Planet Labs - Earnings Call - Q3 2026

Transcript

Operator (participant)

Thank you for joining us, and welcome to the Planet Labs PBC Third Quarter of Fiscal 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand, star six to unmute. I will now hand the conference over to Cleo Palmer-Poroner, Director of Investor Relations.

Cleo Palmer-Poroner (Director of Investor Relations)

Thanks, operator, and hello everyone. This is Cleo Palmer-Poroner, Director of Investor Relations at Planet Labs PBC. Welcome to Planet's Third Quarter of Fiscal Year 2026 earnings call. 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 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 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 this afternoon, which is available on our website at investors.planet.com. 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 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.

Will Marshall (CEO, Chairperson, and Co-Founder)

Thanks, Cleo, and welcome everyone joining us today. It was another strong quarter, so let's dive in. To briefly summarize the financials, we generated $81.3 million in revenue, representing approximately 33% growth year-over-year, marking another quarter of growth acceleration. Non-GAAP gross margin was 60% in the quarter, and Adjusted EBITDA profit came in at $5.6 million, representing our fourth sequential quarter of Adjusted EBITDA profitability. Our Backlog was $734.5 million at the end of the quarter, representing a year-over-year increase of 216%. Once again, we delivered positive Free Cash Flow, the third quarter in a row, reinforcing our expectation of being Free Cash Flow positive for the full fiscal year.

I'm particularly proud to report that with a strong performance in Q3, we are now also expected to be Adjusted EBITDA positive in FY2026, an excellent milestone for the team as we work to strike a balance between profit and growth. Turning to sales highlights, I'll start with the defense and intelligence sector, where Q3 revenue accelerated to over 70% growth year-on-year, up over 15% quarter-over-quarter, all driven by strong performance in our data subscription and solutions businesses, as well as our satellite services business. As previously announced, we awarded a prime contract under the Luno B program by the National Geospatial-Intelligence Agency for a $12.8 million initial award with partner SynMax. The award is for advanced analytics for maritime operations and reconnaissance.

Under this program, we will provide the NGA with AI-enabled maritime domain awareness solutions, which include vessel detections and monitoring over key areas of interest in Asia Pacific. We're honored to have been selected and excited to be expanding this relationship. The National Reconnaissance Office renewed its baseline contract for PlanetScope broad area monitoring data under the Electro-Optical Commercial Layer program for $13.2 million through June 2026. If you were to analyze this award, the annual run rate would be approximately $21.1 million. For the high-resolution component of our EOCL relationship, we have been awarded a framework contract, which the NRO can utilize to order high-resolution Pelican imagery. As a reminder, the EOCL program has been impacted by both the U.S. government shutdown and potential federal budget reductions.

That said, we're encouraged by the continued engagement from this critical customer and see significant opportunities for growth in that relationship in the future, particularly as this administration leans into leveraging commercial technologies. We also won an eight-figure renewal with a long-standing international defense and intelligence customer for high-resolution imagery, as we announced last month. And also, as previously announced, we were awarded a six-month $7.5 million contract renewal by the U.S. Navy for vessel detection and monitoring over key areas of interest throughout the Pacific. Finally, our global monitoring pilots with NATO and DIU have been progressing very well. We're pleased to share that last month we were awarded a seven-figure expansion by NATO prior to the completion of our existing pilot for them. We're incredibly proud of this early traction and are working hard to continue delivering for these customers.

More broadly, we continue to see robust demand for downstream products that embed AI-enabled analytics on top of our daily scan for customers' operations, enhance situation awareness, and support informed decision-making. Turning to the civil government sector, where third quarter revenue was up approximately 1% year-over-year and up approximately 15% quarter-over-quarter. To share a recent highlight, during the quarter, NASA awarded us a one-year $13.5 million task order under the Commercial Satellite Data Acquisition program. As a reminder, this program has also been impacted by the U.S. government shutdown and potential federal budget reductions. Although this relationship has historically been an approximately $20 million annual run rate, we're very pleased to be continuing this important work with our partners at NASA and see opportunities to expand the relationship in the future.

In fact, since the end of the quarter, we have received an incremental CSDA task order from NASA for disaster response. Under this new order, which is just under $1 million in value, we will be providing high-resolution task imagery to support disaster response and recovery. Shifting finally to the commercial sector, where revenue was moderately down both year-over-year and quarter-over-quarter. While this trend is expected given our increased focus on large government customers, we remain confident in the commercial sector as a significant market opportunity for Planet, especially as we continue to advance our solution capabilities.

We believe that AI-enabled solutions we're developing for our government customers will enable us to deliver insights that can serve applications across a broad range of industries and use cases, from supply chain, security and optimization, to insurance, finance, energy, and agriculture, where we have had a number of marquee customers today. We expect these solutions will help unlock growth in the commercial sector, bridging the gap from data to insights for those customers. To share a recent commercial highlight, we signed a new operational contract with AXA, one of the world's leading insurance groups, following a successful proof of concept. AXA Digital Commercial Platform, or DCP, will integrate data from Planet Basemaps, our medium resolution monitoring satellite, and high-resolution tasking fleets, as well, directly into its DCP GeoClaims application to enhance claim processing efficiency and accuracy for property management.

We've also signed a strategic marketplace agreement, which will add Planet's products to AXA's DCP platform, making them commercially available to AXA's vast client network of insurance partners. This partnership marks a major step forward in proactive, data-led resilience in the face of complex disaster and crisis management needs. Turning to our satellite services business, the team is continuing to execute well on our contract with JSAT, which once again contributed to revenue upside in the quarter. We've also begun ramping for our German-funded satellite services deal and saw a small contribution from that work in the quarter. As we've shared previously, we're seeing very strong demand signals for satellite services driven by our current geopolitical landscape and the demand for sovereign access to space. We're continuing to aggressively pursue strategic opportunities, and the pipeline is robust. Turning now to the consistently remarkable execution of by our Space Systems teams.

