What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-09 · 188 added, 348 removed, 161 unchanged (77% of the section changed)

5 unchanged sentences

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.

We build software that empowers organizations to effectively integrate their data, decisions, and operations at scale.

We were founded in 2003 and started building software for the intelligence community in the United States to assist in counterterrorism investigations and operations.

We later began working with commercial enterprises, who often faced fundamentally similar challenges in working with data.

We have built three principal software platforms, Gotham, Foundry, and Apollo.

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

For over a decade, Gotham has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond.

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

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.

Apollo, which we began offering as a commercial solution in 2021, is a cloud-agnostic, single control layer that coordinates ongoing delivery of new features, security updates, and platform configurations, helping to ensure the continuous operation of critical systems.

Apollo allows our customers to run their software in virtually any environment.

In addition to the investments we have made in our platforms, we plan to continue to expand our ability to sell our subscriptions globally by investing in resources to address the business needs of local markets, including by increasing our sales and marketing functions and activities, expanding our ecosystem of service partners to support local deployments, and investing in personnel to support our growing customer base and product offerings.

We believe that every institution faces challenges that our platforms were designed to address.

Our focus in the near term is to build partnerships with institutions that have the leadership necessary to effect structural change within their organizations — to reconstitute their operations around data.

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

For the three months ended September 30, 2021, we generated $392.1 million in revenue, reflecting a 36% growth rate from the three months ended September 30, 2020, when we generated $289.4 million in revenue.

In the nine months ended September 30, 2021, we generated $1.1 billion in revenue, reflecting a 44% growth rate from the nine months ended September 30, 2020, when we generated $770.6 million in revenue.

Our operating results continued to improve when excluding stock-based compensation.

In the three months ended September 30, 2021, we incurred losses from operations of $91.9 million, or adjusted income from operations of $116.1 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended September 30, 2020, our losses from operations were $847.8 million, or adjusted income from operations of $73.1 million when excluding stock-based compensation, related employer payroll taxes, and non-recurring

charges relating to the direct listing of our Class A common stock (“Direct Listing”) on the New York Stock Exchange (“NYSE”).

In the nine months ended September 30, 2021, we incurred losses from operations of $352.1 million, or adjusted income from operations of $349.4 million when excluding stock-based compensation and related employer payroll taxes.

In the nine months ended September 30, 2020, our losses from operations were $1.0 billion, or adjusted income from operations of $85.7 million when excluding stock-based compensation, related employer payroll taxes, and non-recurring

charges relating to our Direct Listing.

In the three months ended September 30, 2021, our gross profit was $305.3 million, reflecting a gross margin of 78%, or 82% when excluding stock-based compensation.

In the three months ended September 30, 2020, our gross profit was $140.0 million, reflecting a gross margin of 48%, or 81% when excluding stock-based compensation.

In the nine months ended September 30, 2021, our gross profit was $857.2 million, reflecting a gross margin of 77%, or 82% when excluding stock-based compensation.

In the nine months ended September 30, 2020, our gross profit was $488.5 million, reflecting a gross margin of 63%, or 79% when excluding stock-based compensation.

For more information about our income from operations, when excluding stock-based compensation, related employer payroll taxes, and non-recurring charges related to our Direct Listing;

and 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

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

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

For example, we have approved and entered into strategic investments pursuant to certain approved agreements (“Investment Agreements”) to purchase, or commit to purchase shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, and commitments to purchase, the “Investments”).

See further discussion in Note 4.

Investments and Fair Value Measurements and Note 7.

Commitments and Contingencies — Investment Commitments .

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

While we generally offer contract terms of one to five years in length, our customers sometimes enter into shorter-term contracts.

Revenue is generally recognized ratably over the contract term.

Many of our customer contracts contain termination for convenience provisions.

For the three months ended March 31, 2022, we generated $446.4 million in revenue, reflecting a 31% growth rate from the three months ended March 31, 2021, when we generated $341.2 million in revenue.

Our operating results continued to improve, including when adjusting for stock-based compensation.

In the three months ended March 31, 2022, we incurred losses from operations of $39.4 million, or generated adjusted income from operations of $117.4 million when excluding stock-based compensation and related employer payroll taxes.

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

In the three months ended March 31, 2022, our gross profit was $352.0 million, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.

