Planet Labs PBC ($PL)

Thank you for joining us, and welcome to the Planet Labs PBC First Quarter of Fiscal 2027 Earnings Call. [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 First Quarter of Fiscal Year 2027 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 Planet 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 such 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 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 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. Planet had another excellent quarter, delivering record revenue and signing an 8-figure deal with an international customer. We also successfully launched 3 additional Pelican satellites, including one for Sweden, their first sovereign reconnaissance satellites, just 4 months after contract signing. To briefly summarize the results, we generated a record $94 million in revenue, representing approximately 42% year-over-year growth. Non-GAAP gross margin was 56% for the quarter. For the third sequential quarter, we achieved Rule of 40, which is our revenue growth rate plus adjusted EBITDA margin. End-of-period backlog was approximately $906 million, equating to approximately 72% growth year-on-year. Defense and Intelligence continues to be an area of strength for us, underpinned by the geopolitical backdrop. First quarter D&I revenue grew over 65% year-on-year, driven by strong performance in our data subscription solutions and satellite services. I'd like to highlight a few recent customer wins with the U.S. government. We were awarded a 6-month $7.5 million contract renewal by the U.S. Navy for vessel detection and monitoring over key areas of interest throughout the Pacific. As we announced earlier today, the U.S. National Geospatial Intelligence Agency, the NGA, awarded Planet a $21.9 million 1-year contract extension for maritime surveillance under the Luno B IDIQ for advanced analytics for maritime operations and reconnaissance. We also received a new award from the NGA for our global monitoring service to support crisis response. These awards reinforce the U.S. government's commitment to integrating commercial AI-enabled geospatial intelligence into its national security architectures. They underscore our position as a vital partner for customers seeking persistent monitoring to accelerate critical decision-making in a complex arena. We're very proud to have received these awards and eager to deliver for this critical customer. We also continue to see robust international government demand driven by the aforementioned geopolitics. Nations are articulating an urgent imperative to secure sovereign access to space, understand threats in their region, modernize their defense capabilities and maintain their strategic edge. For example, we signed a new dedicated capacity deal with an international defense and intelligence customer. This 8-figure, 1-year contract will give the customer immediate access to dedicated capacity from our satellites in orbit as well as advanced analytical solutions integrated across our Pelican, SkySat and PlanetScope constellations. And also, we're making excellent progress executing against our previously announced satellite services deals. To highlight one prominent example, last month, we successfully launched the first Pelican for the Swedish Armed Forces. Critically, the launch occurred just 4 months after we were awarded the contract. Members of the Swedish delegation attended the launch of Vandenberg and they expressed their excitement and national pride in launching Sweden's first ever sovereign reconnaissance satellite. We're incredibly proud to have delivered it for them and look forward to what we hope is a long and fruitful partnership. We're continuing to focus on execution and delivery for our international customers across the board. We believe our ability to ramp them quickly and address their most urgent needs, whether through immediate dedicated capacity or speedy launch to orbit continues to be a key differentiator for us. With our reliable track record and agile aerospace approach, we're able to deliver a suite of solutions that meet our customers' critical needs. Turning to the civil government sector, where first quarter revenue was roughly flat year-over-year, primarily due to the reduction in our contract with NASA. In spite of that headwind, we've seen some strong momentum with our customers in Europe. To share some recent highlights. we were awarded a 2-year 7-figure agreement with the Greek government in support of the country's National Satellite Space project. Signed through the European Space Agency on behalf of the Hellenic Ministry of Digital Governance and the Hellenic Space Center, this contract will support historical change analysis, trend detection, rapid response during critical events and the integration of satellite data into national monitoring workflows. We won a 2-year 7-figure contract to provide satellite imagery and AI-powered analytics to the State Agricultural Intervention Fund of the Czech Republic. This deal will support the country-wide agricultural payments and monitoring System, serving approximately 25,000 agricultural holdings across the Czech Republic. Last but not least, we onboarded the Scottish Agriculture and Rural Economy Directorate with our partner, Computer Center following a 7-figure award closed at the end of Q4 for PlanetScope data and advanced analytics to support the agricultural reform route map. Plan's