PL - NYSE

Good afternoon. Thank you for attending today's Planet Labs PBC Fiscal Second Quarter 2023 Earnings Call. My name is Hannah and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Chris Genualdi, Vice President, Investor Relations. Please go ahead.

Hello and welcome to Planet's second quarter of fiscal year 2023 earnings call. Before we begin today's call, we'd like to remind everyone that we may make forward-looking statements related to future events or our financial outlook. Any forward-looking statements are based on management's current outlook, plans, estimates, expectations and projections. The inclusion of such forward-looking information should not be regarded as a representation by Planet that future plans, estimates, or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions as detailed in our SEC filings, which can be found at www.sec.gov. Our actual results or performance may differ materially from those indicated by such forward-looking statements and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier this afternoon. Further, throughout this call, we provide a number of key performance indicators used by management and often used by our competitors in the industry. These and other key performance indicators are discussed in more detail in our press release. On today's call, we will also be discussing our backlog of contracted revenue. Although our backlog reflects business that our management considers to be firm, please note it is also a forward-looking metric. And any termination, amendment or cancellation of contracts or awards may occur which could result in a reduction in our backlog. Before we jump in, I'd like to encourage everyone to reference the slides we have posted on our Investor Relations website, which are intended to accompany our prepared remarks. At this time, I'd now like to turn the call over to Will Marshall, Planet’s CEO, Chairperson, and Co-Founder. Over to you, Will.

Thanks, Chris and hi everyone. I'm glad that you could join us today. I'm excited to share our results for the second quarter of fiscal 2023, as well as our Board perspective on the market, data on our recent wins and our outlook for the third quarter and the fiscal year. Kicking off with a summary of our Q2 results, we generated $48.5 million in revenue during the quarter which represents a 59% year-over-year growth. We believe this substantive step up in growth rates reflects the robust market demand for our mission-critical solutions. We saw a strong growth from existing customers in the government and agriculture sectors as well as some exciting new customer additions. Non-GAAP gross margins expanded to 52% up from 36% a year ago, another significant year-over-year uptick, which we believe is strongly indicative of the margin potential of Planet's one-to-many data subscription business model. We added a number of great new customers to the Planet platform during the quarter and ended Q2 with 855 unique customers. I'm clearly thrilled with our revenue and gross margin expansion for the quarter, but I'm also excited to see that our retention rates are improving showing that our investments in customer success as well as product fundamentals are yielding great results. Executing for our customers and growing within these accounts is a key component of accelerating growth. Ashley will share more on that in a moment. To sum it up, Q2 came in above our expectations across the board. We are pleased with the momentum that we're seeing in our sales and product organizations and we're continuing to invest across our teams and our margin performance shows we are progressing with both strong growth and profitability. Now let me take you through some of the details. As shared on our last earnings call we're seeing significant demand for our data across both government and commercial markets and we believe this reflects both the usability and critical nature of the solutions we are providing. Customers across our largest vertical markets, agriculture, defense and intelligence, and civil government are using our data to better measure, monitor and manage land and other critical resources as they tackle pressing sustainability and security issues, issues that I'll note persist despite the economic climate. Last quarter we shared the exciting news that Planet has been awarded $145.9 million multiyear contract as part of the National Reconnaissance Office's Electro-Optical Commercial Layer, EOCL. Today, I'm pleased to share with you that our service for the NROs ramped up quickly and our team's execution has been excellent. Our ability to hit the ground running on this landmark contract contributed to the strength of our results in the quarter. We are proud to be able to serve our partners in the U.S. Government with our powerful and differentiated geospatial data and we're excited to continue to expand this relationship in the years to come. Turning to the civil governments side, digital transformation initiatives continue to drive demand at both the national and local levels. For example, during Q2 we announced that we are providing the German Federal Agency for Cartography and Geodesy, BKG with daily high-resolution satellite data for a huge variety of use cases including crisis response, environment management and nature conservation, as well as forest and agriculture monitoring. This is a pioneering contract because it is a country wide partnership in which employees of more than 400 German Federal Institutions can gain access to Planet's data to help promote public and civil safety throughout the entire Federal Republic of Germany. This engagement follows an assessment by the central government that determined that Planet's data can help address the needs of the entire Federal Government. There is a potential for expansion with this contract and importantly this represents an example that other country may look to follow. We also highlighted in Q2 the expansion of our relationship with the New Mexico State Land Office. Using Planet's road detection analytics, the land office has been able to detect roads that were created on protected land and have identified up to $1 million in trespass violations fines thus far. After the beginning of the devastating 2022 wild fire season, the land office is using SkySat to monitor burn scars and severity, allowing the state to plan for potential flooding and debris flows along with mitigation efforts to restore the land. This is an example of how both digital transformation and recent climate events are driving demands for our solutions. Shifting gears to commercial applications, the agriculture vertical is a top market for Planet and our data is used across a range of applications and industry value chain. Many of these applications either increase yields and therefore revenues or increase efficiency and therefore profits which is especially important to today's economic environment. A new customer in agriculture that I'd like to highlight this quarter is Organic Valley, the organic food brand and independent cooperative of farmers. During Q2 we announced that we had completed a successful pilot program with them which utilize our technology to efficiently measure pasture health on dairy farms. With our near daily satellite imaging, participating Organic Valley farmers access reports created by the cooperative regarding their pastures which help them assess pasture quality thereby support herd nutrition and contributing to sustainable agriculture practices like regenerative rotational grazing. I'm pleased to share that the program is set to expand fivefold this year following the successful pilot.

