Planet Labs PBC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PLANET The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Planet Labs PBC. The MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item I of this Quarterly Report on Form 10-Q , as well as our audited annual consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 (the “2023 Form 10-K”). This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report and Part I, Item 1A, “Risk Factors” of our 2023 Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Business and Overview Our mission is to use space to help life on Earth, by imaging the world every day and making global change visible, accessible, and actionable. Our platform includes imagery, insights, and machine learning that empower companies, governments, and communities around the world to make timely decisions about our evolving world. As a public benefit corporation, our purpose is to accelerate humanity toward a more sustainable, secure, and prosperous world, by illuminating the most important forms of environmental and social change. We deliver a differentiated data set: a new image of the entire Earth’s landmass, constantly refreshed. To collect this powerful data set, we design, build and operate hundreds of satellites, making our fleet the largest Earth observation fleet of satellites in history. Our daily stream of proprietary data and machine learning analytics, delivered through our cloud-native platform, helps companies, governments and civil society use satellite imagery to discover insights as change happens. To help further our mission, we have developed advanced satellite technology that increases the cost performance of each satellite. This has enabled us to launch large fleets of satellites at lower cost and in turn record over 2,400 images on average for every point on Earth’s landmass, a non-replicable historical archive for analytics, machine learning, and insights. We have advanced data processing capabilities that enable us to produce “AI-ready” data sets. As this data set continues to grow, we believe its value to our customers will further increase. We currently serve ove r 950 c ustomers across large commercial and government verticals, including agriculture, mapping, forestry, finance and insurance, as well as federal, state, and local government bodies. Our products serve a variety of diverse customer needs. For example, our products have helped farmers make decisions that result in significant increases in their harvests, while using fewer resources, by timely alerting them to changes happening within their fields. Governments use our data to help deliver public services more effectively in disaster response. Mapping companies use our data to keep online maps up to date. Also, journalists and human rights organizations use our data to uncover and report the truth about events in hard-to-reach places. Our proprietary data set and analytics are delivered pursuant to subscription and usage-based data licensing agreements and are accessed by our customers through our online platform and subscription APIs. We believe our efficient cost structure, one-to-many business model and differentiated data set have enabled us to grow our customer base across multiple vertical markets. As of October 31, 2023, our EoP Customer Count wa s 976 customers, which represented a 13% year-over-year growth when compared to October 31, 2022. Our EoP Customer Count has grown quarter-over-quarter for every quarter in the last three years. For a definition of EoP Customer Count see the section titled “Key Operational and Business Metrics.” Over 90% of our ACV Book of Business (as defined below) consists of annual or multi-year contracts. Our average contract length continues to be approximately two years, weighted on an annual contract value basis. 31 Table of Contents Our Business Model We primarily generate revenue through selling licenses to our data and analytics to customers over an entirely cloud-based platform via fixed price subscription and usage-based contracts. Data licensing subscriptions and minimum commitment usage-based contracts provide a large recurring revenue base for our business with a low incremental cost to serve each additional customer. Payment terms of our customer agreements are most commonly in advance on an either quarterly or annual basis, although a small number of large contracts have required payment terms that are monthly or quarterly in arrears. We also generate an immaterial amount of revenue from sales of third-party imagery, professional services, and customer support. We employ a “land-and-expand” go-to-market strategy with the goal to deliver increasing value to our customers and generate more revenue with each customer over time by expanding the scope of the services we offer. We work closely with our customers and partners to enable their early success, both from an account management and technical management perspective. Deeper adoption from our customers comes in many forms, including more users, more area coverage, and more advanced software analytics capabilities. Two key elements of our growth strategy include scaling in existing verticals and expanding into new verticals. Scaling in Existing Verticals : We plan to invest in sales, marketing and software solutions to drive our expansion within our existing customer base and further penetrate verticals that are early adopters of geospatial data, such as Civil Government, Agriculture, Defense & Intelligence, and Mapping. In addition, we plan to invest in expanding the analytic tools we make available to these customers with the goal of increasing the services we provide to these customers and more deeply embed our data and analytics into their business intelligence systems. Expansion into New Verticals : We plan to invest in our software engineering teams to develop solutions to address use cases in emerging markets in our industry such as Energy & Infrastructure, Finance & Insurance, Forestry and ESG-related Industrial / Consumer Packaged Goods. In addition, to expand our reach within vertical markets, we intend to leverage our open data platform with specific vertical partners to deliver vertical market-specific solutions. We believe our increased investment in developing software analytics solutions has the potential to accelerate the usage of our data and analytics across broader audiences. Factors Affecting the Results of Operations We believe that our financial condition and result of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, in Part II, Item 1A “Risk Factors” of this Quarterly Report and in Part I, Item 1A, “Risk Factors” of our 2023 Form 10-K. Recent Developments Sinergise Acquisition On March 26, 2023, the Company entered into an asset purchase agreement with Holding Sinergise d.o.o., a company existing under the laws of Slovenia (“Sinergise”), and its subsidiaries and certain shareholders of Sinergise, to acquire the cloud-based geo-spatial analysis products, platforms and solutions business from Sinergise. On August 4, 2023, we completed the acquisition. The acquisition date fair value of the consideration transferred was approximately $40.0 million, consisting of $7.5 million in cash, $21.6 million in the issuance of our Class A common stock and $10.8 million relating to liabilities for cash consideration placed into escrow. The acquisition has been accounted for as a business combination and is expected to expand our data analysis platform and allow customers to extract insights from earth observation data more easily. Refer to Note 5 “Acquisition” to the condensed consolidated financial statements for further information regarding this transaction. Headcount Reduction In August 2023, we announced a plan to reduce our global headcount by approximately 10% of our total number of employees prior to the reduction (the “headcount reduction”). This action was taken to increase our focus on high priority growth opportunities and operational efficiency. 