What changed in this filing

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Item 1A. Risk Factors

2023-11-03 compared with 2023-08-08 · 89 added, 92 removed, 1352 unchanged (12% of the section changed)

68 unchanged sentences

As part of our sales efforts, we invest considerable time and expense evaluating the specific organizational needs of our potential customers and educating these potential customers about the technical capabilities and value of our platforms and services.

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, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue-generating contracts.

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, including at bootcamps, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue-generating contracts.

In addition, we have grown and may continue to grow our direct sales force, and our sales efforts have historically depended on the significant involvement of our senior management team.

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Because decisions to purchase our platforms involve significant financial commitments, potential customers generally evaluate our platforms at multiple levels within their organization, each of which often have specific requirements, and typically involve their senior management.

Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including as a result of the COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related economic sanctions, rising inflation and interest rates, monetary policy changes, financial services sector instability, or foreign currency fluctuations), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments.

Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including as a result of the COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related economic sanctions, Hamas’ recent attack against Israel and ensuing conflicts, rising inflation and interest rates, monetary policy changes, financial services sector instability, or foreign currency fluctuations), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments.

In addition, certain decision makers and other stakeholders within our potential customers tend to have vested interests in the continued use of internally developed or existing software, which may make it more difficult for us to sell our platforms and services.

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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 17% and 18% of our revenue for the years ended December 31, 2022 and 2021, respectively, and 20% and 16% of our revenue for the six months ended June 30, 2023 and 2022, respectively.

Our top three customers by revenue, for the six months ended June 30, 2023, have been with us for an average of seven years as of June 30, 2023.

revenue from these customers, and which has required us to refund some previously paid amounts to these customers.

Our top three customers together accounted for 17% and 18% of our revenue for the years ended December 31, 2022 and 2021, respectively, and 19% and 17% of our revenue for the nine months ended September 30, 2023 and 2022, respectively.

Our top three customers by revenue, for the nine months ended September 30, 2023, have been with us for an average of eight years as

of September 30, 2023.

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.

It is not possible for us to predict the future level of demand from our larger customers for our platforms and applications.

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Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales.

In addition, our customers’ decisions to expand the deployment of our platforms depends on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our forward-deployed engineers to assist our customers in identifying new use cases, modernizing their data architectures, and achieving success with data-driven initiatives, and our customers’ satisfaction with our services.

In addition, our customers’ decisions to expand the deployment of our platforms depends on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our employees to assist our customers in identifying new use cases, modernizing their data architectures, and achieving success with data-driven initiatives, and our customers’ satisfaction with our services.

If our efforts to expand within our existing customer base are not successful, our business may suffer.

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Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below:

• the success of our sales and marketing efforts, including the success of our pilot deployments;

• the success of our sales and marketing efforts, including the success of our pilot deployments (including bootcamps);

• our ability to increase our contribution margins;

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Further, the proper use of our platforms may require training of the customer and the initial or ongoing services of our technical personnel as well as O&M services over the contract term.

training and/or ongoing services require more of our expenditures than we originally estimated, our margins will be lower than projected.

If training and/or ongoing services require more of our expenditures than we originally estimated, our margins will be lower than projected.

In addition, if our customers do not use our platforms correctly or as intended, inadequate performance or outcomes may result.

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We spend substantial amounts of time and money researching and developing new technologies and enhanced versions of existing features to meet our customers’ and potential customers’ rapidly evolving needs.

There is no assurance that our enhancements to our platforms or our new product features, capabilities, or offerings, including new platforms or product modules, such as our Artificial Intelligence Platform (“AIP”), will, either individually or in the aggregate, be compelling to our customers, gain market acceptance, or have a positive or material impact on our business, financial condition, or results of operations, in each case in a timely or cost-effective manner.

If our research and development investments do not accurately anticipate customer demand or if we fail to develop our platforms in a manner that satisfies customer preferences in a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our platforms.

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As we continue to grow, we face challenges of integrating, developing, retaining, and motivating our 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 3,734 full-time employees as of June 30, 2023, 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 3,810 full-time employees as of September 30, 2023, 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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The successful execution of our strategy to increase our sales to existing customers, identify and engage new customers, and enter new U.S.

depend, among other things, on our ability to successfully build and expand our sales organization and operations.

markets will depend, among other things, on our ability to successfully build and expand our sales organization and operations.

Identifying, recruiting, training, and managing sales personnel requires significant time, expense, and attention, including from our senior management and other key personnel, which could adversely impact our business, financial condition, and results of operations in the short and long term.

