gross profit and gross margin, when excluding stock-based compensation; as well as reconciliations from income (loss) from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below.

Our Customers

We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period. During the period ended June 30, 2023, we had 421 customers, including companies in various commercial sectors and government agencies around the world. During the period ended June 30, 2022, we had 304 customers.

For large government agencies, where a single institution has multiple divisions, units, or subsidiary agencies, each such division, unit, or subsidiary agency that enters into a separate contract with us and is invoiced as a separate entity is treated as a separate customer. For example, while the U.S. Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health are subsidiary agencies of the U.S. Department of Health and Human Services, we treat each of those agencies as a separate customer given that the governing structures and procurement processes of each agency are independent.

We have built lasting and significant customer relationships and partnerships with some of the world’s leading government institutions and companies. Our average revenue for the top twenty customers during the trailing twelve months ended June 30, 2023 was $52.6 million, which grew 15% from an average of $45.8 million in revenue from the top twenty customers during the trailing twelve months ended June 30, 2022, demonstrating our expanding relationships with existing customers.

Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward. Our decisions about which customer relationships require further investment may change over time, based on our assessment of the potential long-term value that our software can generate for them. We enter into initial pilots with customers, generally at our own expense and without a guarantee of future returns, in order to access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons. We manage customers at the account level, not by industry or sector, so that we can optimize on the specific growth opportunities for each customer. In the six months ended June 30, 2023, 56% of our revenue came from government customers and 44% came from commercial customers.

Our U.S. customers have been a meaningful source of revenue growth for our business. In the six months ended June 30, 2023, we generated 63% of our revenue from customers in the United States and the remaining 37% from non-U.S. customers. Revenue from our U.S. customers during the trailing twelve months ended June 30, 2023 was $1.3 billion, which grew 21% from the prior twelve-month period. We expect that U.S. customers will continue to be a source of significant revenue growth for us.

We continue to believe that our government customers remain a meaningful and resilient source of revenue for our business, particularly during periods of economic uncertainty. However, large government customers in particular are generally subject to a number of uncertainties regarding budgets and spending levels, changes in timing and spending priorities, and regulatory and policy changes, which can make it difficult to predict when, or if, we will make sales to such customers or the size and scope of any contract awards. See also the discussion of “Risks Related to Relationships and Business with the Public Sector” within “Item 1A. Risk Factors” included in this Quarterly Report on Form 10-Q.

Expansion of Access to Platforms

The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term. We anticipate that our reach among an increasingly broad set of customers, in both

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the commercial and government sectors, will accelerate moving forward. We believe that, as these new partners grow, we will grow with them.

We have also made a number of investments in companies whose businesses rely on the ability of their organizations to manage and analyze data effectively at scale.

Our proximity to these businesses and the industries in which they are operating has enhanced, and is expected to continue enhancing, our own product and business development efforts, as we continue expanding access to our platforms to the broadest possible set of customers.

Macroeconomic Trends

As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, the COVID-19 pandemic, the impact of the ongoing Russia-Ukraine conflict, rising inflation and interest rates, monetary policy changes, financial services sector instability, and foreign currency fluctuations. Additionally, these macroeconomic impacts have generally disrupted the operations of our customers and prospective customers. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.

See the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q for further discussion of the impact of macroeconomic trends on our business.

COVID-19 Impact

The COVID-19 pandemic continues to impact the global economy. The extent to which COVID-19 may impact our financial conditions or results of operations in future periods remains uncertain, but to date has not had a material adverse impact on our results of operations. We continue to prioritize the health and safety of our employees, our customers, and the communities in which we operate. We have reopened our offices and have allowed business travel and in-person events to resume, while continuing to closely monitor developments around the evolving nature of the pandemic. As such, our travel and office-related expenditures have increased, and may continue to increase moving forward. However, we expect that some of our employees will continue to work remotely. The economic effects of the pandemic and resulting societal changes are currently not predictable.

The COVID-19 pandemic has made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not an option during a crisis. As a result, customers are increasingly adopting our software, which can be ready in days, over internal software development efforts, which may take months or years.

Russia-Ukraine Conflict

We continue to closely monitor the impact of the ongoing Russia-Ukraine conflict and its global impacts on our business. While the conflict is still evolving and the outcome remains highly uncertain, we do not expect that the Russian invasion will have a material impact on our business and results of operations. We do not currently have office locations in Russia and none of our revenues came from sales to entities headquartered in Russia. In June 2022, our Chief Executive Officer, Alexander Karp, met with the President of Ukraine and other senior officials to discuss opening an office in Ukraine and providing ongoing support. In 2023, we announced partnerships with Ukraine to support its defense and reconstruction efforts and investigations of potential war crimes, among other activities. Our current operations related to Ukraine are not material to our financial position or results of operations. However, if the conflict continues or worsens, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Foreign Currency Exchange Rates

Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty which may adversely affect our results of operations or financial position.

