Good morning. Welcome to Palantir's Second Quarter 2021 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 third quarter and fiscal 2021, 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 prior to market open 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 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. Joining me on today's call or Shyam Sankar Chief Operating Officer; Dave Glazer, Chief Financial Officer; and Kevin Kawasaki, Global, Head of Business Development. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. I will turn the call over to Shyam to get us started.

Thank you, Rodney. Before diving into results, I'd like to share a bit of our latest product innovation, something that we deployed at the Global Information Dominance Experiments, GIDE 3 last month. We call it the meta-constellation, and it's radically changing how satellites are tasked, the latency of collection, and it's creating a fundamental link in that AI-enabled decision chain. Overnight, we orchestrated a meta-constellation of 237 satellites by working with an array of commercial space companies. These companies have been deploying constellations of hyperspectral, radar, and elite sensors into orbit. And we're putting all of that power directly into the hands of the frontlines, empowering the edge. It's one of the largest collaborative sensor constellations ever to see operational news. Here to show us more is Shannon, who has led our work defining and building the AI-enabled decision chain.

Palantir's meta-constellation software harnesses the power of growing satellite constellations, deploying AI into space to provide insights to decision-makers here on Earth. Our meta-constellation integrates with existing satellites, optimizing hundreds of orbital sensors and AI models, and allowing users to ask time-sensitive questions across the entire planet. Important questions like, where are the indicators of wildfires, or how are climate changes affecting crop productivity? And when and where are naval fleets conducting operations? Meta-constellation pushes Palantir's Edge AI technology to a new frontier. As we all know, submarines present threats to the U.S. and its allies. And to protect strategic interest, allied forces need to track every submarine's deployment around the world. And at the forefront of this challenge are anti-submarine warfare officers. They turn to meta-constellation to monitor ports across the Pacific. Let me show you a little bit about what that looks like. In response to Allied monitoring requests, meta-constellation dynamically determined, which orbiting sensors are available. Integrated through Palantir, the constellations then collaboratively scheduled coverage over each port. Meanwhile, Apollo for Edge AI assigns tailored AI micro models to each satellite. Running onboard the satellite, the models will automatically find submarines and stream those insights directly to users. With the mission planned, Apollo automatically reconfigures each of the satellites, pushing the right micro models into orbit. And as a software payload on board, Palantir's Edge AI platform connects complex satellite subsystems to models integrating new AI with the hardware. The best part, my favorite part is that as it orbits, the Edge AI platform hot-swaps the right micro models in, rapidly reconfiguring the satellite. The models process imagery, they detect submarines, geo-locate them, and then determine any movement since the last collection passed, all in under a second. When the AI sees a submarine movement, that insight is directly downlinked to allied forces as the satellite passes overhead, and the anti-submarine warfare officers are notified in just minutes, empowering them to respond in a way that we've never seen before. As you can tell, we're really excited about Palantir's meta-constellation and see it as the software that brings hundreds of satellites to bear on your hardest problem. Whether it's the anti-submarine warfare officer that I just described using it to find submarines, or first responders leveraging AI to spot wildfire signs. Meta-constellation is there to empower users.

Thank you, Shannon. Cutting-edge product and continued efficiencies and distribution drove exceptionally strong year-over-year Q2 results. Total revenue grew 49% in Q2. U.S. commercial revenue accelerated to 90%, second quarter TCB book rose 175% year-over-year to $925 million. We added 20 net new customers in Q2 alone, while generating $7.9 million of average revenue per customer. The average revenue of the top 20 customers grew sequentially quarter-over-quarter from $36 million to $39 million. The number of commercial customers grew 32% over last quarter. We closed 62 deals of a million dollars more, 30 of which were for $5 million or more and 21 were for $10 million or more. For the first half, we grew revenue 49%. We generated 28% adjusted free cash flow and a 33% adjusted operating margin. And visibility into future growth is strong, as total deal value increased 63% to $3.4 billion. Product innovation is at the core of these results and the momentum that's driving our business forward. You just saw how innovations on Edge AI delivered through Apollo or transforming the capabilities of our customers. We recently completed a number of crucial firsts for this technology, including running onboard advanced military helicopters and special operations fast boats. And just last week, our Edge AI was inferencing from space, 484 kilometers above our heads, truly from space to mud. Now, Apollo, our third platform, has always been our secret advantage. It enables us to take our SaaS offering to where no SaaS has gone before, drone, sub, satellites, classified networks, and on-premises without losing the efficiencies in the scalability of a centrally managed SaaS solution. We've been able to meet our customers where they are. And now, we're going to help our customers meet their customers where they are by commercializing Apollo itself. We are…

