Palantir’s Business: Explained! | A Must-Watch Presentation for Investors | Buy the Stock Now?

[Music] so welcome to palutear's investor day uh we're very happy and proud to have you here uh many of you know us for our work in the intel and defense space some of you know us for powering some of the largest uh institutions in the world in the commercial spec sector um uh and what's interesting about uh what we're showing you today is that you're gonna get to take a look at our financial history and one of the things that i think people have already noticed is that the revenue has grown dramatically that the quality of the revenue is uh in my view astonishing and then the combination of quality of revenue and growth it's a very unique company then the question is well how did you get this revenue growth off of a large scale late into the history of a tech company and how did this happen well this happens because our business is just different than what you'll find in most software businesses most software companies build software based on what were the past needs of a client and reduce those needs to a tiny uh understandable wrench that you can buy and put into your frankenstein monster of an enterprise palantir discovered in the intel and defense space that the single most efficient way to supply software would be to supply the whole stack that the end user to get the true alpha of the enterprise needs a stack that works on day one or in our case in hour two pound tier foundry uh pg and the other products we supply to the classified space work on day one and give you the power of a complete stack that otherwise you would have to build over many months if not years and quite frankly mostly doesn't work but what's interesting about pound here and particularly unique what i would say is an end of one is that palantir builds stacks five to ten years before the general public realizes that these that this way of looking at the world will literally save your institution and in many cases save your life and the magic of palantir was building pg and foundry five years before anyone believed that they were things that were necessary for our survival either commercially or in the context of data protection our way of life or on the anti-terror battlefield and what what makes this magic special is that we've done it not just once but many times and that we will do it again in the future on this day i'd like to welcome new palleterians in the form of new investors ask you to look at uh our what we're saying be aware of the fact that we're going to keep our culture and their we've not wavered for that and thank the paleterians who in my view are the most important investors we have thank you very much hey everybody welcome to our investor day my name is kevin kawasaki i'm the head of business development at palantir i'm joined by our chief operating officer sean sankar and our chief financial officer dave glaser i'm going to start by sharing a little bit about the general profile of our business particularly from a financial perspective and i'll start with revenue we did 743 million in revenue last year but i'd like to go back to 2017 when we did just over 500 million in revenue and only grew at a rate of 11 nothing exceptional about that what is exceptional is that we've accelerated the growth in revenue every year since in 2020 we've grown 49 through the first half of the year and we've also grown our gross margins to 78 so we're growing 49 on an extremely large base with 78 gross margins we don't see anyone else doing this so how are we doing this well that's what we're going to share with you today and to kick us off i'm going to introduce our chief operating officer sean sankar thank you kevin as kevin mentioned i'm sean sanchard the chief operating officer of palantir i've had the great privilege of helping build this company over the last 15 years when i joined as the 13th employee and i'm really excited to share with you how we're thinking about the business you heard from kevin about our strong growth well we sell two platforms gotham and foundry and they are vertically integrated end-to-end platforms that are designed to be the central operating system of a modern enterprise we have invested for years in building two truly unique platforms that are focused exclusively on helping our customers win and that's because they're focused exclusively on alpha generation in the government context it's pretty hard to get more alpha than how do you win the literal war and in the commercial context as well it's not just how do i beat my competitor but how do i secure my place as the entire value chain that i exist in is being disrupted all around me and we help our customers generate this alpha because our platforms embrace the fundamental complexity of our customers operations rather than forcing them into incorrect and preconceived notions as a result our platforms they become integral to our customers operations what does that mean in the real world means at chrysler plants in north america you will find foundry open on the stations of the assembly line used to manage quality in real time that fbp oil production flows through foundry and that at u.s special operations command missions are planned and executed in gotham our software has become the place customers make decisions and where they go to continuously learn how to make better decisions you can't do that with analytics or a data platform it's not enough it's grossly insufficient you're not going to win a war with the data platform you can't discover new drugs with analytics you need a central operating system so how do we accomplish this ambition this ambition of being the central operating system for the modern enterprise well we install our platforms and install is a very important word here all enterprise software requires installation and there are different philosophies around this we have chosen to internalize the cost of installation so we sell our software with a subscription fee but the installation is a cost that we bear and we do this for two reasons the first is that this creates a ruthless economic incentive for us to continuously decrease the overall installation time by applying r d against it and you know we're pretty good at that over the last year alone the average customer onboarding has fallen by a factor of five we can now onboard customers in less than two hours we continue to see significant reductions in the intensity of these deployments from software-defined data integration investments that we're making but the second reason that we internalize the cost of installation is much more strategic and it has to do with the nature of our software we think of our platforms as internal software aggregators in the ben thompson sense of the word aggregator we are aggregating the supply of all the data in the enterprise we have the greatest source of truth well-modeled ontologized with security built in and we are aggregating the demand in the form of all the users who make operational decisions and so to accomplish this we have to onboard a critical mass of the enterprise onto the operating system and once you are