What changed in this filing

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Item 1A. Risk Factors

2021-11-09 compared with 2021-08-12 · 42 added, 33 removed, 1359 unchanged (5% of the section changed)

31 unchanged sentences

the market for our platforms and services may develop more slowly than we expect;

we have made and may continue to make strategic investments to support key business initiatives, including in privately-held and publicly-traded companies, and we may not realize a return on these investments;

we have made and may continue to make strategic investments to support key business initiatives, including in privately-held and publicly-traded companies as well as alternative investments, and we may not realize a return on these investments;

issues raised by the use of artificial intelligence in our platforms may result in reputational harm or liability;

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there may be a decline in the U.S.

and other government budgets, changes in spending or budgetary priorities, or delays in contracts awards;

and other government budgets, changes in spending or budgetary priorities, or delays in contract awards;

the multi-class structure of our common stock, the Founder Voting Trust Agreement, and the Founder Voting Agreement concentrate voting power with certain stockholders, in particular, our Founders and their affiliates.

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We often also provide our platforms to potential customers at no or low cost initially to them for evaluation purposes through short-term pilot deployments of our platforms in the Acquire phase of our business model, and there is no guarantee that we will be able to move customers from the Acquire phase into later phases.

In addition, we currently have a limited direct sales force, and our sales efforts have historically depended on the significant involvement of our senior management team.

In addition, we currently have a growing but limited direct sales force, and our sales efforts have historically depended on the significant involvement of our senior management team.

The length of our sales cycle, from initial demonstration of our platforms to sale of our platforms and services, tends to be long and varies substantially from customer to customer.

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We may not be effective in executing this or any other aspect of our growth strategy.

Our top three customers together accounted for 25% and 28% of our revenue for the years ended December 31, 2020 and 2019, respectively, and 19% and 29% of our revenue for the six months ended June 30, 2021 and 2020, respectively.

Our top three customers by revenue, for the six months ended June 30, 2021, have been with us for an average of four years as of June 30, 2021.

Our top three customers together accounted for 25% and 28% of our revenue for the years ended December 31, 2020 and 2019, respectively, and 18% and 27% of our revenue for the nine months ended September 30, 2021 and 2020, respectively.

Our top three customers by revenue, for the nine months ended September 30, 2021, have been with us for an average of five years as of September 30, 2021.

Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced their spend with us or terminated their agreements with us, which has reduced our anticipated future payments or revenue from these customers, and which has required us to refund some previously paid amounts to these customers.

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It is possible that our platforms may also be intentionally misused or abused by customers or their employees or third parties who obtain access and use of our platforms.

Similarly, our platforms sometimes used by customers with smaller or less sophisticated IT departments, potentially resulting in sub-optimal

Similarly, our platforms sometimes are used by customers with smaller or less sophisticated IT departments, potentially resulting in sub-optimal

performance at a level lower than anticipated by the customer.

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As we continue to grow, we face challenges of integrating, developing, retaining, and motivating a rapidly growing employee base in various countries around the world.

For example, our headcount has grown from 313 full-

time employees as of December 31, 2010 to 2,593 full-time employees as of June 30, 2021, with employees located both in the United States and outside the United States.

For example, our headcount has grown from 313 full-time employees as of December 31, 2010 to 2,733 full-time employees as of September 30, 2021, with employees located both in the United States and outside the United States.

In the event of continued growth of our operations, our operational resources, including our information technology systems, our employee base, or our internal controls and procedures may not be adequate to support our operations and deployments.

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Volatility or lack of appreciation in the trading price of our Class A common stock may also affect our ability to attract and retain qualified personnel.

Many of our senior personnel and other key personnel hold equity awards that vested or became exercisable in connection with our listing, which could adversely affect our ability to retain these personnel.

Personnel may be more likely to leave us if the shares they own or the shares underlying their vested options or RSUs have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the trading price of our Class A common stock.

Many of our senior and other key personnel hold equity awards that have vested in part or are exercisable, which could adversely affect our ability to retain these personnel.

Personnel may be more likely to leave us if the shares they own or the shares underlying their vested options or RSUs have significantly appreciated in value.

In addition, many of our personnel may be able to receive significant proceeds from sales of our equity in the public markets, which may reduce their motivation to continue to work for us.

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Publicly available information regarding Palantir has historically been limited, in part due to the sensitivity of our work with customers or contractual requirements limiting or preventing public disclosure of certain aspects of our work or relationships with certain customers.