Just 12 days ago, we launched two of our high-resolution Pelicans into orbit, bringing our commercial fleet size to five satellites. We also launched 36 SuperDoves, which will join our broad area monitoring fleet. We have successfully completed all 38 satellites, and they're now undergoing routine commissioning as they prepare to begin serving customers. We got first light down from the Pelicans the next day, and we're excited to share initial images, which you can find in the Investor Deck or on our IR website. We also recently announced plans to open a new Berlin satellite manufacturing facility for the production of next-generation high-resolution Pelican satellites in Germany. We expect to begin ramping operations next year with the aim to roughly double our manufacturing capacity and better meet growing demand from the European market.

Now I want to provide a little more context on our two strategic projects that we announced in the quarter. Firstly, in October, we announced Owl, our next-generation monitoring fleet, to continue our unique broad area monitoring mission currently serviced by the SuperDove fleet, but improving the resolution to one-meter class, lowering the latency, and significantly upgrading the onboard compute to incorporate NVIDIA GPUs. Owl is designed from the ground up to address expanded applications ranging from security to disaster response to rapid change detection. The first tech demo is slated for launch later in calendar year 2026, and we're incredibly excited about the future of our daily monitoring solutions. Secondly, we've recently announced a funded R&D initiative with Google called Project Suncatcher.

Suncatcher aims to enable scaled AI computing in space by putting Google's Tensor Processing Units, or TPUs, on purpose-designed satellites where they can leverage the energy of the sun and shed excess heat into the natural coldness of space. This was a competitive win for Planet, and our strong track record of building, launching, and operating over 600 satellites to date, together with our collaboration on AI-enabled solutions, represents a competitive edge underlying the depth of our experience and our Agile Aerospace approach. Suncatcher aligns well with our technology development roadmap for Owl, leveraging the same satellite bus and is therefore highly synergistic. As previously announced, we're planning to deploy two prototype satellites in early 2027. We're excited to be working with our long-term partner, Google, to develop this promising new technology.

On the solution side, I'm excited to share today that we recently closed the acquisition of Bedrock Research, an AI solutions company based in Denver, Colorado. Through our collaborations to date, Bedrock has successfully delivered for our existing defense and intelligence customers. From a team perspective, they have a rare, deep expertise in the intersection of remote sensing, AI, and national security. We've been very impressed with their team's agility, creativity, and innovation. We view this as a strategically valuable capability, and given the traction we're seeing in global monitoring, bringing this expertise in-house now will help us to accelerate our roadmap for AI-enabled solutions and support our ability to efficiently scale to meet that market demand. We're thrilled to welcome the Bedrock team to the Planet organization.

To close out, in Q3, we demonstrated continued momentum across the business driven by strong execution, strategic wins in the government sector, and exciting new developments and technologies that we announced of Owl and Suncatcher. We believe we are well positioned for growth and profitability, reinforced by our robust backlog and commitments to developing best-in-class solutions for our customers. I'm incredibly proud of our global team for the phenomenal execution and excited for what lies ahead. With that, I'll turn it over to Ashley to discuss our financials. Over to you, Ash.

Ashley Johnson (CFO and COO)

Thanks, Will. I'll start by echoing Will's remarks in saying that Q3 was another outstanding quarter with strong execution by our teams around the globe.

I was particularly proud of our finance and operations teams, who added to our list of accomplishments by raising $460 million of convertible debt in September and hosting a highly successful Investor Day at the New York Stock Exchange in October, where we provided an in-depth update on momentum in the business and our go-to-market focus. Turning to the quarter's results, as Will highlighted, revenue came in at $81.3 million, representing approximately 33% year-over-year growth. The outperformance was driven primarily by our defense and intelligence and civil government customers, as well as continued progress against our JSAT satellite services contract. We saw upside during the quarter from the Luno B win with the NGA, as well as contribution from some one-time factors, which supported our better-than-expected results.

During the third quarter, revenue from the defense and intelligence sector grew significantly year-on-year, driven largely by wins with the NGA, the U.S. Navy, and international defense and intelligence customers. The commercial sector was down, in part due to seasonality in the agricultural sector, in addition to our shift in focus towards larger accounts. Civil government revenue was up modestly, with strength from international customers in the sector offset primarily by the end of our contract with Norway for their NICFI program. We're pleased to see strong uptake of our AI-enabled solutions in the government markets, contributing particularly to defense and intelligence wins in the quarter. Turning to our regional revenue breakdown, growth was distributed across the globe in the third quarter, with approximate revenue growth of 38% year-over-year in both Asia Pacific and EMEA, 30% in North America, and 7% in Latin America.

As of the end of Q3, our end-of-period customer count was 910 customers, flat on a sequential basis, reflecting our direct sales team's intentional shift to focus on large customer opportunities and leveraging our self-serve platform to provide access to data for our other customers. As a reminder, Planet Insights Platform customers are not included in our end-of-period customer count. We continue to see strong revenue growth and thus a solid increase in average revenue per customer as a positive indicator that our sales team's focus on landing and expanding high-value accounts is yielding results. As we shift to some of our ACV metrics, I want to remind you that the JSAT multi-year satellite services contract is not included in our ACV metrics, although it is included in our RPOs and backlog, which we will discuss in a moment.

Recurring ACV was 97% 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 83% of our end-of-period ACV book of business consists of annual or multi-year contracts, lower than prior periods, as we have seen a higher proportion of large, shorter-term government deals closed in recent quarters. Net dollar retention rate at the end of Q3 was 109%, and net dollar retention rate with Winbacks was 110%. Turning to gross margin, non-GAAP gross margin for the third quarter was 60%, compared to 64% in the third quarter of fiscal year 2025, reflecting investments in support of our satellite services contracts and the mix of contracts including AI-enabled partner solutions. Our gross margins came in better than expected, primarily driven by the revenue outperformance in the quarter.