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If we do not effectively deploy, update, or upgrade our platforms, succeed in helping our customers quickly resolve post-deployment issues, and provide effective ongoing services, our ability to sell additional products and services to existing customers could be adversely affected, we may face negative publicity, and our reputation with potential customers could be damaged.

Many enterprise and government customers require higher levels of service than smaller customers.

Many enterprise and government customers require higher levels of service than

smaller customers.

If we fail to meet the requirements of the larger customers, it may be more difficult to execute on our strategy to increase our penetration with larger customers.

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However, such a decline would negatively affect our revenue in future quarters.

Accordingly, the effect of significant downturns in sales or renewals, significant customer terminations, and potential changes in our contracting

terms and pricing policies would not be fully reflected in our results of operations until future periods.

Accordingly, the effect of significant downturns in sales or renewals, significant customer terminations, and potential changes in our contracting terms and pricing policies would not be fully reflected in our results of operations until future periods.

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.

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Our contracts with our customers are typically non-exclusive, but we have historically entered into arrangements with our customers and our partners that include exclusivity provisions, and we expect to continue to do so in the future.

These exclusivity provisions limit our ability to license our platforms and provide services to specific customers, or to compete in certain geographic markets and industries, which may limit our growth and negatively impact our results.

These exclusivity provisions limit our ability to license our platforms and provide services to specific customers, or to compete in certain geographic markets or industries, which may limit our growth and negatively impact our results.

In addition, we have entered into joint ventures and strategic alliances with our customers, as described below, which also limit our ability to compete in certain geographic markets or industry verticals.

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In addition, our competitors include large enterprise software companies, government contractors, and system integrators, and we may face competition from emerging companies as well as established companies who have not previously entered this market.

Additionally, we may be required to make substantial

additional investments in our research, development, services, marketing, and sales functions in order to respond to competition, and there can be no assurance that we will be able to compete successfully in the future.

Additionally, we may be required to make substantial additional investments in our research, development, services, marketing, and sales functions in order to respond to competition, and there can be no assurance that we will be able to compete successfully in the future.

Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

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We may not compete successfully against our current or potential competitors.

If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition and results of operations could be adversely affected.

If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial

condition and results of operations could be adversely affected.

In addition, companies competing with us may have an entirely different pricing or distribution model.

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Our culture emphasizes rapid innovation and advancement of successful hires who may in some cases have limited prior industry expertise and prioritizes customer outcomes over short-term financial results, and if we cannot maintain or properly manage our culture as we grow, our business may be harmed.

We have a culture that encourages employees to quickly develop and launch key technologies and platforms intended to solve our customers’ most important problems and prioritizes the advancement of employees to positions of significant responsibility

based on merit despite, in some cases, limited prior work or industry experience.

Much of our hiring into technical roles comes through our internship program or from candidates joining us directly from undergraduate or graduate engineering programs rather than industry hires.

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Joint ventures, channel sales relationships, platform partnerships, strategic alliances, and other similar arrangements involve significant investments of both time and resources, and there can be no assurances that they will be successful.

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.

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 IBM is supplying a new product leveraging certain components of Foundry integrated with IBM’s Cloud Pak for Data.

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in December 2022 in which we have a controlling interest.

We believe these arrangements offer our business strategic operational advantages within the Japanese and Korean markets, but they also limit our ability to

independently sell our platforms, provide certain services, engage certain customers, or compete in the Japanese and Korean markets or related industry verticals, which in turn limits our opportunities for growth in Japan and Korea and, depending on the success of each respective entity, may negatively impact our results.

We believe these arrangements offer our business strategic operational advantages within Japanese and Korean markets, but they also limit our ability to independently sell our platforms, provide certain services, engage certain customers, or compete in Japanese and Korean markets or related industry verticals, which in turn limits our opportunities for growth in Japan and Korea and, depending on the success of each respective entity, may negatively impact our results.

Additionally, in 2016, we entered into a partnership with Airbus S.A.S.

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In the event we enter into an arrangement with a particular partner, we may be less likely (or unable) to work with one or more direct competitors of our partner with which we would have worked absent the arrangement.

We may have interests that are different from our joint venture partners and/or which may affect our ability to successfully collaborate with a given partner.

We may have interests that are different from our partners and/or which may affect our ability to successfully collaborate with a given partner.

