Buy the Palantir Dip? Earnings Deep Dive
all right guys it is finally the day we are going to get into palantir's earnings we're going to see what this company is actually made of we're going to take a sneak peek at this earnings presentation to just see the high level of where the company's going but then we're really going to dig into the numbers and look at the actual three financial statements of course the income statement the balance sheet the cash flows we're going to dig into the stock-based compensation which is wacky and we're gonna have some fun and i'm really excited about this one because palantir if you guys don't know it is a big data company it works with the military works with commercial customers really big business and helps them make sense out of huge data which of course is something that's becoming more and more important throughout the world so i just want to point out palantir you could initially start buying it at nine dollars back in october of 2020 went all the way up to 45 bucks back in january of 2021 and now it's down to 23 dollars today so you know we're trying to figure out is this on sale is this something that is regressing due to a number of factors between the lock-up more shares are available is this something that's a good hold long term that's what we're going to dig into with the earnings so without further ado let's actually get into it so they released this earnings presentation some quick hits that we're going to mention are the revenue grew by 47 percent in 2020 their adjusted operating margin is a really important number the 17 we're going to talk about this later on but this is i like this and then so in q4 they signed 21 deals worth 5 million or more and 12 of which were 10 million or more i really like this because it shows they're signing up new customers ibm being one of them they are launching a partnership with them so this partnership is going to be helping other companies with ai powered solutions something else a lot of people are talking about 44 of their total revenue came from the commercial business and some people wish that this number was larger personally i look at it as positive because having the military contracts and the government contracts being 50 or more of your revenue right now um it grants a lot of stability which is nice so the way that their structure works is they are subscription based company which means they're at least having a yearly long subscription with the business they're helping sometimes even longer than that and what they're doing is they're actually integrating their software and data capabilities with the companies in existing infrastructure so all that fancy speak is basically saying that the companies that they're working with whether it's the government the military or so on are getting used to the fact that they have all these data capabilities which is not something that's easy to let go of once you get used to it their subscription-based business model is generally something that grants a lot of stability because customers keep paying and keep coming back to you adobe was a great example of this for example when they switched up selling their products from charging 1200 bucks or whatever so that you could buy photoshop and keep it forever into a subscription-based model they took off and i love a company that has a subscription-based model so on this page one other thing that i want to point out is they generated 107 revenue growth in their u.s commercial customers which is awesome and it's even more awesome because they signed big deals across many different sectors which is really cool and i want to point out something down below over here which is if i could find it which is this slide a lot of people look at this slide and they're like wow only 8 out of 100 fortune 100 companies only 24 out of the global 300 that is tiny they suck i choose to look at it a different way optimistically there's a lot of room for growth it's in the commercial sector eight out of a hundred we are in a world right now where we are getting hungrier and hungrier for data especially we being companies so with that being said if you're someone who's concerned about there's only so many governments in the world there are only so many militaries that can use help in so many military contracts the fact that palantir only has this much of a market share in the big business commercial sector is something that you should be feeling pretty optimistic about now that we have gone through the presentation seen some quick hits about the company and some of the big things they wanted to talk about let's actually dig into the numbers which is my favorite part to see the behind the scenes of what's actually going on so the first thing i want to point out is we're mainly going to focus on year ended 2020 and 2019 we're not going to focus so much on the last quarter for each one mainly just want to get a big picture of what the scenario is so first thing we're going to point out is these numbers are in thousands so what that means is when you see 1 million 92 000 in revenue don't freak out what this really means this is 1 billion 92 million in revenue so just want to point that out in case this is your first time kind of looking through this and highlight the actual flow for how we're going to do it is we're going to look at the income statement first then we're going to look at the balance sheet and then finally we are going to look at the cash flows so this is the income statement and so as you can see here revenue has gone up from 742 million in 2019 to a billion in 2020 we're going to go over to my sheet and we're going to see that that is a 45 change positive lines up pretty