10-Q 1 pltr-20220331.htm 10-Q pltr-20220331
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____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
S
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 001-39540
________________________________________________

Palantir Technologies Inc.
(Exact Name of Registrant as Specified in its Charter)
________________________________________________
Delaware68-0551851
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1555 Blake Street, Suite 250
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 classTrading
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 S 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 S 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
S
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 S
As of May 2, 2022, there were 1,946,706,268 shares of the registrant’s Class A common stock outstanding, 98,883,190 shares of the registrant’s Class B common stock outstanding, and 1,005,000 shares of the registrant’s Class F common stock outstanding.
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
1




TABLE OF CONTENTS
Page

2

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 March 31,As of December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$2,269,411 $2,290,674 
Restricted cash33,804 36,628 
Accounts receivable256,554 190,923 
Marketable securities252,563 234,153 
Prepaid expenses and other current assets115,042 110,872 
Total current assets2,927,374 2,863,250 
Property and equipment, net41,866 31,304 
Restricted cash, noncurrent29,222 39,612 
Operating lease right-of-use assets224,888 216,898 
Other assets95,829 96,386 
Total assets$3,319,179 $3,247,450 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$27,454 $74,907 
Accrued liabilities150,176 155,806 
Deferred revenue218,521 227,816 
Customer deposits232,908 161,605 
Operating lease liabilities40,045 39,927 
Total current liabilities669,104 660,061 
Deferred revenue, noncurrent33,244 40,217 
Customer deposits, noncurrent22,276 33,699 
Operating lease liabilities, noncurrent227,617 220,146 
Other noncurrent liabilities2,192 2,297 
Total liabilities954,433 956,420 
Commitments and Contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.001 par value: 20,000,000 Class A shares authorized as of March 31, 2022 and
   December 31, 2021; 1,945,140 and 1,926,589 shares issued and outstanding as of March 31, 2022
   and December 31, 2021, respectively; 2,700,000 Class B shares authorized as of March 31, 2022
   and December 31, 2021; 99,731 and 99,880 shares issued and outstanding as of March 31, 2022
   and December 31, 2021, respectively; and 1,005 Class F shares authorized, issued, and
   outstanding as of March 31, 2022 and December 31, 2021
2,046 2,027 
Additional paid-in capital7,953,856 7,777,085 
Accumulated other comprehensive loss(4,044)(2,349)
Accumulated deficit(5,587,112)(5,485,733)
Total stockholders’ equity2,364,746 2,291,030 
Total liabilities and stockholders’ equity$3,319,179 $3,247,450 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Palantir Technologies Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
    
Three Months Ended March 31,
20222021
Revenue$446,357 $341,234 
Cost of revenue94,403 74,111 
Gross profit351,954 267,123 
Operating expenses:
Sales and marketing160,485 136,097 
Research and development88,601 98,471 
General and administrative142,307 146,569 
Total operating expenses391,393 381,137 
Loss from operations(39,439)(114,014)
Interest income547 376 
Interest expense(594)(1,840)
Other income (expense), net(59,870)(4,894)
Loss before provision for income taxes(99,356)(120,372)
Provision for income taxes2,023 3,102 
Net loss$(101,379)$(123,474)
Net loss per share attributable to common stockholders, basic$(0.05)$(0.07)
Net loss per share attributable to common stockholders, diluted$(0.05)$(0.07)
Weighted-average shares of common stock outstanding used in computing net loss per share
   attributable to common stockholders, basic
2,036,307 1,821,158 
Weighted-average shares of common stock outstanding used in computing net loss per share
   attributable to common stockholders, diluted
2,036,307 1,821,158 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Palantir Technologies Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended March 31,
20222021
Net loss$(101,379)$(123,474)
Other comprehensive income (loss)
Foreign currency translation adjustments(1,695)3,610 
Comprehensive loss$(103,074)$(119,864)
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Palantir Technologies Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of December 31, 20212,027,474 $2,027 $7,777,085 $(2,349)$(5,485,733)$2,291,030 
Issuance of common stock from the exercise of stock options6,654 7 27,218 — — 27,225 
Issuance of common stock upon vesting of restricted stock units (“RSUs”)11,748 12 (12)— —  
Stock-based compensation— — 149,565 — — 149,565 
Other comprehensive loss— — — (1,695)— (1,695)
Net loss— — — — (101,379)(101,379)
Balance as of March 31, 20222,045,876 $2,046 $7,953,856 $(4,044)$(5,587,112)$2,364,746 
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance as of December 31, 20201,792,140 $1,792 $6,488,857 $(2,745)$(4,965,354)$1,522,550 
Issuance of common stock from the exercise of stock options55,300 55 208,805 — — 208,860 
Issuance of common stock upon vesting of RSUs10,960 11 (11)— —  
Issuance of common stock upon vesting of growth units1,471 1 (1)— —  
Issuance of common stock upon net exercise of common stock warrants736 1 (1)— —  
Stock-based compensation— — 194,397 — — 194,397 
Other comprehensive income— — — 3,610 — 3,610 
Net loss— — — — (123,474)(123,474)
Balance as of March 31, 20211,860,607 $1,860 $6,892,046 $865 $(5,088,828)$1,805,943 


