Hey guys, it's sasha a few days ago, palantir released their quarterly results, and there were some really interesting things in there that i wanted to discuss. Some of these things were really good. Palantir is beating some of my expectations and some of them by quite a margin, but some other things in this report in the palantir update were not so good and i'm going to cover them in detail as well. I'll also share my valuation model and tell you what's changed and why it's changed, and just in case you do not know, i do hold a long position in palantir that i may extend in the future.

Also, everything in this video is just my opinion. I might be wrong, i'm just some random guy in the internet, so always do your own research recheck every number and make up your own mind regarding your own. Investing decisions. Don't listen to me! Don't listen to other people, i'm just here sharing my personal view.

In case you find it interesting now, first up the overall highlight is everything is going to plan valencia posted 375.6 million dollars of revenue for q2, which is up from 341 million in q1. The gross margin is still really high at 76 percent r d and marketing spend are both going up, because valencia is reinvesting every dollar that comes right back into the business, and this is really important. I'm going to cover that in a bit more detail in just a minute: palantir is continuing to post technical losses, 138.6 million dollars for q2 and a lot of traditional investors will look at the numbers and say that you should steer clear of palantir. The losses are apparently accelerating: the outstanding shares are being diluted heavily and their costs are rising faster than their revenues.

So what kind of an idiot would want to invest in a company like that? Well, here's what's actually happening in the valentine business and why i have recently increased my position. First, let's talk about the shares, because this is something that people often misunderstand and don't really know where to look. Palantir has a very complex share ownership structure compared to the average company, and i won't go into the depths of that. But part of the reason for this structure is that palencia rewards its senior management and other staff with company stock.

That's what they've been doing for some time before they went public and that's now transpiring into those options being exercised. This is a good thing when you hire extremely smart and effective people and then give them a big future incentive based on long-term performance outcomes. Really great things can happen, ask tesla and if you look on page 17 of the q2 sec filing the penalty filed you'll notice, there are 1.936 billion outstanding shares as of the end of q2, which is already 144 million up on six months ago. So it looks like things are crazy, but if you look through the next couple of pages in more detail, you'll notice that there are another 597 million shares that have not been issued.

Yet these are options and rsus that are being held in people's hands. This means that at some point in the future, those will also convert into shares, so the total number of existing shares and the ones that are not shares yet is 2.53 billion, and six months ago there were 1.792 billion shares outstanding, with 720 million in options and Rsu's for a total of 2.51 billion, that's less than a 1 increase from one number to the other. If you actually look at the totals not just at the outstanding number - and this is the bill that i think some people don't really look at or maybe choose to ignore now over the last six months, no new options have been issued, which is really important and Actually kind of good, if you are concerned about shared illusion and only 10 000 rsu's came out, they were granted at a 27 price, so the stuff that is being granted now and if any share options are going to be given out in the future. The price on them is going to be substantially higher than the ones that were given out some time ago.

The truth is the company incentivized, its management before they went public and the shared illusion has pretty much stopped this year. So now, let's look at some of the really good things from this update. The total outstanding contract value has gone up from 2.8 billion in q1 to 3.4 billion in just one quarter. This is the total amount of contracts that have been signed by palantir or by parentheses, clients, but have not yet been delivered, and this is huge because palantir only made about 1 billion in revenue in 2020..

So if they sign zero new customers forever, they currently have more than three times of that revenue that they signed that they earned last year coming over the next few years. Now there is a risk that some of these contracts won't play out. Some of them might be cancelled and not earn a hundred percent of the signed amount, but quarter and quarter that outstanding number is increasing. It is growing, and certainly if you look at the amount they signed and the growth in that total value, it doesn't look like many of them are getting cancelled at all.

Now this quarter, panter did not publish one number that was really important. It was the average contract duration of the contracts that are outstanding and it was 3.7 years in q1. However, they did let it slip on the quarterly course somewhere right, roughly in the middle. They mentioned that that number was 3.9 years, and this is why it is really important to listen to those quarterly results.

