Good afternoon. Welcome to Palantir’s Fourth Quarter 2020 Earnings Call. We’ll be discussing the results announced in our press release issued prior to the market open and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our first quarter 2021 and multi-year outlook, management’s expectations for our future financial and operational performance and other statements regarding our plans, prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after market close today and in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Further, during the course of today’s call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, GAAP measures. Additional information about these non-GAAP measures, including a reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation and SEC filings are available on our Investor Relations website at investors.palantir.com. [Technical Difficulty]

Welcome, Palantir had a very strong year, last year and then because of the strength year, it might be worth taking a second and asking, well, what do the numbers actually mean? Obviously, on the face of them they’re strong and even curiously strong. We believe, I believe that Palantir’s numbers are a lagging indicator of several macro trends that we got right. First is the obvious macro trend that is almost become venality that the world is becoming a software world and the institutions that survive and thrive and provide benefits to their citizens, both in terms of actual output, but also real output, meaning output that includes data protection that make sure that the data is actually preserved in a way that guarantees its veracity that gives comfort to its citizens that make sure the citizens aren’t merely a product to be monetized. And second that as diverse as the institutions are that we work in from clandestine services to providing AI in the most sensitive military context to working with oil and gas companies to airlines to pharmaceutical research took all aspects of helping to ameliorate the plague that is COVID. There’s one trend; institutions, countries, individuals that can assess the value of software that can work now are the institutions that survive and provide value both in the government, commercial and even moral context, moral as defined by they increase the legitimacy of institutions. One of the primary issues we have in the West is the dearth of legitimacy of commercial and government institutions of experts. And this makes it very impossible to navigate issues around how do you rebuild your company internally and externally to conform and thrive in a very difficult context, where there’s COVID rebuilding the supply chain, political volatility, uncertainty in general…

On today’s call, you’ll hear from Alex Karp, Founder, and Chief Executive Officer; Shyam Sankar, Chief Operating Officer’; Dave Glazer, Chief Financial Officer, and Kevin Kawasaki, Global Head of Business Development. With that, I’ll turn it over to Shyam.

Thank you, Rodney. First, I’d like to congratulate the NHS and the UK for a stunningly successful vaccine rollout. The NHS is truly a national treasure. I’d also like to congratulate HHS protect on winning Gartner’s Eye on Innovation Awards for Government in 2020. And finally, I’d like to congratulate U.S. Space Force’s Kobayashi Maru, their cutting edge software factory for winning the Software Innovation Team and Gears of Government Awards. To 2020 results. 2020 was a seminal year for Palantir. We helped 100 commercial organizations and 10 national governments respond to the COVID crisis. We were able to solve incredibly complex problems in three days and enabled our customers to reinvent themselves amidst these continuums shocks. But of course, that’s not just three days. It’s 15 years of product development, more than $2 billion on R&D and three days. And for many of those customers, in a short period, we became their default operating system – we became critical to the core functioning of their operations. In meeting that moment our business grew significantly in 2020 resulting in 47% revenue growth on a full year. And we created and continued to create substantial opportunities for growth over the next year and beyond. Last week, we announced a groundbreaking partnership with IBM, where IBM or OEM, a number of foundry modules and its Cloud Pak for data offering enabling commercial customers to easily build AI-infused applications, leveraging a trusted data foundation and enterprise AI. This partnership dramatically expands our distribution capabilities, leveraging IBM’s data and AI’s 2,500 sellers. For context, that is a sales force that is larger than all of Palantir. Along with an already large installed base of Cloud Pak customers. We were very excited about what this partnership means for our go-to-market in 2021 and beyond. The…