deep archive of data and AI analysis will aid in the country's agricultural transition by rewarding farmers who focus on sustainable food production, biodiversity and net zero emissions. Shifting to the commercial sector, where revenue grew over 20% year-on-year, reflecting the focus from our teams on landing and expanding in large opportunities and leveraging AI-enabled solutions. We saw positive trends in the agriculture sector, reflecting our shift in the sector to align our business model with that of our ag customers, focused on improving yields and decreasing costs. We also had our first maritime domain awareness solution sale in the energy sector. To highlight a few specific wins in the commercial sector then, in April, Planet was awarded a John Deere Supplier Sustainability Award for 2025. This award highlighted the value of our data empowering next-generation precision agricultural technologies, helping to improve on-farm efficiency and positive environmental impact for John Deere. We renewed our customer Nave analytics. Since 2022, we have partnered with Nave to incorporate our planetary variables such as our surface soil moisture and biomass proxy into their data fusion framework. Nave's products provide farmers and their trusted advisers with near real-time streams covering all components of the field, water balance, planting and irrigation decision risks and operational sustainability impacts. We recently signed Watch Duty as a new customer. Watch Duty is a nonprofit public safety platform that provides real-time wildfire tracking, mapping and emergency alerts, particularly in remote regions of the U.S. where satellite imagery fills critical gaps in radio traffic and on-the-ground reporting. Watch Duty has begun integrating our imagery and data into their platform for a mutual lighthouse customer in the energy sector. We're excited about this new integration and look forward to building on this foundation. Finally, supported by funding from the Bezos Earth Fund, Planet's tropical Forest Observatory program is providing 15 environmental and research institutions with 12 months of monthly Mosaics and PlanetScope data. These broad area monitoring products are utilized to track changes across the Amazon Biome, empowering those institutions to help hold and reverse tropical forest loss. Turning to product updates. Firstly, in AI, one of our key focus areas for the year. We recently started early customer access through a private beta testing phase of our new AI app, a pioneering tool aimed at making Planet's massive global data archive querable through natural language. By leveraging Planet's daily data and integrating large language models, it can help nontechnical users to search the data through space and time, conduct complex time series analysis, generate answers and produce automatic insights and even analytic reports at speed and scale. Although the app is still in early testing, we're excited about how it can help accelerate the expansion of our business into new markets, and it has the potential to significantly lower the barrier to entry for new nonexpert users to answer previously unanswerable questions about the world as well as provide the foundations to build bespoke solutions. We also launched a new feature called SuperRres, an AI-powered technology to improve the resolution of our planetscope data into a 2-meter class resolution visual product, providing clarity for human-in-the-loop analysis with speed and frequency. We are constantly improving our data products to be best-in-class and deliver better results for our customers. Just last year, we leveraged sharpening technology to take the resolution of our daily scan from 3.7 meter to 3-meter class product. This year, we introduced SuperRres. And as previously announced, our planned our constellation will be designed to upgrade our daily monitoring data to a 1-meter class resolution product. We recently announced our agreement with our partners, Carbon Mapper and NASA's Jet Propulsion Laboratory to design a specialized short-wave infrared-only iteration of the Tanager spacecraft. This design would expand the swath width of the instrument approximately fivefold, enabling more imagery area per collect. This new satellite is aimed at accelerating and building upon the existing Canada satellite mission by enhancing atmospheric gas detection and supporting commercial use cases like fire fuel monitoring. Earlier this week, Planet announced that the Pelican 11 satellite was shipped to Vandenberg Space Force Base in California ahead of its launch aboard the upcoming Transporter 17 mission with SpaceX. This technology demonstration is the first of the Gen 2 Pelican satellites, which are expected to progress to providing up to 30-centimeter class imagery. In summary, this quarter, we delivered strong revenue growth and our third consecutive quarter achieving Rule of 40. Our strong performance in Defense and Intelligence demonstrates the mission-critical nature of our data in a complex geopolitical landscape. We launched 3 more Pelican satellites, including our first for Sweden, and we have many additional launches on deck, including our first Gen 2 Pelican tech demo. Last but not least, our investments in AI position Planet at the forefront of the industry, making planetary scale insights accessible and actionable to more users than ever before. With that, I'll turn it over to Ashley to discuss our financials. Over to you, Ash.