In the three months ended March 31, 2021, our gross profit was $267.1 million, reflecting a gross margin of 78%, or 83% when excluding stock-based compensation.

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

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

Our Customers

We define a customer to be an organization from which we have recognized revenue during the trailing twelve month period.

During the period ended September 30, 2021, we had 203 customers, including leading companies in various commercial sectors as well as government agencies around the world.

During the period ended September 30, 2020, we had 142 customers.

We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period.

During the period ended March 31, 2022, we had 277 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended March 31, 2021, we had 149 customers.

For large government agencies, where a single institution has multiple divisions, units, or subsidiary agencies, each such division, unit, or subsidiary agency that enters into a separate contract with us and is invoiced as a separate entity is treated as a separate customer.

2 unchanged sentences

Department of Health and Human Services, we treat each of those agencies as a separate customer given that the governing structures and procurement processes of each agency are independent.

We have built lasting and significant customer relationships with some of the world’s leading government institutions and companies.

Our average revenue per customer during the trailing twelve months ended September 30, 2021 and 2020 was $7.0 million.

Our average revenue for the top twenty customers during the trailing twelve months ended September 30, 2021 was $41.3 million, which grew 35% from an average of $30.7 million from the top twenty customers during the trailing twelve months ended September 30, 2020.

We have built lasting and significant customer relationships with some of the world’s leading government institutions and companies, and are expanding our partnerships with early- and growth-stage companies.

Our average revenue for the top twenty customers during the trailing twelve months ended March 31, 2022 was $44.6 million, which grew 24% from an average of $36.1 million in revenue from the top twenty customers during the trailing twelve months ended March 31, 2021, demonstrating our expanding relationships with existing customers.

Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward.

In the nine months ended September 30, 2021, commercial customers accounted for 41% of our revenue while government agencies accounted for 59%.

In the nine months ended September 30, 2021, we generated 56% of our revenue from customers in the United States and the remaining 44% from customers abroad.

In the three months ended March 31, 2022, 54% of our revenue came from government agencies and 46% came from commercial customers.

In the three months ended March 31, 2022, we generated 61% of our revenue from customers in the United States and the remaining 39% from non-U.S.

Expansion of Access to Platforms

We have recently begun to expand access to our platforms to earlier stage companies, including startups, as we continue our outreach efforts to an increasingly broad swath of the potential market.

Our software platforms can now be installed and ready for use within hours.

We have recently begun to expand access to our platforms to early- and growth-stage companies, including startups, as we continue our outreach efforts to an increasingly broad swath of the potential market.

The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.

2 unchanged sentences

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

The companies in which we are investing include some of the most innovative organizations in their fields.

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

Coronavirus (“COVID-19”)

As a result of COVID-19,

we continue to take precautionary measures in order to minimize the risk of the virus to our employees, our customers, and the communities in which we operate, which included the suspension of all non-essential

business travel of employees and the temporary closure of all of our major offices.

COVID-19 Impact

As a result of the ongoing COVID-19 pandemic, we continue to take precautionary measures in order to minimize the risk of the virus to our employees, our customers, and the communities in which we operate, which initially included the suspension of all non-essential business travel of employees and the temporary closure of all of our major offices.

Although the majority of our workforce worked remotely, there was minimal disruption in our ability to ensure the effective operation of our software platforms.

As local situations permit, we continue to open our offices in at least a limited capacity and are allowing business travel to resume, while continuing to closely monitor 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.

As local conditions and public health guidance permits, we are reopening our offices and allowing business travel to resume, while continuing to closely monitor developments around the evolving nature of the pandemic.

The economic consequences of the COVID-19 pandemic have been challenging for certain of our customers and prospective customers.

While the broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain, the COVID-19 pandemic has, to date, not had a material adverse impact on our results of operations.

The economic effects of the pandemic and resulting societal changes are currently not predictable.

The 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.

The COVID-19 pandemic has made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not an option during a crisis.

As a result, customers are increasingly adopting our software, which can be ready in days, over internal software development efforts, which may take months or years.

We saw decreases in our travel and office-related expenditures, including during the temporary closures of our offices globally and reductions in related operating expenses, related to the ongoing 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 continue to open 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.

We 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 $1.1 billion 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 $1.1 billion in revenue in 2020.