32 Table of Contents As a result of the headcount reduction, in the third quarter of the fiscal year ending 2024, we recognized $7.3 million of costs for one-time employee termination benefits consisting of severance and other employee costs. We also recognized a $1.5 million stock-based compensation benefit primarily related to the reversal of previously recognized stock-based compensation expenses for unvested stock awards. The headcount reductions, including the remaining cash payments, are expected to be substantially complete by the end of the fiscal year ending January 31, 2024. Continuing to Acquire New Customers Attracting new customers is an important factor affecting our future growth and operating performance. We believe our ability to attract customers will be driven by our ability to continue to improve our data and offer software and analytic solutions that make our data easier to consume and integrate into our customers’ workflows, our success in offering new data sets and products to solve customer problems, increases in our global sales presence and increases in our marketing investments. As part of this strategy, we have recently made Planet’s data available through our Sentinel Hub self-service platform, which facilitates rapid user adoption, particularly by empowering users to access our solutions without formal sales interaction. We believe this serves as a natural entry point for some of our smaller accounts, enabling them to realize the value of Planet’s offerings, and leading to broader awareness of our solutions throughout their networks and organizations. We plan to continue investing in making our data more digestible and accessible to non-technical business users and to build solutions to address more use cases and expand our addressable market. As a result of this strategy, we anticipate our research and development expenditures will increase in the near term. In addition, to expand our reach with customers, we intend to partner with independent software vendors and solution providers who are building vertical market-specific solutions. While we have customers and partners today in many markets, we believe that our increased investment in developing software analytics solutions has the potential to accelerate the usage of our data and analytics across broader audiences. Additionally, the timing of securing new customer contracts, including when it occurs during the year and the length of the sales cycle, as well as the size of the contracts, can impact our operating performance. Retention and Expansion of Existing Customers We are focused on increasing customer retention and expanding revenue with existing customers because this will affect our financial results, including revenues, gross profit, operating loss, and operating cash flows. To increase customer retention and expansion of revenue from existing customers, we are making a number of investments in our operations. Areas of investment that affect customer retention and expansion include our customer success function, continuous improvements to our existing data, and the software tools and analytic tools that make our data easier to consume. Additionally, customer retention and expansion is driven by the speed with which our customers realize the value of our data once they become customers, our ability to cross-sell our different products to our existing customers and our ability to offer new products to our customers. As a result of the foregoing, we anticipate our cost of revenue, operating expenses, and capital expenditures will continue to increase and consequently, we are likely to experience losses in the near term, delaying our ability to achieve profitability and adversely affecting cash flows. Developing New Sensors and Data Sets We expect that our ability to provide new data sets through new sensors and new proprietary data will be an important factor for our long-term growth and future market penetration. We believe offering new data sets and fusing new data sets with our existing data sets will enable us to deliver greater value to our existing customers and help us attract new customers. This may require significant investment in technology and personnel and result in increased research and development costs as well as costs of revenue. Investment Decisions We regularly review our existing customers and target markets to determine where we should invest in our product and technology roadmap, both for our space systems engineering to enable new geospatial coverage models, as well as our software engineering focused on providing sophisticated analytics models and tools to service an expanding set of markets and use cases. Our financial performance relies heavily on effective balance between driving continued growth, maintaining technology leadership, and improving margins across the business. 33 Table of Contents Seasonality We have experienced, and expect to continue to experience, seasonality in our business and fluctuations in our operating results due to customer behavior, buying patterns and usage-based contracts. For example, we typically have customers who increase their usage of our data services when they need more frequent data monitoring over broader areas during peak agricultural seasons, during natural disasters or other global events, or when commodity prices are at certain levels. These customers may expand their usage and then subsequently scale back. We believe that the seasonal trends that we have experienced in the past may occur in the future. To the extent that we experience seasonality, it may impact our operating results and financial metrics, as well as our ability to forecast future operating results and financial metrics. Additionally, when we introduce new products to the market, we may not have sufficient experience in selling certain products to determine if demand for these products are or will be subject to material seasonality. Key Operational and Business Metrics In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions. ACV and EoP ACV Book of Business In connection with the calculation of several of the key operational and business metrics we utilize, we calculate Annual Contract Value (“ACV”) for contracts of one year or greater as the total amount of value that a customer has contracted to pay for the most recent 12 month period for the contract, excluding customers that are exclusively Sentinel Hub self-service paying users. For short-term contracts (contracts less than 12 months), ACV is equal to total contract value. We also calculate EoP ACV Book of Business in connection with the calculation of several of the key operational and business metrics we utilize. We define EoP ACV Book of Business as the sum of the ACV of all contracts that are active on the last day of the period pursuant to the effective dates and end dates of such contracts, excluding customers that are exclusively Sentinel Hub self-service paying users. Active contracts exclude any contract that has been canceled, expired prior to the last day of the period without renewing, or for any other reason is not expected to generate revenue in the subsequent period. For contracts ending on the last day of the period, the ACV is either updated to reflect