at that critical mass the software does the work from there in effect you can walk away and stop investing in installation when while remaining completely confident that the software will provide ever increasing value hitting that threshold means that our software is the most logical place for the enterprise to implement the next marginal application because they have already amassed all the data and this is where their users live and make operational decisions all day long i want to share one of our secrets here one of our core pieces of technology both gotham and foundry they stand on the shoulders of a silent third platform apollo apollo is our continuous delivery and production infrastructure and apollo is really important because it enables us to have sas like economics regardless of our deployment target and so while most new customers for us are in the public cloud we have very important and strategic customers across very heterogeneous deployment targets public cloud private cloud on-prem in a humvee on a submarine on a drone apollo allows us to service all of this footprint economically delivering modern software experience but even more importantly it's a strategic mode for the company we can meet the customers where they are today and win business rather than focusing on convincing them to deploy in a multi-tenant public cloud as the only option we founded the company in 2003 really with a singular ambition focused on national security that i kind of summarized as why can't we have more privacy and more security so it took us a long time to build and release our first project was five years in 2008 we released gotham and then quickly on the back of that we expanded into the adjacencies beyond intelligence defense law enforcement the prosecutorial space regulation and oversight the cdc for example has been a customer for over a decade in 2012 we started more aggressively pursuing opportunities in the commercial space and there's part of that journey that went really well you know gotham has very strong product market fit for anti-money laundering or anti-fraud and there's another part of it that was an unmitigated disaster really it has not that much product fit for revenue generating use cases like cross-sell or upsell and so in that period from 2012 to 2015 we were plugging the gap you know we were doing lots of custom software development lots of exploration and experimentation and as a result there are parts of the commercial segment at that time that started to take on characteristics that resembled a services company but we were really doing is that we were earning the right to have an opinion specifically an opinion of what software ought to exist to solve our customers problems what software we would want ourselves in their shoes and by 2014 we had that opinion and we started investing extensively in the r d around that in 2016 we released that product it became foundry 2017 with the benefit of hindsight is probably the most successful and important year uh in the history of the company so on its face as kevin mentioned it actually looks bombastically bad revenue only grew 11 but that belies the accomplishment uh in that year which was that we were able to migrate our customers who were on these custom applications over to foundry over to this rock solid platform baseline upon which we've been able to accelerate revenue growth every year since and in 2018 2019 we really doubled down uh investing in r d that enabled customer independence allowing our customers to get ever increasing value from the products without us and you'll see that in some of the case studies that we walk through we compete against our customers more specifically against our customers desire to build their own solution internally historically periods of macro instability or crisis have been a huge tailwind for us the global financial crisis isis attacks in europe in 2015 and the present day coved and it's a tailwind for us because it means that the competitive alternative of building your own solution in three years or more is just not viable it's just not feasible but we're in 36 industries and we have a unique ability to draw on cross-industry insights as we do r d often people look at what at this kind of industry spread and they think about verticalization are we getting leverage from the r d we're doing and the things that we're learning about any given vertical but i think that undersells the real power here the real power is the cross industry leverage that we've been getting how our digital twin capabilities improve oil production but also drive how someone should do ppe allocation at a national level or how the experience is optimizing f1 race cars drive the experiences of optimizing wind energy production and this this is what's increasingly powering uh the business uh and so you see this in in the the depth that we're achieving within these verticals but the acceleration and the the application we have to new industries and new verticals as we approach them last year we did 60 of our revenue outside the united states we do a lot of work with global multinationals and u.s allied governments our two business segments are the commercial business and our government business 53 of our revenue last year was from our commercial business 47 of the revenue last year was from the government business last year our government business grew 35 this year it's grown 76 our commercial business last year grew 17 this year it's accelerated to 27 the majority of our revenue comes from existing customers recurring and growing this year over 95 percent of our revenue came from existing customers how does that break down on a per customer basis well our average customer does 5.6 million of revenue per year with us and that's grown at a compounded rate of 30 percent it's pretty large on average particularly when compared to other sas companies but oftentimes customers start small and they grow over time our large customers they've been with us for a really long time over six and a half years on average and you could see that this average rate now at about 25 million dollars a year has grown over time as well gross margins are important because they reflect the general strategy we have two platforms two binary sets of written code and our business is to distribute these platforms to our customers so how do we measure how well we're distributing our platforms we look at contribution margin key metric for us contribution margin is a way to think about the cost that we bear to generate revenue and as you can see here we're getting much more efficient our contribution margins have increased nearly four times since the first quarter of 2019. we think these margins should converge with gross margins as we continue to invest in things like apollo next we're going to talk a little bit about the business model we break this down into three phases acquire expand and scale in summary what we're showing you is how we go from a loss leading category acquire grow through the expand phase and go into a positive contribution margin phase that we call scale we're generating just under 19 million of revenue but still