Planet Labs PBC

NYSE:PL

Earnings Call Transcript 2025-Q1

[Operator]

Hello, everyone. Thank you for attending today's Planet Labs PBC First Quarter and Fiscal 2025 Earnings Call. My name is Sierra, and I will be your moderator for today. [Operator Instructions]I would now like to pass the conference over to our host, Chris Genualdi, VP of Investor Relations. Please proceed.

[Christopher Genualdi, executive]

Thanks, operator, and hello, everyone. This is Chris Genualdi, Vice President of Investor Relations at Planet Labs PBC. Welcome to Planet's First Quarter of Fiscal 2025 Earnings Call. I'm joined today by Will Marshall and Ashley Johnson, who'll provide a recap of our results and discuss our current outlook. We encourage everyone to please reference the earnings press release and earnings update presentation for today's call, which are available on our Investor Relations website.Before we begin, we'd like to remind everyone that we may make forward-looking statements related to future events or our financial outlook. We also may reference qualified pipeline, which represents potential sales leads that have not yet executed contracts. 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 historic and forward-looking 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 competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, 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.

[William Marshall, executive]

Thanks, Chris, and hello, everyone. Thanks for joining the call today. Planet delivered a solid quarter to start the year. For the first quarter of fiscal year 2025, we generated a record $60.4 million in revenue, representing 15% year-on-year growth, driven by the strength in the government sector. Non-GAAP gross margin for the quarter was 55% and adjusted EBITDA loss was $8.4 million. These results were all in line with or better than the guidance provided on our last earnings call.Q1 marked our fourth sequential quarter of quarter-over-quarter improvement in adjusted EBITDA as we progress towards our target of achieving adjusted EBITDA profitability by Q4 of this fiscal year. We also launched the Planet Insights platform in April, which extends our market reach and empowers our customers and partners to easily access and build solutions with our data.Let's go into more detail in Q1, starting with the continued strength that we're seeing in the government sector. Heightened security needs, increased sustainability requirements and global climate risks are fueling government customer demand for our broad area monitoring capabilities and solutions. In the defense and intelligence sector, specifically, revenue grew approximately 25% year-over-year.We're pleased to share that the National Reconnaissance Office, NRO, has exercised a priced option of the EOCL contract with Planet, which includes PlanetScope monitoring, SkySat high-resolution tasking and access to our data archive. As a reminder, a portion of our 5-year base period contract with NRO had priced options that could be exercised by them at the 2-year anniversary of the award. We're pleased to have secured this important renewal and are proud to continue serving the U.S. government's needs. We see meaningful opportunity to expand our relationship with the U.S. government as the EOCL contract continues, and we bring new solutions and capabilities online.You'll also recall from our Q4 earnings that we had multiple 7-figure pilot programs in flight or in procurement with the U.S. Department of Defense for our PlanetScope data enhanced with AI-based partner solutions. We're pleased to share that we successfully completed 2 of these 7-figure pilots and anticipate additional follow-on pilots from these programs.These pilots require broad area monitoring, detecting and reporting, and reflect a growing trend towards acquiring focused insights from our global data. We're also pursuing additional larger pilots with other government agencies and believe our unique daily scan positions us favorably to win. We believe all of these pilots have the potential to convert into very large operational contracts over time.During Q1, we also signed a contract with Rambus to provide SkySat high-resolution data for their AI platform, which assists the strategic operational and tactical decisions of the U.S. national defense and security customers. And we recently expanded our contract with the Royal United Services Institute, RUSI, to provide the leading defense and security think tank with access to our PlanetScope monitoring, SkySat high-resolution tasking and archive data to conduct rapid and relevant analysis for policymakers.All in all, we're pleased with the strong results and trends that we're seeing in the defense and intelligence market and remain confident in our opportunity to win new accounts, gain share and expand with customers over time. We're especially encouraged by the growing demand with some of our largest customers for our PlanetScope daily scanning capabilities enhanced by AI-based partner solutions.Turning to the civil government sector, where we continued to see strong growth during Q1. Demand for our broad area management solutions remains solid, and we continue to win our new customers for applications such as compliance monitoring, regulatory enforcement, risk management and disaster response.During Q1, we signed a contract for the U.K. EO Data Hub through our partner, Earth-i, who offer Earth observation consultancy and program management services. U.K. EO Data Hub will have access to Planet's data, platform and training services to support the development and operation of a new centralized EO platform infrastructure for the U.K.'s public institutions and commercial organizations looking to leverage Earth observation data.During the quarter, we also won a new contract with the Kenya Space Agency to provide PlanetScope data for policy and decision support in agriculture, urban development, spatial planning, disaster response, amongst other