Planet Labs PBC (PL) Earnings Call Transcript & Summary

Okay. Welcome back, everybody, Jason Gursky, Citi's Aerospace and Defense analyst. I have the pleasure today of welcoming Planet [Labs] to the stage. And I think most importantly, and I'm really excited to have Robert here with us, given his background. Robert Cardillo is the Chairman of Planet Federal and Chief Strategist of...

Planet at large...

Planet at large.

PBC.

Perfect. Thank you very much. He was also -- I'm going to let him give him a little bit more of his background. But just for some context, you got relatively long career in the government. Most recently, I think as the Director of the National Geospatial-Intelligence Agency.

Correct. '14 to '19.

Yes, NGA, that's one of the 3 letter agencies that very few people really know.

I'd like to stay below the fold.

Okay. It's funny, I tell my team, this is a very interesting industry to follow because we're -- everything that's above the fold is relevant to what we do. So it's really funny that you say that. So why don't you kick it off a little bit of your background? Talk a little bit about the National Geospatial-Intelligence Agency, where it fits in the government would be helpful. Just to help set the stage.

Yes. Well, once again, thanks for having me. Thanks for having us. Thanks for being here. Yes, and thanks for saying I think relatively long career. It was 4 decades. I'm in my fifth now in and around this, what's now a business. When I joined at a college, it was not a business. I'm sure there were companies involved, but you basically were entering into a dark world, both literally and figuratively because you tended to do your work on light tables. So spools of film moving from one side to the other, tended to be collected from top secret satellites with top secret budgets from -- as a matter of fact, the organization that created those satellites -- didn't even officially exist. The National Reconnaissance Office was not an acknowledged entity. So -- and because of the nature of our work, we tended to be in basements or in buildings with no windows because you wanted it to be dark. And so it was literally dark as well. So doing -- and I was proud and enthused to be an analyst and being invited into the one small part of this broad engagement and it was U.S. Soviet competition. The challenge really was, can I get an image of them that's better than the image they can get of me, right? And if we're in this global competition that was predominantly at the military level, that was the way that you created and sustained advantage. You had better optics, you had better return, you had better time lines, et cetera, et cetera. And so that's through the '80s into the late '90s was kind of my core analytic career when I was contributing directly. And about the same time that I was pivoting into what I would call the back office pieces of the U.S. intelligence community, which is Congressional Affairs and Public Affairs and budget preparation and development of programs and doing long-term studies and those kinds of things. It was about the same time the commercial imagery industry was standing up. So the -- we had a presidential directive that made a U.S. policy that it was in our country's interest to create a vibrant and competitive U.S. commercial imagery industry. And so this is way back to QuickBird and IKONOS in those early days of success and failure and something in between. And as I moved into the kind of that last 1/3 of my government career, which was broadly speaking, leading analytic organizations and entities. So defense intelligence agencies, analytic cadre, the Pentagon's Intelligence Cadre, the President's Daily Brief for 4 years from '10 to '14, NGA, of course. But then coming back to NGA as the Director in 2014, I served '14 to '19 and we can talk more about it. But broadly speaking, because I had been born and raised there, I knew the place very well, and I was very proud of what we had done. But I also had a strong sense that or fear that the pride in yesterday would inhibit the future of tomorrow, meaning we would -- we were so proud of what we did yesterday. We defended it quite aggressively. And sometimes, we saw a company or an algorithm, or an application, wait a minute, that's a threat. It's something that could either displace or disrupt -- and so my overall intent was to creatively disrupt what I thought was a false comfort. And I'm sure if you still took a poll today at NGA, some people would say, he over disrupted or under created or something like that, but it's interesting now. I can look back almost 10 years from my beginning. A lot of the pieces that I put in place are still there. The move towards machine learning and again, not to replace the human but to elevate it. I'm quite comfortable that machines are pretty -- very good and getting better all the time at answering 3 questions, what, where and when. You need experts in humans and analysts to answer much more difficult, 2 questions of why and what's next. And so it's not an either/or, it's human and machine. And so anyway, that's kind of how it all came together for me.

