PLANET LABS PBC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PLANET
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand the
results of operations and financial condition of Planet Labs PBC . The MD&A is
provided as a supplement and should be read in conjunction with the consolidated
financial statements and related notes included in Part II, Item 8, "Financial
Statements" of this Form 10-K. This discussion contains forward-looking
statements and involves numerous risks and uncertainties, including, but not
limited to, those described in Part I, Item 1A, "Risk Factors" of this Form
10-K. Actual results may differ materially from those contained in any
forward-looking statements. Our historical results are not necessarily
indicative of the results that may be expected for any period in the future.
Business and Overview
Our mission is to use space to help life on Earth, by imaging the world every day and making global change visible, accessible, and actionable. Our platform includes imagery, insights, and machine learning that empower companies, governments, and communities around the world to make timely decisions about our evolving world.
As a public benefit corporation, our purpose is to accelerate humanity toward a more sustainable, secure, and prosperous world, by illuminating the most important forms of environmental and social change.
We deliver a differentiated data set: a new image of the entire Earth landmass
every day. To collect this powerful data set, we design, build and operate
hundreds of satellites, making our fleet the largest Earth observation fleet of
satellites in history. Our daily stream of proprietary data and machine learning
analytics, delivered through our
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Table of Contents cloud-native platform, helps companies, governments and civil society use satellite imagery to discover insights as change happens.
To help further our mission, we have developed advanced satellite technology that increases the cost performance of each satellite. This has enabled us to launch large fleets of satellites at lower cost and in turn record over 2,000 images on average for every point on Earth's landmass, a non-replicable historical archive for analytics, machine learning, and insights. We have advanced data processing capabilities that enable us to produce "AI-ready" data sets. As this data set continues to grow, we believe its value to our customers will further increase. We currently serve over 700 customers across large commercial and government verticals, including agriculture, mapping, forestry, finance and insurance, as well as federal, state, and local government bodies. Our products serve a variety of diverse customer needs. For example, our products help farmers make decisions that result in significant increases in their harvests, while using fewer resources, by timely alerting them to changes happening within their fields. Governments use our data to help deliver public services more effectively in disaster response. Mapping companies use our data to keep online maps up to date. Also, journalists and human rights organizations use our data to uncover and report the truth about events in hard-to-reach places. Our proprietary data set and analytics are delivered pursuant to subscription and usage-based data licensing agreements and are accessed by our customers through our online platform and subscription APIs. We believe our efficient cost structure, one-to-many business model and differentiated data set have enabled us to grow our customer base across multiple vertical markets. As ofJanuary 31, 2022 , our EoP Customer Count was 770 customers, which represented a 25% year-over-year growth when compared toJanuary 31, 2021 . Our EoP Customer Count has grown quarter-over-quarter for every quarter in the prior two years. For a definition of EoP Customer Count see the section titled "Key Operational and Business Metrics." Over 90% of our customers sign annual or multiyear contracts, with an average contract length of approximately 2 years, weighted on an annual contract value basis. The Business Combination OnJuly 7, 2021 ,Planet Labs Inc. ("Former Planet") entered into an Agreement and Plan of Merger (the "Merger Agreement") with dMYTechnology Group, Inc. IV ("dMY IV"), a special purpose acquisition company ("SPAC") incorporated inDelaware onDecember 15, 2020 ,Photon Merger Sub, Inc. , aDelaware corporation and a direct wholly owned subsidiary of dMY IV ("First Merger Sub"), andPhoton Merger Sub Two, LLC , aDelaware limited liability company and a direct wholly owned subsidiary of dMY IV ("Second Merger Sub"). Pursuant to the Merger Agreement, upon the favorable vote of dMY IV's stockholders onDecember 3, 2021 , onDecember 7, 2021 , First Merger Sub merged with and into Former Planet (the "Surviving Corporation"), with Former Planet surviving the merger as a wholly owned subsidiary of dMY IV (the "First Merger"), and pursuant to Former Planet's election immediately following the First Merger and as part of the same overall transaction as the First Merger, theSurviving Corporation merged with and into dMY IV, with dMY IV surviving the merger (the "Business Combination"). Following the completion of the Business Combination, dMY IV was renamedPlanet Labs PBC . The Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance withU.S. GAAP. Under the guidance in Accounting Standard Codification ("ASC") 805, Business Combinations, dMY IV was treated as the "acquired" company for financial reporting purposes. Former Planet was deemed to be the accounting predecessor of the combined business, andPlanet Labs PBC , as the parent company of the combined business, is the successorSEC registrant, meaning that our reported consolidated assets, liabilities and results of operations prior to the Business Combination are those of Former Planet. Upon the closing of the Business Combination, we received aggregate gross proceeds of$590.4 million , including$252.0 million in gross proceeds from aPrivate Investment in Public Equity financing ("PIPE Investment ") which closed substantially simultaneously with the Business Combination. We paid approximately$57.2 million of transaction expenses in connection with the Business Combination. We also repaid our existing debt of approximately$67.1 million , including repayment fees associated with the debt of approximately$2.0 million and accrued interest, after the Business Combination was consummated. In addition, immediately prior to the effective time of the Business Combination, Former Planet's outstanding convertible notes were automatically converted into 52 -------------------------------------------------------------------------------- Table of Contents shares of Class A common stock, and as such, the converted convertible notes are no longer outstanding and ceased to exist at the effective time of the Business Combination. As a result of the Business Combination, we are anSEC -registered company listed on the NYSE which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees. Our results of operations and statements of financial position may not be comparable between periods as a result of the Business Combination described above.
Impact of COVID-19
COVID-19 continues to spread throughoutthe United States and other parts of the world and has negatively affected theU.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to "shelter-in-place" and quarantine restrictions. We have taken measures to protect the health and safety of our employees, including shifting many employees to remote work. We have also worked with our customers and suppliers to minimize disruptions, and we support our community in addressing the challenges posed by this ongoing global pandemic. The COVID-19 pandemic has generally disrupted the operations of our vendors, customers, and prospective customers, and may continue to disrupt their operations, including as a result of travel restrictions and/or business shutdowns, uncertainty in the financial markets, or other harm to their business and financial results. This disruption could result in a reduction to information technology budgets, delayed purchasing decisions, longer sales cycles, extended payment terms, the timing of payments, and postponed or canceled projects, all of which could negatively impact our business and operating results, including sales and cash flows. The ultimate impact of COVID-19, including the impact of any new strains or variants of the virus, on our financial and operating results is unknown and will depend on the length of time that the disruptions to our vendors, customers and prospective customers exist. The full extent of the impact of COVID-19 is unknown but we do not expect the COVID-19 pandemic to have a material impact on our business going forward.
Our Business Model
We primarily generate revenue through selling licenses to our data and analytics to customers over an entirely cloud-based platform via fixed price subscription and usage-based contracts. Data licensing subscriptions and minimum commitment usage-based contracts provide a large recurring revenue base for our business with a low incremental cost to serve each additional customer. Payment terms of our customer agreements are most commonly in advance on an either quarterly or annual basis, although a small number of large contracts have required payment terms quarterly in arrears. We also generate an immaterial amount of revenue from sales of third-party imagery, professional services, and customer support. We employ a "land-and-expand" go-to-market strategy with the goal to deliver increasing value to our customers and generate more revenue with each customer over time by expanding the scope of the services we offer. We work closely with our customers and partners to enable their early success, both from an account management and technical management perspective. Deeper adoption from our customers comes in many forms, including more users, more area coverage, and more advanced software analytics capabilities.
Two key elements of our growth strategy include scaling in existing verticals and expanding into new verticals.
Scaling in Existing Verticals:
We plan to invest in sales, marketing and software solutions to drive our
expansion within our existing customer base and further penetrate verticals that
are early adopters of geospatial data, such as Civil Government, Agriculture,
Defense & Intelligence, and Mapping. In addition, we plan to invest in expanding
the analytic tools we make
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available to these customers with the goal of increasing the services we provide to these customers and more deeply embed our data and analytics into their business intelligence systems.
Expansion into New Verticals:
We plan to invest in our software engineering teams to develop solutions to address use cases in emerging markets in our industry such asEnergy & Infrastructure, Finance & Insurance, and Consumer Packaged Goods. In addition, to expand our reach within vertical markets, we intend to leverage our open data platform with specific vertical partners to deliver vertical market-specific solutions. We believe our increased investment in developing software analytics solutions has the potential to accelerate the usage of our data and analytics across broader audiences.
Factors Affecting the Results of Operations
We believe that our financial condition and result of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Form 10-K titled "Risk Factors."
