Planet Labs PBC ($PL)

Thank you for joining us, and welcome to Planet Labs PBC Fiscal Fourth Quarter and Full Year 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions]. I will now hand the conference over to Cleo Palmer-Poroner, Director of Investor Relations. Please go ahead.

Thanks, operator, and hello, everyone. Welcome to Planet's Fiscal Fourth Quarter and Full Year 2026 Earnings Call. I'm joined by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook. We encourage everyone to please reference the earnings press release and earnings update presentation for today's call, which are available on our Investor Relations website. Before we begin, we'd like to remind everyone that we will make forward-looking statements related to future events or our financial outlook. Any forward-looking statements are based on management's current outlook plans, estimates, expectations and projections. The inclusion of such forward-looking information should not be regarded as a representation by plan that future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions as detailed in our SEC filings, which can be found at www.sec.gov. Our actual results or performance may differ materially from those indicated by such forward-looking statements, and we undertake no responsibility to update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss historic and forward-looking non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier today, which is available on our website at investors.planet.com. Further, throughout this call, we will provide a number of key performance indicators used by management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks. At this point, I'd now like to turn the call over to Will Marshall, Planet's CEO, Chairperson and Co-Founder. Over to you, Will.

Thanks, Cleo, and welcome, everyone, joining us today. Last year was transformational for Planet, and I'm proud of everything that our team accomplished. We made incredible progress in the satellite services market, signing a $240 million agreement funded by Germany and a 9-figure deal with Sweden, capping off 3 such deals in 12 months. We launched 4 satellites, including 4 of our high-resolution Pelican satellites, invested strongly in AI and announced a cutting-edge partnership with Google to demonstrate satellites for compute and space. We delivered record annual revenue, adjusted EBITDA profitability, positive free cash flow and accelerated our revenue growth. And we laid out a strong foundation for the year ahead, enabling us to continue that growth acceleration. So let's dive in. To briefly summarize the full year results. We generated a record $308 million in revenue, representing approximately 26% year-over-year growth. Non-GAAP gross margin was 59% for the year. Adjusted EBITDA profit came in at $15.5 million and free cash flow was $53 million, representing our first full fiscal year of non-GAAP profitability and excellent milestone for the team as we strike a balance between profit and growth. Q4 was also a record for revenue, representing 41% year-over-year growth and our fifth consecutive quarter of adjusted EBITDA profitability. For the second sequential quarter, we achieved Rule of 40, which is revenue growth plus adjusted EBITDA margin. And on an annual basis, we achieved a rule of 30 in a full year earlier than we anticipated. End-of-period backlog was over $900 million, approximately 79% growth year-on-year, providing us with excellent visibility to accelerating our revenue growth for the coming fiscal year. Defense & Intelligence was a major area of strength for us in FY '26, underpinned by global dynamics. Full year D&I revenue grew over 50% year-on-year, driven by strong performance in our data subscriptions, solutions and satellite services. To recap our role here, Planet Labs was founded on a core mission of making information about our world visible, accessible and actable to help both sustainability and security globally. As the geopolitical landscape shifts, security is an urgent mandate for governments worldwide, and our customers face mission-critical decisions in an increasingly complex and chaotic world, and this mission is critical to them. We view security as inextricably linked to sustainability. Resource scarcity and climate disasters are not just environmental issues. They are direct threat multipliers or even triggers for conflict. The Defense and Intelligence sector is essential to realizing our mission. Our customers rely on us to help identify unknown unknowns, detect changes and warning signals that they didn't know to look for before they escalate into crisis is a critical part of our public. To highlight a few recent customer wins in this area. During the quarter, we received 2 awards from the U.S. Defense Innovation Unit. We were awarded a 7-figure extension of our pilot in support of Indo Pacific Command to deliver vital indications and warnings. The short-term contract demonstrates how customers can leverage planet data and AI-powered analytics to monitor sites of strategic interest for critical changes and threats. DI also exercised an option under the existing hybrid space architecture pilot with Planet for just under $1 million to demonstrate the cutting-edge capabilities for our high-resolution Pelican set lines. During the quarter, NATO's Allied Command transformation also extended its agreement with Planet to deliver persistent space-based surveillance and enhanced indications and warning capabilities. The Board underscores Planet's position as a trusted and essential partner for customers seeking strategic indications and warnings across broad domains. Finally, last month, the U.S. Defense Agency selected Planet as a prime contractor for the Shield IDIQ contract vehicle. Planet will now compete for awards under that program. Turning to the civil government sector, where full year revenue was flat year-over-year to share some recent highlights. During the quarter, Planet was awarded a 7-figure renewal and expansion by the German Federal Agency for cartography and Geodis or BKG. Under the 1-year renewal, BKG will continue its countrywide partnership through which employees have more than 400 German federal institutions gain access to plant data and solutions for a wide variety of uses. As an example, this expansion will allow BKG to track permafrost thawing across the Arctic. In January, we announced an enterprise scale agreement with Slovenia's surveying and mapping authority, to provide comprehensive satellite data and high-resolution task and capabilities across the country's civil public administration in support of agriculture, urban planning and disaster management. Shifting to the commercial sector, where annual revenue was down year-on-year. While this trend was expected, given our increased focus on large government customers and the headwinds in agriculture, we remain confident in the commercial sector