applications. Under the contract, the agency will also have access to daily data that can help with situational awareness in the event of disasters by the recent flooding in that country.We also recently won a new contract with the Sabah Forestry to provide data for forest carbon monitoring in North Borneo, Malaysia. Sabah Forestry is the state's forestry department whose aim is to efficiently plan and implement the management of state resources according to the principles of sustainable forest management.Taking a step back, we continue to see regulatory-driven tailwinds supporting civil government customer adoption globally. We also see an opportunity to win new customers in the civil government sector by providing solutions and platform capabilities, which support faster customer time to value and enhance customer ability to efficiently manage broad areas of land and water.Shifting to the commercial sector, where headwinds have continued and we are refocusing our go-to-market strategy to align more closely with where we see the opportunity, particularly in the agricultural vertical. For example, we see promising growth potential with our large ag customers, particularly where our data is being used for precision ag applications, like variable rate application and crop protection. There's an opportunity we're focused on.We have also seen softness with certain customers that provide digital agriculture apps, which, in many cases, represent loss leaders for those customers. We see potential for improvement as some of those digital ag apps shift towards new business models with better aligned incentives. These are the digital agriculture customers that we're focused on.More broadly, our go-to-market strategy for the commercial sector is centered around serving customers via our platform, both directly to end customers as well as through third-party solution partners. We believe this strategy can support durable revenue growth and higher ROI on customer acquisition costs over time. And as an example of a recent partner-led win, during Q1, we signed a 3-year contract with a Brazilian utilities company, Eletrobras. Eletrobras will leverage Planet data and alert systems for our partner, SCCON, to monitor reservoirs and transmission lines impacted by environmental change and irregular occupations.As you may recall, we also partnered with SCCON to serve the needs of the Brazilian Federal Police, particularly for identifying illegal deforestation and mining in the Amazon rainforest.This brings us to our product updates. As I mentioned, an important part of our strategy for the commercial sector is the Planet Insights platform that we launched in April. The Planet Insights platform is designed as the destination for earth data analytics and geospatial tools. It's built to enable an ecosystem serving as the home for both direct customers and partners to train and run models, build solutions and turn data into insights. We believe the platform will support a more effective and efficient go-to-market strategy, leading to higher customer usage, retention, expansion and ultimately, higher revenue growth.We're also pleased to share today that our first hyperspectral satellite, Tanager-1, is ready for launch. The spacecraft arrived at Vandenberg Space Force Base on June 3 in preparation for the liftoff scheduled for July. It will be joined by 36 SuperDove satellites on board a SpaceX Falcon 9 rocket. Tanager-1 will be the second of our next-generation satellite to take flight following the successful Pelican tech demo launched last November. These 2 satellites share a common bus, and Tanager-1 has benefited from the many learnings gained on orbit from the Pelican tech demo.Tanager-1 will be our first of our hyperspectral fleet. This will expand our capabilities by adding more than 400 spectral bands of data, capturing phenomenon that [ aren't ] visible to the human eye. We expect Tanager's imagery will be analyzed by expert scientists around the world, including at our partner, Carbon Mapper, who plan to use Tanager's data to pinpoint methane and carbon dioxide superemitters globally.Tanager's hyperspectral data will also be commercially available to Planet customers for a variety of other applications like defense and intelligence monitoring, biodiversity assessments, mineral mapping and water quality assessments. The Tanager program, which is funded through our partner, Carbon Mapper, represents a great example of the opportunity we see to provide customer or partner-funded missions, leveraging our space systems capabilities and IP to scale the business efficiently. We view this as an attractive model we can use with our government relationships going forward.Finally, we continue to prioritize resources behind core high ROI areas that support our ability to capture the market opportunity unfolding in front of us while streamlining where necessary, support organizational efficiency and our profitability objectives. We remain committed to reaching our target of adjusted EBITDA profitability in the fourth quarter of this year, an important milestone on our journey to building a high-margin, sustainable cash flow generating business.In summary, we're pleased with our results for Q1. We are succeeding in the government sector and seeing increased demand for our data enhanced by AI-enabled partner solutions, which has opened up new use cases. We have a strong qualified pipeline of large opportunities, and we're confident in our position to compete and win.The Planet Insights platform is launched, which enables us to serve a larger addressable market with a low-touch model, empowering customers and partners to access insights and build solutions. We're doing all of this while driving operational efficiency and aligning resources to our core opportunities. I'm proud of our teams across the company for their hard work and dedication to building a great business.I'll now turn it over to Ashley to review the financials and our outlook. Over to you, Ash.