Continuing to Acquire New Customers
Attracting new customers is an important factor affecting our future growth and operating performance. We believe our ability to attract customers will be driven by our ability to continue to improve our data and offer software and analytic solutions that make our data easier to consume and integrate into our customers' workflows, our success in offering new data sets and products to solve customer problems, increases in our global sales presence and increases in our marketing investments. We plan to invest in making our data more digestible and accessible to non-technical business users and build solutions to address more use cases and expand our addressable market. As a result of this strategy, we anticipate our research and development expenditures will increase in the near term. In addition, to expand our reach with customers, we intend to partner with independent software vendors and solution providers who are building vertical market-specific solutions. While we have customers and partners today in many markets, we believe that our increased investment in developing software analytics solutions has the potential to accelerate the usage of our data and analytics across broader audiences.
Retention and Expansion of Existing Customers
We are focused on increasing customer retention and expanding revenue with existing customers because this will affect our financial results, including revenues, gross profit, operating loss, and operating cash flows. To increase customer retention and expansion of revenue from existing customers, we are making a number of investments in our operations. Areas of investment that affect customer retention and expansion include our customer success function, continuous improvements to our existing data, and the software tools and analytic tools that make our data easier to consume. Additionally, customer retention and expansion is driven by the speed with which our customers realize the value of our data once they become customers, our ability to cross-sell our different products to our existing customers and our ability to offer new products to our customers. As a result of the foregoing, we anticipate our cost of revenue, operating expenses, and capital expenditures will continue to increase and consequently, we are likely to experience losses in the near term, delaying our ability to achieve profitability and adversely affecting cash flows.
Developing New Sensors and Data Sets
We expect that our ability to provide new data sets through new sensors and new
proprietary data will be an important factor for our long-term growth and future
market penetration. We believe offering new data sets and fusing new data sets
with our existing data sets will enable us to deliver greater value to our
existing customers and help us attract new customers. This may require
significant investment in technology and personnel and result in increased
research and development costs as well as costs of revenue.
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Investment Decisions
We regularly review our existing customers and target markets to determine where we should invest in our product and technology roadmap, both for our space systems engineering to enable new geospatial coverage models, as well as our software engineering focused on providing sophisticated analytics models and tools to service an expanding set of markets and use cases. Our financial performance relies heavily on effective balance between driving continued growth, maintaining technology leadership, and improving margins across the business.
Seasonality
We have experienced, and expect to continue to experience, seasonality in our business and fluctuations in our operating results due to customer behavior, buying patterns and usage-based contracts. For example, we typically have customers who increase their usage of our data services when they need more frequent data monitoring over broader areas during peak agricultural seasons, during natural disasters or other global events, or when commodity prices are at certain levels. These customers may expand their usage and then subsequently scale back. We believe that the seasonal trends that we have experienced in the past may occur in the future. To the extent that we experience seasonality, it may impact our operating results and financial metrics, as well as our ability to forecast future operating results and financial metrics. Additionally, when we introduce new products to the market, we may not have sufficient experience in selling certain products to determine if demand for these products are or will be subject to material seasonality.
Key Operational and Business Metrics
In addition to the measures presented in our consolidated financial statements,
we use the following key operational and business metrics to evaluate our
business, measure our performance, develop financial forecasts, and make
strategic decisions.
Year Ended January 31,
2022 2021 2020
Net Dollar Retention Rate 108 % 113 % 102 %
Net Dollar Retention Rate including Winbacks 116 % 117 % 103 %
EoP Customer Count 770 618 442
% Recurring 92 % 92 % 88 %
Capital Expenditures as Percentage of Revenue 11 % 27 % 25 %
ACV and EoP ACV Book of Business
In connection with the calculation of several of the key operational and
business metrics we utilize, we calculate Annual Contract Value ("ACV") for
contracts of one year or greater as the total amount of value that a customer
has contracted to pay for the most recent 12 month period for the contract. For
short-term contracts (contracts less than 12 months), ACV is equal to total
contract value.
We also calculate EoP ACV Book of Business in connection with the calculation of
several of the key operational and business metrics we utilize. We define EoP
ACV Book of Business as the sum of the ACV of all contracts that are active on
the last day of the period pursuant to the effective dates and end dates of such
contracts. Active contracts exclude any contract that has been canceled, expired
prior to the last day of the period without renewing, or for any other reason is
not expected to generate revenue in the subsequent period. For contracts ending
on the last day of the period, the ACV is either updated to reflect the ACV of
the renewed contract or, if the contract has not yet renewed or extended, the
ACV is excluded from the EoP ACV Book of Business. We do not annualize
short-term contracts in calculating our EoP ACV Book of Business. We calculate
the ACV of usage-based contracts based on the committed contracted revenue or
the revenue achieved on the usage-based contract in the prior 12-month period.
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Net Dollar Retention Rate
We define Net Dollar Retention Rate as the percentage of ACV generated by existing customers in a given period as compared to the ACV of all contracts at the beginning of the fiscal year from the same set of existing customers. We define existing customers as customers with an active contract with Planet. We believe our Net Dollar Retention Rate is a useful metric for investors as it can be used to measure our ability to retain and grow revenue generated from our existing customers, on which our ability to drive long-term growth and profitability is, in part, dependent. We use Net Dollar Retention Rate to assess customer adoption of new products, inform opportunities to make improvements across our products, identify opportunities to improve operations, and manage go to market functions, as well as to understand how much future growth may come from cross-selling and up-selling customers. Management applies judgment in determining the value of active contracts in a given period, as set forth in the definition of ACV above. Net Dollar Retention Rate decreased to 108% for the fiscal year endedJanuary 31, 2022 , as compared to 113% for the fiscal year endedJanuary 31, 2021 , primarily due to the lower renewal value of a large government contract and the discontinuation of services to a government customer that ceased to exist beginning inAugust 2021 . Net Dollar Retention Rate increased to 113% for the fiscal year endedJanuary 31, 2021 , as compared to 102% for the fiscal year endedJanuary 31, 2020 , due to our success in upselling and cross-selling to our existing customers during the period, as well as a reduction in customers with contract lengths less than one year.
Net Dollar Retention Rate including Winbacks
We report on two metrics for net dollar retention-net retention excluding winbacks and including winbacks. A winback is a previously existing customer who was inactive at the start of the fiscal year, but has reactivated during the same fiscal year period. The reactivation period must be within 24 months from the last active contract with the customer; otherwise, the customer is assumed as a new customer. We define Net Dollar Retention Rate including winbacks as the percentage of ACV generated by existing customers and winbacks in a given period as compared to the ACV of all contracts at the beginning of the fiscal year from the same set of existing customers. We believe this metric is useful to investors as it captures the value of customer contracts that resume business with Planet after being inactive and thereby provides a quantification of Planet's ability to recapture lost business. Management uses this metric to understand the adoption of our products and long-term customer retention, as well as the success of marketing campaigns and sales initiatives in re-engaging inactive customers. Beyond the judgments underlying managements' calculation of Net Dollar Retention set forth above, there are no additional assumptions or estimates made in connection with Net Dollar Retention Rate including winbacks. Net Dollar Retention Rate including winbacks decreased to 116% for the fiscal year endedJanuary 31, 2022 as compared to 117% for the fiscal year endedJanuary 31, 2021 . The Net Dollar Retention including winbacks as ofJanuary 31, 2022 was primarily impacted by the discontinuation of services to a government customer that ceased to exist beginning inAugust 2021 .
EoP Customer Count
We define EoP Customer Count as the total count of all existing customers at the end of the period. We define existing customers as customers with an active contract with Planet at the end of the reported period. For the purpose of this metric, we define a customer as a distinct entity that uses our data or services. We sell directly to customers, as well as indirectly through our partner network. If a partner does not provide the end customer's name, then the partner is reported as the customer. Each customer, regardless of the number of active opportunities with Planet, is counted only once. For example, if a customer utilizes multiple products of Planet, we only count that customer once for purposes of EoP Customer Count. A customer with multiple divisions, segments, or subsidiaries are also counted as a single unique customer based on the parent organization or parent account. We believe EoP Customer Count is a useful metric for investors and management to track as it is an important indicator of the broader adoption of our platform and is a measure of our success in growing our market presence and penetration. Management applies judgment as to which customers are deemed to have an active contract in a period, as well as whether a customer is a distinct entity that uses our data or services. The EoP Customer Count increased to 770 as ofJanuary 31, 2022 , as compared to 618 as ofJanuary 31, 2021 . The EoP Customer Count increased to 618 as ofJanuary 31, 2021 , as compared to 442 as ofJanuary 31, 2020 . These increases were primarily attributable to the increased demand for our data. 56
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Percent of Recurring ACV
Percent of Recurring ACV is the portion of the total EoP ACV Book of Business that is recurring in nature. We define Percent of Recurring ACV as the dollar value of all data subscription contracts and the committed portion of usage-based contracts divided by the total dollar value of all contracts in our ACV Book of Business at a specific point in time. We believe Percent of Recurring ACV is useful to investors to better understand how much of our revenue is from customers that have the potential to renew their contracts over multiple years rather than being one-time in nature. We track Percent of Recurring ACV to inform estimates for the future revenue growth potential of our business and improve the predictability of our financial results. There are no significant estimates underlying management's calculation of Percent of Recurring ACV, but management applies judgment as to which customers have an active contract at a period end for the purpose of determining ACV Book of Business, which is used as part of the calculation of Percent of Recurring ACV. Percent of Recurring ACV stayed constant at 92% for the fiscal year endedJanuary 31, 2022 , as compared to 92% for the fiscal year endedJanuary 31, 2021 . Percent of Recurring ACV increased to 92% for the fiscal year endedJanuary 31, 2021 , as compared to 88% for the fiscal year endedJanuary 31, 2020 . The increase for the fiscal year endedJanuary 31, 2021 was primarily attributable to scaling our business models towards subscription and annual commitment usage sales.