And while competitors are bought down by legacy IT investments in an obsession with reinventing every wheel internally, these companies, they have no IT catalog. They are just founders, entrepreneurs, and engineers focused on winning, and they see Foundry as the best way to do that.

This program includes companies like Chapter, which is revolutionizing the consumer experience in Medicare plans selection and enrollment, or Gecko Robotics is building badass robots for industrial inspections, and Origin Materials, which is helping companies de-carbonize their supply chains to achieve net 0 and, really, net negative carbon footprint. And we plan to extend this offering to more early-stage companies in a variety of industries over time. We see substantial opportunity to grow our business and push the ambition of our product with these Day Zero companies and we couldn't be more excited to power the next generation of builders. And this innovation is all happening in the context of ongoing investment in business strength. We continue to invest in distribution across the business. We added more than 60 hires into our sales function in the second quarter, surpassing 100 hires for the 1st half of the year, and the pipeline is accelerating. Active commercial pilot's increased 26% just since the end of April, we added 20 net new customers in the second quarter alone, our commercial customer count grew 32% in Q2 and we booked just over $900 million of total contract value in the second quarter, providing substantial visibility into our future growth. In our government business, we continue to see a broadening scope of opportunities and expansion of work that we're doing across defense, healthcare, and other critical initiatives. We signed new deals with the U.S. Army, Air Force, and Coast Guard, including a 2 year, $100 million deal with U.S. Special Operations Command. We participated in the U.S. Northern Command's third Global Information Dominance Experiment in July, where our software is driving applied AI decision-making for real-world scenarios, revolutionizing Northcom 's ability to wheel data to outpace adversaries. In healthcare, we signed new deals in the…

Thanks, Shyam. I'll review our second-quarter performance followed by our outlook. We had a record-breaking Q2 as continued product innovation and our ongoing investments in distribution through a strong financial performance as deal activity accelerated in the second quarter. We generated year-over-year revenue growth of 49% for the quarter and for the first half bringing Q2 revenue to 376 million and first-half revenue to 717 million. We generated 50 million and adjusted free cash flow in the second quarter bringing our adjusted free cash flow for the first half of the year above 200 million, a free cash flow margin of 28% in the first half, which was a $433 million improvement year-over-year. We had a strong first half and have increased visibility for the second half of the year as reflected by our raise full-year adjusted free cash flow guidance. Q2 adjusted operating income increased to 117 million, representing a margin of 31%, our third straight quarter with adjusted operating margins above 30%. Second-quarter total contract value bookings grew a 175% year-over-year to 925 million, providing increased visibility for durable long-term growth, while second-quarter billings increased 40% year-over-year to 379 million. We added 20 net new customers in the quarter, 13% quarter-over-quarter sequential growth for our customer count. Our commercial customer count grew 32% quarter-over-quarter sequentially. Drilling down into our second-quarter revenue, revenue growth was 49% ahead of our prior guidance of 43%. We continue to see strength across our U.S. business, which grew 60% year-over-year in Q2. Looking at revenue by segment, second-quarter government revenue was 232 million of 66% year-over-year. The strength in our government business was driven by new deals with the U.S. Army, Air Force, Coast Guard, HHS, CDC, as well as milestone revenue for the international government customer. We continue to build a strong…

Thanks Dave. We'll begin Q&A with questions submitted from our shareholders through say. Shyam first one is for you, Ralston asks, as Palantir deepened its relationships within the enterprise customer base to increase share of [Unclear]. How are these customers' lifecycles evolving over time as Palantir becomes their default operating system and how is it creating a flywheel of network effects?

