Good afternoon. Thank you for attending the Planet Labs PBC Third Quarter of Fiscal 2023 Earnings Call. [Operator Instructions] I would now like to pass the conference over to your host, Mr. Chris Genualdi, Vice President of Investor Relations. Thank you. You may proceed.

Hello and welcome to Planet's third quarter of fiscal year 2023 earnings call. Before we begin today's call, we'd like to remind everyone that we may make forward-looking statements related to future events or our financial outlook. Any forward-looking statements are based on management's current outlook, plans, estimates, expectations and projections. The inclusion of such forward-looking information should not be regarded as a representation by Planet that future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, as detailed in our SEC filings, which can be found at www.sec.gov. Our actual results or performance may differ materially from those indicated by such forward-looking statements and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier this afternoon. Further, throughout this call, we provide a number of key performance indicators used by management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release. Before we jump-in, I'd like to encourage everyone to reference the slides we have posted on our Investor Relations website, which are intended to accompany our prepared remarks. At this time, I'd now like to turn the call over to Will Marshall, Planet's CEO, Chairperson and Co-Founder. Over to you, Will.

Thanks, Chris, and hello everyone. We're glad you could join us. I'm pleased to share with you today our results for the third quarter of fiscal 2023, highlight some recent sales wins and talk through our progress on a number of strategic initiatives. I'll also provide a perspective on the demand environment and our outlook for the remainder of the year. So let's dive in. In Q3, we generated $49.7 million in revenue, representing 57% year-over-year growth. Non-GAAP gross margins expanded to 54%, up from 35% a year-ago. Yes, another significant year-over-year increase. We think this demonstrates the margin, potential of planet's one-to-many data subscription business model. We ended the quarter with 864 unique customers spanning a diverse range of industries. So to sum it up, we delivered another quarter of solid results in the face of an uncertain macro environment, which is a testament to the strong execution across the company and the mission critical nature of Planet solutions. Now I'll take you through some highlights. As we discussed at our Investor Day in October, we're increasingly focused on building partnerships to accelerate growth of our ecosystem of customers and users. There are three new and exciting strategic partnerships that I'd like to discuss first here today, the first of which is that last week, we announced a collaborative agreement with Accenture. We are combining Planet's high-frequency satellite data with Accenture's industry and technology expertise to collaborate on an array of sustainability and impact initiatives including traceable supply-chain strategy and database climate risk assessments to mitigate disruption across global value chains. These are just our initial areas of focus. We're thrilled to be working with Accenture and think our partnership will drive greater awareness of our offerings and the benefits of our data to deliver to organizations across many…

Thank you, Will and thanks everyone for joining today. As Will mentioned, our revenue for the third quarter of fiscal '23 ending October 31st came in at $49.7 million, which represents 57% year-over-year growth. It's worth calling out that $1.5 million of the upside this quarter came in the form of onetime revenue associated with an option renewal by a European customer, focused on climate and environmental monitoring. We're proud to continue to support this partnership and I'm especially proud of the strong execution of our global teams who are delivering results for our customers. Our end-of-period customer count grew to 864 customers, which represent 16% year-over-year growth and is an indicator of the broader adoption of our platform. Our end-of-period customer count has grown quarter-over-quarter for every quarter in the last three years. We're pleased with our new logo additions in Q3, which showed continued momentum with large accounts. We've seen the average annual contract value of our customers grow year-over-year during the last four quarters, as our sales teams are prioritizing higher-value accounts with opportunity to expand over time. Net dollar retention rate at the end of Q3 was 123% and net dollar retention rate with win backs was 125%. This represent significant year-over-year improvement primarily driven by renewals and expansions in government and agriculture. This is down slightly quarter-over-quarter due to the timing of a renewal with a large international government customer in Asia, which was signed shortly after the end of our quarter. We remain focused on driving higher retention through our investments in product and customer success. Turning to gross margin, we expanded our non-GAAP gross margin to 54% for the third quarter of fiscal '23, compared to 35% in the prior year. The expansion of gross margins continues to be driven by the growth…

[Operator Instructions] The first question is from the line of Michael Latimore with Northland. You may proceed.