[Ashley Whitfield Johnson, executive]

Thanks, Will. To kick things off, I'd like to share a quick reflection from my first couple of months serving as Planet's President. First of all, the go-to-market product and engineering teams at Planet are some of the most innovative and driven professionals I've had the privilege to work with during my career. I'm impressed every day by the work they are doing and the passion that they put behind it.In collaborating with these leaders and examining many of our key operating metrics together, we also see opportunities to enable these teams to work in ways that are better aligned to the markets and customers we're serving. We are focused on driving operational efficiency and efficacy to reaccelerate our growth and continue our path to profitability. We'll share more on these efforts over the course of the year.Now turning to the quarter. Revenue for the first quarter in fiscal 2025 came in at a record $60.4 million, which represents 15% year-over-year growth. As Will mentioned, revenue growth in the first quarter was led by government customers, while we continued to face headwinds in the commercial vertical, largely driven by contractions among agricultural customers.Our product and go-to-market teams are focused on fueling the momentums we're seeing in the government sector, while shifting our investments in the commercial sector towards lowering our cost to acquire and serve these markets by leveraging our partner ecosystem and Insights platform.From a geographic perspective, during the first quarter, North American revenue grew approximately 15% on a year-over-year basis, EMEA revenue grew approximately 11% year-over-year, and Asia Pacific grew approximately 10% year-over-year, while our team in Latin America drove revenue growth of over 50% year-over-year.As of the end of Q1, our end-of-period customer count was 1,031 customers. Recurring ACV or annual contract value was 95% of our end-of-period ACV book of business, and over 90% of our end-of-period ACV book of business consists of annual or multiyear contracts. Our average contract length continues to be approximately 2 years weighted on an ACV basis.Net dollar retention rate at the end of Q1 was 100%. The net dollar retention rate with winbacks was 101%. As a reminder, at this point in the year, our net dollar retention rate reflects only 3 months of contract renewals. Our net dollar retention rate starts each year at 100%, then builds through the course of the year towards our final full year results.Turning to gross margin. Non-GAAP gross margin for the first quarter was 55%, which was better than our guidance for the quarter due in part to operational efficiencies in our cloud infrastructure. Adjusted EBITDA loss was $8.4 million for Q1. As Will mentioned, this marks another quarter of sequential improvement in adjusted EBITDA, driven by focus throughout the company on managing costs and implementing operational improvements.Capital expenditures, including capitalized software development, were $11.4 million for the quarter. This came in below our guidance due to the timing of purchases and shipments received. Please keep in mind that we have multiple launches anticipated for this year, and we expect CapEx to be higher in subsequent quarters than what we booked in Q1.Turning to the balance sheet. We ended the quarter with approximately $276 million of cash, cash equivalents and short-term investments, which we continue to believe provides us with sufficient capital to invest behind our core growth accelerating initiatives and achieve cash flow breakeven without needing to raise additional capital, and we still have no debt outstanding.At the end of Q1, our remaining performance obligations, or RPOs, were approximately $125 million, of which approximately 81% apply to the next 12 months and 98% to the next 2 years. Our backlog, which includes contracts with the termination for convenience clause, which is common in our U.S. federal contracts and occasionally found in other customer contracts, was approximately $220 million, of which approximately 64% apply to the next 12 months and 85% to the next 2 years. As a reminder, RPOs and backlog can fluctuate quarter-to-quarter as revenue is recognized against customer contracts and multiyear contracts come up for renewal.It's worth noting that the $25.5 million EOCL-priced option renewal with the NRO is not yet reflected in the backlog as it was received after the quarter end. Additionally, the annualized revenue potential of the large pilots we're running with defense customers is also not captured in backlog.Let me turn now to our guidance for the second quarter of fiscal 2025. We're expecting revenue to be between $59 million and $63 million, which represents growth of approximately 10% to 17% year-over-year. We expect non-GAAP gross margin for Q2 to be between 51% and 53%. Similar to Q1, gross margin is expected to be impacted by the inclusion of partner solutions and some of our government sales.In addition, we're making investments in our cloud infrastructure this quarter that we expect will lower our cloud costs in subsequent quarters and generate compounding efficiencies over time. Guidance also reflects an estimated $2.9 million impact from the higher depreciation expense related to 3 of our SkySat satellites, which we discussed on our prior call.We expect our adjusted EBITDA loss for the second quarter to be between minus $10 million and minus $7 million. We are planning for capital expenditures of approximately $14 million to $17 million in Q2, reflecting our continued CapEx investments in next-generation fleets as well as the maintenance CapEx for replenishment of our PlanetScope constellation.Turning to the full year. We continue to see an increase in large contracts and partner solutions in our existing business and pipeline opportunities. Recent wins, including the Naval Information Warfare Center announced earlier this year, the EOCL renewal with the NRO and the success of the ongoing pilots we're running with the Department of Defense, are all positive indications of demand for our solutions and our ability to win such large contracts.We are pursuing many additional large government opportunities that we believe can further increase revenue and gross margin visibility as well as drive meaningful scale and upside in our business. Some of these include new solutions that we are providing with partners, enabled by recent advancements in AI. We remain confident in our position to win such opportunities. However, as shared on our prior call, predicting the timing, size and structure of such wins remains difficult.In the commercial sector, we expect our recently launched Planet Insights platform and increased focus on partner-led opportunities will support efficient sales execution and durable growth over the long term.To sum it up, we plan to capitalize on the momentum that we see in the government sector today while we position our platform to capture the broader market opportunity over the long term.Finally, before we turn to Q&A, I'd like to highlight that we just published our second annual ESG report, which can be found on our website. It includes information on Planet's ESG programs and furthermore highlights the use of Planet's data by our customers and partners. We're especially proud of the fact that our day-to-day business enables an ecosystem of customers and partners to further their own ESG initiatives and impact.We estimate that approximately half of Planet customers are using our data for impact use cases, including environmental, social and humanitarian applications. We're proud to support the important work of our customers and partners around the world with our powerful global data set.Operator, that concludes our comments. We can now take questions.

