I Gotta be honest with you I feel a little bit strange yesterday. didn't really feel like getting punched in the nuts like I usually feel after palantir earnings which is a very peculiar feeling to be honest. but I can get used to it now in this video. I'm gonna do a deep dive long format of the entire Palantir earnings.

Now if you're not into Palantir, this video isn't for you. Skip to the next one. It's okay. Now if you are into Palantir, we're gonna do a deep dive but without over geeking and over detailing the numbers.

I Don't want to get lost in the numbers I Want to keep it simple but deep and detailed now. Hopefully we can achieve that and this video is going to be a little bit longer. So sit back, relax, and let's do it. So the first thing I want to mention is what just happened post earnings.

obviously post earnings. The company had a blast of it after hours with you know, the share price spiking. I'm assuming the same thing will continue in the pre-market it's currently 5 a.m so I don't really know exactly what's going on the pre-market media do I care and I'll explain in a second why this point is coming. Don't worry now, what happened yesterday is basically Palantir beat EPS earnings per share and it actually hit Gap generally accepted accounting principle profitability.

So these two elements basically Spike the share price. Basically, this all comes down to one thing which is: Wall Street really loves performance and execution on the financial side. once you hit EPS once you actually hit Gap profitability, you'll get a nice little bonus. that's okay now.

I wasn't particularly focused on these two things although I did care I had a whole list of my own which I posted on Twitter and it included seven items I'm gonna redo all the seven items to tell you what I was looking at number One obviously Gap Profitability I care about Gap Probability I Actually want to know that the company is heading the right direction, but it's only one out of seven item. The second item I was looking at is grow growth guidance how much the company is guiding for in the financial year 2023. We're going to talk about that because not all is Rosie in that section at all, but more on that later. Number three is commercial sector growth.

I Believe that the growth engine for the company is the commercial sector, so I wanted to see the commercial sector numbers in this section. We obviously check the mark. no problem at all. Exactly what I wanted to see.

Number Four: What's going on with us versus EU This company has a major Achilles heel as far as almost virtually no business in the EU compared to the US Did it get better I Want to see the company becoming a little bit more Global Obviously they're not going to go into China we know why, but at least in the EU front with everything that happened with Ukraine with the whole de-globalization I Expected to see a little bit more out of the EU Um, not necessarily got what I was looking for there Number five stock based compensation reduction I think we already had the big peak of hiring all the sales force to actually go after the commercial Market I'm expecting to see a little bit of a decline, if not more of a decline in SBC stock base comp. We definitely got that more on that in a second Number Six net dollar retention Very important to me to see that the company isn't losing ground as far as charging existing customers more. I'm talking about that as well I have a whole section dedicated to that again, not always Rosie there as you can see as you can see. I'm not into fluffing this company I'm not here to basically say that everything was great and you know you should just go all out.

There's plenty of channels to do that. On this channel you get an objective view the good and the bad. If you want to be actually a good investor, you have to look at the good and the bad and be able to recognize both. So exactly what we're doing in this video.

and of course number Seven I Wanted the company to present the data in a little bit of more straightforward, transparent matter without all this nonsense like aggregating U.S business. And of course they didn't do it and we had to dig through this again. Sorry for my language, but it is what it is. It might be a company culture thing as far as presentation I'm not getting caught up in that too much Now talking about the company mindset leads me to the second point in the company mindset section: I've seen a lot of improvement in these specific earnings and in fact, the first thing I was impressed with with Alex Carp's ability to basically be concise, direct answer to the point no philosophical stuff I Think it's a really good change as far Alex goes.

It shows a lot of understanding as far as what the market is looking for from SEO of a multi-billion dollar company and I was actually impressed I gave him an eight for his performance communication skills I Know that's not easy for him, but in fact he was actually so self-aware that he made a little joke about it basically saying well I want to go on this philosophical tangent but I know you guys hate it. So I won and I thought that was actually pretty brilliant. Now leaving Alex Carp aside because this was a nuanced thing nobody really cares about that. Let's talk about the most important thing here.

This earnings call was the first time where I actually felt that the company was focused on Gap profitability just as much as it was focused on growth in fact, probably even more in gap of Stability this time than the previous quarter. shows me that the company is actually speaking in that language that institutional investors are looking for. Institutional investors will not invest in Palantir, at least not in huge amounts until we see Gap Profitability and the management finally understands it. It's a sign of maturity.

It's a sign of basically them talking the language institutional investors are speaking. Does it mean we have a 60 institutional ownership tomorrow? Probably not. But it definitely seems that the management understands the channel, change the frequency change. They have to talk the language of the institutional investors and actually show they care about Gap profitability.

They can no longer do this. Oh, we only care about growth, you know Screw Profitability. They've not. They've done it before and the market punished them for these statements so to speak.

And this time they actually Dodge the bullet and spoke very to the point. I Think that the big move here in this share price and I mentioned this earlier was the fact that the company hit for the first time in history. Gap or stability. I Mean that's huge milestone.