in the negative contribution margin category so as we grow these accounts we'll be looking to move them into the expand and scale phases next is the expand phase which accounted for about 24 of our revenue in 2019. the objective here is that we should be growing revenue and finding the inflection point to positive contribution margin these accounts have continued to grow generating almost the same amount of revenue in six months as they did all last year so strong growth and retention and we've done this while hitting the inflection point to positive contribution margin going from negative 43 to positive 35 in six months if this continues on average it looks like these accounts will advance to the scale phase the scale phase is the majority of our revenue about 76 percent of our revenue last year and generating the bulk of the contribution margin this is where we should be constantly getting better and you're seeing this from 2019 to today so you could see what we're striving for what is possible with accounts when we leverage the platforms and continue to invest our r d dollars our objective is to make the acquire and expand phases as short as possible so we can grow the scale phase accounts when we look at this as a whole all customers should be scale phase over time i think of the commercial business as really being four years old coinciding with the release of foundry in 2016 but the government business in my mind is even younger and it dates to late 2018 with the appellate court upholding the ruling on 2377 so 2377 is the commercial item preference this is a law that's been on the books for over 25 years since roughly 1994 and it states that to the extent there is a commercial item i.e a product that meets the government's requirements they must buy it they are not allowed to go build their own custom developmental solution and if you remember what we've been talking about in terms of who is our competition well it's the customer and their desire to build their own custom solution you can see how powerful this ruling should be so if we look at our army revenue over time you can see that there's a very clear inflection point between 2018 and 2019 and that coincides with the appellate court ruling and for the first decade of our relationship with the army the revenue was flat but we were consistently losing to the competition which again is the army itself and the desire to build their own solution in 2016 the army did a procurement and the procurement excluded us from competing because it would only consider custom and developmental solutions and so we sued and we won the government appealed and the appellate court upheld the lower court's ruling and on the back of that we've won multiple army contracts we've become a program of record for logistics in the navy we've expanded into the air force space force and coast guard but really this ruling applies to all us government agencies not just the dod and so it is massively tam expanding because it takes a ton of budget that has historically been spent on services to build custom solutions and makes it addressable by software and we have been investing in software in this category for over 15 years and so are uniquely positioned to take advantage of that i'm dave glaser founder's chief financial officer i want to share some of our financial highlights with you as we think about our potential growth as a company from a financial perspective we're focused on revenue margins and liquidity as you've seen we've experienced impressive growth in our top line and profitability our revenue in the first half of 2020 grew 49 percent from a top-line perspective and it was the first time we had an operating profit on a non-gaap basis what's most interesting is how our financial results evidence the efficiencies we've gained in our software and operations all while maintaining a strong financial position i'll start off by talking a little bit about our revenue our revenue for fiscal year 2019 was 743 million this represented a 25 growth rate from fiscal year 2018. revenue in the first half of 2020 further accelerated and was 481 million this represented a 49 growth rate from the first half of 2019. while we've been focused on top line growth we're also seeing acceleration in our margins starting with gross margin our gross margins were 80 when excluding stock-based compensation not only are we seeing improvements in gross margin we're also seeing them in contribution margin contribution margin is an indicator of our efficiency in delivering and selling our product contribution margin is defined as gross profit minus sales and marketing excluding stock-based compensation divided by revenue in q2 2020 our contribution margin was 55 this represents an improvement from 18 in q2 2019 our q2 operating margin excluding stock based compensation was 11 this was our first quarter with an adjusted operating profit at this exciting juncture with accelerating revenue and margin growth we also have a very strong balance sheet our cash at the end of q2 was 1.5 billion dollars and this doesn't include a 410 million dollar strategic investment that closed in the first few weeks of q3 so to briefly recap we grew at 49 in the first half of this year versus the first half of last year in revenue our adjusted gross margin in q2 was 80 and we had a positive adjusted operating margin in q2 for the first time we're a 17 year old software company but in many ways our products and our go to market strategy are still in their infancy our customers pay us for the all-in costs to deliver maintain and service these platforms and we continue to do this more and more efficiently as our products have matured and adoption across our customer base has increased we are well positioned to take advantage of a host of opportunities for growth that lie ahead of us in these very uncertain times when we think about the future visibility of our business there are a number of factors that provide strong visibility and stability for future revenue growth our existing customer base is really our revenue base and the expansion of existing customers is the main driver of our revenue base we've calculated our total addressable market to be approximately 120 billion it's spread roughly equally between our two business segments in the commercial segment we're calculating this based on 6 000 of the largest companies in the world but we're excluding those that are based in china and russia on the government side we see similar opportunity for expansion both in the u.s and abroad and given the growing instability in the world today our products will be needed more than ever while we're positioned strongly today we are focused on our long-range target model this will be gross margin in excess of 85 contribution margin in excess of 70 and operating margin in excess of 35 it's the investment in our platforms and the underlying technologies that drive these numbers that they've just shared with us on the gotham side we are investing in ai enabled mission command and that means that gotham is going to be the substrate that the next war is fought on and that deterrence is delivered in america and