[Operator]

[Operator Instructions] Our first question today comes from Trevor Walsh with JMP.

[Trevor Walsh, analyst]

Maybe I'll start, Will, with you. If -- could you just give a little bit of your thoughts around the Tanager-1 launch and where you might think the kind of immediate impacts to the business might come from that from a revenue perspective? And maybe just keeping it simple, breaking it out kind of between defense and intelligence, civil government, commercial, kind of just between those 3 buckets where you think you see kind of the immediate demand coming from?

[William Marshall, executive]

Yes, absolutely. So personally very excited that that satellite got the launch signed. We're looking forward to that launch scheduled for July. And yes, we have an early access program with folks across defense and intelligence, commercial like oil and gas, agriculture as well civil government. And we believe that there's strong interest there.It is early days, so breaking it down by fractions is going to be impossible at this time. But remember that it won't be starting from completely 0 because of the early access program trying already the synthetic data that we're developing, and as we mentioned last time, we do have a contract already that involves providing data on the methane side that we have revenue to recognize when we deliver in data. So it's not starting from scratch. So all I can say is that day 1 would be probably 100% of that because that's the first deal we have.

[Trevor Walsh, analyst]

Great. I appreciate the color on that. Ash -- yes, absolutely. Ashley, maybe just switching gears a little bit. I understood the kind of softness around commercial customers and especially in the agricultural space. I guess 2-part question there. One, just from a numbers perspective, it looked like the percentage of the business in the quarter ticked down in commercial from about 29% to 22%, just looking at your investor deck charts that you have there. Is that a combination of both the strength in the D&I business compounded by the kind of contractions in the agricultural space or just broadly within commercial? Or is it one outweighing the other there in terms of the contribution?And then second question, can you maybe just double-click a little bit in terms of what's happening within that agricultural arena to kind of have customers either reducing spend or shifting gears a little bit on that front?