Thanks, Will. The year is indeed off to a strong start, and it's exciting to see the acceleration across the business. Before I dive into the financials, I want to take a brief moment to reflect on my recent trip to Panama for our Planet on the Road customer conference. It is hard not to start with one of our most impactful programs, the work we've been doing with our long-term partner, SC CON and the Brazilian government to fight illegal deforestation. This program began in September 2020 and has grown to support over 133,000 registered users and 730 institutions. According to the updated figures provided by SC CON, as of April 2026, the government's investment of $59 million into the program has generated an estimated USD 5.3 billion in total impact from fines, seizures and asset freezes, while reducing the amount of illegal deforestation in the Amazon from over 19,000 square kilometers in 2022 to under 7,500 square kilometers in 2025, a decrease of over 60% in 3 years. At our event, we also recognized the Panamanian Ministry of the Environment with Planet's Social Impact Award for its pioneering work in protecting the Darien Gap. Utilizing Planet's proactive early warning systems the ministry now monitors over 50,000 hectares nationwide, transitioning from reactive monitoring to a near real-time model and successfully improving response times for fires and deforestation from weeks to mere days. Overall, it was a very successful event with over 150 attendees from industry-spanning civil government to finance, logistics, airlines and education and research. Attendees held from 20 different countries, providing a fantastic opportunity to connect directly with our customers and partners, the people who are leveraging our data to help solve some of the planet's most pressing challenges. Now turning to our financial results. Revenue for the first quarter came in at a record $94 million, representing approximately 42% year-over-year growth. The outperformance in the quarter was driven primarily by new wins. During the first quarter, our Defense & Intelligence sector revenue grew more than 65% year-on-year. The commercial sector was up more than 20% year-on-year, and civil government revenue was approximately flat. Turning to our regional revenue breakdown. Growth continues to be distributed around the globe. During the quarter, revenue growth was approximately 25% year-over-year in Asia Pacific and North America, 86% in EMEA and 7% in Latin America. Before I turn to our ACV metrics, I want to remind you that our ACV metric excludes Satellite Services, which, for the purposes of our financial reporting, we define as sovereign satellite ownership, direct access services and managed operations. Our ACV metrics do include dedicated capacity contracts as they are delivered using Planet-owned satellites and infrastructure and revenue for these services is recognized ratably. Recurring ACV was 99% 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 92% of our end-of-period ACV book of business consists of annual or multiyear contracts. Net dollar retention rate at the end of the first quarter was 113%, and net dollar retention rate with win backs was 114%. Our non-GAAP gross margin for the first quarter was 56% compared to 59% in the first quarter of fiscal '26, reflecting investments in support of our satellite services contracts, new satellite launches and our AI-enabled partner solutions. Our gross margins came in better than expected, driven by the strong bookings and our revenue mix in the quarter. Adjusted EBITDA loss was $1 million for the first quarter better than expected as the revenue outperformance largely dropped to the bottom line. Capital expenditures in Q1, which include our capitalized software development were approximately $18 million. This was on the lower end of our guidance range based on timing of procurements. We expect CapEx to increase in future quarters as we lean into market demand, scale up our manufacturing capacity in San Francisco and Berlin and build out our next-generation fleets. Turning to the balance sheet. We ended the quarter with approximately $731 million of cash, cash equivalents and short-term investments, an increase of over $500 million year-on-year, driven by our issuance of convertible debt positive trailing 12 months free cash flow and approximately $108 million in proceeds from exercises of our public warrants. During the quarter, we generated approximately $15 million in net cash from operating activities while free cash flow was a negative $2.5 million. At the end of Q1, our remaining performance obligations or RPOs were approximately $816 million, up over 80% year-over-year, of which approximately 35% apply to the next 12 months and 66% to the next 24 months. We estimate our backlog, which includes contracts with the termination for convenience clause to be approximately $906 million, up approximately 72% year-over-year. Approximately 40% of our backlog applies to the next 12 months and 69% to the next 24 months. Let me now turn to our guidance for the second quarter and full fiscal year 2027. In Q2, we're expecting revenue to be between $102 million and $107 million, which represents approximately 42% year-on-year growth at the midpoint, driven by strong bookings growth and delivery on our backlog. We expect non-GAAP gross margin for the quarter to be between 52% and 55%, a modest step down from Q1 as a result of our satellite services execution, the mix of deals with AI-enabled partner solutions and increased depreciation from the recent launches of our Pelicans. Q2 adjusted EBITDA profit is expected to be between breakeven and $5 million, reflecting our investments to drive sustained growth. We are planning for capital expenditures of approximately $21 million to $27 million in the quarter. For the full fiscal year 2027, we are raising our revenue expectations to be between $425 million and $441 million, representing approximately 41% growth at the midpoint. We believe our Q1 performance and backlog provide us with excellent visibility to our revenue projections. The visibility enables us to shore up our growth expectations for the year and provides us with the confidence to invest behind initiatives to sustain high growth in the future years. Our non-GAAP gross margin for the year is expected to be between 52% and 54%, better than our prior expectations. We anticipate margins will expand in subsequent years as we realize returns on our growth investments. We are maintaining our prior expectations for fiscal year '27 adjusted EBITDA profit to be between breakeven and $10 million, reflecting our desire to drive 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 calculated as 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. CapEx recognition can vary quarter-to-quarter based on the timing of our procurements, launches and real estate build-outs. Even with these operating and capital expenditures, we expect to be free cash flow positive on an annual basis again in fiscal year '27. As a reminder, while free cash flow can vary quite significantly quarter-to-quarter based on the timing of cash collections and capital outlays for procurement, our focus remains on generating sustainable annual free cash flow through efficient growth in revenue from our Data Solutions and satellite services. In closing, the incredible start to the year is a testament to the growing global demand for high-impact geospatial data and sovereign space capabilities with record first quarter revenue and a 42% revenue growth rate, we are demonstrating the ability to scale the business and expand our market while maintaining financial discipline as evidenced by our Rule of 40 performance and improved full year guidance. From Brazil to Sweden and around the globe, our work is yielding tangible ROI for both our customers and our planet. As we lean into a strategic investment cycle for our next-generation satellites and pioneering Geospatial AI solutions, we remain steadfast in our commitment to turning daily global change into actionable intelligence. We are well positioned for a year of delivering durable revenue growth and sustainable annual free cash flow, building our momentum as the indispensable data layer for a changing world. Will and I are once again blown away by the excellent performance and constant innovation of the Global Planet team. Thank you for all that you do. Operator, that concludes our comments. We can now take questions.