Okay. Awesome. And just to kind of educate those in the room that may not be as familiar with the NGA and the NRO today because you're helping to advise Planet Federal, which is, I'm guessing, largely focused on -- D&I customers for the company. So you've got the National Geospatial Intelligence Agency that historically had been responsible for procuring commercial imagery. That's now shifted over to the NRO and they're now responsible for procuring commercial imagery as well as developing and operating the nation's classified satellites?

That's right. So try not to overcomplicate this. The Director of NGA has 2 jobs. One is they run this agency and I'll talk more about what that agency does. But they also have the title of Functional Manager for the U.S. government for Geospatial Intelligence. What that means is they, again, with inputs from the rest of the community, create the standards and the doctrine and the policies and the procedures and the interface definitions, everything that makes it all come together as a cohesive effort. And most importantly, sets the requirements. For the U.S. government. Again, with the input of all of the Pentagon and all the intelligence community, USGS, Civil Applications Committee, all of those requirements come in. Once those requirements are set, if the government decides that it's not commercially available, we can talk more about how that decision is made, that it needs to be government developed, that's when you call the NRO. And you give them the problem, say, look, I need to understand this or I need to be able to sense these kinds of wavelengths at this kind of capability and the NRO goes and figures that out. Now they obviously do that with industry as well. But it tends not to be in the newspaper because it ends up as a classified program. You are also correct, though, that there's also a piece for commercial to contribute to those overall requirements. And yes, that was managed by NGA. It's a longer story why it was managed by NGA. Happy to follow up with. But frankly, in 2017, when it moved from me because I was managing it to the NRO, I think it put 2 things that belong together, together. Now my friends at NGA are still upset, some of them, okay, that we no longer control that contract and run it, whatnot. My view is that NRO is the right place to execute the decisions on what the government builds on top of what commercial creates. I mean, the bumper sticker is, buy what you can, build what you must. Well, the commercial is the buy what you can. And then NRO on top of that builds anything bespoke or tailored. So, and by the way, then that all of that then goes back to NGA because that's just raw data imagery. Somebody has to do the processing, the exploitation, the analysis creating the maps and charts that underpin our navigation and understanding of the world, all of that is NGA then. So -- you start with NGA, they set all the requirements, right? You go out to NRO. They deliver the potential value, and then it goes back to NGA to realize that value.

Okay. Perfect. So maybe describe a little bit about how Planet gets involved in that ecosystem? Where is the company playing today, recognizing that there's the NRO relationship. There are, I think, fledgling relationships with DoD directly as well. But just kind of talk to us how you move around the beltway and what are you up to?

So at the top level, that contract that you just described is called electro-optical commercial layer or EOCL. Is the contract vehicle that moved back to NRO. And again, you heard me, I think it's in the right place. Roughly $400 million a year, a 10-year contract, math pretty straightforward, $4 billion. It's a lot of money. It's a big investment. And with that, the government procures the commercial ability to work down that requirements list, the prioritized requirements list. It was competed 2-plus years ago. 3 primes were awarded. The one that was already there, Maxar, and 2 new additions as primes being BlackSky and Planet. So today Planet is a proud provider into EOCL. It's a 10-year contract, but it's renewed every year. So Planet's renewal will be coming up this summer. The government can make choices each year about allocations and whatnot, but Planet's been proud of its contribution there. But that's a pretty -- as complicated as is, it's pretty straightforward. Government needs this imagery, we compete to provide it, right? So -- but it's imagery. On the rest of your question, where we're finding more I'll say, interest, test and evaluation is on the analytics side. So again, when I joined the business, if you wanted something out of an image, you had to go find an imagery analyst, an expert, right? They would apply their craft and their tools and extract it for you, write a report, et cetera, and hand it to you. The machine is much better at doing much of that, not all of it. And so if you're looking to consume transportation activity or logistics or supply chain or even something like land use, water resources, there's myriad conditions. You can now get a good deal of that through applying compute and computation to the data set. I'm pretty sure I'm right that the largest current government contract on that was -- along those lines is what's called Luno. It's managed and run by NGA. It actually has an A and a B. I don't know why the government did that, but sometimes the government does things for their own reasons, but you should think of it as one total contract. It's an IDIQ contract, which means they will compete and select primes to bid for task orders underneath. Total ceiling across 5 years is in the $500 million range when you add up A and B. It's not $4 billion, but it's a lot of money in anybody's book. What excites me about it is, it's still growing. I mean when I left NGA, that budget was $5 million. So in 7, 8 years, it's $500 million now. I'm not saying it's going to continue on that scale. But I believe that the government is going to increasingly apply resources to those kinds of services because -- let's jump over to the Pentagon, right? They don't necessarily want the image. They want the answer or they want the detection or they want the alert. So it's much more of a service mentality. This creates all sorts of lanes in the road debates in Washington because that's what Washington likes to do about, wait, I'm lead, you're not, I do this, you don't do that. So there is some healthy churn going on right now about who's in charge of analytics, and who gets to procure it for the government. But if I want to project out the next 5 to 10 years, do I think EOCL will still be a big player? Of course, it will be. I don't -- but I see growth in that analytic field. And I think it will come from multiple budgets.