our allies we've spent hundreds of billions of dollars in sensors but you know we struggle to make sense of things and so we are investing in the sensor fusion to help the commander make sense of what's going on in the battle space and to automatically generate recommended courses of action and then we're integrating upstream with the weapon systems and the assets so that with the single click the commander's decision can be executed and we are doing this from space to mud land maritime air space cyber all five warfighting domains on the foundry side we're deepening our investments that help make foundry the operating system for the modern enterprise and i'll highlight two places i'm particularly excited about the first is in simulation which is really about understanding the counter factual what would happen if i did this or you know what my supply chain just got disrupted what can i do now and we're making this sort of simulation capability native to the ontology and a reusable primitive across the platform i think this is really important because this sort of interrogation is the basis of learning and outlining others is an irreplaceable source of alpha generation we're also investing in greater low code no code capabilities so that the thousands of blue collar workers who leverage foundry every day to make operational decisions can also build their own applications each application that is built is going to deepen the customers relationship with us as they generate more and more value from our platforms on their own i got my first demo of palantir in 2008 after returning from a tour in iraq and realized two things immediately i wished i had had access to it while deployed and i wanted to be a part of building it in the future over the past 12 years i've had the fortune of working with dozens of customers across our government and commercial businesses and still feel that same drive of purpose to build our products for our users around the world when i saw that demo in 2008 i was immediately taken with the idea that everyone working on complex operations like those in iraq could achieve their mission on one platform they could leverage years of data and share knowledge between headquarters in the field between agencies between units i knew our platform could support the unique operations of each user around the world and also connect the entire effort but to do that we had to deliver tactical results first when i was deployed i didn't care about data transformation i cared about my toughbook working the petroleum engineers i work with today care most about the data they need for their job pouring in from thousands of sensors streaming in real time to their machines on the rig this is where palantir got it right in every engagement since i've been here we started with one specific problem at the unit engineer or store level and built a data asset from there that breaks down silos and creates a connected company rather than prioritize the end user or the cio palantir built for both this approach to software worked on the ground in iraq and it's worked across the commercial sector oil and gas companies have myriad functions reservoir development shipping and trading sales and marketing but all of those efforts have to come together to deliver more energy more safely with reduced emissions car manufacturers care about design manufacturing efficiency quality monitoring those threads have to come together to build higher quality cars targeted at the right markets each business unit has a unique mandate but none can operate independently our platforms bridge that gap each user sees a different screen feels like it's built for their job and their unique decisions but it's all powered by the same platforms foundry and gotham so as they make those decisions they're also building a connected company across their organization i left my old job because i thought i'd have more of an impact building software for a thousand intelligence officers instead of doing my one job better i'm more convinced of that impact than ever before as our world has expanded from defense and national security to safer cars lower carbon energy and whatever we tackle next the technology to drive this impact for our customers started with a basic question what if we use software engineering concepts to solve real-world problems the platforms we sell today answer that question we deliver an institutional operating system that our customers use to make the best decisions and to track evaluate and respond to their outcomes data logic and learning accrue and become knowledge people do their best work when they can use concepts that feel familiar we help organizations model the best description of their world by defining the objects properties and relationships that they already reason in too often for frontline employees and senior executives making decisions about hospitals factories or military units data is a barrier not an enabler our approachable semantic model for data lets everyone from the factory floor to the boardroom speak in a common language so they can wield data effectively against problems within their arema software engineers use code tests to raise the quality of their code our platforms provide frameworks for authoring and configuring data health checks to ensure data quality technical users view these health checks as tests while less technical users simply view them as assurances our aim is to unite technical and non-technical users in a system that they can trust concepts that feel familiar to developers are reinterpreted in interfaces that frontline workers or senior decision makers can use too this approach establishes trust in an institution's knowledge base and by extension our software by helping everyone understand where data came from how it evolved and who modified it along the way and we do all this while providing government grade security so that our customers can manage any and every aspect of their knowledge base [Music] organizations evolve and legacy tech usually fails to keep up throwing another big data solution in the mix doesn't address that core problem and over time all these systems grow rigid and just disconnected from the business we figured out that the real problem to solve is data integration we learned that what our customers needed most was a platform to help them overcome literally decades of fragmented data systems and one that pivots with the business institutions evolve organically so a prescriptive model doesn't work our platforms embrace the inherent complexity of organizations customers can see the entire lineage tracing provenance from an end user's view back to the source and understand logic data and dependencies in between with this visibility they can manage complex data pipelines as well as view health schedules permissions and much more all historical data investments can be plugged in and transformations easily written to combine them with other data and power applications for end users and the result is an open and flexible data operating system to make the data operational for the business we built a suite of applications that basically any user