Our contracts with customers are primarily denominated in U.S. dollars. As a result, the general strengthening of the U.S. dollar relative to other major foreign currencies (primarily the Euro and British pound sterling (“GBP”)) has had and could in the future have an unfavorable impact on our revenues from certain non-U.S. customers; however, that impact for the six months ended June 30, 2023 was not material to our financial position or results of operations. Additionally, certain of our U.S. and non-U.S. subsidiaries may hold monetary assets and liabilities in currencies other than their functional currency (primarily the Japanese Yen (“JPY”), Euro, and GBP), which could subject our results of operations and cash flows to adverse fluctuations due to changes in such foreign currency exchange rates as compared to the U.S. dollar.

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Customer Impacts

Current macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses, particularly our early- and growth-stage customers. Relationships with early- or growth-stage customers carry inherent risks because, among other things, such customers may be unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them in the current macroeconomic environment, which has impacted, and may continue to impact, our expected revenue and collections. As a result, current macroeconomic conditions have impacted, and may continue to impact, our ability to realize the full value of our commercial contracts with such early- or growth-stage customers. For additional information, see Note 4. Investments and Fair Value Measurements in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Key Business Measure

In addition to the measures presented in our condensed consolidated financial statements, we use the following key non-GAAP business measure to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions.

Contribution Margin

We believe that the revenue we generate relative to the costs we incur in order to generate such revenue is an important measure of the efficiency of our business. We define contribution margin as revenue less our cost of revenue and sales and marketing expenses, excluding stock-based compensation, divided by revenue.

Revenue is allocated to each customer account directly. The cost of revenue and sales and marketing costs include both the costs associated with the deployment and operation of our software as well as expenses associated with identifying new customers and expanding partnerships with existing ones. Our software engineers working with existing customers often manage the deployment and operation of our platforms as well as identify new ways that those platforms can be used. To calculate the contribution by segment, we allocate cost of revenue and sales and marketing expenses, excluding stock-based compensation, to an account pro rata based on headcount and time spent on the account during the period. To the extent certain costs or personnel are not directly assigned to a specific account, they are allocated pro rata based on total headcount staffed during such period. Direct costs, such as third-party cloud hosting services, are directly allocated to the account to which they relate. Allocated revenues and expenses are then aggregated into a segment based upon the customer account to which they relate.

Contribution margin, both across our business and segments, is intended to capture how much we have earned from customers after accounting for the costs associated with deploying and operating our software, as well as any sales and marketing expenses involved in acquiring and expanding our partnerships with those customers, including allocated overhead. We exclude stock-based compensation as it is a noncash expense.

We believe that our contribution margin provides an important measure of the efficiency of our operations over time. We have included contribution margin because it is a key measure used by our management to evaluate our performance, and we believe that it also provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team. Our calculation of contribution margin may differ from similarly titled measures, if any, reported by other companies. Contribution margin should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

For more information about contribution margin, including the limitations of this measure, and a reconciliation to income (loss) from operations, see the section titled “Non-GAAP Reconciliations” below.

Non-GAAP Reconciliations

We use the non-GAAP measures contribution margin; gross profit and gross margin, excluding stock-based compensation; and adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes, to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions. We exclude stock-based compensation, which is a noncash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team. Additionally, we exclude employer payroll taxes related to stock-based compensation as it is difficult to predict and outside of our control.

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Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Thus, our non-GAAP contribution margin; gross profit and gross margin, excluding stock-based compensation; and adjusted income from operations should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures. We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

Contribution Margin

The following table provides a reconciliation of contribution margin for the three and six months ended June 30, 2023 and 2022 (in thousands, except percentages):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Income (loss) from operations	$	10,074		$	(41,745)		$	14,189		$	(81,184)
Add:
Research and development expenses (1)	76,341			63,193			146,517			124,889
General and administrative expenses (1)	87,774			95,310			177,929			176,148
Total stock-based compensation expense	114,201			145,769			228,915			295,092
Total contribution	$	288,390		$	262,527		$	567,550		$	514,945
Contribution margin	54		%	56		%	54		%	56		%

————

(1) Excludes stock-based compensation.