Adjusted EBITDA profit was $5.6 million for Q3, better than expected, primarily driven by revenue outperformance in the quarter and disciplined OpEx spend. This marks our fourth sequential quarter of Adjusted EBITDA profitability. Capital expenditures in Q3, which include our capitalized software development, were approximately $27.7 million. This was above our guidance range, driven primarily by our decision to prepay for more favorable pricing in certain hardware procurements and launch deposits for our next-generation satellites. As a reminder, we're currently in a growth CapEx investment cycle as we lean into market demand and build out our next-generation fleets. Turning to the balance sheet, we ended the quarter with approximately $677 million of cash, cash equivalents, and short-term investments, an increase of approximately $406 million sequentially. The increase is driven primarily by our convertible note raise in September.

We achieved an excellent outcome, raising $460 million at a 0.5% interest rate for a five-year term. Use of proceeds for the transaction are general corporate purposes, with a portion of the proceeds used to purchase a capped call, allowing us to avoid dilution up to a stock price of $18.04, providing net proceeds of approximately $406 million. This capital provides us a strategic asset in the form of a very strong balance sheet. Year-to-date, we generated approximately $114 million in net cash from operating activities and $55 million in free cash flow. Our focus remains on managing the business to enable sustainable cash flow generation through efficient growth across our data, solutions, and satellite services revenue streams.

At the end of Q3, our remaining performance obligations, or RPOs, were approximately $672 million, up about 361% year-over-year, of which approximately 33% apply to the next 12 months and 59% to the next 24 months. We estimate our backlog, which includes contracts with a termination for convenience clause, to be approximately $734 million, up about 216% year-over-year. Approximately 37% of our backlog applies to the next 12 months and 61% to the next two years. Let me turn now to our guidance for the fourth quarter and full year for fiscal 2026. In Q4, we're expecting revenue to be between $76 million and $80 million, which represents approximately 27% year-on-year growth at the midpoint and excludes many of the 1x factors that drove upside in Q3.

We expect non-GAAP gross margin for the quarter to be between 50%-52%, driven by our satellite services contract with JSAT, the mix of deals with AI-enabled partner solutions, and investments in our next-generation fleets. Our range for Adjusted EBITDA loss in the fourth quarter is expected to be between -$7 million and -$5 million, reflecting our investments to drive sustained growth across both AI-enabled solutions and our next-generation fleets. We are planning for capital expenditures of approximately $22 million-$26 million in Q4. For the full fiscal year 2026, we now expect revenue to be between $297 million-$301 million. This increase reflects our strong performance in Q3 and improved outlook for Q4, as we've seen some of our U.S. government contracts come in.

We believe our backlog provides us with good visibility to sustain our Q4 revenue growth rate into fiscal 2027 and achieve our revenue and Adjusted EBITDA targets as shared at our Investor Day in October. You can find these details in our Investor Day presentation on our Investor Relations website. We are updating our guidance for Non-GAAP gross margin for fiscal 2026 to be between 57%-58%, reflecting the better-than-expected gross margins during Q3. We expect our Adjusted EBITDA profit for fiscal 2026 to be between $6 million and $8 million, reflecting the strong performance we've seen throughout the year in revenue and cost efficiencies, even as we continue to invest in downstream solutions and our space systems capabilities.

Achieving Adjusted EBITDA profitability on an annual basis represents a major milestone in the company's maturity and reflects the hard work of our global teams in focusing our investments in the highest priority growth areas. We are planning for capital expenditures of approximately $81 million-$85 million for the year, as the increased investments we're making in our satellite fleets puts us in a strong position to meet accelerating market demand. As I mentioned earlier, we're also pulling forward some investments to take advantage of some favorable pricing opportunities. We continue to expect to be Free Cash Flow positive on an annual basis this year. While quarterly results may vary due to the timing of cash collections, CapEx requirements, and other factors, we remain focused on generating sustainable annual positive cash flow. As always, we're incredibly grateful for the ingenuity, collaboration, and achievements of our Planet team.

These stellar results were made possible by your hard work. Operator, that concludes our comments. We can now take questions.

Operator (participant)

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. A reminder that if you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand, star six to unmute. Please stand by as we compile the Q&A roster, and our first question comes from the line of Ryan Coontz with Needham. Your line is open. Please go ahead.

Ryan Coontz (Senior Analyst)

Great. Thanks for the question. Terrific quarter, guys. Just outstanding in the October quarter. I wanted to ask about the guide a little bit here. In terms of the revenue and the margin guide down, is the revenue down on 1x benefits on usage in the past quarter and then the gross margin guide down? Is that mostly tied to some of your large international programs you're ramping?

Ashley Johnson (CFO and COO)

Great. Thanks, Ryan. Appreciate the question. In terms of Q3 to Q4 trends, a couple of factors to keep in mind. So I did highlight that there were some 1x items in Q3. Those can be related to renewals of certain contracts that have archive components. Anytime we have any kind of bonus payments or deliverables, that can factor into a quarter that obviously wouldn't continue into the next. And then I mentioned there was some upside that was driven by the timing of landing new business. That does continue into Q4, and you see that rolling through.

That's balanced against. We mentioned that both the NASA contract and the EOCL contracts were downsized, so we have to factor that revenue drop into the Q4 guidance, so that is fully factored into the guidance that we've given, and that results in that quarter-to-quarter flatness, just like down that we guided to. In terms of margin, we're both investing in the opportunity that we see, as we've highlighted, investing into execution against our satellite services contracts, which continue to perform well and also with awards like Luno B, those are with partners, and so we do have partner fees that go into COGS that get layered into Q4, and that also causes some margin compression quarter-to-quarter, so those are the factors. It really comes down to mix of business and the fact that we are investing because we see a lot of opportunity in front of us.