Capital Expenditures as a Percentage of Revenue
We define capital expenditures as purchases of property and equipment plus capitalized internally developed software development costs, which are included in our statements of cash flows from investing activities. We define Capital Expenditures as a Percentage of Revenue as the total amount of capital expenditures divided by total revenue in the reported period. Capital Expenditures as a Percentage of Revenue is a performance measure that we use to evaluate the appropriate level of capital expenditures needed to support demand for our data services and related revenue, and to provide a comparable view of our performance relative to other earth observation companies, which may invest significantly greater amounts in their satellites to deliver their data to customers. We use an agile space systems strategy, which means we invest in a larger number of significantly lower cost satellites and software infrastructure to automate the management of the satellites and to deliver our data to clients. As a result of our strategy and our business model, our capital expenditures may be more similar to software companies with large data center infrastructure costs. Therefore, we believe it is important to look at our level of capital expenditure investments relative to revenue when evaluating our performance relative to other earth observation companies or to other software and data companies with significant data center infrastructure investment requirements. We believe Capital Expenditures as a Percentage of Revenue is a useful metric for investors because it provides visibility to the level of capital expenditures required to operate our business and our relative capital efficiency. Capital Expenditures as a Percentage of Revenue decreased to 11% for the fiscal year endedJanuary 31, 2022 , as compared to 27% for the fiscal year endedJanuary 31, 2021 . The decrease was primarily attributable to the fact that our high-resolution satellite constellation was completed during the fiscal year endedJanuary 31, 2021 ; therefore capital expenditures in the fiscal year endedJanuary 31, 2022 , were primarily associated with the replenishment of our lower cost PlanetScope satellites. Capital Expenditures as a Percentage of Revenue increased to 27% for the fiscal year endedJanuary 31, 2021 , as compared to 25% for the fiscal year endedJanuary 31, 2020 . The increase was primarily attributable to an increase in capital expenditures related to the launch of high-resolution satellites.
Components of Results of Operations
Revenue
We derive revenue principally from licensing rights to use our imagery that is
delivered digitally through our online platform in addition to providing related
services. Imagery licensing agreements vary by contract, but generally have
annual or multi-year contractual terms. The data licenses are generally
purchased via a fixed price contract on a subscription or usage basis, whereby a
customer pays for access to our imagery or derived imagery data that may be
downloaded over a specific period of time, or, less frequently, on a
transactional basis, whereby the customer pays for individual content licenses.
We also provide an immaterial amount of other services to customers, including
professional services such as training, analytical services, research and
development services to third parties, and other value-added activities related
to our imagery, data and technology. These revenues are recognized as the
services are rendered, on a
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proportional performance basis for fixed price contracts or ratably over the
contract term for subscription professional services and analytics contracts.
Training revenues are recognized as the services are performed.
Cost of Revenue
Cost of revenue consists of employee-related costs of performing account and data provisioning, customer support, satellite and engineering operations, as well as the costs of operating and retrieving information from the satellites, processing and storing the data retrieved, third party imagery expenses, depreciation of satellites and ground stations, and the amortization of capitalized internal-use software related to creating imagery provided to customers. Employee-related costs include salaries, benefits, bonuses and stock-based compensation. To a lesser extent, cost of revenue includes costs from professional services, including costs paid to subcontractors and certain third-party fees. We expect cost of revenue to continue to increase as we invest in our delivery organization and future product sets that will likely require higher compute capacity. As we continue to grow our subscription revenue contracts and increase the revenue associated with our analytic capabilities, we anticipate further economies of scale on our satellites and other infrastructure costs as we incur lower marginal cost with each new customer we add to our platform.
Research and Development
Research and development expenditures primarily include personnel related expenses for employees and consultants, hardware costs, supplies costs, contractor fees and administrative expenses. Employee-related costs include salaries, benefits, bonuses and stock-based compensation. Expenses classified as research and development are expensed as incurred and attributable to advancing technology research, platform and infrastructure development and the research and development of new product iterations. We continue to iterate on the design of our satellites and the capabilities of our automated operations to optimize for efficiency and technical capability of each satellite. Satellite costs associated with the design, manufacturing, launch, and commissioning of experimental satellites or other space related research and development activities are expensed as incurred. We intend to continue to invest in our software platform development, machine learning and analytic tools and applications and new satellite technologies for both the satellite fleet operations and data collection capabilities to drive incremental value to our existing customers and to enable us to expand our traction in emerging markets and with new customers. As a result of the foregoing, we expect research and development expenditures to increase in future periods. Sales and Marketing Sales and marketing expenditures primarily include costs incurred to market and distribute our products. Such costs include expenses related to advertising and conferences, sales commissions, salaries, benefits and stock-based compensation for our sales and marketing personnel and sales office expenses. Sales and marketing costs are expensed as incurred. We intend to continue to invest in our selling and marketing capabilities in the future and expect this expense to increase in future periods as we look to upsell new product features and expand into new market verticals. Selling and marketing expenses as a percentage of total revenue may fluctuate from period to period based on total revenue and the timing of our investments.
General and Administrative
General and administrative expenses include personnel-related expenses and
facilities-related costs primarily for our executive, finance, accounting, legal
and human resources functions. General and administrative expenses also include
fees for professional services principally consisting of legal, audit, tax, and
insurance, as well as executive management expenses. General and administrative
expenses are expensed as incurred.
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We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance and reporting obligations of public companies, and increased costs for insurance, investor relations, and professional services. As a result, we expect that our general and administrative expenses will increase in future periods and vary from period to period as a percentage of revenue, but we expect to realize operating scale with respect to these expenses over time as we grow our revenue.
Debt Extinguishment gain (loss)
Debt extinguishment gain (loss) reflects the gains or losses associated with the extinguishment of debt or incurred in connection with our early repayment of debt. Interest Expense Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt issuance costs for our loans. Our debt as ofJanuary 31, 2021 included loans withVenture Lending & Leasing, Inc. ("Venture"), an affiliate ofWestern Technology Investment and our Credit Agreement withSilicon Valley Bank ("SVB") and Hercules Capital, Inc. ("Hercules"). We repaid our debt with SVB and Hercules of$67.1 million , including the outstanding principal, accrued interest and repayment fees, upon completion of the Business Combination.
Change in fair value of convertible notes and warrant liabilities
Change in fair value of liabilities includes the change in fair value of warrant liabilities, including the change in fair value of the public and private placement warrant liabilities assumed in connection with the Business Combination, and the change in fair value of our convertible notes, which converted into Class A common stock in connection with the Business Combination. We expect to incur other incremental income or expense for fair value adjustments resulting from warrant liabilities that remain outstanding.
Other Income (Expenses), net
Other income (expenses), net, consists of interest income earned and net gains or losses on foreign currency. Other income (expenses), net for the fiscal year endedJanuary 31, 2022 includes transaction costs associated with the public and private placement warrants assumed in connection with the Business Combination.
Provision for Income Taxes
Our income tax provision consists of an estimate forU.S. federal and state income taxes, as well as those foreign jurisdictions where we have business operations, based on enacted tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We believe that it is more likely than not that the majority of theU.S. and foreign deferred tax assets will not be realized. Accordingly, we recorded a valuation allowance against our deferred tax assets in these jurisdictions. 59
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Results of Operations
Year Ended
The following table sets forth a summary of our consolidated results of operations for the years indicated and the changes between such periods.