the ACV of the renewed contract or, if the contract has not yet renewed or extended, the ACV is excluded from the EoP ACV Book of Business. We do not annualize short-term contracts in calculating our EoP ACV Book of Business. We calculate the ACV of usage-based contracts based on the committed contracted revenue or the revenue achieved on the usage-based contract in the prior 12-month period. Net Dollar Retention Rate Nine Months Ended October 31, 2023 2022 Net Dollar Retention Rate 104 % 123 % We define Net Dollar Retention Rate as the percentage of ACV generated by existing customers in a given period as compared to the ACV of all contracts at the beginning of the fiscal year from the same set of existing customers. We define existing customers as customers with an active contract with Planet. We believe our Net Dollar Retention Rate is a useful metric for investors as it can be used to measure our ability to retain and grow revenue generated from our existing customers, on which our ability to drive long-term growth and profitability is, in part, dependent. We use Net Dollar Retention Rate to assess customer adoption of new products, inform opportunities to make improvements across our products, identify opportunities to improve operations, and manage go to market functions, as well as to understand how much future growth may come from cross-selling and up-selling customers. Management applies judgment in determining the value of active contracts in a given period, as set forth in the definition of ACV above. Net Dollar Retention Rate decreased to 104% for the nine months ended October 31, 2023, as compared to 123% for the nine months ended October 31, 2022, primarily due to large government contract expansions in the prior nine months ended October 31, 2022 and the impact from delays in renewals and expansions of some government contracts and contractions of certain commercial contracts in the nine months ended October 31, 2023. 34 Table of Contents Net Dollar Retention Rate including Winbacks Nine Months Ended October 31, 2023 2022 Net Dollar Retention Rate including Winbacks 105 % 125 % We assess two metrics for net dollar retention—net retentio n excluding winbacks and including winbacks. A winback is a previously existing customer who was inactive at the start of the current fiscal year, but has reactivated during the current fiscal year. The reactivation period must be within 24 months from the last active contract with the customer; otherwise, the customer is counted as a new customer and therefore excluded from the retention rate metrics. We define Net Dollar Retention Rate including winbacks as the percentage of ACV generated by existing customers and winbacks in a given period as compared to the ACV of all contracts at the beginning of the fiscal year from the same set of existing customers. We believe this metric is useful to investors as it captures the value of customer contracts that resume business with Planet after being inactive and thereby provides a quantification of Planet’s ability to recapture lost business. Management uses this metric to understand the adoption of our products and long-term customer retention, as well as the success of marketing campaigns and sales initiatives in re-engaging inactive customers. Beyond the judgments underlying managements’ calculation of Net Dollar Retention set forth above, there are no additional assumptions or estimates made in connection with Net Dollar Retention Rate including winbacks. Net Dollar Retention Rate including winbacks decreased to 105% for the nine months ended October 31, 2023, as compared to 125% for the nine months ended October 31, 2022, primarily due to large government contract expansions in the prior nine months ended October 31, 2022 and the impact from delays in renewals and expansions of some government contracts and contractions of certain commercial contracts in the nine months ended October 31, 2023. EoP Customer Count As of October 31, 2023 2022 EoP Customer Count 976 864 We define EoP Customer Count as the total count of all existing customers at the end of the period excluding customers that are exclusively Sentinel Hub self-service paying users. For EoP Customer Count, we define existing customers as customers with an active contract with us at the end of the reported period. For the purpose of this metric, we define a customer as a distinct entity that uses our data or services. We sell directly to customers, as well as indirectly through our partner network. If a partner does not provide the end customer’s name, then the partner is reported as the customer. Each customer, regardless of the number of active opportunities with us, is counted only once. For example, if a customer utilizes multiple products of Planet, we only count that customer once for purposes of EoP Customer Count. A customer with multiple divisions, segments, or subsidiaries are also counted as a single unique customer based on the parent organization or parent account. For EoP Customer Count, we do not include users that only utilize our self-service Sentinel Hub web based ordering system, which we acquired in August 2023, and which offers standard starter packages on a monthly or annual basis. We believe excluding these users from EoP Customer Count creates a more useful metric, as we view the Sentinel Hub starter packages as entry points for smaller accounts, leading to broader awareness of our solutions throughout their networks and organizations. We believe EoP Customer Count is a useful metric for investors and management to track as it is an important indicator of the broader adoption of our platform and is a measure of our success in growing our market presence and penetration. Management applies judgment as to which customers are deemed to have an active contract in a period, as well as whether a customer is a distinct entity that uses our data or services. The EoP Customer Count increased to 976 as of October 31, 2023, as compared to 864 as of October 31, 2022. The increase was primarily attributable to the increased demand for our data. Percent of Recurring ACV As of October 31, 2023 2022 % Recurring ACV 94 % 94 % 35 Table of Contents Percent of Recurring ACV is the portion of the total EoP ACV Book of Business that is recurring in nature. We define ACV Book of Business as the sum of the ACV of all contracts that are active on the last day of the period pursuant to the effective dates and end dates of such contracts, excluding customers that are exclusively Sentinel Hub self-service paying users. We define Percent of Recurring ACV as the dollar value of all data subscription contracts and the committed portion of usage-based contracts (excluding customers that are exclusively Sentinel Hub self-service paying users) divided by the total dollar value of all contracts in our ACV Book of Business at a specific point in time. We believe Percent of Recurring ACV is useful to investors to better understand how much of our revenue is from customers that have the potential to renew their contracts over multiple years rather than being one-time in nature. We track Percent of Recurring ACV to inform estimates for the future revenue growth potential of our business and improve the predictability of our financial results. There are no significant estimates underlying management’s calculation of Percent of Recurring ACV, but management applies judgment as to which customers have an active contract at a period end for the purpose of determining ACV Book of Business, which is used as part of the calculation of Percent of Recurring ACV. Capital Expenditures as a