There are many insights; indeed, some secrets that have powered Palantir and got us from a company that in the beginning no one believe would succeed, because we’re heavily focused on strengthening the west through a near fanatical fixation on data integration and data protection. When we transferred to the commercial world, people didn’t believe that would succeed, because there’s no history of anybody going from government to commercial. When we went, we became a global company, people didn’t believe that would succeed, because the global – typically companies that started with in the American government or in America do not succeed or thrive abroad. When we went and did our DPO people thought we should IPO, because that is the best and quickest way to transfer money to Wall Street. But we believe we should be focused on allowing the average person to participate and therefore absorb that risk. And now, as we’ve had a pretty sublime year based on any conventional metric, and as you’ve seen the results, we want to underscore this relentless focus, what you could call an insight secret, it would – should be a venality of business, have a long-term focus on the health of what we believe is, and will be continued to be one of and will become the most important software business in the world. And to do that, we’re providing long-term guidance pretty radical in the sense that we are committing to keeping a growth threshold of above 30% for the next five years, but not focused on the day-to-day, quarter-to-quarter near-term focus that quite frankly destroys businesses is one of the main reasons why so many of our businesses, especially in tech are actually only serving Wall Street and not serving their clients and not serving an everyday investor and generate suboptimal returns over time, because they too are lacking indicator of the suboptimal performance. near-term, my optimism [ph] of running a business, and at Palantir, obviously, we have rejected this in every way, both from the way we’ve produced software, from the way we interact with clients from the best we’ve made, that tend to be vets that come to our vision years after a very, very significant investment, any case, we hope those of you on this call, who are a current investors stay with us. And those of you who prefer a more short-term focus that you choose companies that are more appropriate for you.

Thanks, Karp. I’ll review our fourth quarter and full year 2020 performance followed by our outlook. Full year 2020 revenue was $1.93 billion, up 47% year-over-year. Fourth-quarter revenue was $322 million, up 40% year-over-year, and roughly $21 million above the high end of our prior guidance range. In addition, for the full year 2020, the average revenue per customer was $7.9 million, up 41% year-over-year. Average revenue from the top 20 customers was $33 million, up 34% year-over-year with our top 20 customers representing roughly 61% of our total 2020 revenue, down from roughly 67% in 2019 as we continue to broaden our revenue and customer base. For the full year 2020, 43% of our revenue was generated from new customers in 2018 or later exemplifying our improving ability to rapidly onboard customers to our software and realized compounding value as their data assets grow and used cases develop. We see this scaling taking place across our customer base. In 2020, the number of customers generating more than $1 million in revenue annually grew 32% year-over-year. Customers generating more than $5 million annually grew 54% year-over-year. And customers generating more than $10 million annually grew 50% year-over-year. In the fourth quarter alone, we closed 21 deals of $5 million or more in total contract value including 12 deals worth $10 million or more. Looking at revenue by segment. Government revenue accelerated in the fourth quarter growing 85% year-over-year to $190 million. We signed several large deals in the quarter including a three-year $44 million expansion with the U.S. Food and Drug Administration and a two-year $31 million agreement with the NHS. In addition, we announced that the U.S. Army executed its first option year with approximately $114 million as part of our partnership on the Army Vantage program. For the…

Thanks, Dave. John, Dave and Kevin will join me for Q&A today. And we’ll begin with some shareholder questions from say, Shyam; I’ll start with you on this first question. Palantir is guiding for double-digit percentage growth this year. Can Palantir sustain such a compound growth rate, barring any unforeseen negative economic impacts or should investors expect choppy yearly growth numbers. Can you comment on a long-term expected growth rate?

I’ll build on what Karp said earlier in the call on long-term guidance. We are very much at the beginning here. We just did 45% growth in 2020. We expect to do – sorry, 47% growth in 2020. We expect to do 45% growth in Q1 of 2021 and we are only in 24 of the global 300. But I think looking at that kind of misses the point around the TAM expansion, that’s currently happening. Look at the channel partnership with Fujitsu and IBM among others, where we’re not just distributing to the top 300 or the top 1,000, but really, we have the ability now to distribute to the entire market, potentially tens of thousands of customers. And with our investments in the end-to-end, sensor-to-shooter workflows from space to mud, we’re not just going after the roughly, $60 billion of government IT spend anymore, we’re talking about the quarter-trillion dollars of U.S. DoD weapons system spend in 2020. And our product investments mean that we are uniquely positioned to seize those opportunities. Broadening the market is not about Palantir life, it’s about Palantir Automated. It’s about the power of Apollo, it’s about software that manages itself. Look – look at our archetypes investments like this means with a few clicks, you can deploy end-to-end powerful use case. Use cases that would have cost millions of dollars and taken many months can now be deployed in minutes. It’s about software-defined data integration and modularity. That means that you get 100% of the power of Palantir, but with the ease of self-managing software. And these are examples of why we’re confident in our long-term growth of being greater than $4 billion in 2025.