We can't hear you.

Apologies, Mr. Latimore, your line is now open.

Right. Hi. Excellent. Yes. Thanks. Very, very strong results. I guess, I just wanted to touch on one of the topics really from last quarter where you would have several customers. I think they used up their annual commitments early and there was some - reevaluate - did they coming expand or renew early or do they kind of hold the pattern with that annual commitment? Can you provide any color on how that's played out in the last quarter?

Yes. I'd say, as we expected there are some customers that have engaged with us on either early renewals or expansions to their contracts, based on their higher consumption levels, and we've had others that continue to manage to the overall annual size that they have for their contract. So obviously we came in at the high end, we came in above our guidance range. And so we definitely continue to see strong consumption patterns, which is great.

Sounds good. And then on the use of partners, can you elaborate a little bit more on how influential they are to new bookings and expansion that maybe segment a little bit between sort of maybe traditional software kind of our size, like Accenture versus tech partners here and how influential there on your leads and bookings at this point?

Yes, it's great question. So we have both direct sales business and via partners. It's always - we've always used partners quite a bit, but we are seeing is a very strong go-to-market approach. And the strategic partners that you saw, I think it really is a great sign that those three large entities, AWS, Accenture and Microsoft are leaning in. It's obviously from my perspective, demonstrating that they see the big value of geospatial data to their markets, and it's mostly commercial markets that they have in mind by the way. And it's great to see them led that big opportunity, they don't lean in for small opportunity. So these organizations and so that's really great. And we have a number of solution partners as well where they're adding capabilities on top of our data that enables solutions and use cases that our solutions don't directly handle and that's what the market do. So we definitely leaning into partners. We've done it before but we're leaning in stronger and stronger into the partners as a rich market.

Very good. Thanks a lot.

Thank you.

Thank you, Mr. Latimore. The next question is from the line of Edison Yu with Deutsche Bank. You may proceed.

Hi, thanks and congratulations on the quarter. I had a question on the acquisition announced. If we think about the contacts your peer men - I think I heard that this kind of falls under the planetary variables piece. Do you foresee kind of doing some more scouting in this area or are you starting to think about kind of moving up to insights?

It's great question. We are very excited by this acquisition. Let me just speak a little bit broadly firstly, Planetary Variables and the sustainability business, because I think that the sustainability transition is desperately in need of really good scientific measures. And a Planetary Variables on carbon in particular it's critical to our carbon offsetting strategy as a species. So that's really exciting. Salo has great forest user for our satellite data to make good forest management techniques and translating that into not just forest cover but to forest carbon. This is essential ground preparation for that sort of move. And of course we've worked with them for some years through the California forest observatory work and other pieces. So we've got a good relationship with that team. So it's really good cultural fit and everything. And it does as you're pointing out, fit into the Board of Planetary Variables strategy, that we're embarking upon, really started in earnest with the acquisition this time last year of VanderSat, and they neatly fit into that as a piece of work. So - and this is continuing us up the stack, I'm the Planetary Variables are really important piece of it. And I think that's where the bigger focus is right now than the insights and indicators that might come beyond that. But they are the critical horizontal component that we need to be building up today.

Understood. And just a follow-up actually several questions on the financials, obviously very, very strong flow through. I know you said, you mentioned that part of it was kind of a onetime upside, I think bringing early renewal or something. Could you maybe just give us a sense of, I guess, what happened there? Why would it kind of repeat? And then I think you also mentioned that there was a deal that kind of slipped after the quarter and any sense of what the rates would have looked like, if that actually fell in the quarter? Thanks.