Percentage of Revenue Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Capital Expenditures as Percentage of Revenue 16 % 6 % 20 % 8 % We define capital expenditures as purchases of property and equipment plus capitalized internally developed software development costs, which are included in our statements of cash flows from investing activities. We define Capital Expenditures as a Percentage of Revenue as the total amount of capital expenditures divided by total revenue in the reported period. Capital Expenditures as a Percentage of Revenue is a performance measure that we use to evaluate the appropriate level of capital expenditures needed to support demand for our data services and related revenue, and to provide a comparable view of our performance relative to other earth observation companies, which may invest significantly greater amounts in their satellites to deliver their data to customers. We use an agile space systems strategy, which means we invest in a larger number of significantly lower cost satellites and software infrastructure to automate the management of the satellites and to deliver our data to clients. As a result of our strategy and our business model, our capital expenditures may be more similar to software companies with large data center infrastructure costs. Therefore, we believe it is important to look at our level of capital expenditure investments relative to revenue when evaluating our performance relative to other earth observation companies or to other software and data companies with significant data center infrastructure investment requirements. We believe Capital Expenditures as a Percentage of Revenue is a useful metric for investors because it provides visibility to the level of capital expenditures required to operate our business and our relative capital efficiency. Capital Expenditures as a Percentage of Revenue increased to 16% and 20% for the three and nine months ended October 31, 2023 , as compared to 6% and 8% for the three and nine months ended October 31, 2022 . These increases were primarily attributable to an increase in capitalized labor and material related to the build of high resolution and medium resolution satellites. Components of Results of Operations Revenue We derive revenue principally from licensing rights to use our imagery that is delivered digitally through our online platform in addition to providing related services. Imagery licensing agreements vary by contract, but generally have annual or multi-year contractual terms. The data licenses are generally purchased via a fixed price contract on a subscription or usage basis, whereby a customer pays for access to our imagery or derived imagery data that may be downloaded over a specific period of time, or, less frequently, on a transactional basis, whereby the customer pays for individual content licenses. We also provide an immaterial amount of other services to customers, including professional services such as training, analytical services, research and development services to third parties, and other value-added activities related to our imagery, data and technology. These revenues are recognized as the services are rendered, on a proportional performance basis for fixed price contracts or ratably over the contract term for subscription professional services and analytics contracts. Training revenues are recognized as the services are performed. 36 Table of Contents Cost of Revenue Cost of revenue consists of employee related costs of performing account and data provisioning, customer support, satellite and engineering operations, as well as the costs of operating and retrieving information from the satellites, processing and storing the data retrieved, third party imagery expenses, depreciation of satellites and ground stations, amortization of acquired intangibles and amortization of capitalized internal-use software related to creating imagery provided to customers. Employee-related costs include salaries, benefits, bonuses and stock-based compensation. To a lesser extent, cost of revenue includes costs from professional services, including costs paid to subcontractors and certain third-party fees. We expect cost of revenue to continue to increase as we invest in our delivery organization and future product sets that will likely require higher compute capacity. As we continue to grow our subscription revenue contracts and increase the revenue associated with our analytic capabilities, we anticipate further economies of scale on our satellites and other infrastructure costs as we incur lower marginal cost with each new customer we add to our platform. Research and Development Research and development expenditures primarily include personnel related expenses for employees and consultants, hardware costs, supplies costs, contractor fees and administrative expenses. Employee related costs include salaries, benefits, bonuses and stock-based compensation. Expenses classified as research and development are expensed as incurred and attributable to advancing technology research, platform and infrastructure development and the research and development of new product iterations. Funding for our performance of research and development services under certain arrangements are recognized as a reduction of research and development expenses based on a cost incurred method. We continue to iterate on the design of our satellites and the capabilities of our automated operations to optimize for efficiency and technical capability of each satellite. Costs associated with satellite and other space related research development activities are expensed as incurred. We intend to continue to invest in our software platform development, machine learning and analytic tools and applications and new satellite technologies for both the satellite fleet operations and data collection capabilities to drive incremental value to our existing customers and to enable us to expand our traction in emerging markets and with new customers. As a result of the foregoing, we expect research and development expenditures to increase in future periods. Sales and Marketing Sales and marketing expenditures primarily include costs incurred to market and distribute our products. Such costs include expenses related to advertising and conferences, sales commissions, salaries, benefits and stock-based compensation for our sales and marketing personnel and sales office expenses. Sales and marketing expenses also include fees for professional and consulting services principally consisting of public relations and independent contractor expenses. Sales and marketing costs are expensed as incurred. We intend to continue to invest in our selling and marketing capabilities in the future and expect this expense to increase in future periods as we look to upsell new product features and expand into new market verticals. Selling and marketing expenses as a percentage of total revenue may fluctuate from period to period based on total revenue and the timing of our investments. General and Administrative General and administrative expenses include personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expenses also include fees for professional services principally consisting of legal, audit, tax, and insurance, as well as executive management expenses. General and administrative expenses are expensed as incurred. 