In the nine months ended September 30, 2021, customers cohorted as of December 31, 2020 generated a total of $1.1 billion in revenue.

New customers acquired during the nine months ended September 30, 2021 generated an additional $37.9 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 nine months ended September 30, 2021, those same customers generated $15.6 million in revenue, which yielded a contribution loss of $7.1 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 nine months ended September 30, 2021, those same customers generated $62.1 million in revenue with a contribution margin of 45%.

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 customer’s 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 $1.1 billion in revenue from customers in the Scale phase, with a contribution margin of 63%.

In the nine months ended September 30, 2021, those same customers generated $993.4 million in revenue with a contribution margin of 64%.

We 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.

While we expect our travel and office-related expenditures to increase moving forward, we do not expect such expenditures to return to their pre-pandemic levels, given that we have made significant investments in enabling employees to work with customers remotely.

See the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, and in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 24, 2022, for further discussion of the impact of the COVID-19 pandemic on our business.

Key Business Measure

In addition to the measures presented in our condensed consolidated financial statements, we use the following key non-GAAP

business measure to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions.

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

1 unchanged sentence

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.

Contribution margin, both across our business and on specific customer accounts, is intended to capture how much we have earned from customers after accounting for the costs associated with deploying and operating our software, as well as any sales and marketing expenses involved in acquiring and expanding our partnerships with those customers, including allocated overhead.

We exclude stock-based compensation as it is a non-cash

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 exclude stock-based compensation as it is a non-cash expense.

We believe that our contribution margin provides an important measure of the efficiency of our operations over time.

We have included contribution margin because it is a key measure used by our management to evaluate our performance, and we believe that it also provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.

Our calculation of contribution margin may differ from similarly titled measures, if any, reported by other companies.

Contribution margin should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with 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

We use the non-GAAP

measures contribution margin;

Contribution margin should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

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

Non-GAAP Reconciliations

We use the non-GAAP measures contribution margin;

gross profit and gross margin, excluding stock-based compensation;

and adjusted income from operations, which excludes stock-based compensation, related employer payroll taxes, and non-recurring

charges relating to our Direct Listing, 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 expenses primarily related to our Direct Listing during the quarter ended September 30, 2020, as they are a one-time

nonrecurring charge, and employer payroll taxes related to stock-based compensation, as it is difficult to predict and outside of our control.

and adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions.

We exclude stock-based compensation, which is a non-cash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.

Additionally, we exclude employer payroll taxes related to stock-based compensation as it is difficult to predict and outside of our control.

Our definitions may differ from the definitions used by other companies and therefore comparability may be limited.

1 unchanged sentence

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;

Thus, our non-GAAP contribution margin;

gross profit and gross margin, excluding stock-based compensation;

and adjusted income from operations should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for these limitations by providing reconciliations of these non-GAAP

measures to the most comparable GAAP measures.

We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP

measures in conjunction with the most directly comparable GAAP financial measures.

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

We encourage investors and others to review our business, results of operations, and financial information in its entirety,

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

Contribution Margin

The following table provides a reconciliation of contribution margin for the three and nine months ended September 30, 2021 and 2020 (in thousands, except percentages):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table provides a reconciliation of contribution margin for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

Three Months Ended March 31,

Loss from operations $ (39,439) $ (114,014)

Research and development expenses (1)

61,696 60,597

General and administrative expenses (1)

Stock-based compensation

80,838 63,975

Total stock-based compensation expense 149,323 193,731

Total contribution $ 252,418 $ 204,289

Contribution margin 57 % 60 %

1 unchanged sentence

Gross Profit and Gross Margin, Excluding Stock-Based Compensation

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three and nine months ended September 30, 2021 and 2020 (in thousands, except percentages):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

Three Months Ended March 31,

Gross profit $ 351,954 $ 267,123

stock-based compensation 11,677 15,977

2 unchanged sentences

Adjusted Income from Operations

The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation, related employer payroll taxes, and non-recurring

Direct Listing charges, for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Loss from operations $ (39,439) $ (114,014)

1 unchanged sentence

employer payroll taxes related to stock-based compensation 7,506 36,866

non-recurring

Direct Listing charges (1)

Adjusted income from operations $ 117,390 $ 116,583

Non-recurring

Direct Listing charges were primarily incurred during the quarter ended September 30, 2020 and were immaterial in other periods.