Year Ended $ %
January 31,
(in thousands, except percentages) 2022 2021 Change Change
Revenue $ 131,209 $ 113,168 $ 18,041 16 %
Cost of revenue 82,987 87,383 (4,396) (5) %
Gross profit 48,222 25,785 22,437 87 %
Operating expenses
Research and development 66,684 43,825 22,859 52 %
Sales and marketing 52,917 37,268 15,649 42 %
General and administrative 56,672 32,134 24,538 76 %
Total operating expenses 176,273 113,227 63,046 56 %
Loss from operations (128,051) (87,442) (40,609) 46 %
Debt extinguishment gain (loss) (1,690) 673 (2,363) (351) %
Interest expense (8,772) (9,447) 675 (7) %
Change in fair value of convertible notes and warrant 5,726 (30,053) 35,779 (119) %
liabilities
Other income (expense), net (2,227) 239 (2,466) (1032) %
Total other expense, net (6,963) (38,588) 31,625 (82) %
Loss before provision for income taxes (135,014) (126,030) (8,984) 7 %
Provision for income taxes 2,110 1,073 1,037 97 %
Net loss $ (137,124) $ (127,103) $ (10,021) 8 %
Revenue
Revenue increased $18.0 million , or 16%, to $131.2 million for the fiscal year
ended January 31, 2022 from $113.2 million for the fiscal year ended January 31,
2021 . The increase was due, in part, to a significant customer contract in
Europe which resulted in an $11.3 million increase in revenue for the fiscal
year ended January 31, 2022 , the significant expansion of a U.S. civil
government contract during the same period, and an increase in total customers
worldwide. Total customers increased approximately 25% to 770 as of January 31,
2022 from an EoP Customer Count of 618 as of January 31, 2021 . The increase in
total customers and the associated revenue from those customers was largely due
to our investment in expanding our sales and marketing teams. These increases in
revenue were partially offset by the timing of renewals, as well as the
restructuring of a significant customer contract that expired at the end of
December 2020 , resulting in a decrease in revenue of approximately $7.6 million
for the fiscal year ended January 31, 2022 .
Cost of Revenue
Cost of revenue decreased$4.4 million , or 5%, to$83.0 million for the fiscal year endedJanuary 31, 2022 , from$87.4 million for the fiscal year endedJanuary 31, 2021 . The decrease was primarily due to a$17.4 million decrease in depreciation expense, mainly associated with reduced satellite depreciation expense as a result of an increase in the estimated useful life of certain of our high resolution satellites from six years to nine years. See Note 2 in our consolidated financial statements included elsewhere in this Form 10-K for information on the change in estimate. The decrease was partially offset by an increase in hosting costs of$6.4 million associated with an increase in archive data costs and the growth of our customer base, a$4.5 million increase in salaries and related personnel costs associated with an increase in headcount and a$1.4 million increase in stock-based compensation expenses. 60
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Research and Development
Research and development expenses increased$22.9 million , or 52%, to$66.7 million for the fiscal year endedJanuary 31, 2022 , from$43.8 million for the fiscal year endedJanuary 31, 2021 . The increase was partially due to an increase of$11.8 million in stock-based compensation expenses primarily due to restricted stock unit awards subject to both time-based service and liquidity event vesting requirements that met the liquidity event requirement upon the closing of the Business Combination. The increase was also partially due to an increase of$7.0 million in costs associated with our software and product development teams as a result of an increase in headcount and program expenses.
Sales and Marketing
Sales and marketing expenses increased$15.6 million , or 42%, to$52.9 million , for the fiscal year endedJanuary 31, 2022 , from$37.3 million for the fiscal year endedJanuary 31, 2021 . The increase was partially due to an increase of$6.2 million in stock-based compensation expenses primarily due to restricted stock unit awards subject to both time-based service and liquidity event vesting requirements that met the liquidity event requirement upon the closing of the Business Combination. The increase was also partially due to an increase of$4.2 million for headcount, commissions and program expenses and an increase of$3.8 million in marketing program expenses, primarily related to events.
General and Administrative
General and administrative expenses increased$24.5 million , or 76%, to$56.7 million for the fiscal year endedJanuary 31, 2022 , from$32.1 million for the fiscal year endedJanuary 31, 2021 . The increase was partially due to an increase of$8.3 million in stock-based compensation expenses primarily due to restricted stock unit awards subject to both time-based service and liquidity event vesting requirements that met the liquidity event requirement upon the closing of the Business Combination. The increase was also partially due to an increase of finance and accounting costs of$5.5 million , primarily due to accounting and consultant fees and employee personnel costs, an increase of$2.3 million in legal fees, including costs related to acquisition activities, and an increase of$1.8 million in directors' and officers' insurance.
Debt Extinguishment Gain (Loss)
Debt extinguishment loss for the fiscal year endedJanuary 31, 2022 reflects the loss realized upon the repayment of all amounts owed under the credit agreement with SVB and Hercules in connection with the Business Combination.
Debt extinguishment gain for the fiscal year ended
Interest Expense Interest expense decreased$0.7 million , or 7% to$8.8 million for the fiscal year endedJanuary 31, 2022 , from$9.4 million for the fiscal year endedJanuary 31, 2021 . The decrease in interest expense is primarily due to the repayment of all amounts owed under the credit agreement with SVB and Hercules in connection with the Business Combination.
Change in fair value of convertible notes and warrant liabilities
The change in fair value of convertible notes and warrant liabilities increased$35.8 million to a gain of$5.7 million for the fiscal year endedJanuary 31, 2022 , from a loss of$30.1 million for the fiscal year ended 2021. The change in fair value of convertible notes and warrant liabilities during the fiscal year endedJanuary 31, 2022 includes a loss of$13.1 million due to the revaluation of the 2020 convertible promissory notes and our Venture Tranche B convertible note upon conversion to Class A common stock in connection with the Business Combination transactions, a loss of$12.1 million due to revaluations of liability classified Series B and Series D preferred stock warrants that converted to Class A common stock warrants in connection with the Business Combination, offset by a 61
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gain of
The change in fair value of convertible notes and warrant liabilities for the fiscal year endedJanuary 31, 2021 reflects a$24.4 million loss due to the revaluation of the 2020 convertible promissory notes, a$0.7 million loss due to the revaluation of our Venture Tranche B convertible note, and a$4.9 million loss due to the revaluation of the liability classified Series B and Series D preferred stock warrants.
Other Income (Expense), net
Other expense of
Other income of
Provision for Income Taxes Provision for income taxes increased$1.0 million or 97% to$2.1 million for the fiscal year endedJanuary 31, 2022 , from$1.1 million for the fiscal year endedJanuary 31, 2021 . For the fiscal year endedJanuary 31, 2022 , the income tax expense was primarily driven by the current tax on foreign earnings. For the fiscal year endedJanuary 31, 2021 , the income tax expense was primarily driven by the foreign withholding taxes. The effective tax rate for the fiscal year endedJanuary 31, 2022 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of ourU.S. and foreign deferred tax assets and foreign rate differences. The effective tax rate for the fiscal year endedJanuary 31, 2021 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of ourU.S. and foreign deferred tax assets and the tax impact of the non-deductible revaluation loss on our convertible debts.
Year Ended
The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between such periods.
Year Ended January 31, $ %
(in thousands, except percentages) 2021 2020 Change Change
Revenue $ 113,168 $ 95,736 $ 17,432 18 %
Cost of revenue 87,383 102,393 (15,010) (15) %
Gross profit 25,785 (6,657) 32,442 (487) %
Operating expenses
Research and development 43,825 37,871 5,954 16 %
Sales and marketing 37,268 34,913 2,355 7 %
General and administrative 32,134 27,019 5,115 19 %
Total operating expenses 113,227 99,803 13,424 13 %
Loss from operations (87,442) (106,460) 19,018 (18) %
Debt extinguishment gain (loss) 673 (11,529) 12,202 (106) %
Interest expense (9,447) (6,946) (2,501) 36 %
Change in fair value of convertible notes and warrant
liabilities (30,053) 207 (30,260) (14,618) %
Other income (expense), net 239 1,144 (905) (79) %
Total other expense, net (38,588) (17,124) (21,464) 125 %
Loss before provision for income taxes (126,030) (123,584) (2,446) 2 %
Provision for income taxes 1,073 130 943 725 %
Net loss $ (127,103) $ (123,714) $ (3,389) 3 %
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Revenue
Revenue increased$17.4 million , or 18%, to$113.2 million for the fiscal year endedJanuary 31, 2021 from$95.7 million for the fiscal year endedJanuary 31, 2020 . The increase in revenue for the fiscal year endedJanuary 31, 2021 , as compared to the fiscal year endedJanuary 31, 2020 , is primarily attributable to an increase in the value of our existing customer contracts and an increase in new customer contracts. EoP Customer Count increased approximately 40% from 442 as ofJanuary 31, 2020 to 618 as ofJanuary 31, 2021 . The increase in revenue and EoP Customer Count was largely due to our expanded marketing efforts, investment in new high resolution data offerings, investments in analytic capabilities, and expansion of our commercial sales team globally.