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

Maybe if you could talk about the remaining opportunities like all within the context of -- if you go back to September's Investor Day slides and call it, roughly $3 billion to $4 billion pipeline, can you maybe rank order the remaining opportunities among intelligence customers and maybe split that out between international and then U.S.? And then if you can provide any color on kind of how you think about maybe near-term award opportunities and how it splits within that matrix?

Do you want to take this one?

I mean, obviously, Colin, we're not going to give too much color on the specifics of our pipeline. What we say is it continues to be robust. We updated last quarter that it had increased our Analyst Day, and we continue to be very well positioned just with the proof points that we actually already have. As you recall, when we signed the opportunity with the funded by the government last summer, we were able to get them there for satellite on the next rocket launch. And with Sweden, we similarly just announced that the first satellite for their contract went up on our most recent launch of 3 Pelicans. So we are very well positioned on the basis that we've got great solutions. We can get these customers up and running on our data and AI-based solutions very quickly, while we also rapidly move them through our pipeline of production or a production line to get their first sovereign satellites into orbit. So strong pipeline continues to be very healthy. It is balanced geographically and then I think Planet's well positioned. Anything you'd add, Will?

No. I mean I think it's just -- we're seeing really robust demand here. And we said last time how that had increased in at least qualitative way and both in size and in a number of deals. And Ashley is pointing out, I mean, what we have here is that we can execute really fast. Countries really like that. They can get immediate access to a satellite they're in orbit for both the data and the AI-enabled solutions and quickly get sovereign satellites up in space and the 1 with Sweden, I was to point out is a great example. They got immediate data services from our satellites and then within 4 months the first sovereign satellite in orbit. I mean, basically, we're the only ones that can do that, it's really unheard of traditional aerospace industry would take years, normally decades to do that sort of capability. And here, we are offering that just 4 months after signing a contract. So that's unprecedented in the sector, it speaks to our differentiation and that's why governments are coming to Planet for that kind of solution.

That's great. No, I appreciate the color. And then maybe pivoting over to data centers. If you could talk about kind of any color on initial discussions that you and Google are having with the chip suppliers? And then maybe talk about kind of what do you think are the key engineering signposts that investors should look for as Planet on-ramps for orbital compute?

Yes. Well, it's a very exciting area. Obviously, what we're doing with Google is an early tech demo. And on the chip side, it's all leveraging their TPU architecture, testing those working space, which is 1 of the questions, I'm pretty confident about that side of it. But we're also testing things like inter-satellite links because we will be formation flying these sort of satellites together and other technologies, radiation the radiators for the power, and that's one of the other core technologies that we have to develop a little bit here. I mean, well, stepping back a little bit, what I'd say is that it's very clear to me that the -- this is going to make sense fiscally and from an engineering standpoint, within 10 years, it will definitely be cheaper to do it in space than on the ground as to exactly how fast we can do it between now and then. I think that depends on some of these engineering questions that we'll be tackling in these early tech demos. So again, early days, but a really exciting field and you see there's a lot of players going into it, and we think Planet is well positioned because of our history of doing hundreds of satellites before 1 of the few players that have done that. We've already put fast computers, GPUs and video GPUs in space. We already do a lot of stuff with AI, as you're all aware. And so we're well positioned for this sector.