in the organization can contribute to the data foundation data engineers and data scientists can write code in the programming language of their choice to build production pipelines visualize results and share templates to reuse logic we also have non-code visual interfaces to do unstructured analysis or fully integrated spreadsheet workflows no matter which interface is used to author the data is written back to our platforms this means that non-technical and large-scale technical integrations can both be used to power production pipelines underlying all these applications are granular security controls and a versioning system for data and logic application developers adopt our platforms because it lets them to deliver immediate results to users and removes the burden of systems integration one framework that we have to maintain data correctness runs validations as the data moves through our platform not only can end users see the contract set on the data that they're using but data engineers are able to use the validations when updating production to know that the changes are successful before rolling them out to users the summation of these tools allows us to launch new applications and weeks instead of years additionally security can't be an afterthought for enterprises data layers something we learned over the years is that for the largest organizations in the world the primary source of complexity is in the boundaries the boundaries between the parts that they're made of between teams between data systems between models and when you need to react to a changing world like a basic operational surprise or a global crisis for each of those parts their plans and set ways of doing things are now obsolete and as a whole you need to find a new equilibrium that works well for the new conditions palantir and foundry's unique ability to adapt to each customer sector and challenge has made us indispensable in the fight against covid and solidified our software as a necessity for how our partners conduct core operations [Music] so far we've talked about two of our user basic platforms but there's actually a third and this third platform runs behind the scenes it's called apollo and it's the engine that powers both foundry and gotham isbo provides our platforms with sas style continuous delivery and it's actually the foundation on which all of our software is based and it runs anywhere that our software is deployed because since day one we've worked in the most secure and highly regulated industries operated in the world's most logistically challenging environments and we've built software suitable for our customers most sensitive data the fact that we had to tackle the most technically challenging environments first that is what ultimately led us from the very beginning to invest so heavily in building a flexible yet powerful platform like apollo and since then apollo has allowed us to extend our software platforms across the whole public cloud across regions in order to meet data residency requirements and even across cloud providers enabling us to run a truly multi-cloud sas and our centralized operations teams can monitor the whole fleet from a single pane of glass in other words apollo has enabled palantir to bring sas economics to environments where no sas has gone before this technology is allowed palantir to achieve something that is truly unique because we can run our software in a homogeneous way across heterogeneous environments we can bring sas economics to even the most unlikely places we can deploy our software anywhere we can do it efficiently and we can do it at scale and it's this that gives us unparalleled flexibility and what makes our addressable software market virtually unconstrained [Music] so you've heard a lot about what we've already built but now jess and i want to tell y'all how we actually decide what to build next and what that product iteration and product roadmap development looks like one of the most unique things about palantir is that our products evolve through our work in the field we send our software engineers to war zones in the middle east to offshore oil rigs even onto submarines and as we do this we see how data is actually being used and relied on in the real world and we identify patterns of data problems that our customers face in particular we are earning differentiated insights deeper truths that most people don't believe to be true based on these unique earned insights we are able to identify high-value product improvements build them in a scalable flexible and industry agnostic form and extend our core platforms not only does this provide us a sustainable product differentiation but it enables unprecedented iteration speed and feedback cycles we are able to hypothesize productize and ship to the fleet faster in turn these technologies have helped our customers in pharma finance and other highly regulated industries respond to and comply with complex and constantly evolving regulations this forward-deployed model is a huge part of who we are as palunterians and is integral to our product strategy and our sustainable continuous product differentiation by having engineers deeply embedded in industries across public and private sectors armed with the platform primitives they need to rapidly develop we ensure that we're building and deploying solutions that push our product into new user bases and use cases across our fleet making decisions with it we built gotham to meet users where they are by translating baroque data formats into an intuitive domain specific ontology we cut out the time and mental energy required to actually make sense of the information at hand it's been a crazy ride and the ethos of meeting users where they are has in fact led us to some interesting places as our user base has grown from analysts in air conditioned rooms in northern virginia to special forces operators stationed in every theater across the globe peter and i both have had the privilege of embedding with users deployed in the middle east we've spent time collecting feedback in the offices of commanding generals as well as the tents of forward-deployed operational units but the story of gotham isn't just a story of growth it's also a story of adaptability building a product for the dod means signing up to deal with constantly changing adversaries and it requires designing a system that's both flexible enough to address the threats of today and the unknown challenges of tomorrow we're moving beyond the cloud and onto the edge from laptops and mobile devices onto new cutting edge form factors we're developing sophisticated hardware and software interfaces for shortening the loop from an ever expanding set of sensors to an increasingly heterogeneous set of shooters and finally we're working with visionary leaders across the dod to prepare the product to support entirely new kinds of warfare information warfare cyber warfare economic warfare conflicts that will be fought in a completely virtual battle space our ultimate vision is for foundry to be the operating system of a connected company the platform where critical decisions and processes take place on a