Here's My Plan for Planet Labs After Earnings Impress
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On Wednesday evening, "Stocks Under $10" name Planet Labs (PL) released its fiscal third quarter financial results. For the period ended October 31, Planet Labs posted adjusted EPS of $0.00 (GAAP loss per share: $0.19) on revenue of $81.254 million. Both the top and adjusted bottom-line numbers managed to beat Wall Street consensus expectations, while that revenue print was good enough for year-over-year growth of 32.6%.
Planet Labs experienced 361% year-over-year growth in remaining performance obligations to $672 million, and backlog order growth of 216% to $734 million. During the quarter, the company received a $12.8 million award from the National Geospatial-Intelligence Agency, a $13.5 million task order from NASA, a six-month $7.5 million order from the U.S. Navy and a seven-figure contract expansion form NATO.
The CEO
Chairman, CEO and co-founder Will Marshall commented in the press release: "We’re seeing strong traction with our AI-enabled global monitoring solutions, demonstrated by our recent award under the NGA’s Luno B program and expansion with NATO. We’re announcing our acquisition of Bedrock Research, an AI-enabled solutions company, to accelerate our roadmap in support of this demand. Since the end of the quarter, we have successfully launched another 2 Pelican satellites as well as 36 Super Doves and announced an R&D initiative with Google to explore scaled AI computing in space.”
Operations
As revenue generation grew 32.6% to $81.254 million, the cost of that revenue increased 46% to $34.67 million. This left a gross profit of $46.584 million (+24.2%) as gross margin dropped from 61.2% to 57.3%. GAAP operating expenses were up 8% to $64.924 million. That left a GAAP operating loss of $18.34 million, improving from -$22.608 million.
After accounting for interest, other income and expense and taxes, the company posted a GAAP net loss of $59.185 million, versus -$20.081 million. This works out to -$0.19 per share, compared to the year-ago comparison of -$0.07.
Planet Labs did adjust for some stock-based compensation ($0.04 per share), but the lion's share of the adjustment was for the purpose of changes in the fair value of its warrant liabilities ($0.14 per share) outside of business operations. After adjustments, EPS moved up to $0.00, versus the year-ago comp of -$0.03.
Guidance
For the current quarter, Planet Labs sees revenue of $76 million to $80 million. That took the low end of the range above the $73.6 million that Wall Street was looking for.
For the full year, the company is projecting revenue of $297 million to $301 million and an adjusted gross margin of 57% to 58%. Wall Street was looking for revenue of just $284 million. This was a major reason why the stock was popping overnight.
Fundamentals
For the period, Planet Labs generated operating cash flow (up from $4.076 million) of $28.593 million. Out of that number, it spent $26.704 million on traditional capex and $978,000 on capitalized internal-use software. This left free cash flow of $911,000, up from the year-ago comp of -$4.786 million.
Turning to the balance sheet, Planet Labs ended the period with a cash position of $678.23 million and current assets of $754.143 million. Current liabilities add up to $188.589 million, including deferred revenue of $45.857 million and no short-term debt. This puts the current ratio at 3.99 at the headline and at a stunning 17.65 when adjusted for those deferred revenue.
Total assets amount to $1.106 billion, of which less than 15% is labeled as either goodwill or other intangibles. That is not an issue. Total liabilities less equity comes to $756.502 million. This does include $446.201 million in convertible notes that could ultimately dilute the equity. That said, the company does have the cash on hand to easily take care of these if need be. This is a very healthy balance sheet.
My Thoughts
Planet Labs is making progress. Sales are growing rapidly. Operational execution is improving. Cash flows have gone positive. The balance sheet is very healthy. Key customers like NASA and the U.S. Navy are engaged.
There's a lot to like.
Readers will see in the chart above that Planet Labs stock is breaking out from a falling wedge pattern of bullish reversal and is now trying to retake its 50-day simple moving average (SMA). This comes after already taking back its 21-day exponential moving average (EMA). Relative Strength is better than neutral as the daily moving average convergence divergence (MACD) has shown marked improvement.
Price Target: $17
Pivot: 50-day SMA (currently $13)
Add: Down to November low ($10.52)
Panic: Loss of November low
At the time of publication, Guilfoyle was long PL equity.