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

Great. I wanted to first follow up on the orbital data center. In your kind of early work around the engineering, do you have a sense on what kind of compute density is realistic in the next couple of years? And I think the framework has been through around kilowatts per tonne. And so any sense on what you guys are seeing there? Is it realistic would be like 80 or 100? I'll stop there for now.

Thanks for the question, Edison. I mean I'm not getting those sort of technical specific to this stage. I mean, remember, this is really, as Google put it, a moonshot at the present time, it's going to be an iterative project that we iterate the capabilities in space. But I will point out that there's several interrelated challenges to do with compute radiators and the interconnect between all the different satellites as well as their computers on board any one satellite, there will be multiple. And that complex trade space, I think a lot of people are focused just on the launch costs, but it is a lot to do with the efficiency of your chips and because the excess energy you have to give up in here, you have to radiate out. And so efficiency of chip space is a really important part as well as the networking of those together and the firmware to optimize all of it. So it's a very complex trade space. And one of the things Planet is really good at is that sort of thing and doing really good systems engineering to bring down costs for that sort of space gas system. So again, early days, but those are the kind of problems we're tackling.

Understood. And then I wanted to ask you about the [ SAs ] you put out very, very recently.

Yes. From Planetary intelligence, yes.

Yes. And obviously, I think very profound and I think thought-provoking ideas. I guess in a more kind of operational sense, what do you think is kind of the next, call it, 2 to 3 years, how do we see that sort of manifest either in the business or industry? Like what are some paths you could envision to see that benefit more on like commercial or operational basis?

Well, I mean, that's very much the first part of what I was talking to in that Planetary Intelligence SA, which is the merger of Earth imaging data with AI and the large language models really unlocking the value latent in earth imaging data in new ways and lowering the barriers to entry. And I think that's what is most exciting, it doesn't depend on the future phases of compute in space or something. I think that, that sort of super chases this when we get to that phase, like it's natural that sensing for -- at the planetary level of that space. We've done that for years, the compute is going to follow, and they will lead to this sort of new Planet intelligence era. But way before that, right now, earth imaging data and other sort of space data sets and AI enabling us to do more real-world models, more real-world models open up real-world applications on the ground today in farming, in energy, in insurance and so on. Most of the entities that we serve today are big governments, big enterprise commercial players and this in principle can enable that to be lower, right? And I think that's the most exciting thing now. And so that's what we're mostly focused on. But it's cool to do the tech overs for computing base as well because of the long term that could be very exciting too.

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

Will, on the AI side, interesting exceeding you've got the beta program now up with the natural language query. Can you just talk about the scope of the trial? How many participants, thoughts on when that goes GA? And I'd love to hear is kind of maybe your mind, what are a couple of more compelling use cases you're seeing people playing with right now?

Well, firstly, it's very early days. So let me just say -- I mean we're in a beta testing mode, as I mentioned in the prepared remarks. And again, just like the answer to the prior question, this is about unlocking the latent value in our data more easily and more simply. -- especially expanding the number of users that could get value out of that really fast speed, scale and simplicity basically, all in one. And -- but it's early days in the testing. So I'm not going to get into specific numbers, but we have a cohort of beta-testers just so that we can find where the best value use cases we could dive into and how do we improve that product so that is better able to serve those use cases. So very early days, but what's tantalizing about it is the Planet historically has faced the solution gap is that our data in principle can answer a lot of questions. In practice, it's difficult. You have to build these solutions. We've been focused on these AI-powered solutions, especially with defense intelligence, MDA, GMS. In principle, this direction can help a lot of others by enabling people to be able to build bespoke solutions on top of our data leveraging this kind of technology, which can unlock that for a lot more players. And we know that value is there. and AI is ready to help us to get to that quicker, I think. So that's the exciting thing, and it's also where Planet is so uniquely positioned because all of this is because of our daily scan. Our daily scan is really so unique because no one in the Earth Observation sector really is doing that sort of daily scan, at least not commercially. And that is the basis for all these applications have got to wider areas where you don't have target satellite, but it already covers all the land you're interested, whether for agriculture, energy and so on. And that's really great for these AI models.