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.

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

Palantir Cloud

2 unchanged sentences

Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

On-Premises Software

Sales of our software subscriptions grant customers the right to use functional intellectual property, either on their internal hardware infrastructure or on their own cloud instance, over the contractual term and are also sold together with stand-ready O&M services.

O&M services include critical updates and support and maintenance services required to operate the software and, as such, are necessary for the software to maintain its intended utility over the contractual term.

Because of this requirement, we have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises

Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.

Because of this requirement, we have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract.

Revenue is generally recognized over the contract term on a ratable basis.

Professional Services

Our professional services support the customers’ use of the software and include, as needed, on-demand

user support, user-interface configuration, training, and ongoing ontology and data modeling support.

Professional services contracts typically include the provision of on-demand

professional services for the duration of the contractual term.

These services are typically coterminous with a Palantir Cloud or On-Premises

Software subscriptions.

Professional services are on-demand,

whereby we perform services throughout the contract period;

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.

1 unchanged sentence

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.

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 customers.

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.

Our sales and marketing efforts span all stages of our sales cycle, including personnel involved with sales functions, and executing pilots at new or existing customers.

Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in sales functions, executing on pilots and customer growth activities;

as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, and allocated overhead.

Sales and marketing costs are generally expensed as incurred.

2 unchanged sentences

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.

10 unchanged sentences

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

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, all of our outstanding preferred stock warrants were converted into common stock warrants, which resulted in the reclassification of the warrants liability to additional paid-in

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

Provision (Benefit) for Income Taxes

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

Provision for Income Taxes

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

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.

1 unchanged sentence

Our operating segments are described below:

This segment primarily serves customers working in non-government

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

federal government and non-U.S.

• Commercial:

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

• Government:

This segment primarily serves customers that are U.S.

government and non-U.S.

government agencies.

Segment profitability is evaluated based on contribution and contribution margin.

6 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Revenue $ 446,357 $ 341,234

Cost of revenue (1)

94,403 74,111

Gross profit 351,954 267,123

Operating expenses:

Sales and marketing (1)

160,485 136,097

Research and development (1)

88,601 98,471

General and administrative (1)

142,307 146,569

Total operating expenses 391,393 381,137

2 unchanged sentences

Interest expense (594) (1,840)

Change in fair value of warrants

Other income (expense), net (59,870) (4,894)

Loss before provision (benefit) for income taxes

Provision (benefit) for income taxes

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

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

Sales and marketing

Research and development

General and administrative

Total stock-based compensation expense (i)

On September 30, 2020, in connection with the Direct Listing, we incurred $769.5 million and $8.4 million of stock-based compensation using the accelerated attribution method related to the satisfaction of the performance-based vesting condition for RSUs and growth units, respectively, that had satisfied the service-based vesting condition as of such date.

Loss before provision for income taxes (99,356) (120,372)

Provision for income taxes 2,023 3,102

Net loss $ (101,379) $ (123,474)

(1) Includes stock-based compensation expense.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Revenue 100 % 100 %

Cost of revenue 21 22

Gross margin 79 78

Operating expenses:

6 unchanged sentences

Interest expense — (1)

Change in fair value of warrants

Other income (expense), net (13) (1)

Loss before provision (benefit) for income taxes

Provision (benefit) for income taxes

Comparison of the Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30,

Loss before provision for income taxes (22) (35)

Provision for income taxes 1 1

Net loss (23) % (36) %

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Change

2022 2021 Amount %

Government $ 241,790 $ 208,420 $ 33,370 16 %

Commercial 204,567 132,814 71,753 54 %

Total revenue $ 446,357 $ 341,234 $ 105,123 31 %

Revenue increased by $102.8 million, or 36%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Revenue from government customers increased by $55.3 million, or 34%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily from customers in the United States.

Revenue increased by $105.1 million, or 31%, for the three months ended March 31, 2022 compared to the same period in 2021.

Revenue from government customers increased by $33.4 million, or 16%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily from customers in the United States.

Of the increase, $33.0 million was from government customers existing as of December 31, 2021.

Revenue from commercial customers increased by $47.5 million, or 37%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase is primarily due to an increase of $35.0 million from new customers that were not yet our customers 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.

Revenue from commercial customers increased by $71.8 million, or 54%, for the three months ended March 31, 2022 compared to the same period in 2021.