As our business has grown and as interest in Palantir and the technology industry overall has increased, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable coverage and coverage that is not directly attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.

As our business has grown and as interest in Palantir and the technology industry overall has increased and we have engaged more actively with media and marketing efforts, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable coverage and coverage that is not directly attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.

If such news or social media coverage presents, or relies on, inaccurate, misleading, incomplete, or otherwise damaging information regarding Palantir, such coverage could damage our reputation in the industry and with current and potential customers, employees, and investors, and our business, financial condition, results of operations, and growth prospects could be adversely affected.

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The timing of our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales in any given period, as revenue is generally recognized over the applicable contractual term.

Our pricing structures for our platforms and services may change from time to time.

Our pricing structures for our platforms and services may change from time to time, which could adversely impact our business, financial condition, and results of operations.

We expect that we may change our pricing model from time to time, including as a result of competition, global economic conditions, general reductions in our customers’ spending levels, pricing studies, or changes in how our platforms are broadly consumed.

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They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, including our business development and product development efforts, they may expose us to unexpected liabilities, they may conflict with our increased sales hiring and direct sales strategy, or we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours.

For example, in January 2021, we entered into a channel sales relationship with International Business Machines Corporation (“IBM”), pursuant to which we expect IBM to supply a new product leveraging certain components of Foundry integrated with IBM’s Cloud Pak for Data.

For example, in January 2021, we entered into a channel sales relationship with International Business Machines Corporation (“IBM”), pursuant to which IBM is supplying a new product leveraging certain components of Foundry integrated with IBM’s Cloud Pak for Data.

In addition, in November 2019, we created a jointly controlled entity in Japan with SOMPO.

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may disrupt the operations of our customers and partners for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business, financial condition, and results of operations.

Moreover, the potential impact on our workforce and business of implementing government orders or rules requiring COVID-19 vaccinations, including but not limited to the U.S.

executive order requiring COVID-19 vaccination for federal contractor employees, is currently unknown.

Furthermore, as a result of the COVID-19

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In the future, we may not be able to secure the financing necessary to operate and grow our business as planned, or to make acquisitions.

In the future, we may seek to raise or borrow additional funds to expand our product or business development efforts, make acquisitions or otherwise fund or grow our business and operations During April 2021, we fully repaid our outstanding term loans in an aggregate principal amount of $200.0 million and mutually agreed with the lenders and other applicable parties under our secured credit facility to amend our credit facility to, among other things, increase the revolving commitments under the credit facility by $200.0 million, for total undrawn revolving commitments of $400.0 million.

In the future, we may seek to raise or borrow additional funds to expand our product or business development efforts, make acquisitions or otherwise fund or grow our business and operations.

During April 2021, we fully repaid our outstanding term loans in an aggregate principal amount of $200.0 million and mutually agreed with the lenders and other applicable parties under our secured credit facility to amend our credit facility to, among other things, increase the revolving commitments under the credit facility by $200.0 million, for total undrawn revolving commitments of $400.0 million.

Any principal amounts outstanding under our secured credit facility will be due and payable in June 2023, and any interest or facility payments are due and payable quarterly or more or less frequently in certain circumstances.

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While these obligations remain outstanding and are cash collateralized, we do not have access to and cannot use the pledged cash for our operations or to repay our other indebtedness.

As of June 30, 2021, we were in compliance with all covenants and restrictions associated with our secured credit facility.

As of September 30, 2021, we were in compliance with all covenants and restrictions associated with our secured credit facility.

Variable rate indebtedness that we may incur under our secured credit facility will subject us to interest rate risk, which could cause our debt service obligations to increase significantly.

As of June 30, 2021, no borrowings were outstanding under our secured credit facility.

As of September 30, 2021, no borrowings were outstanding under our secured credit facility.

Any borrowings under the secured credit facility bear interest at variable rates, which exposes us to interest rate risk.

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In particular, we are subject to risks associated with our investments, including a partial or complete loss of invested capital.

As part of our business strategy, we have engaged in strategic transactions in the past and expect to evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products and other assets in the future.

As part of our business strategy, we have engaged in strategic transactions and alternative investments in the past and expect to evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products and other assets in the future.

We also may enter into relationships with other businesses to expand our products or our ability to provide services.

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We have made and may continue to make strategic investments pursuant to certain approved agreements (“Investment Agreements”) to purchase, or commit to purchase, securities of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee”).