It came two years early because last time we spoke to Alex Carp basically he spoke to us. He said 2025. So hitting gapper's ability two years early is very, very strong as far as share price performance as far as institutional participation. I Think this is a huge milestone for the company.

Does it mean we have to start celebrating and getting into Euphoria No, no, no price action in Euphoria post gap of stability is understandable. There's a lot of idiots out there, but you should not be one of them. You have to be objective, look at the good, look at the bad, and actually assess the company for what it did not for what you think it might. Basically getting into this formal because of price action right now is a huge mistake.

There's plenty of time to buy volunteer shares if you want to do so in the next two years. There's no rush. definitely not in the middle of a formal cycle which I hope we don't get now. How I personally handle this and again I Think psychology is a huge part of being a long-term investor.

In fact, I would say critical part is look I didn't get down on myself and I didn't get depressed when the share price was six dollars. I'm not gonna get high right now on this nine dollar share price or 10 share price just because of price action. It's meaningless to me when it's down to six, it's meaningless to me when it's up to 10. whatever it may be I care about long-term success I Think that this is a 30, 40, 50 stock in a few years.

That's the only thing I'm focused I Don't care about these price wings and making any decisions based on that. Making any kind of euphoric statements based on that is plain stupidity. You have to stay objective. You have to stay grounded.

Don't get distracted by this nonsense. Now to summarize, before we go deep into the numbers: the earnings were good. They were not brilliant I think there's a lot of places for improvement. There's a lot of work to be done.

There's a lot of weaknesses, but they were definitely better and in the right direction. I think there's way more work to be done here. And talking about that. My main concerns are basically the fact that Revenue growth this year was actually not that high, at least compared to last year.

Last year we did 40 percent. this year 24.. I mean that's really a huge decline in acceleration rate. Still growing at 24 is impressive, but given last year at 40 growth, that's a huge concern.

And I'll talk about why this is happening. I I think I know why this is happening, but let's hold off on that for a second. The other thing which I had a huge issue with is the decline in net dollar retention. Now, net dollar retention is basically how much existing clients are paying you more this year compared to what they paid you last year.

Now, a company like Snowflake has an 180 retention, which is insane. Not that I'm expecting Palantir to hit that, but last year Palantir had 131 percent net door retention, which is very good this year 115 Network retention. So they're declining on net door retention. Now This is a huge problem because if you're expecting to hit 30 Keger, you have to be able to charge your existing customers more every single year.

It's 10 times easier to upsell an existing client versus to cold call and recruit a brand a new client. So losing net dollar retention ground is a huge concern. If they are to hit that 30 Keger, it's just another thing I'm really concerned about another point I'm concerned about and we'll get to the good parts in a second. But I Want to start with the concerns is the fact that Cash Operations is down.

Last year they did 330 million this year 220. it's a huge decline. Operating margin is down from 31 last year 31 last year to 22 this year. Now, there's a lot of excuses to be made here.

Obviously, the company is expanding. there's more low ticket item sales, there's more freemiums, there's more of recruiting going on, and obviously that hurts the margins. I Get it. But still.

I Don't expect to see such a huge decline from 31 to 22 on operating margins within a year. That's another huge concern. Now, at this point, having heard all my concerns, you might ask yourself a simple question: Well, Tom are you still bullish on Palantir with all these concerns? Yes. In fact, I'm more bullish than ever.

and I think the results were good. but I showed you all these concerns to show you that not everything is. Rosy A lot of people on social media on Twitter are hyping up about the share price. They're overlooking these weaknesses.

You have to be aware of them. Even as a bullish investor, it's super super important. I'm not here to fluff the stock. I'm here to give you the facts good or bad.

Now look let's move on to what I like about this company. What I like about these earnings and what I like about it Beyond Just a gap of stability. We have talked about it. Everybody has beaten this topic to death.

Let's talk about what I like beyond that Now number one: I Like the customer growth, customer growth is up 55 year over year. It's absolutely insane. Very impressive. but you still have to remember we did just mention that the net door retention is only 115 this year.

it's extremely low compared to last year 130. It's way lower than the company like snowflake, but on its own Standalone basis. If I tell you hey I have a SAS Software is a software business and I'm having a 115 Network retention. It's not a bad result.

It's just not as good as it used to be and not as good as we expected. But getting more clients through the door is the first step of fixing that. So 55 growth in customer account is good. It's also a huge mitigation to the concentration risk.

You never want to have too much business in the hands of two little clients. That's a huge risk. Now talking about that, Palantir's current top 20 clients comprise about 50 percent of its entire Revenue So 50 of volunteers entire revenue is sitting in the hands of just 20 clients. That's a huge concentration risk.

However, those 20 clients the best 20 clients of the company have increased their spend by 13 on average from 44 to 50 million dollars per client per year in this current year, which is really impressive. I mean Corporate America Mainly doesn't spend 50 million a year for a service provider unless they have the good stuff. So the increase from 44 to 50 million per client per year on the top 20 clients shows me their product is that good and even better. Now the second item I want to talk about is stock based compensation.