The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Palantir Technologies Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31,
20222021
Operating activities
Net loss$(101,379)$(123,474)
 Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization4,312 3,237 
Stock-based compensation149,323 193,731 
Deferred income taxes(3)1,846 
Non-cash operating lease expense10,142 6,477 
Unrealized and realized (gain) loss from marketable securities, net62,843  
Other operating activities(2,751)771 
Changes in operating assets and liabilities:
Accounts receivable(65,867)4,480 
Prepaid expenses and other current assets(4,320)(9,753)
Other assets2,891 (6,711)
Accounts payable(47,404)51 
Accrued liabilities(5,334)44,488 
Deferred revenue, current and noncurrent(16,335)(11,952)
Customer deposits, current and noncurrent59,822 20,825 
Operating lease liabilities, current and noncurrent(10,388)(7,132)
Other noncurrent liabilities(75)(3)
Net cash provided by operating activities35,477 116,881 
Investing activities
Purchases of property and equipment(15,215)(708)
Purchases of marketable securities(89,500) 
Proceeds from sales of marketable securities8,247  
Net cash used in investing activities(96,468)(708)
Financing activities
Proceeds from the exercise of common stock options27,225 208,860 
Other financing activities16 (2,506)
Net cash provided by financing activities27,241 206,354 
Effect of foreign exchange on cash, cash equivalents, and restricted cash(727)(2,197)
Net increase (decrease) in cash, cash equivalents, and restricted cash(34,477)320,330 
Cash, cash equivalents, and restricted cash - beginning of period2,366,914 2,128,146 
Cash, cash equivalents, and restricted cash - end of period$2,332,437 $2,448,476 
Supplemental disclosures of cash flow information
Cash paid for income taxes$659 $878 
Cash paid for interest2 1,662 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7

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 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 the investee, but does not control, 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, loss from operations, net loss, or cash flows. The Company's fiscal year ends on December 31.
The unaudited condensed consolidated balance sheet as of December 31, 2021 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 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, 2021, which was filed with the SEC on February 24, 2022.
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 tangible assets; and the incremental borrowing rate for operating leases. 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, 2021, which was filed with the SEC on February 24, 2022. There have been no significant changes to these policies during the three months ended March 31, 2022.
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.
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.
8

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):
As of March 31,
20222021
Cash and cash equivalents$2,269,411 $2,339,437 
Restricted cash33,804 37,106 
Restricted cash, noncurrent29,222 71,933 
Total cash, cash equivalents, and restricted cash$2,332,437 $2,448,476 
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses, if any. 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 ongoing 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 March 31, 2022 and December 31, 2021, it did not record an allowance for credit losses as probable losses are not expected to be material.
Concentrations of 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 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 March 31, 2022 and December 31, 2021 were $256.6 million and $190.9 million, respectively. Customer I represented 14% of total accounts receivable as of March 31, 2022, No other customers represented more than 10% of total accounts receivable as of March 31, 2022 or December 31, 2021.
For the three months ended March 31, 2022 and 2021, no customer represented 10% or more 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 March 31, 2022 and December 31, 2021 the Company's contract liability balances were $506.9 million and $463.3 million, respectively. Revenue of $187.0 million and $169.5 million was recognized during the three months ended March 31, 2022 and 2021, respectively, that was included in the contract liability balances as of December 31, 2021 and 2020, respectively.
Remaining Performance Obligations
The Company’s arrangements with its customers often have terms that span over multiple years. However, the Company allows many of its customers to terminate contracts for convenience prior to the end of the stated term with less than twelve months’ notice. Revenue allocated to remaining performance obligations represents noncancelable contracted revenue that has not yet been recognized, which includes deferred revenue and, in certain instances, amounts that will be invoiced. The Company has elected the practical expedient allowing the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancelable contracted revenue, which includes customer deposits, is not considered a remaining performance obligation.
The Company’s remaining performance obligations were $1.2 billion as of March 31, 2022, of which the Company expects to recognize approximately 42% as revenue over the next 12 months, 41% as revenue over the subsequent 13 to 36 months, and the remainder thereafter.
9