Yes. So in terms of the one-time revenue that I referenced in my remarks, that was a four-year deal that had a couple of renewal options after year two and year three. And just based on the accounting treatment, as it relates to the contract that required analyzing the revenue recognition over the term and understanding where we are on that revenue recognition versus the full contract size. So I'm not an accountant by background, but the team worked with the auditors to do an analysis on where we are in that, it resulted in a one-time revenue recognition in the quarter on a net basis, it was about $1.5 million impact to revenue. So obviously that is significant. So I wanted to make sure to call that out. Even without that, obviously, we would have come in at the high end or just above the high end of our range. So - but that was - that's what I was referencing in that part of the remarks with respect to the delayed renewal and that also as you know, had the opposite impact in the quarter where - when renewal comes in late and that's revenue that we miss out on. So had that come in on time, obviously, net dollar retention rate would have been higher in the quarter. RPOs would have been higher and revenues would have been higher. And so that underscores the importance of on-time renewals and it's something that we're very focused on internally.

Awesome. Thanks for the color.

Thank you, Mr. Yu. The next question is from the line of Josh Sullivan with The Benchmark Company. You may proceed.

Good evening. Nice quarter here.

Thank you.

Thank you.

As far as the net dollar retention, just given the comments on more customers scrutiny of spend. Do you think you'll be able to sustain this kind of level or do you think you might see some of those newer renewables extend more often?

Yes. I think across the Board, the broader customer success team and the investments we have made have given us really good visibility into both the renewals and the ability to drive expansion. And we aim to be a business that operates in kind of the best-in-class net dollar retention rate levels north of 120%. Right now, we're on track for that. And we think that the investments that we've been making both in the product and usability of our products as well as with the teams that are working with our customers to drive that value proposition is having that impact and it should be sustainable. In terms of the cautionary note about the headwinds basically I could say, we're not immune to the macroeconomic environment. And so we are working with our customers to understand whether there is other ways to scope our relationships with them to continue to drive value. But the relationships remain strong and obviously the results in the quarter are speaking for themselves.

Yes, I could just add that, yes, that's why we're seeing a little bit more budget tightening. But also at the same time in some of our commercial side is, but at the same time we just highlighted a bunch of new commercial sign-ups. So it's a mixed story there. But overall, we're continuing to grow even on the commercial side year-on-year. And if I step back a little bit more, there is still the secular tailwinds of digital transformation and sustainability transformation are really driving excitement here. And so I remain bullish on the commercial potential in the long-term, no matter what. And you can see by these three strategic partners leaning in another example of again they wouldn't do that if this was a small example, a small opportunity, they're only leaning with us a significant one. So I think that's a recognition of the opportunity from them as well. So we remain bullish on this in the long-run.

Great. And then just the comment on the timing of procurement in the quarter, how should we think of the cadence of those layering back-end?

You're asking about on the spend side?

Yes, I believe you made a comment just on there was some timing of procurements in the quarter. Just curious how we should expect those coming back?

Yes. As I said, I anticipate that we will catch-up over the next couple of quarters. We are working closely with the teams to understand which are the - we've talked about this a bit at our Analyst Day, which are those long lead-time items where we see there could be risks. And so we want to mitigate any risks in the future and which are those where we're actually feeling quite comfortable that procurement will not be problematic when we need it. We prefer to operate very agile as it relates to procurement. So that we can be judicious with our spend and our vertical integration actually gives us a lot of flexibility on that front. But the lower spend in the quarter we do anticipate will catch up in the next couple of quarters.

Got it. Thank you for the time.

Thank you.

Thank you, Mr. Sullivan. The next question is from the line of Jeff Van Rhee with Craig-Hallum. You may proceed.

Great. Thanks for taking my questions. Ashley, Will, great job. Great job to the team, love the gross margins. I'm sure you're pretty satisfied with a lot of what you're looking at here. On the pipeline, I have just two quick questions on the pipeline. Can you quantitatively talk, I'd love some sense of the overall growth in pipeline year-over-year? And if you can quantitatively --qualitatively just what's really standing out in terms of the pipeline build?

Well, I'm feeling really good about our pipeline overall. Both on the commercial and the government side, in fact, I've never quite seen so many big deals, to be honest. I think we counted over 40 deals greater than $1 million in our pipeline, which is pretty amazing. I've never seen quite that many. So, of course, these are big deals, so they can take some time. So it may not have an overnight but overall, the demand is incredibly strong, so we're feeling good about it.