That's one of my specific Focus points I'm happy to report that although stock waste composition is still fairly high, it's down 27 year over year, which is a step in the right direction. Now the next point I'm really excited about is the deal flow. Palantir increased their deals closed this year by more than 60 percent from 600 to 980 deals closed just in the entire year of 2022. That's a huge increase that shows me that their business development that the sales force is actually doing its thing.

which is what I was concerned about because we didn't know how good these sales people were. So that's another important Milestone we have to be aware of as a positive signal. Now let's talk about commercial growth now. Commercial growth is very impressive 67, which is something to be celebrated for sure.

However, what I'm still missing here is a push of the EU side. Now the EU side is pretty much non-existent I Love how the growth in the US is absolutely insane, but the EU is still the Achilles heel of this company. We don't have to go to China, there's plenty of business to be had in the EU and palleteer has to try and diversify a little bit outside the U.S Currently, the entire Commercial Business is primarily in the US and that's another huge risk. It's concentrated.

We have plant concentration problems and geographical concentration problems that need to be fixed. But then again, 67 is very impressive. But if you look at the entire commercial growth, it's 29. That's what happens when you have zero percent or close to zero percent at other geographies.

Now, the one thing I want to talk about is the government. Now government. You know, it's always been kind of the anchor of this company. A lot of government clients.

they're very sticky, but they're actually increasing the government revenue. This was the first year in the company's history they crossed the one billion dollar Revenue per year from government business. It's insane. It's very, very impressive.

However, you have to be aware that the growth is not going to come from government. government comprises about half of this company's business, give or take, but the growth in the government side is only about 13. It's a lot slower. it is stickier, but it's a lot slower than the commercial side.

It's another thing to be aware. And I guess the most impressive part about this company is that somehow sales are up 24. Whether you think this number is high or not, it's still an impressive number on a standalone basis. So sales are up 24.

But sales expenses Sgna is down seven percent. But at this point you might say, well, Tom that's because they're paying everybody with stocks. Well, it's kind of true, but stock based composition is also down 27. So the company is generating 24 more sales.

but it's paying less than stock base count by 27 and paying less in SG A by seven percent. That's very impressive. And let's talk about the weak guidance we got for next year. Not very impressed by that 2.2 billion give or take based on the year.

We just finished with 1.9 billion. So it's a very, very cautious guidance. Very, very meager. Why? Well, there's two reasons here.

Which well, there's really three reasons I Hope the third one is not legit. Reason number One: they're just sandbagging it. They're basically giving us slow guidance so they can beat it. Definitely possible they're not the first one to try this method.

In fact, they have before and as you can see in this guidance, it worked for them last year. The lower guidance and this is what we got this year: a huge spike in the share price. Maybe that's the case. Maybe it's because they think that next year macroeconomically is going to be horrific and they're adjusting to that.

Maybe possibly maybe it's a combination of both. I Don't know. There is a third reason is because their business is trash. but at this point I tend to think that this reason is not so valid.

but if it is, then that would be a good reason to lower your guidance again. I Don't know I'm not a fortune teller Now There's two more things to talk about. Very important I Had a lot of questions post earnings. One question was when will palantir be added to the S P 500 I Would say that this question is as ridiculous as asking somebody who is a a High School varsity player when he's making it to the NBA All-Star game I mean this.

This is way too early to talk about that. That's not even a serious question. The other one, which was a little bit more serious, started by Alex Carp hinting at possible M A at possible acquisition If Planetir will get acquired by a big company, obviously, there's going to be a huge spike in the share price and all that good stuff. and I think it's partially responsible for that share run up we saw I'm just here to tell you that I think it's highly unlikely that Palantir would ever be a target of an M A of Emergency acquisition activity for two reasons: Number one, it has a class F shares which gives unlimited lifetime veto to Uh Alice Carp and Peter Thiel and a lot of other guys.

and the other part is their government business is dependent on them not doing business in China Any acquisition that you can think of who would buy Palantir that doesn't have business in China that doesn't have Chinese exposure because in that case older government side is going to the toilet and they become half as valuable as they are right now. So unless they can find a strategic purchaser that has nothing to do with China which is very hard in this day and age, I Think this is highly unlikely I think it's a lot of hot smoke air to kind of pump it up a little bit I Don't take this seriously at all now. I Want you guys to tell me right now in the comment section. Two things: Number one: What did you think about the earnings? What kind of score do you give it from one to ten? I'm curious to hear you and also if you can't explain to me what is the one thing you love the most, What is the one thing you hated the most? I will pick the most interesting comment or a few for my next video to highlight on my channel.

As always, thank you for staying with me. If you haven't yet, there's about 30 of you who's watching who are not yet subscribed I Don't care about the likes and all that stuff or patreon all that stuff but I am really focused on actually growing my channel getting to 300 000 if you can subscribe to the channel if you find Value in it I'd really appreciate it. Thank you so much, even if you don't just keep watching the video. see you next video.