Of the increase, $53.8 million was from existing customers as of December 31, 2021, of which $26.8 million was revenue from customers with which we have entered into concurrent Investment Agreements.

For additional information, see Note 4.

Investments and Fair Value Measurements and Note 7.

Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Cost of Revenue and Gross Profit

Three Months Ended September 30,

Three Months Ended March 31, Change

2022 2021 Amount %

Cost of revenue $ 94,403 $ 74,111 $ 20,292 27 %

Cost of revenue for the three months ended September 30, 2021 decreased by $62.5 million, or 42%, compared to the three months ended September 30, 2020.

The decrease was primarily due to decreases in personnel costs of $78.6 million, which included a decrease of $79.5 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by an increase of $13.2 million related to third-party cloud hosting services.

Our gross margin for the three months ended September 30, 2021 increased by 30% compared to the three months ended September 30, 2020.

Gross margin increased primarily as a result of higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing and as a result of increased efficiencies in supporting revenue growth at our customer deployments, including investments in our platforms.

This was partly offset by an increase in third-party cloud hosting services.

For the three months ended September 30, 2021 and 2020, gross margin, excluding stock-based compensation, would have been 82% and 81%, respectively.

Gross profit 351,954 267,123 84,831 32 %

Gross margin 79 % 78 % 1 %

Cost of revenue for the three months ended March 31, 2022 increased by $20.3 million, or 27%, compared to the same period in 2021.

The increase was primarily due to increases of $14.3 million in third-party cloud hosting services driven by increased usage by

existing customers and $5.4 million in field service representatives and other direct deployment costs mainly related to new projects.

These increases were partially offset by a decrease of $6.9 million in stock-based compensation expense.

Our gross margin for the three months ended March 31, 2022 increased from 78% for the same period in 2021 to 79% as a result of increased efficiencies in supporting revenue growth at our customer deployments, for example from making investments in our platforms as well as a lower rate of increase in cost of revenue partially driven by a decrease in stock-based compensation expense.

Operating Expenses

Three Months Ended September 30,

Three Months Ended March 31, Change

2022 2021 Amount %

Sales and marketing $ 160,485 $ 136,097 $ 24,388 18 %

3 unchanged sentences

Sales and Marketing

Sales and marketing expenses decreased by $181.5 million, or 54%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The decrease was primarily driven by decreases in personnel costs of $199.2 million, which included a decrease of $206.8 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by an increase of $5.3 million in payroll costs due to an increase in headcount attributable to our sales and marketing functions, average cost per head, and commission payments.

Additionally, there was an increase of $9.8 million in marketing costs.

Sales and marketing expenses increased by $24.4 million, or 18%, for the three months ended March 31, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $18.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our sales and marketing function, $11.0 million in marketing and advertising expenses, and $7.7 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions.

These increases were partially offset by a decrease of $17.5 million in stock-based compensation expense.

Research and Development

Research and development expenses decreased by $219.6 million, or 70%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The decrease was primarily driven by decreases in personnel costs of $219.2 million, which included a decrease of $222.3 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

Research and development expenses decreased by $9.9 million, or 10%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $20.1 million in stock-based compensation expense;

partially offset by an increase of $4.7 million in payroll and other payroll-related costs primarily driven by an increase in headcount attributable to our research and development function.

General and Administrative

General and administrative expenses decreased by $189.5 million, or 56%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The decrease was primarily driven by decreases in personnel costs of $150.8 million, which included a decrease of $153.5 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

Additionally, there was a decrease of $44.1 million in legal and other consulting services primarily from non-recurring

expenses related to our Direct Listing incurred in the third quarter of 2020, partially offset by an increase of $5.5 million from increased recruiting costs, cloud-based hosting costs, and allocated overhead.

Interest Income

Three Months Ended September 30,

Interest income

Interest income decreased by $0.1 million for the three months ended September 30, 2021 compared to the three months ended September 30, 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 September 30,

Interest expense

Interest expense decreased by $1.5 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The decrease was primarily due to the full repayment of the outstanding debt balance during the second quarter of 2021.

Change in Fair Value of Warrants

Three Months Ended September 30,

Change in fair value of warrants

During the three months ended September 30, 2020, the $9.2 million loss from the change in fair value of warrants was primarily driven by the increase in the fair value of our stock during the period.