I might just turn for a moment to Ukraine. As we have previously shared, we are supporting critical efforts in multiple areas by providing imagery to governments, aid and relief organizations, think tanks and the media. We continued that important work in Q2 and NASA Harvest and Windward are a couple partners I'd like to highlight who are using our data in response to recent events. The team at NASA Harvest, NASA’s food security and agriculture program recently used the Planet data to develop country-wide assessment of the health of grain in every field across Ukraine and its effect on global supplies. As of August 2022, the Harvest team found that more cropland than was initially expected has been harvested and planted along both the Russian-occupied and Ukrainian-held territories. The team is also currently estimating a higher production out of the region than other publicly-sourced estimates. Such analysis is important as Ukraine is a breadbasket of Europe and has important implications for supply chains generally and the poorest countries in particular, since an estimated 40% of grain used by the World Food Program comes from Ukraine. Another example of our data at work in Ukraine is how Maritime AI company Windward, when combining their AI-powered behavioral analytics models with Planet’s daily imagery, found vessels engaging in dark activities and ship-to-ship operations in the Kerch Strait in June as part of what appeared to be the coordinated effort to launder grain allegedly stolen from Ukraine. The report found a 160% increase in dark activity in the Black Sea year-on-year, with 73% of those cases occurring after the war started. We are constantly inspired by the innovation and passion of our customers and partners to use our solutions to solve big and important problems. Planet's daily scan of the earth generated by our SuperDove fleet, especially lends itself to this cultivation of innovative applications, thanks to its unique always on non-tasking architecture. The work of our users and the impact that they have with our data on a daily basis is what motivates us to continue building Planet's earth data platform into a more powerful and easier to use solution for our customers. With that, let's turn to some product updates. Development of our next generation Pelican fleet has been progressing as planned and we continue to expect to launch the first two satellites towards the beginning and end of next calendar year respectively. One of the critical design components of our new fleet is the significant reduction in latency of the constellation that is reducing the time between a customer ordering and receiving our data. Our customers want our data as close to real-time as possible. So our teams have designed a leading edge approach to satellite to satellite communications enabling downlink by other satellites to reduce latency. To this end, we were excited to share in Q2 that Planet was selected as a partner by two companies, SES Government Solutions and Telesat Government Solutions to demonstrate real-time connectivity solutions low earth orbit satellites to other in space communications satellites as a part of the NASA funded Communication Services Project or CSP. NASA’s goal with the project is developing next generation system for near earth in space communications that leverages private sector capabilities. Planet's goal is to bring our next generation technologies to markets faster and at a lower cost than it would have been possible otherwise. These are win-win partnerships. Furthermore we can continue to innovate on our existing fleets as well. As we have previously shared we have made improvements to our SkySat tasking systems that have driven substantive increases in our high-resolution capacity and efficiency. We have demonstration that we can rapidly improve the capabilities of our hardware through iterative software upgrades and algorithmic improvements. These efforts continue to bear fruit and the customers are benefiting from enhanced reliability, improved quality and faster delivery as a result and we are also able to support more customers. These improvements ultimately make our high-resolution fleet more one to many in nature and contribute to our operational efficiency, the strength of our results and our market lead. In summary, Q2 is an excellent quarter exceeding our targets across the board, further bolstering our confidence, not only in Planet's growth opportunity, but also our ability to capture it. We continue to see growing demand for our solutions across the end markets driven by board secular tailwinds and we're executing well, both commercially and technically. With that I'd now like to turn over to Ashley, after which we will have some time for Q&A.