37 Table of Contents We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance and reporting obligations of public companies, and increased costs for insurance, investor relations, and professional services. As a result, we expect that our general and administrative expenses will increase in future periods and vary from period to period as a percentage of revenue, but we expect to realize operating scale with respect to these expenses over time as we grow our revenue. Interest Income Interest income primarily consists of interest earned on our cash, cash equivalents and short-term investments. Our cash equivalent and short-term investment portfolio is invested with a goal of preserving our access to capital, and generally consists of money market funds, commercial paper, corporate debt securities and U.S. government and U.S. government agency debt securities. Change in Fair Value of Warrant Liabilities The change in fair value of warrant liabilities consists of the change in fair value of the public and private placement warrants. We expect to incur other incremental income or expense for fair value adjustments resulting from warrant liabilities that remain outstanding. Other Income (Expenses), net Other income (expenses), net, primarily consists of net gains or losses on foreign currency. Provision for Income Taxes Our income tax provision consists of an estimate for U.S. federal and state income taxes, as well as those foreign jurisdictions where we have business operations, based on enacted tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We believe that it is more likely than not that the majority of the U.S. and foreign deferred tax assets will not be realized. Accordingly, we recorded a valuation allowance against our deferred tax assets in these jurisdictions. 38 Table of Contents Results of Operations Three months ended October 31, 2023 compared to three months ended October 31, 2022 The following table sets forth a summary of our consolidated results of operations for the interim periods indicated and the changes between such periods. Three Months Ended October 31, $ % (in thousands, except percentages) 2023 2022 Change Change Revenue $ 55,380 $ 49,704 $ 5,676 11 % Cost of revenue 29,350 24,728 4,622 19 % Gross profit 26,030 24,976 1,054 4 % Operating expenses Research and development 33,002 27,598 5,404 20 % Sales and marketing 20,774 19,383 1,391 7 % General and administrative 20,112 20,627 (515) (2) % Total operating expenses 73,888 67,608 6,280 9 % Loss from operations (47,858) (42,632) (5,226) 12 % Interest income 3,445 2,853 592 21 % Change in fair value of warrant liabilities 6,833 (19) 6,852 * Other income (expense), net (69) 1 (70) * Total other income (expense), net 10,209 2,835 7,374 260 % Loss before provision for income taxes (37,649) (39,797) 2,148 (5) % Provision for income taxes 355 439 (84) (19) % Net loss $ (38,004) $ (40,236) $ 2,232 (6) % *Percentage not meaningful Revenue Revenue increased $5.7 million, or 11%, to $55.4 million for the three months ended October 31, 2023 from $49.7 million for the three months ended October 31, 2022. The increase was primarily due to a $6.6 million increase from total customer growth worldwide, including new customers acquired from the Sinergise acquisition, which was partially offset by a $0.9 million reduction of existing customer contracts. EoP Customer Count increased approximately 13% to 976 as of October 31, 2023 from 864 as of October 31, 2022. The increase in revenue from new customers was primarily driven by growth in the Civil Government and Defense and Intelligence verticals. Cost of Revenue Cost of revenue increased $4.6 million, or 19%, to $29.4 million for the three months ended October 31, 2023, from $24.7 million for the three months ended October 31, 2022. The increase was primarily due to an increase in depreciation of $1.9 million. The increase in depreciation expense was primarily due to a $3.3 million increase resulting from a change in estimated useful lives for two high resolution satellites as described further below which was partially offset by a $1.4 million decrease resulting from a high resolution satellite that became fully depreciated during the fiscal year ended January 31, 2023. The increase was also partially due to a $1.4 million increase in hosting costs associated with an increase in archive data and growth in our customer base and a $1.2 million increase in employee related costs. The increase in employee-related costs was partially due to a $0.6 million one-time severance and termination benefits charge associated with the headcount reduction that we announced in August 2023. In April 2023 and September 2023, additional information specific to two high resolution satellites became available indicating that the useful lives of the two satellites will be less than originally estimated. The changes in estimated useful lives for these satellites were accounted for prospectively, resulting in an increase of depreciation expense classified as cost of revenue of $3.3 million for the three months ended October 31, 2023. The change in estimate is expected to result in a $6.4 million increase in depreciation expense classified as cost of revenue for the fiscal year ended January 31, 2024. 39 Table of Contents Research and Development Research and development expenses increased $5.4 million, or 20%, to $33.0 million for the three months ended October 31, 2023, from $27.6 million for the three months ended October 31, 2022. The increase was primarily due to a $6.8 million increase in employee related costs. The increase in employee-related costs was primarily due to increased headcount and a $3.3 million one-time severance and termination benefits charge associated with the headcount reduction. We also recorded a $1.9 million non-recurring expense related to transaction bonuses paid to Sinergise employees, which was allocated from the purchase consideration we paid in connection with the Sinergise acquisition. The increase was also partially due to a $0.6 million increase in software and maintenance expenses. These increases were partially offset by a $2.6 million increase in funding recognized for our research and development arrangements and a $2.3 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares. Sales and Marketing Sales and marketing expenses increased $1.4 million, or 7%, to $20.8 million, for the three months ended October 31, 2023, from $19.4 million for the three months ended October 31, 2022. The increase was primarily due to a $2.4 million increase in employee related costs, primarily due to a $1.9 million one time severance and termination benefits charge associated with the headcount reduction. The increase was also partially due to a $0.7 million increase in sales commissions expense. These increases were partially offset by a $1.6 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares, and a $0.3 million decrease in professional and consulting expenses. General and Administrative General and administrative expenses decreased $0.5 million, or 2%, to $20.1 million for the three months ended October 31, 2023, from $20.6 million for the three months ended October 31, 2022. The decrease was primarily due to a $2.6 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares, and a $0.6 million decrease related to directors and officers and other corporate insurance. These decreases were partially offset by a $2.4 million increase in employee related costs, primarily due to a $1.5 million one time severance and termination benefits charge associated with the headcount reduction. Interest Income Interest income increased $0.6 million to $3.4 million for the three months ended October 31, 2023, from $2.9 million for the three months ended October 31, 2022. The increase was primarily due to our short-term investment balances and an increase in interest rates. Change in fair value of warrant liabilities The change in fair value of warrant liab ilities for both the three months ended October 31, 2023 and 2022 represents the change in fair value of the public and private placement warrants, which primarily fluctuates based on the change in trading price of our Class A common stock. Other Income (Expense), net Other income (expense), net for the three months ended October 31, 2023 and October 31, 2022, primarily reflects realized and unrealized foreign currency exchange gains and losses. Provision for Income Taxes Provision for income taxes was $0.4 million for both the three months ended October 31, 2023 and 2022. For the three months ended October 31, 2023 and 2022 , the income tax expense was primarily driven by the current tax on foreign earnings. The effective tax rate for the three months ended October 31, 2023 and 2022 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of our U.S. and foreign deferred tax assets and foreign rate differences. 