Gross Profit and Gross Margin, Excluding Stock-Based Compensation

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three and six months ended June 30, 2023 and 2022 (in thousands, except percentages):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Gross profit	$	426,418		$	370,786		$	843,959		$	722,740
Add: stock-based compensation	8,004			11,211			17,181			22,888
Gross profit, excluding stock-based compensation	$	434,422		$	381,997		$	861,140		$	745,628
Gross margin, excluding stock-based compensation	81		%	81		%	81		%	81		%

Adjusted Income from Operations

The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Income (loss) from operations	$	10,074	$	(41,745)	$	14,189	$	(81,184)
Add: stock-based compensation	114,201		145,769		228,915		295,092
Add: employer payroll taxes related to stock-based compensation	10,760		3,825		17,045		11,331
Adjusted income from operations	$	135,035	$	107,849	$	260,149	$	225,239

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Components of Results of Operations

Revenue

We generate revenue from the sale of subscriptions to access our software in our hosted environment along with ongoing operating and maintenance (“O&M”) services (“Palantir Cloud”), software subscriptions in our customers’ environments with ongoing O&M services (“On-Premises Software”), and professional services.

Palantir Cloud

Our Palantir Cloud subscriptions grant customers the right to access the software functionality in a hosted environment controlled by Palantir and are sold together with stand-ready O&M services, as further described below. We agree to provide continuous access to the hosted software throughout the contract term. Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

On-Premises Software

Sales of our software subscriptions grant customers the right to use functional intellectual property, either on their internal hardware infrastructure or on their own cloud instance, over the contractual term and are also sold together with stand-ready O&M services. O&M services include critical updates and support and maintenance services required to operate the software and, as such, are necessary for the software to maintain its intended utility over the contractual term. Because of this requirement, we have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract. Revenue is generally recognized over the contract term on a ratable basis.

Professional Services

Our professional services support the customers’ use of the software and include, as needed, on-demand user support, user-interface configuration, training, and ongoing ontology and data modeling support. Professional services contracts typically include the provision of on-demand professional services for the duration of the contractual term. These services are typically coterminous with a Palantir Cloud or On-Premises Software subscriptions. Professional services are on-demand, whereby we perform services throughout the contract period; therefore, the revenue is recognized over the contractual term.

Cost of Revenue

Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing O&M and professional services, as well as field-service representatives, third-party cloud hosting services, travel costs, allocated overhead, and other direct costs.

We expect that cost of revenue will increase in absolute dollars as our revenue grows and will vary from period to period as a percentage of revenue.

Sales and Marketing

Our sales and marketing efforts span all stages of our sales cycle, including personnel involved with sales functions, and executing pilots at new or existing customers. Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in sales functions, executing on pilots and customer growth activities; as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead. Sales and marketing costs are generally expensed as incurred.

We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, in our sales force, and in enhancing our brand awareness.

Research and Development

Our research and development efforts are aimed at continuing to develop and refine our platforms, including adding new platforms, features, and modules, increasing their functionality, and enhancing the usability of our platforms. Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms, internal use of third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead. Research and development costs are expensed as incurred.

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We plan to continue to invest in personnel to support our research and development efforts. As a result, we expect that research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest to support these activities.

General and Administrative

General and administrative costs include salaries, stock-based compensation expense, and benefits for personnel involved in our executive, finance, legal, human resources, and administrative functions, as well as third-party professional services and fees, travel costs, and allocated overhead.

We expect that general and administrative expenses will increase in absolute dollars as we enhance our systems, processes, and controls to support the growth in our business as well as our continuing compliance and reporting requirements as a public company.

Interest Income

Interest income consists primarily of interest income earned on our cash, cash equivalents, U.S. treasury securities, and restricted cash balances.

Interest Expense

Interest expense consists primarily of interest expense and commitment fees incurred under our credit facility.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency exchange gains and losses, realized and unrealized losses from equity securities, and our share of income and losses from our equity method investments.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests represents our joint venture partners’ proportionate share of the results of operations of the respective joint venture.

Segments

We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker, who is our Chief Executive Officer, manages our operations for purposes of allocating resources and evaluating performance. Various factors, including our organizational and management reporting structure and customer type, were considered in determining these operating segments.

Our operating segments are described below:

•Commercial: This segment primarily serves customers working in non-government industries.

•Government: This segment primarily serves customers that are U.S. government and non-U.S. government agencies.

Palantir Technologies Inc. [PLTR] Filings
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-02-21]
10-Q	[2022-11-07]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-02-24]
10-Q	[2021-11-09]
10-Q	[2021-08-12]
10-Q	[2021-05-12]
10-K	[2021-02-26]
10-Q	[2020-11-13]
S-1	[2020-08-25]