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 indicates the fair value hierarchy of the valuation (in thousands):
As of March 31, 2022
TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents:
Money market funds$365,487 $365,487 $ $ 
Certificates of deposit8,253  8,253  
Restricted cash, current and noncurrent
Certificates of deposit38,721 $ 38,721  
Marketable securities:
Marketable securities252,563 252,563   
Total$665,024 $618,050 $46,974 $ 
As of December 31, 2021
TotalLevel 1Level 2Level 3
Assets:
Cash and cash equivalents:
Money market funds$507,317 $507,317 $ $ 
Certificates of deposit6,844  6,844  
Restricted cash, current and noncurrent
Certificates of deposit45,048  45,048  
Marketable securities:
Marketable securities234,153 234,153   
Total$793,362 $741,470 $51,892 $ 
Certificates of Deposit
The Company’s Level 2 instruments consist of restricted cash invested in certificates of deposit. 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.
Marketable Securities
Marketable securities consist of equity securities in publicly-traded companies and are recorded at fair market value each reporting period. Realized and unrealized gains and losses are recorded in other income (expense), net on the condensed consolidated statements of operations. During the three months ended March 31, 2022, the Company recorded net unrealized losses of $51.9 million and realized losses of $10.9 million within other income (expense), net on the condensed consolidated statements of operations.
Investments
Since 2021, the Company has approved and entered into certain agreements (“Investment Agreements”) to purchase, or commit to purchase, as further discussed in Note 7. Commitments and ContingenciesInvestment Commitments, shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, and commitments to purchase, the “Investments”). 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. The total value of such commercial contracts was $754.9 million as of March 31, 2022, which is inclusive of $116.2 million of
10

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
contractual options. The terms of such contracts, including contractual options, range from three to ten years. The majority of these commercial contracts are subject to various termination provisions, including for convenience in the event a proposed business combination is not completed.
The Company assesses the concurrent agreements under the non-monetary guidance within ASC 606—Revenue from Contracts with Customers as well as the commercial substance of each arrangement considering the customer’s ability and intention to pay as well as the Company’s obligation to perform under each contract. The total revenue recognized from these commercial contracts during the three months ended March 31, 2022 was $39.2 million.
During the year ended December 31, 2021, the Company purchased shares for a total investment of $326.0 million. The following table presents the details of the investments purchased under such Investment Agreements during the three months ended March 31, 2022 (in thousands):
Entity (1)
Share AmountInvestment Amount
Fast Radius2,000 $20,000 
Energy Vault850 8,500 
Tritium2,500 15,000 
Rigetti1,000 10,000 
Allego2,000 20,000 
Starry Group Holdings2,133 16,000 
Total10,483 $89,500 
—————
(1) Investments are in publicly-traded marketable securities.
Alternative Investments
During the year ended December 31, 2021, the Company purchased $50.9 million in 100-ounce gold bars. The gold bars are kept in a secure third-party facility located in the northeastern United States. The Company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
As of March 31, 2022As of December 31, 2021
Leasehold improvements$74,730 $72,834 
Computer equipment, software, and other24,424 16,916 
Furniture and fixtures8,774 8,358 
Construction in progress3,683 3,126 
Total property and equipment, gross111,611 101,234 
Less: accumulated depreciation and amortization(69,745)(69,930)
Total property and equipment, net$41,866 $31,304 
Depreciation and amortization expense related to property and equipment, net was $3.9 million and $3.2 million for the three months ended March 31, 2022 and 2021, respectively.
11