Ryan Coontz (Senior Analyst)

Great. Ashley, thanks. And just a clarification on those partner fees, are those front-loaded in some way before revenue hits, or how should we think about how those kind of behave in the future?

Ashley Johnson (CFO and COO)

No, they align to revenue.

Ryan Coontz (Senior Analyst)

Okay. Got it. Got it. Perfect. And maybe a quick question on the acquisition of Bedrock. I mean, which sectors are these guys focused on, and what sort of data does Bedrock integrate?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah, good question. I mean, Bedrock is fantastic. It's a small team, but they're very, very talented at the intersection of remote sensing, AI, and national security. Very, very good, solid team there. What we see them doing, I mean, we already work with them with actual customers as we're building out our GMS solution, and it's been working really well. And so we thought bringing them in-house would help us to scale and speed that execution faster and make it more efficient to the margins point we were just discussing.

Ryan Coontz (Senior Analyst)

Got it. And what sorts of, well, what sort of data do they deal with? Is it all primarily your data, or do they bring other data sources together?

Will Marshall (CEO, Chairperson, and Co-Founder)

Well, they have done multiple different data sets in the past, public and primarily, though, national security data sets on contract with the government. So it's a variety of things. And it's a sort of versatile approach that they've been doing using embeddings, a technology we've been also working with in our AI modeling work. And so it's the kind of very generic, scalable solution that can work across different data streams.

Ryan Coontz (Senior Analyst)

Great. Thanks, Will. Thanks, Ashley.

Ashley Johnson (CFO and COO)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is open. Please go ahead.

Edison Yu (Director)

Hi. Thank you. And congrats on the very impressive quarter. I want to ask about Project Suncatcher. There's been a lot of talk, a lot of excitement about data centers in space. Can you give us a sense on how you think about just the feasibility and viability of this, and how does one kind of measure that going forward?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. Well, thanks. On the quarter, we agree. It's really great. And yeah, Suncatcher is really exciting. I do think it's a very viable project long term. We have spoken in the space sector for some decades about how, as space infrastructure costs come down, it eventually makes sense to put compute into space and other energy-intensive infrastructure.

And to your point about the feasibility of scaling it, well, that is hard, right? And there's only a couple of companies in the world that have done scaled constellations, basically us and SpaceX. And therefore, knowing how to get costs down is something that really is an incredible advantage we have in a competitive position in going into this. One of the reasons, obviously, we're very proud that Google selected us. That's obviously one of the reasons for that. I see a huge market opportunity here. I do in the long run. This is just an R&D at this phase. This is an R&D contract. We're going to do these couple of demo satellites that will test out some of the critical components of that, like shedding heat from the TPUs into outer space and doing the formation flying.

So building towards a cluster system approach, which is the architecture that the Google and Planet teams have been designing towards. And we think the most efficient approach to this. So yeah, so in summary, it's early days, but an exciting potential project for Planet. Really exciting.

Edison Yu (Director)

Just one follow-up. I think you mentioned in the prepared remarks that you're using the same bus as Owl. Yes. Are there any special kind of design changes you need to make on the bus? Anything you need to do differently just from a, I guess, engineering perspective, given it's a TPU?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. I mean, there's a few things, but not much on the scale of things. For example, we're expanding the number of solar panels a little bit and a few things like that.

But on the scale of the hard complex things of the avionics and all those systems, how they work together, it's primarily the same at this stage. And that's why, I mean, there's two big reasons we did this project at the tactical level. One was how aligned it was to our Owl project per that point on the same bus. And the second is that it was an option on a big program in the future. To the earlier point, I mean, I think this is a big market. So let's take advantage of the fact that we're one of a couple of companies that can do it. I'll just add as well that Planet, we've been saying, is a space and AI company. And I think we have the credibility to say that we're the first one in a way to prove that.

We've obviously got scaled satellite stuff, so we're the space company. We've got at-scale use of AI based on our daily scan, and we've already been putting NVIDIA chips in space on satellites, including the ones that were launched just 12 days ago, and so we're already familiar with putting compute into space, so it's a natural extension of where we're going to think about AI and space together in this way, and so Planet is incredibly well-positioned for that, we believe.

Edison Yu (Director)

Thank you very much.

Ashley Johnson (CFO and COO)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Mike Latimore at Northland. Your line is open. Please go ahead.

Mike Latimore (Managing Director and Equity Analyst of Artificial Intelligence)

Excellent. Thanks. Yeah. Excellent results. I guess on the quarter, I think you said JSAT was one of the drivers of maybe the upside. Can you talk a little bit about is JSAT sort of ahead of schedule? And maybe just generally, how is the JSAT and Germany deals proceeding relative to maybe your internal timelines?

Ashley Johnson (CFO and COO)

Yeah. Obviously, this was the first time we'd engaged in this type of contract. And so while we have obviously agreed milestones with the end customer, we gave ourselves some flexibility for when certain milestones might get hit through the year. And obviously, that flexibility translates also into how we guide. And so that team continuing to execute and meet and hopefully exceed the customer's expectations also results in upside in our financial forecast.

Will Marshall (CEO, Chairperson, and Co-Founder)

I would just add, yeah, I mean, overall, things are going very well with those programs. And we're very focused on committed commitments to those customers. And yeah, things are going great. And the pipeline of opportunities for deals is going really well as well. So yeah, we're very happy with that side of the business team.

