What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-12 · 487 added, 1103 removed, 197 unchanged (89% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

As of March 31,

As of June 30,

As of December 31,

Current assets:

Cash and cash

Cash and cash equivalents

Restricted cash

Accounts receivable

Prepaid expenses and other

current assets

counts receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment,

Restricted cash,

Operating lease right-of-use assets

Liabilities and

Stockholders Equity

Property and equipment, net

Restricted cash, noncurrent

Operating lease

Liabilities and Stockholders’ Equity

Current liabilities:

3 unchanged sentences

Customer deposits

Operating lease

Total current

Operating lease liabilities

Total current liabilities

Deferred revenue, noncurrent (1)

Customer deposits,

Customer deposits, noncurrent

Debt, noncurrent, net

Operating lease liabilities,

Other noncurrent

Operating lease liabilities, noncurrent

Other noncurrent liabilities

Total liabilities

Commitments and Contingencies

Stockholders

Commitments and Contingencies (Note 8)

Stockholders’ equity:

Preferred stock, par value $ 0.001 :

2,000,000 shares authorized and 0 issued and outstanding as of

March 31, 2021 and December 31, 2020

2,000,000 shares authorized and 0 issued and outstanding as of June 30, 2021 and December 31, 2020

Common stock, $ 0.001 par value:

20,000,000 Class A shares authorized as of March 31, 2021

and December 31, 2020;

1,792,699 shares issued and outstanding as of March 31, 2021, and 1,542,058 shares issued and outstanding as of December 31, 2020;

2,700,000 Class B shares authorized as of March 31, 2021 and

20,000,000 Class A shares authorized as of June 30, 2021 and December 31, 2020;

1,855,143 shares issued and outstanding as of June 30, 2021, and 1,542,058 shares issued and outstanding as of

December 31, 2020;

66,903 shares issued and outstanding as of March 31, 2021, and 249,077 shares issued and outstanding as of December 31, 2020;

and 1,005 Class F shares authorized, issued, and outstanding as of March 31,

2021 and December 31, 2020

Additional paid-in capital

Accumulated other

comprehensive income (loss)

2,700,000 Class B shares authorized as of June 30, 2021 and December 31, 2020;

80,430 shares issued

and outstanding as of June 30, and 249,077 shares issued and outstanding as of December 31, 2020;

and 1,005 Class F

shares authorized, issued, and outstanding as of June 30, 2021 and December 31, 2020

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders

Total liabilities and

stockholders equity

(1) Deferred revenue as of March 31, 2021 and

December 31, 2020 includes $61.1 million and $68.2 million, respectively, from Palantir Technologies Japan, K.K.

Equity Method Investments, for more information.

( 5,227,408 )

( 4,965,354 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Deferred revenue as of June 30, 2021 and December 31, 2020 includes $ 53.2 million and $ 68.2 million, respectively, from Palantir Technologies Japan, K.K.

Equity Method Investments,

for more information.

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

2 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue

Operating expenses:

Sales and marketing

administrative

Total operating

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest income

Interest expense

Change in fair value of

Other income (expense),

provision for income taxes

Provision for

Net loss per share

attributable to common stockholders, basic

Net loss per share

attributable to common stockholders, diluted

Weighted-average

shares of common stock outstanding used in computing net loss per share attributable to common stockholders, basic

Weighted-average

shares of common stock outstanding used in computing net loss per share attributable to common stockholders, diluted

Change in fair value of warrants

Other income (expense), net

Loss before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net loss per share attributable to common stockholders, basic

Net loss per share attributable to common stockholders, diluted

Weighted-average shares of common stock outstanding used in computing net loss per share attributable to

common stockholders, basic

Weighted-average shares of common stock outstanding used in computing net loss per share attributable to

common stockholders, diluted

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

comprehensive income:

currency translation adjustments

Comprehensive

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income:

Foreign currency translation adjustments

Comprehensive loss

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

Palantir Technologies Inc.

Condensed Consolidated Statements of Redeemable Convertible and Convertible Preferred Stock and Stockholders

Equity (Deficit)

Condensed Consolidated Statements of Redeemable Convertible and Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

2 unchanged sentences

Stockholders’

Balance as of

December 31, 2020

Issuance of common

stock from the exercise of stock options

Issuance of common

stock upon vesting of restricted stock units (RSUs)

Issuance of common

stock upon vesting of growth units

Issuance of common

stock upon net exercise of common stock warrants

comprehensive income

Balance as of

March 31, 2021

Balance as of March 31, 2021

Issuance of common stock from the exercise of stock options

Issuance of common stock upon vesting of restricted stock units (“RSUs”)

Issuance of common stock upon net exercise of common stock warrants and other

Stock-based compensation

Other comprehensive loss

Balance as of June 30, 2021

Comprehensive

Income (Loss)

Stockholders’

Balance as of December 31, 2020

Issuance of common stock from the exercise of stock options

Issuance of common stock upon vesting of RSUs

Issuance of common stock upon vesting of growth units

Issuance of common stock upon net exercise of common stock warrants and other

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2021

Palantir Technologies Inc.

Condensed Consolidated Statements of Redeemable Convertible and Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands)

Redeemable Convertible

3 unchanged sentences

Comprehensive

Stockholders’

Balance as of March 31, 2020

Issuance of Series K convertible preferred stock

Issuance of common stock from the exercise of stock options

Issuance of common stock, net of issuance costs

Retirement of treasury stock

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2020

Redeemable Convertible

Preferred Stock

Convertible Preferred

Treasury Stock

Comprehensive

Income (Loss)

Stockholders’

Balance as of

December 31, 2019

Conversion of

Series H-1 convertible preferred stock to common stock

Repurchase of

common stock, held in treasury

Issuance of common

stock from the exercise of stock options

comprehensive income

Balance as of

March 31, 2020

Balance as of December 31, 2019

Conversion of Series H-1

convertible preferred stock to common stock

Issuance of Series K convertible preferred stock

Repurchase of common stock, held in treasury

Issuance of common stock from the exercise of stock options

Issuance of common stock, net of issuance costs

Retirement of treasury stock

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2020

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Adjustments to

reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and

Change in fair value of

Non-cash operating lease expense

Other operating

Changes in operating assets

and liabilities:

Six Months Ended June 30,

Operating activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock-based compensation

Change in fair value of warrants

operating lease expense

Other operating activities

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other

current assets

Prepaid expenses and other current assets

Accounts payable

Accrued liabilities

Deferred revenue, current and

Customer deposits, current and

Operating lease liabilities,

current and noncurrent

Other noncurrent

Net cash provided

by (used in) operating activities

property and equipment

Net cash used in

Deferred revenue, current and noncurrent

Customer deposits, current and noncurrent

Operating lease liabilities, current and noncurrent

Other noncurrent liabilities

Net cash provided by (used in) operating activities

Investing activities

Proceeds from the

exercise of common stock options

Repurchase of

Other financing

Net cash provided

by financing activities

Effect of foreign

exchange on cash, cash equivalents, and restricted cash

(decrease) in cash, cash equivalents, and restricted cash

equivalents, and restricted cash - beginning of period

equivalents, and restricted cash - end of period

disclosures of cash flow information:

Cash paid for

Purchases of property and equipment

Proceeds from the sale of assets held for sale

Net cash used in investing activities

Financing activities

Proceeds from the issuance of common stock, net of issuance costs

Proceeds from issuance of debt, net of issuance costs

Principal payments on borrowings

Proceeds from the exercise of common stock options

Repurchase of common stock

Other financing activities

Net cash provided by financing activities

Effect of foreign exchange on cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash - beginning of period

Cash, cash equivalents, and restricted cash - end of period

Supplemental disclosures of cash flow information:

Cash paid for income taxes

Cash paid for interest

Supplemental disclosures of non-cash

investing and financing information:

Common stock issuance costs included in accounts payable and accrued liabilities

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

2 unchanged sentences

Palantir Technologies Inc.

(including its subsidiaries, Palantir, or the Company) was incorporated in Delaware on

(including its subsidiaries, “Palantir,” or “the Company”) was incorporated in Delaware on May 6, 2003.

The Company builds and deploys software platforms, Palantir Gotham and Palantir Foundry, that serve as the central operating systems for its customers.

Significant Accounting Policies

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.

Basis of Presentation and Consolidation

The accompanying

unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

ly 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.

For such investments, the share of the

investees results of operations is included as a component of other income (expense), net in the condensed consolidated statements of operations and the investment balance is included in other assets and classified as noncurrent in the

condensed consolidated balance sheets.