Cost of Revenue
Cost of revenue decreased$15.0 million , or 15%, to$87.4 million for the fiscal year endedJanuary 31, 2021 , from$102.4 million for the fiscal year endedJanuary 31, 2020 . The decrease in cost of revenue is driven by a$13.9 million decrease in depreciation and amortization expense year-over-year, in large part due to a reduction in satellite depreciation related to our RapidEye fleet of satellites. Our RapidEye satellite fleet reached the end of its useful life inMarch 2020 and did not require replacement as customers were able to transition to our PlanetScope products. This resulted in a$7.6 million decrease in depreciation and amortization for the fiscal year endedJanuary 31, 2021 . The end of life of the RapidEye fleet also resulted in a$1.5 million decrease in ground station costs. These decreases were offset in part by an increase in hosting costs of$2.6 million resulting from the increase in archive data and current data accessed by our growing customer base.
Research and Development
Research and development expenses increased$6.0 million , or 16%, to$43.8 million for the fiscal year endedJanuary 31, 2021 , from$37.9 million for the fiscal year endedJanuary 31, 2020 . The increase in research and development expense is primarily due to an employee and personnel cost increase of$6.9 million in the fiscal year endedJanuary 31, 2021 , as compared to the fiscal year endedJanuary 31, 2020 , which resulted from an increase in headcount in both our space systems and software development teams.
Sales and Marketing
Sales and marketing expenses increased$2.4 million , or 7%, to$37.3 million for the fiscal year endedJanuary 31, 2021 , from$34.9 million for the fiscal year endedJanuary 31, 2020 . The increase in sales and marketing expense is primarily related to the increase in headcount in the sales and marketing organization. This increase was offset by the reduction in travel, entertainment, and marketing spend due to COVID-19, as our user conference was transitioned from an in-person event in the fall of 2019 to a virtual event in the fall of 2020 at lower cost, and employees were discouraged from traveling to meet customers. As a percentage of revenue, selling and marketing expenses decreased to 32.9% from 36.5% due to the increase in revenue in addition to the lower non-personnel related costs.
General and Administrative
General and administrative expenses increased$5.1 million , or 19%, to$32.1 million for the fiscal year endedJanuary 31, 2021 , from$27.0 million for the fiscal year endedJanuary 31, 2020 . The increase in general and administrative expense is primarily related to an increase in stock-based compensation expense of$6.6 million due to options granted to executives during the fiscal year endedJanuary 31, 2021 . This increase was partially offset by lower travel and entertainment expenses and other overhead expenses due to COVID-19.
As a percentage of revenue, general and administrative expenses remained flat at approximately 28%.
Debt Extinguishment (Gain) Loss
Debt extinguishment gain for the fiscal year ended
Debt extinguishment loss for the fiscal year ended
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Interest Expense
Interest expense increased$2.5 million , or 36%, for the fiscal year endedJanuary 31, 2021 , from$6.9 million for the fiscal year endedJanuary 31, 2020 . This increase was primarily related to an increase in borrowings under our Credit Agreement with SVB and Hercules. This increase was partially offset by a decrease in borrowings under the 2017 Venture loans.
Change in fair value of convertible notes and warrant liabilities
The change in fair value of convertible notes and warrant liabilities was a loss of$30.1 million for the fiscal year endedJanuary 31, 2021 , as compared to a gain of$0.2 million for the fiscal year endedJanuary 31, 2020 . The change in fair value of convertible notes and warrant liabilities for the fiscal year endedJanuary 31, 2021 reflects a$24.4 million loss due to the revaluation of the 2020 convertible promissory notes, a$0.7 million loss due to the revaluation of our Venture Tranche B convertible note, and a$4.9 million loss due to the revaluation of the liability classified Series B and Series D preferred stock warrants. The increase in fair value of these instruments is primarily related to the increase in our enterprise valuation. The change in fair value of liabilities for the fiscal year endedJanuary 31, 2020 reflects a$0.2 million gain due to the revaluation of our Venture Tranche B convertible note and a$0.1 million gain due to the revaluation of the liability classified Series B and Series D preferred stock warrants.
Other Income (Expense), net
Other income (expense) of$0.2 million and$1.1 million for the fiscal years endedJanuary 31, 2021 and 2020, respectively, primarily reflects realized and unrealized foreign currency exchange gains and losses.
Provision for Income Taxes
Provision for income taxes increased to$1.1 million for the fiscal year endedJanuary 31, 2021 from$0.1 million for the fiscal year endedJanuary 31, 2020 . For the fiscal year endedJanuary 31, 2021 , the income tax expense was primarily driven by the foreign withholding taxes. For the fiscal year endedJanuary 31, 2020 , the income tax expense was primarily driven by the current tax on foreign earnings. The effective tax rates for the fiscal years endedJanuary 31, 2021 and 2020 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of ourU.S. and foreign deferred tax assets and the tax impact of the non-deductible revaluation loss on our convertible debts. Non-GAAP Information This Form 10-K includes Non-GAAP Gross Profit and Adjusted EBITDA, which are non-GAAP performance measures that we use to supplement our results presented in accordance withU.S. GAAP. We believe Non-GAAP Gross Profit and Adjusted EBITDA are useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and are regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. As mentioned above, Non-GAAP Gross Profit and Adjusted EBITDA are non-GAAP measures, are additions, and not substitutes for or superior to, measures of financial performance prepared in accordance withU.S. GAAP and should not be considered as an alternative to gross profit, net income, operating income or any other performance measures derived in accordance withU.S. GAAP or as an alternative to cash flows from operating activities as a measure of liquidity. Further, Non-GAAP Gross Profit and Adjusted EBITDA are not based on any standardized methodology prescribed byU.S. GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and facilitates comparisons on a consistent basis across reporting periods. Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance. 64 -------------------------------------------------------------------------------- Table of Contents We include these non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Non-GAAP Gross Profit excludes stock-based compensation expenses that are classified as cost of revenue from gross profit (loss), which is required in accordance withU.S. GAAP. Adjusted EBITDA excludes certain expenses from net income (loss) that are required in accordance withU.S. GAAP. We exclude in this calculation certain non-cash expenses, such as depreciation and amortization, stock-based compensation and change in fair value of convertible notes and warrant liabilities, and expenses that are considered unrelated to our underlying business performance, such as interest income, interest expense, and taxes. Non-GAAP Gross Profit (Loss)
We define and calculate Non-GAAP Gross Profit (Loss) as gross profit (loss) adjusted for stock-based compensation classified as cost of revenue, and Non-GAAP Gross Margin percentage as the percentage of Non-GAAP Gross Profit (Loss) to revenue as outlined in the reconciliation below.
The table below reconciles our Gross Profit (Loss) (the most directly comparable
Year Ended
(in thousands, except percentages) 2022 2021 2020
Gross Profit (Loss) $ 48,222 $
25,785
Cost of revenue-Stock-based compensation 2,257 843 788
Non-GAAP Gross Profit (Loss) $ 50,479 $
26,628
Gross Margin percentage 37 % 23 % (7) %
Non-GAAP Gross Margin percentage 38 % 24 % (6) %
Non-GAAP Gross Profit (Loss) excludes stock-based compensation, which has
recently been, and will continue to be for the foreseeable future, a significant
recurring expense for our business and an important part of our compensation
strategy.
Adjusted EBITDA
We define and calculate Adjusted EBITDA as net income (loss) before the impact
of interest income and expense, income tax expense and depreciation and
amortization, and further adjusted for the following items: stock-based
compensation, change in fair value of convertible notes and warrant liabilities,
gain or loss on the extinguishment of debt and non-operating income and expenses
such as foreign currency exchange gain or loss, as outlined in the
reconciliation below.
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The table below reconciles our net loss (the most directly comparable
Year Ended January 31,
(in thousands) 2022 2021 2020
Net loss $ (137,124) $ (127,103) $ (123,714)
Interest expense 8,772 9,447 6,946
Interest income (21) (53) (980)
Income tax provision 2,110 1,073 130
Depreciation and amortization 45,043 62,212 77,629
Debt extinguishment (gain) loss 1,690 (673) 11,529
Change in fair value of convertible notes and warrant
liabilities (5,726) 30,053 (207)
Stock-based compensation 41,956 14,012 5,071
Other (income) expense 2,248 (186) (164)
Adjusted EBITDA $ (41,052) $ (11,218) $ (23,760)
There are a number of limitations related to the use of Adjusted EBITDA,
including:
•Adjusted EBITDA excludes stock-based compensation, which has recently been, and
will continue to be for the foreseeable future, a significant recurring expense
for our business and an important part of our compensation strategy;
•Adjusted EBITDA excludes depreciation and amortization expense and, although
these are non-cash expenses, the assets being depreciated and amortized will
have to be replaced in the future;
•Adjusted EBITDA does not reflect interest expense, or the cash requirements
necessary to service interest or principal payments on our debt, which reduces
cash available to us;
•Adjusted EBITDA does not reflect income tax expense that reduces cash available
to us; and
•the expenses and other items that we exclude in our calculation of Adjusted
EBITDA may differ from the expenses and other items, if any, that other
companies may exclude from similar measures when they report their operating
results.