As an investor, it is critical. That number was not in any of the findings. It wasn't an ascc document, it wasn't in their presentation. So if you didn't listen, you would have missed on it, and this is important because it shows that the clients panels here are signing are not only signing higher value contracts, they're also signing longer term ones and for a software-based company like palantir.

That kind of long-term outlook is phenomenal, but here is the really important number. In q2 palencia signed 925 million dollars worth of new contracts, that's 150 percent more than they actually booked in revenue. So that's 2.5 times the revenue within the quarter and this growth and new contract signed is the bit that i think some people don't fully understand, or at least don't understand the implications. The contracts that you sign today are going to become revenue tomorrow.

So you can see what sort of rate that revenue will be growing over the next three to four years, when you look at the stuff that the company is signing today versus what they are earning today, this booked revenue is not only amazing because of its size, Though it is also amazing, because those clients that are being signed that are signing these deals can then become repeat clients. They can extend projects, they can add additional projects, their competitors, their competition might begin paying more attention and want to get the same service in this industry. This growth that they are booking today can itself yield more growth in the future and in many cases it will, and if you book this long-term growth quarter at a quarter, then in each subsequent quarter, your revenues will be growing as a function of the previous growth. Take that 925 million dollars apparently sold in q2, let's subtract the 375 million dependency made in revenue, and that leaves 550 million dollars.

Now, if i take that 3.9 years number as the average contract length, that has about 141 million dollars per year to their revenue or about 35 million dollars per quarter and remember, this is not the rate of growth. This is the rate of growth of the rate of growth, and that rate is 10 per quarter, which is ridiculous. On top of this, palancio have just gone and paid off all of their debt. They literally have zero debt as a company.

At the moment sure there are liabilities like bills, salaries, tax payments, all the usual stuff, but in the last quarter they cleared the last 200 million dollars worth of debt and that number for the company is now zero. While the total amount of cash that they're holding literally cash sitting in the bank is 2.3 billion dollars for a company that made one billion in revenue over the last year, this is one of the best balance sheets that you'll ever see now. Palantir does have some major drawbacks and it is important to pay attention to them as well. Valencia's revenue is still very heavily skewed towards us government income.

The decline in air travel over the last two years really did not help, because the air industry was one of their biggest growth areas, and this reliance on the government revenue is actually worse today than it was a year ago, and this means that pancreas revenue is Also heavily skewed towards the united states market as well, and the expansion globally is not progressing as fast as maybe people expected, but over the last two quarters, palantiya have hired a huge number of salespeople 50 people in q1 and 60 in q2, and those new hires Are likely not actually adding to that conversion pipeline because that sales process is going to be taking several months? It takes a long time to convert clients. First, you have to do the whole hour. Each thing then there's a whole sales process. Then, in many cases with parents here they offer them a period of either reduced or near free service, so that then the customer can decide if they want to go and buy.

So these people that they're hiring in much larger numbers than ever before are probably not yet contributing to that crazy sales pipeline and when they do that can only accelerate the future growth of that pipeline. So, on the back of all that my valuation really hasn't actually changed much i've updated some of my assumptions. I've reduced the debt and i've put the total number of shares, including all options in rsus. In instead of doing something halfway house, i have very slightly reduced the total for 2021 in terms of revenue after this update.

But i have increased that same number for 2022 and 2023 because of those ridiculous sales figures and i've upped my multiples as well, because the rate of growth for palantir is increasing. I now have a five times: multiple on perpetual growth and an 18 times multiple on the free cash flow model. Now the free cash flow figure for 2021 might be a bit out. I might be a bit on the high side because it's very hard to predict what they're going to be doing with their cash over the next two quarters.

Valentia does some stuff which nobody expects, but even if it goes and drops by quite a substantial amount, it doesn't really matter because that number is relatively negligible to the overall valuation and they'll only have maybe a few cents impact at most and on the back of All that i'm actually keeping my target price at 81, like i did after the previous quarter's results. This one is going to be a long term play, but i am really liking all the underlying numbers. Now, if you found this video useful, please don't forget to smash the like button for the youtube algorithm. That would really help this video to reach more people and grow my channel.

Thank you so much for watching. I really really appreciate and as always i'll see you guys later.