Mike Latimore (Managing Director and Equity Analyst of Artificial Intelligence)

Great. And then, Ashley, did you say that you expect the fourth quarter kind of implied growth rate to be sort of continue into fiscal 2027? Is that what you said?

Ashley Johnson (CFO and COO)

I did. Yeah. So as we're looking at the shape of the business and kind of the drivers of growth, Q4 is pretty indicative of how we see things going forward. Obviously, I've mentioned the change in the government contracts. Those go into full effect in Q4. We've obviously continued to land new business and expand relationships both with the U.S. government and international governments. And we expect across all of the areas of business to continue to focus on converting the pipeline that we have. So we're very comfortable with that as kind of a target for growth going into fiscal 2027. And also, as we think about margins next year, that's a pretty good benchmark to use as a reference.

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. And we said at the beginning of the year, we would accelerate revenue growth rate. And here we are, and it's nice to be in a position where we can see that continuing into the next year.

Ashley Johnson (CFO and COO)

And then the only qualifier I'd add to that is reference back to the Investor Day materials. We're obviously thinking about FY2027 very actively right now, and we continue to uphold a commitment to targeting EBITDA break-even or better, as well as maintaining our annual cash flow positivity.

Mike Latimore (Managing Director and Equity Analyst of Artificial Intelligence)

Okay. Excellent. Congrats.

Ashley Johnson (CFO and COO)

Thank you.

Will Marshall (CEO, Chairperson, and Co-Founder)

Thank you.

Operator (participant)

Thank you. Your next question comes from the line of Colin Canfield with Cantor Fitzgerald. Your line is open. Please go ahead.

Ashley Johnson (CFO and COO)

Colin, are you there?

Operator (participant)

You may be muted, Colin. You may have to unmute yourself.

Colin Canfield (Director)

Thank you. Apologies. Zoom mechanics. So just going back to the pipeline that you put together for the Investor Day, 20 contracts, average contract value of $170 million. That tracks pretty closely to kind of the F-35 friends and family. So as we think of kind of drawing comparisons between that portfolio of opportunities and the companies that we're looking at, how do you kind of think about the sizing and magnitude of those awards? I mean, is it fair to assume that we could see 20% of that pipeline convert? And maybe the magnitude of that pipeline looking similar as a factor of the JSAT and Germany deal such that maybe it's like $100 million awards upfront? How do we think about kind of that, just the timing and magnitude of that pipeline?

Will Marshall (CEO, Chairperson, and Co-Founder)

Well, yeah. I mean, firstly, I mean, I think Planet is extremely well-positioned for this market. I mean, we're the only ones that have built hundreds of Earth imaging satellites. We did 600 so far. So these countries, when they want sovereign satellites, especially at least in optical, are with an obvious first call. And yeah, we feel well-positioned against those 20 or so opportunities. We're focused on a half dozen or so that are a little bit more mature, and those ones are doing very, very well. When we really go in, I think we've got a higher probability than that, but time will tell exactly how this turns out. We are committed to really executing on this business side and being a reliable partner with these countries, building off a long-term relationship we've had with them in most cases.

And so yeah, overall, feeling very good about where this is going. Does that answer your question? I'm not sure the subtleties in your question.

Colin Canfield (Director)

Yeah, it does. I think timing probably might be a little bit too aggressive in terms of answering the question. So good to hear that you're well-positioned and looking forward to seeing those awards. Maybe pivoting to putting some numbers around Suncatcher. So if we think of the 81 cluster concept, let's call it $250,000-$300,000 per satellite, $1 million per cluster. Is it fair to assume that that has some value capture tail on top of that such that it can be above, call it an initial award of $81 million?

And then just a high-level question, as we think of Google's R&D budget of, call it $30 billion a year, and the concept that a lot of these AI people that are basically chasing data centers and the like are now pivoting that R&D spend from the development of the systems to the scaling of systems, and that scaling of systems likely going through space infrastructure versus terrestrial. So maybe $81 million, is that fair, or is it above that? And how do we think of kind of that longer-term scaling opportunity into that Google R&D wallet?

Will Marshall (CEO, Chairperson, and Co-Founder)

Got it. Yeah. Well, firstly, what we're on contract to do with Google is a couple of demo satellites. It's really just the testing early phase. We're not getting into the scale cluster. You're referring to the paper that they put out with where they were talking about 81 satellites in the cluster.

That's more to do with the architecture that we're building long term. I think you're right to point out that this will take significant R&D dollars, and these companies are going to be willing to put dollars behind it. Because if it has the cost advantages, which we believe it will, and the experiments will need to show that, this is a scaled operation. It would require thousands of satellites and many other things, but at this point, we're very early on, and I think it's important to think about Google choosing us in this process, is a huge compliment to us, of course, but one of the reasons is that we're one of the few companies that has done this at scale, as I said in my prior remarks.

And so, even though it's an R&D scale at this stage, we think we're one of the few players that can really build that out. It is not trivial to put up huge numbers of satellites in a cost-efficient way. There's literally only a couple of companies in the world that have done that. And, to boot, Planet, as I was mentioning in my earlier remarks, really the first proven space and AI company. We've already put fast processors in space. We already do a huge amount of AI work. And so, our collaboration, and a bunch of that AI work, is with Google. We've got a partnership with the Gemini team, and we've got a long trusted record working with them. So, I think Planet is well-positioned.

Again, this is an early option, early contract on R&D, but it's an option on a big long-term future that Planet is well-positioned to be taking part in. Does that answer your question?

Colin Canfield (Director)

I think so. So thank you for the call, as always. Appreciate it.

Will Marshall (CEO, Chairperson, and Co-Founder)

No problem.

Operator (participant)

Thank you. Your next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital. Your line is open. Please go ahead.