closely they're 47 percent that they had just in rounding error on my part or theirs accounting is fun so other things i want to point out this this gets pretty long and confusing so i just kind of took the main figures that i want to look at personally and highlighted them here so you could see that the gross profit went from 500 million to 740 million so that's almost a 48 growth as well which is awesome gross profit growing gross margin slightly growing those are good things so basically what this is telling me is one they're generating more revenue which is great gross profit growing is fantastic because what that means is while they're generating more money it's not costing them as much money to continue to scale which is chef kiss it's amazing so let's take a step back right now and look at this stock-based compensation table that i had here we're jumping all over the place but i just want to point out that one thing that drove the numbers up the wall made everything look bad and made them come out with technically a net loss was that they had a butt ton of stock-based compensation come up this year and the reason for that is over the last 10 or so years they have been paying their employees with stocks which is natural for a company that's in palantir's kind of stage to incentivize smart people to stay they give a mistake in the company with the hope that as the company grows they can cash out and make a butt ton of money that's a great incentive to stay if you're a smart guy right or girl so this is a little table here where they actually went in and added back their stock based compensation to their overall operating loss and that's how they got to that adjusted operating margin of 17 percent so so even though they technically took a net loss when you look at the high level numbers when they took out the stock based compensation then they brought in a little bit of operating income which is good so let's look at the stock based compensation real quick i took the liberty of just taking the numbers from their 10k and i plugged them into this table so what i want to point out is cost of revenue this is basically like what it costs to run your business so you can see here that total cost of revenue for this past year was 352 million but they had 139 of that was stock based compensation so the total was really 212 million if you factor out stock based compensation and if you look down in 2019 it was 214 million so it's basically the cost of revenue has not really changed at all two million dollars is negligible when you're talking about a company of that size for the type of revenue growth that they've had which is great and then so sales and marketing has actually decreased which is interesting r d has also decreased slightly [Music] but general and administrative expenses grew a little bit um to be honest i don't really have too much to say here i am highly curious about why their sales and marketing numbers are down by almost 100 million so i got really curious about the sales and marketing cost number and why it was down so much so i dug into their 10k and i was looking into what does this number actually entail it has salaries stock based compensation which we took out and benefits for personnel sure they have third party cloud hosting services for pilots marketing and sales event related costs and allocated overhead so what i think it might be is part of the reason their sales and marketing decreased was due to kovid which go figure 2020. there was a lot of uncertainty and a lot less opportunities to go market in person so that might be part of why it decreased that's a number to watch year over year to see if they are putting less money into sales and marketing or if the code covet event was basically a black swan that led to a decrease something to keep in mind but so going back to the numbers everything decreased a little bit over here and as you can see the total expenses actually decreased from last year if you take out stock-based compensation they had spent a billion dollars this year they spent 995 million so that's encouraging and going back to the the income statement figures that i have here this is where i reflected what i just pointed out that the selling generate excuse me that the selling general and r d costs excluding stock based compensation decreased by seven percent expect that number to go up next year just due to covid will be further away so they'll probably beef up a little bit on that front and then so this is the best part the operating income i just put in huge change because the number was just such a big move in the positive direction which is awesome so just to summarize operating income up revenue up gross profit up expenses slightly down income statement looks pretty good to me we'll move on to the balance sheet again here i just took the liberty of highlighting a few things that i will look for current assets to current liabilities so what this is is you're essentially looking at the cash restricted cash account receivable so money that you're expecting to be paid and prepaid expenses which this is a funny accounting thing so let's say i book a flight one week from now i haven't actually received the service i haven't gone on the flight but i've paid the money so i have the right to do it so technically it's an asset it's an accounting thing but essentially so those are the current assets and then so you have current liabilities so the things that you owe i believe it's generally within a year is the way they think about it so the current asset to current liability ratio is important because that's basically let's say the company just stopped generating revenue for the rest of the year would they be able to pay their debts with all of their current assets so the balance sheet over here what you can see is that the current assets for palantir have actually increased by 68 the current liabilities have decreased by 17 percent and then so what i have here with the ca over cl is basically the ratio of current assets to current liabilities and you can see that in 2019 it was 1.67 the ratio which is good you like to be greater than one and this year it's 3.74