I might just turn for a moment to Ukraine. As we have previously shared, we are supporting critical efforts in multiple areas by providing imagery to governments, aid and relief organizations, think tanks and the media. We continued that important work in Q2 and NASA Harvest and Windward are a couple partners I'd like to highlight who are using our data in response to recent events. The team at NASA Harvest, NASA’s food security and agriculture program recently used the Planet data to develop country-wide assessment of the health of grain in every field across Ukraine and its effect on global supplies. As of August 2022, the Harvest team found that more cropland than was initially expected has been harvested and planted along both the Russian-occupied and Ukrainian-held territories. The team is also currently estimating a higher production out of the region than other publicly-sourced estimates. Such analysis is important as Ukraine is a breadbasket of Europe and has important implications for supply chains generally and the poorest countries in particular, since an estimated 40% of grain used by the World Food Program comes from Ukraine. Another example of our data at work in Ukraine is how Maritime AI company Windward, when combining their AI-powered behavioral analytics models with Planet’s daily imagery, found vessels engaging in dark activities and ship-to-ship operations in the Kerch Strait in June as part of what appeared to be the coordinated effort to launder grain allegedly stolen from Ukraine. The report found a 160% increase in dark activity in the Black Sea year-on-year, with 73% of those cases occurring after the war started. We are constantly inspired by the innovation and passion of our customers and partners to use our solutions to solve big and important problems. Planet's daily scan of the earth generated by our SuperDove fleet, especially lends itself to this cultivation of innovative applications, thanks to its unique always on non-tasking architecture. The work of our users and the impact that they have with our data on a daily basis is what motivates us to continue building Planet's earth data platform into a more powerful and easier to use solution for our customers. With that, let's turn to some product updates. Development of our next generation Pelican fleet has been progressing as planned and we continue to expect to launch the first two satellites towards the beginning and end of next calendar year respectively. One of the critical design components of our new fleet is the significant reduction in latency of the constellation that is reducing the time between a customer ordering and receiving our data. Our customers want our data as close to real-time as possible. So our teams have designed a leading edge approach to satellite to satellite communications enabling downlink by other satellites to reduce latency. To this end, we were excited to share in Q2 that Planet was selected as a partner by two companies, SES Government Solutions and Telesat Government Solutions to demonstrate real-time connectivity solutions low earth orbit satellites to other in space communications satellites as a part of the NASA funded Communication Services Project or CSP. NASA’s goal with the project is developing next generation system for near earth in space communications that leverages private sector capabilities. Planet's goal is to bring our next generation technologies to markets faster and at a lower cost than it would have been possible otherwise. These are win-win partnerships. Furthermore we can continue to innovate on our existing fleets as well. As we have previously shared we have made improvements to our SkySat tasking systems that have driven substantive increases in our high-resolution capacity and efficiency. We have demonstration that we can rapidly improve the capabilities of our hardware through iterative software upgrades and algorithmic improvements. These efforts continue to bear fruit and the customers are benefiting from enhanced reliability, improved quality and faster delivery as a result and we are also able to support more customers. These improvements ultimately make our high-resolution fleet more one to many in nature and contribute to our operational efficiency, the strength of our results and our market lead. In summary, Q2 is an excellent quarter exceeding our targets across the board, further bolstering our confidence, not only in Planet's growth opportunity, but also our ability to capture it. We continue to see growing demand for our solutions across the end markets driven by board secular tailwinds and we're executing well, both commercially and technically. With that I'd now like to turn over to Ashley, after which we will have some time for Q&A.

