What happened
Recently IPO'ed Earth-imaging satellite company Planet Labs PBC (PL) made its first earnings report as a public company last night -- and it was kind of a disaster.
As of 11:30 a.m. ET, shares of Planet are down a staggering 18.5%.
Image source: Getty Images.
So what
So how bad was the news exactly? For fiscal Q3 2022, Planet reported record quarterly revenue of $31.7 million, up 16% year over year, with 94% of its revenue coming from recurring revenue streams (up from 93% a year ago), and customer count growth of 32%.
Gross profit margins climbed 7 full percentage points to 34%, and "non-GAAP" (i.e., pro forma) gross margins were 35%. Nevertheless, Planet lost $41.5 million in the quarter -- 31% more than the revenue it took in.
Finally, Planet guided investors to expect that in Q4, it will report sales between $35 million and $37 million and pro forma gross profit margins of 37% to 39%.
Now what
Investors were clearly disappointed with Planet's numbers, but should they have been? Let's look at them in the context of the predictions the company made -- pre-IPO -- for its future growth path.
At last report, Planet was predicting it would end fiscal 2022 (that's this year -- calendar year 2021) with sales of $130 million and gross profit margins of about 40%. Assuming Q4 plays out as Planet is now saying it will, though, revenues for this year will range from $129 million to $131 million and have about a 37% pro forma gross profit margin.
In other words, Planet Labs appears to be on track to achieve the revenue growth it promised pre-IPO. Its gross profit margin earned on those revenues, however, looks likely to fall short of expectations. Granted, so far as we know, management is still sticking to its prediction that gross profit margins will roughly double to 74% over the next five years, and if it achieves that goal, I suspect the stock will work out just fine.
For the time being, however, Planet is falling short in the profitability department -- and that's why its stock is down so much today.