40 Table of Contents Nine months ended October 31, 2023 compared to nine months ended October 31, 2022 The following table sets forth a summary of our consolidated results of operations for the interim periods indicated and the changes between such periods. Nine Months Ended October 31, $ % (in thousands, except percentages) 2023 2022 Change Change Revenue $ 161,844 $ 138,281 $ 23,563 17 % Cost of revenue 81,375 73,333 8,042 11 % Gross profit 80,469 64,948 15,521 24 % Operating expenses Research and development 87,929 79,085 8,844 11 % Sales and marketing 66,209 57,721 8,488 15 % General and administrative 62,161 61,128 1,033 2 % Total operating expenses 216,299 197,934 18,365 9 % Loss from operations (135,830) (132,986) (2,844) 2 % Interest income 11,753 4,276 7,477 175 % Change in fair value of warrant liabilities 14,004 5,369 8,635 161 % Other income (expense), net 894 123 771 627 % Total other income (expense), net 26,651 9,768 16,883 173 % Loss before provision for income taxes (109,179) (123,218) 14,039 (11) % Provision for income taxes 1,244 907 337 37 % Net loss $ (110,423) $ (124,125) $ 13,702 (11) % Revenue Revenue increased $23.6 million, or 17%, to $161.8 million for the nine months ended October 31, 2023 from $138.3 million for the nine months ended October 31, 2022. The increase was primarily due to a $12.7 million increase from total customer growth worldwide, including new customers acquired from the Sinergise acquisition and net expansion of existing customer contracts of $10.9 million. EoP Customer Count increased approximately 13% to 976 as of October 31, 2023 from 864 as of October 31, 2022. The increase in revenue from new customers was primarily driven by growth in the Civil Government and Defense and Intelligence verticals. Cost of Revenue Cost of revenue increased $8.0 million, or 11%, to $81.4 million for the nine months ended October 31, 2023, from $73.3 million for the nine months ended October 31, 2022. The increase was primarily due to a $3.9 million increase in hosting costs associated with an increase in archive data and growth in our customer base and a $2.4 million increase in employee-related costs. The increase in employee-related costs was primarily due to increased headcount and partially due to a $0.6 million one time severance and termination benefits charge associated with the headcount reduction. The increase was also partially due to a $1.7 million increase in depreciation and amortization. The increase in depreciation expense was primarily due to a $5.8 million increase resulting from changes in estimated useful lives for two high resolution satellites in April 2023 and September 2023 as discussed further above, which was partially offset by a $4.1 million decrease resulting from a high resolution satellite that became fully depreciated during the fiscal year ended January 31, 2023. These increases were partially offset by a $1.1 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares. 41 Table of Contents Research and Development Research and development expenses increased $8.8 million, or 11%, to $87.9 million for the nine months ended October 31, 2023, from $79.1 million for the nine months ended October 31, 2022. The increase was primarily due to an increase of $18.9 million in employee related costs, which was primarily due to increased headcount and partially due to a $3.3 million one-time severance and termination benefits charge associated with the headcount reduction. The increase was also partially due to a $1.9 million non-recurring expense related to transaction bonuses paid to Sinergise employees, which was allocated from the purchase consideration we paid in connection with the Sinergise acquisition. The increase was also partially due to an increase in contractor costs of $1.3 million to support various research and development initiatives, $1.2 million increase in depreciation associated with satellites classified as experimental, and $0.9 million increase in software and maintenance costs. These increases were partially offset by a $11.5 million increase in funding recognized for our research and development arrangements and a $6.1 million decrease in stock based compensation expense, which was primarily to a decline in expense related to earn-out shares. In July 2023, projected costs related to certain of our research and development arrangements were revised down as a result of operational decisions. This change in estimate resulted in a $2.2 million cumulative increase of funding recognized for certain of our research and development arrangements for the nine months ended October 31, 2023. Sales and Marketing Sales and marketing expenses increased $8.5 million, or 15%, to $66.2 million, for the nine months ended October 31, 2023, from $57.7 million for the nine months ended October 31, 2022. The increase was primarily due to an increase of $7.7 million in employee related costs, which was primarily due to increased headcount and partially due to a $1.9 million one-time severance and termination benefits charge associated with the headcount reduction. The increase was also partially due to a $3.4 million increase in marketing expenses driven by increased events and a $1.7 million increase in sales commissions expense. These increases were partially offset by a $2.8 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares and a $1.9 million decrease in professional and consulting expenses. General and Administrative General and administrative expenses increased $1.0 million, or 2%, to $62.2 million for the nine months ended October 31, 2023, from $61.1 million for the nine months ended October 31, 2022. The increase was primarily due to an increase of $5.7 million in employee related costs, primarily as a result of increased headcount and partially due to a $1.5 million one-time severance and termination benefits charge associated with the headcount reduction. The increase was also partially due to a $0.9 million increase in rent costs related to new facility leases and a $0.8 million increase in legal fees, primarily due to our acquisition of Sinergise. These increases were partially offset by a $5.2 million decrease in stock based compensation expense, which was primarily due to a decline in expense related to earn-out shares, and $1.1 decrease in depreciation and amortization, primarily related to our office facilities. Interest Income Interest income increased $7.5 million, to $11.8 million for the nine months ended October 31, 2023, from $4.3 million for the nine months ended October 31, 2022. The increase was primarily due to our short-term investment balances and an increase in interest rates. Change in fair value of warrant liabilities The change in fair value of warrant liab ilities for both the nine months ended October 31, 2023 and 2022 represents the change in fair value of the public and private placement warrants, which primarily fluctuates based on the change in trading price of our Class A common stock. Other Income (Expense), net Other income (expense), net of $0.9 million for the nine months ended October 31, 2023 primarily reflects the recognition of an insurance claim recovery of $0.8 million associated with a high resolution satellite. Other income (expense), net of $0.1 million for the nine months ended October 31, 2022 primarily reflects realized and unrealized foreign currency exchange gains and losses. 