Planet Labs Stock: Q1 Recap and Q2 Reflections (NYSE: PL)

Thibault Renard


I wrote a more detailed analysis on Planet (NYSE: PL) in February, two months after it was published via PSPC. I laid out my investment thesis, which relies heavily on expanding use cases as the company transforms raw imagery data into more consumable insights and predictive analytics. The new use cases should attract new customers and encourage existing customers to spend more. With incremental margins of over 95%, revenue growth will naturally drive profitability.

Although Planet is still in the early stages of execution, its fiscal first quarter results (end of April) were in line with initial analysis. In this article, I’ll give a quick recap of the FQ1 results and outline a few things I’ll be watching for when the company reports on Monday (September 12).

Summary of the 1st quarter

Although an FQ1 revenue summary may be a somewhat outdated analysis at this point, it is necessary to preface what I will be looking for in FQ2. Overall, I saw FQ1 earnings favorably despite missing earnings expectations quite substantially.

Revenue during the quarter totaled $40.1 million, +26% Y/Y and +8% Q/Q. Approximately 40% of the increase was due to increased spending by existing customers, with the remainder driven by customer growth. Planet added 56 clients over the period, bringing the total to 826, +23% Y/Y and +7% Q/Q.

Gross margin rose 370 Q/Q basis points to 41.1%, demonstrating the company’s ability to scale profitably with additional customers.

Much of the revenue discussion centered on the National Recognition Office’s EOCL award. Planet, on the other hand, refrained from discussing any upside opportunities, instead focusing on the guaranteed portion. The contract is for $146 million over five years, of which $89 million will be recognized in the first two years.

With increased revenue visibility from EOCL, management tightened its full-year guidance, increasing the midpoint by $2 million to $182 million. So a little adjustment, better to go up than down!

Net dollar retention rate was 105% compared to 95% the previous year. Planet calculates this metric based on the value of customer contracts at the start of the fiscal year, so I expect this number to improve significantly over the course of the year (as before), especially with the recent EOCL price.

On the call, Will Marshall specifically highlighted the growing momentum of the agriculture sector (~23% of FY2021 revenue). I consider this a fairly significant development in the wake of the VanderSat acquisition, as it provides some confirmation of the growth of the advanced analytics market. If Planet can develop similar software – based on its unique data – to meet the needs of other industries, such as insurance, supply chain monitoring and finance, the opportunity set is greatly enhanced.

Ultimately, spending skyrocketed as Planet invested in software sales and headcount. While it’s hard to gauge the return on these investments in advance, I’m comfortable with increased spending (for now) as long as revenue growth continues to accelerate. The company has plenty of cash reserves to fund its short-term growth.

Importantly, the company has indicated that it is on track to meet its hiring needs for the year, a prerequisite for growing its customer base.

At a high level, the results for the quarter were good – not great – with a lot of potential priced in in the near term thanks to the EOCL price and the dynamics in agriculture.

Focus Q2

I will mainly focus on four variables in the FQ2 report:

  • Increase in income;
  • Gross margin;
  • New customers; and
  • Net dollar retention rate.

A continued acceleration of revenue growth is essential to the investment thesis. If not, where are the company’s investments going? With the addition of EOCL contract revenue, I don’t see this as a major concern in the quarter, but it is perhaps the most important consideration.

On the margin side, a sequential increase in gross margin seems natural if the company can meet its revenue goals. However, the company has expected non-GAAP gross margins to be in the same range as FQ1, so a sequential increase could be perceived positively by the market.

If my thesis proves to be correct over the long term, new customers will lead to a sustained acceleration in revenue. I would like to see proof that new salespeople are starting to gain momentum, reflected by a high number of new customers during the quarter.

I interpret the net dollar retention rate as a measure of how much a business adds value to existing customers in new ways. As Planet continues to explore the potential embedded in its vast (and expanding) library of data, it is critical that the company can find ways to add value. As such, I would like to see a sequential increase in net dollar retention rate. I do not see this as a significant burden given the impact of awarding the EOCL on the value of the USG contract.

Finally, I would appreciate confirmation that the company continues to be able to meet its hiring needs.


Planet is still in the early stages of execution and plans to significantly accelerate its growth in the short to medium term. Planet’s third report as a public company (second with consensus estimates) has the potential to be a big factor in the market’s appetite for the stock.

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