Thanks, Ralston. It took about 8 years I'd say for Foundry to give the operating system of special operations, it took about 4 years to be the operating system of aviation. It took about 2 months to be the operating system COVID research and collaboration. And it's taking about 2 days to be the operating system of Day Zero companies and their ambitions to power their industry. Our vision remains unchanged. It's could be the default operating system for the enterprise and the industry. But customers, they're moving faster and faster, and the network affects are profound. Today, [unclear] 5% of the Boeing fleet is managed in Airbus's SkyWay ecosystem. That is a particularly powerful testament to the network effects. When you recall that Microsoft and Boeing launched a competitive ecosystem nearly a year before Foundry and Airbus launch SkyWay. And this further underscores the fundamental difference between that sort of LEGO block DIY approach versus our end-to-end operating system. Another example, one pharma Company has harmonized over 2,000 clinical trials in Foundry. For context, that pooled analysis of 5 clinical trials is often considered a big deal. 2,000 is a first; it's category-defining. And is their ambition to take that clinical trial asset to other pharma companies and collaborate on R&D. And if you believe that superior clinical insights will drive superior R&D outcomes, then the network effects here are going to be a game-changer. And if you're a pharma Company, and you are participating, where does that leave you? Probably at a fundamental and compounding disadvantage. To remain relevant, you need to join. This customer has innovated from using Foundry and operating system for their internal R&D to the operating system for the entire industry. And what's distinct for us about Day Zero companies is that their starting with that ambition from the beginning. The whole vision is to transform their industries. They are starting the ecosystem first.

Great, thanks, Shyam. Kevin, and the next one is for you. Avi asked, are you satisfied with the number of new customers added in the last quarter?

Thanks, Avi The numbers are strong. Customer count is accelerating, especially if you look at the commercial space where we grew our customer count 32% quarter-over-quarter and up 61% for the first half of the year. So on track to more than double our commercial customer base by end of year. Deal volume was also up. We closed 62 deals of 1 million or more. That is a 72% increase from last quarter. Second-quarter, TCB grew a 175% to 925 million year-over-year. Our current customers also grew. If you net out new customers to average revenue, per customer grew from 8.1 million to 8.8 million quarter-over-quarter. Our largest customers, top 20, also grew from 36 million to 39 million. These results are driven by investments in our product and efficiencies in distribution. So I'll finish by reiterating what Shyam just discussed. We are now delivering a full power Foundry to small companies through a subscription model. And we're doing this across many sectors, range from healthcare to robotics, to software companies, SaaS businesses using Foundry to build their offerings.

Great Kevin, sticking with you on the next one, [Unclear] asks, can you guys describe your long-term vision with your pipe investments into pre-revenue companies? The talk is Palantir 's buying revenue, but I believe it is a clever, high-risk, high-reward strategy enhancing network effects.

Thank you. This is a huge opportunity for us to invest in our customers, and that's something we feel we've always done. Now, we can do with our balance sheet. These are companies that we think we will be working with for very long time. Further, we think that using our product is going to help them win. One thing we've always looked for in our customer relationships is the founder mentality. That is where we're most aligned. No bureaucracy, high-speed, quality execution. So that's something that we're looking for in these deals, that founder mentality. So I'll also break down the numbers a little bit here. Dave already mentioned that less than 1% of our revenue came from this program in Q2. Additionally, of the 925 million of total TCB in Q2, 543 million from this program. This is a long-term strategy. And the deal is as long-term as well, so we expect longer duration and time to revenue recognition. The portion of the Q2 TCB outside of the strategic investments is also strong, totaling 382 million. This grew at a sequential rate of 33%, quarter-over-quarter. So in other words, assumed no investment program, TCB grows 33% sequentially from last quarter. So very pleased with that. And we signed a lot of great institutions [unclear] National Grid, Avi, John Deere, Bass Pro, [unclear], the FAA, we expanded with U.S. Army, Air Force, Coast Guard, CDC, HHS, Tiberius, which as you probably know by now, U.S. government used to tract vaccine production, distribution, and administration. And last but not least, we did $100 million expansion with U.S. Special Forces.