[Ashley Whitfield Johnson, executive]

Yes, I'm happy to take that. I'd say quarter-over-quarter, we definitely saw a downtick in the commercial sector, driven primarily by some of the larger agricultural contracts that we've referenced earlier, where we've seen our customers really facing their own challenges. And several of them are public companies, so it's easy to see more directly the headwinds that are hitting them.And so we obviously really value these relationships. We believe in the long-term opportunity for the agricultural sector. So we work with these customers to figure out how to reduce the scope of what we offer to them and maintain that commercial relationship, but also maintain our pricing so that we have the opportunity to grow with them as their business returns.Actually, I turn it over to Will to talk about kind of how we see the outlook in the agricultural space because we do see this as an important sector for us in the medium to long term.

[William Marshall, executive]

Yes, exactly. Very much believing that market opportunity. I mean fundamentally, our data can enable improvement in crop yield and decrease in inputs, which enable real efficiency gains across that trillion-dollar sector. They are having struggles in general sector, facing pretty strong headwinds. But fundamentally, those facts remain true. The problem, if there was any, is that they were using digital ag platforms that they were largely giving away, which was an underlying incentive model, and it's the kind of thing they cut when they're having hard time.Actually, now we're finding several partnerships, some of which we've talked about. In fact, several of the big ag companies that even released videos and things showing use of our data in these ways, but they're reforming their digital ag platform such that they align incentives that is that when the farmer benefits, they get the money. When they get the money, we get the money. When you align incentives like that, we can really imagine that scaling.So as Ashley was saying, we're keeping those relationships strong so they can come back up. I would just also note when you're asking about commercial sector slightly more broadly, we still see a lot of strength in that market more broadly. Agriculture was our biggest sector.But just to touch on a couple of other examples from the last quarter, ZEP-RE, which we had previously mentioned just as an expansion, they're doing these automatic drought insurance products in Africa and they got to their 5-year milestone within the first 2 years, getting to, I think 1.6 million pastoralists, which is huge. BASF, to talk about an ag customer, did do an expansion to do the sustainable agriculture monitoring.PG&E, outside the ag sector, now talking about the -- they were using our data for vegetation encroachment in power lines, and they did an expansion also in Q1 and also showed some pretty good breakthroughs in the number of fires that were being started. It was something like a 70% reduction in fires started because of their efforts to reduce vegetation near their power lines. So these are really important value propositions for these customers.A lot of that small, and I think that we -- in terms of the outlook in agriculture is probably going to be still relatively soft this year, but perhaps we can expect to see something grow more from that [ seed corn ] in next year.

[Operator]

The next question today comes from Kristine Liwag with Morgan Stanley.

[Kristine Liwag, analyst]

Will and Ashley, in terms of the government opportunities you highlighted, you mentioned last quarter pursuing NGA's Luno program. And it looks like since they've announced Luno B and the A and B portions of the programs could be like about $500 million in ceiling combined. So I guess, how big of a focus is this for you? How do you think about positioning? Is this one of the big defense opportunities you had referenced? And when would you expect to make a decision or hear about a decision?

[William Marshall, executive]

Yes. That's certainly an opportunity we're seeing. [indiscernible] That's right. They recently announced in GEOINT that they increased that budget from $290 million to $490 million. So obviously the NGA has a strong interest in this sort of analytics and AI on top of satellite imagery. We believe we're in a unique position with our daily scan to be able to search large areas that no one else can do, frankly, and that's very exciting. So we're definitely competing for that and we'll keep you up to date.

[Kristine Liwag, analyst]

Great. If I could speak a second question here. It's great to hear that you've been making progress on AI. That's clearly a big driver of growth. I mean, a few months ago, we saw Spire announce a collaboration with NVIDIA to advance AI-driven weather prediction. I guess, can you provide more context regarding the AI opportunities you're pursuing? And is there an opportunity for you to also collaborate with NVIDIA? And what could that look like?

[William Marshall, executive]

Yes. I'm very excited by all the prospects in AI. And obviously, we use it in some of our core products today. We've mentioned previously some of the incredible results of our roads and buildings. Road detection enables us to work with Brazil [indiscernible] workstation. And some of our new products, like you were asking about Luno, of course, they're interested in the use of AI on top of our broad scan, which is unlocking new potential there.So both present products and new products that we're working on involve AI. We're very excited about collaboration with a lot of different large players. But we've got nothing to announce today regarding NVIDIA.

[Operator]

Our next question today comes from Jason Gursky.

[Jason Gursky, analyst]

Well, I wanted to start on Tanager. I'm not sure if I heard exactly your answer there as it relates to revenue generation on Tanager. So can you confirm that you get Tanager up and running and that on a quarter-on-quarter basis, you're going to be generating higher levels of revenue? I just want to try to better understand exactly what Tanager is going to add to the revenue mix.

