Ouch
Editor:
Hi, I’m Arny 😊 Join +980 fellow Palantir investors spotting asymmetries. If you are new, you can join here. Please hit the heart button if you like today’s article.
Would you like to ask me to discuss Palantir directly with me? Book a 1:1 meeting!
Book a meeting with Arny Trezzi
To end our year in a lighter way, as I deem myself the honorary CEO of PLTR 0.00%↑ social networks, here is my message to Palantir shareholders, inspired by Jeff Bezos’ sensational 2000 letter, written to Amazon investors.
To our fellow shareholders:
Ouch. It’s been a brutal year for many in the capital markets and certainly for Palantir shareholders. At the time of this message, shares of Palantir are down more than 65% since last year. Nevertheless, by almost any measure, Palantir the company is in a stronger position now than at any time in its past.
Palantir serves over 337 clients, up from 203 as of last year;
LTM Revenues grew to $1.8bn in Q3 from $1.4bn last year;
Our top 20 clients generate on avg. $48mn vs $41mn last year;
We closed $1.3bn Deal Value in Q3 alone, up 76% vs. last year;
We invest in our partners while maintaining a strong FCF margin of ~20%;
We sit on $2.4bn “war chest” to deal with adversities;
We are among the only three companies with DoD IL-6 SaaS accreditation;
Our software has obtained accreditations from Gartner, Forrester, and ICD;
And, most importantly, our heads-down focus on defending western values was reflected in our contribution to Ukraine. Our software is tipping the balance of the war.
So, if the company is better positioned today than it was a year ago, why is the stock price so much lower than it was a year ago? As the famed investor Benjamin Graham has said: “in the short term, the stock market is a voting machine; in the long term, it’s a weighing machine.” Clearly, there was a lot of voting going on in the boom year of 2020 and much less weighing. We’re a company that wants to be weighed, and over time, we will be, over the long term, as all companies are. In the meantime, we have our heads down working to build a stronger and more robust company.
Many of you have heard about the “strategic investments” that we have made into smaller companies, many of which are going to shut down. We lost a significant amount of money on strategic investments, but these didn’t affect the financial stability of our company.
We made these investments because we saw the opportunity to learn from ambitious founders and develop a deeper understanding of the needs of future champions. The market has turned and it is clear that these investments were unsuccessful. It was a bet on a group of early-stage companies, that, with the benefit of hindsight, from a financial perspective, we wish we did not make.
Future: Software eats the world
Let’s move to the future. Why should you be optimistic about the future of foundational software and the future of Palantir?
Industry growth and new customer adoption will be driven over the coming years by relentless improvements in AI applications. These improvements in customer empowerment will be driven by innovations made possible by the dramatic reduction in the marginal cost of integrating data and developing new applications. The speed with which new customers are adopting our platforms and the ease with which such platforms are being deployed is a reflection not only of the further maturation of the software itself but, of its essential nature to the modern enterprise.
Companies will need software to survive change. The software that will help companies achieve their goals and leverage their uniqueness will deliver unmatched capabilities. We are uniquely set for this. We too will use technology to reduce costs, but the bigger effect will be using technology to drive adoption and generate value for our partners. While there are no foregone conclusions, and we still have much to prove, Palantir today is a unique company. We have the brand, the customer relationships, the technology, the partners, the financial strength, the people, and the determination to extend our leadership in this infant industry and to build an important and lasting company. We will do so by keeping the customer first.
Where others withdraw, we see the opportunity. The abundance of liquidity of the past years derived from accommodative monetary policies created an era of reckless spending in the technological sector. This era is now over. The companies who relied on this fragile setting while having a weak offering, have now no other choice than to contain or even reduce their spending. Conversely, we are investing heavily in our existing partners and in our ability to reach new ones. To capture the immense opportunity standing in front of us we are becoming home to the most talented minds, which will be the pillars to achieve further scale.
The years 2023-25 will be an important stage in our development. Like 2022, these years will be years of focus and execution. As a first step, we’ve set the goal of achieving GAAP profitability by 2025. While we have a tremendous amount of work to do and there can be no guarantees, we have the plan to get there: the health of our business is our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting this progress in the coming year. We, at Palantir, remain grateful to our customers, for their business and trust, to each other, for our hard work, and to our shareholders for their support and encouragement. Many, many thanks.
Our preparation for the current moment is anything but accidental. We anticipated the present volatility and will continue to grow, not in spite but because of it. - Alex Karp, Palantir CEO
I am excited about the new year ahead of us. Happy new year!
Yours,
Arny
Not Financial Advice. I own (many) PLTR stocks.
You're the man, Arny. Great write up
You're the man, Arny. Great write up