All significant intercompany balances and transactions have been eliminat e

d 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 d o

es not control, are accounted for using the equity method of accounting.

For such investments, the share of the investee’s results of operations is included as a component of other income (expense), net in the condensed consolidated statements of operations and the investment balance is included in other assets and classified as noncurrent in the condensed consolidated balance sheets.

The Company’s fiscal year ends on December 31.

The unaudited condensed consolidated balance

sheet as of December 31, 2020 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.

managements 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

(deficit), 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.

The Company ceased to be an emerging growth company as of December 31, 2020, which accelerated its adoption of Accounting Standards

Update (ASU) 2016-02, Leases (Topic 842).

As a result, certain components of cash flows used in operating activities within the Companys condensed consolidated statements of cash flows for

the three months ended March 31, 2020 have been presented to conform to the new standard.

The unaudited condensed consolidated balance sheet as of December 31, 2020 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 (deficit), 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.

The Company ceased to be an emerging growth company as of December 31, 2020, which accelerated its adoption of Accounting Standards Update (“ASU”) 2016-02,

Leases (Topic 842).

As a result, certain components of cash flows used in operating activities within the Company’s condensed consolidated statements of cash flows for the six months ended June 30, 2020 have been presented to conform to the new standard.

The impact to the presentation of the other statements was not material.

These unaudited condensed consolidated financial statements should be read in conjunction with the Companys audited consolidated

financial statements and notes included in its Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

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, 2020, which was filed with the SEC on February 26, 2021.

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,

identification of performance obligations in customer contracts, the valuation of deferred tax assets and uncertain tax positions, collectability of accounts receivable, useful lives of tangible assets, and the incremental borrowing rate for

operating leases.

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, identification of performance obligations in customer contracts, the valuation of deferred tax assets and uncertain tax positions, collectability of accounts receivable, 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 Companys financial position and results of operations.

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, 2020, which was filed with the SEC on February 26, 2021.

There have been no significant changes to

these policies during the three months ended March 31, 2021.

Significant Accounting Policies

in the notes to consolidated financial statements in its Annual Report on Form 10-K

for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

There have been no significant changes to these policies during the six months

ended June 30, 2021.

Palantir Technologies Inc.

1 unchanged sentence

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 consists 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.

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,

Cash and 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.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):

As of June 30,

Cash and cash equivalents

Restricted cash

Total cash, cash

equivalents, and restricted cash

Restricted cash, noncurrent

Total cash, cash equivalents, and restricted cash

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 Companys best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on

expectations of the customers 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 Companys assessment as of March 31, 2021 and

December 31, 2020, it did not record an allowance for credit losses as probable losses are not expected to be material.

Concentrations of

Credit Risk and Other Concentrations

Financial instruments that potentially subject the Company to significant concentrations of

credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable.

Cash equivalents consist of money market funds with original maturities of three months or less, which are invested primarily with U.S.

institutions.

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 June 30, 2021 and December 31, 2020, it did no t record an allowance for credit losses as probable losses are not expected to be material.

Concentrations of Credit Risk and Other Concentrations

instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable.

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 Companys accounts receivable balances as of March 31, 2021 and December 31, 2020 were $151.4 million and $156.9 million, respectively.

Customer G represented 14%

and 13% of total accounts receivable as of March 31, 2021 and December 31, 2020, respectively.

No other customer represented more than 10% of total accounts receivable as of March 31, 2021 and December 31, 2020.

seeks to mitigate its credit risk with respect to accounts receivable by contracting with large commercial customers and government agencies and regularly monitoring the aging of accounts receivable balances.

As of March 31, 2021 and

December 31, 2020, the Company had not experienced any significant losses on its accounts receivable.

For the three months ended

March 31, 2021, no customer represented more than 10% of total revenue.

For the three months ended March 31, 2020, Customer F, which is in the government operating segment, represented 12% of total revenue and Customer A, which is in the

commercial operating segment, represented 11% of total revenue.

No other customer represented more than 10% of total revenue for the three months ended March 31, 2020.

Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.

The Company is exposed to concentrations of credit risk with respect to accounts receivable presented on the condensed consolidated balance sheets.

The Company’s accounts receivable balances as of June 30, 2021 and December 31, 2020 were $ 243.0 million and $ 156.9 million, respectively.

Customer I represented 24 % of total accounts receivable as of June 30, 2021.

Customer G represented 13 % of total accounts receivable as of December 31, 2020.

No other customer represented more than 10 % of total accounts receivable as of June 30, 2021 and December 31, 2020.

The Company seeks to mitigate its credit risk with respect to accounts receivable by contracting with large commercial customers and government agencies and regularly monitoring the aging of accounts receivable balances.

As of June 30, 2021 and December 31, 2020, the Company had not experienced any significant losses on its accounts receivable.

For the three and six months ended June 30, 2021, no customer represented more than 10% of total revenue.

For the three and six months ended June 30, 2020, Customer F, which is in the government operating segment, represented 11 % of total revenue and Customer A, which is in the commercial operating segment, represented 10 % of total revenue, respectively.

No other customer represented more than 10 % of total revenue for the three and six months ended June 30, 2020.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company relies on the technology, infrastructure, and software applications, including software-as-a-service offerings, of third parties in order to host or operate certain key products and functions of its business.

The Company relies on the technology, infrastructure, and software applications, including software-as-a-service

offerings, of third parties in order to host or operate certain key products and functions of its

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic

n December 2019, the FASB issued ASU

Simplifying the Accounting for Income Taxes (Topic 740)

as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes.

ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax

allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also amends other aspects of the

guidance to help simplify and promote consistent application of GAAP.

The Company adopted ASU 2019-12 as of January 1, 2021 using transition methods allowed under each aspect of the guidance.

of the standard did not have a material impact on the Companys condensed consolidated financial statements.

Contract Liabilities and

Remaining Performance Obligations

removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

also amends other aspects of the guidance to help simplify and promote consistent application of GAAP.

The Company adopted ASU

as of January 1, 2021 using transition methods allowed under each aspect of the guidance.

The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements.

Contract Liabilities and Remaining Performance Obligations

Contract Liabilities

The Company’s contract liabilities consist of deferred revenue and customer deposits.

As March 31, 2021 and December 31, 2020

the Companys contract liability balances were $552.4 million and $531.9 million, respectively.

Revenue of $169.5 million and $181.2 million was recognized during the three months ended March 31, 2021 and 2020, respectively,

that was included in the contract liability balances as of December 31, 2020 and 2019, respectively.

Performance Obligations

The Companys arrangements with its customers often have terms that span over multiple years.

As of June 30, 2021 and December 31, 2020, the Company’s contract liability balances were $ 555.5 million and $ 531.9 million, respectively.

Revenue of $ 285.4 million and $ 301.3 million was recognized during the six months ended June 30, 2021 and 2020, respectively, that was included in the contract liability balances as of

December 31, 2020 and 2019, respectively.

Remaining Performance Obligations

The Company’s arrangements

with its customers oft e

n have terms that span over multiple years.

However, the Company generally allows 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.

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 Companys remaining performance obligations were $625.9 million as of March 31, 2021, of which the Company expects to

recognize approximately 50% as revenue over the next twelve months.

The Company’s remaining performance obligations were $ 671.9 million as of June 30, 2021, of which the Company expects to recognize approximately 49 % as revenue over the next twelve months.

Disaggregation of Revenue

Segment and Geographic Information , for disaggregated revenue by customer segment and geographic region.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Segment and Geographic Information

, for disaggregated revenue by customer segment and geographic region.

Fair Value Measurements

Financial instruments consist of cash equivalents, restricted cash, accounts receivable, other assets accounted for at fair value, accounts

payable, and accrued liabilities.

Cash equivalents and restricted cash are stated at fair value on a recurring basis.

Accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value

due to the short time to the expected receipt or payment date.

The carrying amount of the Companys outstanding debt approximates the fair value as the debt bears a floating rate that approximates the market interest rate.

The following table presents the Companys assets and liabilities that are measured at fair value on a recurring and nonrecurring basis

and indicates the fair value hierarchy of the valuation (in thousands):

As of March 31, 2021

Financial instruments consist of money market funds and certificates of deposit included in cash equivalents and restricted cash, accounts receivable, other assets accounted for at fair value, accounts payable, and accrued liabilities.

money market funds and certificates of deposit are stated at fair value on a recurring basis.

Accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

The following tables present the Company’s assets that are measured at fair value on a recurring and nonrecurring basis and indicates the fair value hierarchy of the valuation (in thousands):

As of June 30, 2021

Money market funds

Certificates of

Certificates of deposit

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of December 31, 2020

Money market funds

Certificates of

Certificates of deposit

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

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.

