Palantir Tells Investors to Expect $1 Billion in 2020 Revenue

(Bloomberg) -- Palantir Technologies Inc. expects to generate $1 billion in revenue this year and break even for the first time in its 16-year history, offering shareholders a rare optimistic forecast in a badly bruised economy.

These and other details in financial documents reviewed by Bloomberg show a glimpse into the famously secretive company known as much for its government work as for its controversial co-founder, Peter Thiel. Among other things, the documents suggest Palantir is preparing to go public, though the coronavirus could pose an insurmountable barrier to that goal.

One obstacle that’s within the company’s power to fix: its flimsy corporate governance. The board, composed of Thiel and three other men, is in dire need of more diverse perspectives. The company is interviewing candidates for the board and intends to elect at least two independent members by the end of the year, said three people familiar with the discussions who asked not to be identified because they were private. A spokeswoman for Palantir declined to comment.

The Palo Alto, California-based data mining and analytics company increased revenue 24% to $739 million in 2019, according to the documents. It expects to boost that number 38% to $1 billion this year. The vast majority of Palantir’s contracts are long-term, and a significant portion of annual revenue comes from prior years, helping Palantir offset slow patches.

Still, the coronavirus pandemic is impacting almost every business in the world and forcing many companies to tear up financial forecasts. Palantir is currently offering some of its software for free to governments and international organizations to help fight the virus, forgoing revenue from those clients. The financial projections, which were issued to investors at the end of March and haven’t been previously reported, don’t account for the full effects of the virus.

Eric Munson, a Palantir shareholder since 2014, said the forecast probably undercounts the benefits to the company’s revenue. “Unfortunately, war, terrorists, chaos and pandemics are good for their business,” said Munson, a founder of Adit Ventures. “I think these estimates are very conservative.”

The privately held company has long resisted the public markets because it risked getting valued like a consultancy and because investors have given the company freedom to set its own pace toward profitability, people familiar with the matter said. Even when Palantir executives warmed to the idea of going public, a public offering has eluded them. Alex Karp, the chief executive officer, said in 2016 he was weighing an IPO. The deliberations continued in the intervening years, with little clarity on a timeline.

Palantir had about $1 billion in cash at the end of last year. To eventually reach the public markets, Palantir is considering a direct stock listing, which wouldn’t raise capital for the business. It still hasn’t set a date for a stock listing and, given the frozen public markets, may not any time soon. The prospect for going public is one major item on the agenda for the new board members planned for this year, said people familiar with the discussions.

Staying private enabled Palantir to spend freely on projects it might not have otherwise been able to develop, investors said. For example, it accumulated losses over many years to build Foundry, software that makes it easier for customers to pull together disparate data into one place. Foundry is now used by 98% of Palantir customers, the documents show.

The project coincided with a big push to hire sales staff. “I love lawyers and engineers, but they don’t necessarily make the best salespeople,” said Munson. “You have a product, and you hire salespeople to sell it, and -- no surprise -- you get sales.”

The new financial documents are based on generally accepted accounting principles -- the method typically employed by public companies -- instead of bookings, cash collections and other Silicon Valley-style metrics that Palantir has relied on in the past. They show Palantir had a backlog of contracts from multi-year deals worth $2.2 billion as of Dec. 31. Of the $1 billion in estimated 2020 revenue, Palantir expects $839 million of that to come from existing contracts, some of which include options for extensions.

©2020 Bloomberg L.P.