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
As of March 31, 2022As of December 31, 2021
Accrued payroll and related expenses$46,741 $60,732 
Accrued other liabilities103,435 95,074 
Total accrued liabilities$150,176 $155,806 
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”), including most recently on March 31, 2022 (the “March 2022 Amendment”). The March 2022 Amendment provides for, among other things, an extension of the revolving loan facility maturity date to March 31, 2027 and an increase of $100.0 million to the lenders’ revolving commitments for total revolving commitments of $500.0 million. The 2014 Credit Facility allows for the drawdown of up to $500.0 million to fund working capital and general corporate expenditures. 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 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 March 31, 2022, the Company had no outstanding debt balances and $500.0 million undrawn revolving 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 March 31, 2022.
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 June 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 March 31, 2022, the Company had satisfied $115.2 million of its $167.0 million commitment for the contract year ending June 30, 2022.
Investment Commitments
The Company approved and entered into certain Investment Agreements with Investees, as further discussed in Note 4. Investments and Fair Value MeasurementsInvestments. As of March 31, 2022, the Company had an outstanding investment commitment relating to Rubicon, effective as of December 15, 2021, subject to the applicable terms and conditions, to purchase a total of 3.5 million shares for an aggregate purchase price of $35.0 million. The closing of such investment commitment is contingent upon the completion of a proposed business combination by and among Rubicon and other applicable parties. The Company’s commercial contract with Rubicon contains termination for convenience clauses in the event the proposed business combination or the Company’s proposed investment is not completed.
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
12

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
infringement of trademarks, copyrights, and other intellectual property rights; employment claims; securities claims; investor claims; corporate claims; class action claims; and general contract, tort, or other claims. The Company may from time to time also be subject to various legal or government claims, disputes, or investigations. Such matters may include, but not be limited to, claims, disputes, allegations, or investigations related to warranty; refund; breach of contract; breach, leak, or misuse of personal data or confidential information; employment; government procurement; intellectual property; government regulation or compliance (including but not limited to anti-corruption requirements, export or other trade controls, data privacy or data protection, cybersecurity requirements, or antitrust/competition law requirements); securities; investor; corporate; or other matters. The Company establishes an accrual for loss contingencies when the loss is both probable and reasonably estimable.
On December 14, 2017, members of KT4 Partners LLC (Managing Member Marc Abramowitz) and Sandra Martin Clark, as trustee for the Marc Abramowitz Irrevocable Trust Number 7 (together, “KT4 Plaintiffs”), filed an action in the Delaware Superior Court against the Company and Disruptive Technology Advisers LLC. The complaint alleges tortious interference with prospective economic advantage and civil conspiracy in connection with a potential sale of stock by the KT4 Plaintiffs to a third party. The KT4 Plaintiffs seek compensatory and punitive damages, interest, fees, and costs.
The Company believes the lawsuit brought by the KT4 Plaintiffs is without merit and is vigorously defending itself against it. Given the uncertainty of litigation, it may be reasonably possible that the Company will incur a loss with regards to the matter; however, it cannot currently estimate a range of possible losses. Accordingly, the Company is unable at this time to estimate the ultimate impact of the litigation on its financial condition, results of operations, or cash flows.
As of March 31, 2022, 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 $63.0 million and $76.2 million as of March 31, 2022 and December 31, 2021, 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 March 31, 2022, 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 via its operations and maintenance (“O&M”) services to its customers. 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 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, as set forth in the applicable SLA, 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 March 31, 2022 and December 31, 2021.
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 March 31, 2022 and December 31, 2021.
The Company has obligations under certain circumstances to indemnify each of the defendant directors and certain officers against judgments, fines, settlements, and expenses related to claims against such directors and certain officers and otherwise to the fullest extent permitted under the law and the Company’s bylaws and Amended and Restated Certificate of Incorporation.
13