As of June 30, 2021, we had outstanding approved investment 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.

As of September 30, 2021, we had outstanding approved investment commitments, subject to the applicable terms and conditions, to purchase a total of 22.7 million shares for an aggregate purchase price of $226.5 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, and are subject to numerous terms and conditions, including approvals of the stockholders of applicable parties and regulatory review, which are inherently uncertain.

Additionally, in connection with approving and signing the Investment Agreements, we and each Investee or an associated entity entered into a commercial contract for access to our 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 three to ten years.

The maximum potential revenue from these commercial contracts, including investments that have already closed, is $640.2 million, which is inclusive of $82.9 million of contractual options.

The terms of such contracts, including these contractual options, range from three to ten years.

The majority of these commercial contracts are subject to various termination provisions, including, as applicable, for convenience in the event a proposed business combination or our proposed investment is not completed.

Parties to certain of these and other commercial contracts entered into in connection with our investments may elect to exercise termination rights, including, to the extent applicable, in the event a proposed business combination is not completed, which would negatively impact our expected revenue and collections.

The total revenue recognized by us from these commercial contracts during the three and six months ended June 30, 2021 was $3.0 million.

In addition to the above, as of June 30, 2021, we have entered into certain commercial contracts that, if the corresponding contemplated investment agreements are negotiated, approved, and executed, could result in additional maximum potential revenue of $195 million.

The total revenue recognized by us from the commercial contracts during the three and nine months ended September 30, 2021 was $19.0 million and $22.0 million, respectively.

In addition to the above, as of September 30, 2021, we have entered into certain commercial contracts that, if corresponding contemplated investment agreements are negotiated, approved, and executed, could result in additional maximum potential revenue of $218 million.

If the companies that we enter into commercial contracts with, including, as applicable, companies that complete their proposed business combinations as contemplated, are unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them, our commercial contracts and expected revenue and collections would be negatively impacted.

These companies may be engaged in businesses that involve novel and unproven technologies, products, and services and such companies may be unable to perform their obligations under any commercial contracts that we enter into with them, in a timely manner or at all.

We entered into additional Investment Agreements from July 1, 2021 through the date of this filing.

We entered into additional Investment Agreements from October 1, 2021 through the date of this filing.

In connection with signing certain of these Investment Agreements, we and each Investee or an associated entity entered into a commercial contract to access our products and services.

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Our ability to sell or transfer, or realize value from our investments may be limited by applicable securities laws and regulations, including the requirement that offers or sales of securities must be registered with the Securities and Exchange Commission (“SEC”) pursuant to applicable laws or qualify for an exemption from such registration, and our ability to liquidate and realize value from our investments may be negatively and materially impacted by any delays or limitations on our ability to offer, sell, or transfer our investments.

In addition, our investments are speculative in nature and may decline in value or be entirely lost.

In addition, our investments are speculative in nature and may be volatile or decline in value or be entirely lost.

The occurrence of any of these risks could have a material adverse effect on our business, results of operations, and financial condition.

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Any failure or perceived failure by us or our platforms to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the U.S., European Union, or other governmental or non-governmental

bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.

bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.

sales and operations subject us to additional risks and regulations that can adversely affect our results of operations.

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If our existing NOLs are subject to limitations arising from an ownership change, our ability to utilize NOLs could be limited by Section 382 of the Code, and a certain amount of our prior year NOLs could expire without benefit.

Changes in the law may also impact our ability to use our net operating loss and tax credit carryforwards.

There is also a risk that the expiration of our existing net operating losses or tax credits or a limitation on their use to offset future income tax liabilities could result from statutory or regulatory changes, especially in reaction to the COVID-19

Changes in the law may also impact our ability to use our NOLs and tax credit carryforwards.

There is also a risk that the expiration of our existing NOLs or tax credits or a limitation on their use to offset future income tax liabilities could result from statutory or regulatory changes, especially in reaction to the COVID-19

Our results of operations may be harmed if we are required to collect sales or other related taxes for our license arrangements in jurisdictions where we have not historically done so.

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In addition to the supply and demand and volatility risk factors discussed above, sales of a substantial number of shares of our Class A common stock into the public market, particularly sales by our directors, executive officers, and principal stockholders, or the perception that these sales might occur in large quantities, could cause the trading price of our Class A common stock to decline.

As of June 30, 2021, approximately 60.5 million options will expire through December 2022 (including approximately 38.3 million options held by Mr.