During the three months ended September 30, 2021, there were no outstanding liability classified warrants.

Other Income (Expense), Net

Three Months Ended September 30,

Other income (expense), net

Other income (expense), net changed by $5.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to changes in realized and unrealized gains, net from foreign exchange transactions and unrealized losses, net from our investments in marketable securities.

Provision (Benefit) for Income Taxes

Three Months Ended September 30,

Provision (benefit) for income taxes

We recorded a provision for income taxes of $1.4 million for the three months ended September 30, 2021 compared to a benefit from income taxes of $8.5 million for the three months ended September 30, 2020.

The change was primarily due to the benefits from stock-based compensation windfalls and the revaluation of the UK deferred tax assets as a result of a change in the UK corporate tax rate recorded in the third quarter of 2020 but not in the current quarter.

Comparison of the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30,

Total revenue

Revenue increased by $338.4 million, or 44%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Revenue from government customers increased by $238.1 million, or 57%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily from customers in the United States.

Of the increase, $236.0 million was from government customers existing as of December 31, 2020.

Revenue from commercial customers increased by $100.3 million, or 29%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Of such increase, $51.0 million is from customers existing as of December 31, 2020 and the remaining amount is from new customers acquired during the nine months ended September 30, 2021.

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

Nine Months Ended September 30,

General and administrative expenses decreased by $4.3 million, or 3%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $29.3 million in stock-based compensation expense, partially offset by increases of $9.6 million in professional service fees, $7.0 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions, and $4.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our general and administrative functions.

Stock-Based Compensation

Three Months Ended March 31, Change

2022 2021 Amount %

Cost of revenue $ 11,677 $ 15,977 $ (4,300) (27) %

Cost of revenue for the nine months ended September 30, 2021 decreased by $30.2 million, or 11%, compared to the nine months ended September 30, 2020.

The decrease was primarily due to decreases in personnel costs of $63.1 million, which included a decrease of $65.4 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by increases of $27.8 million related to third-party cloud hosting services and $10.6 million related to other direct deployment costs and increased usage of field service representatives.

Our gross margin for the nine months ended September 30, 2021 increased by 14% compared to the nine months ended September 30, 2020.

This was partly offset by an increase in third-party cloud hosting services and direct deployment costs.

For the nine months ended September 30, 2021 and 2020, gross margin, excluding stock-based compensation, would have been 82%.

Operating Expenses

Nine Months Ended September 30,

Sales and marketing 49,272 57,286 (8,014) (14) %

1 unchanged sentence

General and administrative 61,469 82,594 (21,125) (26) %

Total operating expenses

Sales and Marketing

Sales and marketing expenses decreased by $84.2 million, or 16%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was primarily driven by decreases in personnel costs of $100.8 million, which included a decrease of $135.9 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by increases of $24.8 million in employer payroll taxes primarily related to income from share-based payments and $13.1 million in payroll mainly due to an increase in headcount attributable to our sales and marketing functions, average costs per head, and commission payments.

Additionally, there was an increase of $11.0 million in marketing costs.

Research and Development

Research and development expenses decreased by $163.2 million, or 35%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was primarily driven by decreases in personnel costs of $160.8 million, which included a decrease of $186.7 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by increases of $15.0 million related to payroll taxes primarily for income from share-based payments and $13.7 million in payroll related to increases in headcount attributable to our research and development functions and cost per head.

General and Administrative

General and administrative expenses decreased by $49.0 million, or 10%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was primarily driven by a decrease of $49.6 million in legal professional services primarily from non-recurring

expenses related to our Direct Listing incurred in the third quarter of 2020, partially offset by an increase of $6.1 million from office related expenses.

Additionally, there were decreases in personnel costs of $8.6 million, which included a decrease of $29.5 million in stock-based compensation expense primarily due to higher RSU expense in the prior period related to the recognition of cumulative stock-based compensation expense upon our Direct Listing.

These decreases in personnel costs were partially offset by an increase of $16.8 million related to payroll taxes primarily for income from share-based payments.

Total stock-based compensation expense $ 149,323 $ 193,731 $ (44,408) (23) %

Stock-based compensation expenses decreased by $44.4 million, or 23%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily driven by lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our direct listing, during the three months ended March 31, 2022 compared to the same period in 2021, and lower expense due to options becoming fully vested over time.