as a significant market opportunity for Planet, especially as we continue to advance our AI-enabled solutions. To share a few customer highlights from the quarter, specifically around our work in energy. We were awarded a renewal by San Diego Gas & Electric, which utilizes planet data and analytics to monitor vegetation health and conditions within their service areas to manage risk of wildfires during the dry season. We also signed a strategic partnership with AI DASH establishing Planet as the preferred provider of daily and weekly fuel monitoring data for utility wildfire risk mitigation across North America. Through the partnership, leading investor-owned utilities are already using planet data to identify where and when to deploy fuel treatment resources. Reducing ignition risk and targeting high-priority clearance with Precision that was not previously possible. Turning to our Satellite Services business. In January, we announced a 9-figure multiyear deal with the Swedish arm forces to rapidly deliver a suite of satellites, space-based data and solutions to support Sweden's peace and security operations. In terms of our existing contracts for satellite services, our teams are continuing to execute well. We are progressing with the builds for our contract with JSAT and beginning to serve dedicated capacity under the German funded contract. We're continuing to find that our satellite services contracts are a win-win-win. The customer guarantees their sovereign space capabilities in their desired area of interest. Our other clients will benefit from increased capacity and revisit rates in the rest of the world and Planet receives capital to forward fund our fleet build-outs. They also bolster our data and solutions offerings as countries want both speed and scale of our data solutions and the sovereignty of our satellite services technology. Through our AI-enabled solutions, we accelerate time to value, become more deeply embedded in our customer operations and gain more direct visibility to our customers' operational needs. We're leaning into these synergies across our product offerings. We're continuing to see robust demand from around the world for satellite services, driven by the current geopolitical landscape and the demand for sovereign space systems. Our competitive edge here is twofold. Firstly, our proven track record, having launched over 650 Earth imaging satellites by far the most of any commercial company. Our second is speed. We are able to launch the first satellites within a few months of contract signing, as shown with the partnership funded by Germany, far faster than traditional aerospace. The demand is significant and reflected in our pipeline, which has grown appreciably in both number of deals and average deal size since we spoke about this at our Investor Day in October. We're leaning into this demand by expanding our manufacturing capacity in San Francisco and building out our second manufacturing location in Berlin. On the solutions side, I'm pleased to report that our integration of Bedrock Research is going very well. The team is helping us scale rapidly and deliver AI-based solutions, notably standing up 600 new monitoring sites within 3 hours compared to a week long process when we first launched the service. This deep domain area expertise paired with our ongoing advancements in AI, have allowed us to expand the number of sites we're monitoring around the world, drastically reduce the time needed to implement and enable our customers to scale across broader geographic areas. During the quarter, Plant expanded its technology collaboration with NVIDIA on multiple fronts. With Planet's proprietary data set and NVIDIAs compute, we can enable significant new capabilities. This includes exploring the use of NVIDIA's accelerated GPU-based computing platform for planet data processing, enabling faster, more efficient processing for all of our customers. testing NVIDIA's new though processor for in-space use, enhancing super resolution and other AI processing capabilities and more. As announced earlier this week, we're collaborating to build the world's first scaled GPU native AI engine for satellite data and drive huge advances in efficiency and latency. More generally, we anticipate that AI will be transformational to our business this year. Let me give a bit of broader context. While LLM offer users the incredible ability to have conversations with the text of the Internet, they know very little about the physical world. Real-world models need real-world data and planet has it. Our deep data archive of averaging over 3,000 collections for every point in the [ Elanders ] represents a treasure trove of indexing the physical world and training next-generation models. As Wikipedia was the foundation data set for LLM, we believe that Planet's Daily scan is foundational to real-world models. Furthermore, AI itself is commoditizing software development, making data the key differentiation in AI. And why does this matter? Because it has the potential to unlock a huge market. While Planet is currently seeing tremendous traction for AI-based solutions in defense and intelligence, these developments are making broader area monitoring scalable and accessible for other applications and sectors. Ultimately, we believe this will result in generic applications, democratizing access to Earth Intelligence and unlocking markets far faster. Specifically, we think that more generic AI solutions will soon empower nontechnical users to go from a concept to a bespoke application in under an hour. We expect expanding these capabilities will benefit our current customers and drive new opportunities in markets such as agriculture, insurance, energy, supply chain and finance. For the year ahead, our top priorities are executing against our current contracts across both data and solutions and satellite services and scaling up to capture the massive opportunity before us. We see strong demand, so investing into our growth, including the technology road map. We're doubling our satellite manufacturing capacity. We're scaling our Pelican fleet with multiple launches scheduled this year. We're launching demos of our hour and Sun catcher spacecraft, and we're investing in AI for existing solutions and the aforementioned more generic capabilities. In sum, last year, we saw the start of returns on our investments into satellite services. This year, we expect to see the start of returns into our investments in AI. We sit uniquely at the intersection of space and AI revolutions, and Planet is the first space and AI company. By year's end, we believe Planet's Earth Intelligence platform will deliver transformational global impact as our customers leverage space and AI to transform data into action. We're leaning in to meet the moment and we're playing to win. With that, I'll turn it over to Ashley to discuss our financials. Over to you, Ash.