Liquidity and Capital Resources
Since inception, we have incurred net losses and negative cash flows from operations. Our operations have historically been primarily funded by the net proceeds from the sale of our equity securities, borrowings under credit facilities, as well as cash received from our customers. We currently have no debt outstanding. We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations, including debt obligations, and other commitments, with cash flows from operations and other sources of funding. Our current working capital needs relate mainly to our continued development of our platform and product offerings in new markets, as well as compensation and benefits of our employees. Our ability to expand and grow our business will depend on many factors, including our working capital needs and the evolution of our operating cash flows. As ofJanuary 31, 2022 and 2021, we had$490.8 million and$71.2 million , respectively, in cash and cash equivalents. We believe our anticipated operating cash flows together with our cash on hand provide us with the ability to meet our obligations as they become due during the next twelve months. We expect our capital expenditures and working capital requirements to continue to increase in the foreseeable future as we seek to grow our business. We could also need additional cash resources due to significant acquisitions, an accelerated manufacturing timeline for new satellites, competitive pressures or regulatory requirements. To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financial covenants that would restrict our operations. We cannot assure you that any such equity or 66 -------------------------------------------------------------------------------- Table of Contents debt financing will be available on favorable terms, or at all. If the needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in software and market expansion efforts or to scale back our existing operations, which could have an adverse impact on our business and financial prospects.
Our principal commitments were as follows as of
Less than More than
(in thousands) Total 1 Year 1-3 Years 3-5 Years 5 Years
Operating lease obligations (1) $ 7,088 $ 5,359 $ 1,729 $ - $ -
Launch and Ground Station
Services (2) 6,780 3,431 2,871 447 31
Other (3) 180,891 25,379 58,170 63,915 33,427
$ 194,759 $ 34,169 $ 62,770 $ 64,362 $ 33,458
(1) Includes operating leases of corporate office facilities, including our
headquarters in San Francisco, California .
(2) Includes purchase commitments under non-cancelable future satellite launch services
and ground station services, including leases, to be performed by third-parties.
(3) Includes minimum purchase commitments for hosting services from
("Google") through
statements included elsewhere in this Form 10-K for information regarding our
related party transactions with
We do not engage in any off-balance sheet activities or have any arrangements or relationships with unconsolidated entities, such as variable interest, special purpose, and structured finance entities.
Statement of Cash Flows
The following tables present a summary of cash flows from operating, investing
and financing activities for the following comparative periods. For additional
detail, please see the consolidated statements of cash flows as presented within
the Consolidated Financial Statements.
Year Ended January 31,
(in thousands) 2022 2021 2020
Net cash provided by (used in)
Operating activities $ (42,211) $ (4,027) $ (33,687)
Investing activities $ (25,149) $ (30,800) $ (27,172)
Financing activities $ 489,184 $ 83,940 $ 8,728 Net cash used in operating activities
Net cash used in operating activities for the fiscal year endedJanuary 31, 2022 , primarily consisted of the net loss of$137.1 million , adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items primarily included depreciation and amortization expense of$45.0 million and stock-based compensation expense of$42.0 million , which were partially offset by a change in fair value of warrant liabilities and convertible notes of$5.7 million . The net change in operating assets and liabilities primarily consisted of a$16.1 million increase in accounts payable and accrued expenses, a$5.8 million increase in deferred hosting costs and a$3.3 million decrease in accounts receivable, which were partially offset by a$8.7 million increase in prepaid expenses and other assets, a$4.9 million decrease in deferred revenue and a$2.1 million decrease in deferred rent. Net cash used in operating activities for the fiscal year endedJanuary 31, 2021 , primarily consisted of the net loss of$127.1 million , adjusted for non-cash items and changes in operating assets and liabilities. Non-cash items included depreciation and amortization expense of$62.2 million , stock-based compensation expense of$14.0 million , and the change in fair value of warrant liabilities and convertible notes of$30.1 million . The net change in operating assets 67
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and liabilities primarily consisted of a$14.4 million increase in deferred revenue, a$11.0 million increase in accounts payable and accrued expenses, a$8.0 million increase in deferred hosting costs, and a$2.6 million decrease in prepaid expenses and other current assets, which were partially offset by a$19.9 million increase in accounts receivable and$2.2 million decrease in deferred rent. Net cash used in operating activities for the fiscal year endedJanuary 31, 2020 , primarily consisted of the net loss of$123.7 million , adjusted for non-cash items, which included depreciation and amortization expense of$77.6 million , stock-based compensation expense of$5.1 million and a loss on extinguishment of debt of$11.5 million . These non-cash items were partially offset by a change in operating assets and liabilities of$6.0 million . The net change in operating assets and liabilities primarily consisted of a$27.3 million decrease in deferred revenue and$3.7 million decrease in deferred rent, which were offset partially by a$9.0 million decrease in accounts receivable and$12.9 million decrease in prepaid expenses and other current assets.
Net cash used in investing activities
Net cash used in investing activities for the fiscal year ended
Net cash used in investing activities for the fiscal year ended
Net cash used in investing activities for the fiscal year ended
Net cash provided by financing activities
Net cash provided by financing activities for the fiscal year endedJanuary 31, 2022 , primarily consisted of$533.2 million of proceeds from the Business Combination andPIPE Investment net of transaction costs paid,$28.6 million proceeds from the exercise of common stock options, inclusive of an early exercise of$17.9 million inJuly 2021 , which was offset by a$67.0 million principal repayment of the credit agreement with SVB and Hercules and$5.6 million for common stock withheld to satisfy employee tax withholding obligations. Net cash provided by financing activities for the fiscal year endedJanuary 31, 2021 , primarily consisted of net proceeds of$71.1 million received from the issuance of the 2020 convertible promissory notes and warrants and$14.9 million net proceeds received from borrowings under the Credit Agreement with SVB and Hercules. The proceeds received from the Credit Agreement with SVB and Hercules were used in part for the repayment of$2.6 million of principal balance of our Venture Tranche B loans. Net cash provided by financing activities for the fiscal year endedJanuary 31, 2020 , primarily consisted of$10.0 million in net proceeds received from the issuance of Series D preferred stock,$49.6 million in net proceeds received borrowings under the Credit Agreement with SVB and Hercules. These proceeds were partially offset by repayment of the 2017 loans from Venture of$51.2 million .
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest 68
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potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
Revenue Recognition
We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts
with Customers ("Topic 606"). Under Topic 606, we recognize revenue under the
core principle to depict the transfer of control to our customers in an amount
reflecting the consideration to which we expect to be entitled. In order to
achieve that core principle, we apply the following five-step approach: (1)
identify the contract with a customer, (2) identify the performance obligations
in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract and (5)
recognize revenue when a performance obligation is satisfied.
We derive our revenue principally from licensing rights to use imagery that is
delivered digitally through our online platform in addition to providing related
services. Imagery licensing agreements vary by contract, however, generally they
have annual or multi-year contractual terms. The licenses are generally
purchased on a subscription basis, whereby a customer pays for access to our
imagery that may be downloaded over a specific period of time, or, on a
transactional basis, whereby the customer pays for individual content licenses
at the time of download. Our imagery licensing agreements and service agreements
are generally non-cancelable and do not contain refund-type provisions
The recognition and measurement of revenue requires the use of judgments and estimates. Specifically, judgment is used in identifying the performance obligations and the standalone selling price ("SSP") of the performance obligations.
At contract inception, we assess the product offerings in our contracts to
identify performance obligations that are distinct. A performance obligation is
distinct when it is separately identifiable from other items in a bundled
package and if a customer can benefit from it on its own or with other resources
that are readily available to the customer. To identify the performance
obligations, we consider all of the product offerings promised in the contract.
Data licensing arrangements generally provide customers with the right to access
imagery through our platform, download content on a limited or unlimited basis
over the contractual period depending on the terms of the applicable contract,
or provide both the right to access imagery and download content. We have
determined that access to imagery through our online platform and the ability to
download such imagery represent two separate performance obligations. As such, a
portion of the total contract consideration related to access to continuously
updated imagery content is recognized ratably on a straight-line basis over the
term of the contract. At contract inception, existing or archived imagery is
available for download by the customer. The existing or archived imagery has
significant standalone functionality and is not updated once licensed to a
particular customer. As such, the portion of the contract consideration related
to the download license of existing or archive imagery content is recognized as
revenue at the commencement of the contract when control of the imagery is
transferred, and the imagery is available for download by the customer. The
portion of the contractual consideration related to the download of monitoring
imagery content is recognized over the term of the contract utilizing a
usage-based output measure of progress based on the download capacity specified
in the contract. To the extent the number of downloads of the specified imagery
content is unlimited, the contractual consideration related to downloads is
recognized ratably on a straight-line basis over the term of the contract.