[William Marshall, executive]

I mean, foundationally, it's providing a new data stream that can drive a lot of different use cases, as already mentioned, defense and intelligence, vessel monitoring, emissions and so on. It is a nascent market. As I mentioned, we do have this early access program, so that that enables those customers to get up and running when we're producing operational data.So that system has potential to be operational from the first satellite. So that's exciting. But we're in a nascent market there, so we're obviously going to be building that at the time. The way we're doing that is doing an early access program to get those folks going.But also, as Ashley mentioned last time, we have a $20 million contract with Carbon Mapper in order to buy some of the data to get going on, on the emissions side of things. So that helps us to get going. Obviously, therefore, it's going to be incremental revenue. And we -- I think it's an exciting area long term, but it's a major market. Anything to add, Ashley?

[Ashley Whitfield Johnson, executive]

Yes. Just a reminder that that contract is for outer period. So obviously, it's contingent on 1 -- yes, certain milestones around the data generated by the satellite. So we don't expect to see revenue from that contract in the next couple of quarters, but we'll keep you posted as we get to first flight with this exciting new satellite.

[Jason Gursky, analyst]

Okay. Yes, it is helpful. Yes, I appreciate that. And then on the DoD side of things, and the 3 pilots that you've been working on, 2 have been completed. Is there a possibility here that what we could be adding to the revenue would be something at the scale of your annual EOCL contract? Can you just kind of help us better understand what you think you've got here on the horizon potentially?

[William Marshall, executive]

Yes. I mean, look, we're very excited about those pilots because they're generating real capabilities already for the Defense Department in this case. And we're seeing interest around the Defense Department and internationally in the fair producing capabilities that they don't have, a peripheral vision, enabling them to monitor large areas for threats. And that's the combination of our daily scan plus AI.I do think it's scaled operation. So yes, we believe there's large opportunities there. And yes, these pilots we believe will build -- we will expect to do more pilots and then eventually building to operate on contracts there. But yes, we believe they are scaled opportunities and just note that they are all dependent on this PlanetScope daily scan. So we, again, believe we're in a pretty unique position to go after that.

[Ashley Whitfield Johnson, executive]

And just to remind you, it's incredible the pilots that we're seeing, they can scale across multiple dimensions. So the scope of the pilots, how much area we're monitoring, the amount of services that we're providing on top of it, and then also time, because we've been doing time bound pilots.But to speculate exactly how they will scale and getting the budgets lined up to support those operational opportunities is where we don't have the visibility at this time. And so, we're very excited about the early results from the pilots, but speculating as to whether this could be as big as an EOCL-type award would not be prudent for us to do at this time.

[Jason Gursky, analyst]

But you did use the word large here. So maybe you can just baseline things for us out here in the investment community. When you use the word large opportunity, is that a 5-figure deal, 6-figure deal, 7, 8, 9? How big [indiscernible] in your vocabulary?

[William Marshall, executive]

Yes. That already 7-figure deals as they were pilots, right? So definitely going to be bigger than that.

[Jason Gursky, analyst]

Okay. Great. Will, can you give us an update on Pelican and where we go to from here based on the recent tech demo that you did?

[William Marshall, executive]

Yes. So very pleased with how that tech demo continues to perform, testing all the technology aspect of that. And so far, it's very good. And as I mentioned in my prepared remarks, it's feeding into our ability to do the Planet emissions, they use the same bus. And so there's learnings that have gone into that.And as I mentioned last time, we are building towards operational satellites that we expected in 12 months of when I mentioned that last time. So it's still holding that sort of timeframe. We are very pleased with the progress of that program.

[Jason Gursky, analyst]

Okay. So we're going to have some more launches coming in the next 12 months. That's the right way to think about it?

[William Marshall, executive]

Yes.

[Jason Gursky, analyst]

Okay. Great. And then what about international demand in the D&I area? Are there any opportunities for you all Five Eyes, Japan, the Middle East? Is there any of our allied nations that might want something similar to an EOCL kind of construct?