shared foundation of data models and operational workflows we still have a lot to do to fully realize that vision and i'm going to highlight a few of the most important upcoming investments let's take an example a sales agent and a demand planner share a common goal of maximizing revenue but they have very different workflows the sales agent has to prioritize customer outreach based on inventory and a demand planner has to ensure upstream production is on track to meet projected sales on an individual basis the model fabric would allow each user to use the same logic to forecast revenue reducing inconsistent assumptions or duplicate work but within their unique workflow even more powerful is how the model fabric would enable cross-function collaboration especially in these sort of difficult situations where there are unplanned changes for example if there is excess inventory of a particular product the sales agent can be alerted to this as a potential opportunity for additional sales and quickly iterate with a demand planner on a prices set to maximize revenue and evaluate how it might impact other products in the portfolio this kind of change decision analysis that allows for quick response to change that is impossible today when models are fractured across the organization another key priority on our roadmap is decreasing the time to value we see a lot of common challenges across our customers supply chain disruptions production ramp up manufacturing quality and more we are building product that allows us to encode these common patterns into a shared catalog of ends and workflows available in foundry we are moving towards a future where any set of building blocks and foundry can trivially be packaged together so users can use it to solve real problems from day one this will radically decrease the time to value for our customers and enable both them and us to focus on innovating and customizing the platform to their needs instead of reinventing the wheel as you may know we started our defense business in 2008 with a singular focus on helping commanders win our nation's wars and helping keep our soldiers safe we did this by delivering an operating system that tied together data from thousands of sensors and systems so that operators and leaders at every level could make fast and informed decisions the technical challenge was enormous we had to develop an operating system that met the military where they were they had a worldwide footprint and thousands of sensors mixing both brand new sensors with 40 year old systems our platform had to be able to work on mobile devices in the cloud as well as with traditional on-premises hardware we had to make an enterprise operating system agile to go where the defense customer wanted to go it wasn't easy but we did our platforms worked in the military demand we're employing both of our platforms across a variety of the hardest problems our defense forces have we work on maintenance logistics training forecasting finance medical and patient care human resources for million person organizations we run artificial intelligence ecosystems for a variety of the hardest problems in the field one of our most exciting growth areas is the customer's realization that you have to have integrated data ecosystems with lineage and pedigree before any ai or machine learning project can successfully begin and we do this out of the box in many ways our defense business is just beginning and our product offering has never been stronger so what makes the dod such a compelling partner for palangir from a purely technical perspective the dod's data landscape is incredibly complex tens of thousands of databases living across enclaves and networks of every data structure and type with ever evolving security auditability and classification requirements you can imagine bringing that data together to answer even basic questions about the dod's resources or mission capability would be a herculean task something only a flexible and time-tested software solution could support in this way it's the perfect place for palleter to compete to that end palantir's data management and integration suite provide the dod with a wide range of critical benefits including granular role-based and classification-based access controls robust security controls data providence and auditability tooling tools to identify gaps in data coverage and critical data quality issues improving data correctness more rapidly than ever before enabling the dod to take control of their data story so what problems do we end up actually solving first and foremost the platform supports the dod's most critical readiness workflows being prepared to execute any mission at any time requires a complete understanding of the dod's resources and its targeted battle space palantir empowers its dod partners to assess its current resources predict future states run simulations and forecast models and securely facilitate rapid decision making at the strategic operational and tactical levels for example when the covid crisis hit palancher was able to support the dod's most critical response efforts within hours of the call over the last several months palantir has enabled our partners to integrate data from dozens of disparate sources in order to analyze ppe ventilator stock test kit statuses test results and recovery data providing the tools required to understand the impact to the dod's assets missions and the critical locations that are part of the dod's overall response to the pandemic outside of these most exigent needs palantir enables the dod to operate optimally across every domain and business area so just to give you a little background with my experience with palantir i started working with palantir in 2017 it really brought forward the ability for us the end users to be able to control the pace of development the pace of implementation and in the items that we wanted to add previously with the prior system that we had we had to work with other vendors or other people within the company in order to get things executed this was a way to really expedite that and so we're able to actually develop the underlying physics model develop the configuration of it as well and actually get the tag streaming live in less than 24 hours previously a task like this would have taken anywhere from two to three months and so that was another thing that was really focusing in on wow this is a lot of power that we now have available to the end users to really go from concept to getting the value out of it and putting into the hands of the user's ability to create and develop the processing power and capability from a standpoint of the number of sheer number of data points along with the speed in which we're able to process that information it's just it's a step change from where we were before anybody from an entry level can have the comfort to go in and look at what if scenarios or understand the cause and effect relationships of doing something within the system and that really casts a much wider net of who can actually add or generate value uh to the company and that's reflected its way uh into the value that we've seen from