Great, thanks, Kevin. Dave, coming to you at the next one. Linda asks, when does Palantir expect to report positive GAAP, EPS?

Thanks, Linda. We're delivering high growth with strong cash flow results, and very few institutions can do that at our scale. June numbers, we focus on a lot. Revenue and our ability to generate cash from that revenue, which is measured by the adjusted free cash flow. In the first half of this year, we did 49% revenue growth, with a 28% adjusted free cash flow margin. And we raised our full-year adjusted free cash flow outlook by 100% to an excess of 300 million from our prior guidance of 150 million.

Great. Thank,. Dave. Shyam, coming back to you, Mohamad asks, how fast is the business growing? And what are some possible competitive threats to Palantir?

Thanks, Mohamad. So for the 1st half, we grew revenue 49%, we generated 28% adjusted free cash flow margin, and a 33% adjusted operating income. Our commercial customer count grew 32% sequentially, it's up 61% since the beginning of the year. Our U.S. commercial revenue grew 90% year-over-year. The international commercial revenue is accelerating. Our healthcare work is growing. And what you see with all of these things is our growth is only constrained by the envision of our customers. And on the frontlines of COVID, there is no lack of ambition around the vaccination programs or for a clinical R&D project, or the transformation of the commercial supply chain. And what you -- and you see that most clearly with Day Zero companies. These Day Zero companies, they want to accomplish in less than 5 months with the PTS and the Airbus's is sought to do with Foundry over 5 years. And that's the thing I'm most excited about in terms of working with them. These companies are tackling enormous problems on aggressive timelines, and they are planning to all of that on top of Foundry. And so you should talk to them and see what they think about the competitive threats and what their alternatives were. But my distinct impression is that they either build on top of Foundry or they spend a lot more time and a lot more money building something bespoke from scratch on the rep. And I think that's pretty easy decision in their shoes. So simply put the competitive threat is it's cowardice and laziness. And where the customers brave and efficient, we win every time.

Great, Shyam, another one for you Jason asks, it seems the nominee analysts understand what Palantir does. Are there plans for the Company to increase its PR presence, to increase awareness of its business model, which may lead to increase utilization of Palantir 's various software platforms?

Thanks, Jason, I can't really tell you why some people don't know or understand what we do. I can tell you about the people who do not know though. It's the special operators, who chase down Karp to give him up. It's the civil servant who work tirelessly to deliver vaccines in the U.S. and the U.K. it's the French government, as they raise for rents -- are from excluding on the eve of Micron's election. The Germans beliefs to cost the suicide bombers and time to supply chain operators at the World Food Program tackling COVID, escalating impact on global poverty and hunger, the factory workers on the assembly lines from [unclear] to Detroit decided besides it's and clinical R&D among COVID, the hostages in Nigeria who we're rescued, we seem to be clear and crisp by communicating with these folks, with users at the extreme edge, and perhaps be able to talk to them.

Great. Thanks, Shyam. Dave, one for you. Benjamin asks, why has there been a significant increase of insider selling recently?

Thanks, Benjamin. You're referring to the scheduled sales you seen from Harbors a few times a month, each month that started earlier this year. As I mentioned on the call last quarter in Q1, Harbors granted a large number of options 10 years ago that expired in December at the end of this year. In short, if he doesn't exercise the options before then, he will lose all the shares. So far in 2021, Harbors exercised roughly 40 million of those options, selling half the shares, and using the funds to exercise and hold the remaining half. So group as a perspective, [Indiscernible] hundreds of millions of dollars income taxes this year as part of these transactions, and will likely owe a couple 100 million more by the end of the year. For the roughly 27 million options that are set to expire at end of December, he's scheduled to sell half of them, and use upon [Indiscernible] exercise and hold the other half.