Thanks, Will. It was indeed a fantastic year, underpinned by strong execution and key wins in Satellite Services. I'd like now to cover the results in more detail. Revenue for the fourth quarter came in at a record $86.8 million, representing approximately 41% year-over-year growth. Full year revenue was $307.7 million representing approximately 26% year-over-year growth. The outperformance in the quarter was driven primarily by strong usage from our Defense and Intelligence and civil government customers as well as new wins that came in during the quarter. During fiscal 2026, our Defense and Intelligence sector revenue grew more than 50% year-on-year. The commercial sector was down modestly year-on-year, and the civil government revenue was flat, driven in large part by the end of our contract with Norway for their NCI program. Turning to our regional revenue breakdown. Growth was distributed across the globe in fiscal '21. with approximate revenue growth of 41% year-over-year in Asia Pacific, 48% in EMEA; 11% in North America and down about 2% in Latin America. As of the end of fiscal year '26, our end-of-period customer count was 897 customers, slightly down on a sequential basis, reflecting our direct sales team's intentional shift to focus on large customer opportunities and leveraging our self-serve platform to provide access to our data for other customers. As a reminder, Planet Insight Platform customers are not included in our end-of-period customer count. Given our focus on larger customers and the shift to a self-service model for the long tail of the market, we believe this metric has become less useful for investors and is not proactively monitored by management. We believe our retention rates on ACV are far more constructive measures of our business health and opportunity. Therefore, we plan to discontinue this metric beginning with the first quarter of fiscal year '27. We continue to see strong revenue growth and thus a solid increase in average revenue per customer as a positive indicator that our sales team's focus on landing and expanding high-value accounts is yielding results. As we shift to some of our ACV metrics, I want to remind you that our satellite services contracts are not included in ACV, although they are included in our RPOs and backlog, which we will discuss in a moment. Recurring ACV was 98% of our end-of-period ACV book of business, reflecting our continued focus on selling subscription data contracts and solutions as opposed to onetime professional or engineering services. Approximately 85% of our end-of-period ACV book of business consists of annual or multiyear contracts, lower than prior periods as we have seen a higher proportion of large shorter-term government contracts signed in recent quarters. Net dollar retention rate at the end of fiscal year '26 was 116% and net dollar retention rate with win backs was 118%. Our non-GAAP gross margin for fiscal year '26 was 59% compared to 60% in fiscal year 2025. For Q4, our non-GAAP gross margin was 57% and compared to 65% in Q4 of fiscal year '25, reflecting investments in support of our satellite services contracts and the mix of contracts including AI-enabled partner solutions. Our gross margins came in better than expected for the quarter and the year, primarily driven by the revenue outperformance in the quarter. Adjusted EBITDA profit was $15.5 million for fiscal year 2026 and better than expected, primarily driven by revenue outperformance and disciplined OpEx spend. Fiscal year '26 marks our first year of delivering adjusted EBITDA profitability on an annual basis a milestone we're incredibly proud of. Adjusted EBITDA profit for Q4 was $2.3 million, also better than expected, marking our fifth sequential quarter of adjusted EBITDA profitability. Capital expenditures in FY '26, which include our capitalized software development were approximately $81.5 million. Capital expenditures in Q4 were approximately $23 million. To echo Will's remarks, we're currently in a growth CapEx investment cycle as we lean into market demand, scale up our manufacturing capacity in Berlin and build out our next-generation fleets. Turning to the balance sheet. We ended the year with approximately $640 million of cash, cash equivalents and short-term investments, an increase of approximately $418 million year-on-year, driven by our issuance of convertible debt and free cash flow profitability. In fiscal year 2026, we generated approximately $134.4 million in net cash from operating activities and $52.9 million in free cash flow, representing our first year of achieving positive free cash flow on an annual basis. Our focus remains on managing the business to enable sustainable cash flow generation through efficient growth across our data solutions and Satellite Services revenue streams. At the end of FY '26, our remaining performance obligations or RPOs were approximately $852.4 million, up about 106% year-over-year, of which approximately 34% apply to the next 12 months and 65% to the next 24 months. We estimate our backlog, which includes contracts with the termination for convenience clause, to be approximately $900 million, up approximately 79% year-over-year. Approximately 37% of our backlog applies to the next 12 months and 67% to the next 24 months. Let me now turn to our guidance for the first quarter and full fiscal year 2027. In Q1, we're expecting revenue to be between $87 million and $91 million, which represents approximately 34% year-on-year growth at the midpoint. We expect non-GAAP gross margin for the quarter to be between 49% and 51%. The step-down is driven by our satellite services contracts, the mix of deals with AI-enabled partner solutions and investments in our next-generation fleets. Our range for adjusted EBITDA in the quarter is expected to be between minus $6 million and minus $3 million, reflecting our investments to drive sustained growth. We are planning for capital expenditures of approximately $17 million to $23 million in the quarter. For the full fiscal year 2027, we expect revenue to be between $415 million and $440 million representing approximately 39% growth at the midpoint. We believe our backlog provides us with strong visibility to our revenue projections, which is enabling us to raise our growth expectations for the year. Our non-GAAP gross margin for the year is projected to be between 50% and 52%, in line with our prior expectations and driven by the forecasted mix of business. We anticipate margins will expand as we realize returns on our growth investments in subsequent years. We are targeting adjusted EBITDA profit for fiscal 2027 of between breakeven and $10 million reflecting our desire to maintain EBITDA profitability on an annual basis even as we continue to invest in our Space Systems capabilities, AI-powered solutions and our global sales and marketing organization. We also aim to deliver a Rule of 40 for this fiscal year, where Rule of 40 is our revenue growth rate plus adjusted EBITDA margin. We are planning for approximately $80 million to $95 million in capital expenditures for the year. reflecting the necessary investments in our next-generation satellites to meet accelerating market demand. Even with these operating and capital expenditures, we expect to be free cash flow positive on an annual basis again in fiscal year '27 with a focus on sustaining and expanding free cash flow generation into the future. As a reminder, while cash flow can vary quite significantly quarter-to-quarter based on the timing of cash collections and capital outlays for procurements, our ultimate objective is generating sustainable annual positive cash flow. To close, the incredible momentum we generated in fiscal year 2026 provides us with a strong foundation for the future. Given the strength of our backlog and our robust pipeline, we have significant visibility into our continued revenue growth and as our revenue scales, we anticipate non-GAAP gross margin expansion as well as rule of 40 for fiscal year 2028 and beyond. This gives us the confidence to invest into the massive market opportunity unfolding in front of us and as Will mentioned, we are leaning into these trends and playing to win. As always, Will and I are incredibly grateful for the outstanding execution, dedication and teamwork of our Planet around the globe. Fiscal 2026 was a standout year because of you, and we're excited for the year ahead. Operator, that concludes our comments. We can now take questions.