those digital twins that was explained before and a huge explosion um of growth in revenue just in the last year how did that happen i i think one of the interesting things about being a private company is as we've gone through this listing process people uh got to see our our gap numbers and of course what jumped out a lot of people was that you know we grew 49 um at the beginning of the year that our software margins are are super solid um and that we grew uh this 49 off of a pretty large uh base and you know more people spend more time looking at other companies uh you know will note that there are very very very few companies if any uh that are similar to palantir in any way that are growing 49 off of a large base with the margins we have both gross margins and contribution margins and then the question uh becomes well how does a company which is um been in existence for 17 years and has this significant gap um scale surge forward and that's in order to understand that you have to understand that our business model is actually very different than what you'll find in other software companies palantir builds products approximately five years before the world knows that it needs these products if you look at our two core products pg and foundry they were both conceived pga was conceived when people thought that um integrating data integrating data according to norms and the scale and intricate issues involved in data in the government context especially in the anti-dara context was a worthless way to look at data especially the idea that data protection civil liberties would be a necessary part of working with data this was at least five years if not ten years ahead of its time and then foundry uh which was uh conceived of roughly uh four and a half years ago five years ago uh and really came into fruition we put all of our customers commercial customers in foundry in 2017 but um it was the the the need to supply a complete stack of software to an enterprise was built on the bias that we believed that crisis in the western world would be so extreme that the frankenstein monster way of servicing an enterprise with a 50 different products that have to be sewn together by a myriad of engineers none of whom particularly are coordinated but on the back of power points that take years to develop if not uh and a cost structure that can go into the hundreds of millions would not work in a time of macro either economic or political crisis of course we didn't know that covet would come but we were betting that there would be economic and political conditions that meant the old way of building the frankenstein mice monster internally or purchasing 50 products that are supposed to be sewn together according to a powerpoint genera generated by a non-technical consultant would not be efficacious when your business would either live or die based on whether you can you can rebuild your enterprise stack overnight and in our case within hours and so the supposition of foundry was individual trinkets may be appealing to people building their business based on some report written on past norms and needs but would not be able to service the needs of a growing uh of a market shift of uh galactic nature and we put enormous resources against building this and there was internal disagreement where a company that embraces disagreement but even as of a couple years ago there was enormous discussion about whether a product that would be ideally suited for a world where everything has to change overnight as covet and other future macro uh and political crisis would generate would be something when you could just build something much similar that amounts to a little widget that's well understood by everyone because already there's 50 000 reports written about it and every company has it that was a subject of enormous debate and had we been wrong about the way the world was gone people would be uh questioning whether we are sane or not or further questioning my lunacy um but the the the lurching forward of powentier on revenue gross margins contribution margins is because we built a product five years before it was needed just like we did with pg and just like we'll do in the future and this is why a small motley crew of a couple thousand people scattered around the globe can generate 49 growth in the first half of this year off of a massive scale and the magic of palantir is not what people typically talk about which is our ability to steadfastly you know defend uh the men and women that defend us or the fact that we are crucial to some of the largest industry in the world the magic of palantir is we build products five years before anyone believes they're needed and deliver them at the moment when they are needed and that's the story of pg and that's the story of foundry well i think also people have questions that have similar questions about other silicon valley companies you know what happens to their data so um so how does palantir um differentiate itself in that regard how does palantir protect people's data whereas these other big well i think the main difference is that we do not uh mine purchase resell or in any way monetize data one thing that is uh um not well understood about our palantir is that you know well over um 50 of our revenue historically has come from from international uh contracts and that is because the more you codify how the data is used the more valuable our product is and it's valuable because in a context where there's radical transparency and enforcement about the use and application of data it's quite frankly very hard to find another product that can do what we do and so the the interesting thing about the civil liberties uh uh discussion in our business is the decision to in the beginning with pg to both um uh not to solve the problem of reducing terrorism and increasing civil liberties as opposed to sacrificing one to the other was completely an ideological bias driven uh by the core founding team and uh and i'm quite proud of that and my role in that but like many good moral decisions it's also led to tremendous financial success because the rigor and granular granularity with which we can we can we can uh use data make it transparent to a third party makes it so that we have an enormous structural advantage the more data is regulated for what i would use legitimate reasons like who sees it how long do they see it under what conditions can they keep it is the data purged these are these are also there's been a burgeoning uh rigor around uh the codification of the use of data which i which i as a co-founder and ceo have supported as a as a citizen and it's just very advantageous for palantir because we've been thinking and codifying these things in our code uh since inception and people just now are beginning to understand the actual necessity to do this but it's actually nearly impossible to rebuild this into a platform that was not designed to do this whereas palantir was designed ex-ante to deal with a world in which data was not only had to be available but had to be rigorously tracked and partic under very particular circumstances integrated so it could conform with