Yes. I mean, I think it certainly has the potential to break up the commercial and civil TAMs. Maybe one last quick one. On the Pelican 1s up and up and ramping nicely 50 centers, -- you talked about the tech demo Pelican 2 going to 30 centimeters. Just any crude swags on kind of based on prior experience, how long you would expect to tech demo for and broad brush sort of strokes on when you think those Pelican 2 to start going up commercially?

I don't comment on that specifically, but we have got a bunch more launches this year. We are ramped and at pace on the Pelican Gen 1, as you're aware. We already launched 3 of those earlier this year, including that first one for Sweden. And we're excited about that Gen 2, but it is a tech demo at this stage. So a couple of technologies that it has on it is got a bit of a bigger telescope to enable it to get to that 30 centimeters, and it also has a satellite to sell like communications as well as the NVIDIA chips that we're flying with the other ones. And that in combination is what enables the more real-time insights going from hours, latency for getting analysis of after you take a picture to minutes. And so that's the biggest improvement. It's even more important, I would say, than the resolution improvement, although both are important. But we'll get back to you once we get that in albeit start seeing how it performs but we're ready to scale that week to and excited about the program.

Yes. I think it's important just to highlight that across our satellite fleet. As you know, we tend to repurpose a lot of the components. So there's a lot of commonalities even as we iterate on various aspects, whether that's improving latency, improving the payload for resolution. So that enables us to have a much faster pace of iteration than you might typically see in hardware iterations, especially in space. So I would say, stage in, there's a lot of fun stuff coming.

Your next question comes from Mike Latimore from Northland Capital Markets.

All right. Great. Yes. Congrats on the quarter. Over the last several quarters, we've highlighted Europe as being an area of urgency and increasing demand, I guess, is it still kind of the most hot spot within the pipeline? Or is the pipeline urgency broadening?

I'd say it's very global. I mean we have strong interest in Asia, U.S. as well. North America is strong. But I think you're right. Europe is probably our strongest area. EMEA is strong, as you saw in the breakdown very strong growth in that region. And obviously, all of the global interest is driven by a lot of this geopolitical trends. It's driving demand because of political uncertainty. And in this uncertainty, people want their own sovereign space capabilities, the access to information, about threats in their neighborhood and we can provide that relatively quickly and affordably. So countries are coming to us, Europe is perhaps most stressed by that kind of situation. So obviously, that is driving strong demand there. And of course, we also have a very strong European base. We have hundreds of employees in Europe and a lot of facilities, mission control center in Berlin. And as you're aware, we're now opening a manufacturing site for our Pelican most advanced Pelican spacecraft in Berlin as well. approximately doubling our manufacturing capacity. So we're really leaning into that market opportunity, plan is well positioned there as well.

Great. And then on the commercial side, nice change in the trajectory there this quarter. Are the drivers of that change sustainable? Or was there some one-offs in this quarter? How should we think about commercial?

I think it's very sustainable. And one of the things about our agriculture partnerships that we mentioned is that we've really turned it around to a point where we really align that business model with the agriculture partners that we're doing with like the John Deere piece that we announced. As they do well, we do well. And that -- so we took a reset in that area, but now we're growing it. And so we feel good. I'm very happy about that growth as well. Ashley, anything to add?

Yes. I would just say the comments that we made earlier, both around the AI solutions that we have, like things like GMS, our MDA as well as this beta of a new natural language-based interface is really enabling us to engage with customers that haven't historically really thought about how they might integrate GIS into GIS data sets into their modeling and analysis. So even in financial services sector, when you think about what things like GMS or MDA can do really unlocking kind of a view into changes in global supply chains and patterns and understanding when a change in pattern could lead to some type of economic indicator of change or market impact. So we're excited. We are early days in -- certainly in the AI application but also even in exploring how the solutions that we've initially explored primarily in defense and intelligence, are unlocking opportunities for us in the commercial sector. So we remain very optimistic about how the commercial sector can be a major growth vector for us in the years to come.

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

This is Gabby Knafelman on for Kristine. Congratulations on the quarter. Since last quarter, Planet moved from a 14-day delay in Middle East imagery access to an indefinite restriction for imagery in the conflict region. Have you seen any change in customer behavior as a result? And since the news came out in early April and with the recent ceasefire talks, is there any anticipated time line or framework for restoring satellite imagery access in the Middle East?

