Hey this is tom nash, and this is going to be my deep dive, which i promised into the palantir financials all 81 pages of the full filing, including the comments and, most importantly, including the things the company did not show in their earnings call, which i think Was a huge mistake, so, first of all, i think palinding can really work on their presentation skills because the q1 call was abysmal. They broke the cardinal rule of presenting to people which is just don't read directly from the slides verbatim, give some added information. They failed to do it. The overall vibe was a little bit arrogant in my opinion, and i fear that this might be actually trickling down into their sales, culture and business development culture, and i hope that that kind of arrogance isn't going to be the next time.

We're going to have this call, i do not think that this directly impacted the way this stock collapsed after the earnings. I think that would have happened. Anyways, that's just the market we're in, but it's not a good look, even if they are convinced that they have the best solution. Ever they got ta be more humble about it and got ta, provide a little bit more information and not just hype.

On page nine, i want you to pay attention to this remaining performance obligations and i'm gon na talk to you in a second about it. This is basically how much the company still has in the tank as far as contracts they haven't performed. Yet they have 1.2 billion already of remaining obligations, which means that if what they're saying here is correct and they're going to utilize about 40 of it this year, they already have 500 million out of the 2 billion they have to do this year. Already in the bank they just have to do the work.

That means they already have 25 of the annual targets secured even before they did any sales, and that's a really positive signs. Now, there's going to be a lot of negative signs, but you know we have to actually give them credit where credit is due as we're about to shellack them on some other stuff and unfortunately it has to be done now. This is the part where i have a lot of criticism for the company, because the way they're presenting this data is a little bit misleading. That shows you that the operating expense of the companies have only grown three percent and while their revenue grew by 31 and that's initially something i saw - and i was really excited about.

But when i dug deeper, i found out that this is a whole bunch of horse crap. Let me show you why, and it's really unfortunate. I don't like this idea of presenting stuff. Total revenue did grow by 31 to 446 million, while the total operating expenses grew by three percent as they showing here.

That is very impressive. No doubt, however, this hides a major problem without stock-based compensation, if you remove the stock-based compensation expenses that were allocated, you get a very different number now, just to remind you. Stock-Based compensation is stock that were given to employees they're, not a cash flow expense, but they're treated as an expense for accounting purposes. And if you remove this stock based compensation, which is not a cash flow expense, you can get a better picture of how efficient the company is and usually removing or neutralizing stock based competition works in the favor of the company.

It makes it look better, but here as you're about to see it about, to make it look much worse, because without stock based compensation, if you remove it from q1 last year in q1 this year, the operating income in both years is identical. 116 million last year. In the quarter, one 117 million in this year's q1, even though revenue went up to 445 million dollars now how? How does revenue go up to 445 million dollars over a hundred million of extra revenue? And yet the operating income only grew by one million? That is not good well, the reason is because the real operating margin is now 26, which is a massive decline from last year. Last year they had 34, so basically, the operating margin is getting smaller.

That is not good, so they went from 341 million in revenue to 446 million in revenue, and yet the operating income remained the same. That's what happens when you present the numbers correctly, which i think they should have been more transparent about now. The reason this is happening again, i dug very deep here, and i found out exactly why this is going on is just because of marketing costs. Now, r d expenses did not change, they did if you look at the ones that include sbc.

But if you neutralize spc r d expenses did not change, but marketing expenses went up from 79 to 111 million, which is a 40 increase, so you needed 40 more marketing expenses to generate 31 of revenue. Now, obviously, there's good explanations to this and i totally understand why it's, basically, when you set up a whole new sales force and your whole new marketing department, that's what's going to happen, but we needed to hear this in the call. We needed this transparency because, once this sales force actually starts generating new sales, this extra increase is going to be swallowed by the new massive revenues they haven't explained this at all. They just hit it under drag, which i don't think is a good policy.

They needed to show what i just showed you and another point that concerns me is the way they present the actual customers now look. This is a very interesting presentation, they're talking about going from 149 customers to 277 customers, which is great, that's good. That's in the beginning of the presentation, but at page 21 they're talking about the top 20 clients and how the average spend went from 36 to 45 million per client for the top 20 clients, which is great a 24 increase on your best clients, they're spending more They're staying that's great, but the problem is that they're not talking about the flip side of it. Obviously, almost doubling your customer account is great.