[Operator Instructions]. Your first question comes from the line of Colin Canfield from Cantor.

Can you perhaps update us on the timing and the scaling of both the Sun Catcher opportunity as well as what sounds like a pretty nascent due intelligence platform with NVIDIA. And then if you could maybe talk about how much of that was included in the set of opportunities from the Investor Day.

Well, both are very exciting opportunities and in a way, both involve both a space component and an AI component. Let me talk to the Google one first since you brought that up. SunCapture,'s going well. It's early days. Just to recap that project. This is about putting their CPUs into space. It's an early tech demo that is what we're doing right this second for them. It's a lot of interest in that space that you've seen in recent months. It's very exciting. It's heating up. But we're focused on executing towards those research goals, and there's a big potential market there long term. As [ Sun capture ] put it, I think within 10 years, he expects most compute spending to go into orbit. That's a big amount of money. That's a huge, huge market to go after, but we're very early days. So it's exciting. We're staying focused on executing on those early missions. And then to NVIDIA, yes, that's also exciting. It's great to announce that extension of our partnership. It's also a research partnership at this stage. You all know about the fact that we've been putting those NVIDIA GPUs into orbit on our Pelican spacecraft, which is pretty cool. This is actually more focused on the compute on the ground, how we leverage their GPUs, in particular, to speed up our data processing pipeline in an increasingly fast-changing world, people want those answers really quickly. And GPUs have the potential to really speed things up, and we've seen some early results that are very promising where big speed ups like 100x on certain parts of our coding base, getting answers to our clients faster is really important. So research collaboration, they're leaning in, and we are leaning into too. It's very exciting. But as to the revenue implications, I don't know if you wanted to touch on that, Ashley.

I mean I would just remind you that the SunCapture partnership is structured as an R&D partnership. So it's recognized as contra revenue. And with respect to the NVIDIA partnership, that's really just a research collaboration.

Got it. Got it. And then as we think about imputing working capital tailwinds for 2027, is the right framework to think about it maybe as like a percentage of the backlog increase or kind of high level, kind of what are the building box on working capital that we should consider?

First of all, I just want to correct myself. I made a misstatement on my prior answer. It's not contra revenue. It's contra R&D expense. Thanks for letting me clarify that. As for your second question in terms of the building blocks for working capital, obviously, as I said, the -- as we are acquiring investments to execute on our backlog, so that includes all of the capital expenditures we need to make to build out the Pelicans for our customers that obviously will weigh into the procurement quarter-to-quarter. The nice thing about the way these contracts are structured as they typically provide us upfront capital to match the timing of those expenses, at least on an annual basis, there may be differentials quarter-to-quarter as to when we make procurements and when we receive milestone payments. So as I said in the prepared remarks, cash flow is expected to vary quarter-to-quarter, but on an annualized basis, these contracts really enable us to operate the business in a free cash flow positive way.