Great. So, the next question is on Demo Day and I’ll stick with you, Shyam. Could you – can you please share how Demo Day was received by potential customers and would the Palantir experience a surge of interest in its products specifically on the commercial side of the business?

Yes. Demo Day was a hit with potential customers. We were very excited by the marked uptick in inbound inquiries. And – and these have led to some great generative conversations with prospective customers. Demo Day really helped customers understand if they had a problem that Palantir can solve, and it kept our growing sales force pretty busy. But it really underscores the tremendous opportunity in front of us and how much we are at the beginning. One of the reflections that I had about Demo Day is that we tried to do an all-purpose Foundry demo. But the truth is that Foundry can solve so many, many problems. So, we’re going to be hosting a – another event in April, Demo Day DoubleClick. We’re going to spend more time on Foundry, focused on more use cases across more industries. So, stay tuned for that formal announcement and registration details.

Great. Kevin, I’ll come to you on this next one. Will big company deals such as the IBM announcement become more common as Foundry’s price become more apparent to the public? Also, is there any timeframe or chance for widely available, bullet-technical medium-sized businesses or consumer-level software?

Thank you, Rodney. So, yes, we’re excited about this partnership as well. I’ll start with the small and medium-sized businesses. In short, yes, Shyam just talked about how our TAM is expanding that we’re automating the delivery of Foundry. This means you can have full end-to-end use cases with no code, just drag, and drop. And the result of this is that we can deliver the full power of our products to small, medium, and of course, large institutions. And it’s important to note here that the unit economics really allow for us to do this, 84% adjusted gross margin in Q4 last year, 62% contribution margin in Q4. So, of course, partnerships like IBM adding salespeople to scale and distribution just made a lot of sense, right.

Great. Shyam, I’ll come at – I’ll come back to you on this next one. It seems like the bulk of your channel partnerships are focused on the enterprise of the commercial segment. What are the near-term opportunities to broaden the channel that government side overall growth there need to be directly sourced?

We are aggressively pursuing partnerships with large primes. But these partnerships, they’re specifically focused on partnering with the divisions that build hardware platforms. The folks that build aircraft, submarine, land vehicles, space-based platforms, drone, ship, and other weapons systems. And the focus of these partnerships is to explore putting Palantir’s unique AI capabilities, capabilities that have already been proven in the field and retrofitting them onto existing programs of record and taking them in from inception into future programs. And so this is going to manifest in something that looks like Palantir inside of every missile, inside of every drone, Palantir of the edge inside of every sensor in every shooter. And we’re approaching these partnerships in a unique way with the commercial item. So, that means, of course, we get to leverage the commercial item preference 2377. But I think much more importantly, this creates a massive opportunity for the primes themselves to generate high-margin, recurring software revenue businesses by partnering with us against their installed base. And in talking with them, it seems like one of the reasons that they’re most excited about it this is that they see this in the face of shrinking defense budgets as a way of driving their own multiple expansion and growing their market cap. This is massively TAM-expanding for Palantir. As I mentioned earlier, this is us not just going after government IT spend, but actually, we’re now entering into – enable to address the roughly $0.25 trillion of DoD weapons system spend. And I think this represents a revolutionary opportunity for our joint customers in terms of capabilities that they can get.