Yes. Thanks for the question, Kristine. When there are conflict amount where we always have to balance operational security needs for civilians or military person in the area with public interest. And I just noticed something that's, I think, been confused a little bit in the media reporting on this is that all of our core customers continue to have access in that area straight away. It's really about publication that could lead to operational security challenges that folks are worried about legitimately and we're putting a delay in phase for. So most of our core customers continue to have data access. So -- and of course, the intent is to unwind that as the conflict results. And so our stakeholders, obviously, around the board care about this, and we do too. And I think that the strong demand we've seen in the region is excellent despite that. And just so you're aware, we do have a managed access program for media clients as well. It's just moved to a push model, which is rather more similar to other folks in the earth observation sector, where we provide imagery on an as-needed basis. Where we can and where it's not going to hurt security operations in the region. And that means that the articles continue to happen in the press as well.

Got it. That's super helpful color. And a quick follow-up. Defense & Intelligence is clearly becoming a larger portion of revenue and has been the fastest grower for quite some time now. We also highlighted some nice civil government and commercial wins during the quarter. I think as we look ahead, how should we think about the size and growth of Civil and Commercial relative to Defense & Intelligence?

Well, I think that's a question. And the way I view it is long term, I believe the civil and commercial sectors will be bigger than Defense & Intelligence. We're obviously leaning into Defense & Intelligence right now because there is such strong demand, and it makes sense for us to lean in there. We're very needed. But as we just talked about AI, that helps us unlock these other areas. I think that's the right way to think about it. It helps us to accelerate that. And yes, I mean does the breadth of use cases in commercial all the sectors we talked about before, we believe that's many tens of billion dollars of TAM to go after in commercial and civil. And so we're going to go after those. But I think for the immediate focus, Defense & Intelligence is the best place to focus because there's such strong demand.

And also a very sophisticated customer that provides us with feedback that helps make our solutions even stronger, and we think ultimately much more broadly applicable. .

[Operator Instructions] Your next question comes from the line of John Godyn from Citi.

This is [ Jeremy Jason ] on for John Godyn. I just kind of wanted to ask what are the upcoming milestones for the key programs that you're looking forward to? Just for clarity's sake and can you provide any color on like the time line for those?

Which key programs are you referring to? .

Involvement in, for example, Al, you guys mentioned that in the prepared remarks?

Like the tech demos? Yes. So there, we're building our first demo spacecraft scheduled for the end of this year. It's a lot of synergy with the Suncatcher, so we're using the same bus. So as the Suncatcher, that's the project with Google for computing space. same bus, different payloads, just like we did with Tanager and Pelican, same bus different payload, and so we're building that. And we're very pleased with how that's progressing. It's still being built right now. It's early days. So we'll let you know when there's updates.

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

Great. Will, and may be Ashley, if you want to add as well There was a smaller competitor, but a competitor that announced a win in late April kind of end of your quarter, of their own satellite sovereign deal, much smaller than I think you guys have booked, but I was just curious if you're seeing just based on your own success and that being pretty widely known and policies if you're seeing more competition specifically in that space kind of working for government agencies, international, et cetera? And then kind of relatedly, is there a minimum deal size that you all would entertain as far as structuring more where the sovereign or the entity owns the actual satellite, so something more of an JSAT kind of realm?

Yes. Good question. So I mean, look, I don't think competitive landscape has changed very much. I don't know which deal you're referring to, but obviously, there are other players that can build imaging satellites for countries. But really our differentiator, as I mentioned, is proven track record, having launched hundreds of satellites doing earth imaging before and the speed of delivery, the speed of delivery in months rather than years, sometimes decades for these systems. And also cost performance that I would add, having had that long track record, we've got the cost down of our satellite a large -- sometimes these things are radically lower cost. We might be launching 10 satellites at the same cost as people were before or companies were before launching just 1 or more. And so that is -- all those differentiators make us strong in the market. And we haven't had too many cases where we see others competing with us, we feel pretty strong.

And I would just add, we're able to compete on all of the points that Will just made in terms of speed and performance and cost effectiveness. We also are the only ones that can enable customers to get up and running immediately on the network of satellites that we have combination of the daily scan and the analytics on top, which help inform them where to look and how to best optimize the sovereign capabilities as they're building them out. including how they want those in orbit so that they can get the best performance ultimately out of the fleet that we would build for them. And we can very cost effectively get them up and running through a dedicated capacity service or tasking credits so that they immediately are getting the eyes that they need to understand what's going on around them. So it's not just the ability to be best-in-class in delivering satellites, which obviously, we are but it's also the fact that we have the network of satellites and capabilities, the daily scan and the analytics solutions on top of it that bring value on day 1.

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

A question for Ashley on gross margins, surprised to get the upside here. Can you maybe give a bridge or unpack what the upside was on mix? Obviously, satellite services deals, are those lower margins not contributing as much? Maybe help unpack the mix a little bit for us.