Thank you Will and thanks everyone for joining today. As Will mentioned, our revenue for the second quarter of fiscal 2023, ending July 31, came in at $48.5 million, which represents 59% year-over-year growth driven by expansions and increased usage for existing customer accounts and the addition of new customers. We're pleased with how our growth rate has continued to accelerate driving revenue over $5 million above the high end of our guidance range. We've spoken at length about the predictability and repeatability afforded by our data subscription business model. As you know, the majority of our book of business consists of recurring annual contracts. Many of our contracts have usage components with committed quarterly or annual minimums, primarily for our SkySat tasking services, but in some cases also for our Planetscope downloads. With the strong execution of our teams, recent product optimizations mentioned by Will and the heightened demand from our customers, the pace of usage in the quarter exceeded our expectations, particularly in some of our larger contracts, as well as some of our newer contracts related to the situation in Ukraine. The higher usage led to the significant upside in revenues for the quarter. We anticipate that about half of the upside was an acceleration of revenue that we had expected in the second half of the year, while some of the higher usage patterns reflect our ability to deliver faster and drive earlier renewal and expansion opportunities. It's also important to note that in prior years we have seen Q2 to be sequentially lower in revenue because of the pacing of consumption for a couple of larger customers with whom we have usage based contracts. This year, the consumption patterns were much stronger in the quarter, creating a particularly favorable year-over-year comparison. We're very pleased with this upside and are cautiously optimistic about our opportunity to drive additional upside for the next several quarters. Over 90% of our customers signed annual or multi-year contracts and our average contract length is approximately two years weighted on an annual contract value basis. These contractual commitments from our customers combined with our own strong execution, provide us with the ability to engage our customers early around renewals, cross sells and upsells of our solutions. Our sales motion is to land and expand and our commercial teams are armed with the proof points to go execute. Moving on to some of our core business metrics, our end of period customer count grew to 855 customers, which represents 17% year-over-year growth and reflects the growing demand for our data. We continue to see meaningful expansions with our customers as evident in our net dollar retention rate of 125% and our net dollar retention rate with winbacks of 127%. This is a significant step up in net dollar retention rate, primarily driven by the higher than average renewal value of large government contracts and the expansion of large agricultural customers. We continue to anticipate that this metric will expand over the year as we realize the returns on the investments that we have made in both our products and our global customer success teams. Turning to gross margins, we expanded our non-GAAP gross margin to 52% for the second quarter of fiscal 2023 compared to 36% in the prior year. The expansion of gross margin continues to be driven by the growth of our top line, the efficiency of our industry-leading agile aerospace approach, and the fundamentals of our one to many data subscription business model. We expect gross margins will continue to expand in the years ahead as we scale. Adjusted EBITDA loss was $10.5 million for the quarter better than we had expected as the revenue upside largely fell to the bottom line. We are continuing to invest in our teams across Planet, adding headcount across the organization to meet the increasing demand for our solutions. In fact, as of Q2, we've grown our software headcount by 55% year-over-year and sales organization headcount 78% year-over-year. We believe Planet's commitment to our mission, technology and market leadership and the strength of our global organization are competitive advantages in the