When our contracts with customers contain more than a single performance
obligation, management allocates the total contract consideration to each
performance obligation on a relative SSP basis. The SSP is the price at which we
would sell a promised product or service separately to a customer. Judgment is
required to determine the SSP for each distinct performance obligation. We
determine the SSP by considering our overall pricing practices and market
conditions, including our discounting practices, the size and volume of our
transactions, the customer demographic, price lists, historical sales, contract
prices and customer relationships.
We also provide other services to customers, including professional services
such as training, analytical services, research and development services to
third parties, and other value-added activities related to imagery products.
These revenues are recognized as the services are rendered, on a proportional
performance basis for fixed price
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contracts or ratably over the contract term for subscription professional services contracts. Training revenues are recognized as the services are performed.
We recognize revenue on a gross basis. We are the principal in the transaction as we are the party responsible for the performance obligation and we control the product or service before transferring it to the customer. The transaction price is the total amount of consideration that we expect to be entitled to in exchange for the product offerings in a contract. The prices of imagery licensing and other services are generally fixed at contract inception and therefore, our contracts do not contain a significant amount of variable consideration. From time to time, we may enter into contracts with our customers that provide a form of variable consideration, including a revenue share arrangement. For these arrangements, we estimate the variable consideration at the contract inception based on the most likely amount in a range of possible outcomes. The estimate of variable consideration is reassessed on a quarterly basis. We typically bill in advance either quarterly or annually for contracts with terms of one year or longer. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the underlying performance obligations have been satisfied. Advance payments from customers have been categorized as current or non-current deferred revenue based on the expected performance date. We applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component. The financing component of multi-year contracts was not significant.
Stock-Based Compensation and Common Stock Valuation
Stock-based compensation expense is measured based on the grant-date fair value
of the stock-based awards, and is recognized over the requisite service period.
We determine the fair value of stock-based awards granted or modified on the
modification date at fair value, using appropriate valuation techniques. We
recognize forfeitures as they occur.
We grant certain awards, primarily options, that vest based upon a service
condition. We use the Black-Scholes option pricing model to determine the fair
value of the stock options granted. The Black-Scholes option pricing model
requires the input of highly subjective assumptions, including the fair value of
the underlying common stock, the expected term of the option, the expected
volatility of the price of the common stock, risk-free interest rates, and the
expected dividend yield of the common stock. The assumptions used to determine
the fair value of the option awards represent management's best estimates. These
estimates involve inherent uncertainties and the application of management's
judgment. We record stock-based compensation expense for stock options on a
straight-line basis over the requisite service period, which is generally four
years. We have historically granted stock options at an exercise price equal to
the fair value.
The fair value of the Restricted Stock Units ("RSUs") is the fair value of the
underlying stock at the measurement date. For awards that are subject to both
time-based service and performance conditions (including liquidity events), no
expense is recognized until it is probable that the vesting criteria would be
met. Stock-based compensation expense for awards with performance and other
vesting criteria is recognized as expense under an accelerated graded vesting
model.
Pursuant to the Merger Agreement for the Business Combination, Former Planet
equity holders, including Former Planet equity award holders, have the right to
receive earn-out consideration (the "Earn-out Shares"). The Earn-out Shares may
be earned in four equal tranches (i) when the closing price of our Class A
common stock equals or exceeds $15.00 , $17.00 , $19.00 and $21.00 , over any 20
trading days within any 30 day trading period prior to December 7, 2026 or (ii)
we consummate a change of control transaction prior to December 7, 2026 that
entitles our stockholders to receive a per share consideration of at least
$15.00 , $17.00 , $19.00 and $21.00 . Any right to Earn-out Shares that remains
unvested on the first business day after five years from the closing of the
Business Combination will be forfeited without any further consideration.
The Earn-out Shares allocated to Former Planet equity award holders are
accounted for as stock-based compensation pursuant to ASC 718,
Compensation-Stock Compensation, because service must be provided through each
market
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condition vesting requirement described above. The fair value of the Earn-out
Shares allocated to Former Planet equity award holders was determined upon the
close of the Business Combination which will be recognized as stock-based
compensation expense over the requisite service period. Compensation expense for
awards with market conditions is not reversed if the market condition is not
met.
The fair value of the Earn-out Shares was estimated using a model based on
multiple stock price paths developed through the use of a Monte Carlo simulation
that incorporates into the valuation the possibility that the market condition
targets may not be satisfied. This valuation model requires inputs such as the
fair value of our Class A common stock, the risk-free interest rate, expected
term, expected dividend yield and expected volatility. The fair value of our
Class A common stock was the closing stock price on the NYSE as of the
measurement date. The risk-free interest rate assumption is determined by using
the U.S. Treasury rates of the same period as the expected term of the Earn-out
Shares, which is 5 years from the closing of the Business Combination. Our
volatility is derived from several publicly traded peer companies. We have
historically been a private company and lacked sufficient company-specific
historical and implied volatility information. Therefore, we estimated our
expected stock volatility based on the historical volatility of a publicly
traded set of peer companies. The requisite service period for each of the four
vesting tranches for the Earn-out Shares was derived from the median time to
vest for each tranche utilizing the same simulation model that produced the fair
value estimate.
Common Stock Valuations
Prior to the Business Combination, our board of directors estimated the fair
value of our common stock at the time of each grant of an equity-based award.
Our board of directors utilized various valuation methodologies in accordance
with the framework of the American Institute of Certified Public Accountants'
Technical Practice Aid , Valuation of Privately Held Company Equity Securities
Issued as Compensation, to estimate the fair value of our common stock. These
estimates and assumptions include numerous objective and subjective factors to
determine the fair value of our common stock at each grant date, including the
following factors:
•relevant precedent transactions including our capital transactions;
•the liquidation preferences, rights, preferences, and privileges of our
preferred stock relative to the common stock;
•our actual operating and financial performance;
•our current business conditions and projections;
•our stage of development;
•the likelihood and timing of achieving a liquidity event for the common stock
underlying the stock options, such as an initial public offering, given
prevailing market conditions;
•any adjustment necessary to recognize a lack of marketability of the common
stock underlying the granted options;
•the market performance of comparable publicly traded companies; and
•U.S. and global capital market conditions.
In valuing our common stock, our board of directors determined the equity value
of our business generally using the income approach and the market approach
valuation methods. In allocating the equity value, we considered and have used a
combination of the option pricing method, or OPM, the Probability Weighted
Expected Return Method, or PWERM, and the Hybrid Method (which is a combination
of the OPM and PWERM). When using the Hybrid Method, it involves the estimation
of multiple future potential outcomes for us and estimates of the probability of
each respective potential outcome. The common stock per share value determined
using this approach is ultimately based upon probability-weighted per share
values resulting from the various future scenarios. Our scenarios included the
use of an initial public offering scenario and a scenario assuming continued
operation as a private entity (in which an OPM was applied). After the equity
value is determined and allocated to the various classes of shares, a discount
for lack of marketability, or DLOM, is applied to arrive at the fair value of
the common stock. A DLOM is applied based on the theory that as a private
company, an owner of the stock has limited opportunities to sell this stock and
any such sale would involve significant transaction costs, thereby reducing
overall fair market value.
In addition, we also considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange. Factors considered include transaction volume, timing, whether the transactions
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occurred among willing and unrelated parties, and whether the transactions involved investors with access to our financial information.
Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events.
Following the consummation of the Business Combination, the fair value of our common stock is now determined based on the quoted market price on the NYSE.