Great. Dave, I’ll come to you on this next one. In terms of profitability, when does Palantir expect to achieve a level, where it can repeatedly and continually achieve profitability? Does Palantir need to hit the targeted 6,000 Foundry clients along with other revenue sources from other platforms to become meaningfully profitable?

On profitability, and Kevin just briefly touched on it. but I’d point you to our margins today. 84% adjusted gross margin in Q4, 81% for full-year 2020, 62% contribution margin in Q4, 54% for full-year 2020, 32% adjusted operating margin in Q4, 17% for the full year. We have proven the unit economics this year and we did it in a year, where we did 47% growth. And this is why we’re going to continue investing in that growth. And it’s just really, really like a massive opportunity ahead of us.

Great. Shyam, I’ll come back to you before we open the call for – for more Q&A. While the IBM announcement is great, their public cloud share is relatively small. Can you commit to expanding managed offerings to other cloud providers such as – such as Microsoft, Azure, AWS, Google Cloud, et cetera?

Let’s start with Apollo, because it – it’s crucial technology. Apollo means that we can run our software efficiently anywhere. In your cloud, in my cloud, and their cloud, you know, in space, on a drone, on a Humvee. The customer of the future should not have to worry about this. It will run wherever you need it to seamlessly. It’s also important to understand that the vast majority of our new customers are taking advantage of the speed, security, and reliability of our SaaS offering and we have committed to spending over $1 billion on cloud providers. So, we’re operating these offerings that scales with the providers. And I mean, just to give you a – a sense of that, it turns out actually there are limits to how Elastic Compute actually is. We got a call we never thought we’d get, one of the providers calling us to let us know that they were out of servers. So, of course, we’re working with all these providers in all of these places. But maybe, more interestingly is to think about how do we think about these providers to us, their channels. Our offering is an end-to-end solution that: one, delivers a rapid amount of value to our customers; but two, it drives a massive amount of cloud consumption for these providers. And so we’re going to continue focusing on working with the providers that generate the most growth for us, where we have a joint go-to-market. So, it’s worth watching the space.

Great. Operator, we’ll turn it over to you for our next question.

Certainly. [Operator instructions] Your first question comes from the line of Brent Thill from Jefferies. Your line is open.

Good morning. The $4 billion revenue target for 2025, can you just walk through the assumptions that – that you are making to achieve that target, and what gives you the confidence to achieve this? This is obviously a – a pretty big target and few companies in the industry give this type of target. Maybe if you could just talk to that. Thank you.

You bet. Thanks, Brent. So, just kind of starting off reiterating some of the numbers that we gave here. Yes, 47% revenue growth last year, expected 45% growth in Q1. What’s driving this? And that gives us the confidence looking forward. So, yes, the product investments that we’ve made, along with direct sales force, now channel partnerships, really fuels the distribution. And you can see this in the data, 110% revenue growth in our U.S. commercial market, 91% revenue growth in U.S. government, both last year. Revenues from new accounts as Dave mentioned in Q4 grew 375%. Our acquirer-phase customers grew over 200% in the second half of 2020 alone. The expand-phase customers were 100%. So, that’s showing a lot about the strength of our new account pipeline and how we land and expand? Our average revenue per customer grew 41% to $7.9 million. And I think we – we talked about this already but probably worth reiterating, we did our 47% growth last year while increasing our margin. 84% adjusted gross margin, 62% contribution margin, up from 33% last year that nearly doubling in one year.

Your next question comes from the line of Keith Weiss from Morgan Stanley. Your line is open.

Thanks, everyone. Thank you, guys, for taking the question, and very nice quarter. I think it was probably a question for Dave. And just kind of helping us better understand in the income statement. On one side of the equation, can you help us better understand kind of – some of the volatility we see in revenue growth? Commercial revenue growth slowed down a lot into Q4 versus Q3. Sounds like, over the full year, you did really well. So, can you explain to us how we see that volatility? Because I think software investors are used to seeing a lot of recurring revenues and pretty smooth revenue trends there. So, one, could help us understand kind of that bouncing around the revenue growth. And two, on the OpEx side of the equation. OpEx for the quarter was down – the adjusted OpEx was down almost 30% year-on-year, for the full year, it’s down 20%. I know T&E is a big chunk of that probably about half of it. But given like the huge opportunity, still very early days, you guys have such a lead in terms of technology, why are you investing in it so low? Like why is OpEx down on a year-on-year basis versus really aggressively investing for it if it’s an opportunity on a go-forward basis?