How are eight figure deal is going to be?

We have them a lot - they're happening. So, what we do Ashley - how would you answer that?

Yes, how would I answer that, I would say that, the good news is we see them. Obviously, the challenge with eight-figure deals as they tend to be longer procurement cycles and they can cause variability quarter-to-quarter on the bookings. But the fact that we have the - see them in our pipeline and are closing them is really fantastic for the business. And quite often we see these as multi-year procurements which is also very helpful to us, to know that these are relationships that are signed up at the outset for the long-term.

Yes. Makes sense. With the partners and then just one other question on the partner front, I mean, obviously AWS, Microsoft, Accenture, I mean a lot of heavy weight names right there. And I guess you've already had meaningful partner influences. From a quantitative way, how are you going to measure it? I mean, are you already measuring partner influence - partner led partner influence deals? Do you have any numbers you can share?

Yes. And in fact quite a large number of our deals are partner influenced, fewer of them are partner-led. But in a lot of cases we're bringing a partner and particularly what we call our solution partners that are building that kind of last mile interface that specific to the customer use case or the customer geography or both. So we do have a robust partner ecosystem. As we think about these larger partnerships, we're making fewer bets with those partners that view this as a really strategic opportunity. We're early days in them. So we'll be able to report on the progress of these relationships over time. But what's exciting as you see, these big names at very high level thinking of this as a very strategic opportunity which signals that we're not alone in seeing these tailwinds due to sustainability and digitization of the economy. Anything you want to add there, Will?

No, I think it's great.

Yes. Good. Great. Congrats again. Thanks for taking the questions.

That's -

Thank you.

Thank you.

Thank you, Mr. Van Rhee. [Operator Instructions] The next question is from the line of Greg Mesniaeff with WestPark Capital. You may proceed.

Yes, thank you. Question on your sales and marketing expense levels. Can you give us a little bit of color and guidance on what to expect going forward? I know you've had a pretty significant ramp in your sales force. And given the fact that you're focusing your incremental wins on partnerships. How sales force intensive are those wins and how do you see the ramp in sales people continuing as you win more deals? Do you see that slowing down? Do you see it accelerating? I know you didn't give any guidance on sales and marketing, but your number was up, non-GAAP sales and marketing was up pretty significantly year-over-year at just over $16 million for this quarter. Thanks.

Sure. Thanks for the question. And yes, as you point out, we've been investing significantly in our sales infrastructure. We talked about before we went public that a large reason for raising the capital was wanting to have more feet on the street, because there were a number of geographies where we weren't even vertically aligned in our sales organization, because we just didn't have enough AEs on the ground to do so. So we've been adding on that front, and with that comes a support infrastructure that you need to make a lot successful. So everything from our sales ops teams to our SDRs and sales engineers. And we've also been investing in customer success, making sure when we sign these customers, we're getting them the value as early in that on ramping process as possible. The goal now is to make that scalable and there are multiple ways to scale the sales infrastructure. One of them is through the continued automation that we're building into the product to make it easier for customers to on-ramp and to make it lighter touch for the customer success teams. So they can cover a broader customer base. The other way is through partnership programs. So right now, I would say, most - if not, well the vast majority of our partners still have a Planet wrap involved in the sales process. Ultimately as the products become more advanced again on the customer onboarding et cetera, we can be lighter touch with our rep involvement in the sales process. So we've been scaling rapidly over the last year, we'll obviously be focusing on making sure we get operational scale over the coming years.

Great. And it sounds from what you're saying that, given the scale in the business we could expect the rate of growth in sales and marketing to taper-off a little at some point?

Yes. We provided our long-term operating targets, which would see sales and marketing as a percentage of revenue, continue to drop. Obviously, we said we needed to first ramp it up. And then as we drive scale, we'll see that as a percentage of revenue, start to taper down to our target margins.

Thank you for that.

Great.