market for talent. I want to spend a quick moment on the funding we received from our partners for the NASA CSP project, which in aggregate represents $40.5 million to accelerate the development of ultra-low latency communications capabilities in space. The program is expected to span just over three and a half years, and the funds are expected to be paid based on certain milestones and will be recognized as Contra R&D expense, therefore offsetting the accelerated investments. Therefore we anticipate it will be neutral to the P&L. As Will mention, we're incredibly proud to support NASA's mission and bring these next generation technologies to market faster than we otherwise would have been able to. Turning to the balance sheet, we ended the quarter with $458 million in cash, cash equivalents and short-term investments, which we believe provides us sufficient capital to invest behind our growth accelerating initiatives. During Q2, we invested a portion of our cash into short-term investments that are highly liquid in nature in order to generate a higher yield on our cash. So you will note the new line item on our balance sheet for short-term investments. We also continue to be debt free. Capital expenditures for the quarter, including capitalized software development were $4.3 million or approximately 8.8% of revenue. At the end of Q2, our remaining performance obligations or RPOs were approximately $131 million of which approximately 75% apply to the next 12 months and 95% to the next two years. RPOs will fluctuate quarter-to-quarter as multi-year contracts come up for renewal and in general provide strong visibility to future revenue. As a reminder, our reported RPOs exclude the value associated with the $145.9 million EOCL contract, as well as other contracts that include a termination for convenience clause, which is common in our federal contracts. These contracts are incremental to the RPOs that we report and are considered a part of our backlog, which is now more than double our reported RPOs. Looking ahead to the third quarter, we expect revenue to come in between $45 million and $48 million, which represents growth of approximately 47% year-over-year at the midpoint. We expect non-GAAP gross margin for Q3 of 47% to 49%, up from 35% in fiscal 2022. Our adjusted EBITDA loss for the third quarter is expected to be between negative $22 million and negative $20 million. We expect capital expenditures of approximately $8 million to $9 million, which represents 16% to 19% of revenue. For the fiscal year ended January 31, 2023, we now expect revenue to be between $182 million and $190 million representing 39% to 45% year-over-year growth, an increase from our last forecast based on our overachievement in Q2. Our growth rate at the midpoint of this guidance would be 42%, a significant top line acceleration on a year-over-year basis. We expect our non-GAAP growth margin to be between 49% and 51%, an improvement of over 10 percentage points year-over-year. Our adjusted EBITDA loss is expected to be between negative $68 million and negative $60 million. We expect CapEx to be approximately $24 million to $28 million representing approximately 13% to 15% of revenue. This increase in our range for CapEx reflects some of the acceleration of purchases we intend to make in order to reduce supply chain risks that we anticipate could occur given global market dynamics. Finally, I'd like to remind everyone that we're hosting an Investor Day on October 12, 2022 in San Francisco, as well as virtually. We will go through a number of our key business and financial metrics, as well as showcase some of our new customers and products. Please visit our Investor Relations website or reach out to our Investor Relations team if you'd like to receive more details. We hope that you'll be able to join us. To close, I'd just like to say it was a great quarter. I'm really impressed with the execution of our teams around the globe. We continue to perform well against our plan and remain confident in the growing market demand for our unique data sets and we believe we are well positioned to capture the market opportunity ahead of us. Operator, that concludes our comments. We can now take questions.