Similarly, one or more of our partners in a joint venture, channel sales relationship, platform partnership, or strategic alliance may independently suffer a bankruptcy or other economic hardship that negatively affects its ability to continue as a going concern or successfully perform on its obligation under the arrangement.

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and result in postponed or canceled projects, all of which would negatively impact our business, financial condition, and results of operations, including sales and cash flows.

For example, some of our early-stage Investee (as defined below) customers recently filed for bankruptcy and we may not realize the full value of our commercial contracts with such customers as a result.

For example, some of our early-stage

Investee (as defined below) customers recently filed for bankruptcy and we may not realize the full value of our commercial contracts with such customers as a result.

It is not possible at this time to estimate the full impact that the COVID-19 pandemic, Russia-Ukraine conflict, and related challenging macroeconomic conditions will have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

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We have a limited history of operating with a hybrid workforce.

There is no guarantee that we will

realize any anticipated benefits to our business from this model, including cost savings, operational efficiencies, or productivity.

There is no guarantee that we will realize any anticipated benefits to our business from this model, including cost savings, operational efficiencies, or productivity.

It is also possible that remote work arrangements may have a negative impact on our operations;

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In recent periods, we have increased our focus on commercial customers.

In the future, we may increasingly focus on such customers, including in the banking, financial services, healthcare, pharmaceutical, manufacturing, telecommunication, automotive, airlines and aerospace, consumer packaged goods, insurance, retail, transportation, shipping and logistics, energy, mining, and other emerging industries.

In the future, we may increasingly focus on such customers, including in the banking, financial services, healthcare, pharmaceutical, manufacturing, telecommunication,

automotive, airlines and aerospace, consumer packaged goods, insurance, retail, transportation, shipping and logistics, energy, mining, and other emerging industries.

We have also increased our focus on new technologies, such as AI.

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

In March 2022, our revolving credit facility was further amended to, among other things, extend the maturity date of the revolving loan facility and increase the commitments under the revolving credit facility by $100.0 million, and in July 2022, our revolving credit facility was further amended to, among other things, provide a new incremental DDTL commitment in an aggregate principal amount of $450.0 million, upon the terms and conditions set forth in the credit agreement, as amended, with new and existing lenders.

The DDTL commitment was available to draw upon through July 1, 2023, on which date it expired undrawn.

The existing revolving credit facility, as amended, matures in March 2027 and provides for total commitments of up to $500.0 million, all of which are undrawn as of the date of this Quarterly Report on Form 10-Q.

Any interest or facility payments are due and payable quarterly or more or less frequently in certain circumstances.

Our existing revolving credit facility, as amended, matures in March 2027 and provides for total commitments of up to $500.0 million, all of which are undrawn as of the date of this Quarterly Report on Form 10-Q.

Any interest or facility payments are generally due and payable quarterly.

Additional equity or debt financing may not be available on favorable terms, or at all.

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Additionally, our credit facility is secured by substantially all of our assets.

Upon a default, unless waived, the lenders under our credit facility could elect to terminate their commitments and cease making further loans, and, when amounts are outstanding, foreclose on our assets pledged to such lenders to secure our obligations under our credit agreement and force us into bankruptcy or liquidation.

In addition, a default under our credit facility could trigger a cross

default under agreements governing any future indebtedness.

Upon a default, unless waived, the lenders under our credit facility could elect to terminate their commitments and cease making further loans,

and, when amounts are outstanding, foreclose on our assets pledged to such lenders to secure our obligations under our credit agreement and force us into bankruptcy or liquidation.

In addition, a default under our credit facility could trigger a cross default under agreements governing any future indebtedness.

If we experience a default under our credit facility or instruments governing our future indebtedness, our business, financial condition, and results of operations may be adversely impacted.

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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, 2023, we were in compliance with all covenants and restrictions associated with our credit facility.

As of September 30, 2023, we were in compliance with all covenants and restrictions associated with our credit facility.

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

As of June 30, 2023, no borrowings were outstanding under our credit facility.

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

Our loans under our credit facility would incur interest at the Secured Overnight Financing Rate (“SOFR”) as administered by the Federal Reserve Bank of New York, or a successor administrator of the SOFR (or the applicable benchmark replacement) plus 2.00% or a base rate plus 1.00%, subject to certain adjustments, and is payable quarterly or more or less frequently in certain circumstances.

As of September 30, 2023, no borrowings were outstanding under our credit facility.

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

We have invested in, and may in the future acquire or invest in, companies and technologies, which may divert our management’s attention, and result in additional dilution to our stockholders.