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 March 31, 2022.
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 March 31, 2022.
The following represented the total authorized, issued, and outstanding shares for each class of common stock (in thousands):
As of March 31, 2022As of December 31, 2021
AuthorizedIssued and OutstandingAuthorizedIssued and Outstanding
Class A Common Stock20,000,000 1,945,140 20,000,000 1,926,589 
Class B Common Stock2,700,000 99,731 2,700,000 99,880 
Class F Common Stock1,005 1,005 1,005 1,005 
Total22,701,005 2,045,876 22,701,005 2,027,474 
9. Stock-Based Compensation
Stock Options
The following table summarizes stock option activity for the three months ended March 31, 2022 (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, 2021349,952 $7.81 9.06$3,638,685 
Options exercised(6,654)4.09 — 
Options canceled and forfeited(823)4.81 — 
Balance as of March 31, 2022342,475 $7.89 8.91$1,999,422 
Options vested and exercisable as of March 31, 2022172,081 $5.29 7.74$1,452,249 
As of March 31, 2022, the unrecognized expense related to options outstanding was $842.8 million, which is expected to be recognized over a weighted-average service period of eight years.
RSUs
The following table summarizes the RSU activity for the three months ended March 31, 2022 (in thousands, except per share amounts):
14

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
RSUs OutstandingWeighted Average Grant Date Fair Value per Share
Balance as of December 31, 2021153,749 $9.56 
RSUs granted1,373 16.01 
RSUs vested and converted to shares(11,748)8.50 
RSUs canceled(1,607)8.56 
Balance as of March 31, 2022141,767 $9.73 
As of March 31, 2022, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $824.4 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 March 31,
20222021
Cost of revenue$11,677 $15,977 
Sales and marketing49,272 57,286 
Research and development26,905 37,874 
General and administrative61,469 82,594 
Total stock-based compensation expense$149,323 $193,731 
10. Income Taxes
The Company recorded a provision for income taxes of $2.0 million and $3.1 million for the three months ended March 31, 2022 and 2021, 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 March 31, 2022 differs from the U.S. statutory rate primarily due to the valuation allowance recorded on its losses from the U.S. and other jurisdictions, foreign income taxed at different rates, non-deductible stock-based compensation, and foreign withholding taxes. The provision for income taxes decreased by $1.1 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to decreases in profits from the Company’s international operations offset by an increase in foreign withholding taxes.

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company assesses its ability to realize the deferred tax assets on a quarterly basis, and it establishes a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. For example, due to the weight of objectively verifiable negative evidence, including its history of U.S. and U.K. net operating tax losses, the Company 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 March 31, 2022.
Provisions enacted in the 2017 Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental (“R&E”) expenditures became effective on January 1, 2022. Beginning January 1, 2022, all U.S. and non-U.S. based R&E expenditures must be capitalized and amortized over five and fifteen years, respectively. The U.S. Congress is considering legislation that would defer the amortization requirement to future periods. However, there is no assurance that the provision will be deferred, repealed or otherwise modified. The effect of the requirement did not have a material impact on our income tax provision.
15

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
11. Net Loss Per Share Attributable to Common Stockholders
The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share amounts):
Three Months Ended March 31,
20222021
Numerator
Net loss attributable to common stockholders, for diluted net loss per share$(101,379)$(123,474)
Denominator
Weighted-average shares used in computing net loss per share, basic2,036,307 1,821,158 
Weighted-average shares used in computing net loss per share, diluted2,036,307 1,821,158 
Net loss per share
Net loss per share attributable to common stockholders, basic$(0.05)$(0.07)
Net loss per share attributable to common stockholders, diluted$(0.05)$(0.07)
The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented due to their anti-dilutive effect (in thousands):
As of March 31,
20222021
Options and stock appreciation rights issued and outstanding342,475 477,602 
RSUs outstanding140,793 174,523 
Warrants to purchase common stock13,042 18,253 
Total496,310 670,378 
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.
Financial information for each reportable segment was as follows (in thousands):
Three Months Ended March 31,
20222021
Revenue:
Government$241,790 $208,420 
Commercial204,567 132,814 
Total revenue$446,357 $341,234 
16

