Last week there was a rush of IPO filings
that we briefly covered during last week’s
livestream. One of the most intriguing on
the list was Palantir. Today, I’m giving
you some details about the company and I’ll
share some highlights from their filing as
they begin the march to their IPO. I guess
you could say I’m analyzing the data analyzers!
Hey everyone, welcome back to the channel…and
in some cases, welcome to the channel for
the first time; my name is Kevin. As always,
shout out to the community for your fantastic
support. Today we’re taking a first, and
more in-depth look at Palantir on the channel.
But before we get into it, today’s a special
day and I want to take a moment to thank the
biggest supporter I have on YouTube. She encouraged
me to start the channel when I was just thinking
about it; in fact she gave me gifts at Christmas
that was to encourage me to stop thinking
about it and to just do it. She helped me
with finding, and then using, editing software
and she’s the first to tell me that I’m
doing a great job with it, even when I’m
not sure that I am. We met 2 years ago today
and I look back at how great that day was
and how great it has been with her ever since.
Now she doesn’t like the attention so I
won’t do that to her, but it would be great
if you could just simply say ‘thanks’
in the comments to thank her, because if you
enjoy this channel, she’s a big reason that
it even exists. Thank you sweetheart!
Okay, now it’s time to get back to business,
and focus for this video, Palantir. I know
some of you have been eagerly awaiting for
the company to go public, while others probably
are wondering who they are and what’s the
big deal. So let’s start talking a little
bit about the background of the company. The
company’s full name is Palantir Technologies,
Inc. which actually comes from The Lord of
the Rings where the magical palantír were
"seeing-stones" which allowed their users
to communicate with each other or to see faraway
parts of the world. The company was founded
in 2003 with their mission initially being
to build software for US intelligence agencies
for counterintelligence purposes. They have
since evolved to also support commercial businesses.
At the most basic level, they are a data analytics
company; Palantir helps gather information
from various sources like internet traffic
and cellphone records and analyzes that information.
One of the co-founders is Peter Thiel who
also co-founded PayPal and became Facebook’s
first outside investor. The company’s headquarters
is being moved from Palo Alto to Denver and
the company is currently valued in the low
to mid 20 billion dollar range.
In the filing, Palantir discuss the two principal
software platforms it has developed. The first
is named, “Gotham” and was constructed
for analysts at defense and intelligence agencies
who, as they put it, were hunting for needles
not in one, but in thousands of haystacks.
And they did not have the software they needed
to do their jobs. In Afghanistan and Iraq,
soldiers were mapping networks of insurgents
and makers of roadside bombs by hand. Gotham
enables users to identify patterns hidden
deep within datasets, ranging from signals,
intelligence sources, to reports from confidential
informants, and helps U.S. and allied military
personnel find what they are looking for.
Gotham’s use has now extended beyond intelligence
analysis into defense operations and mission
planning. Needless to say, the U.S. government
is a big and important customer to the firm.
Later, the company found that the challenges
faced by commercial institutions when it came
to working with data were similar to what
governments experience, as companies often
struggle to manage, let alone make sense of
the data involved in large projects. And this
resulted in the second platform being developed
for these commercial clients and they named
it Foundry. The platform transforms the ways
in which organizations interact with information
by creating a central operating system for
their data. The commercial side of their business
has really grown, as 53% of Palantir’s total
revenue came from commercial customers in
2019.
Palantir reports that their software is used
by customers across 36 industries and in more
than 150 countries. As of the first half of
this year, its platforms were used by 125
customers, including the US Army whom it actually
sued…did you know that? In 2016, the company
sued the Army over the procurement process
for a new version of an intelligence analysis
system, claiming the process was unlawful
and wasteful. Palantir ended up winning the
contract, which accounts for $1.7 billion
of the $2.9 billion in potential federal contract
money it has won since that year. Which brings
up something to keep in mind, and that is
that just three large customers made up 29%
of its revenue as of June 2020, with a single
government customer accounting for 11% of
its total revenue in that period. And then
you have a large commercial customer making
up an additional 10% of its revenue. Obviously
a loss of one of these customers could result
in a significant hit to the bottom line. As
far as their market or potential customer
base, the filing also indicated that Palantir
generally does "not enter into business with
customers or governments whose positions or
actions they consider inconsistent with the
mission to support Western liberal democracy
and its strategic allies.” Knowing the capabilities
of their technology, I would say that’s
a good thing for the U.S.