42 Table of Contents Provision for Income Taxes Provision for income taxes was $1.2 million and $0.9 million for the nine months ended October 31, 2023 and 2022 , respectively. For the nine months ended October 31, 2023 and 2022, the income tax expense was primarily driven by the current tax on foreign earnings. The effective tax rate for the nine months ended October 31, 2023 and 2022 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of our U.S. and foreign deferred tax assets and foreign rate differences. Non-GAAP Information This Quarterly Report on Form 10-Q includes Non-GAAP Gross Profit, Non-GAAP Gross Margin and Adjusted EBITDA, which are non-GAAP performance measures that we use to supplement our results presented in accordance with U.S. GAAP. We believe Non-GAAP Gross Profit, Non-GAAP Gross Margin and Adjusted EBITDA are useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Non-GAAP Gross Profit, Non-GAAP Gross Margin and Adjusted EBITDA are non-GAAP measures, and are additions, and not substitutes for or superior to, measures of financial performance prepared in accordance with U.S. GAAP and should not be considered as an alternative to measures derived in accordance with U.S. GAAP. Further, Non-GAAP Gross Profit, Non-GAAP Gross Margin and Adjusted EBITDA are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and facilitates comparisons on a consistent basis across reporting periods. Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance. We include these non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Non-GAAP Gross Profit excludes stock-based compensation expenses that are classified as cost of revenue from gross profit, which is required in accordance with U.S. GAAP. Non-GAAP Gross Profit also excludes amortization of acquired intangible assets related to business combinations, which is a non-cash expense required in accordance with U.S. GAAP. Adjusted EBITDA excludes certain expenses from net income (loss) that are required in accordance with U.S. GAAP. We exclude in non-GAAP calculations certain non-cash expenses, such as depreciation and amortization, stock-based compensation and change in fair value of warrant liabilities, and income and expenses that are considered unrelated to our underlying business performance, such as restructuring charges, interest income, interest expense and taxes. Non-GAAP Gross Profit and Non-GAAP Gross Margin We define and calculate Non-GAAP Gross Profit as gross profit adjusted for stock-based compensation, amortization of acquired intangible assets classified as cost of revenue, restructuring costs, employee transaction bonuses in connection with the Sinergise business combination, and other expenses that are considered unrelated to our underlying business performance. We define Non-GAAP Gross Margin as Non-GAAP Gross Profit divided by revenue. 43 Table of Contents The table below reconciles our Gross Profit and Gross Margin (the most directly comparable U.S. GAAP measure) to Non-GAAP Gross Profit and Non-GAAP Gross Margin, for the periods indicated: Three Months Ended October 31, Nine Months Ended October 31, (in thousands, except percentages) 2023 2022 2023 2022 Gross Profit $ 26,030 $ 24,976 $ 80,469 $ 64,948 Cost of revenue—Stock-based compensation 888 1,317 2,855 3,992 Amortization of acquired intangible assets 796 366 1,674 1,163 Restructuring costs (1) 563 — 563 — Employee transaction bonuses in connection with the Sinergise business combination (2) 267 — 267 — Non-GAAP Gross Profit $ 28,544 $ 26,659 $ 85,828 $ 70,103 Gross Margin 47 % 50 % 50 % 47 % Non-GAAP Gross Margin 52 % 54 % 53 % 51 % (1) As part of the headcount reduction plan announced in August 2023, we recognized $0.6 million of severance and other employee costs within cost of revenue for the three and nine months ended October 31, 2023. For the three and nine months ended October 31, 2023, the restructuring related stock-based compensation benefit recognized within cost of revenue of $0.1 million is included on its respective line item. Refer to Note 7 “Restructuring” to the condensed consolidated financial statements for further information. (2) ) Certain employees of Sinergise, which became employees of Planet, were paid cash transaction bonuses in connection with the closing of the Sinergise acquisition. The cost of the transaction bonuses was allocated from the purchase consideration we paid for the acquisition. Refer to Note 5 “Acquisition” to the condensed consolidated financial statements for further information. Adjusted EBITDA We define and calculate Adjusted EBITDA as net income (loss) before the impact of interest income and expense, income tax expense and depreciation and amortization, and further adjusted for the following items: stock-based compensation, change in fair value of warrant liabilities, gain or loss on the extinguishment of debt and non-operating income, expenses such as foreign currency exchange gain or loss, restructuring costs, employee transaction bonuses in connection with the Sinergise business combination, and other expenses that are considered unrelated to our underlying business performance. 44 Table of Contents The table below reconciles our net loss (the most directly comparable U.S. GAAP measure) to Adjusted EBITDA for the periods indicated: Three Months Ended October 31, Nine Months Ended October 31, (in thousands) 2023 2022 2023 2022 Net loss $ (38,004) $ (40,236) $ (110,423) $ (124,125) Interest income (3,445) (2,853) (11,753) (4,276) Income tax provision 355 439 1,244 907 Depreciation and amortization 13,625 10,785 36,033 33,997 Change in fair value of warrant liabilities (6,833) 19 (14,004) (5,369) Stock-based compensation 12,598 19,438 44,611 59,841 Restructuring costs (1) 7,341 — 7,341 — Employee transaction bonuses in connection with the Sinergise business combination (2) 2,317 — 2,317 — Other (income) expense, net 69 (1) (894) (123) Adjusted EBITDA $ (11,977) $ (12,409) $ (45,528) $ (39,148) (1) As part of the headcount reduction plan announced in August 2023, we recognized $7.3 million of severance and other employee costs for the three and nine months ended October 31, 2023. For the three and nine months ended October 31, 2023, the restructuring related stock-based compensation benefit of $1.5 million is included on its respective line item. Refer to Note 7 “Restructuring” to the condensed consolidated financial statements for further information. (2) Certain employees of Sinergise, which became employees of Planet, were paid cash transaction bonuses in connection with the closing of the Sinergise acquisition. The cost of the transaction bonuses was allocated from the purchase consideration we paid for the acquisition. Refer to Note 5 “Acquisition” to the condensed consolidated financial statements for further information. There are a number of limitations related to the use of Adjusted