Certainly. [Operator Instructions] The first question is from the line of Noah Poponak with Goldman Sachs. Please proceed.

Hi, good evening everybody.

Hey.

Thanks for taking my questions. Can you give us a little bit more detail and specifics on what work and what customers were pulled forward in 2Q and similarly what's being added into the full year?

Yes, I could start maybe. I mean, a high level, just to mention at the beginning, it is multiple accounts that had high usage in the quarter, but it is both commercial and government ones. So Ashley anything to add to that?

Yes, I would just make clear that, when we talk about timing, it's about the revenue recognition for the annual contracts that we sign with customers, so we have these annual commitments of send from the customer. The timing of rev rec in some accounts can be tied to the usage of those customers. So when they exceed the usage that we kind of anticipate above the minimum, then that will cause the revenue to be recognized earlier than we may have otherwise anticipated. Net, this is a really good thing because it gives us the opportunity to engage with customers about potentially expanding the contract and continuing at this higher usage rate. But we've made assumptions about which of those are likely to kind of smooth out on the back end and which could potentially be upside overall on the year.

And if I could just add sorry, yes just add to that. What it seems to me is that the product improvements that we've been making and the customer success improvements we've been making on those investments are really paying off just to see that across multiple accounts like that Noah.

Okay, great. Is there, I appreciate that, prior to the NRO transition at EOCL, is there an element of the legacy enhanced view and the new EOCL happening at the same time this year as they transition and is that adding to the year's revenue?

My understanding is that the EOCL replace is enhancing.

Okay. I didn't know if there was an overlap in the transition, but okay. And then just last one, just on the EBITDA performance, I mean the EBITDA beep in the quarter is essentially the same size as the revenue beep. So on paper, it implies a 100% incremental margin. I don't know if there's other pieces moving around, Ashley if you could help me there? And then for the full year the EBITDA change is small, I guess, relative to that revenue change and the EBITDA being accretive, if you can help me square all that up?

Yes, you're exactly right that the upside in revenue effectively fell to the bottom line in the quarter and as I mentioned in the call, there are a couple of areas where we're leaning into the opportunity to invest, particularly in R&D some -- in some cases it's accelerating investments and purchases, to mitigate any potential future supply chain challenges. And in a lot of cases, it's, growing the teams that we've been talking about since the beginning. So, I think I mentioned software headcount grew 55% year-over-year, and sales is up about 78% year-over-year. So we're investing into these areas. So we're assuming that those investments show up in the back half of the year and offset some other revenue upside.

Okay, all right. Thanks so much.

Great, thank you.

Thank you. The next question is from the line of Jeff Van Rhee with Craig-Hallum. Please proceed.

Great, thanks for taking my questions. I'm going to circle back maybe to the usage first, just could you talk a bit more about where that usage upside was coming, if you'd sort of frame it either within particular end markets, use cases or geos?

Yes, and like I was saying, there's not, it is really pretty much across the board where a lot of the upside was actually coming from commercial accounts. So just to be clear, it's not just government, but we're seeing it from across government and commercial accounts. So there's no particular vertical market bias if you'd like. And then yes, I don't know, Ashley, do you have anything to add to that?

No, that's exactly right. We, as Will mentioned, we rolled out a number of product enhancements. We've been making investments in customer success to get customers up and running faster on the product. And we're seeing that payoff across, frankly all of our vertical markets.

Yes. I mean, I understand the conservatism of not playing it through, but is there anything about the type or the way the upside came in that on the flip side can convince you that it doesn't continue?

As I said, our customers sign annual contracts with us and so we're looking at those that are likely now that they've kind of accelerated their usage, they might slow that down to stay within their contract envelope. At the same time, like I said, it creates an opportunity for the sales team to engage with those customers and spotlight the value that we're really driving towards them and talk about either an early renewal or an expansion to the contract. So really it's understanding, kind of on an account by account basis where we've got high confidence and potentially seeing some of that upside and where we want to hold some of that back until we know it's there.

Yes, okay that makes sense. And then just to revisit on the CapEx understanding the supply chain issues, wanting to pull things forward to make sure you get what you need has just to confirm, has anything really changed over the last, I guess if you look at on a rolling average, out over the next 12 to 18 months, in terms of your general thinking on CapEx needed?

Basically, we're excited about the market opportunity in front of us, especially the receptivity we've had with Pelican. And so we're looking at opportunities to make sure that, that we can either do bulk purchases for that program or as we mentioned in our earlier remarks, if we see that there could potentially be issues down the road and we want to get ahead of those just making those purchase decisions earlier, so that's the net of it.

Okay. Maybe one last on if I can sneak it in the pipeline, any change or composition wise that's notable. And again, I'm thinking more along the lines of verticals, use cases in terms of what's flowing through the pipeline right now.

