Palantir ($PLTR Stock) just released a BOMBSHELL earnings.
*Clapping*
Kudos to Palantir's marketing team - they finally got their act together and hit the right tones this week during their earnings report and conference call to surprise investors in the best way possible. With profits.
Up until this earnings report, investors have punished Palantir stock for 2 main things:
1. Lack of profitability - they keep losing money, when will they become profitable?
2. Stock-based Compensation (SBC) - Palantir issues a lot of stock, and this results in massive dilution to shareholders.
Well, in this earnings release, the company addressed BOTH these issues and when I'm writing this AH, investors agree as the stock is up over 16% - hitting over 21% at one point
So - what happened? What's the scoop here?
We'll get into it - but if Palantir is a stock you follow closely, sign up for free weekly updates on the company to keep your investment thesis up to date:
So the first bombshell they dropped - they are profitable!
Palantir reported their first ever quarter of positive GAAP net income of $0.01 - and in their first sentence in their press release, they make sure investors don't miss it, stating that they are in fact officially a profitable company.
They managed to go from losing 8c/share to gaining 1c/share in a year - which is quite a remarkable achievement and took everyone by surprise.
We all know this is what Wall Street is watching closely in 2023 - they want profits AND growth - and this company just delivered.
The growth has been good, especially in the US that makes up majority of their revenue - with government growing 22%, but commercial growing 67% - and they expect commercial to be well above 40% for the remainder of 2023.
All segments combined, revenue was up 24% YoY - below the 30% management touted in 2021, but the stock has been punished bigtime since, so investors have priced this in and 24% appears acceptable.
On the conference call, Alex Karp (CEO) did address this as noted that it's been a hot topic since the company went public in 2021. He said that investors have been asking for when profitability was coming - but more importantly - their customers were asking as well, because they wanted peace of mind that Palantir wasn't going to go bankrupt during tough economic times.
So PLTR made this a focus, and it's now showing
They said that for the remainder of 2023, they expect the economic condition to worsen, but they will be profitable this year. We can all collectively release a huge sign of relief! They did it.
In terms of their balance sheet, they have $2.6B in cash, no debt, and nearly $1B of credit they can access if required.
The other hot topic with tech stocks is stock-based compensation (SBC), and PLTR was one of the most criticized companies issuing SBC and diluting investors. It got so bad that investors believed they cannot continue to issue massive stock AND turn profitable - and Palantir took this seriously as well.
SBC has been trending down QoQ and YoY - from Q4 2021 to Q4 2022, SBC was down $37.5M, and for FY21 vs FY22 it's down $213M. Those are significant savings - and investors had a hard time believing they could achieve GAAP profitability with this much SBC, but they managed to pull back SBC a bit and turn profitable. Kudos to them!
Through 2023, this is another line item that should reduce - so we should continue to see SBC decline QoQ (and YoY) while the company continues to grow their EPS positively as well.
All in all, this report took investors by surprise (in a good way) and was very strong showing from Palantir. No bs, straight down to business and just an overall strong report and strong guidance for the year as well. It deserves the green it's seen AH.
Oh - also as a side note, it's worth mentioning that their conference call video and audio quality was stellar - best I've seen honestly. They hosted on a YouTube livestream, had HD quality video with different camera angles to zoom in depending on who's talking, and excellent audio quality as well. Other companies can learn a thing or two from Palantir and adopt this as the new standard for conference calls as well!
So that's it for this post. This company is setup for a record 2023, and investors have reignited their excitement for the stock again (clearly) - so now all that remains is time to see if they can continue executing and delivering.
Disclosure: I do own shares of Palantir Technologies (PLTR) at the time of publishing this article.