Interest Income

Nine Months Ended September 30,

Three Months Ended March 31, Change

2022 2021 Amount

Interest income $ 547 $ 376 $ 171

Interest income decreased by $3.2 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to a reduction in U.S.

Interest income increased by $0.2 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to an increase in U.S.

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

Interest Expense

Nine Months Ended September 30,

Three Months Ended March 31, Change

2022 2021 Amount

Interest expense $ (594) $ (1,840) $ 1,246

Interest expense decreased by $9.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was primarily due to the full repayment of the outstanding debt balance during the second quarter of 2021.

Change in Fair Value of Warrants

Nine Months Ended September 30,

Change in fair value of warrants

During the nine months ended September 30, 2020, the $0.8 million gain from the change in fair value of warrants was primarily driven by the decrease of fair value of the underlying stock.

During the nine months ended September 30, 2021, there were no outstanding liability classified warrants.

Interest expense decreased by $1.2 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the full repayment of the outstanding debt balance during the second quarter of 2021.

Other Income (Expense), Net

Nine Months Ended September 30,

Three Months Ended March 31, Change

2022 2021 Amount

Other income (expense), net $ (59,870) $ (4,894) $ (54,976)

Other income (expense), net changed by $12.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to changes in realized and unrealized gains, net from foreign exchange transactions and unrealized losses, net for investments in marketable securities.

Benefit from Income Taxes

Nine Months Ended September 30,

Benefit from income taxes

We recorded a benefit from income taxes of $1.1 million for the nine months ended September 30, 2021 compared to a benefit from income taxes of $5.0 million for the nine months ended September 30, 2020.

The change was primarily due to the benefits from stock-based compensation windfalls and the revaluations of the UK deferred tax assets as a result of a change in the UK corporate tax rate enacted during the third quarter of 2020 and the second quarter of 2021, which will be effective on April 1, 2023, offset by decreases in profits from our international operations.

Other income (expense), net changed by $55.0 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to unrealized losses, net from our investments in marketable securities.

Provision for Income Taxes

Three Months Ended March 31, Change

2022 2021 Amount

Provision for income taxes $ 2,023 $ 3,102 $ (1,079)

Provision for income taxes decreased by $1.1 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to decreases in non-US income tax expense partially offset by an increase in foreign withholding taxes.

Liquidity and Capital Resources

Historically, we 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 and cash flows from operations 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 September 30, 2021, our accumulated deficit balance was $5.3 billion, and our principal sources of liquidity were $2.3 billion of cash and cash equivalents, exclusive of additional restricted cash of $88.1 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.

During April 2021, we repaid our outstanding term loans of $200.0 million.

As of September 30, 2021, we had no outstanding balance under the 2014 Credit Facility and a $400.0 million revolving credit facility available and undrawn.

For more information, see the section titled “ Management’s Discussion and Analysis of

Financial Condition and Results of Operations

— Credit Facilities.

We generated positive cash flow from operations for the three months ended March 31, 2022 as our customer billing cycles have continued to normalize and our growth in customer collections outpaced our cash operating expenses.

We had $2.3 billion in cash and cash equivalents available as of March 31, 2022.

We believe that cash flows generated from operations, cash, cash equivalents, available funds and access to financing sources, including our revolving credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.

However, any projections of future cash needs and cash flows are subject to substantial uncertainty.

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

As of March 31, 2022, our accumulated deficit balance was $5.6 billion, and our principal sources of liquidity were $2.3 billion of cash and cash equivalents.

As of March 31, 2022, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 million under our revolving credit facility.

For more information, see Note 6.

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

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, as of September 30, 2021, our approved investment commitments outstanding totaled $226.5 million, which are in addition to the investments we made during the period, and we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies.

Further, as of March 31, 2022, our approved investment commitments outstanding totaled $35.0 million, which are in addition to the investments we made during the period, and 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.

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):

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash provided by (used in):

3 unchanged sentences

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

Net increase in cash, cash equivalents, and restricted cash

(727) (2,197)

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

$ (34,477) $ 320,330

Operating Activities

Net cash provided by operating activities was $240.4 million for the nine months ended September 30, 2021.