Gross unrealized gains or losses for

cash equivalents as of March 31, 2021 and December 31, 2020 were not material.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Gross unrealized gains or losses for cash equivalents as of June 30, 2021 and December 31, 2020 were not material.

Balance Sheet Components

Property and Equipment, Net

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

As of March 31,

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

As of June 30,

As of December 31,

equipment, software, and other

Furniture and

Construction in

Total property and equipment,

depreciation and amortization

Total property and equipment,

Depreciation and amortization expense related to property and equipment, net was $3.2 million and

$3.7 million for the three months ended March 31, 2021 and 2020, respectively.

Leasehold improvements

Computer equipment, software, and other

Furniture and fixtures

Construction in progress

Total property and equipment, gross

accumulated depreciation and amortization

Total property and equipment, net

Depreciation and amortization expense related to property and equipment, net was $ 3.1 million and $ 3.2 million for the three months ended June 30, 2021 and 2020, respectively, and $ 6.3 million and $ 6.8 million for the s i

x months ended June 30, 2021 and 2020, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

As of March 31,

As of June 30,

As of December 31,

Accrued payroll

and related expenses

Accrued other

Total accrued

Accrued payroll and related expenses

Accrued other liabilities

Total accrued liabilitie

Equity Method Investments

Palantir Technologies Japan, K.K.

November 2019, the Company and SOMPO Holdings, Inc.

During November 2019, the Company and SOMPO Holdings, Inc.

(“SOMPO”) created a Japanese Kabushiki Kaisha (“K.K.”), Palantir Technologies Japan, K.K.

2 unchanged sentences

The shares the Company received in exchange represent a 50 % voting interest in Palantir Japan.

remaining 50% of the voting interest is held by SOMPO.

The remaining 50 % of the voting interest is held by SOMPO.

The Company’s investment in Palantir Japan is accounted for as an equity method investment as the Company is able to exercise significant influence over, but does not control, the investee.

Concurrently with the formation of Palantir Japan, the Company entered into a ten-year license

and services agreement with Palantir Japan for a limited non-transferable right to resell the Companys platforms and use certain of the Companys trademarks in exchange for $25.0 million and

future quarterly royalty payments to be paid based on Palantir Japans net revenue.

In connection with the license rights sold to Palantir Japan, the Company recorded the receipt of the $25.0 million in deferred revenue, which will be

recognized over the term of the agreement.

In addition, the Company received a prepayment of $50.0 million to be used toward future products and services provided by the Company to support the business operations and future deployments of the

Companys platforms by Palantir Japan (service credit).

The Company recorded the $50.0 million service credit in deferred revenue, which will be utilized on an as-needed basis and expires

after five years.

For the three months ended March 31, 2021 and 2020, Palantir Japan utilized $6.7 million and $0.3 million, respectively, of the service credit.

Palantir Technologies Inc.

1 unchanged sentence

2014 Credit Facility

2014, the Company entered into an unsecured revolving credit facility which has been subsequently amended (the 2014 Credit Facility).

The 2014 Credit Facility bears interest at the London Interbank Offered Rate (LIBOR) plus a

margin of 2.75% per annum, subject to certain adjustments, and incurs a commitment fee of 0.375% assessed on the daily average undrawn portion of revolving commitments.

Interest and commitment fees are payable at the end of an interest period or at

each three-month interval if the interest period is longer than three months.

In October 2014, the Company entered into an unsecured revolving credit facility which has been subsequently amended (the “2014 Credit Facility”).

The 2014 Credit Facility incurred interest at the London Interbank Offered Rate (“LIBOR”) plus a margin of 2.75 % per annum, subject to certain adjustments, and incurs a commitment fee of 0.375 % assessed on the daily average undrawn p o

rtion of revolving commitments.

Interest and commitment fees are payable at the end of an interest period or at each three-month interval if the interest period is longer than three months.

The 2014 Credit Facility, as amended, matures on June 4, 2023 .

As of March 31, 2021, the Company had $200.0 million of term loans outstanding under the 2014 Credit Facility and an additional

$200.0 million undrawn revolving credit facility available.

The 2014 Credit Facility is secured with substantially all of the Companys assets.

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, 2021.

The Companys outstanding debt consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

As of March 31,

As of December 31,

Carrying value of

During April 2021, the Company entered into an amendment to the 2014 Credit Facility, which provided for an increase of $ 200.0 million to the revolving commitments of the existing lenders under the 2014 Credit Facility, for total revolving commitments of $ 400.0 million, and which also provided for an incremental loan facility for additional loans in an agg r

egate principal amount of up to $ 100.0 million with one or more existing or new lenders upon mutual agreement between the Company and such lenders.

Upon entering into the amendment, the Company repaid its outstanding term loans of $ 200.0 million.

As of June 30, 2021, the Company had no amounts outstanding under the 2014 Credit Facility and a $ 400.0 million undrawn revolving credit facility.

The 2014 Credit Facility contains customary representations and warranties, and certain financial and nonfinancial covenants, including but not limited to maintaining minimum liquidity of $ 50.0 million, and certain limitations on liens and indebtedness.

The Company was in compliance with all covenants associated with the 2014 Credit Facility as of June 30, 2021.

Commitments and Contingencies

Letters of Credit and Guarantees

The Company had irrevocable standby letters of credit and guarantees, including bank guarantees, outstanding in the amounts of

$109.0 million and $116.8 million as of March 31, 2021 and December 31, 2020, respectively, which were fully collateralized.

The Company is required to maintain these letters of credit and guarantees primarily for operating lease

agreements, certain customer contracts, and other guarantees and financing arrangements.

As of March 31, 2021, these letters of credit and guarantees had expiration dates through August 2028.

Purchase Commitments

2019, the Company entered into, and subsequently amended during December 2020, 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.

In December 2019, the Company entered into, and subsequently amended during December 2020, 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, 2021, the Company had

satisfied $111.2 million of its $126.0 million commitment for the contract year ending June 30, 2021.

In June 2020, the

Company entered into an additional commitment to purchase at least $45.0 million of cloud hosting services over a period of five years commencing on June 1, 2020 and ending on May 31, 2025.

If the spend commitment is not met at the

end of the term, the Company is obligated to pay the full amount of the outstanding balance (shortfall payment).

The shortfall payment may be applied as a prepayment against consumption during an additional twelve-month coverage period

expiring on May 31, 2026, at which time any unused amount would be forfeited.

As of March 31, 2021, the Company had satisfied $4.4 million of its commitment.

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.

The Company satisfied its $ 126.0 million commitment for the contract year ended June 30, 2021.

The commitment amount for the contract year ended

June 30, 2022 is

$ 167.0 million.

In June 2020, the Company entered into an additional commitment to purchase at least $ 45.0 million of cloud hosting services over a period of five years commencing on June 1, 2020 and ending on May 31, 2025.

If the spend commitment is not met at the end of the term, the Company is obligated to pay the full amount of the outstanding balance (“shortfall payment”).

The shortfall payment may be applied as a prepayment against consumption during an additional twelve-month coverage period expiring on May 31, 2026, at which time any unused amount would be forfeited.

As of June 30, 2021, the Company had satisfied $ 6.0

million of its commitment.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Investment Commitment

On March 30, 2021, the Company entered into a subscription agreement with Qell Acquisition Corp (Qell) and Qell DutchCo B.V

(Lilium HoldCo) to purchase 4.1 million Class A ordinary shares of Lilium HoldCo in a private placement for a total purchase price of $41.0 million.

The closing of the private placement is contingent upon the completion of

the proposed business combination between Qell, Lilium HoldCo, and Lilium GmbH (Lilium).

Additionally, concurrent with signing the subscription agreement, Lilium and the Company entered into a five-year enterprise subscription contract

to access the Companys products and services.

Investment Commitments

The Company approved and entered into certain 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, or commitments to purchase, the “Investments”).

As of June 30, 2021, the Company had outstanding commitments, subject to the applicable terms and conditions, to purchase a total of

25.0 million shares for an aggregate purchase price of

$ 250.0 million.

The closings of certain of such Investments are contingent upon the completion of a proposed business combination between the applicable Investee and other applicable parties.

As of June 30, 2021, none of such Investments had closed.