So NGA, DoD...

Pentagon services. Look, I think even places like Department of Transportation, Planet, proudly won a contract called SeaVision a year, almost 1.5 years ago. It's a Department of Transition platform called SeaVision. Underneath it, the U.S. Navy procures maritime domain awareness services. So where they operate, in this case, it was the South China Sea and they competed that capability to provide them with, again, not imagery, but quite frankly, oversight and insight into ship traffic in that region. Planet won the contract by combining with a partner, a software company called SynMax. If we'd have been speaking 2 years ago, I would not have known that company because I don't think Planet knew -- we didn't know each other 2 years ago. But -- what we found is when you apply their software, which wasn't designed for overhead imagery, it was designed for oil and gas exploration in Texas, but somehow it works really well with PlanetScope, and it does a really good job in the maritime domain. So it's a win-win-win for us. And if you think about state of the world and need for confidence in that maritime domain -- that's a pretty big market. And so -- and I forgot one key piece. So won the contract a year ago, November, Navy just decided to not only renew but to expand it. So we're doing well against it.

Okay. As we step back and think about Planet Federal in the context of Planet corporate, PBC...

PBC...

How big is Planet Federal? How important of a piece is this to the company at this point today? And then we're going to talk about a little bit about the future?

I don't know the exact number, but I do know that when I joined 4 years ago, our Defense Intelligence business was in the 20%, 25% total. It's more than half now. By the way, I take particular credit in that. I realize what's -- here's what we say sometimes at Planet. When things are not good for the Planet we live on, sometimes they're good for the Planet we work at, meaning -- instability, insecurity, global migration, challenges, et cetera, et cetera. I just spent the weekend in Munich. We had a lot of meetings. We had more meetings than we've ever had because people are more concerned about their security. And so anyway, yes, over the past 4 years that has risen and it's become...

Okay. So it's a big growth driver for the company. So that's a perfect segue. You mentioned Munich. So today, you are servicing the U.S. customer through various agencies, both delivering data and doing some analytics, both on the civil as well as on the intelligence side of things. Fair to say...

That's right.

That's somewhere from NASA today. And now we've got -- we wake up sometime last week, and our friends are still our friends, but maybe we've got them on the back foot kind of rethinking things. And I suspect any government that wants to worry about the Homeland, first and foremost, wants to know what the heck is going on out there around them in the world. And that's obviously, one area that Planet and some of your commercial competitors can help solve. And in fact, we saw -- 2 weeks ago, I think it was, Planet put out a press release about a fairly sizable contract that they won with an unnamed government customer to build an undefined number of satellites for a foreign government to provide them kind of eyes over the regional world in which they live and Planet will use the excess capacity and other parts of the world. So in a way, the commercial industry can act as kind of an outsourced NRO for a country that doesn't have those capabilities. So I'm just kind of curious, you're coming out of Munich or those conversations that you had, what are you hearing from customers overseas -- potential customers overseas and -- how quickly can that translate into -- you mentioned sometimes things aren't good for the Planet are good for the Planet. When do these things turn into good things for Planet?