[William Marshall, executive]

Yes. I mean, there are absolutely opportunities with governments around the world. So we're actively pursuing them. We have existing relationships with many U.S. allies around the world. We talked about several of them before longstanding partnership with Japan, for example, Germany, for example, and others. So, yes, and there's a lot of expansion opportunity there.They are absolutely looking at both what is happening in Ukraine and seeing the value of satellite data there and being keen eyed on that. And they're also looking to the U.S. as leaders in this domain and following it. And in some senses, they're in an even more eager position because the U.S. has more capacities of its own, various countries have less.And so ours enable them to get there without the degree of billions that the U.S. government is spending. And they get a lot of those capabilities at lower costs. So there is a strong demand signal. And I've been to several of those countries in recent times. I'm actively working with the sales team on maturing those projects.

[Jason Gursky, analyst]

Okay. Great. And then 2 last quick ones for me. The European regulations around deforestation and some of the basic products coming into the EU and the supply chain needing to demonstrate that they're not leading to deforestation. And I know there's an acronym associated with this regulation, I can't remember off the top of my head.But can you just give us a little -- yes, thank you. Can you give us a little bit of an update on the company's involvement in helping those that are importing those goods into the EU, demonstrating that their products aren't leading to deforestation? Has that been any kind of catalyst at all for demand for Planet?

[William Marshall, executive]

Yes. We are seeing interest there. And we've been approached by several governments, for example, that are being affected by this, where countries outside the EU that have a lot of commodity producers for the EU and are frankly scrambling to try to put together systems so that industries aren't adversely affected by this and help provide their industries with centralized systems. So we're working with civil government. We have discussions with companies that are interested in this too.Just slightly more broadly, another thing we had launched this last quarter was an initiative with Salesforce and ERM, and NatureMetrics, which is meant to be a solution to help biodiversity monitoring, which is also coming up as opposed to you asked about the deforestation piece, but biodiversity is also coming to more broadly and that's to help companies track their nature-based targets as well as their carbon ones. So yes, we do see this happening. Is it big? Not yet. But we believe this is really driving demand long term for us.

[Jason Gursky, analyst]

Last one for me. Actually, I can't let a quarter go by without asking you about cash flow breakeven. And when do we get there?

[Ashley Whitfield Johnson, executive]

Of course. As I said on the call, we are continuing to make progress on getting to our target this year of EBITDA profitability, which is the first step to cash flow profitability. And obviously, we're a business with gross margins that can support continued scale and expansion. So that enables us to get to cash flow profitability ahead of needing to raise any additional CapEx. Beyond that, no further guidance.

[Operator]

Our next question today comes from Ryan Koontz with Needham & Company.

[Ryan Koontz, analyst]

Nice to hear the great progress on the government side, and I understand there's some strategic resets sound like going on the commercial side. I know you've talked in the past about some of your efforts there on commercial are going to be with partners and we've heard some partner announcements in the past.And I wonder if you can give us an update there. And any kind of milestones that we should look for with your partners as far as first deals or first sizable important strategic deals that we might look for from some of your commercial partners, either in ag or otherwise?

[Ashley Whitfield Johnson, executive]

I'd say it's fair to say that a lot of our business, commercial and otherwise, [ involve ] partners. It's really about leading to a partner-first model to enable us to scale that side of the business. And as we talked about in the prepared remarks, a big part of that is enabling partners to be able to self-serve and build solutions on top of our data.And our strategy is focused on enabling all of that through our platform. So making it easier for partners to work with our data, test our data, so giving them a sandbox environment, giving them more of a self-serve experience in working with our data to test their solutions and then enabling them to more easily scale on top of the platform, which also, one, reduces their total cost of ownership of working with Planet because they don't have to then download and extract the data and try to predict where their end customers are ultimately going to need data, but rather they can access the data and work inside of Planet's environment.The benefit to us is that it also gives us visibility to the end customer for that motion. So we can see as the partners engaging and expanding the business, not only the revenue benefits, but the type of usage data that will enable us to provide feedback into our own product development life cycle. So I'd say partners has always been a very important part of our strategy. And as we've talked about before, we think that this is a really important way for us to scale the business profitably.And the investments that we're making around the platform are really about enabling that to scale and serve the needs that we're hearing from our partners that will make their life easier and make it easier for them to build their own solutions on top of Planet data.