Palantir Technologies Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31,
20222021
Contribution:
Government$139,810 $131,746 
Commercial112,608 72,543 
Total contribution$252,418 $204,289 
The reconciliation of contribution to loss from operations is as follows (in thousands):
Three Months Ended March 31,
20222021
Loss from operations$(39,439)$(114,014)
Research and development expenses (1)
61,696 60,597 
General and administrative expenses (1)
80,838 63,975 
Total stock-based compensation expense149,323 193,731 
Total contribution$252,418 $204,289 
—————
(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 March 31,
20222021
Amount%Amount%
Revenue:
United States$272,913 61 %$198,447 58 %
United Kingdom49,902 11 %34,385 10 %
Rest of world (1)
123,542 28 %108,402 32 %
Total revenue$446,357 100 %$341,234 100 %
—————
(1) No other country represents 10% or more of total revenue for the three months ended March 31, 2022 or 2021.
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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, and cybersecurity;
our expectations regarding new and evolving markets;
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 recent 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 our multi-class stock and governance structure and the benefits thereof;
the impacts of the ongoing coronavirus (“COVID-19” or “COVID”) pandemic and the ongoing Russian invasion of Ukraine, including on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate; 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
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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.
In addition to the investments we have made in our platforms, we plan to continue to expand our ability to sell our subscriptions globally by investing in resources to address the business needs of local markets, including by increasing our sales and marketing functions and activities, expanding our ecosystem of service partners to support local deployments, and investing in personnel to support our growing customer base and product offerings.
We believe that every institution faces challenges that our platforms were designed to address. Our focus in the near term is to build partnerships with institutions that have the leadership necessary to effect structural change within their organizations — to reconstitute their operations around data. Over the long term, we believe that every institution in the markets we serve is a potential partner.
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. For example, we have approved and entered into strategic investments pursuant to certain approved agreements (“Investment Agreements”) to purchase, or commit 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, and commitments to purchase, the “Investments”). See further discussion in Note 4. Investments and Fair Value Measurements and Note 7. Commitments and ContingenciesInvestment Commitments.
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 March 31, 2022, we generated $446.4 million in revenue, reflecting a 31% growth rate from the three months ended March 31, 2021, when we generated $341.2 million in revenue.
Our operating results continued to improve, including when adjusting for stock-based compensation. In the three months ended March 31, 2022, we incurred losses from operations of $39.4 million, or generated adjusted income from operations of $117.4 million when excluding stock-based compensation and related employer payroll taxes. In the three months ended March 31, 2021, we incurred losses from operations of $114.0 million, or generated adjusted income from operations of $116.6 million when excluding stock-based compensation and related employer payroll taxes.
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In the three months ended March 31, 2022, our gross profit was $352.0 million, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation. In the three months ended March 31, 2021, our gross profit was $267.1 million, reflecting a gross margin of 78%, or 83% when excluding stock-based compensation.
For more information about our adjusted income or loss from operations, which excludes stock-based compensation and related employer payroll taxes; and gross profit and gross margin, excluding stock-based compensation, as well as reconciliations from 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 March 31, 2022, we had 277 customers, including companies in various commercial sectors and government agencies around the world. During the period ended March 31, 2021, we had 149 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 with some of the world’s leading government institutions and companies, and are expanding our partnerships with early- and growth-stage companies. Our average revenue for the top twenty customers during the trailing twelve months ended March 31, 2022 was $44.6 million, which grew 24% from an average of $36.1 million in revenue from the top twenty customers during the trailing twelve months ended March 31, 2021, 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. In the three months ended March 31, 2022, 54% of our revenue came from government agencies and 46% came from commercial customers. In the three months ended March 31, 2022, we generated 61% of our revenue from customers in the United States and the remaining 39% from non-U.S. customers.
Expansion of Access to Platforms
We have recently begun to expand access to our platforms to early- and growth-stage companies, including startups, as we continue our outreach efforts to an increasingly broad swath of the potential market.
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 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.
COVID-19 Impact
As a result of the ongoing COVID-19 pandemic, we continue to take precautionary measures in order to minimize the risk of the virus to our employees, our customers, and the communities in which we operate, which initially included the suspension of all non-essential business travel of employees and the temporary closure of all of our major offices. Although the majority of our workforce worked remotely, there was minimal disruption in our ability to ensure the effective operation of our software platforms. As local conditions and public health guidance permits, we are reopening our offices and allowing business travel to resume, while continuing to closely monitor developments around the evolving nature of the pandemic.