Your next question comes from the line of Ryan Koontz from Needham & Co.

Congrats on a great quarter and outlook. Starting with maybe some of the segment, what your real strength you saw in Europe in the quarter. I wonder if you can maybe unpack that for us? What were some of the drivers behind that? Obviously, a lot of defense work there, but any kind of color you can give us on the European market and how that's been progressing so well for you?

Yes, maybe I can just kick it off. I spent quite a big fraction of the quarter in Europe going through a number of capital speaking to a lot of our customers there. The demand is off the charts. We are leaning into it as best we can, both for our data and AI solutions and Constellation services. We talked about the interest in that going up. Yes. I mean it's back to the geopolitical dynamics, right? That's what's underneath this and driving a lot of this demand. They need to own sovereign systems. They need it quickly. They need speed and sovereignty. And we can offer both of those things, speed, immediate access to our present satellites, sovereignty building satellites dedicated for them. And even that we can do very swiftly compared with anyone else in our history of having launched under the satellite really puts us in a great position to do that. So that's the sort of demand signal, Ashley, towards the breakdown. I don't know if you want to comment at all on that.

We provide the breakdown in the materials, I would just say, we have historically had a very strong presence in Europe. And have a strong team in Berlin foundationally, and we've built on that with acquisitions that have given us presence in the Netherlands as well as in Slovenia. And that really helps us -- and when we're engaging with governments across both their civil and defense and intelligence needs.

And if I could just add one final thing. Of course, commitment to building satellites there in Berlin. -- adds to that interest, I mean, we both needed it for expanded manufacturing for Pelicans and it lent into the European demand because, of course, that helps connect the dots there.

Sure. That's great. And just any comments around supply chain right now? Is it getting more difficult to acquire the types of kind of key components you need on the supply chain side?

Not really. No. We're not seeing anything material.

Obviously, it's something that we carefully our teams are always seeking to diversify our supply chain sources.

Your next question comes from the line of Edison Yu from Dutch Bank.

Congratulations on the quarter. wanted to come back to the AI element. You talked a little about OM. What's the latest, I guess, status on the entropic partnership? And have we kind of progressed further from kind of just testing or early testing the models of the training?

Yes. I mean, AI, in general, as I said, we're moving from this world of LLM that couldn't tell you about things about the tech of the Internet to how models are increasingly trying to move towards real-world models and real-world models needing real-world data has this stack, if that's necessary. We're doing these research collaborations that we've mentioned and they're very exciting. What they're really building a foundation towards is -- we've been building these bespoke solutions, these what we call AI-enabled solutions for our board area, Planet Daily scan. So the Maritime Domain Aware Solution, the global monitoring solution and the area monitoring solution for civil government. And those are really good and they're starting to take up, and that's what's driving a lot of the great growth that you're seeing in the numbers. But AI has the potential of making that more generic, that is that anyone can turn up, build their own bespoke application of equivalent fidelity in short order, like maybe within an hour and in a completely bespoke way for their needs. That is just on the horizon. And so what we're focused on with those research collaborations is how we can build towards that capability. And that is what -- I mean, what's so exciting about that is the ability to unlock all the potential of our data, especially for commercial and several government markets where we've been less focused of late because of the strong interest on the Defense and Intelligence side, but are huge markets for planner. So basically, that's the direction and leaning of those partnerships is enabling us to build out that capability to expand the TAM.

Absolutely. Just a follow-up on that. Yes. Just a follow-up on that. to -- so I guess, get there, what do you see as the biggest, I don't know if you want to say a bottleneck or thing we should look out for? Is it a question of just any more compute? Is it a question of just takes time more trading? Like how do you think about like the path there and bottlenecks.

It's complex and evolving in that -- the space is changing so fast. I mean, literally, we are seeing capabilities that just a couple of months ago, we weren't able to do because of the advances in -- especially coding. Like that makes it now that you can even build whole applications very quickly. So we are just seeing that potentially take off much faster than we thought there's nothing really standing in the way per se. We have the data. That's the critical ingredient, and it's the differentiating ingredient for AI. And as I said briefly, like I mean, in many ways, AI, it's making commoditizing more the software layer, that's making the AI piece -- the data piece most useful for AI. And so that's very differentiating that we have this unique data set coming into it. So there's nothing holding us back there and it's moving very fast. And that's why I was saying that I think you're going to start to see this come to fruition this year. And so watch this space.

Your next question comes from the line of Kristine Liwag from Morgan Stanley.

This is Gaby on for Kristine. Congratulations. Given your recent decision to extend the satellite imagery delay in the Middle East to 14 days as a result of the ongoing conflict -- have you seen any changes in customer behavior? And are there any potential contractual implications that we should maybe be aware of?