which is really good some would argue that they might have too much current assets it's interesting that it's so high that's something to watch in the future to see how they're using their money but something good to look at right here other thing i just want to recap is so current assets have increased current liabilities have decreased total cash has increased by 86 percent and stockholder equity so what this is is its total assets minus total liabilities whatever is left over is stockholder equity so this is a big change it went from a negative number to a positive number which is great because it means that their total assets are greater than their total liabilities all of the money they have it and all the property they have is more than everything that they owe that's a good sign so now that we've looked at the income statement and the balance sheet the next step is we're going to go ahead and we're going to take a look at the cash flows so finally here we're going to talk about a summary of the cash flows they have 2018 2019 and 2020 so we're gonna go ahead and look at all three years and so first thing that's awesome is net increasing cash cash equivalents and restricted cash has actually grown a whole bunch in the past three years and the rest of it's kind of wonky to look at so so the first thing we're going to point out is this loss which is greater than past years for the operating activities is in large part due to the stock based compensation that we keep talking about you look down here they have in their 10k form a quick explanation about the factors that affected their operating cash flows so that net loss was in large part due to the 1.3 billion in stock based compensation expense um hopefully that won't be as big next year but i don't know the rest of it are things like leases amortization normal stuff that we're not going to get into but again as you can see down here the non-cash charges primarily consisted of stock based compensation expense there's also some deferred revenue which is essentially revenue that they don't expect to see in the next 12 months so moving on i think i've hammered home the point about the wonky stock based compensation expenses that have thrown off this whole 10k and made it pretty hard to interpret but anyway net cash flows from investing activities was not that exciting mainly the only thing that was of note 12 of this 14 million was basically property implant purchases just normal expected stuff out of a company and finally we have the net cash flows from financing activities and of course there was a big change from 2019 and 2018 and a large part of that was from the issuance of common stock where you issue common stocks you take money off it as you can see here 942 million of that was proceeds from the issuance of common stock some of it was from borrowing money from credit facilities and some of it was from the exercise of common stock options so what that means is basically the the company gives you a target of hey you know if the stock is greater than x dollar amount let's say six bucks by this period of time you can go ahead and sell the stock at this period of time and you take the net so like let's say this the option was six dollars and stocks 23 you're gonna pocket a big difference there options work at 100 per share so assuming how many options you had it could be a lot of money so 298 million was from the proceeds of the exercise of common stock options they repaid some debt which is good and then so if you're interested you can go in here and see see about their borrowing from credit facilities how they paid some of it back and then here they have a basic chart that shows some of their commitments in terms of contractual obligations so you can see their lease commitments that are less than one year one to three three to five no dropbox for instance is trying to get out of a lot of their leases to decrease those expenses and then of course they have debt so this is a nice little table about some of their debt and how it's structured it's nice to look at if you're really interested in where the company's debts lie and so finally last thing we're going to go up here we're going to summarize by saying cash grew revenue grew gross profit grew expenses were very large next quarter and next year are going to be very interesting they have a 30 revenue target growth for the coming year we'll see if they exceed that or not overall i'm feeling pretty good about palantir i'm interested to see what's going to happen in the short term with their stock price and of course very curious to see which companies they're going to be adding in the future whether that's a t some other big whales and what they're going to be doing so i hope you guys enjoyed this video please go ahead and leave a like a subscribe i'd really appreciate it take a lot of effort to put these things together and i'm going to be doing a lot more in the future and to give you a sneak peak of next week we know roblox's ipo is coming out in less than 20 days so we will be doing a video shortly about roblox and if we think that's a good buy-in at the ipo or not so stay tuned for that i'm really excited to dig into roblox and see if it's a good investment
2021-03-09 17:52