Additionally, 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 maximum potential revenue from these commercial contracts is $ 428 million, which is inclusive of $ 73 million from contractual options, and the terms of such contracts, including these contractual options, range from

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 assessed the concurrent agreements under the non-monetary

guidance within Accounting Standards Codification (“ASC”)

606 - Revenue from Contracts with Customers

and the total revenue recognized from such

commercial contracts during the three and six months ended June 30, 2021 was

$ 3.0 million.

The following table presents details related to the Company’s investment commitments as of June 30, 2021 (in thousands):

Agreement Date

Investment Amount

March 30, 2021

Sarcos Robotics

April 5, 2021

Roivant Sciences

Celularity (1)(2)

Mobility company

Babylon Health

June 13, 2021

Pear Therapeutics

June 21, 2021

Autonomous vehicle company (1)

June 22, 2021

Commercial contract contains termination for convenience clauses in the event the proposed business combination and/or the Company’s proposed investment is not completed.

The Company’s investment closed during July 2021.

Litigation and Legal Proceedings

From time to time, third parties may assert patent infringement claims against the Company.

In addition, from time to time, the Company may be

subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, and other intellectual property rights;

From time to time, third parties may assert paten t

infringement claims against the Company.

In addition, from time to time, the Company may be subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, and other intellectual property rights;

employment claims;

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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;

Such matters may include, but not be limited to, claims, disputes, allegations, or investigations related to warranty;

breach of contract;

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intellectual property;

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);

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);

or other matters.

The Company is unable to predict whether or when any such matters may arise, the outcome of these matters, or the ultimate legal and financial liability, and cannot reasonably estimate the possible loss or range of loss

at this time and accordingly has not accrued a related liability.

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

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 KT4 Plaintiffs seek compensatory and punitive damages, interest,

fees, and costs .

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company believes this lawsuit is without merit and is vigorously defending itself against it.

uncertainty of litigation, it may be reasonably possible that the Company will incur a loss with regards to the matter;

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

overall effects that may result from the case on its financial condition, results of operations, or cash flows.

As of March 31,

2021, 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.

Accordingly, the Company is unable, at this time, to estimate the overall effects that may result from the lawsuit on its financial condition, results of operations, or cash flows.

As of June 30, 2021, 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 $ 98.7 million and $ 116.8 million as of June 30, 2021 and December 31, 2020, respectively, all of which were fully collateralized.

The Company is required to maintain these letters of credit and guarantees primarily for operating lease agreements, certain customer contracts, and other guarantees and financing arrangements.

As of June 30, 2021, these letters of credit and guarantees had expiration dates through August 2028.

Warranties and Indemnification

The Company generally provides a warranty for its software products and services and a service level agreement (SLA) for the

Companys performance of software operations via its operations and maintenance (O&M) services to its customers.

The Companys 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 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).

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, 2021 and December 31, 2020.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company generally agrees to indemnify its customers against legal claims that the

Companys 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 Companys 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;

The Company has not recorded warranty expense or related accruals as of June 30, 2021 and December 31, 2020.

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, 2021 and December 31, 2020.

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

Companys bylaws and Amended and Restated Certificate of Incorporation.

To date, the Company has not been required to make any payment resulting from infringement claims asserted against its customers and does not believe that the Company will be liable for such claims in the foreseeable future.

As such, the Company has not recorded a liability for infringement costs as of June 30, 2021 and December 31, 2020.

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 .

Stockholders’ Equity

The Companys 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.

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 below 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 (our

The Class F common stock generally gives the Founders the ability to control up to 49.999999% of the total voting power of the Companys 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 Companys equity securities as of March 31, 2021.

common stock are entitled to dividends when, as and if declared by the Companys 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, 2021.

In connection with the Companys direct listing of its Class A common stock on the New York Stock

Exchange (Direct Listing) in September 2020, all outstanding shares of redeemable convertible preferred stock and convertible preferred stock were converted into 4,017,378 and 793,725,807 shares of Class B common stock,

respectively, and 1,005,000 shares of Class B common stock held by the Founders were exchanged for an equal number of shares of Class F common stock.

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

As of March 31, 2021

As of December 31, 2020

The Class F common stock has the voting rights generally described below 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

The Class F common stock generally gives the Founders the ability to control up to 49.999999 % of the total voting power of the Company’s capital stock, so long as the Founders and certain of their affiliates collectively meet a minimum ownership threshold, which was 100.0 million of the Company’s equity securities as of June 30, 2021.

Holders of common stock are entitled to dividends when, as and if declared by the Company’s Board of Directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends.

No dividends have been declared as of June 30, 2021.

In connection with the Company’s direct listing of its Class A common stock on the New York Stock Exchange (“Direct Listing”) in September 2020, all outstanding shares of redeemable convertible preferred stock and convertible preferred stock were converted into 4,017,378 and 793,725,807 shares of Class B common stock, respectively, and 1,005,000 shares of Class B common stock held by the Founders were exchanged for an equal number of shares of

Class F common stock.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

As of June 30, 2021

As of December 31, 2020

Common stock:

Stock-Based Compensation

Stock Options

The following table

summarizes stock option activity for the three months ended March 31, 2021 (in thousands, except per share amounts):

The following table summarizes stock option activity for the six months ended June 30, 2021 (in thousands, except per share amounts):

Exercise Price

Intrinsic Value

Balance as of

December 31, 2020

Balance as of December 31, 2020

Options exercised

Options canceled and forfeited

Balance as of

March 31, 2021

Options vested and exercisable as of March 31, 2021

As of March 31, 2021, the unrecognized expense related to options outstanding was $1.1 billion,

which is expected to be recognized over a weighted-average service period of 8.09 years.

The following table summarizes the RSU activity for the three months ended March 31, 2021 (in thousands, except per share amounts):

Balance as of June 30, 2021

Options vested and exercisable as of June 30, 2021

As of June 30, 2021, the unrecognized expense related to options outstanding was $ 1.0 billion, which is expected to be recognized over a weighted-average service period of 8.07 years.

The following table summarizes the RSU activity for the six months ended June 30, 2021 (in thousands, except per share amounts):

Weighted Average

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Value per Share

outstanding as of December 31, 2020

Unvested and outstanding as of December 31, 2020

RSUs canceled

outstanding as of March 31, 2021

As of March 31, 2021, the total unrecognized stock-based compensation expense related to the RSUs

outstanding was $850.8 million, which the Company expects to recognize over 3.30 years.

In May 2019, the Company granted growth units which vest upon the satisfaction of both a performance-based vesting condition, which was

satisfied upon the Companys Direct Listing, and a service-based vesting condition, which was satisfied in March 2021.

In March 2021, the 3.6 million outstanding growth units vested and, per the formula applicable to the awards, converted

into 1.5 million shares of common stock.

During the three months ended March 31, 2021, the Company recognized the remaining stock-based compensation expense related to the growth units of $1.2 million.

Unvested and outstanding as of June 30, 2021

As of June 30, 2021, the total unrecognized stock-based compensation expense related to the RSUs outstanding was $ 815.0 million, which the Company expects to recognize over 3.20 years.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In May 2019, the Company granted growth units which vest upon the satisfaction of both a performance-based vesting condition, which was satisfied upon the Company’s Direct Listing, and a service-based vesting condition, which was satisfied in March 2021.

In March 2021, the 3.6 million outstanding growth units vested and, per the formula applicable to the awards, converted into 1.5 million shares of common stock.

During the three months ended March 31, 2021, the Company recognized the remaining stock-based compensation expense related to the growth units of $ 1.2 million.

Stock-based Compensation Expense

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

Three Months Ended March 31,

administrative

Total stock-based

compensation expense

Related Party Non-Recourse Note

In November 2016, the Company entered into a non-recourse promissory note to lend an employee director

$25.9 million, which was secured by 10.5 million shares of the Company common stock held by the employee director (pledged collateral).

Such arrangement was accounted for as a stock option issued to the employee, and the

Company recorded the related stock-based compensation expense upon the issuance of the note.

The promissory note accrued interest at a rate of 1.5% per annum, compounded semi-annually.

In August 2020, the Company received a payment of $26.6 million for a portion of the principal and accrued interest on the outstanding non-recourse promissory note in the form of 3.5 million shares of common stock based on the fair market value of the common stock on the date of repayment.

The Company forgave the remaining $0.8 million

owed under the note, guaranteed the employee director a tax neutrality payment to cover his additional tax liability associated with the transaction, and terminated its security interest in the remaining shares of common stock that were originally

pledged as collateral.

The forgiveness of the remaining debt and the provision of the tax neutrality payment was accounted for as a modification to the original stock option, and the Company recorded additional stock-based compensation expense of

$4.5 million during the year ended December 31, 2020 and satisfied the liability as of March 31, 2021.