EBITDA, including: • Adjusted EBITDA excludes stock-based compensation, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated and amortized will have to be replaced in the future; • Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; • Adjusted EBITDA does not reflect income tax expense that reduces cash available to us; and • the expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from similar measures when they report their operating results. Liquidity and Capital Resources Since inception, we have incurred net losses and negative cash flows from operations. Our operations have historically been primarily funded by the net proceeds from the sale of our equity securities and borrowings under credit facilities, as well as cash received from our customers. We currently have no debt outstanding. We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations, including debt obligations, and other commitments, with cash flows from operations and other sources of funding. Our current working capital needs relate mainly to our continued development of our platform and product offerings in new markets, as well as compensation and benefits of our employees. Our ability to expand and grow our business will depend on many factors, including our working capital needs and the evolution of our operating cash flows. 45 Table of Contents As of October 31, 2023 and January 31, 2023, we had $101.5 million and $181.9 million, respectively, in cash and cash equivalents. Additionally, as of October 31, 2023 and January 31, 2023, we had short-term investments of $213.3 million and $226.9 million, respectively, which are highly liquid in nature and available for current operations. We believe our anticipated operating cash flows together with our cash on hand provide us with the ability to meet our obligations as they become due during the next 12 months. We expect our capital expenditures and working capital requirements to continue to increase in the foreseeable future as we seek to grow our business. We could also need additional cash resources due to significant acquisitions, an accelerated manufacturing timeline for new satellites, competitive pressures or regulatory requirements. We may need to seek additional equity, equity-linked or debt financing. The issuance of additional shares may create additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating or financial covenants that would restrict our operations. We cannot assure you that any such financing will be available on favorable terms, or at all. If needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in software and market expansion efforts or to scale back our existing operations, which could have an adverse impact on our business and financial prospects. As of October 31, 2023, our principal contractual obligations and commitments include lease obligations for real estate and ground stations, purchase commitments for future satellite launch services, and minimum purchase commitments for hosting services from Google, LLC. Refer to Notes 8, 10, and 12 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding these cash requirements. We do not engage in any off-balance sheet activities or have any arrangements or relationships with unconsolidated entities, such as variable interest, special purpose, and structured finance entities. Statement of Cash Flows The following tables present a summary of cash flows from operating, investing and financing activities for the following comparative periods. For additional detail, please see the unaudited condensed consolidated statements of cash flows as presented within the unaudited condensed consolidated financial statements. Nine Months Ended October 31, (in thousands) 2023 2022 Net cash provided by (used in) Operating activities $ (43,874) $ (59,118) Investing activities $ (24,032) $ (237,478) Financing activities $ (357) $ 6,377 Net cash used in operating activities Net cash used in operating activities for the nine months ended October 31, 2023, primarily consisted of the net loss of $110.4 million, adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items primarily included stock-based compensation expense of $44.6 million and depreciation and amortization expense of $36.0 million, which were partially offset by a change in fair value of warrant liabilities of $14.0 million. The net change in operating assets and liabilities primarily consisted of a $19.6 million increase in deferred revenue and a $9.5 million decrease in prepaid expenses and other assets, which were partially offset by a $20.7 million decrease in accounts payable, accrued and other liabilities, and a $3.9 million increase in accounts receivable. Net cash used in operating activities for the nine months ended October 31, 2022, primarily consisted of the net loss of $124.1 million, adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items primarily included depreciation and amortization expense of $34.0 million and stock-based compensation expense of $59.8 million, which was offset by a change in fair value of warrant liabilities of $5.4 million. The net change in operating assets and liabilities primarily consisted of a $19.4 million decrease in deferred revenue, a $8.6 million decrease in accounts payable, accrued and other liabilities and a $9.5 million increase in prepaid expenses and other assets, which was offset by a $15.2 million decrease in accounts receivable. 46 Table of Contents Net cash used in investing activities Net cash used in investing activities for the nine months ended October 31, 2023, primarily consisted of purchases of available-for-sale securities of $166.2 million, purchases of property and equipment of $29.1 million, and $7.5 million of consideration paid related to the acquisition of Sinergise, which were partially offset by maturities of available-for-sale securities of $142.9 million and sales of available-for-sale securities of $40.1 million. Net cash used in investing activities for the nine months ended October 31, 2022, primarily consisted of purchases of property and equipment of $9.0 million, capitalized internal-use software costs of $1.7 million and purchases of available-for-sale securities of $239.3 million, partially offset by maturities of available-for-sale securities of $13.0 million. Net cash provided by (used in) financing activities Net cash used in financing activities for the nine months ended October 31, 2023, consisted of payment of tax withholding obligations for vesting of restricted stock units of $7.1 million, which was partially offset by proceeds from the exercise of common stock options of $6.8 million. Net cash provided by financing activities for the nine months ended October 31, 2022, primarily consisted of proceeds from the exercise of common stock options of $10.9 million, which was partially offset by payment of tax withholding obligations for vesting of restricted stock units of $4.3 million. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. The accounting policies that have been identified as critical to our business operations and to understanding the results of our operations pertain to revenue recognition, stock-based compensation, public and private placement warrant liabilities, property and equipment and long-lived assets, business combinations, goodwill, and income taxes. The application of each of these critical accounting policies and estimates is discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Recent Accounting Pronouncements Refer to Note 2 in our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information regarding recently issued accounting pronouncements.