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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 (collectively, the “Strategic Commercial Contracts”).

As of June 30, 2023, the terms of such Strategic Commercial Contracts, including contractual options, range from two to seven years and are subject to termination for cause provisions.

The total value of such Strategic Commercial Contracts as of June 30, 2023 was $395.4 million, inclusive of $43.7 million of contractual options.

The total value of Strategic Commercial Contracts, which is calculated as the sum of the cumulative revenue recognized from Strategic Commercial Contracts and the remaining deal value of such contracts, was $392.1 million, inclusive of $43.7 million of contractual options, as of September 30, 2023.

Strategic Commercial Contracts with remaining deal value as of September 30, 2023 have original contract terms, including contractual options, ranging from two to seven years and are subject to termination for cause provisions.

When determining the total value of these Strategic Commercial Contracts, we assess customers’ financial condition, including the consideration of their ability and intention to pay, and whether all or some portion of the value of the contracts continue to meet the criteria for revenue recognition, among other factors.

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For example, some of our early-stage Investee customers recently filed for bankruptcy, and the remaining value of the commercial contracts with such customers that is not expected to be recognized as revenue has been excluded from the total value of Strategic Commercial Contracts above.

As of June 30, 2023, the cumulative amount of revenue recognized from Strategic Commercial Contracts was $219.4 million, of which $52.8 million was recognized by us during the six months ended June 30, 2023.

As of September 30, 2023, the cumulative amount of revenue recognized from Strategic Commercial Contracts was $234.1 million, of which $67.4 million was recognized by us during the nine months ended September 30, 2023.

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 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.

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Our success depends in part on our ability to provide effective data security protection in connection with our technology platforms and services, and we rely on information technology networks and systems to securely store, transmit, index, and otherwise process electronic information.

Because our platforms and services are used by our customers to store, transmit, index, or otherwise process and analyze large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information, personal health information, government classified information, and other information subject to regulatory or statutory control or requirements), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, loss, or unavailability of data.

Additionally, because many of our customers use our platforms to store, transmit, and otherwise process proprietary, confidential, or sensitive information, and

complete mission critical tasks, they have a lower risk tolerance for security vulnerabilities in our platforms and services than for vulnerabilities in other, less critical, software products and services.

(including in some instances personal or identifying information, personal health information, government classified information, and other information subject to regulatory or statutory control or requirements), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, loss, or unavailability of data.

Additionally, because many of our customers use our platforms to store, transmit, and otherwise process proprietary, confidential, or sensitive information, and complete mission critical tasks, they have a lower risk tolerance for security vulnerabilities in our platforms and services than for vulnerabilities in other, less critical, software products and services.

Our platforms and services operate in conjunction with, and we are dependent upon, third-party products and components across a broad ecosystem, including our customer environments.

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For instance, due to political uncertainty, geopolitical tensions, and military actions associated with the ongoing Russia-Ukraine conflict, we and our third-party vendors have been vulnerable to a heightened risk of cybersecurity attacks, phishing attacks, viruses, malware, ransomware, hacking or similar breaches and incidents from nation-state actors or affiliated actors, including attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell, and distribute our products and services.

While we have security measures in place to protect our information and our customers’ information and to prevent data loss and other security breaches and incidents, we have not always been able to do so and there can be no assurance that in the future we will be able to anticipate or prevent security breaches or incidents, or unauthorized access of our information technology systems or the information technology systems of the third-party vendors upon which we rely.

Despite our implementation of network security measures and internal information

security policies, data stored on personnel computer systems is also vulnerable to similar security breaches and incidents, unauthorized tampering, bad actors, or human error.

While we have security measures in place to protect our

information and our customers’ information and to prevent data loss and other security breaches and incidents, we have not always been able to do so and there can be no assurance that in the future we will be able to anticipate or prevent security breaches or incidents, or unauthorized access of our information technology systems or the information technology systems of the third-party vendors upon which we rely.

Despite our implementation of network security measures and internal information security policies, data stored on personnel computer systems is also vulnerable to similar security breaches and incidents, unauthorized tampering, bad actors, or human error.

Many governments have enacted laws requiring companies to provide notice of data security breaches or incidents involving certain types of data, including personal data.

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The rapid evolution of AI may also require additional resources to develop, test, and maintain our platforms and products to help ensure that AI is implemented appropriately in order to minimize unintended or harmful impact, which may be costly and may not produce the benefits and results that we expect.