No, but I mean, we are seeing some really exciting new accounts across the board. So I mean, both in our core vertical markets and new ones. Let me just mention a couple of the new areas because it's fun. We signed a contract with Fremont which is a mining company, a large mining company, and that's the monitoring environmental practices, and water, tracking water in the facilities and things like that is kind of cool use case. We talked about this quarter, a partnership with EO, live EO, which is a really cool partner in Germany that is tracking the, basically the encroachments of undergrowth onto supply -- onto pipelines and power lines. And it's really cool use case. We've got a lot of expansion potential and sort of win-win. So we're seeing this sort of thing just on Friday Bloomberg sent out this one of these first word weekly updates and included a Planet data fee, basically an economic indicators to do with agriculture. And so, basically we're seeing general increased awareness about Planet in these vertical markets, a lot of our go-to-market approach there is in collaboration with partners. And we're seeing that, so a lot of little things like that beginning which is really peaking our interest about future markets, as well as the cool ones, so we're seeing goodness across the border.

And have you seen the continuing of the shorter sales cycles you called out last quarter?

They were generally in line with what we see on average, so neither accelerating nor decelerating. We're very pleased with the way the team is executing.

Got it. Okay, thanks for taking my questions.

Yes, thank you, Jeff.

No, worries.

Thank you. The next question is from the line of Ryan Koontz with Needham & Company. Please proceed.

I apologize for background noise here, but on the great gross margin in the quarter, any -- were there any one time contributors there that would drive you to think it will be lower sequentially with revenues increasing there?

So it really is tied the revenue upside and so the variation quarter-to-quarter is driven by our seasonality on revenue quarter-to-quarter.

Got it. Okay, thanks. And on the sales org expansion there you had nice numbers on the headcounts. Any other color you can give us in terms of verticals or different channel efforts you have underway to target new verticals? Thanks.

I just shed some light on that with a few new customers, as I mentioned, I mean, we are, but we mainly focused on the core three vertical markets we've spoken about. I would just say that overall we feel that we have very excellent sales execution. That's what I'm most proud about for this quarter. We've mentioned before we have a virtualized sales force in certain regions and that's going well and but overall, I just feel very good about the customers access. The AEs, everything is or the machine is humming right now.

That's great to hear. Thanks Will and thanks Ashley.

No worries.

Thank you.

Thank you. [Operator Instructions] The next question comes from the line of Josh Sullivan with The Benchmark Company. Please proceed.

Hey, good evening.

Hi.

As far as the supply, as far as the supply chain risks that you're looking up for, are there any particular areas of concern you're preparing for?

Well, let me just say that actually we are not seeing any particular challenges with our supply chain, right. The second, what actually I was referring to is the fact that we are getting way ahead of any potential supply chain. Remember also though that, the number of parts that we have are pretty low volume. And so this isn't a huge challenge for us, but we want to be lower our risk and find alternative vendors and so on for other inventories. But generally no other major things that we're tracking that we are worried about. Obviously the economic board economic situation is on our mind. That also seems to be just fine right now. As I mentioned in my remarks if anything the agriculture sector for example, we're talking about with increasing profitability, decreasing costs, that's the kind of thing that you don't throw away in this sort of broader macroeconomic situation. Same on the government side. So we're feeling good about that, but of course we're thinking about it and taking it into account and our planning.

Got it. And then on EOCL, initially when it first came out, you were a little more conservative with what you recognized in the backlog versus peers, has that perspective changed at all? Now that you have a, almost a quarter under your belt and you've seen some increased utilization here, just curious on your current thoughts on the long-term EOCL opportunity?

No, I mean, we're really pleased with EOCL. As I mentioned, that we're really pleased how it kicked off. We hit the ground running. There is lots of expansion opportunities there. Obviously we took a slightly different approach to how we talk about that. We talked about firm fixed contracts only, and that was the, we think the right thing to do. Others can do what they choose to do. And but we think that's the right thing to do. And we see a lot of upside there and we have a lot of great conversations but, I'm most pleased with just the execution against what we said we would do and how that's going.