Yes. I mean the short answer is nothing material. Look, -- what we're focused on there is helping our critical customers in the region to the things they need, which is get critical answers fast and trying to help them through that. We're focused and mainly heads down on supporting those customers in this critical time as best we can. The delay is a lot to do with the balance of thinking about those operational needs and making sure we don't put people in harm's way and it's very genuine needs. At the same time, our transparency and accountability mission that we care about and ensuring all of our actors get access eventually. So it's a carefully thoughtful decision, and we're just trying to do our best to help the people that need it.

Great. Super helpful color. And if I could ask a quick follow-up. I mean, you announced the satellite services agreement with Sweden in January. Can you just talk about how you're seeing the pipeline for similar deals progressing relative to what you had laid out at the Investor Day? And what are you seeing in terms of conversion time lines and potential scale of upcoming opportunities?

Yes. I mean, as I've mentioned in my prepared remarks, since that October Investor Day, both the number and the average size of those deals has been increasing. And so I mean just to give you a sense, it is a strong market demand right now, even stronger than we had said then and it's a bit too early to talk about sort of average deal length because it's just -- these are very few in number, right? So I haven't got any comments to that effect. But overall, the demand is very strong.

Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group.

Congrats, a lot here to love. Let me start first with Civil commercial, about 40%, a little less than that as a percent of revenues. What do you think when you look at those markets, obviously, D&I is killing it. You've got a lot of sovereign deals flowing through and it makes sense to be pursuing those deals. I'm wondering how you think about civil and commercial and what dynamics have to play out for those markets to reaccelerate.

Well, as I said, see earlier answer to Edison about the AI piece because that unlocks these things and enable it. And we're just on the precipice of that. And so yes, I see that beginning to come this year. And just to be clear, in my opinion, the biggest markets are those 2 segments, not defense and intelligence. And we think that is a long and sustaining and really great market. And -- but the civil government market is huge. The commercial market is huge. There's so many -- but it's been lacking those critical solutions. Here, we have a generic way of crossing that CASM to the full solution that enables us to unlock that market. And so we know those capabilities that those answers are latent in our data and this gives the bridge to the actual solution that the customers need. So I mean it's back to my earlier point, AI is going to enable it. And I think we're going to see the beginnings of that really take off this year.

Yes. And over to the sovereign deals for a second. I mean, obviously, what 3 mega deals here roughly trailing 12 months, give or take. It sounds like the pipeline has expanded. It sounds like you're thinking deal count should improve. I mean just any other observations on those sovereign deals on the magnitude of the growth in the pipeline? It sounds like it really accelerated even further potentially in the last 90 days?

No, I didn't want to quantify that, but just to give you a sense that it is really growing and it's very strong. And yes, that's it.

And the only other thing that I would add, Jeff, which I think is an important point is that when we are selling these sovereign capabilities, we are coupling with that our data and solutions. And it actually is the synergies across that, that is a competitive differentiator because we can drive value to these customers out of the gate. We can give them visibility and intelligence that they didn't have before as we work with them over the longer-term contract to build out what their sovereign capabilities will ultimately be. And so it's worth pointing out that actually a lot of our backlog growth is in data and solutions. In fact, that part of the backlog has almost doubled year-over-year.

That's great color. Last one, if I could, just on the Owls. Any updates there that you could share?

Yes. I mean we're building that tech demo as we announced last year towards that improved daily scan capability -- the team is working hard on it. It's going well. It's quite an incredible capability that we're obviously building there. Just remind everyone that we're moving towards 1-meter scan rate than 3 meters, and that's roughly 10x more data per unit area of the ground. And roughly 10x improvement in latency as well because they will be equipped with both onboard compute systems as well as satellite telecom so that we can get the data back as well. So those things are all going to be faster as well and so much lower latency at 10x there, too. So it's really a significant improvement on that system. And yes, we're looking forward to launching a demo.

Your next question comes from the line of John Godyn from Citibank.

I just wanted to square off the the backlog strength and all of the positive commentary with revenue guidance. The revenue guidance is fantastic. Don't get me wrong. But even so, it just seems like there's upside to it based on the commentary of incredibly strong demand signals, particularly in Europe as well as the fact that as a percentage of the backlog that you guys have right now, it doesn't seem like the revenue guide is a particularly large percentage versus maybe how you've set guidance in the past.

Yes. It's obviously a good question, John. We're in a really favorable position right now in terms of the level of visibility that we have. Obviously, there's a lot of execution that goes into turning backlog into revenue, and we are laser-focused on that. And in terms of setting guidance, I think what you've seen from us, particularly in recent periods is we try to give ourselves room for the fact that on these big mission-critical types of transactions and contracts, there are things that can shift from quarter to quarter, and we want to give room in our guidance for that to happen so that we can keep our customers front and center around execution. Similarly, we have a great pipeline of opportunity. But when those deals land, given how big they can be. can really impact revenue in the year. And so we tend to assume that new signings are back half loaded, which gives us opportunity to deliver upside if that doesn't end up being the case, if it ends up landing sooner, but it doesn't put us in a position where we're out over our skis in terms of the numbers we've given you.