Some AI scenarios present ethical issues, and the enablement or integration of AI into our platforms may subject us to new or heightened legal, regulatory, ethical, or other challenges.

Some AI scenarios present ethical issues, and the enablement or integration of AI into our platforms may subject us to new or heightened legal, regulatory, ethical, or other challenges, the application or interpretation of which are complex and will likely continue to evolve.

Our technologies and business practices are designed to mitigate many of these risks.

For example, our platforms include data governance tools and machine learning modeling tools which help to regulate and limit user access to data sets and develop, deploy, and manage more effective and responsible AI capabilities.

However, if these controls are not properly implemented by, or for, our customers, or if we enable or offer AI solutions that are controversial or problematic because of their purported or real impact on human rights, privacy, employment, or other societal issues, we may experience brand or reputational harm, as well as regulatory or legal scrutiny.

However, if these controls are not properly implemented by, or for, our customers, or if we enable or offer AI solutions that are controversial or problematic

because of their purported or real impact on human rights, privacy, employment, or other societal issues, we may experience brand or reputational harm, as well as regulatory or legal scrutiny.

We depend on computing infrastructure operated by Amazon Web Services (“AWS”), Microsoft, and other third parties to support some of our customers and any errors, disruption, performance problems, or failure in their or our operational infrastructure could adversely affect our business, financial condition, and results of operations.

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If we experience disruptions, failures, data loss, outages, or other performance problems, our business, financial condition, and results of operations could be adversely affected.

Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, natural disasters, public health crises such as the COVID-19 pandemic, geopolitical tensions such as those that may be caused by the ongoing Russia-Ukraine conflict, or acts of misconduct.

Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, such as Hamas’ recent attack against Israel, natural disasters, public health crises such as the COVID-19 pandemic, geopolitical tensions such as those that may be caused by the ongoing Russia-Ukraine conflict, or acts of misconduct.

Moreover, we have business operations in the San Francisco Bay Area, which is a seismically active region.

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AWS, Microsoft Azure, and other third parties have no obligation to renew their agreements with us on commercially reasonable terms, or at all.

If AWS, Microsoft Azure, or other third parties increase pricing terms, terminate or seek to terminate our contractual relationship, establish more favorable relationships with our competitors, or change or interpret their terms of service or policies in a manner that is unfavorable to us, we may be required to transfer to other cloud providers or invest in a private cloud.

If we are required to transfer to other cloud providers or invest in a private cloud, we

could incur significant costs and experience possible service interruption in connection with doing so, or risk loss of customer contracts if they are unwilling to accept such a change.

interpret their terms of service or policies in a manner that is unfavorable to us, we may be required to transfer to other cloud providers or invest in a private cloud.

If we are required to transfer to other cloud providers or invest in a private cloud, we could incur significant costs and experience possible service interruption in connection with doing so, or risk loss of customer contracts if they are unwilling to accept such a change.

A failure to maintain our relationships with our third-party providers (or obtain adequate replacements), and to receive services from such providers that do not contain any material errors or defects, could adversely affect our ability to deliver effective products and solutions to our customers and adversely affect our business and results of operations.

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In addition, any of our patents, copyrights, trademarks, or other intellectual property or proprietary rights may be challenged, narrowed, invalidated, held unenforceable, or circumvented in litigation or other proceedings, including, where applicable, opposition, re-examination, inter partes review, post-grant review, interference, nullification and derivation proceedings, and equivalent proceedings in foreign jurisdictions, and such intellectual property or other proprietary rights may be lost or no longer provide us meaningful competitive advantages.

Such proceedings may result in substantial cost and require significant time from our management, even if the eventual outcome is favorable to us.

Such proceedings may result in substantial cost and require significant

time from our management, even if the eventual outcome is favorable to us.

Third parties also may legitimately and independently develop products, services, and technology similar to or duplicative of our platforms.

In addition to protection

under intellectual property laws, we rely on confidentiality or license agreements that we generally enter into with our corporate partners, employees, consultants, advisors, vendors, and customers, and generally limit access to and distribution of our proprietary information.

In addition to protection under intellectual property laws, we rely on confidentiality or license agreements that we generally enter into with our corporate partners, employees, consultants, advisors, vendors, and customers, and generally limit access to and distribution of our proprietary information.

However, we cannot be certain that we have entered into such agreements with all parties who may have or have had access to our confidential information or that the agreements we have entered into will not be breached or challenged, or that such breaches will be detected.