The economic consequences of the COVID-19 pandemic have been challenging for certain of our customers and prospective customers. While the broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain, the COVID-19 pandemic has, to date, not had a material adverse impact on our results of operations. 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.
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We saw decreases in our travel and office-related expenditures, including during the temporary closures of our offices globally and reductions in related operating expenses, related to the ongoing COVID-19 pandemic. However, improvement of our contribution metric has also been driven by the expansion of existing customer accounts, improved sales efficiency, and the increasing deployment of centralized hosting and other software deployment infrastructure. While we expect our travel and office-related expenditures to increase moving forward, we do not expect such expenditures to return to their pre-pandemic levels, given that we have made significant investments in enabling employees to work with customers remotely.

See the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, and in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 24, 2022, for further discussion of the impact of the COVID-19 pandemic on our business.
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.
Contribution margin, both across our business and on specific customer accounts, 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 non-cash 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 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 non-cash 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.
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 statement 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,
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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 months ended March 31, 2022 and 2021 (in thousands, except percentages):
Three Months Ended March 31,
20222021
Loss from operations$(39,439)$(114,014)
Add:
Research and development expenses (1)
61,696 60,597 
General and administrative expenses (1)
80,838 63,975 
Total stock-based compensation expense149,323 193,731 
Total contribution$252,418 $204,289 
Contribution margin57 %60 %
————
(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 months ended March 31, 2022 and 2021 (in thousands, except percentages):
Three Months Ended March 31,
20222021
Gross profit$351,954 $267,123 
Add: stock-based compensation11,677 15,977 
Gross profit, excluding stock-based compensation$363,631 $283,100 
Gross margin, excluding stock-based compensation81 %83 %
Adjusted Income from Operations
The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Loss from operations$(39,439)$(114,014)
Add: stock-based compensation149,323 193,731 
Add: employer payroll taxes related to stock-based compensation7,506 36,866 
Adjusted income from operations$117,390 $116,583 
Components of Results of Operations
Revenue
We generate revenue from the sale of subscriptions to access our software in our hosted environment with 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 promise 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.
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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 third-party cloud hosting services, 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, 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, sales force, and 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 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 third-party cloud hosting services and other IT-related costs, and allocated overhead. Research and development costs are expensed as incurred.
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, and allocated overhead.
We expect that general and administrative expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our increased compliance and reporting requirements as a public company.
Interest Income
Interest income consists primarily of interest income earned on our cash, cash equivalents, and restricted cash balances.
Interest Expense
Interest expense consists primarily of interest expense and commitment fees incurred under our credit facilities.
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Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency exchange gains and losses, realized and unrealized losses from Investments, 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.
Segments
We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker (“CODM”), 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.
Segment profitability is evaluated based on contribution and contribution margin. Contribution is segment revenue less the related costs of revenue and sales and marketing expenses, excluding stock-based compensation expense. Contribution margin is contribution divided by revenue. To the extent costs of revenue or sales and marketing expenses are not directly attributable to a particular segment, they are allocated based upon headcount at each operating segment during the period. We use it, in part, to evaluate the performance of, and allocate resources to, each of our operating segments, which excludes certain operating expenses that are not allocated to operating segments because they are separately managed at the consolidated corporate level. These unallocated costs include stock-based compensation expense, research and development costs, and general and administrative costs, such as legal and accounting.
Results of Operations
The following table summarizes our condensed consolidated statements of operations data (in thousands):
Three Months Ended March 31,
20222021
Revenue$446,357 $341,234 
Cost of revenue (1)
94,403 74,111 
Gross profit351,954 267,123 
Operating expenses:
Sales and marketing (1)
160,485 136,097 
Research and development (1)
88,601 98,471 
General and administrative (1)
142,307 146,569 
Total operating expenses391,393 381,137 
Loss from operations(39,439)(114,014)
Interest income547 376 
Interest expense(594)(1,840)
Other income (expense), net(59,870)(4,894)
Loss before provision for income taxes(99,356)(120,372)
Provision for income taxes2,023 3,102 
Net loss$(101,379)$(123,474)
————
(1) Includes stock-based compensation expense.