As of September 30, 2021, approximately 30.6 million options will expire through December 2022 (including approximately 17.2 million options held by Mr.

Karp which will expire in December 2021) if not exercised prior to their respective expiration dates, and we expect many holders will elect to exercise such options prior to expiration.

Upon exercise, the holders will receive shares of our Class A or Class B common stock, which may subsequently be sold.

As of June 30, 2021, there were 1,855,143,087 shares of our Class A common stock outstanding, 80,429,767 shares of our Class B common stock outstanding and 1,005,000 shares of our Class F common stock outstanding.

As of September 30, 2021, there were 1,900,440,709 shares of our Class A common stock outstanding, 89,672,006 shares of our Class B common stock outstanding and 1,005,000 shares of our Class F common stock outstanding.

Substantially all of these shares may be immediately sold, although sales by our affiliates remain subject to compliance with the limitations of Rule 144.

Further, as of June 30, 2021, there were outstanding options to purchase an aggregate of 183,267,437 shares of our Class A common stock and 234,406,177 shares of our Class B common stock, and 106,721,852 shares of our Class A common stock and 60,000,000 shares of Class B common stock subject to RSUs.

Further, as of September 30, 2021, there were outstanding options to purchase an aggregate of 163,164,831 shares of our Class A common stock and 211,364,014 shares of our Class B common stock, and 108,058,307 shares of our Class A common stock and 57,975,000 shares of Class B common stock subject to RSUs.

All shares of our common stock reserved for future issuance under our equity compensation plans have been registered for sale under the Securities Act.

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Shares of our Class B common stock may be transferred (without converting into shares of Class A common stock) to, among others, our Founders or their affiliates, and such transfers to our Founders or their affiliates could increase the total voting power of the Founders and their affiliates above 49.999999% of the Voting Power with respect to such matter.

Excluding the voting power of the Class F common stock, our Founders and their affiliates owned shares entitled to approximately 24.4% of the voting power of our outstanding capital stock in the aggregate as of August 5, 2021.

Excluding the voting power of the Class F common stock, our Founders and their affiliates owned shares entitled to approximately 26.8% of the voting power of our outstanding capital stock in the aggregate as of November 4, 2021.

In addition, if one or two Founders withdraw from the Founder Voting Agreement, the total voting power of the Founders and their affiliates in the aggregate could exceed 49.999999% of the Voting Power.

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The shares identified by Mr.

Thiel as Designated Founders’ Excluded Shares represented less than 5% of the voting power of our outstanding capital stock as of August 5, 2021.

Thiel as Designated Founders’ Excluded Shares represented less than 5% of the voting power of our outstanding capital stock as of November 4, 2021.

In the future, Mr.

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The Ownership Threshold that must be met on any applicable record date is currently 100,000,000 Corporation Equity Securities, which is a small minority of our outstanding Corporation Equity Securities.

While the number of outstanding Corporation Equity Securities may exceed the number of shares of our outstanding capital stock, as a comparison, there were 1,936,577,854 shares of our common stock outstanding as of June 30, 2021.

While the number of outstanding Corporation Equity Securities may exceed the number of shares of our outstanding capital stock, as a comparison, there were 1,991,117,715 shares of our common stock outstanding as of September 30, 2021.

Except for certain equitable adjustments as provided in our amended and restated certificate of incorporation, future issuances of Corporation Equity Securities by us will not increase the Ownership Threshold that must be met on any applicable record date and, accordingly, will decrease the percentage of outstanding Corporation Equity Securities represented by the Ownership Threshold.

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Each of these agreements could remain in place until the death of our last living Founder.

As of June 30, 2021, our Founders were 53, 53, and 38 years old.

As of September 30, 2021, our Founders were 53, 53, and 39 years old.

Further, upon a discretionary or compulsory withdrawal of a Founder as a beneficiary of the Founder Voting Trust Agreement, the Trustee will instruct our transfer agent and us to convert the withdrawing Founder’s pro rata portion of the shares of Class F common stock held in the Founder Voting Trust at the time of the withdrawal into shares of Class B common stock in accordance with our amended and restated certificate of incorporation.

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dollar and decreases in the value of foreign currencies could result in the dollar equivalent of our revenues being lower.

UNREGISTERED SALES OF EQUITY SECURITIES

Not applicable.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

MINE SAFETY DISCLOSURES

Not applicable.

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 1A. Risk Factors