So, a couple of things. One, before I go back to Munich, I need to clarify the recent announcement. It actually was between Planet Labs, PBC, public U.S. company and JSAT, public Japanese company. So -- and by the way, even though we didn't announce it in our press release, they announced the number of 10 pelicans. So Pelicans is our next-generation high-resolution satellite. Pelican-2 just went up a month ago. That's -- and so we're still going through the testing and evaluation of that. But it is an exciting model in the following sense because what JSAT gets for the $230 million over a 7-year period, is the services of 10 Pelican satellites as they come into their area of interest.

So can you tell the audience JSAT, Japan.

It's the name of the company. Yes.

Okay. But it's based in Japan?

That's right. It's a Japanese company -- because of licensing and because of export regulations, JSAT will form a U.S. entity. So it will be a U.S. to U.S., Planet will build the satellites. We will get them launched and we'll get them licensed, and we will operate them for JSAT. And then JSAT will have all of that imagery to sell into their market which, again, I presume the Japanese government would be a part of that, but others as well. And then as you said, outside of that Planet would be able to commoditize. So it's -- look, it's -- we think it's a win-win. We think it's a good deal for them. We think it's a good deal for us. And so there's -- I think there's more that can be done there. Back to your question or the reality that I experienced in Munich. I mean, won't even come close to the politics here, but the clear message to Europe is you've been over relying on us and/or we've been overspending on you, take your pick. We are going to ratchet back, right? You need to pick up more of your own defense and capabilities. Okay? Everyone knew that was coming, that came. It got delivered. And so there's a -- I don't know, there are stages of -- as you digest that information, but let's face it. From my seat, I think Europe will take on that load. I think they will step up to the challenge. But even if you can imagine a world in which you make the budgetary changes that are necessary to create more potential defense acquisition capabilities, those things don't happen overnight. And if at the end of the day, you're talking about hardware, whether it's planes or tanks, the missiles, et cetera, we're talking years to do that. I think the reason why we got more meetings than we ever had before is because you could turn to a company like Planet and almost immediately.

Turn it on.

Right. increase your information awareness, which could lead to better preparedness, which could lead to better security. So there's a -- there really is a software component to the security dimension and I think this is my fourth year going to Munich with my Planet hat on. And what I felt that was different this year is every year, we'd make our argument. We've got this global scan. We can provide you with an information service that provides you these alerts and detections, and it was theoretically interesting but it wasn't actually interesting. You know what I mean -- and this year, it felt quite different. And we had, again, more and better, more what I would call constructive meetings with, more substantive follow-up. And if Europe follows the path that we're -- that I talked about earlier at the Pentagon, I suspect we'll move into at least in some ways. Test, the demonstration of pilot. Obviously, we'll have to show that, that theory does apply to the value proposition that I described, gives them more awareness and confidence in security. But I'm quite confident we'll deliver on that.

Yes. When you think about NATO today, stripping out NRO assets and things that the United States might be contributing to that. What types of indigenous capabilities are there amongst the other countries in NATO?

Well, it depends -- so it depends how -- NATO is such an interesting entity because it's 32 nations, right, coming together for collective security. And part of that security comes what nations actually contribute to NATO. So there are things that really get NATO stickers and NATO license plates and all that. So that's the members' contributions. But relative speaking to what the countries hold. And by the way, that's Germany, France, U.K., U.S., not just us, most of the capability is kept sovereign. But it's committed to mutual defense, which is why NATO is so effective because no one has ever attacked a NATO member. Well, I take it back. The only time that the Article 5, which is the self-defense was 9/11. So NATO invoked it once, which was in our defense because we were under attack. But back to your question about, so what does NATO have? It's interesting...

Or the NATO countries, I guess, it's...

Look, Germany has a healthy SAR capability. France, Europe has EO through Airbus. Italy is a strong competitor. Finland is very strong in the SAR game. So there are very good capabilities to be sure what -- and by the way, we had multiple NATO meetings over the weekend as well. They do have a bespoke program. It's called APSS, Allied Persistent Space Sensing. Awkward acronym, but it is what it says. Okay, they're trying to put together a services capability. Planet is one of the awardees. We're actually the first awardee under the APSS contract. But I will -- full disclosure, it is their version of a test, evaluate, land, expand. So I think they're using APSS to understand how they can leverage commercial companies as a way to provide a -- I'll say an umbrella of understanding across all NATO countries. But clearly work-in-progress. But look, I'm confident that those kinds of efforts will pick up given the shift. We can't rely on the U.S. as much as we did prior.