Now any overview of the Palantir would be
incomplete without talking about some of the
controversy surrounding the company. The biggest
criticism has come from its work with developing
software for U.S. Immigration and Customs
Enforcement, commonly known as ICE. ICE has
used Palantir’s Gotham software for years
to track down undocumented immigrants. One
report revealed that Palantir's software was
critical in an operation to arrest the parents
of illegal immigrant children. Obviously immigration
is a hot button topic and one we’re not
going to talk about here, that's not what
this channel is about, but it is something
to consider when looking at its work with
the government and what types of work it does.
Privacy concerns are everywhere nowadays in
the era of big tech, and like many companies,
there are concerns about how the data on us
is being collected and used. Palantir CEO
and co-founder Alex Karp makes a direct point
in saying that Palantir has repeatedly turned
down opportunities to sell, collect, or mine
data, unlike the Facebooks and Googles of
the world.
So that’s some background on the company,
now let’s go over some highlights from the
filing including some financial data. Quickly,
I would just like to ask you to remember to
push that like button if you’re enjoying
the video, it’s more important than you
might think…so thank you. Back to financials,
the first thing to note is that the company
is going the direct listing route, meaning
it isn’t using an underwriting bank. We
talked about a new SEC ruling on direct listings
on this week’s episode of IPO This Week
that you might want to check out if you haven’t
seen it yet; I’ll link it for you in the
description. Before the ruling, a company
pursuing a direct listing wasn’t able to
raise new capital through new shares, which
is why many companies have a traditional IPO.
So that might leave you wondering why they
are going public, which, will result in them
having to be more open in what they reveal
as public companies have to do. And the main
reason is really just to have that liquidity
that is important to current investors and
employees. Simple as that.
To give you some financial highlights from
the filing; the first thing to know is that
the company has never been profitable since
its inception. A lot of that has been due
to high costs in research and development,
but also being typical for companies looking
to grow at the scale they're growing. Most
recently, Palantir reported revenue of $742.5
million in 2019, up 25% from the previous
year; and that came alongside a net loss of
$580 million. In the prior year, its sales
were $595.4 million with a net loss of $580
million. In the first half of this year, Palantir
brought in $481.2 million in revenue and lost
$164.7 million.
The $481.2 million in revenue reflects a growth
rate of 49% over the same period last year.
Some other numbers that you might be interested
in; for 2019, the average revenue per customer
was $5.6 million, and the average revenue
for the top twenty customers, by revenue generated
in 2019, was $24.8 million. So having only
125 customers isn't really that bad!
Recent operating results have shown improvements
as their net loss decreased to $164.7 million
over the first half of 2020 which was down
from a loss of $280.5 million in the first
half of 2019.
Palantir says that it plans to grow its revenue
by becoming the default data solution within
the U.S. government, further expanding into
the commercial sector, and expanding its reach
with existing customers. The company estimates
the total addressable market for their software
across the commercial and government sectors
around the world would be approximately $119
billion. When considering the market, they
exclude institutions in countries or regions
where they have chosen not to sell their software
as I mentioned earlier.
The Palantir stock will be listed on the New
York Stock Exchange under the ticker PLTR
once trading begins. We’re still a lit bit
away from the IPO date, but now that the filing
has been submitted, we’re getting close.
I’ll make sure to keep you up to date as
we get closer to the big day coming, so you’ll
want to make sure you have your notification
bell turned on. As more information comes
out and I have more time to dig through the
filing, I’ll release another video on Palantir
with updated information and share some of
my own personal thoughts about the company
right before trading begins. I know I can
count on my subscribers to stay informed and
share updates in the comments…because afterall,
that’s what the community is all about,
you learning from me, me learning from you,
all of us learning from each other. And if
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You just got to push that red subscribe button
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And once you’re in, you’ll be sure to
keep up on all of the upcoming IPOs and SPACs
when we release our weekly featured show,
IPO This Week, as well as the more analytical
videos that I put out on some of the companies
that investors have a lot of interest in.
I know I’m biased, but I think this channel
is a combination of the best and most concise
way to stay up on all of the companies going
public…and I’m always working to try and
make it better. Anyway, I hope everyone enjoyed
this video…and if you did, please like it
and share with your friends or even share
the link to your social media sites, afterall,
the more we grow, the more we can, and will
do here. Thank you for watching, and until
next time, have a great day!