Jeff Van Rhee (Senior Research Analyst)

Great. Thanks for taking the question, Will. Congratulations. Just a few left for me. Well, on the compute front, as it relates to, obviously, congrats on what you're doing with Google. And you've been ahead of that embedding compute into your platform already. Just talk about the demand pull. You're pushing it, but to what degree are people ready to consume it, demanding it, having use cases already pegged out and driving value from it?

Will Marshall (CEO, Chairperson, and Co-Founder)

You mean demanding compute in space?

Jeff Van Rhee (Senior Research Analyst)

Yep.

Will Marshall (CEO, Chairperson, and Co-Founder)

Well, look, I mean, this is really talking about putting compute in space because ultimately, as launch costs and satellite infrastructure costs come down, there's a point at which it becomes more economically feasible to put those entire data centers in space. So it's not about any particular compute demand. It's about the entire compute demand in principle. But that depends on us getting that cost threshold. I think it's the position of Google and Planet that we are just a few years away from that. And therefore, it's the right time to starting to invest in that R&D. There are some types of compute demand that more lend themselves to space than others. But generally, we're talking about the entirety of that business.

I would just say, I think similarly to Sundar. He was talking about this last week and talking about how in 10 years' time, he thinks most compute will be going up to space. So that's the way I perceive it too. So that's the way I think we should think about it. Does that make sense? As opposed to any particular piece of the compute sector?

Jeff Van Rhee (Senior Research Analyst)

Yeah, understood. That's fair. Two last, if I could then. One, as it relates to Pelican, congrats. Real quick, first light imagery. Is there a number in the sky or a particular point in time this year? Just talk maybe to whatever degree you can share how that revenue layers in, if it just tends to be very gradual, if there are going to be lumps in that. So that would be the first question. And then my last would just be on EOCL. Obviously, the cutbacks in the first place shocked everybody. Just wondering if you have any more clarity on what might replace what they've taken away, if there's any clarity there. So those two questions. Appreciate it.

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah, absolutely. Let me take the second one first. I mean, I just came back from D.C., and I can tell you that there is a lot of interest in this administration in leveraging new tech to drive real mission value in the DoD. And we sit firmly in that area. And so we are seeing them leaning in. So despite what you're seeing there with the EOCL, A, it's growing. But more importantly, they are leaning in heavily. In fact, I mean, we see this, of course, in the numbers already. The Luno B award, the Navy expansion, and so on.

They're already leaning into this stuff, but I think we're going to see it in a big way coming. So I think the outlook is really very positive. What was the first part of the question again?

Ashley Johnson (CFO and COO)

First part of the question is, as we continue to launch Pelicans, how do we see revenue flowing in? And I see it more gradual. Yeah. As we continue to bring on contracts, and obviously, if we land bigger contracts, we talked about we have a framework contract in place already for Pelican or for high-res in general with USG under EOCL. There's opportunities to expand that. There's opportunities, obviously, to expand with many of our existing customers and new customers. So nothing at this point that would cause me to say there's going to be irregularities in it. It's more.

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. I'd say it's roughly linear as we scale it, and they're scaling as the SkySat start ramping down, and then rebuilding towards what we've said before, ultimately a 30-satellite fleet with 30 revisits a day, 30-minute latency, and all this. And yeah, we're already seeing customers very excited about leveraging that data. And I'm glad you saw that first light. It was impressive of the team to bring that out the next day. I think the first light came out. So it's really fast how quickly they're able to process all of this and get those satellites up to. It's almost routinized at this point that we can launch these satellites and get them going. It's really cool.

Jeff Van Rhee (Senior Research Analyst)

Yeah. Absolutely. Congrats on the quarter, guys.

Will Marshall (CEO, Chairperson, and Co-Founder)

Thank you.

Ashley Johnson (CFO and COO)

Thank you.

Operator (participant)

Thank you. And a quick reminder to keep it to one question and one follow-up, please. Our next question comes from the line of Kristine Liwag with Morgan Stanley. Your line is open. Please go ahead.

Kristine Liwag (Executive Director)

Great. Good afternoon, everyone. Thanks for taking my question. I guess, look, you've delivered four consecutive quarters of positive adjusted EBITDA, and the loss for 4Q is really driven by incremental investments, which are all good problems. I was wondering, can you parse out how much these investments are for 4Q, their duration into fiscal year 2027? And if we take out these investments, would fiscal year 2027 be adjusted EBITDA profitable?

Ashley Johnson (CFO and COO)

Thanks, Kristine. Appreciate the question. So first of all, at the Investor Day, I talked about the fact that for fiscal 2027, we are targeting EBITDA profitability as one of the metrics that, as we're doing our fiscal 2027 planning, we are keeping in mind, so break-even or better.

So I'd urge you to look back at some of those materials where we talked about just general framing for thinking about that year. For Q4 specifically, it's kind of a step up as we're ramping up some new contracts and then scaling the revenue alongside of it. So as that revenue continues to scale, that gives us the opportunity to sustain these investments but get to that Adjusted EBITDA break-even or better goal. So really, the key for us is balancing the opportunity for growth that we see with sustaining profitability across the business. Hope that helps.

Kristine Liwag (Executive Director)

Yeah, super helpful. And if I could do a follow-on, the AXA contract that you mentioned earlier, if you think about the opportunity set for that kind of insurance-type business, when you sign on incremental customers, how scalable is your capability set there regarding profitability? Would you sign on new customers and have incrementally higher profit? How do we think about that versus incremental investments you would have to make if you sign on customers similar to what they're already doing?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah, and highly scalable, and I mean, the direct margins of this sort of data business is extremely high. I mean, in the 90s%. What we did with AXA is really cool because just think about it very practically. They're trying to make claims processing more efficient. Take natural disasters like floods or fires, have quicker assessments of losses and damages, and instead of people having to send individuals out to check, they can, in many cases, just check that with the satellite imagery automatically from their computer. I mean, this is a huge efficiency saving across a big business. That's why AXA has not just bought some data for their own use.