Great, thanks, Dave. Shyam coming back to you, Ralston asks, as Karp once said, [Indiscernible] years numbers are lagging indicator of several macro trends at management GAAP rate. What forward-looking micro and macro trends give management confidence that can be leveraged to improving shareholders' value or delivering alpha over time?

Thanks Austin. If I told an analysts or a Wall Street investor 4 months ago, that COVID was not going away, I will have been laughed at. I happen to know this because I did tell them this, and I was laughed at over and over again. Look, Humpty Dumpty had a great fall. The world has changed and it isn't going back. We built software for the world we are in now and the world we will continue to be in. We saw that coming. We anticipated the future needs, supply chain will never be the same, but isn't just about today's shortages. The old world, it's fixated on the accuracy of the forecast. The new world is all about how well you manage the error in your forecast. Error is the signal, the error is the opportunity to win. Healthcare is never going to be the same. Its not just about the vaccine, is going to be about working through the 18-month backlog and the impact on morbidity and mortality from delayed in deferred diagnosis. Energy [Indiscernible] every industry has been transformed. Our customers, they were disappointed and frankly angry by how few of their IT investments over the last decade, rose needed [Indiscernible]. It was a huge market, it was ugly. The reality is that shock will be more frequent. It's isn't a one-off. It's the new norm. Years of investing my mindless inefficiency has resulted in enormous fragility. We are the resilient operating system for the future champion.

Great Shyam. One more for you before we open it up. Steve asks, how will Palantir continue to attract and keep great talent?

Thanks, Steve. Well, this is a question that's near and dear to my heart. I mean, we have such a unique culture and I think -- I can't really tell you about culture. Management can explain our culture. It's something it has to be experienced. It emanates from every core of the institution. And that culture is fueled by our mission. We have slept on concrete floors in Baghdad. We have been on the front lines of fighting HIV, TB, malaria, and Ebola in Africa. We have coded from the factory floors, from Toulouse to Detroit. I can't describe the culture, but I can tell you the fundamental tenants that the culture is symptomatic of. We are an artist calling; we're not a factory. People don't come to Palantir. Don't come to Palantir if you want a predictable career trajectory or some methodical ladder to climb. We don't have that. Some companies are factories. You start up as Software Engineer 1, and if you work your way up, you can be Software Engineer 1 1/2, or something like that. We're an artist calling. It makes no sense to tell Dal Li to paint more like Monet. We are looking for unique and extraordinary people who by definition are going to be uneven and spiky. And we're committed to going on a journey with that, to build a bespoke roll around who they are as humans. We spend so much time thinking critically about our people. Who are they? Who can they be? How do we maximize them and their potential? We spend time thinking about exactly what gamma radiation, your incoming Bruce Banner needs to turn into the Incredible Hulk, and then we eradiate them. Working at Palantir isn't for everyone. But if it is for you, the fellowship is charismatic beyond compare. And you don't get this culture for free. The entropy of the universe is against you. You have to wake up every day and fight for it.

Great thanks Shyam Operator, we'll open up the call for Q&A

[Operator Instruction] And your first question is from Brent Thill with Jefferies.

Good morning, thanks for the caller. The commercial business was impressive quarter-on-quarter. I'm curious if you could just drill in and talk to a little more of the drivers from direct sales build-outs, the IBM partnership to bringing Palantir to everyone. Can you maybe just give us a little more color in terms of what's driving this? And how do you think about the shape of this for the back half of the year? Thank you.

Absolutely. Thanks, Brent. I'll start there. You're seeing the effects of our investment in the direct sales force area. We are really happy about the 100 or so folks we hired in the first half of the year here. They're ramping well. We're getting a lot more account coverage here. Some really big logos in the quarter, FD Edison, National Grid, Avis, Deer. And not just, of course, exceptional strength in the commercial sector, but also, we're seeing that in the government sector as well with new wins like with the FAA. And so, we should expect to see more year -- Of course, channel's contributing. We're really happy about that as they're about 10% of the ad gain from the channel. But really, the impact of the direct sales force is starting to take hold here.