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Any of these results would harm our business, financial condition, and results of operations.

Further, our agreements with customers and other third parties generally include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of third-party claims of intellectual property infringement, misappropriation, or other violations of intellectual property rights, damages caused by us to property or persons, or other liabilities relating to or arising from our platforms, services, or other contractual obligations.

Large indemnity payments could

harm our business, financial condition, and results of operations.

misappropriation, or other violations of intellectual property rights, damages caused by us to property or persons, or other liabilities relating to or arising from our platforms, services, or other contractual obligations.

Large indemnity payments could harm our business, financial condition, and results of operations.

Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.

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Florida, Montana, Oregon, and Texas each has enacted similar legislation that will become effective in 2024;

Tennessee and Iowa each has enacted similar legislation that will take effect in 2025;

Tennessee, Iowa, and Delaware each has enacted similar legislation that will take effect in 2025;

and Indiana has enacted similar legislation that will become effective in 2026.

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• volatility in non-U.S.

political and economic environments, including by way of examples, the potential effects of the COVID-19 pandemic, and the ongoing Russia-Ukraine conflict, as well as economic sanctions the United States and other countries have imposed on Russia;

political and economic environments, including by way of examples, the potential effects of the COVID-19 pandemic, the ongoing Russia-Ukraine conflict, as well as economic sanctions the United States and other countries have imposed on Russia, and Hamas’ recent attack against Israel and ensuing conflicts;

• weaker protection of intellectual property rights in some countries and the risk of potential theft, copying, or other compromises of our technology, data, or intellectual property in connection with our non-U.S.

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The EU has proposed certain legislation, such as the EU AI Act, that, when adopted, could impose onerous obligations related to the use of AI-related systems.

If such legislation, or similar regulations in other jurisdictions, is enacted, compliance with such obligations may be difficult, onerous, and costly, and could adversely affect our business, reputation, financial condition, results of operations, and growth prospects.

When such legislation, or if similar regulations in other jurisdictions, is enacted, compliance with such obligations may be difficult, onerous, and costly, and could adversely affect our business, reputation, financial condition, results of operations, and growth prospects.

We may be subject to government inquiries that drain our time and resources, tarnish our brand among customers and potential customers, prevent us from doing business with certain customers or markets, including government customers, affect our ability to hire, attract and maintain qualified employees, or require us to take remedial action or pay penalties.

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Most of our products, including our core software platforms, have been classified under the EAR and are generally exportable without needing a specific license, under an EAR exception for encrypted software.

If a product, or component of a product, is classified under the ITAR, or is ineligible for the EAR encryption exception, then those products could be exported outside the United States only if we obtain the applicable export license or qualify for a different license exception.

In certain contexts, the services we provide might be classified as defense services subject to the ITAR separately from the products we provide.

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• the adoption of new laws or regulations or changes to existing laws or regulations;

• budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies;

• influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers;

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• volatility in the trading prices and trading volumes of technology stocks;

• the inclusion, exclusion, or deletion of our Class A common stock from any major trading indices, such as the S&P 500 Index;

• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

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• any significant change in our management;

• other events or factors, including those resulting from war, including the ongoing Russia-Ukraine conflict, incidents of terrorism, pandemics, including the COVID-19 pandemic, or responses to these events;

• other events or factors, including those resulting from war, including the ongoing Russia-Ukraine conflict, incidents of terrorism, such as Hamas’ recent attack against Israel, pandemics, including the COVID-19 pandemic, or responses to these events;

• general macroeconomic conditions, such as rising inflation and interest rates and slow or negative growth of our markets.

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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, 2023, approximately 1.6 million options will expire through December 2023 if not exercised prior to their respective expiration dates, and we expect many holders will elect to exercise such options prior to expiration.

As of September 30, 2023, approximately 0.4 million options will expire through December 2023 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, 2023, there were 2,045,404,354 shares of our Class A common stock outstanding, 103,571,141 shares of our Class B common stock outstanding and 1,005,000 shares of our Class F common stock outstanding.

As of September 30, 2023, there were 2,068,689,133 shares of our Class A common stock outstanding, 105,546,704 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 volume limitations of Rule 144.

Further, as of June 30, 2023, there were outstanding options to purchase an aggregate of 113,835,356 shares of our Class A common stock and 187,299,134 shares of our Class B common stock, and 62,307,140 shares of our Class A common stock and 43,800,000 shares of Class B common stock subject to RSUs.