Public and Private Placement Warrant Liabilities
In connection with dMY IV's initial public offering, which occurred onMarch 9, 2021 , dMY IV issued warrants which entitle the holder to purchase one share of Class A common stock at an exercise price of$11.50 per share, subject to adjustment (the "Public Warrants"). Simultaneously with the closing of its initial public offering, dMY IV completed the private sale of 5,933,333 warrants to dMYSponsor IV, LLC (the "dMY Sponsor") at a purchase price of$1.50 per warrant (the "Private Placement Warrants"). Upon the closing of the Business Combination and as ofJanuary 31, 2022 , there were 6,899,982 Public Warrants and 5,933,333 Private Placement Warrants outstanding. The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants, including the Class A common stock issuable upon exercise, are not transferable, assignable or salable until 30 days after the closing of the Business Combination (except in limited circumstances) and are not redeemable by us so long as they are held by the dMY Sponsor or its permitted transferees. Additionally, the dMY Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis. If the Private Placement Warrants are held by holders other than the dMY Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by such holders on the same basis as the Public Warrants. Additionally, pursuant to a lock-up agreement entered into with the dMY Sponsor in connection with the Business Combination, 2,966,667 of the Private Placement Warrants are subject to vesting conditions (the "Private Placement Vesting Warrants"). The Private Placement Vesting Warrants vest in four equal tranches (i) when the closing price of our Class A common stock equals or exceeds$15.00 ,$17.00 ,$19.00 and$21.00 , over any 20 trading days within any 30 day trading period prior toDecember 7, 2026 or (ii) if we consummate a change of control transaction prior toDecember 7, 2026 that entitles our stockholders to receive a per share consideration of at least$15.00 ,$17.00 ,$19.00 and$21.00 . Any right to Private Placement Vesting Warrants that remains unvested on the first business day after five years from the closing of the Business Combination will be forfeited without any further consideration. We evaluated the Public Warrants and Private Placement Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity's Own Equity ("ASC 815-40"), and concluded that they do not meet the criteria to be classified in stockholders' equity. Since the Public and Private Placement common stock warrants meet the definition of a derivative under ASC 815, we recorded these warrants as liabilities on the balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statement of operations at each reporting date.
The Public Warrants are traded on the NYSE and are recorded at fair value using the closing price as of the measurement date.
The fair value of the Private Placement Warrants (excluding the Private
Placement Vesting Warrants) was estimated using the Black-Scholes option pricing
model. Due to the market condition vesting requirements, the fair value of the
Private Placement Vesting Warrants was estimated using a model based on multiple
stock price paths developed through the use of a Monte Carlo simulation that
incorporates into the valuation the possibility that the market condition
targets may not be satisfied. These valuation models require inputs such as the
fair value of our Class A common stock, the risk-free interest rate, expected
term, expected dividend yield and expected volatility. The fair
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value of our Class A common stock is the closing stock price on the NYSE as of
the measurement date. The risk-free interest rate assumption is determined by
using the U.S. Treasury rates of the same period as the expected term of the
Private Placement Warrants, which is 5 years from the closing of the Business
Combination. We have historically been a private company and lacked sufficient
company-specific historical and implied volatility information. Therefore, we
estimated our expected stock volatility based on the historical volatility of a
publicly traded set of peer companies. Changes in these assumptions can
materially affect the estimate of the fair value of these instruments and
ultimately change in fair value of Private Placement Warrants.
Property and Equipment and Long-lived Assets
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Repair and maintenance costs are expensed as incurred. Significant improvements that extend the useful life or add functionality to property and equipment are capitalized. Depreciation is computed once an asset is placed in service using the straight-line method over the estimated useful life of the asset. Costs directly associated with design, construction, launch, and commissioning of satellites and systems are capitalized when the design and operation of the satellites and systems is at a sufficiently advanced stage such that we believe the recovery of the costs through future cash inflows to be probable. We capitalize materials, labor and launch costs (including integration and launch insurance costs) that are incurred and necessary for the satellites to be placed into service. We depreciate the cost of a satellite over its estimated useful life, using a straight-line method of depreciation, once it is placed into service, which is when we determine that the satellites are providing imagery that meets the required quality specifications for sale to our customers. The estimated useful life over which we depreciate a satellite is determined once the satellite has been placed into service. The initial determination of the satellite's useful life involves the consideration of multiple factors, including design life, random part failure probabilities, expected component degradation and cycle life, fuel consumption (where applicable), and experience with satellite parts, vendors and similar assets. At least annually, or more frequently, should facts and circumstances indicate a need, we perform an assessment of the remaining useful lives of our property and equipment including our satellites. The assessment for satellites evaluates satellite usage data, remaining fuel (where applicable), operational stresses and other factors that may impact the satellite's expected useful life. InFebruary 2021 , we completed an assessment of the useful lives of our satellites and adjusted the estimated useful life of certain satellites from 6 years to 9 years. This change in accounting estimate was effective beginning in fiscal year 2022. InAugust 2021 , additional information specific to a single high resolution satellite became available which indicated the useful life for the satellite will be less than originally estimated. The change in estimate for this satellite was accounted for prospectively beginning inAugust 2021 . The effect of these changes in estimate was a net decrease in depreciation expense of$17.6 million for the fiscal year endedJanuary 31, 2022 . Additionally, the carrying amount of long-lived assets to be held and used in the business are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset may be impaired. When impairment indicators are present, the recoverability of the asset is measured by comparing the carrying value of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. This evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, or an asset group. If the carrying amount of the asset or asset group is not recoverable, the impairment to be recognized is measured by the amount by which the carrying amount of each long-lived asset or asset group exceeds the fair value of the asset or asset group. During the fiscal year endedJanuary 31, 2022 , the Company recognized impairment expense of approximately$1.1 million relating to capitalized costs for certain internal-use software development projects that were discontinued before the projects were completed. The impairment expense is included in research and development expenses within the consolidated statement of operations and comprehensive loss for the fiscal year ended January 73
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31, 2022. Other than as noted above, no events or changes in circumstances
indicated the carrying amounts of our long-lived assets may not be recoverable
during the fiscal years ended
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination.Goodwill is not subject to amortization and is tested for impairment at least annually, during the fourth quarter of each fiscal year or more frequently if events or circumstances indicate that the asset might be impaired. In assessing goodwill for impairment, the Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In the qualitative assessment, the Company considers factors including economic conditions, industry and market conditions and developments, overall financial performance and other relevant entity-specific events in determining whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Should the Company conclude that it is more likely than not that the recorded goodwill amounts have been impaired, the Company would perform a quantitative impairment test.Goodwill impairment exists when a reporting unit's carrying value exceeds its fair value. Significant judgment is applied when goodwill is assessed for impairment. No goodwill impairment was recorded during the fiscal years endedJanuary 31, 2022 , 2021 and 2020.
Income Taxes
We account for income taxes using the asset and liability method whereby deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain. As ofJanuary 31, 2022 and 2021, we had deferred tax assets of$168.9 million and$131.1 million , respectively, before valuation allowances. We regularly assess whether we can realize our deferred tax assets and establish a valuation allowance if it is more likely than not that some or all of our deferred tax assets will not be realized. We evaluate all available positive and negative evidence such as past operating results, future reversals of existing deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax planning strategies. Based on management's assessment that the realization of any future benefit from our deferred tax assets cannot be sufficiently assured, we recorded a valuation allowance against these deferred tax assets. Management's estimates of future profitability and future changes in ownership may materially impact our valuation allowance and our net deferred tax position. Judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. We may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. As ofJanuary 31, 2022 , our estimated gross unrecognized tax benefits were$5.7 million , none of which, if recognized, would affect the effective tax rate. We are subject to income tax inthe United States and various foreign jurisdictions. As ofJanuary 31, 2022 , we had a net deferred tax asset of$0.1 million . Our federal net operating loss ("NOL") carryforward totaled$472.9 million , of which$259.2 million will expire at various dates through 2038 and$213.7 million has an indefinite carryforward. Additionally, we have state and foreign NOL carryforwards of$226.6 million and$0.8 million , respectively. The NOL carryforwards may be available to offset future income tax liabilities.
JOBS Act Accounting Election
We are an "emerging growth company" within the meaning of the Securities Act, as
modified by the JOBS Act, and have elected to take advantage of the benefits of
the extended transition period for complying with new or revised accounting
standards. We expect to use this extended transition period for complying with
new or revised accounting standards until the earlier of the date we (a) are no
longer an emerging growth company or (b) affirmatively and irrevocably opt out
of the extended transition period provided for in the JOBS Act. This may make
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it difficult or impossible to compare our financial results with the financial
results of another public company that is either not an emerging growth company
or is an emerging growth company that has chosen not to take advantage of the
extended transition period exemptions because of the potential differences in
accounting standards used. Refer to Note 2 in our consolidated financial
statements included elsewhere in this Form 10-K for the recent accounting
pronouncements adopted and the recent accounting pronouncements not yet adopted
for the fiscal years ended January 31, 2022 , 2021 and 2020.
In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, as an emerging growth company, we are not required to, among
other things: (a) provide an auditor's attestation report on our system of
internal control over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act; and (c) disclose certain executive
compensation-related items such as the comparison of the Chief Executive
Officer's compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest
of (a) the last day of our first fiscal year following the fifth anniversary of
dMY IV's initial public offering, (b) the last date of the fiscal year in which
our total annual gross revenue is at least $1.07 billion , (c) the date on which
we are deemed to be a "large accelerated filer" under the rules of the SEC with
at least $700.0 million of outstanding securities held by non-affiliates or (d)
the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the previous three years.
Recent Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements included elsewhere in this Form 10-K for more information regarding recently issued accounting pronouncements.
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