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The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue:
Three Months Ended March 31,
20222021
Revenue100 %100 %
Cost of revenue21 22 
Gross margin79 78 
Operating expenses:
Sales and marketing36 40 
Research and development20 28 
General and administrative32 43 
Total operating expenses88 111 
Loss from operations(9)(33)
Interest income— — 
Interest expense— (1)
Other income (expense), net(13)(1)
Loss before provision for income taxes(22)(35)
Provision for income taxes
Net loss(23)%(36)%
Comparison of the Three Months Ended March 31, 2022 and 2021
Revenue
Three Months Ended March 31,Change
20222021Amount%
Revenue:
Government$241,790 $208,420 $33,370 16 %
Commercial204,567 132,814 71,753 54 %
Total revenue$446,357 $341,234 $105,123 31 %
Revenue increased by $105.1 million, or 31%, for the three months ended March 31, 2022 compared to the same period in 2021. Revenue from government customers increased by $33.4 million, or 16%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily from customers in the United States. Of the increase, $33.0 million was from government customers existing as of December 31, 2021. Generally, increases in revenue from our existing customers are related to increased adoption of our products and services within their organizations. Revenue from commercial customers increased by $71.8 million, or 54%, for the three months ended March 31, 2022 compared to the same period in 2021. Of the increase, $53.8 million was from existing customers as of December 31, 2021, of which $26.8 million was revenue from customers with which we have entered into concurrent Investment Agreements. For additional information, see Note 4. Investments and Fair Value Measurements and Note 7. Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Cost of Revenue and Gross Profit
Three Months Ended March 31,Change
20222021Amount%
Cost of revenue$94,403 $74,111 $20,292 27 %
Gross profit351,954 267,123 84,831 32 %
Gross margin79 %78 %%
Cost of revenue for the three months ended March 31, 2022 increased by $20.3 million, or 27%, compared to the same period in 2021. The increase was primarily due to increases of $14.3 million in third-party cloud hosting services driven by increased usage by
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existing customers and $5.4 million in field service representatives and other direct deployment costs mainly related to new projects. These increases were partially offset by a decrease of $6.9 million in stock-based compensation expense.
Our gross margin for the three months ended March 31, 2022 increased from 78% for the same period in 2021 to 79% as a result of increased efficiencies in supporting revenue growth at our customer deployments, for example from making investments in our platforms as well as a lower rate of increase in cost of revenue partially driven by a decrease in stock-based compensation expense.
Operating Expenses
Three Months Ended March 31,Change
20222021Amount%
Sales and marketing$160,485 $136,097 $24,388 18 %
Research and development88,601 98,471 (9,870)(10)%
General and administrative142,307 146,569 (4,262)(3)%
Total operating expenses$391,393 $381,137 $10,256 %
Sales and Marketing
Sales and marketing expenses increased by $24.4 million, or 18%, for the three months ended March 31, 2022 compared to the same period in 2021. The increase was primarily due to increases of $18.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our sales and marketing function, $11.0 million in marketing and advertising expenses, and $7.7 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions. These increases were partially offset by a decrease of $17.5 million in stock-based compensation expense.
Research and Development
Research and development expenses decreased by $9.9 million, or 10%, for the three months ended March 31, 2022 compared to the same period in 2021. The decrease was primarily due to a decrease of $20.1 million in stock-based compensation expense; partially offset by an increase of $4.7 million in payroll and other payroll-related costs primarily driven by an increase in headcount attributable to our research and development function.
General and Administrative
General and administrative expenses decreased by $4.3 million, or 3%, for the three months ended March 31, 2022 compared to the same period in 2021. The decrease was primarily due to a decrease of $29.3 million in stock-based compensation expense, partially offset by increases of $9.6 million in professional service fees, $7.0 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions, and $4.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our general and administrative functions.
Stock-Based Compensation
Three Months Ended March 31,Change
20222021Amount%
Cost of revenue$11,677 $15,977 $(4,300)(27)%
Sales and marketing49,272 57,286 (8,014)(14)%
Research and development26,905 37,874 (10,969)(29)%
General and administrative61,469 82,594 (21,125)(26)%
Total stock-based compensation expense$149,323 $193,731 $(44,408)(23)%
Stock-based compensation expenses decreased by $44.4 million, or 23%, for the three months ended March 31, 2022 compared to the same period in 2021. The decrease was primarily driven by lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our direct listing, during the three months ended March 31, 2022 compared to the same period in 2021, and lower expense due to options becoming fully vested over time.
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Interest Income
Three Months Ended March 31,Change
20222021Amount
Interest income$547