Well, I’ll start with things, Keith, this is Shyam, and I’m jumping in on the OpEx one. Really what you’re seeing there is the payoff of our long-term investments in the product. So, last year, Apollo delivered a massive step-change in terms of both cost of revenue and the efficiency around sales and marketing and how we acquired customers in our three-phase model. On top of that, with the software-defined data integration and the investments in archetypes allowing us to capture business, shrinking the duration of pilots, shrinking the investment that was required which drove down sales and marketing. And that reduced, of course, on the other end, the cost of revenue. And then the second component that you’re seeing outside of product is the investment in the direct sales force, which for us has paradoxically reduced the unit cost around sales and marketing. It’s cheaper for us to acquire customers by building out the direct sales force. So, you should expect to see, of course, a very significant investment in that going forward. But if invested on a much more efficient base and you’ll see that spend go up here. Now, in terms of commercial customers there, I – it was a big year for commercial customers. A lot of expansion, the right way to look at this from our perspective is the amount of growth that we had in U.S. commercial, the place that we have invested significantly in our direct sales force here. And that resulted in 107% growth. And then when you look at the investments that we’re making with channel partnerships, Fujitsu in Japan, IBM Worldwide, distribution in 180 countries, adding as many folks and effectively a week to our sales forces we have, employees at Palantir, we’re feeling really good about what we should be expecting from commercial going forward.

Your next question comes from the line of Christopher Merwin from Goldman Sachs. Your line is open.

Okay. Thanks very much for taking my question. I wanted to ask about the modularization of Foundry. Obviously, it’s a very powerful platform, and your pre-packaging need solutions, which just sounds like you need so much more easily that way. Can you talk a bit about how that might change the competitive set for you if at all? Are you mainly focused on use cases that are generally not served by other horizontal DoD spenders today? Thanks.

Thanks, Chris. It’s a great question. We’re very much focused on modularizing of Foundry in a way that creates a unique set of offerings underneath it. I’ve personally been talking with customers and prospective customers around these modules and there’s a huge amount of excitement from them around it because really it allows them to leverage their existing investments, things that they spent many years building that they’re quite happy with that are core components of their business. But it also allows them to accelerate their modernization journey by leveraging components that we offer that are completely unique. And we’re going to continue to be focused on offering modules that we perceive as being unique, the market perceives as being unique and that allow us to meet the customers where they are.

Your final question comes from the line of Brad Zelnick from Credit Suisse. Your line is open.

Great. Thank you so much and congrats. Really strong results, guys. I guess, I wanted to ask more about the triple-digit growth in sales headcount that you mentioned. Can you just maybe remind us how much of demand in Q4 or perhaps in 2020 was captured explicitly by sales heads versus forward-deployed engineers? How does that progress and how should we think about the hiring cadence and productivity ramp of these reps that you intend to hire?

Yes. So, I think, roughly, I could think of good way thinking about this is about half of incremental growth is now being driven by our investments in the direct sales force and channel partnerships and we expect that can grow pretty substantially here. But the places where we’ve had the most growth, U.S. government, U.S. commercial, that is way more than half. In terms of productivity ramp, I think we’ll be ready to comment in that in future periods, but what we’re seeing is a marked compression in how long it’s taking to ramp our reps and get them to be productive. And we’re also seeing – this is happening at a time where there’s just a lot more demand in the market, there’s a lot more inbound coming to us. So, we’re pretty excited about ramping the reps and ramping the hiring as quickly as possible to meet that demand.

That concludes the Q&A. And I would like to take this time to thank everybody for joining and you may now disconnect. Have a wonderful day, everybody.