Yes. It's my favorite kind of upside. It's sales performance. As you know, we typically for the purposes of our own planning, assume pretty back-half-weighted sales execution that just gives us headroom on that front. And when they bring in something like an 8-figure international deal early and that drives data and solutions revenue, that's very high margin upside in the quarter. So I really attribute this to the excellent performance of our sales team and the delivery teams that get those customers up and running so that we're going from contract to revenue very, very, very quickly. So the business model that we have where delivering data comes at relatively low marginal cost means that when we drive upside on revenue, you see that fall to the bottom line and in this case, it definitely stopped by gross margin along the way and drove up all the way.

And actually, that was for your deal you signed in this quarter? .

Correct.

Your next question comes from the line of Steven Wahrhaftig from Wedbush Securities. Your line is now open.

Congrats on the quarter, everybody. So actually, just a question for you because it seems like there's a lot of different focus is for capital investments. You thinking about the R&D for new AI enable solutions, you're thinking about CapEX ramp. I mean, you really do have a strong balance sheet. So what would you say is the priority from a capital allocation perspective? And then if I can add just one more on to that. Is the company still looking at M&A opportunities? I know that you haven't shy away from it, but I want to get a little more color on that opportunity.

Yes. Thank you for the question. We're obviously very proud of our balance sheet, and it's a great asset, especially when we're delivering such a mission-critical service to really important customers there it gives them a lot of comfort to see that we have both a strong business and a strong balance sheet to go with it. When we think about capital allocation, as you might imagine, we are a very innovative company, and we are never short on ideas. But we always have the customer at the center of what we do and our understanding what customers need that can really unlock market opportunity for us. So I'd say the investments that we're making are really prioritizing growth and market capture. So how can we sustain or even expand our growth rates and then continue to drive high margins. And we gave the Rule of 40 framework, revenue growth rate plus EBITDA margin as one way that we think about making sure that we're balancing, making these investments, but also running a good business that generates profits that generates free cash flow and always has an eye to how we scale our profit margins and free cash flow margins can expand. So a lot of exciting things, incredibly innovative teams, but also really doing it in service of market capture and delivering value to the customers.

And on the M&A side, you brought up, we're mainly focused on execution and have most of what we need. We will do things like the Bedrock acquisition that we did that enhances our AI-powered solutions in really good ways, and that team is working really well, by the way, and very integrated into our AI-powered solutions, especially in the defense and intelligence space. We'll continue to look out for things that could be accretive, especially to the core business product or business synergies -- but again, I think we have most of what we need, and so we're many heads down focused on executing on the deals we have.

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

Just a real quick one. As you have so many things that's going on, especially later in this year with the first half and then subsequent launches to fall in 2027. Are there any stress areas in either the supply chain or launch that could move things around?

Yes, we're seeing launch being -- be a little bit more competitive than it used to be. But Planet is used to working with a lot of different players. We've launched 40 rockets, I think on 10 different launch vehicles. And so we know how to do that, and we have a long history and relationship with various launch providers. And I would also say, despite a little bit of extra competition for the space right now, there's a lot of new players coming onto the for right now. And so we're excited about them, we're excited about what they can offer as well and increased competitiveness in the launch sector. As for supply chain, nothing material to point out, but we -- but one of the things we looked, of course, look at is buying down risk in supply chain by buying components. And that's one of the reasons that we're focused more on growth than profitability where we need to do that to show up risk. Anything to add to that?

No, I'd just say in some of our prior quarters, we've talked about the fact that we've taken up our CapEx, capital expenditures specifically to make sure we're looking at those areas where we can buy in advance to derisk any supply chain but also get better pricing by buying more upfront. So it is something that we keep an eye on and manage, I think, quite successfully. And generally speaking, the team has a very resilient supply chain.

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.

Thanks, everyone. Well, we feel like we had an excellent start to the year, really good momentum. Obviously, on the financial side, it was great that we got the 42% growth, hitting Rule of 40 the third consecutive quarter, $900 million in backlog. We feel very excited about the financials. And obviously, it was great on the Space side, which to have our first launch to send our first Gen 2 tech demo to the launch site, launched Sweden's first, sovereign satellite. So lots of progress on the space side. And on the AI side, and other pieces of the product. We did a super resolution, the beta stage of our app and missing in AI is unlocking a lot of value late in our data. So I'm really proud of the work done in this quarter that led us to all these results. And so thank you to the incredible team and all the efforts that they do to enable us today. Thanks a lot for tuning in.

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