local and local laws and norms covet 19 is not the first crisis you've dealt with i mean you dealt with the aftermath of 911 the rise of isis um there's so many different events that have happened that that palantir's products have have have uh dealt with and i how how did you manage to see these things five years ahead of time we have some structural advantages so that when we interact with clients we actually understand the technical problems they're trying to solve we are organized uh in a way that pushes responsibility to the edges um and we have in all modesty among if not the strongest and most interesting people in the world working at palantir diligently day and night but in the end palantir is a master of creativity but we harness this in an exceedingly creative way and we make bits of the three big products we've built two were built years before anyone understood you personally have a degree in philosophy and i wondered does that inform your leadership at palantir and um and and if so how palantir has thousands of employees and the factorial of that of opinions so um it's uh you there's a there's a management aspect uh which is that when you're managing people of palunterians of talent that we have at pound here you have to understand that you will have to convince the person no palantirian is going to follow some crazy order that makes no sense maybe a couple times a year but if you have a degree of academic training you often understand the person talking to you is telling you something that you have to verify yourself and then it's there's a proclivity uh when you're working in technical political philosophy philosophy social theory area you're you're working on very very small distinctions that have enormous impact and you're very you're emotionally tethered to those and that's the way a technical person works and you have to be able to work and convince those people to build a product that may be different than the way they would conceive of building the product and that requires convincing not order and i think often people with a more classical business training believe that they get to decide and then last not least the interesting thing about these philosophical movements is the ones that were prescient what is it about somebody or a group of people that saw things that were then seen 100 years later or 20 years later or in our tech which would be equivalent five years later and so being focused on what is an idea that will be valuable later is i think a particularly useful way to understand uh academic work and bringing that into the palantir culture is something that that i'm proud to have played a role in we have investors that stuck with us through thick and thin over many years and one of the things i think it's important to tell future investors is that we have a certain set of beliefs and we are going to stick with this belief these beliefs and just like in the past these beliefs cost us revenue there will be decisions in the future that cost us revenue and there will always be somebody who does something that we're not willing to do you need to know that we are going to fight for our culture internally we are going to stick to certain norms that we've elucidated in the s-1 and that if you as an investor would prefer a company that is more open to changing the the basic nature of its culture and the norms that it believes in to make extra revenue you really should pick another company and the reason why we have in my view some of the best investors in the world uh especially the paluterians we were up front from the beginning about what we were going to do and what we weren't going to do and we also delivered i don't view these things by the way as a contradiction you know typically people will say well if you don't take every dollar off the table and work with some crazy environment that's doing highly ethic unethical things that that that that are not in accordance with the local law and cannot be justified by any standard that you are um you're being unfair to the investors but i think if you tell the investors and you tell the people that are at the company from the beginning that there are certain standards we follow independent of revenue opportunities you get better investors you get better employees you should not invest in palantir if you think we are going to change our internal culture drastically if you think we are going to work with regimes that are not allied with the us and are abusing human rights if you think the future is going to be a super rosy place where the past ways of supplying software are going to work because enterprises and governments do not need to be reformed you should not invest in palantir if you think we are going to reduce the complexity of these issues to some weird sound bite that makes sense to somebody in marketing uh hired by a consultancy you should not invest in palantir if you think that we will doggedly build the best software in the world years before anyone else and that we will supply the software at the world's perfect macro timing we want your support because that's what we've done in the past and that's what we're going to do in the future how does artificial intelligence figure into palantir's future i know that you've always used a human-driven approach to technology and i just wonder is that something that you'll be using more of or less of and and and how will that work well foundry it replaces the whole technical stack and a lot of our clients use it in a human-driven way some of our clients are using it on the supply line some of our clients are using it to optimize drilling and oil and gas and some of our clients are using it to run ai against the normalized data and these things are very effective in all contexts and i think what you're going to see in the future is that the pounder stack is used aggressively in some context with ai driven models aggressively on the assembly line and aggressively by technical either technical in their area of expertise or are technical in the sense that they can write code on top of the palantir platform and those are all use cases where as a company we're very very agnostic and we celebrate the migration in many companies to ai because the ai products don't work unless you have something like foundry to normalize the data and they don't work ethically unless you can somehow impose the norms onto the data so that the ai doesn't run amok so in general these benefit these these movements the the ai and political and economic conditions are enormously beneficial in the sense that they expose what part of your tech stack actually works and what part is actually a powerpoint and thank you all for watching [Music]

Channel: The Investing Opportunity

Views: 89,861

Rating: 4.9401445 out of 5

Keywords: palantir stock, palantir, palantir investor day, pltr, palantir earnings, pltr investor presentation, palantir presentation, pltr day, palantir stock analysis

Id: _0i9XU3MA7s

Length: 60min 54sec (3654 seconds)

Published: Mon Nov 16 2020

Reddit Comments

[u/Connelly47]

Great show and listen to original people who are part of the company. Even badass Alex karp