Further, as of September 30, 2023, there were outstanding options to purchase an aggregate of 106,164,915 shares of our Class A common stock and 183,572,447 shares of our Class B common stock, and 50,838,381 shares of our Class A common stock and 41,775,000 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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We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions.

The timing and the amount of stock repurchases in the Share Repurchase Program will be determined by Palantir’s management, based on its evaluation of factors including achieving an additional quarter of profitability, business and market conditions, corporate and regulatory requirements, and other considerations.

The timing and the amount of stock repurchases in the Share Repurchase Program will be determined by Palantir’s management, based on its evaluation of factors including business and market conditions, corporate and regulatory requirements, and other considerations.

There are a number of ways in which the Share Repurchase Program could fail to result in enhanced shareholder value.

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If one or more of the analysts who cover us downgrade our ordinary shares or publish inaccurate or unfavorable research about us, the trading price of our Class A common stock would likely decline.

If these analysts publish target prices for our Class A common stock that are below the then-current public

price of our Class A common stock, it could cause the trading price of our Class A common stock to decline significantly.

If these analysts publish target prices for our Class A common stock that are below the then-current public price of our Class A common stock, it could cause the trading price of our Class A common stock to decline significantly.

Further, if one or more of these analysts cease coverage of Palantir or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock trading price and trading volume to decline.

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Assuming that the Founders and certain of their affiliates collectively meet the Ownership Threshold (as defined below) on the applicable record date for a vote of the stockholders (except as provided in our amended and restated certificate of incorporation), shares of Class F common stock will generally have a number of votes per share in respect of a matter submitted to our stockholders that would cause the total votes of all shares of Class F common stock, together with the votes attributable to shares of Class A common stock and Class B common stock held by our Founders and their affiliates that are subject to the voting agreement among our Founders and Wilmington Trust, National Association (the “Founder Voting Agreement”) and the votes attributable to shares of Class A common stock and Class B common stock held by our Founders and their affiliates that are designated as Designated Founders’ Excluded Shares (as defined in our amended and restated certificate of incorporation), in each case entitled to vote on such matter, to equal, with respect to such matter, 49.999999% of the voting power of (i) all of the outstanding shares of capital stock of the Company entitled to vote on such matter (including in the case of the election of directors);

or (ii) the shares present in person or represented by proxy and entitled to vote on such matter only if a majority of the shares present in person or represented by proxy and entitled to vote on such matter is the applicable voting standard (as applicable, “49.999999% of the Voting Power”).

or (ii) the shares present in person or represented by proxy and entitled to vote on such matter only if a majority of the shares present in person or represented by proxy and entitled to vote on

such matter is the applicable voting standard (as applicable, “49.999999% of the Voting Power”).

Accordingly, subject to limited exceptions described in our amended and restated certificate of incorporation and amended and restated bylaws, such Founders will effectively control all matters submitted to the stockholders for the foreseeable future, including the election of directors, amendments of our organizational documents, compensation matters, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.

Our Founders and their affiliates also hold the substantial majority of our outstanding Class B common stock.

current ownership and may significantly increase their ownership of Class B common stock in the future due to the exercise of currently outstanding warrants and stock options or the settlement of RSUs.

Because of the ten-to-one voting ratio between our Class B and Class A common stock, even without regard to the voting power of the Class F common stock, our Founders and their affiliates collectively control a significant portion of the voting power of our capital stock based on their current ownership and may significantly increase their ownership of Class B common stock in the future due to the exercise of currently outstanding warrants and stock options or the settlement of RSUs.

The Founders may have interests that differ from yours and may vote in a way with which you disagree, and which may be adverse to your interests.

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In certain circumstances in the future, the Founders and their affiliates could have voting power that exceeds 49.999999% of the Voting Power.

If the voting power of shares of Class A common stock and Class B common stock held by the Founders or their affiliates that are subject to the Founder Voting Agreement or are Designated Founders’ Excluded Shares collectively equals greater than 49.999999% of the Voting Power with respect to a matter submitted to our stockholders, then the Class F common stock will have zero votes with respect to such matter.

have zero votes with respect to such matter.

In this case, although the shares of our Class F common stock would generally be entitled to zero votes per share on that matter, all of the shares that are then subject to the Founder Voting Agreement would continue to be voted in accordance with the decision of a majority in number of the Founders who are then party to the Founder Voting Agreement.