The Company recorded provision for income taxes of $3.1 million and $2.6 million for the three months ended March 31, 2021 and

2020, respectively.

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue

Sales and marketing

Research and development

General and administrative

Total stock-based compensation expense

The Company recorded a benefit for income taxes of

$ 5.7 million and a provision for income taxes of $ 0.9 million for the three months ended June 30, 2021 and 2020, respectively, and a benefit for income taxes of

$ 2.6 million and a provision for income taxes of

$ 3.5 million for the six months ended June 30, 2021 and 2020, respectively.

The Company is subject to income tax in the U.S.

as well as other tax jurisdictions in which it conducts business.

The Companys 2021 effective tax rate differs from the U.S.

statutory rate primarily due to the valuation

allowance recorded on the Companys losses in the U.S.

and other jurisdictions.

The change was primarily due to increases in profits from the Companys international operations offset by decreases 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

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 losses in certain jurisdictions, the Company believes that it is more likely than not that its U.S.

federal and state deferred

tax assets will not be fully realized.

Accordingly, the Company has maintained a valuation allowance on its U.S.

federal and state deferred tax assets.

The Company’s effective rate 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 of stock-based compensation, and withholding tax expense.

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 of stock-based compensation and the revaluation of its United Kingdom (“UK”) deferred tax assets as a result of a change in the UK corporate tax rate enacted during the current quarter, which increase d

the rate from 19 % to 25 % and will be effective April 1, 2023.

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.

federal and state deferred tax assets will not be fully realized.

Accordingly, the Company has maintained a valuation allowance

federal and state

deferred tax assets.

Palantir Technologies Inc.

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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,

Net loss attributable to

common stockholders

Change in fair value

attributable to participating securities

Net loss attributable to

common stockholders, for diluted net loss per share

Weighted-average shares used

in computing net loss per share, basic

Weighted-average shares used

in computing net loss per share, diluted

Net loss per share

attributable to common stockholders, basic

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

Six Months Ended

Net loss attributable to common stockholders

Change in fair value attributable to participating securities

Net loss attributable to common stockholders, for diluted net

loss per share

Weighted-average shares used in computing net loss per share, basic

Weighted-average shares used in computing net loss per share, diluted

Net loss per share

attributable to common stockholders, diluted

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,

Net loss per share attributable to common stockholders, basic

Net loss per share attributable to common stockholders, diluted

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):

Three Months Ended June 30,

Six Months Ended June 30,

Redeemable convertible preferred stock

Convertible preferred stock

preferred stock

purchase redeemable convertible and convertible preferred stock

purchase common stock

Options and SARs

issued and outstanding

Warrants to purchase redeemable convertible and convertible

Warrants to purchase common stock

Options and SARs issued and outstanding

RSUs outstanding

Growth units outstanding

Segment and Geographic Information

The following tables reflect the results of the Companys reportable operating segments consistent with the manner in which the chief

operating decision maker (CODM) evaluates the performance of each segment and allocates the Companys resources.

The CODM does not evaluate the performance of the Companys 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.

The following 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.

It excludes certain operating expenses that are not allocated to segments because they are separately managed at the consolidated corporate level.

These unallocated costs include stock-based compensation expense, research and development expenses, and general and administrative expenses.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total revenue

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Contribution:

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

Three Months Ended March 31,

development expenses (1)

administrative expenses (1)

compensation expense

Three Months Ended June 30,

Six Months Ended June 30,

Loss from operations

Research and development expenses

General and administrative expenses

Stock-based compensation expense

Total contribution

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Geographic Information

geography is based on the customers headquarters or agency location at the time of sale.

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,

Three Months Ended June 30,

United States

United Kingdom

Rest of world (1)

Total revenue

(1) No other country represents 10% or more of total revenue for the three months

ended March 31, 2021 or 2020.

No other country represents

or more of total revenue for the three months ended June 30, 2021 or 2020.

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30,

United States

United Kingdom

Rest of world

Total revenue

other country represents 10 % or more of total revenue for the six months ended June 30, 2021 or 2020.

Subsequent Events

Amendment of the 2014 Credit Facility and Repayment of the Outstanding Revolving Term Loan

On April 1, 2021, the Company entered into an amendment to the 2014 Credit Facility, which provides for an increase of $200.0 million

to the revolving commitments of the existing lenders under the 2014 Credit Facility, for total revolving commitments of $400.0 million, and which also provides for an incremental loan facility of additional term loans or revolving loans in an

aggregate principal amount of up to $100.0 million with one or more existing or new lenders upon mutual agreement between the Company and such lenders.

Upon entering into the amendment, the Company repaid its outstanding term loans of

$200.0 million and no amounts were outstanding under the 2014 Credit Facility.

On April 5, 2021, the Company entered into a subscription agreement with Rotor Acquisition Corp.

(Rotor) to purchase

2.1 million shares of Class A common stock of Rotor in a private placement for a total purchase price of $21.0 million.

The closing of the private placement is contingent upon the completion of the proposed business combination

between Rotor, Rotor Merger Sub Corp.

(a wholly owned subsidiary of Rotor), and Sarcos Corp.

Additionally, concurrent with signing the subscription agreement, Sarcos and the Company entered into a

six-year enterprise subscription contract to access the Companys products and services.

May 1, 2021, the Company entered into a subscription agreement with Montes Archimedes Acquisition Corp.

(Montes) and Roivant Sciences Ltd.

(Roivant) to purchase 3.0 million shares of Class A common stock of

Montes in a private placement for a total purchase price of $30.0 million.

The closing of the private placement is contingent upon the completion of the proposed business combination between Montes, Roivant, and other applicable parties.

Additionally, concurrent with signing the subscription agreement, Roivant and the Company entered into a five-year enterprise subscription contract to access the Companys products and services.

On May 5, 2021, the Company entered into a subscription agreement with GX Acquisition Corp.

(GX) to purchase 2.0 million

shares of Class A common stock of GX in a private placement for a total purchase price of $20.0 million.

The closing of the private placement is contingent upon the completion of the proposed business combination between GX, Celularity

(Celularity), and other applicable parties.

Additionally, concurrent with signing the subscription agreement, Celularity and the Company entered into a five-year enterprise subscription contract to access the Companys products

and services.

On May 11, 2021, the Company entered into a subscription agreement with a special purpose acquisition company to purchase

2.0 million shares of its Class A common stock in a private placement for a total purchase price of $20.0 million.

The closing of the private placement is contingent upon the completion of the proposed business combination between the special

purpose acquisition company and a mobility company, and other applicable parties.

Additionally, concurrent with signing the subscription agreement, the mobility company and the Company entered into a five-year enterprise subscription contract to

access the Companys products and services.

Investment Commitments and Investments

The Company approved and entered into additional Investment Agreements from July 1, 202

1 through the date of this filing.

As of the date of this filing, the Company had additional outstanding investment commitments, subject to applicable terms and conditions, to purchase a total of

million shares for an aggregate purchase price of $

The closings of certain of such Investments are contingent upon the completion of a proposed business combination between the applicable Investee and other applicable parties.

The following table presents details regarding such additional investment commitments outstanding as of the date of this filing (in thousands):

Investment Agreement

Investment Amount

July 18, 2021

July 27, 2021

August 2, 2021

Commercial contract contains termination for c onvenience

clauses in the event the proposed business combination and/or the Company’s proposed investment is not completed .

Additionally, during July 1, 2021 through the date of this filing, the Company purchased

9.0 million shares for an aggregate purchase price of $

53.0 million, as set forth in the following table (in thousands):

Investment Amount

Celularity (1)

Electric vehicle company

Autonomous aerial vehicle company

Reflected as commitment in Footnote 8.

Commitments and Contingencies

as of June 30, 2021 .

Palantir Technologies Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In connection with the signing of the Investment Agreements entered into between July 1, 2021 and the date of this filing, each Investee or an associated entity and the Company

entered into a commercial contract for the Company’s products and services.

The maximum potential revenue from these commercial contracts is

$ 162 million, and the terms of such contracts rang

e from four to

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.

Investment in Gold

During August 2021, the Company purchased $ 50.7 million in 100 -ounce gold bars.

Such purchase will initially be kept in a secure third-party facility located in the northeastern United States and the Company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice.

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.