Thank you, Mr. Mesniaeff. The next question is from the line of Harry Wilmerding with Needham & Company. You may proceed.

Hi. Thanks for taking the time. Just a quick question on customer add there. Whether sequentially in the first half of the year, although it looks like 3Q is typically seasonally light, any changes to our call out on converting prospective customers in the quarter? And also how are you thinking about customer growth as we enter the next year?

So it was - the first on customer growth did you say?

Customer count.

Yes. Well, I mean, that's primarily dominated by smaller accounts. And so - the reps are mainly focused on the large accounts and they're being very strategic and focused and disciplined about that. So some small deals - and there was a few on education research that fell off with some added. We're not tracking that closely because that's not where the dominant revenue is. So the growth - I would say is still good in revenue terms, which is the main thing that we're focused on.

Yes. Just to underscore, obviously, we've added some really nice large customer wins and as Will said, that is where we're focusing the sales reps as those opportunities where we see an opportunity to really land and expand. On the smaller account basis as Will pointed out in education and research, you can see some projects that will cause numbers to go up and go down, there may be some seasonality with that - which you called out last year. So on the smaller deal size, it's less of a concern on the numerical numbers - numerical count, what we're really focused on is the quality of the deals that we're bringing on board and really seeing NPS scores across the Board improving.

Yes.

Great. Thank you.

Thank you. [Operator Instructions] The next question is from the line of Ken Mestemacher with Edison Investment Research. You may proceed.

Thank you for taking my questions. First, congratulations on the three announcements on Accenture and AWS and Microsoft. So how should we think about the revenue opportunity and financial impact on the company? And tied in with that, based on your responses to some of my colleagues earlier questions, should we be thinking it would be more medium or long-term rather than something in the next year or how might that timing look?

I would just say like as you mentioned that these are nascent partnerships, but the fact that they're leaning in and again is a big sign of the scale of the opportunity that they see. I mean, I do think we'll see things in the next year. I don't know how meaningful it will change our revenue. But in that year, but we're definitely seeing this lean in and it's just it - after scale in a different way. They have a lot of industry expertise, they have a lot of a huge stack of customers where our data is relevant. And so going to market together with them makes a huge amount of sense. We've got incredibly exciting dataset that can help solve their customers' challenges. They've got the scale of all the compute or the industry knowledge to do that. So that's the way I think about it. Does that make sense?

Definitely. Definitely. Thank you. And second, looking at gross margins increase this quarter. That's great news. And how would you say Planet is mitigating the impact of inflation? You touched earlier on microeconomic issues. But we keep seeing these wage increases and inflation and other people are struggling. So how are you all mitigating that especially in light of expecting it to increase to 56% to 59% next quarter?

Yes. So I would say, on the gross margin line, the majority of that expense relates to either depreciation and amortization, which is a fixed number. Our hosting costs which we have a long-term contract in place. And then to a much lesser degree the cost of our professional services and customer success teams. Many of which we're able to locate in geographies outside of the United States that we can service customers on a lower cost basis. I wouldn't say that we're immune to inflation and cognizant of the impact that has on our employees. So we are - I think what I would say is, we're very focused and thoughtful about our hiring plans and our spending plans. I highlighted at the Analyst Day, how we think about the procurements and where there might be supply chain constraints, where inflation could have a higher impact and maybe getting in front of some of those with earlier in both procurement. So I guess the net answer is we're watching closely what's going on and making sure that we're thoughtful about our spending and budgeting.

Great. I had one more follow-up on the Accenture, AWS, Microsoft. You look at marketing, will those three groups be looking into doing a lot of marketing for you or will it be mostly directed by Planet? Just trying to get a good feel for - how to reach customers?

Definitely marketing is part of this. And we're seeing their leadership of these companies lean in and speak about Planet in high level forms and stuff, so that in of itself helps us. Yes. So I think we will see them help. And again, so broadly expands our reach and we're excited by that. Yes, it really expand our reach. We have a number of initiatives that through this quarter that expand our reach beyond that as well. I would note a couple of things that came out recently that both the economists and Bloomberg leveraged our Planetary Variables and got them into their various magazines and notes. And just incredibly important to see how these Planetary Variables are powering insights into the finance sector and they bringing awareness to our products in that sense as well. So I encourage you to have a look at those, it's quite cool to see how that's being and that's just tip of the iceberg. Let's start with some of that marketing piece, but I think it's - the tip of the iceberg of the potential.