For example, if the Founders and their affiliates hold shares other than the Class F common stock, such as Class B common stock, that, in the aggregate, have voting power that exceeds 49.999999% of the Voting Power with respect to a matter submitted to our stockholders, then the total voting power of the Founders and their affiliates would exceed 49.999999% of the

Voting Power with respect to such matter.

Our Founders and their affiliates may acquire additional shares of our Class A common stock or Class B common stock.

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 26.9% of the voting power of our outstanding capital stock in the aggregate as of July 31, 2023.

Excluding the voting power of the Class F common stock, our Founders and their affiliates owned shares entitled to approximately 26.5% of the voting power of our outstanding capital stock in the aggregate as of October 26, 2023.

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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however, we have implemented a policy that will prohibit hedging by our directors, officers and employees, which currently includes the Founders.

In addition, the trustee will vote shares of Class F common stock in accordance with the decision of a majority in number of the Founders who are then party to the Founder Voting Agreement, regardless of such Founders’ relative ownership of any class of our common stock.

In addition, the trustee will vote shares of Class F common stock in accordance with the

decision of a majority in number of the Founders who are then party to the Founder Voting Agreement, regardless of such Founders’ relative ownership of any class of our common stock.

In August 2020, we granted two of our Founders, Mr.

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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 July 31, 2023.

Thiel as Designated Founders’ Excluded Shares represented less than 5% of the voting power of our outstanding capital stock as of October 26, 2023.

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 2,149,980,495 shares of our common stock outstanding as of June 30, 2023.

While the number of outstanding Corporation Equity Securities may exceed the number of shares of our outstanding capital stock, as a comparison, there were 2,175,240,837 shares of our common stock outstanding as of September 30, 2023.

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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A number of provisions relating to the multiple class structure of our common stock are novel or otherwise not common among other corporations with multiple class structures.

For instance, our Founders who are then party to the Founder Voting Agreement are free to transfer or otherwise dispose of their shares of Class A common stock and Class B common stock without diminishing their voting control so long as our Founders who are then party to the Founder Voting Agreement and

certain of their affiliates meet the Ownership Threshold on the applicable record date.

Shares of our Class B common stock, which have ten (10) votes per share, may remain outstanding in perpetuity.

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

As of June 30, 2023, our Founders were 55, 55, and 40 years old.

As of September 30, 2023, our Founders were 55, 55, and 41 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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In addition, our multi-class governance structure may make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track such indices would not invest in our stock.

For example, from 2017 until recently, Standard & Poor’s did not allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices.

For example, from 2017 until recently, Standard & Poor’s did not allow most newly public companies utilizing dual or multi-class

capital structures to be included in their indices.

These policies may depress our valuation compared to those of other similar companies that do not have multi-class governance structures.

Future issuances of our Class A common stock will dilute the voting power of our Class A common stockholders but may not result in further dilution of the voting power of our Founders who are then party to the Founder Voting Agreement.

Future issuances of our Class A common stock will dilute the voting power of our Class A common stockholders, and future issuances to stockholders other than our Founders who are then party to the Founder Voting Agreement will dilute the

economic interests of our Founders and their affiliates.

However, because of the voting rights of the shares of Class F common stock, in the event that our Founders and their affiliates have less than 49.999999% of the Voting Power prior to giving effect to the voting power of the Class F common stock, future issuances of Class A common stock to stockholders other than our Founders and their affiliates will generally not result in dilution of the voting power of our Founders who are then party to the Founder Voting Agreement or their affiliates, but rather, will correspondingly increase the voting power of the Class F common stock.

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commerce and the global economy, and thus could have a negative effect on us.

Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics such as COVID-19, terrorism, political unrest, cyberattacks including as may be exacerbated by the ongoing Russia-Ukraine conflict, geopolitical tensions including those related to the invasion of Ukraine, the effects of climate change such as drought, wildfires, increased storm

severity, and sea level rise, telecommunications failure, vandalism, and other events beyond our control.

Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics such as COVID-19, terrorism, such as Hamas’ recent attack against Israel, political unrest, cyberattacks including as may be exacerbated by the ongoing Russia-Ukraine conflict, geopolitical tensions including those related to the invasion of Ukraine, the effects of climate change such as drought, wildfires, increased storm severity, and sea level rise, telecommunications failure, vandalism, and other events beyond our control.

Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers, could decrease demand for our services, could make existing customers unable or unwilling to fulfill their contractual requirements to us, including their payment obligations, and could cause us to incur substantial expense, including expenses or liabilities arising from potential litigation.

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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