7 Comments

I am long on Planet. Averaging at about 2.7. Will add more to do DCA. Plan to allocate 10% of my portfolio at least and for 10 years at least. Great article.

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Thanks for the thesis. Some questions to reflect over.

1. Why will nobody else be able to replicate planet labs? How many sattelites do they own and how old are they? The whole world is launching roughly 1000-2000 satellites a year into orbit. And each few years they should improve vastly according to Moore's law. So if company B starts to launch sattelites in the coming years that can produce 2x the amount data at the same price, Planet labs would be in trouble.

2. Are their satellites used for anything else or only data collection?

3. Do they have protective measures, such as patents or other barriers?

4. Any idea of the magnitude of TAM? 1B, 10B, 1T?

These questions are there to answer if Planet Labs is filling a vaccum of demand that nobody else can or with a lot of barriers, fast enough for us to make market beating returns. Cheers

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Thanks for reading and sharing your thoughts. A few thoughts of my own:

1. PlanetScope is ~180 sats. In continuous replenishment mode, so 50-60 are generally replaced each year, with each successive model boasting improved performance. SkySat is ~20 sats, to be replaced over the next few years with Pelicans. Yes, satellites are getting better rapidly, but the difficulty of designing and building them is not going away. Planet's talent and experience iterating on top of a fully functioning platform are meaningful advantages. Constellations capable of producing an entire Earth scan are also still expensive in aggregate - Satellogic is experiencing this challenge today.

2. They're strictly a means of data collection and transmission. It's a focused mission.

3. They do have some patents, but more important is an ability to continuously upgrade their capabilities as patents grow stale when change is occurring so quickly. Planet's Dove is on the ~20th iteration and more than 1,000x better than the initial version. Space presents some natural barriers given the difficulties of operating in orbit. Workflows around the data also create barriers.

4. I won't share a specific estimate of the TAM - it would be relatively useless - but it's large, maybe tens of billions large. Every farmer could benefit from Planet's data. Every civil government could benefit. Every D&I agency could benefit. It's a unique capability they bring to the table, the implications of which are in the early stages of being discovered/explored.

To the broader question: it will be years before anyone is able to replicate the daily scan - if anyone does. By then, Planet will be years ahead in building out a platform that makes the data easy to use / integrates into customers' workflows. The first moat is technology. The second moat is platform stickiness. The second moat is the focus of investment today, while continuing to refine and expand the data they collect in the first place.

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Thanks for the reply.

Something else;

They may have increased gross profit significantly, but they are still burning a ton of cash through R&D (tripled since 2021) and SG&A (more than doubled since 2021) and thus operating margin decreasing. There is no sign of slowing down here.

Is there any strong case for these to drastically decrease in the coming years or are we praying and hoping that this does not continue? After all, even if they have an irreplaceable and high demand product, it is still worth trying to assess wether it is likely that they will slow down this burn in the coming years.

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Opex ramp is part of a planned investment cycle funded by the $500M+ proceeds from going public. I imagine operating leverage will start to become more evident this year (with R&D / SG&A being held flattish) and hit stride in 2025 as Pelican/Tanager comes online, EUDR takes effect, and they have another full year to build out a solution set and GTM with a new sales force / strategy.

We'll see, but I don't think the current pace of cash burn is irresponsible. There's a lot of cash sitting on the balance sheet and a large, underpenetrated market opportunity ahead.

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How likely do you feel hitting management's target of a positive adj EBITDA quarter by YE 2024 is? Assuming +EBITDA in Q4 2024, do you think it is plausible they get to FCF positive by Q4 2025?

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Think it’s likely. FCF is more tricky to predict as it will depend on the pace of Pelican rollout but plausible for sure.

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