The factors affecting our operating cash flows during this period were our net loss of $364.2 million, offset by non-cash

charges of $656.1 million and changes in net operating assets and liabilities of $51.5 million.

charges primarily consisted of $611.3 million in stock-based compensation expense, $23.4 million in operating lease expense, $11.1 million in depreciation and amortization, $7.2 million in unrealized loss from marketable securities and $3.1 million in other operating activities.

The net change in operating assets and liabilities were due to a net increase in assets of $31.4 million, primarily due to an increase of $15.4 million in accounts receivable, a net decrease of $20.0 million in deferred revenue and customer deposits due to increases in revenue recognized from amounts billed and collected in prior periods, and a net decrease of $22.8 million in operating lease liabilities due to payments on our operating leases, partially offset by an increase in accounts payable and accrued liabilities of $21.5 million due to timing of expense payments.

Net cash used in operating activities was $278.3 million for the nine months ended September 30, 2020.

The factors affecting our operating cash flows during this period were our net loss of $1.0 billion, offset by non-cash

charges of $1.1 billion and changes in net operating assets and liabilities of $331.9 million.

charges primarily consisted of $1.0 billion in stock-based compensation expense, $28.8 million in operating lease expense, and $10.3 million of depreciation and amortization.

The net change in operating assets and liabilities were due to a net decrease of $171.1 million in deferred revenue and customer deposits due to increases in revenue recognized from amounts billed and collected in prior periods, a net increase in accounts payable and accrued liabilities of $12.8 million as a result of timing of payments to vendors accrued for in prior periods, and an increase in assets of $145.3 million primarily due to an increase in accounts receivable.

Net cash provided by operating activities was $35.5 million and $116.9 million for the three months ended March 31, 2022 and 2021, respectively.

The decrease was primarily driven by timing of the receipt of payments from our customers, and timing of payments to vendors.

Investing Activities

Net cash used in investing activities was $216.0 million for the nine months ended September 30, 2021, which primarily consisted of purchases of marketable securities of $155.3 million, alternative investments of $50.9 million, and property and equipment of $6.8 million.

Net cash used in investing activities was $10.0 million for the nine months ended September 30, 2020, which primarily consisted of purchases of property and equipment.

Net cash used in investing activities was $96.5 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in cash used by investing activities was primarily due to purchases of marketable securities of $89.5 million.

Financing Activities

Net cash provided by financing activities was $274.3 million for the nine months ended September 30, 2021, which primarily consisted of $474.7 million of proceeds from the exercise of common stock options, partially offset by $200.0 million of payments on term loans.

Net cash provided by financing activities was $817.3 million for the nine months ended September 30, 2020, which primarily consisted of $942.5 million of net proceeds from the issuance of common stock, $199.4 million of net proceeds from borrowings under our credit facilities, and $79.5 million of proceeds from exercise of common stock options, partially offset by the repayments of debt of $400.0 million and $3.8 million net cash used for repurchases of common stock.

Credit Facilities

2014 Credit Facility

In October 2014, we 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.

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

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 for additional loans in an aggregate principal amount of up to $100.0 million with one or more existing or new lenders upon mutual agreement between us and such lenders.

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

As of September 30, 2021, there were no amounts outstanding under the 2014 Credit Facility.

Net cash provided by financing activities was $27.2 million and $206.4 million for the three months ended March 31, 2022 and 2021, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.

Contractual Obligations and Commitments

Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities, non-cancelable

purchase commitments related to third-party cloud hosting services, and commitments to invest in shares of various entities, certain of which are contingent upon certain business combinations.

Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities, non-cancelable purchase commitments related to third-party cloud hosting services, and commitments to invest in shares of various entities, certain of which are contingent upon certain business combinations.

For additional information, refer to Note 7.

Commitments and Contingencies

Subsequent Events

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

Commitments and Contingencies to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Except as already disclosed in Note 7.

Commitments and Contingencies

Subsequent Events

in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q,

there has been no other 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 our contractual obligations.

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.

Commitments and Contingencies in 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, 2021.

See our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 24, 2022, for additional information regarding the Company’s contractual obligations.

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.

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.

2 unchanged sentences

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.

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, 2021, which was filed with the SEC on February 24, 2022.

Recent Accounting Pronouncements

For information on recently issued accounting pronouncements, refer to Note

Significant Accounting Policies

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

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

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

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 2. Management’s Discussion and Analysis