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, would, intend, target,

goal, outlook, project, contemplate, believe, estimate, predict, potential, 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;

In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “would,” “intend,” “target,” “goal,” “outlook,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” 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;

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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 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 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 and data protection;

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;

2 unchanged sentences

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 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 impact of the ongoing COVID-19 pandemic, including on our and our

customers, vendors, and partners respective businesses and the markets in which we and our customers, vendors, and partners operate;

the impact of the ongoing COVID-19

pandemic, including on our and our customers’, vendors’, and partners’ respective businesses and the markets in which we and our customers, vendors, and partners operate;

the increased expenses associated with being a public company.

1 unchanged sentence

You should not rely upon forward-looking statements as predictions of future events.

based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our

business, financial condition, results of operations, and prospects.

The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled

Risk Factors and elsewhere in this Quarterly Report on Form 10-Q.

We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q

primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects.

The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “ Risk Factors

” and elsewhere in this Quarterly Report on Form 10-Q.

Moreover, we operate in a very competitive and rapidly changing environment.

New risks and uncertainties emerge from time to

time and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q.

We cannot assure you that

the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.

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.

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.

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.

MANAGEMENTS 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.

We founded the Company in 2003 to build software for use in counterterrorism operations.

In 2008, we released our first platform, Palantir Gotham (Gotham), for customers in the intelligence sector.

Gotham enables users

to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants.

Defense agencies in the United States then began using Gotham to investigate potential threats and to help protect soldiers from improvised

explosive devices.

Today, the platform is widely used by government agencies in the United States and its allies.

Our software is on the front lines, sometimes literally, and that means so are we.

We later began working with leading companies across industries, including companies in the energy, transportation, financial services, and

healthcare sectors.

In 2016, we released our second software platform, Palantir Foundry (Foundry), to address a common set of challenges that we saw at large companies.

Foundry is becoming a central operating system not only for individual institutions but also for entire industries.

In 2017, for example, our partnership with Airbus expanded into a platform for the aviation industry, and today connects data from more than

one hundred airlines and 9,000 aircraft around the world.

We believe that every large 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.

long term, we believe that every large institution in the markets we serve is a potential partner.

For the three months ended March 31, 2021, we generated $341.2 million in revenue, reflecting a 49% growth rate from the three months

ended March 31, 2020, when we generated $229.3 million in revenue.

Our operating results continued to improve when excluding

stock-based compensation.

In the three months ended March 31, 2021, we incurred losses from operations of $114.0 million, or income from operations of $116.6 million when excluding stock-based compensation and related employer payroll

In the three months ended March 31, 2020, our losses from operations were $70.2 million, or $16.1 million 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.

In the three months ended March 31, 2020, our gross profit was $165.0 million, reflecting a gross margin of 72%, or 75% when excluding stock-based compensation.

For more information about our income or loss from operations, when excluding stock-based compensation and related employer payroll taxes;

gross profit and gross margin, when excluding stock-based compensation, as well as reconciliations from loss from operations and gross profit, see the section titled Non-GAAP Reconciliations

Our Customers

We have updated our definition of a customer to be an organization from which we have recognized revenue during the trailing twelve month

period to provide more meaningful period over period comparisons.

During the period ended March 31, 2021, we had 149 customers, including leading companies in various commercial sectors as well as government agencies around the world.

the period ended March 31, 2020, we had 131 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 worlds leading government institutions and companies.

Our average revenue per customer during the trailing twelve months ended March 31, 2021 was $8.1 million, which grew 29% from $6.3 million per

customer during the trailing twelve months ended March 31, 2020.

Our average revenue for the top twenty customers during the during the trailing twelve months ended March 31, 2021 was $36.1 million, which grew 34% from an average of

$27.0 million from the top twenty customers during the trailing twelve months ended March 31, 2020.

Large 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, 2021, commercial customers accounted for 39% of our

revenue while government agencies accounted for 61%.

In the three months ended March 31, 2021, we generated 58% of our revenue from customers in the United States and the remaining 42% from customers abroad.

Coronavirus (COVID-19) Impact

As a result of COVID-19, we have taken precautionary measures in order to minimize the risk of the

virus to our employees, our customers, and the communities in which we operate, including 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 currently works remotely, there has been minimal disruption in our ability to ensure the effective operation of our software platforms.

We expect to begin to open certain of our offices in a limited capacity

over the remainder of the year, while closely monitoring 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 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.

We have seen a decrease in our travel and office-related expenditures, including

temporary closures of our offices globally and reductions in related operating expenses, related to the ongoing 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, especially as we begin to open certain of our

offices, 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 Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021, for further discussion of the

possible impact of the COVID-19 pandemic on our business.

Our Business Model

Our customers pay us to use the software platforms we have built.

Our business model with respect to acquiring and growing our accounts has three phases:

(1) Acquire, (2) Expand, and (3) Scale.

categorize all customers into cohorts on December 31st each year.

Our decisions about which customer relationships require further investment may change over

time, based on our assessment of the potential long-term value that our software can generate for them.

As a result, customers may move

back and forth through phases, as relationship needs and our assessment of the merits of further investment change.

We enter into initial pilots with customers, generally at our own expense and without a guarantee of future returns, in order to

access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons.

Some customers may

have a rapid Acquire phase followed by a long Expand phase.

Others may skip the Expand phase altogether and move immediately into the Scale phase.

We manage customers at the account level, not by industry or sector, so that we can optimize on the

specific growth opportunities for each.

In 2020, we generated a total of $1,092.7 million in revenue.

Acquire phase customers

cohorted as of December 31, 2020 generated $0.3 million in revenue in 2020.

Expand phase customers cohorted as of December 31, 2020 generated $20.3 million in revenue in 2020.

Scale phase customers cohorted as of

December 31, 2020 generated $1,072.1 million in revenue in 2020.

In the three months ended March 31, 2021, customers

cohorted as of December 31, 2020 generated a total of $340.8 million in revenue.

New customers acquired during the three months

ended March 31, 2021 generated an additional $0.4 million in revenue and will be assigned a cohort as of December 31, 2021.

A more detailed discussion of the three phases, for purposes of illustration of how we manage accounts across

the business, follows below.

We actively pursue discussions with existing and prospective customers in order to identify ways in which our software platforms can provide

long-term value.

In the first phase, we typically acquire new opportunities with minimal risk to our customers through short-term pilot

deployments of our software platforms at no or low cost to them.

We believe in proving the value of our platforms to our customers.

During these short-term pilots, we operate the accounts at a loss.

We believe that our investments during this phase

will drive future revenue growth.

We define a customer or potential customer as being in the Acquire phase if, as of the end of a

calendar year, we have recognized less than $100,000 in revenue from the customer that respective year.

Customers may make nominal payments in connection with the evaluation of our software that we do not consider material in evaluating the

performance of our accounts.

We evaluate the success of customer accounts in the Acquire phase based on the revenue such accounts

generate in the following year.

In 2020, we generated $0.3 million in revenue from customers in the Acquire phase, which yielded a contribution loss of $36.8 million.

In the three months ended March 31, 2021, those same customers

generated $3.6 million in revenue, which yielded a contribution loss of $4.3 million.

Our investment in this second phase is often significant as we seek to understand the principal challenges faced by our customers and ensure

that our software delivers value and results.

We define a customer in the Expand phase as any customer from which we have recognized more

than $100,000 in revenue in a calendar year and whose account had a negative contribution margin during the year at issue, as determined as of the end of the year.

In this phase, we operate at a loss, as measured by contribution margin, in order to

drive future revenue growth and margin expansion.

In 2020, we generated $20.3 million in revenue from customers that were in the

Expand phase as of the end of that year, with a contribution margin of (159)%.

In the three months ended March 31, 2021, those same customers generated $12.4 million in revenue with a contribution margin of 4%.

As customer accounts mature, our investment costs relative to revenue generally decrease, while the value our software provides to our customer

increases, often significantly, as usage of the platform increases across the customers operations.

In this third phase, after having installed and configured the software across an entire enterprise, customers become more self-sufficient in

their use of our platforms, including developing software and applications that run on top of our platforms, while still continuing to benefit from the support of our operations and maintenance (O&M) services.

We define a customer in the Scale phase as any customer from which we recognized more than $100,000 in revenue in a calendar year and whose

account had a positive contribution margin during the year at issue, as determined as of the end of the year.

It is in the Scale phase of

our partnerships with customers that we generally see contribution margin on particular accounts improve.

In 2020, we generated $1,072.1 million in revenue from customers in the Scale phase, with a contribution margin of 63%.

months ended March 31, 2021, those same customers generated $324.8 million in revenue with a contribution margin of 66%.

believe that our customers will move into the Scale phase over the long term.

We also believe that contribution margin for Scale phase accounts will increase further as we become more efficient at deploying our software platforms across the entirety

of our customers operations and at managing and operating our software.