They're also putting it on their platform, exactly to your point about scaling it up to other insurance companies in their network, in their partner network, on their platform. So they're providing the platform and these others. And yeah, the incremental margins on that are really great. And I see lots of potential customers like that in the future. We think the commercial business is going to continue to grow really well in the long term. And yeah, I mean, things like insurance and finance, we believe, are massive markets for us to go over after. So I hope that answers the questions.

Kristine Liwag (Executive Director)

Thank you. Very, very excited about that.

Will Marshall (CEO, Chairperson, and Co-Founder)

Great.

Ashley Johnson (CFO and COO)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Trevor Walsh with Citizens JMP. Your line is open. Please go ahead.

Trevor Walsh (Director and Senior Equity Research Analyst)

Great. Can you guys hear me okay?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yep.

Trevor Walsh (Director and Senior Equity Research Analyst)

Cool. Thanks for taking the questions. I guess around the Luno B contract and the upside in the quarter for Will or for Ashley, jump ball, but can you maybe explain or go in a little bit more detail as to how that just seems like a very from kind of signing the contract in quarter and then having it immediately kind of lead to recognizable. It just seems like a nicer, just better, I guess, execution. And is that actually what happened, or was there some details around the POC being set up beforehand and just kind of getting off with that customer right away specific to NGA? Or I guess I'm trying to understand if there's going to be more kind of potential with that with some of these DIU customers where you kind of sign the deal and then leads to kind of immediate revenue impacts in that actual quarter.

Will Marshall (CEO, Chairperson, and Co-Founder)

Thanks. Yeah. I mean, look, we're ready to go on these things. We've already got the data. We've already got the analytics, so they can just turn it on. And the great thing, I mean, sometimes the government can be slow initially, but when they go, it can just be straight away. And so we just turn it on. And that's exactly what happened in this case. It's great that we primed that. And it's a really substantive award. And it's in an area we've talked about that NGA are leaning into, broad area looking with AI on top. And it is an area that Planet believes we're really well positioned to take. And that's the maritime domain awareness. It's a bit like our Navy program.

And the Navy has subsequently, in extensions, been doing that as a sole source award because we're the only ones that can do it. That also speeds things up faster. But yeah, the main ramp here was just because we were ready to go. And as soon as they turned us on, we were on.

Trevor Walsh (Director and Senior Equity Research Analyst)

Terrific. Great. Thanks, Will. That's really helpful color. Ashley, follow-up maybe for you. Just circling back to JSAT and the Pelican revenues, understand that the JSAT's not included in your ACV metrics as far as the recurring piece of revenue.

But can you just help us understand or remind us exactly how, as you build the 10 or so satellites specific to JSAT and that revenue flows in, is that going to create kind of a 1x non-recurring type of bump in a particular quarter, which we won't really see in that ACV metric because you're not including that in there? And so in other words, you'd have a big revenue bump, but you still have that's not recurring, but you have 97% kind of similar to this quarter type of a metric. So not a good way to necessarily kind of track that, if that makes sense. Can you maybe just help us understand the dynamics there?

Ashley Johnson (CFO and COO)

Yeah. Happy to, and I mean, basically, you can see this in our when we talk about RPOs and backlog and next 12-month revenue. It is more gradual.

There might be some lumpiness quarter-to-quarter, but it's minimal. It's not something that's going to cause things to swing wildly, but so I would say the majority of our revenue still is coming from our traditional ACV business, and it is a very good indicator that we use both on internal managing that growth versus profitability balance, also looking at the health of the business, looking at renewal rates and that recurring revenue, and then the nice thing about contracts like JSAT and other constellation services contracts that we're either engaged or pursuing is that it actually aligns the revenue quite nicely to the lifetime of the satellites, so while there is an upfront component of the revenue, there is also a managed component of the revenue that spreads the revenue over the lifetime of the satellites, so it's a mix.

It's a little hard to overlay it directly to our traditional ACV metrics, which is why we exclude it. But it is still very predictable revenue and obviously enables us to accelerate the build-out of that 30-Pelican fleet that we talked about, which we think gives us a great competitive advantage and competitive offering.

Trevor Walsh (Director and Senior Equity Research Analyst)

Great. Awesome. Super helpful. Thanks both for the questions.

Ashley Johnson (CFO and COO)

Great. Thanks, Trevor.

Operator (participant)

Thank you. Your next question comes from the line of Greg Pendy with Clear Street. Your line is open. Please go ahead. A reminder to unmute yourself, Greg.

Greg Pendy (Director)

Hey, guys. Thanks for taking my question and congrats on the quarter. Just a real quick one. I think you mentioned there was some weakness in agriculture on the commercial side and some seasonality. Is that just the overall pressure we're hearing about in the agricultural sector? And could you just provide a little bit of color on that?

Ashley Johnson (CFO and COO)

Yeah, sure. Actually, it's not weakness. It's seasonality. And it's just the timing of deliverables and usage around those contracts. As I've mentioned, we get these annual commit contracts, but some of them are recognized ratably, and some of them are recognized based on usage depending on the nature of the product that the customer's purchased. And so in this case, you see a lot of usage in the harvesting or pre-harvesting periods for operational efficiencies. And then you see that drop off as you get later into the harvesting cycles. And so that's just seasonality that we would expect year-to-year. Actually, we're pleased with the stability that we're seeing in the agricultural business.

And I think that's largely driven by the shift that we've made over the last couple of years to move out of more of the marketing arms of the agriculture sector and really be embedded into the operations of our customers. So I'm actually very pleased with the progress we're seeing in the ag sector and see that as a potential growth vector for us in the future.