That makes a lot of sense. It sounds like there are some layers of conservatism in there, which is appropriate, and we'll see how that plays out throughout the year. If I could ask one more. Just in terms of the activities in the Middle East, the conflict there, do you feel that, that has additionally kind of turbocharged the demand for your product in any way? I know the backdrop is strong, but has it -- has that had an obvious impact as sort of a recent event.

Well, obviously, there's a huge amount of focus in that, and we are, but again, as I said earlier, we're just focused on delivering pieces. We're doing mission-critical things. We're trying to focus on that. But we'll see. It's early, early days.

Yes. I think one of the things that we have seen in these types of situations is you do see an increase in usage, as there's just more urgency in getting as much data as possible around the situation. But ultimately, as Will said, situations like this can be very dim.

Your next question comes from the line of Trevor Walsh from Citizens.

Great. Will, you called out the Shield IDIQ in your prepared remarks. Can you maybe just give us a sense -- I know early days on this very large project and a lot of it's sensitive, but can you give us a sense of how you're thinking about that opportunity? Is that something where it's just kind of bread-and-butter Planet Labs earth observation data that you would be providing for that as you go after contracts opportunities there? Or might you look like something more of an the satellite services that you might even just building spacecraft that are fairly nontraditional for you guys, but just being used for all the things that are part of that project?

Well, yes, as you say, it's early days. There's obviously a big opportunity. There's a huge budget behind it. But the specific ways in which we fit in will have to be figured out as we understand the architecture, and they're still working on many of those aspects. There are, of course, ways in which our present data sets could fit into that early warning of certain things, strategic analysis across broad areas that obviously makes sense. But right now, that is merely a vehicle and when we will compete on awards within that, and that's the same for all of the people that have got awards under that system. So yes, but obviously, finding unknown unknowns, there could be specific missions, but it's very early days to be thinking about that. What I will say is that we're continuing to lean into specific opportunities that are very live right now like in with Luno, with our Navy customers and others. So we're seeing a lot of interest in corners around the world. So the department has a lot of interest across the board, and we're leaning into it.

Great. Awesome. Appreciate that. Ashley, maybe just one follow-up for you. I appreciate the color you gave around free cash flow. I know you guys aren't giving an official guide, but just given how strong you guys ended this current fiscal year and as we think about '27, there's kind of -- there's obviously, there can be a bit of a step down from just going from $50 million to something that's just generally positive. So just want to make sure we don't get -- just given the CapEx spend and everything else, if you could just give us a little bit of maybe guard relative to how we think about that for '27? That would be great.

Yes. I mean, first, I'll just reiterate the point that I made. We definitely expect there to be pretty significant fluctuations quarter-to-quarter. Just like I said, timing of procurement versus timing of milestone payments. can cause one quarter to be much more positive and another quarter to be significantly negative. So that's one caution that I provide and that makes it a little bit harder to give very precise guidance around it, which is why I haven't. And to your point, depending on how much more of this opportunity we continue to realize, it would not make sense for us to optimize expanding free cash flow on the year versus setting ourselves up to both deliver against the contracts we have and to bring more on. So if that offers enough color to you without giving specific guidance, which I'm really not in a position to do. We're not focused on kind of sustaining or expanding free cash flow from last year but really focus on balancing it quarter-to-quarter and leaning into the market.

Your next question comes from the line of Greg Pendy from Clear Street.

Just 1 quick one, just that I understand kind of the approach on this year of leaning in, in terms of the commercial and simple side. I mean it's hard to think back, but you did have a cost rationalization program at 1 time. And your sales and marketing is down around 15% from fiscal 2024, yet your revenues are roughly 40%. So is it kind of that the customers through Anthropic will figure out how to use the data and how valuable it is into their daily work flows? Or do you think that you'll need some boots on the ground to educate the civil and commercial markets?

Yes Greg, it's a very good call out. We did realign the team across the board to really focus on where we have the largest account opportunities, which I think did disproportionately impact how much resource we were putting behind going after a more distributed commercial market. And as we said, we were building out the platform to enable smaller customers to really access the data on a self-serve basis. I think as we are growing those markets and leaning into the AI that will highlighted, we will be making some targeted investments in those markets where we're seeing the most traction out of the gate. So we do have feet on the street going and meeting with customers and demonstrating for them. And that is a really exciting part of these new capabilities that we have is we can really show not tell in these customer meetings. All the things that you can -- all the insights you can extract from the data to answer their specific questions. So we did a lot of training with our sales team earlier this year, really showing them how to use these tools and demo environments. Obviously, the world has changed a lot in the last 6 years. You can do a lot of that without putting people on airplanes, but it will require some investments across sales and marketing. And I did highlight that as one of the investment areas for us this year.

Your next question comes from the line of Alex Latimore from Northland.