Your next question is from Alex Zukin with Wolfe.

Hey guys, thanks for taking my question. I guess Shyam maybe just first, can you talk about revisiting the question around the percentage of TCB that's coming from the strategic partnerships. How do you expect that to evolve? What are the duration of some of these contracts? That was a pretty striking metric that it was 50% of your TCB was from these strategic partnerships. So just want to get a better understanding of what the overall strategy is for the Company there?

Yep. Sure. So we broke down the numbers a little bit here, and Dave mentioned less than 1% of the revenue came this program in Q2. Additionally, I have the 925 million total TCB in Q2, 543 from the program. Is your questions of long-term strategy the deals are very long-term as well. So we expect some longer duration and time to revenue recognition. Talked about this a little bit, but just to reiterate, the portion of TCB outside of the strategic investments is also very strong, totaling 382 million. This grew on a sequential rate of 33%, quarter-over-quarter. In other words, without the investment program, GP (ph) gross 33% sequentially. And then I think there is a little bit more on the long-term vision here. Dr. Karp has discussed how we're building software for the future in the press and Foundry, the operating system for the modern enterprise. And we're bringing Foundry to people who have the ambition to transform industries and create a new one. We've talked about this, but we're looking at companies in cell-based therapeutics, file and medical healthcare delivery, quantum computing, satellite, electric vehicles, delivering worldwide intelligence from space.

And a lot more. These are companies that have cutting-edge technology of their own. And they're choosing Foundry to help drive their vision forward. And we think many will follow. And our strategic investment program accelerates this.

Your next question is from Keith Weiss with Morgan Stanley.

Thank you, guys, for taking the question. Maybe two questions, one following on Alex's. When we think about the 20 new commercial customers, can you give us a sense of how many of those came from the strategic partnership program? And then, second question, more product related. I know you guys have been doing a lot of work to increase the modularity of the overall platform. Can you talk to us about how that's been progressing and how customers have been adopting that? Has that been part of what's accelerating new customer adoption?

Absolutely. Thanks, Keith. It's a 7 of the 20, I believe came from the strategic investment program. And on the product that I -- we absolutely are continuing to invest in the modularity there. Very excited about that. I discussed some of the evolution of Edge AI. We shared some of the videos earlier on, hope we can to see that. But more broadly, everything from [Indiscernable] date integration,the expansion number systems we're integrating with, accelerating with the archetypes that I talked about the example with the EU Bank, and being able to deploy production, anti-money laundering workflows, compliance workflows in 2 days, which would have taken us 3 months, 3 years ago. And I think the alternatives are the year in the making there. So enabling a bank to buy just the AML answer, instead of say all of the foundries have absolutely spent our time-to-market and is helping us accelerate our customer growth.

Your last question comes from Mark Cash with Morningstar.

Thanks for taking the question. When thinking about the guidance with last 3 quarters of over 30% operating margin, artificially high, and then could you provide some details on the operating margin guidance for the third quarter, but in particular line items are expected to ramp up. And as the low-to-mid 20% range that we should expect as you ramp for Growth in the next coming years?

Thanks, Mark. And thanks for pointing out last three-quarters of 30%. And this quarter, you're strategic. Last three quarters's about 30%. This quarter, above 33%. And I think we're doing that while we are investing in the business. And so, if you look at the 1st half of this year, we added 100 salespeople. Shyam talked about how we're going to really keep that pace up going into the back of the year. We're building lot of structure around them, building out the operations there, well speak on marketing spend, really almost doubled in the Q2 coming off in Q1. We're going to continue to do that throughout the year here and anything beyond. We're going to continue to hire aggressively into product development into other cross business. And so, as we think about the year, we see about continuing to invest, and we're really excited about the next time.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.