Great. It's always good to have them - do some marketing for us, that's really exciting great news. So again congratulations...

Thank you. I was just going to add that we are on the front page of The New York Times again today, that we get a lot of this sort of free advertising anyway.

Absolutely. That's great. Well again, congrats on the quarter and thank you for taking my questions.

You're welcome.

Thank you, Mr. Mestemacher. The next question is from the line of Noah Poponak with Goldman Sachs. You may proceed.

Hello? Hello, can you hear me?

We can.

Yes. How is it going? How is it going? Sorry about that. Sorry about that. It wasn't coming through, but nice to speak to you. Ashley, so last quarter you had guidance for revenue to grow sequentially but EBITDA to be down a decent amount. And the EBITDA didn't play out that way for next quarter, at the same guidance revenue to be up sequentially EBITDA to be down. If I go into your revenue guidance range and your gross margin guidance range, the operating cost between gross profit and EBITDA have to be up quite a lot sequentially to get into the EBITDA range. So what's the dynamic there and why will that actually happen in the fourth quarter?

So as I mentioned on the lower spend in Q3 on the R&D side, there was some timing of procurements. And then I'd say across the Board there was timing of new hires. So some of that is what you saw in Q3 and the anticipation is, we'll be catching up to some of that spend and hiring in Q4. So that's the primary driver.

Okay. That type of spending can bounce around that much quarter-to-quarter, I would think you would be laying that out on a longer-term planning basis and that it will be smoother, but it sounds like you're getting pretty onto it?

Yes. On the space system side when we do procurements waiver in R&D mode for some of our newer fleets, that gets expensed as incurred, as opposed to being capitalized. So that's why you can see, if we make a large procurement for ground stations, some of the other spacecraft purchases that we make. If those procurements come in later than that spend just moves from quarter to quarter. So, yes, so it's a little bit lumpier because of that dynamic while these fleets are in R&D mode, it obviously will smooth out as we move out of R&D mode and into capitalizing those expenses. And then it would just obviously be capitalized as CapEx and run through DNA, primarily through gross margin in future years.

Okay. And then two months through the quarter here, you're almost to your fiscal year end. Sure you're doing a lot of planning for next year. How are you feeling about next year's total company organic revenue growth compared to this year? And how are you feeling about the ability to march towards breakeven EBITDA?

Well, overall we feel very good about the tailwinds behind the company right now. And I mentioned just the demand and pipeline earlier for example is really strong, slightly more cautious on the commercial segment. The reasons we discussed, very bullish on the government segment, both the civil and defense, intelligence. Extremely pleased with the team's execution across the Board and product side and the sales and marketing side. And so that feels like we're well set up similar to last year we will provide guidance on the next earnings call for next year.

Okay. All right. Thanks very much.

Thank you.

Thank you. That concludes our Q&A session. There are no more questions, and I will turn it back to Will Marshall for closing remarks.

Thanks everyone. Thanks for joining the call today. I'd just like to emphasize just a couple of key points to conclude. So I think our Q3 results were really strong, underscoring the durability and demand for our mission critical solutions. I'm very proud of our sales deals that I touched upon and the strategic partnerships. It's great to see those global technology leaders leaning into Planet's tools and to develop new solutions for their clients. I'm also excited by the acquisition of Salo Sciences. As I mentioned, we see a carbon Planetary Variables, a critical element to the sustainability transition, and so that's exciting. And finally, we remain confident in our opportunity, despite the current macroeconomic environment and continue to invest in the long-run, while maintaining our focus on the profitability. So, thanks everyone for calling in today.

That concludes today's conference call. Thank you for your participation. Please enjoy the rest of your day.