Excellent quarter. Alex Latimore on here for Mike Latimore. I had 1 question. I just wanted to hit on guidance over time. good raise on guidance. I was wondering if you could talk about what assumptions are factored into that raise on guidance. Does this assume any new 8 figure wins? Or any commentary there?

Yes. Thanks, Alex. I'd say we're very balanced in terms of how we think about those types of opportunities that may be in our pipeline because obviously, those could swing outcomes based on whether they come in or not. So Typically, what we'll look at is a pipeline of opportunity where if an figure deal were to fall out of the pipeline, what type of backup we have for that opportunity and then probability adjusted. So we are definitely looking at active opportunities, probabilities and then giving ourselves room for those deals where maybe we don't have enough pipeline and make up for that 1 landing on time or in the year. which gives us opportunity to outperform? And like I said earlier, it doesn't put us in a position where we feel over our SKUs.

Awesome. And then onee more. I just wanted to hear if there's any footholds in the Golden Dome initiative. I understand there was a $10 billion incremental add to the Golden Dome initiative for space-based capabilities. I'm not sure if you're seeing any demand there for planet systems. But any commentary around Golden Dome would be helpful.

Yes. I sort of said all that I can on that at the minute. It's very early days as they're architecting that system and there are potential, the Shield IDIQ just to be clear, is going down. And so that answer was about that. And again, it's a framework that we have, and now we will bid for actual awards under that program. So -- but we don't know what they are exactly yet than when we do, we will respond. But my earlier answer, the general thing is giving domain awareness and other things that could be useful for that. So -- but we obviously have to see -- wait and see what comes through that.

Your next question comes from the line of Caleb Henry from Quilty Space.

A couple of questions on satellite manufacturing. Actually, first one, sorry, on Pelican. I noticed that you guys lowered 1 of the Pelican satellites, a little past 400 kilometers recently. Is that part of a larger fleet migration to a very low earth orbit -- or is there another way that we should think about that?

Yes. We lower space card, of course, the operational Altus and Pelican part of the reason we call it Pelican was to fly low Pelicans fly low to the water. And so we were mimicking that when we were talking about this, and they have iron engines such that they can fly really low and in time, that is part of the process that gets us to the 30-centimeter resolution target for those missions. But no changes to the plan. Those are just operational adjustments as we will start with the satellite in a slightly higher orbit and bring down to operational orbit as we progress. And by the way, you may just on Pelican may want to look in the associated deck with this earnings -- there's a few really cool pictures of some of the fast response time lines that we had 3 pictures in about a year. It's very exciting to see in about an hour, and I just had a great performance of that system. So it's very exciting and we've got multiple launches for more of those systems going up this year. So it's exciting times. And was there a broader question about the manufacturing?

Yes. I definitely better look through these pictures. But -- looking at the contract for Sweden and tie that into manufacturing, is that -- can you give us a sense of when those satellites are supposed to be delivered and how many satellites? Is that sort of the reason for the the ramp-up in manufacturing space in California?

Nothing specific. I'm going to say specifically to that customer, but we're ramping up because of the demand overall, right? And and we're building fleets from multiple customers as well as for our own system. And that demand is obviously already clear such that we're expanding here in San Francisco and in Berlin.

Okay. And then last question. I was just curious if you could shed more light on what makes 2026 the year. You first anticipate seeing a return on investment on AI. Was there more of an aha moment that happened? Or is this just the natural evolution of the investment and how customers use plan data?

Yes. And that's an oversimplification because I mean we've had revenue from AI a fair bit before. I just -- what I mean is in terms of the big way in which AI can unleash those other market potential. And I think we're going to really start to see those generic solutions that I mentioned, ways in which anyone can turn out, build an application that's relevant to their needs and then start getting value. That unlocks the markets that we've been talking about for years later in our data, agriculture, energy, insurance, finance, so on -- and so I think that it's just more that I see that all the pieces are coming together such that, that will come to fruition this year, and you'll start to really see that take off. Just like the Constellation service or satellite services really started to take off in FY '26.

Thank you. That's all the time we have for questions today. I will now turn the call back to Will Marshall, CEO and Co-Founder, for closing remarks.

Well, I'd just say that, obviously, it's great to see the business doing grade, both in the satellite services and in the AI-powered solutions side. And we're very proud of the financials that we reported today, not just the beating the revenue expectations, but I'm especially proud of the backlog improvement to $900 million and achieving the rule of 40 million again in the quarter. And it really has set us up for a strong foundation for this coming year and given that backlog and confidence in our pipeline, we've projected quite strong growth again for this year, and that's why -- and even for years that follow, which is why we're investing this year strongly into that market opportunity. And like I was just saying this is the year for AI for planet. And I think this bridge of the solutions gap will unleash a huge opportunity late in Planet data. I just want to end by thanking our teams as we started around the globe that have enabled all of us to be possible. Thanks again for joining, everyone.

This concludes today's call. Thank you all for attending. You may now disconnect.