Palantir Remains Focused on Government Sector

After more than fifteen years of remaining private, Palo Alto-based Palantir finally listed last week on the NYSE. Founded in 2004, Palantir has delayed its IPO several times. But even amid the current turbulent times, the company decided to list.

Palantir’s Financials

Palantir was set up by Alexander Karp, Garry Tan, Joe Lonsdale, Nathan Gettings, Peter Thiel, and Stephen Cohen who wanted to build software that could integrate, visualize, and analyze data while delivering security. Initially run as a government supported initiative focused on identifying ways to improve global security, Palantir’s founders soon realized that advanced analytics could also be used to defend enterprise assets. Palantir has since expanded into other industries including defense, law enforcement, and the financial sector to deliver services focused on fraud detection, terror attack prediction, financial crime identification, and helping in fighting widespread crimes and disease outbreaks.

Since being founded, Palantir has kept its financials hidden. It has finally disclosed them to the public as part of its listing for the IPO. Palantir generates revenue from the sale of subscriptions for its software, maintenance services, software licenses, and professional services. For the year ended December 2019, revenue grew 25% to $742.6 million with a loss of $579.6 million.

In the first half of the 2020, its revenue grew 49% to $481.2 million and net loss narrowed to $164.7 million from $280.5 million a year ago. On an adjusted basis, net income was $17.2 million in H12020 compared with a net loss of $167.6 million a year ago.

Palantir has raised $2.6 billion in 27 rounds from investors including True Capital Management, Fujitsu, Sompo Holdings, eBrands.vc, Bracket Capital, SchnidlerAM Ventures, Manhattan Venture Partners, Binux Capital, Oceanic Partners, and SharesPost Investment Management. Its last round of funding was held in March 2017. A funding round held in December 2015 had valued the company at $20 billion. At the time of the listing, Palantir was valued at $22 billion. Instead of the traditional IPO route, Palantir had opted for a direct listing with a reference price of $7.25 a share.

Palantir’s operations have been shrouded in controversy over the past few years. Investors have questioned its willingness to do business with agencies like US Immigration and Customs Enforcement and for a governance structure that gives co-founders a third class of stock that guarantees outsized control.

Palantir’s Government Focus                                                                    

Controversies aside, Palantir is betting on high growth in the coming quarters. For the current year, Palantir expects to record $1.06 billion in revenue, translating to 42% growth rate for the year. For fiscal 2021, Palantir expects to deliver growth rates of more than 30%. While the growth rates are impressive, it is important to note that Palantir expects much of this to come from Government agencies, resulting in continued secrecy and higher dependency on the sector.

Palantir is heavily dependent on government agencies for its revenues. Revenue from government contracts accounted for 53% of its revenues for the last fiscal. Its top three customers, in fact, accounted for 28% of its revenues in 2019.

It is still early days for the stock. It is currently trading at $9.90 with a market capitalization of $21.8 billion. The stock had climbed to $11.41 on the day of its listing.

Photo Credit: Cory Doctorow/ Flickr