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

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.

At the end of each year, we categorize each customer account into one of the three phases based on its revenue and contribution margin for that year.

Revenue is allocated to each customer account directly.

The cost of revenue and sales and marketing costs include both the costs associated

with the deployment and operation of our software as well as expenses associated with identifying new customers and expanding partnerships with existing ones.

Our software engineers working with existing customers often manage the deployment and

operation of our platforms as well as identify new ways that those platforms can be used.

To calculate the contribution by customer, we allocate cost of revenue and sales and marketing expenses, excluding stock-based compensation, to an account pro

rata based on headcount and time spent on the account during the period.

To the extent certain costs or personnel are not directly assigned to a specific account, they are allocated pro rata based on total headcount staffed during such period.

Direct costs, such as third-party cloud hosting services, are directly allocated to the account to which they relate.

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 across the business and on specific customer accounts 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 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 income (loss) from operations, excluding 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 income (loss) from operations, excluding stock-based compensation and related employer payroll taxes should be

considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for

these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures.

We encourage investors and others to review our business, results of operations, and financial

information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

Contribution Margin

The following

table provides a reconciliation of contribution margin for the three months ended March 31, 2021 and 2020 (in thousands, except percentages):

Three Months Ended March 31,

Loss from operations

Research and development expenses

General and administrative expenses

Stock-based compensation

Contribution margin

(1) Excludes stock-based compensation.

Gross Profit and Gross Margin, Excluding Stock-Based

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation

for the three months ended March 31, 2021 and 2020 (in thousands, except percentages):

Three Months Ended March 31,

stock-based compensation

Gross profit, excluding stock-based compensation

Gross margin, excluding stock-based compensation

Income (Loss) from Operations, Excluding Stock-Based Compensation and Related Employer Payroll Taxes

The following table provides a reconciliation of income (loss) from operations, excluding stock-based compensation and related

employer payroll taxes for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Loss from operations

stock-based compensation

employer payroll taxes related to stock-based compensation

Income (loss) from operations, excluding stock-based compensation and related employer payroll taxes

Components of Results of Operations

We generate revenue from

the sale of subscriptions to access our software in our hosted environment with 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 recognized over

the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

On-Premises Software

Sales of our software subscriptions grant customers the right to use functional

intellectual property, either on their internal hardware infrastructure or on their own cloud instance, over the contractual term and are also sold together with stand-ready O&M services.

O&M services include critical updates and support and

maintenance services required to operate the software and, as such, are necessary for the software to maintain its intended utility over the contractual term.

Because of this requirement, we have concluded that the software subscriptions and O&M

services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.

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 engaging with or executing pilots at new or existing

Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in 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.

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.

Other Income (Expense), Net

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

Change in Fair Value of Warrants

The change in the fair value of warrants consists of the net changes in the fair value of our liability classified warrants to purchase

redeemable convertible and convertible preferred stock that were remeasured at the end of each reporting period.

During September 2020, in connection with the direct listing of our Class A common stock on the New York Stock Exchange

(NYSE) (Direct Listing), all of the Companys outstanding preferred stock warrants were converted into common stock warrants, which resulted in the reclassification of the warrants liability to additional paid-in capital.

As such, we do not expect additional charges related to the fair value of these warrants.

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

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:

This segment primarily serves customers working in

non-government industries.

This segment primarily serves customers that are agencies in the U.S.

federal government

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.

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.

of Operations

The following table summarizes our condensed consolidated statements of operations data (in thousands):

Three Months Ended March 31,

Cost of revenue (1)

Operating expenses:

Sales and marketing (1)

Research and development (1)

General and administrative (1)

Total operating expenses

Loss from operations

Interest income

Interest expense

Change in fair value of warrants

Other income (expense), net

Loss before provision for income taxes

Provision for income taxes

(1) Includes stock-based compensation expense as follows (in thousands):

Three Months Ended March 31,

Cost of revenue

Sales and marketing

Research and development

General and administrative

Total stock-based compensation expense

The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of

Three Months Ended March 31,

Cost of revenue

Operating expenses:

Sales and marketing

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest income

Interest expense

Change in fair value of warrants

Other income (expense), net

Loss before provision for income taxes

Provision for income taxes

Comparison of the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

Total revenue

Revenue increased by $111.9 million, or 49%, for the three months ended March 31, 2021 compared to

the three months ended March 31, 2020.

Revenue from government customers increased by $90.3 million, or 76%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily from customers in

the United States.

Of the increase, $90.1 million was from government customers existing as of December 31, 2020.

Revenue from commercial customers increased by $21.6 million, or 19%, for the three months ended March 31, 2021

compared to the three months ended March 31, 2020.

The increase is primarily due to an increase of $19.2 million from customers existing as of December 31, 2020.

Generally, increases in revenue from our existing customers are related

to increased adoption of our products and services within their organizations.

Cost of Revenue and Gross Profit

Three Months Ended March 31,

Cost of revenue

Cost of revenue for the three months ended March 31, 2021 increased by $9.8 million, or 15%,

compared to the three months ended March 31, 2020.

The increase was primarily due to increases in personnel costs of $6.0 million, which included an increase of $7.9 million in stock-based compensation expense primarily due to the

recognition of stock-based compensation expense related to the Companys RSUs, which vested in connection with the Companys Direct Listing;

and $3.2 million in employer payroll taxes primarily related to income from share-based

These increases in personnel costs were partially offset by decreases in travel-related expenses and other personnel costs of $3.3 million as a result of COVID-related travel restrictions and company-wide initiatives to decrease

overall travel, and $1.8 million in payroll and payroll-related costs driven by a decrease of headcount attributable to cost of revenue functions.

Additionally, there were increases of $6.5 million related to third-party cloud hosting

services, and $2.7 million related to other direct deployment costs and increased usage of field service representatives.

These increases to cost of revenue were offset by decreases of $3.7 million from office related expenses and other

allocated costs, and $1.7 million related to reductions in hardware costs.

Our gross margin for the three months ended

March 31, 2021 increased by 6% compared to the three months ended March 31, 2020.

Gross margin increased primarily as a result of increased efficiencies in supporting revenue growth at our customer deployments, including investments in our

platforms as well as reductions in hardware costs for customers.

This was partly offset by increases in stock-based compensation expense and third-party cloud hosting services.

For the three months ended March 31, 2021 and 2020, gross margin,

excluding stock-based compensation, would have increased by 8% to 83%.

Operating Expenses

Three Months Ended March 31,

Sales and marketing

Research and development

General and administrative

Total operating expenses

Sales and Marketing

Sales and marketing expenses increased by $37.4 million, or 38%, for the three months ended March 31, 2021 compared to the three

months ended March 31, 2020.

The increase was primarily driven by increases in personnel costs of $44.7 million, which included an increase of $38.8 million in stock-based compensation expense primarily due to the recognition of

stock-based compensation expense related to the Companys RSUs and growth units, which vested in connection with the Companys Direct Listing;

$11.9 million in employer payroll taxes primarily related to income from share-based

and $2.8 million in payroll due to an increase in headcount attributable to our sales and marketing functions.

These increases in personnel costs were partially offset by a decrease of $7.2 million in travel-related expenses and

other personnel costs as a result of COVID-related travel restrictions and company-wide initiatives to decrease overall travel, and $1.6 million from other payroll-related costs.

Additionally, there was an increase of $1.3 million in

third-party cloud based hosting services;

offset by decreases of $6.3 million from office related expenses and other allocated costs, and $2.3 million in marketing costs.

Research and Development

Research and development expenses increased by $32.7 million, or 50%, for the three months ended March 31, 2021 compared to the three

months ended March 31, 2020.

The increase was primarily driven by increases in personnel costs of $34.6 million, which included an increase of $22.8 million in stock-based compensation expense primarily due to the recognition of

stock-based compensation expense related to the Companys RSUs, which vested in connection with the Companys Direct Listing;

$11.2 million related to increase in payroll taxes primarily related to income from share-based payments;

and $3.9 million in payroll related to an increase in headcount attributable to our research and development functions.

These increases in personnel costs were partially offset by a decrease of $2.2 million in travel-related expenses and

other personnel costs as a result of COVID-related travel restrictions and company-wide initiatives to decrease overall travel, and $1.2 million from other payroll-related costs.

Additionally, there was an increase of $2.3 million in

third-party cloud hosting services and other IT;

offset by decreases of $4.2 million from office related expenses and other allocated costs.