Yes. So the conversations that you had then last week are, are we delivering pixels? Are we delivering analytics? Is it both? What do you -- how do you think this plays out here in the near term for?

So for now, it's both. But to me, there's no way that pixels will scale because they don't have the capacity to do...

Any...

Process, I mean it's -- NGA is rather unique. Now do the Brits have a version of Geospatial Intelligence Officers? Of course, they do. There's Germany and France, but they're not at that scale. And so -- and especially now, too, I mean, this is the good part about NATO doing this now. They almost have a clean sheet of paper, which is an advantage. Sometimes when you have great histories, I told you earlier about how the past can inhibit your future. I think the fact that NATO has a relatively clean sheet can help them because -- frankly, my recommendation is a former government official, a current industry member is, go machine first hard, right? Just do everything you can to make sure that the -- every machine readable pixel is done that way. It saves you on human personnel costs, it saves you on time. I think it's, at the end of the day, more accurate. Given the veracity of the models and they continue to improve. So to me that it was a long way of saying, I'm confident NATO is going to head towards analytics services and outcomes. It's easier to combine resources to do that, which is a challenge for NATO. And then I think at the end of the day, it's ultimately easier to share, which is sometimes a NATO challenge. How do we get this back out? And I think if you stay in analytics, it stays at a level in a way that can be broadly shared.

Yes. And do you think there's going to be appetite for U.S.-based companies to be a part of that ecosystem?

I do, but I think U.S. companies should think about European partners. It's just natural, right? I mean, look, we -- again, without being political, the America First is our bumper sticker now. Well, there's -- you can imagine Germany putting up its own bumper sticker, France putting up. And let's face it, every country has that type of -- and should, right, for their own well-being. So to me, I think the answer is, transatlantic partnerships will become more important.

Right, right. Does anybody have any questions from the floor at this point? I want to make sure we're keeping everybody engaged here, so I can certainly keep going. Okay. Well, until somebody yells at us. So I believe the company has made some acquisitions over time, including in Europe, right? So you guys already have kind of a toehold on that side of the Atlantic? Will that be...

We have. The European acquisitions were predominantly focused commercial and agricultural, meaning software companies that helped us understand soil moisture and composition and the health of fields and yields, et cetera. And they've all gone into help us create what we call Planets Insights platform. So think of it as a place that you don't have to be expert, but yet you have a problem or you have a project that could be benefited from remote sensing. And again, whether that's fertilization or it's supply chain management or its land-use management. That's the kind of things you would go to the Planet Insights platform for. And both of those companies have fed into that ability.

Okay. Got it. Talk to us a little bit about from your perspective, so we've got -- Europe needs to go do their thing now, and there's maybe a chance for you all to plug in there with both data and your analytics skill sets. Part of what we heard over the last week is the need to focus on the Homeland, securing our borders, Iron Dome and then the 2 things that have kind of come top of to the front fold of the page for, I guess, top fold and then the Indo-Pacific. So maybe start with what's going on here at the Homeland. Where can Planet get involved in helping to secure the Homeland as defined by the current administration?