More spend on your top. Customers is great, but that doesn't address the risks involved. With this, when you have 900 million dollars locked up in your top 20 clients out of 1.6 billion, which you did for the past 12 months, that means that 56 of your business is currently held by 20 clients. Now i couldn't find anywhere any representation of this number in their slide.

Maybe it's there. Let me know below. I had to reverse engineer this number and it's really concerning. Why would you not show this? I mean it's a real problem for a scalable sas business.

That is just too risky 56 for your top 20. Clients is a big problem. Now they could have talked about it and there's definitely good explanations. They could have said.

Look there's a lot of government money in there and government business is not like enterprise software. It's much more stable once you're in you're, in as a contractor, unless you really screw up so that 56 represents a lot of government money which is way more stable than 56 of commercial clients, and this would have been a great explanation. But again, that's not a good policy. I believe they have good intentions, but they need to be way more transparent in the way they present the good and the better about this company.

Now page 14 is actually very impressive, and yet they didn't talk about it. They didn't focus about it in the presentation, which is a shame again bad strategy. Now look stock based compensation is coming down this quarter. We saw a 25 reduction year over year in the amount of stock based compensation from 200 to 150 million dollars, but but the most important thing was the dilution.

In 2019, this company had 600 million shares in 2020. It went up to 1 billion shares. Then, a year later it went to 2 billion shares, that's 2.3 times more shares. The company has in just a few years now over the past year.

The company, literally, as you can see here, did not delude at all. They stayed at the same amount of shares. This year went up from 1.95 billion to 1.94 billion in the amount of shares, so there's no more dilution going on. Obviously they could have talked about it and said: hey.

We had the dpo, the direct public offering and then dpo. It's basically exactly what needs to happen. Employees get a lot of stock and they are the ones who creating the liquidity in the market. It's not an ipo.

So a massive increase in the amount of shares before dpo is normal and they could have shown examples of that, but they haven't talked about it, because this is a really good rebuttal to all this dilution nonsense. Now, on that note, as far as insight is selling, i did check this alex. Carp did not sell any stock this year so far and as far as insiders there's a wash 30 million shares sold 30 million shares bought, which is basically a classic options, grant exercise and selling exercise because, when you're exercising options, you're actually selling stock to pay tax. On the ones you exercise, so when you have this identical, 30 million versus 30 million shows me.

These are option grants being exercised to pay taxes. There is no net selling in the company. Nobody is actually selling in the open market. Without these pre-approved automated sales to pay for tax now pay attention to slide 16 they're talking about rsu's warrants and options when executed.

These will dilute the shares even more and look at the amount it's coming down from 670 000 in q1 last year to 500 000. In q1, this year, a drop of 25 percent in the potential future stock. Delusion now another thing you want to pay attention to on slide 16. Is the government look at the government side of things i'm going to actually highlight it a little bit below so they're, showing you the breakdown between the government and the commercial side of things, and it's really important.

So government went from 208 to 241 million, while commercial went from 132 to 204 million now. Also, another good thing which they didn't talk about, which is a shame, is that the weight of the commercial went up from 40 of the business to 46. The business. That's good and if you look at slide 17 you're going to see that u.s growth is accelerating, uk is kind of the same rest of the world is actually slowing down a bit now with russia and eu.

This is bound to change again, something they needed to talk about. And yes, it's true that the u.s commercial revenue grew by 136, but i believe it can be much better because they're dealing with a two-year-old brand new sales force that has never sold commercial enterprise software. The company knows how to sell to governments and agencies, that's very different than selling to companies. It's a whole different ball game.

It's a jungle, they aren't perfect, but they do make mistakes and they have to own them, and i feel like in the presentation they didn't, but an increase of 136 year-over-year is very good. I do believe that their sales force as far as selling commercial enterprise software will get exponentially better as they get more experience and more traction and you're going to see some insane numbers here. So that's my two cents about it. I hope you enjoyed my analysis and gave you some extra clarity into this company, the good, the bad and then not so pleasant.

Again, i'm a huge believer just to be clear: i'm buying more stock at seven dollars, i'm getting into this company more and more as it actually declines in price, because for me it's an opportunity. But again, this is just my opinion might be, an accurate might be wrong, might be the ramblings of mad men. Talk to a professional, you know, make your own research, and if this talk isn't for you, it isn't for you. It is what it is see you next, video 30 hertz straight up.

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