And then just one last one, as far as the CSP project and better latency, I guess real time would be a perfect world, but is there a latency rate that there's some sort of tipping point allowing a larger revenue opportunity? And then where do your latency rates rank right now, maybe versus peers?

Great question. So, yes and definitely increasing -- decreasing latency is great. It does increase certain and enable certain use cases. Maybe give you one example in disaster response, you really want the data within half an hour, an hour, that sort of timeframe, not a few hours and this system will, the CSP is enabling and helping to fund our ability to get towards minutes, not hours. So our present system is measured in hours. It depends a little bit on the specs of what you are buying. There's faster delivery systems and slower delivery systems, but it's measured in hours and we're going to get it to minutes using this mechanism. It's pretty neat, and it's great to be partnering with NASA on it, who, and it's really cool for them and it's really cool for us. And it obviously has great help on the financial side as well. So we feel really good about that partnership and forward funding that was on a product roadmap.

Got it. Thank you for the time.

Great. Thank you, Josh.

Thank you. The next question is from the line of Colin Canfield with Barclays. Please proceed.

Hey, good afternoon. Can you talk a little bit about how you expect headcount growth to interact with growth in the business and maybe where you'd expect to see kind of the greater needs split between sales and tech over time?

Yes, that's a good question. As we mentioned, we are investing quite a bit on the R&D front, both for our space systems teams, as well as our software teams and obviously we see a global market opportunity and the more feet on the streets that we have, the faster we can capture it. So I'm not sure I've given a specific answer to your question other than to say we're investing across both of these areas.

Sure. That's fine. Maybe and then maybe if you could talk about the levels of wage inflation that you saw in the quarter split between kind of your sales and tech hiring?

Obviously we're watching that closely. It's not something that has created challenges for us either on the ability to hire or to retain key talent. I think we are advantaged in having a very mission oriented business with impact on important problems sets that people want to be part of that solution. So generally speaking, I think Planet is a very attractive place to work and as a result, we're able to attract some really outstanding talent as a result.

Got it. And then last thing from me, but I think we've talked about recent calls kind of your desire to acquire into greater geospatial analytics exposure. So maybe if you could talk about the private evaluation market and how kind of rates and cash management have interacted with what you've seen in your pipe?

What market, sorry, I didn't quite hear that word?

Geospatial analytics.

Yes. I mean, we definitely, I mean, we are investing in sales and marketing and software, and we will always look at M&A for ways in which we can fund it. It mainly is focused, as you say, on this sort of geospatial platform piece and analytics and going up the stack, as we've discussed in, as we went public gearing up the statutes is the sort of main thrust of our investments. And so that enables us and, but we're very disciplined and thoughtful about when and how we would do that, obviously bearing in mind all the relevant considerations of ROI and everything.

Got it. I appreciate the color.

No worries.

Thank you. There are no additional questions waiting at this time. So I will hand the call over to Will Marshall, CEO for closing remarks.

Yes, thanks operator and thanks everyone for joining the call today. I just want to end by emphasizing couple of key points then. Firstly of course our Q2 results were strong and exceeding the targets across the board, we feel very, very good about that. And as I mentioned also, and pleased not just with the specific financial out performance, but also our strong customer attention and customer satisfaction scores, which suggest that the advancements and investments we're making in customer success and the products are really paying off. And we believe the competitiveness of our fleet and the investments we're making will keep continue to keep us competitive edge. So we feel really good about where we're at, and also the growth reflects strong demand across and the secular tailwinds are behind us of sustainability and digital transformation. And I also just wanted to note at the end that as Ashley mentioned at the end of her remarks, we're holding our Investor Day on October 12 in San Francisco and virtually. So please check our Investor Relations website, if you would like to come. It'd be great to see everyone there. With that, I'll close and thanks very much everyone for attending.