General and Administrative

administrative expenses increased by $75.8 million, or 107%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

The increase was primarily driven by increases in personnel costs of

$79.1 million, which included an increase of $70.1 million in stock-based compensation expense primarily due to the recognition of stock-based compensation expense related to the Companys RSUs and growth units, which vested in

connection with the Companys Direct Listing;

$9.3 million related to increase in payroll taxes primarily related to income from share-based payments;

and $1.7 million in other payroll-related costs.

These increases in personnel costs

were partially offset by a decrease of $1.9 million in travel-related expenses and other personnel costs as a result of COVID-related travel restrictions and company-wide initiatives to decrease overall travel, payroll related to a decrease in

headcount attributable to our general and administrative functions.

Additionally, there was a decrease of $3.3 million from office related expenses and other allocated costs.

Interest Income

Three Months Ended March 31,

Interest income

Interest income decreased by $2.9 million for the three months ended March 31, 2021 compared to the

three months ended March 31, 2020 primarily due to a reduction in U.S.

interest rates on interest earned from our cash, cash equivalents, and restricted cash.

Interest Expense

Three Months Ended March 31,

Interest expense

Interest expense decreased by $2.8 million for the three months ended March 31, 2021 compared to the

three months ended March 31, 2020.

The decrease was primarily due to a lower debt balance during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Change in Fair Value of Warrants

Three Months Ended March 31,

Change in fair value of warrants

During the three months ended March 31, 2020, the $13.7 million gain from the change in fair value

of warrants was primarily driven by the decrease in the fair value of our stock during the period.

During the three months ended March 31, 2021, there were no outstanding liability classified warrants.

Other Income (Expense), Net

Three Months Ended March 31,

Other income (expense), net

Other income (expense), net changed by $11.0 million for the three months ended March 31, 2021

compared to the three months ended March 31, 2020 primarily due to changes in net realized and unrealized gains from foreign exchange transactions.

Provision for Income Taxes

Three Months Ended March 31,

Provision for income taxes

Provision for income tax increased by $0.5 million for the three months ended March 31, 2021

compared to the three months ended March 31, 2020.

The change was primarily due to increases in profits from the Companys international operations partially offset by decreases in foreign withholding taxes.

Liquidity and Capital Resources

our inception, we have primarily generated negative cash flows from operations and have financed our operations primarily through the sale of our equity securities, including proceeds from option exercises, and payments received from our customers.

We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months, as well as our short-term and long-term contractual obligations and commitments

primarily consisting of operating lease commitments and non-cancelable purchase commitments related to third-party cloud hosting services.

As of March 31, 2021, our accumulated deficit balance was $5.1 billion, and our principal sources of liquidity were

$2.3 billion of cash and cash equivalents, exclusive of additional restricted cash of $109.0 million.

Cash and cash equivalents consist primarily of cash on deposit with banks as well as institutional money market funds.

Restricted cash

primarily consists of cash and certificates of deposit that are held as collateral against letters of credit and guarantees we are required to maintain for various purposes.

As of March 31, 2021, we had $200.0 million of term loans outstanding under the 2014 Credit Facility and had additional

$200.0 million revolving credit facility available and undrawn.

For more information, see the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations Credit

Our future capital requirements will depend on many factors, including, but not limited to the rate of our growth,

our ability to attract and retain customers and their willingness and ability to pay for our products and services, and the timing and extent of spending to support our efforts to market and develop our products.

Further, we may enter into future

arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies.

As such, we may be required to seek additional equity or debt financing.

In the event that additional financing is required from outside

sources, we may not be able to raise it on terms acceptable to us or at all.

If additional funds are not available to us on acceptable terms, or at all, our business, financial condition, and results of operations could be adversely affected.

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Effect of foreign exchange on cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Operating Activities

Net cash provided by operating activities was $116.9 million for the three months ended March 31, 2021.

The factors affecting our

operating cash flows during this period were our net loss of $123.5 million, offset by non-cash charges of $204.2 million and changes in net operating assets and liabilities of $36.1 million.

The non-cash charges primarily consisted of $193.7 million in stock-based compensation expense, $6.5 million in operating lease expense, and $3.2 million of depreciation and amortization.

net change in operating assets and liabilities were due to an increase in accounts payable and accrued liabilities of $44.5 million due to timing of expense payments, and a net increase of $8.9 million in deferred revenue and customer

deposits due to increases in customer billings, partially offset by a net increase in assets of $10.1 million.

Net cash used in

operating activities was $287.2 million for the three months ended March 31, 2020.

The factors affecting our operating cash flows during this period were our net loss of $54.3 million, offset by

non-cash charges of $54.8 million and changes in net operating assets and liabilities of $287.7 million.

The non-cash charges primarily consisted of

$54.1 million in stock-based compensation expense, $10.2 million in operating lease expense, and $3.7 million of depreciation and amortization, partially offset by a $13.7 million reduction in the fair value of warrant

The net change in operating assets and liabilities were due to a net decrease of $123.5 million in deferred revenue and customer deposits due to increases in revenue recognized from amounts billed and collected in prior periods, a

decrease in accounts payable and accrued liabilities of $80.2 million, and an increase in assets of $67.8 million primarily due to an increase in accounts receivable.

Investing Activities

used in investing activities was $0.7 million and $3.0 million for the three months ended March 31, 2021 and 2020, which consisted of purchases of property and equipment.

Financing Activities

provided by financing activities was $206.4 million for the three months ended March 31, 2021, which primarily consisted of $208.9 million of proceeds from the exercise of common stock options.

Net cash provided by financing activities was $2.5 million for the three months ended March 31, 2020, which primarily consisted of

$6.7 million of proceeds from exercise of common stock options, offset by $3.8 million net cash used for repurchases of common stock.

2014 Credit Facility

In October 2014, we entered into an unsecured revolving credit facility which has been subsequently amended (the 2014 Credit

The 2014 Credit Facility bears interest at the London Interbank Offered Rate (LIBOR) plus a margin of 2.75% per annum, subject to certain adjustments, and incurs a commitment fee of 0.375% assessed on the daily average

undrawn portion of revolving commitments.

The 2014 Credit Facility is secured with substantially all of our assets.

As of March 31,

2021, we had $200.0 million of term loans outstanding under the 2014 Credit Facility and an additional $200.0 million undrawn revolving credit facility available.

During April 2021, we amended the credit facility to increase the total

undrawn revolving credit facility to be $400.0 million and which also provides for an incremental loan facility of additional term loans or revolving loans in an aggregate principal amount of up to $100.0 million with one or more existing

or new lenders upon mutual agreement between the Company and such lenders.

Upon amending the facility, we repaid the outstanding $200.0 million term loan.

Contractual Obligations and Commitments

Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities and non-cancelable purchase commitments related to third-party cloud hosting services.

For additional information, refer to Note 8.

Commitments and Contingencies to our condensed consolidated financial statements

included elsewhere in this Quarterly Report on Form 10-Q.

There has been no material change in our contractual obligations and commitments other than in the ordinary course of business since our fiscal year

ended December 31, 2020.

See our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021, for additional information regarding the

Companys contractual obligations.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, any off-balance sheet financing arrangements or any

relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating

off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies

and Estimates

Our condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly

Report on Form 10-Q are prepared in accordance with GAAP.

The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of

assets, liabilities, revenue, costs and expenses, and related disclosures.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results could differ

significantly from our estimates.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and

estimates discussed in the Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

Recent Accounting Pronouncements

information on recently issued accounting pronouncements, refer to Note 2.

Significant Accounting Policies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in interest rates, foreign exchange, and

Interest Rate Risk

Our cash, cash equivalents, and restricted cash consist of cash, certificates of deposit, and money market funds.

Our investment policy and

strategy are focused on the preservation of capital and supporting our liquidity requirements.

We have not entered into investments for trading or speculative purposes.

Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks

due to changes in interest rates.

A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.

As of March 31, 2021, we had $200.0 million in variable rate term loans outstanding that were repaid during April 2021.

10% change in LIBOR would not have a material impact on our debt-related obligations, financial position, or results of operations.

Currency Exchange Risk

Our contracts with customers are primarily denominated in U.S.

dollars, with a small amount denominated in

foreign currencies.

Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States, United Kingdom, and other European countries.

Our results of current and

future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro and GBP.

Additionally, fluctuations in foreign currency exchange rates may cause us to

recognize transaction gains and losses in our statement of operations.

To date, foreign currency transaction gains and losses have not been material to our condensed consolidated financial statements, and we have not engaged in any foreign currency

hedging transactions.

Inflation Risk

not believe that inflation has had a material effect on our business, results of operations, or financial condition.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements