Planet Labs PBC (PL) Q2 2027 Earnings Call Transcript

Thank you for joining us and welcome to the Planet Labs PBC second quarter of fiscal year 2027 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Cleo Palmer Peroner, Director of Investor Relations.

Thanks, Operator, and hello, everyone. I'm joined by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook. We encourage everyone to please reference the earnings press release and earnings update presentation for today's call, which are available on our Investor Relations website. Before we begin, we'd like to remind everyone that we will make forward-looking statements related to future events of 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 historic and forward-looking 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 today, which is available on our website at investors.planet.com. Further, throughout this call, we will provide a number of key performance indicators used by management, often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks. At this point, I'd now like to turn the call over to Will Marshall, Planet's CEO, chairperson, and co-founder. Over to you, Will.

Thanks, Cleo. And welcome, everyone, joining us today. Planet had another outstanding quarter, delivering a record $116 million in revenue, representing approximately 58% year-over-year growth. Non-gap gross margin was 59% for the quarter, better than expected, demonstrating the ongoing scalability of our business model. For the fourth sequential quarter, we achieved, and, in fact, well exceeded rule of 40, which is our revenue growth rate plus adjusted EBITDA margin. Our revenue growth rate was driven by strong execution across our satellite services deals, as well as continued momentum in our data and solutions business. We completed commissioning and handed over the first Sovereign Earth Observation satellite for the Swedish Armed Forces and successfully launched our next-generation Pelican tech demo. And this week, we shipped our second Tanager and 18 Super Dove satellites for launch. Both at home and abroad, Planet's data, AI-enabled solutions and sovereign satellite capabilities are proving critical to the challenges and opportunities governments and companies across all industries face every day, from disaster response to resource management to national security. defense and intelligence was once again an area of strength for us with over 90 revenue growth year on year i want to highlight two recent wins in this sector for our data and solutions business both of which landed in august and therefore are not included in our financial metrics for the quarter we were awarded a new 8 million contract with the national geospatial intelligence agency NGA to deploy Planet's global monitoring service GMS in support of national defense priorities with options to expand and extend this work. Planet was the only vendor considered as our solutions are truly unique. We've created a deep archive of thousands of images for every point on Earth's landmass enabling a peripheral vision which with AI-powered pattern recognition on top provides customers with the strategic indication and warning capability to proactively recognize patterns and identify emerging threats. This program grew out of a successful pilot with the Defence Innovation Unit in support of Indo-PACOM and we're incredibly proud to see GMS graduate to an operational program. We were also awarded a seven-figure one-year agreement with a European Defence and Intelligence customer to supply high-resolution global mosaics and support operational planning. Turning to satellite services, our team's execution against our backlog for our satellite services customers contributed to the strength in our defense and intelligence results. As we discussed last quarter, in May, we launched our first satellite for the Swedish Armed Forces just four months after the satellite services contract with them was signed. The space systems team's rapid commissioning of that satellite enabled us to officially hand over to the customer, which contributed to the Q2 revenue outperformance. In August, the German government announced that we were awarded a tender for dedicated capacity satellite services. The tender award includes options and has a maximum possible value of 25 million euros over five years. Overall, our satellite services pipeline progress has been extraordinary. In particular, we're very pleased with the maturation of this pipeline. Today, we have over $4 billion of identified opportunities for satellite services, over 25% of which is qualified as near-term pipeline planet is extremely differentiated here due to the strength of our operational history as we've launched more earth imaging satellites than any other company in the globe and due to our speed of delivery for our two most recent satellite services partnerships we've delivered a first satellite in orbit within two and four months of the contract award respectively compared to many years for the space industry historically we are also increasingly finding that our customers and prospects want both AI-enabled solutions and satellite services. This bundling creates synergies and is even more differentiated. Governments are articulating an urgent imperative to secure sovereign access to space, understand threats in and around their region, modernize their defense capabilities, prepare their infrastructure for natural disasters and other catastrophic events, and maintain their strategic edge. More broadly across the civil government sector, second quarter revenue grew over 5% year over year, and we continue to see encouraging momentum both in the US and abroad. To share some recent highlights, during the quarter, Planet signed a new contract with the Rwanda Space Agency to provide national high-resolution data and analytics for government ministries, departments, and agencies, as well as public universities. The satellite imagery data will be used in policy and decision support on agriculture, urban management, spatial planning, disaster response, amongst other applications. This deal marks Planet's first national program of its kind in Africa. Also in the quarter, Planet signed a renewal with the New Mexico State Land Office. Since 2019, this long-standing partnership has evolved into a sophisticated multi-product strategy that enables that land office to monitor, protect, and manage over 9 million acres of public trust land. Shifting to the commercial sector, revenue grew over 15% year-on-year, reflecting the continued focus from our teams on landing and expanding in larger opportunities and leveraging AI-enabled solutions. To highlight a few interesting use cases in the sector, last month we signed a six-figure expanded renewal with a hyperscaler AI developer for global monitoring of data centers and semiconductor manufacturing facility construction. Planet's Pelican high-resolution data is used to track construction milestones for those facilities, which are strong indicators of supply chain health and computing capacity. We're currently seeing meaningful demand from our customers in the AI and financial services industries to use Planet's data to track the pace of infrastructure expansion across the AI value chain. Planet partnered with FarmQA to develop and commercialize AI-powered agronomic intelligence tools for enterprise agriculture. The first application of the collaboration is already in the field, an AI-driven sugar beet yield estimation model currently being piloted with multiple sugar beet cooperatives during the 2026 growing season. Finally, Planet partnered with Braga Technologies to integrate Planet's high-frequency satellite data into their spatial intelligence platform, enabling automated change detection and near-real-time analytics for natural resource management and civil government applications. stepping back ai is enabling us to move up the market into high value higher growth segment we believe we currently have under five percent market share of today's overall earth observation market which excludes satellite services and with the innovations we are making across solutions real-time insights and next generation monitoring we believe we are poised to rapidly expand our market share perhaps more importantly we believe that ai is expanding the potential market for these capabilities by enabling users without geospatial expertise to leverage this critical data into their daily operations and expand to further applications and segments. Planet is uniquely positioned to capture this expansion as our daily scan mission is core to those expanded applications and most ready and relevant for AI utilization. Turning to technology and operational updates. In July, we successfully launched our next generation Pelican tech demo, which included several technology advancements across payload, on-orbit compute, and satellite-to-satellite communications. This satellite forged our path towards delivering 30-centimeter-class resolution imagery. As a reminder, this satellite is a tech demo and is not expected to serve customers. Just this week, we shipped our second Tanager hyperspectral satellite to the launch site, along with 18 superdoves. They're slated for launch this fall aboard SpaceX's Transporter to 18 mission. We're very excited to be growing our fleet in support of our partner Carbon Mapper and doubling our capacity for methane and CO2 detections and enabling higher revisit rates. Overall, we're investing in launch both to diversify our supply chain and in response to synergies with our key satellite services government partners. To that end, in July we announced a launch partnership with ISAR Aerospace. Under this agreement, ISAR is scheduled to launch a Pelican next year, which we plan to build in our new German satellite manufacturing facility. With both the satellite and the ISAR launch vehicle spectrum being built in Germany, this would be a national first for the country demonstrating the value of commercial space in rapid advancements in German sovereign space capabilities. Relatedly, I wanted to provide an update on the German manufacturing facility, which is expected to roughly double our manufacturing capacity. This project is progressing at pace with the facility setup and clean room fit out scheduled for September and plans to begin building in the facility this year. There has been considerable interest from the German and European governments in this new facility and we believe it positions us well to serve critical needs of customers and prospects in the region. Over the summer we also opened a new office in London as we scale our European presence and establish a hub for our customers and partner relationships in the region finally our ai app has progressed to the open beta phase this pioneering tool is focused on making planets massive global data archive queryable through natural language by leveraging planets proprietary 10-year archive of daily data and integrating llms it can help lower the barriers of entry for non-technical users across all markets allowing teams without geospatial expertise to accelerate their adoption of Planet's products. Given our momentum with our AI-powered solutions, I wanted to take a moment to discuss our upcoming next-generation monitoring satellite, OWL, and our excitement over that program. We are already seeing significant traction with GMS and MDA among our most critical partners and customers, and feedback indicates that our program will unlock massive value for them. They would like to see us accelerate that program, which we are beginning to do. This program will upgrade the data underpinning the solutions from three meter to one meter class resolution, enabling the detection of smaller objects such as smaller vehicles, as well as reduce the latency to as little as an hour in key areas, enabling faster response. Our represents in that sense a massive leap forward. To put it in perspective, it will deliver roughly 10 times more data and do so about 10 times faster. We expect our to reinforce our leadership position in broad area monitoring and analytics with greater resolution and lower latency which puts us in the position to capture market share from the high resolution market and power downstream solutions with higher fidelity insights in closing then our strong performance this quarter demonstrates clear execution across the business we delivered robust revenue growth disciplined execution and major strategic wins with our large government customers while growing our pipeline across all of our offerings. By expanding our international footprint, advancing our next generation constellations, and lowering technical barriers with AI, we are positioning Planet to capture a rapidly expanding Earth observation market and building a foundation for sustained long-term growth. With that, I'll turn it over to Ashley to discuss our financials. Over to you, Ash.

Thanks, Will. It was indeed a strong quarter, supported by outstanding execution from our teams and exciting technology developments. Turning to our financial results, revenue for the second quarter came in at a record $116 million, representing approximately 58% year-over-year growth. The outperformance in the quarter was driven primarily by delivering against our satellite services contracts, specifically with respect to the handover of our first pelican for the Swedish Armed Forces. The space systems team did a fantastic job with rapid commissioning, exceeding our expectations, generating point-in-time revenue, and contributing to the Q2 beat. We were pleased to see growth across all of our market sectors in the quarter. Our defense and intelligence revenue grew more than 90 percent year-on-year, which includes our satellite services revenue. The commercial sector was up more than 15 percent year-on-year, and civil government revenue was up over five percent. Similarly, turning to our regional revenue breakdown, growth continues to be distributed around the globe. During the quarter, year-on-year revenue growth was approximately 3% in Latin America, over 15% in Asia Pacific, approximately 25% in North America, and over 130% in EMEA. As our satellite services revenue grows, we will likely see an increase in revenue recognized as point-in-time versus overtime. In Q2, point-in-time revenue was 12% of revenue versus 1% in the same period last year. While we scale our satellite services business, we expect to experience variability in this metric quarter-to-quarter. Before I turn to ACV metrics, I want to remind you that our ACV metrics exclude satellite services, which for the purposes of our financial reporting, we define as sovereign satellite ownership, direct access services, and managed operations. Our ACV metrics do include dedicated capacity contracts, as customers are not taking ownership of the hardware and revenue for these services is recognized ratably. Recurring ACV was 98% of our end-of-period ACV book of business, reflecting our continued focus on selling subscription data contracts and solutions as opposed to one-time professional or engineering services. Approximately 94% of our end-of-period ACV book of business consists of annual or multi-year contracts. Net dollar retention rate on ACV at the end of the second quarter was 109%, and net dollar retention rate with winbacks was 110%. Our non-gap gross margin for the second quarter was 59%, compared to 61% in the second quarter of fiscal 26, reflecting investments in support of our satellite services contracts and AI-enabled partner solutions. Our non-gap gross margins came in considerably better than expected, driven by the scalability of our business model and our revenue mix in the quarter. Adjusted EBITDA profit was $13.9 million for the second quarter, better than expected, driven by higher gross margins and the revenue outperformance. Capital expenditures in Q2, which include capitalized software development, were approximately $29 million. This was just above our guidance range based on the timing of certain Pelican procurements and capitalized software development to support AI-powered solutions. As Will mentioned, given the strong demand we're seeing for our solutions and satellite services, we're investing behind our largest growth opportunities. We expect CapEx to increase in future quarters as we lean into market demand, scale up our manufacturing capacity in San Francisco and Berlin, invest in supply chain resiliency, and build out our next-generation fleets. Year-to-date, we generated approximately $68 million in net cash from operating activities, while year-to-date free cash flow was $21 million. Year-to-date adjusted free cash flow was $29 million, which excludes non-recurring payments related to litigation settlements. Turning to the balance sheet, we ended the quarter with approximately $865 million of cash, cash equivalents, and short-term investments, an increase of over 200% year-on-year, driven by our positive free cash flow and proceeds from our capital transactions over the last During Q2, we raised approximately $120 million from stock sales under our ATM program at an average net sales price of $31.96 per share. after expenses. Given our strong balance sheet and cash flow positive operations, we remain focused on executing sales under the program in a disciplined manner, balancing market dynamics with our desire to minimize dilution as we add to our cash reserves. At the end of Q2, our remaining performance obligations, or RPOs, were approximately $753 million, up approximately 9% year-over-year, of which approximately 46% apply to the next 12 months and 68% to the next 24 months. We estimate our backlog, which includes contracts with a termination for convenience clause, to be approximately $815 million, up approximately 11% year-over-year. Approximately 50% of our backlog applies to the next 12 months and 70% to the next 24 months. This implies that by executing on contracts already in our backlog, we could recognize over $400 million in revenue over the next four quarters, not including the impact of any new business or renewals closed during that period. This provides us with excellent visibility to near-term revenue, and combined with the strength of our pipeline, gives us confidence in our ability to sustain high growth rates in future years. Let me now turn to our guidance for the third quarter and full fiscal year 2027. In Q3, we're expecting revenue to be between $101 and $105 million, which represents approximately 27% year-on-year growth at the midpoint, supported by strong visibility from our backlog. As a reminder, our strong Q2 revenue outperformance was due in part to the timing of the handover of our commissioned satellite in Q2 rather than Q3, shifting revenue between the two quarters without changing our full-year outlook. We expect non-GAAP gross margin for the quarter to be between 56 and 58 percent. Q3 adjusted EBITDA loss is expected to be between minus six and minus one million dollars, reflecting our focus on investing to drive sustained growth. We are planning for capital expenditures of approximately 30 to 37 million dollars in the quarter, encompassing our facilities expansions and procurements for our next generation fleets in response to the strong demand that Will alluded to in his remarks. For the full fiscal year 2027, we are increasing the low end of our guidance range to reflect our improved visibility as we continue to move through the year. We now forecast revenue between $430 and $441 million, reflecting year-over-year growth of 40 to 43 percent. Our non-gap gross margin for the year is projected to be between 55 percent and 57 percent, above the high end of our prior expectations, driven by the mix of business and scale achieved from optimization of our infrastructure and in-house analytics. We anticipate margins to continue to expand in subsequent years as we scale the business and realize returns on our growth investments. We are similarly increasing the low end of our guidance range for adjusted EBITDA to reflect the improvement in margins with a current forecast between $3 and $10 million, reflecting our resolve to drive adjusted EBITDA profitability on an annual basis as we capture market share through advancing our technology stack and expanding our global sales and marketing organization. We also aim to deliver Rule of 40 for this fiscal year, calculated as our revenue growth rate plus adjusted EBITDA margin. We are planning for approximately $100 to $115 million in capital expenditures for the year, reflecting the necessary investments in our manufacturing facilities and next-generation satellites to meet surging market demand. CapEx can vary quarter to quarter based on the timing of our procurements, launches, and real estate build-outs. We are managing the business to be adjusted free cash flow positive on an annual basis for the full fiscal year, 2027, while we also focus on opportunities to accelerate growth. As a reminder, while free cash flow can vary quite significantly quarter to quarter based on the timing of cash collections and capital outlays for procurements, our focus remains on generating sustainable, adjusted free cash flow on an annual basis through efficient growth in revenue across data, solutions, and satellite services. In closing, our Q2 results underscore the robust demand for our products and services. We remain focused on capturing share in a rapidly expanding market to drive top-line growth while also delivering profitability on both an adjusted EBITDA and free cash flow basis. We have built a solid launching point to support our ambitious plans, underpinned by a strong balance sheet with over $850 million of cash and equivalents. We are well-positioned to execute on our growth initiatives and deliver for our customers, whose work is driving real-world security, economic, and ecological value. As always, Will and I are awed by the achievements of our Global Planet team over an incredibly busy and exciting quarter and summer. Thank you all for all that you do. Operator, that concludes our comments. We can now take questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset while asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Edison Yu with Deutsche Bank. Your line is open. Please go ahead.

Great. Thank you for taking our questions. First of all, I want to ask about AI and maybe try to tie in some of the broader dynamics going on. There's obviously been a lot of attention paid to the fact that the gap between Frontier and open source, open-and-wait models has compressed a lot. does this have any sort of impact on sort of your efforts? And if so, is that actually a positive tailwind for you?

I hadn't thought very much about it in that way. But look, what we're taking is the best models across the field to apply on top of our data. It does help us, of course, the proliferation of that, more models, more availability. And what we're trying to be is model agnostic on a lot of our applications. You heard about our AI app and that progressing to the open beta phase. And in that particular app, we allow people to choose their own models back in. So if you have a preference for Gemini over Anthropik or what have you, you can choose. It's a good point about smaller models. Obviously, I think that we're going to turn to a situation where the system will choose the model that's most appropriate for the question at some point. I'm sure that's where the big companies are going to go as well. But yeah, I mean, in a sense, the commoditization of those models only accentuates the extra value that we have of our data. And, you know, I often say to people, AI is all about the training data. Obviously, most generally to date, LLMs have trained off the text and other information on the Internet. That means they're largely blind to real world information. And so if you're a farmer trying to understand your farm field or a journalist trying to investigate a flood or someone in defense and security trying to investigate a threat around the horizon, you don't want theoretical knowledge about that. You want actual information around the corner. And that's where our data, our new daily scan with all of the archive really fits in well. So I think it just, with the point you're making, it accentuates the value of extra data sets like ours. I understand.

And then, yeah, yeah, totally, totally. Separate question as a follow up. You cited the pipeline at, I believe, $4 billion and I think over 25% or a billion, I guess, is the new term. Can you provide a little bit more context on how that number has been relative to in the past and also kind of the size of the deals maybe in the pipeline relative to, you know, in Germany?

Yeah, it's really great. Yeah, well, we're very pleased with the German deal. That pipeline that you're talking about is referring to Constellation Services. So yeah, we've got about $4 billion of deals identified in our pipeline there, about $1 billion of which we have designated as near-term pipeline. And yeah, so we've seen both smaller deals when civil governments come in, like this German, but it's really exciting that there are civil government's now taking interest in in dedicated capacity options in particular of our constellation services options and i'm pleased to say we're also seeing even bigger deals uh at the big end of this spectrum um uh you know and and and some of that's contributing to the sheer scale of uh near-term opportunity pipeline there so yeah i mean i've never seen it as big as it is now and so it's maturing in all the way but especially the maturation of the big deals is really impressive right now so we're pleased on all fronts with constellation services thank you your next

question comes from the line of john godden with city your line is open please go ahead hey guys um thanks for taking my question um you know a number of companies out there planning to launch different types of large leo constellations and the launch players who generally describe the market for their services is very tight. You mentioned a recent partnership in Germany as an example of just diversifying access to launch. I was hoping you could offer a bit of a temperature check on the market for launch services as you see it. And do you have any concerns about getting access at reasonable prices?

Yeah, I mean, there is definitely a lot of demand, especially for the ride share missions with SpaceX right now. And that is driving some challenges for some of the players, especially the smaller players. You have to remember, of course, in the big arc, prices have been coming down. When we first started out at Planet, the launch prices were about 20k a kilogram. Now they're significantly less than that. They have been going up a little bit as we're dealing with that, and we've been investing to secure access. But I would also say that, you know, planet's experience here is really critical. I mean, we've launched 688 earth imaging satellites on 42 rockets of 10 different varieties. So it's not just SpaceX, SpaceX 16 times, the Indian PSLV rocket seven times, the Vega rocket, the H2 rocket, the Atlas rocket, the many others. And so we're very experienced in putting our payloads up when we need and we're very flexible um and and and and speedy so you know all those providers really like working with us because of of how uh experienced we are in doing that so we always turn up with the payloads on time integrate them quickly and so on and so they they love working with us so we've we've got um good plans of course diversification is really great when new players And we like investing in contracts with new players because it helps encourage them to get going. They want to show they've got real opportunities to their investors to get going. And that's great. And it's synergistic with our satellite services with countries. I mean, in the case of that one with ESAR Aerospace in Germany. Yeah, that's really great because, of course, Germany would love to see satellites built in Germany and launched on German rockets. So it just plays into that game. So we're an even stronger industrial player for that country in that example. And there's others around the world like that.

That's great. And if I could just kind of if I could just follow up with a broadening up that question a bit to the supply chain at large, kind of same idea, a lot of activity, a lot of growth in expected satellite launches. Is there anything deeper in the supply chain that's showing up as kind of a problem, a concern, access to some sort of raw material or technology that's tightening up lead times and anything like that? A temperature check would be great. Thank you.

Yeah, no, we feel relatively good about our supply chains. We do think a lot about the supply chain risk, of course, and showing that up. And we have made some investments to stockpile things that we really think are critical components. Most of that is relatively straightforward for us. I mean, we're relatively small numbers still on most of the global scales. So, Ashley, anything to add to that?

No, I mean, I obviously took up guidance on the year for CapEx. And part of that is, you know, we want to make sure that we don't run into any of those constraints. So we're looking at longer lead time items and making sure that we're making advanced procurements so that we can move at the pace of demand.

Excellent. No problem.

Your next question comes from the line of Mike Lattimore with Northland Capital Markets. Your line is open. Please go ahead.

Thanks so much.

On the queryable earth offer, I guess you call it AI application now, you know, when might you see this get to general availability and then how are you thinking about monetizing about it yeah great questions i mean look the the we're really pleased with how that the interest of folks into that application some of the emerging use cases that we're seeing are really incredible we're really still in a learning journey um it's a beta mode for a reason we're learning what and really trying to hone the app into what is valuable for customers um and then we'll think about the marketing and and and go to market pieces of it so we're more focused on on that value uh creation first but the general way in which it's helping is it's enabling people to get going really quickly um like what's the quick way of getting a rough idea does planet have data that could be relevant for this and what's the quick answer and then um the other piece of it is just lowering the barriers of entry for non geospatial experts such that they can get going again without any such team in the loop. And that means also that it opens up to all those organizations that don't have geospatial teams at all. Now, there's all sorts of caveats with it, with learning, it's just early days. But I think, you know, Planet is in a unique position with one of the most fantastic data sets that could be combined with LLMs to make an incredible offering that is is differentiated in the marketplace entirely i mean again all those llm companies are focused on building real world models and to do that they need real world data and we have arguably the most incredible data set of real world data to to train up that and so we're we're focusing on doing that ourselves yeah definitely great and then on the on the pipeline when you say 25 is near term is near term like 12 months and then also um within that near term bucket any any color on regions that are more prominent yeah what we mean by near term is quarters not years and uh what we mean by i mean in terms of geography i mean at least uh uh three geographies of import um emia apac and north america are all playing significantly into our pipeline and yeah i mean we we're we're very pleased to have about a billion dollars in that near-term bucket all right thanks and uh impressive rule 40 this quarter uh yeah one of 70. your next question comes from the line of trevor walsh with citizens your line is open please go

ahead great thanks all for taking the questions um will i wanted to maybe start with you around a comment you made for that $8 million deal with NGA. I think you had said that Planet was the only provider in the mix for that deal, which is impressive, not I think for any customer, but certainly for a US government where that's not really the standard playbook. So I'm just maybe from like a broader competitive perspective, are you seeing that type of situation more where you guys are the only kind of game in town around certain deals or RFPs? And if so, kind of what do you think might be driving that? Is that the bread and butter kind of core ability of kind of PlanetScope or other newer type of capabilities?

Well, yeah, it's because of our daily scan. And we have seen it before. In the case of the U.S. Navy, that was also sole source awarded. And actually, they competed it the first time. But then once they realized what we had, they sole sourced it on the second time. So we have seen that on occasion. Obviously, governments do really prefer to have multiple vendors if they can so this really means they've checked all the boxes and checked that there's no other options um and yeah yeah exactly underlying that is our daily scan which there is simply no one else does that i mean you you can look this up anyone can look this up no one has a sufficient number of earth imaging satellites in the right kind of plane and all this to do a daily scan um and so if you want to monitor for new threats and monitor things consistently, we're the only game in town. Now, that doesn't mean there's not other market opportunities for tasking and other things. Obviously, we're playing in that game as well. But in that particular area, which especially in the security front is about finding new threats, we're kind of the only game in town.

Got it. Helpful. Ashley, maybe for you, but we'll also feel free to chime in. I think kind of as I just looked over the last few quarters, It looked like DNI is now, I think, at a higher watermark in terms of total revenue contribution in the quarter, 70% disque, and then at the same time, international is kind of overtaking by a pretty good clip of the North America business. So just wondering how much of that is really just a function of Germany and JSAT flowing, and maybe even the Swedish deal now flowing through the model, and that's just sort of a natural occurrence of those two metrics reaching those kind of higher contribution levels? Or is that really more of like what the, you know, the story of planet is kind of in the future, kind of going forward, at least? Is it more of an international D&I focused type of opportunity, really, that you guys are chasing ultimately?

So you hit on it at the beginning of your question. As we are realizing backlog into revenue and delivering against our satellite services contracts, That hits primarily international as well as defense and intelligence. Now, we'll talk about the fact that we just signed our first civil government satellite services deal in August. And we do think that there's a meaningful opportunity for us in the civil government arena. and we also see a lot of opportunity for growth in civil government and commercial generally with the daily scan plus AI. I highlighted the fact that we're seeing a lot of interest in data center monitoring across insurance, the energy sector, and financial services. I read a report recently that by 2030, the investment management sector alone is expected to be buying somewhere in the order of $23 billion worth of alternative data sets. And we think the type of data that we're providing fits really nicely into that type of space. So the net of that is there's a lot of opportunity for us to grow in commercial as well as in civil government. and AI is really unlocking that by lowering the barrier to entry, not requiring GIS experts in order to derive value from the data.

Great. Thanks both for the questions.

Your next question comes from the line of Ryan Kuntz with Needham & Co. Your line is open. Please go ahead.

The question, and great quarter. Ashley, I wanted to ask you the dynamics that we're seeing in in rpo here just to simplify it for us here we're seeing a step down in total but a real healthy step up in in current rpo is this primarily driven by kind of progress on these set services deals these big large large and dangerous deals you're just speaking about or are there other um you know trends at play here in terms of shorter duration contracts outside of those Thank you.

Yeah, it's a really good question. Obviously, the current RPO and current backlog is directly attributable to the fact that we are making progress against some of these larger contracts. And as we continue to execute, we absolutely expect to translate that from backlog into revenue. And then just generally speaking, we've talked about the fact that we're exploring new markets. So those are going to be more short-term pilot deals and pilot opportunities as we transition those into program of record, we would expect those to turn into longer term deals. So I think there's a bit of some and some on that. But as Will said, there's also a lot of opportunity in our pipeline. And as we convert that, you know, we'd certainly expect to continue to see backlog to grow. So it's going to be a little inconsistent quarter to quarter, other than the fact that, you know, we absolutely are executing against the backlog and transitioning that into revenue.

Makes perfect sense. Thanks. Another question on maritime domain awareness. You guys have had a lot of success there. Are you seeing any changes in the competitive environment? I did see an announcement of, you know, one of your partners that's working with a competitor now. You can share about the competitive environment in maritime domain.

Yeah, I mean, there are a number of companies out there doing some of the analytics on top of data. But I mean, in terms of the core data set that it depends upon again we're the only one doing a daily scan i mean i mean you know we we image tens of millions of square kilometers of ocean territory i mentioned the u.s navy partnership uh just in the last question and that one alone images 13 million square kilometers of ocean territory just to give you a sense that's far more area coverage than any other at least western company doing earth imaging that it alone um it's bigger than the united states area of ocean territory that they are looking at um and so no one else is doing that um so yeah so the underlying data set is uh it's core to that application so there's a number of players uh you know playing on the top of the analytics like combining ais data sar data r data other sort of um ai to predict ships and things like this but they all need our data as far as i'm concerned got it thanks so much thank you your next question comes from the line of michael filatov with barenberg your line is open please go ahead hi will ashley cleo um so just two questions for me uh the first one there's a view out there that some customers might ideally want a single provider across multiple sensing modalities.

So optical, SAR, RF, thermal, you name it, rather than integrating point solutions themselves. So you've got Tanager and Hyperspectral, but the core of the business remains optical. Can you talk about how you think about the idea of broadening the sensor portfolio? And if you agree with that idea, whether that's primarily an organic development path for Planet or whether M&A could play a role with the balance sheet you've got now, and then I'll follow up with one more.

Yeah, I mean, look, I think ElectroOptic is the mainstay biggest piece of the market when you look at that um biggest areas of applications biggest market across all the segments i think especially in um civil government and commercial it will be the biggest area of expansion as well um size more expensive for shot but there are synergies to your point in certain applications um some of our customers have wanted both uh i'll give you one example in nato that customer did want both saw and optical we integrated into a solution to um for them and others have done the same and so and we're willing to work with others and partner on that front uh and so we feel in good position again daily scan is is hard on SAR because you would you would need a lot and there's a lot of power considerations that are much more power hungry and so the base change detection system we still think is the right right thing to focus on optical first so we think that's the core of the market we're focused on that with partnerships and other things in the other areas.

Sure. And just a follow up on the image archive as an AI asset. One thing I'd like to understand a bit better is data consistency across generations. I assume spectral calibration varies across Dove, SkySat, Pelican fleets, and then archive spans multiple hardware iterations.

So how much sort of normalization work is required before that data is genuinely training ready for a given commercial model or for your customers to utilize yeah well i mean we we essentially make our data backwards compatible so as we enhance it we always make it such that you can get the subset of the previous iteration with it so doves for example had eight spectral bands but they kept the four spectral bands of sorry super doves had eight of the doves had four but they kept the same four and we do a lot of calibration work all of these fleets are calibrated to landsat sentinel modus these are government missions that have high calibration accuracy that we calibrate our data to so such that people can be assured that when they get an analytic feed from us in a next generation they always can continue that by the way that is a huge barrier to entry because it's this sort of calibration is really hard and there's a huge archive involved I think people often underestimate the value of our archive. But you know, it's central to all of the applications. GMS, for example, relies that work with NGA, relies on years of data that looks back at the patterns of life over many years and then determines whether the new image tells you something that's changed that is significant. It's not just that it's changed, it's changed and it's significant. And that's because the archive and the AI applications it's all about the archive and MDA you don't just want to know where a ship is now you also want to know where did it all come from and so not only is our data unique in terms of the daily scan it's unique because we have the archive so even if someone had a daily scan suddenly today they wouldn't have the archive to go back and find all these things for several years um so you know we've got quite a lead there yeah I think um people often Don't underestimate that exact point that you made, which is the calibration over time so that you have a very high signal to noise ratio.

That has been a very significant investment that Planet has made over the years and makes the change detection analytics that we do on top of the data valuable to our customers.

Great.

Your next question comes from the line of Jeff Van Rie with Craig Hallam Capital Group. Your line is open. please go ahead.

Hey, guys, this is Daniel on for Jeff. Maybe, Will, if we could just start on the pipeline, the $4 billion new sovereign deal pipeline number you gave, which is huge and real impressive. Maybe if you could just give us any other context you can around that in terms of how that's been trending quarter over quarter, year over year, any call outs on the composition of that, any concentrations, geography, otherwise, just any other context around that number.

Very interesting yeah i mean so it's been growing in number of deals in uh total size um and i think the key thing we were trying to point out with the with the 1 billion part of it the 25 of it is maturation um i also mentioned earlier we hope getting both smaller deals and bigger deals into the part so bigger than we had thought and smaller than we had thought so that's quite interesting it's spreading out a little bit and and it's transitioned officially from just defense it was into civil government. There's a few other deals like the German one that are in the mix as well, although it's still mainly defense and intelligence ones, which we always wanted. We want our solutions to transition to civil government and commercial, and we want our constellation services to transition. We often think of D&I as our forward-leaning partner. So, yeah, we're very pleased with that momentum, and to geography, again, I said, there's three geos that are really driving that, and it's pretty strong in all three of those. I wouldn't say there's one, like, outstanding place amongst them. Helpful.

And then, Ashley, on the model, and, you know, I take it to Q3 sequential revenue decline that's guided, that's probably due to the step off in one times in satellite services. So that makes sense. As we look at Q4, then what's implied for Q4 looks like there's a real strong bounce back in the revenue. If anything you wanted to call out there, is that just sort of standard course, you know, deals are ramping over time or anything in particular to call out in terms of lumpy rev rec, any other rev rec events to call out in the balance of the year?

Yeah, no, I think you hit on it. Q2 was really about a step up due to the point in time revenue. And I expect there to, as we continue to sign more satellite services deals that will both increase the variability in the short term, but over the long term, probably normalize. In terms of the back half of this year, it's delivering against our backlog and really executing. And from there, it'll be landing and expanding with new business. So generally speaking, we feel very good about how business is trending.

And I also wanted to, you know, point out, you saw that the gross margin went up and is sustaining up, and that's really great as well.

Our next question comes from the line of Noah Poppenup with Goldman Sachs. Your line is open. Please go ahead.

Hello, everyone. Hey, Noah. Maybe just following up on that discussion there on the outlook for the rest of the year and the margins. I recognize you raised the EBITDA, but it implies lower margins in the back half versus the first half. Can you talk us through where in the cost structure that's happening, why that's happening, and maybe how we should think about how that progresses into next year?

So not a significant change in margins, but you're right to call out that it is a modest decline in gross margins. And that's simply just mix of business. So we are continuing to drive scale overall in the business. That's the strength to our one-to-many business model. But again, satellite services are going to be different margin profile, depending on where we are in delivery across those deals. That'll impact the mix of business. And so you'll see some variability quarter to quarter on gross margin. We were obviously really pleased this quarter to still deliver 59% non-gap gross margins, even with, you know, a meaningful step up in delivery against our backlog.

Got it. Is there a way to think, Ashley, at this point about, you know, you had, there was a long-term profitability framework provided, you know, when the company, you know, several years back, earlier days, is there a way to think about the revenue base now after a lot of changes in the business and in strategy that's that's required to achieve that long-term profitability model um there's not necessarily a minimum revenue if that's you know effectively what you're asking you know we we talked through um last fall when we had our investor day um those same long-term financial targets and kind of how we see them

evolving over time. We still see this as a business that can deliver very healthy adjusted EBITDA profitability. So, you know, 25% plus. And with that healthy free cash flow dynamics and, you know, gross margins, we amended that a bit to say, you know, north of 60% because it really is going to depend on, you know, that mix of business. But, you know, as we're demonstrating, Even as we continue to fold more satellite services business into our revenue, we're maintaining, you know, high gross margins. So, you know, generally speaking, we are on track to continue to expand. And the main thing right now is we see so much market opportunity that we are leaning into that and investing across the board.

Okay, that's great. And then just lastly for me on the CapEx increase, could you just further detail a bit what's behind that? It's a pretty large increase to kind of be happening in the middle of the year. What is that for?

Yeah, it's effectively, look, see it as investments in Pelican and Elf. So, as Will highlighted, it's strength of pipeline. We don't know ultimately how those deals will shake out in terms of dedicated capacity versus sovereign. So, as we are stepping up, investing in having that Pelican capacity, we operate under the assumption that those will be planet satellites that could deliver dedicated capacity. Ultimately, if those turn into sovereign deals, those will flow differently through the P&L. But the long and the short of it is there's a lot of demand out there, and we want to make sure that we can continue to be the one that can deliver the fastest. So we're looking at long lay time items and making sure that we're in a good place on having the right inventory. Similarly, there's a lot of interest in OWL. So we announced this last year. We've been talking to our customers and understanding from them how three meter or one meter class imagery could really enhance that daily scan relative to three meter class imagery. And, you know, frankly, the question coming back to us is how quickly can you have this available? And so we're leaning into that and doing some advanced procurements to make sure that as we get those tech demos live, we can be also in parallel scaling up for having a full fleet. So that's really the nature of the CapEx increases is just looking at that demand and deciding to pull forward some of those procurements.

Super helpful. Thank you so much.

Thank you.

In the interest of time, please limit yourself to one question as we continue our Q&A. Your next question comes from the line of Christine Leeweg with Morgan Stanley. Your line is open. Please go ahead.

Hi, this is Kyle Benvenuto on for Christine. Congrats on the quarter and thank you for taking my question one on the balance sheet for you you raised um 120 million through the atm during the quarter and you ended with roughly 865 million of cash and short-term investments while generating positive free cash flow what changed in either the opportunity set or your investment requirements that made it attractive to increase um the raise of equity here. And should we think of the capital as primarily supporting OWL and additional manufacturing capacity, such as the CapEx increase you just discussed, or for other strategic opportunities, or simply just adding balance sheet flexibility? Thank you.

Yeah, absolutely. I would really anchor it on the latter. It's that strategic balance sheet flexibility. You know, our target is on an annual basis to be free cash flow positive. So that means we're generating enough operating cash flow to support the CapEx investments in scaling up our next generation fleets. So, you know, we are very diligent about how we are adding that capital to the balance sheet, making sure that, you know, we're sensitive to dilution as we know our shareholders are. But at the same time, we want to be in a position to make strategic moves that can accelerate our market capture and, you know, make sure that we can deliver for the broadest customer base possible.

Your next question comes from the line of Greg Pendy with Clear Street. Your line is open. Please go ahead.

Yeah, thanks a lot. So you've talked about the OWL upgrade cycle. And I think, Will, you mentioned that it's 10 times more data. I assume that you're going from 3 to 1 and then the 2D area scaling is how you're getting the 10 times increase. But just how should we then translate that as analysts? I mean, does this mean that it's going to drive from a financial impact more usage or is it just, is there a price increase opportunity?

Yeah, definitely a price increase opportunity. I mean, this is considerably more information, so it opens up more applications. Again, think of things like vehicles where a meter you can start telling more about the type or even ID vehicles. I'll give you a specific example in maritime domain awareness. We can typically ID the vessel if it's under 30, if it's over 30 meters in size. At that point, we can actually say it's this vessel with this IMO number, which is really helpful. Smaller vessels we can see, but we can't ID them. If it's one meter, you would expect that roughly to divide in three so that you can see a 10 meter vessel. that's really important because there's a lot of fishing vessels and other things that are in that sort of 10 to 30 meter class uh so it's things like that it opens up more um opportunities different kinds of applications in that case from military ships to to maybe uh you know commercial ships and fishing vessels and things like that so it opens up other applications so definitely and we already have customers interested in in that and for sure they're expecting the prices to go up.

The other thing that OWL delivers, which we'll highlight, excuse me, highlighted is that it's 10 times faster. So we're incorporating into the satellite things like AI capabilities, being able to do that onboard detection and analysis, as well as satellite to satellite communication, which can enable the data to get back to our customers faster. So it's on multiple vectors that this is much more valuable data to our customers. And so, yes, we would certainly expect that to be commensurate in terms of the price we can charge.

Very exciting. Thanks a lot.

Your next question comes from the line of Gabriel Floret with Cantor Fitzgerald. Your line is open. Please go ahead.

Good afternoon. Thank you for the question. This is Gabby Florian for Colin. How does the team's balance of domestic opportunities range across the Pentagon's FY26 budget, FY27 CR, and FY27 requests? To what extent can we see Planet programs put left as program officers drive balance in commercial offerings?

Well, great question. This administration is really leaning into commercial solutions. And one of the interesting pieces also, especially ones that where the company has already gone and invested and is building the system already so the government gets to just benefit from that and then they're really leaning in so um and we see it across the board um there's substantial programs that we we have our eye on um this year uh is coming in their government fy 27 um and uh that hasn't yet passed through congress so we'll be tracking all of that and how it results after reconciliation. But they just know that there are meaningful expansion of commercial type operational budgets across the board. NGA, NRO for intelligence community, the department itself. So it's getting a lot of budgets for new space capabilities. They're recognizing the space as a critical thing. That's because they're learning that. They're seeing what's happening in Ukraine, they're seeing what's happening in the Middle East, and they're learning that satellites are key to information advantage, which is really critical in these places. So, yeah, a lot of interest across multiple years. I haven't got more specifics to give you on that, or specific programs. A lot of that's very tight, but I assure you there's a lot of interest.

Thank you.

Your next question comes from the line of Chris Quilty with Quilty Space. Your line is open. Please go ahead.

Thanks, everybody. I had a follow-up on the Gen-2. You've had the first satellite on orbit for a couple months. Doesn't look like it's been lowered yet, but when will you have a good idea of the performance characteristics of that satellite, which I believe this is the first one targeting the 30 centimeter class and does that satellite have a optical cross plane for testing purposes will that come on the next set of satellites yeah great questions so um generally that mission has been doing really well um so i would say it's it we have got the results from it and that's what has enabled us to pave the past most importantly towards the 30 centimeter class imagery.

So yes, I mean, roughly succeeded in all the major goals we set out for it. It was always set up as a tech demo mission. So it's all about the learnings as opposed to intending to be an operational satellite. But all the things we set it up there for have been doing very well. It does have inter-satellite links, not optical though, it's RF into satellite links and so lower bandwidth but very flexible and so it can enable last-minute tasking as well as summary data to go back and even full images but not that many of them so it really gets us going in that field we're making more advances there including on the optical side in later missions that are coming down the pipe so yeah I mean very much did all the things that we were hoping. I'm very proud of the team.

Gotcha. And just a specific on the optical, I mean, that's been the bane of every program out there, including SpaceX in the early days. I don't think you have announced a partner there. Is that an internal development effort?

And how confident are you in that system working as designed a very confident at this point um that is an internal project um and and and deliberately so uh several years of effort to bring that in-house because we wanted independent supply chain and that's one of the key successes um that we've made so that it's um um uh really um uh very solid and and we will be adding uh optical cross links later as well on those missions so um that yeah having that main telescope system in-house has been a really important advancement. And yes, so it's a success, I would say.

That's all the time we have for questions today. I will now turn the call back over to Will Marshall, CEO and co-founder for closing remarks.

Yeah, I'll just say in closing that we feel it was a great quarter, meaningful beat on the top line and on margins. This is all made possible because of a series of new deals. I want to call out a couple of the first operational program for GMS with NGA, our first satellite services deal with for a federal civil government agency with Germany, our first countrywide contract with the civil government in Africa with Rwanda. And we shared our first win with an AI hyperscaler for data center monitoring, which is also really cool. Each of these speak to the value the planet is bringing to customers around the globe. I couldn't be more pleased also for how our satellite services business is maturing, as we've discussed here, with over $4 billion of opportunities identified and over a billion as qualified as near-term pipeline. Stepping back, I believe today we hold a small growing share of an enormous market. And furthermore, Planet's daily scan, along with our AI, is opening entirely new applications and segments on top of that market. So planets uniquely positioned to go after these opportunities on the satellite services side is our ability to deliver in months, not years, is a huge differentiation. And on the GMS side and MDA, it's all powered by a daily scan that no one else has, as we've also discussed on this call. So thanks always to the incredible hard work of the planet team around the globe that enables this. And thanks, everyone, for joining us today.

This concludes today's call. Thank you for attending. You may now disconnect.