So it's a good question. I actually have a meeting on Monday, just to your question in Pentagon on that end. It isn't obviously clear. But let me just give you kind of a general value proposition and you can apply it frankly, I think, to issues such as border protection. But more broadly, you should think of Planet when you want to get "left of the problem" meaning you want to go further back down that problem chain. To put it another way. Planet is not going to be all that helpful on the border. There are other capabilities. There's other sensing, there's other ways that you can secure [border]. But one downstream effect that could result on the border is instability or food and insecurity or water and security. Anything that would cause the movement of populations. And so Planet is relatively good at looking at the health of an agricultural sector or the strength of a water supply and those kinds of things. So Think of it as giving you early indications that, okay, it's not tomorrow, but that stress that we're seeing in that ecosystem could result in humans saying, I can't live well here. I'm going to make a move. So in a military sense, we would call it indications and warning. I don't know what you call it in the human population, it sounds a little draconian. But if I could, though, on Iron Dome, I would say the same thing. Planet isn't going to help in that Iron Dome piece of it, which people know is kind of the way to defeat an incoming missile with some sort of piece of defense, counter strike, Interceptor, et cetera. I do believe that Planet could be, could be, a contribution way to the left. So what are the very early indicators of potential hostile threat via some sort of missile strike? And here, I won't go into any specifics because they're all rather sensitive. But I guess it does lead me to say, though, I think one of the kind of the core value propositions of what Planet does that still no other company in the world does is that global daily scan. And I think it's healthy to think about that scan as people think about peripheral vision. I mean you and I are having a conversation, so we're focused on one another. And I'm getting feedback from your body language, and I'm trying to use my hands to help explain a point, et cetera, it's what we're focused on. But if somebody had a tomato in their hands, and I hope no one does right now, and they start wheeling back, one of us is going to go wait a minute, there's -- that is a tomato, and I'm going to do this, right? So -- in many ways, I think of the PlanetScope scan is that peripheral vision, right? While you're focused on your priority, whatever that is, conversation or -- you describe as -- or consider to be your biggest threat. There's a whole world going on around that. And so there is a missile threat to the U.S., there are entities out there that are not positively disposed to our country. North Korea is an easy one to pick. It's very clear that they have different views of the world than we do, and they have a capability that they've actually threatened us with. Okay. we should do what we can to protect ourselves to that -- the reality, the distinctness of that particular threat. But there's a whole chain of events.

Leading up to that.

Leading up to it. And that's where I think the Planet strength is, is in that leading up part.

Okay. Fair enough. So let's move over to the Indo-Pacific then. You've got the JSAT agreement. I don't know that the company has ever disclosed how many international customers it's working with on the D&I side, the defense and intelligence side, but I've...

I'm guessing, they haven't. I'm guessing I won't.

But I guess where I was going to go with it. I suspect though that there is continued growth opportunities for the company beyond JSAT.

Well, look, again, as proud of as we are with that deal. And again, it wasn't directly involved with the amount of work you can imagine that went in. It's a very complicated deal. It's very mature customer who's got very deliberate procedures. And so that was a lot of work to do to get that done. But as I said earlier, at end of the day, we think it's a win-win. Obviously, we're going to explore opportunities as they come up. I suspect that before we announced that deal, people probably didn't think of Planet as being interested perhaps in those kinds of arrangements. So I think 2 things are going to happen. One, I think Planet is going to recognize a return, a benefit from that model. I think Other countries may lean in a little bit more to ask questions about how it works and how it might apply to them. So I think the answer -- well, yes, we'll always explore them. Remember that SeaVision contract that we won is Indo-Pacific. It is for the command there. And because it's, to me, a very kind of a keynote account. I think there's lots of opportunities to scale there as well. I mean, not necessarily -- I mean, yes, in that region, but also globally. Because to me, if you can support such a demanding customer of U.S. Navy, if you can do it in the most demanding area at South China Sea, it's worth considering where else it could be applied.

Right. The last 30 seconds we have left here, your strategy hat, at the corporate level. Just kind of curious how you are viewing the market overall, commercial, [C&I] where do you -- where should the company be spending its time and investment dollars at this point from a strategy perspective?

So look, as you've noted and as we've discussed, the market growth has been in the Defense and Intelligence side. For all of the speeches about we're getting out of Europe, it's looking like the U.S. defense budget is going to rise yet again. So I don't see any lessening of the demand there. But going forward, where is the next SynMax? Where is the next partner that can unlock the potential value that we didn't know we even had in maritime domain 2 years ago. I mean it was that much of a discovery. And as I think about ground monitoring and large area surveillance and alerting, yes, for defense, but also for commercial -- for supply chain risk and for insurance. To me, I think that's mostly going to come from finding those partners. And so to me, the strategy needs to be, how do we interact with -- how do we do the testing and the evaluation to understand who can best help us unlock that potential.

Okay. Perfect. Thanks, everybody, in the room for hanging with us. Robert, as always. Great to see you. Really appreciate the time.

Thank you. Yes.