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. If I just have one more thing, it's that we have figured out how to align our business model with theirs. And now we believe we're in a stronger position to help serve that market. But you're right that the overall segment has been having challenges.

Greg Pendy (Director)

That's very helpful. Thanks a lot.

Ashley Johnson (CFO and COO)

Sure.

Operator (participant)

Thank you. Our next question comes from the line of Chris Quilty with Quilty Space. Please, your line is open. Please go ahead.

Chris Quilty (Co-CEO and President)

Thanks, guys. Following on the earlier talk of the pipeline, $170 million deals, and the fact that you're doing the factory expansion in Berlin, what do you expect you'll need in terms of production rate? And is that where are you at today, and where do you expect to scale in the next year? And is that sufficient capacity with those two facilities, should the opportunity show?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah, well, obviously, we are building those facilities, both our expansion here and what we're doing in Berlin, exactly to build towards the demand that we expect to see. So yeah, we're obviously trying to do that. As I think we said at the time of announcing the Berlin manufacturing site, that will roughly double our capacity to build the Pelican satellites, and we're excited to say we're making some really good headway there. Found the place.

And now next year, we'll be going into operations there. So excited by that. But yeah, we're obviously trying to match that demand. We are seeing very strong demand for deals that include building new satellites and for deals that involve leveraging existing satellites, both. Remember, there's a mix between those two, and that affects whether or not we have to launch new satellites. But on both sides, we're seeing good traction. And I think what's great about this, again, is that it will pave the CapEx of deploying that 30-satellite fleet or more. I think that we're in a great position with so much demand there that it will help build out our full fleet.

Ashley Johnson (CFO and COO)

And I would just add to that, Chris, that the team does a really good job of making these different fleets very synergistic. So just as a reminder, the Tanager leverages the same bus as the Pelican. We highlighted that we're leveraging the Owl bus for the Suncatcher program. And that enables us to also be very efficient in how we utilize space both for the R&D front and the manufacturing site. So it enables us to run a pretty efficient operation through and through.

Chris Quilty (Co-CEO and President)

Gotcha. But again, Will said you'll double production to no number given, but I was just asking for a number.

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah. I don't want to specify that right now just because of competitive reasons.

Chris Quilty (Co-CEO and President)

No, fair enough. And again, on the Tanager, any update there? I mean, are you finding a killer app market or application with the hyperspectral? What are your thoughts on scaling with the technology?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yes. Well, Tanager just got to its first year of being in orbit. It had great traction so far.

One of the things we're really pleased about is our California partnership, a powerful proof point that has shown that they are able to find methane leaks across California, stop them, have real incremental benefits for both those businesses as well as for the environment. And we're committed under that program to do the first four of those challenges. Yeah. So it's obviously, as we've said before, that's a very new kind of capability, hyperspectral imagery. But so far, the results have been really impressive. The signal-to-noise ratio on that satellite, the quality of the data it's producing, that is, and it's been beyond our expectations. And the users are starting to report good results. And not just in the civil government side. We have early interest in the defense and intelligence sector as well.

Chris Quilty (Co-CEO and President)

Great. And congrats on the Pelican turnaround on first flight. I think, was it a record?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah.

Chris Quilty (Co-CEO and President)

It was certainly, yeah.

Will Marshall (CEO, Chairperson, and Co-Founder)

I think that might have been a record. I mean, the team just keeps on getting better and better. I mean, just to put it in perspective, when I started in the space sector a couple of decades ago, this was a really complex process planning for launch. And now it's commissioning and all of that process. And our team does this in their sleep at this point. It's incredible how well we do these operations. And I'm incredibly proud of how quickly and efficiently they build the satellites, get them to the launch vehicle, launch them, commission them, contact them, commission them, and then provide those capabilities to customers rapidly. And yeah, continue to be impressed by that.

Chris Quilty (Co-CEO and President)

Gotcha. And we've got the, is it the next two satellites going up will be next-gen 30-centimeter? And can you just remind us, what is the fundamental difference in the driver for the improvement? Is it altitude, taking the satellites down below 420, or is it some change to the payload itself that you've learned from the first iteration?

Will Marshall (CEO, Chairperson, and Co-Founder)

Yeah, it's both. It's upgraded telescopes on those future generations, those V2s, as well as we are flying them lower as well. So yeah, it's a bit of both. So some of those improvements can happen with the existing satellites, and some of those improvements have to wait for the later satellites. But we will be doing those next year. I won't go into more details, but it'll be exciting to have them up too.

Chris Quilty (Co-CEO and President)

Very cool. Looking forward to it. Thanks.

Ashley Johnson (CFO and COO)

Thank you.

Operator (participant)

That is all the time we have for questions today. I will now turn the call back to Will Marshall, CEO and Co-Founder, for closing remarks.

Will Marshall (CEO, Chairperson, and Co-Founder)

Thanks, operator. Yeah, so I think in summary, Q3 was another excellent quarter for the company. The business is humming, both across the data and solutions business, which we see rapidly scaling. We saw the NATO expansion, the Luno B award, and more. Those efforts in AI-enabled solutions are paying off and the satellite services, we have strong execution and a strong and maturing pipeline. It was great to see all of this leading to us beating our revenue guidance again in Q3 and raising our forecast for the full year. Given our robust backlog and recent government wins, we're excited to share that we believe that we're well positioned to continue the end-of-year growth rate into next year.

And since last quarter closed, we launched those 38 satellites and bought in Bedrock and announced Suncatcher with Google, which is a new and exciting R&D initiative at this scale, but a lot of promise for the future. So the team is just executing at pace. I'm incredibly proud of everyone for the phenomenal execution this quarter and excited for what lies ahead. Thanks again for joining, everyone.

Operator (participant)

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