[William Marshall, executive]

I'm going to add that we did have some milestones this last quarter, including the launch of the Planet Insights platform and our first on the road event in Berlin where we were talking to our partner ecosystem. We had thousands of people come to our launch of the platform. We had hundreds of our partners joined that first regional Planet On The Road, and we're doing another one next week in Washington, D.C., so North American market.We really believe in those partners and the ecosystem approach is how we're doing it, enabling them simple ways with pricing and packaging that's appropriate for them on our platform. And it's very much the basis of our acquisition synergized to do that. And I think it enables us to do the expansion into those commercial markets in a low-touch way.

[Ryan Koontz, analyst]

That's really great. And on that new platform you're announcing here, like where are we in that kind of roadmap of having a product that the sectors or customer verticals you're chasing after that you feel that platform is fully featured enough to be widely adopted? Do you feel like we're there with this first version 1? Or is this a roadmap where -- go ahead.

[William Marshall, executive]

Yes. I mean, it's never fair. I mean there's always more things to be adding. But it is there in the sense that it's already operational and customers are using it and it has core capabilities. But I think it's less measured in how many vertical markets can we succeed on that platform because that's more or less to the solution partners in that case for the platform. But it is more about the foundation tools that enables all of those to work and that's what this is about.I mean, in some cases, it's really just pulling off the boring bit so that they can focus on their solutions in that particular vertical market. And we have seen already the central hub users, they have thousands of users on their platform starting to now get access to Planet's data on it to that -- after that launch. And we see Planet's customers start using accounts on central hub so that they can get the tools to apply to the data that they already have access to. So in both ways, we've seen it be a success and sort of the influencing pipeline.

[Ryan Koontz, analyst]

Got it. Super. And just a quick clarification on your U.K. announcement. Is this for -- again, is this for a platform partner that it will be a channel for you? Or is this a contract win for this customer to share your data with their customers? I'm a little confused as to the structure of the deal.

[William Marshall, executive]

Yes. That partner in this case is helping the U.K. government to build that platform for the government internal use is my understanding.

[Operator]

Our next question today comes from Jeff Van Rhee with Craig-Hallum.

[Jeff Van Rhee, analyst]

Just a couple cleanups for me. Actually on the gross margin, obviously, considerably better than you expected. Given you guided most of the way through the quarter, what changed? I wasn't clear how that came in so much better.

[Ashley Whitfield Johnson, executive]

A couple of factors. So, as I said, one was seeing more savings from some of the initiatives that our development team has been working on in cloud infrastructure than we anticipated. I'd say that was one of the biggest drivers of the improvement in gross margin versus our expectations.And then, as I mentioned before, it's also just mix of revenue. So in terms of what that meant in terms of partner fees, I think we came in roughly close to what we had said on that front, about 3% from partner fees. But I think that we have given ourselves a little bit of buffer there just not being 100% sure of what the mix of business would be on the quarter.

[Jeff Van Rhee, analyst]

Okay. And on ag, if I could, would you say that the challenges in ag are more macro related or go-to-market friction related?

[William Marshall, executive]

Macro, for sure, right?

[Ashley Whitfield Johnson, executive]

Yes. I think, as Will talked about, a lot of it is the focus of that market has been around these digitalized platforms and using it almost as a loss leader. And as the macro has had an impact on the margins of our customers, they've had to look at things like these types of initiatives and pull back and really rethink how they want to deliver these types of solutions to their end customers in a more aligned way.

[William Marshall, executive]

And in many ways, that was a journey they were already on, but this is now forcing them to reset and do it. And we have already some partnerships in that line, the incentive line, but it's not got to the scale that we were at, even in these more free digital ag platform pieces. But eventually, it will drive precision ag, which enables all the things we talked about, which is efficiency for that trillion-dollar sector.

[Ashley Whitfield Johnson, executive]

[indiscernible]

[Operator]

Our next question today comes from Edison Yu with Deutsche Bank.

[Xin Yu, analyst]

I want to come back to AI. I know it's a big buzzword right now. Everyone's talking about all the valuations, as I'm sure you noticed, have been popping on it. How do we think about the end game for you guys of where you want to get to?Is it the Queryable Earth demo you showed before? And if that is the ultimate goal, what are we missing? Or what do we need to happen to get there? Is it more faster, cheaper compute? Is it better algos? What's the -- what do we kind of need to do to get to that end state?

[William Marshall, executive]

That's a great question. Again, AI is already powering a lot of our relationships, like the Brazil case and many others that are using that is powering a lot of our Planetary Variables. The Carbon Forest one is another one coming up that we're already seeing good adoption on that's powered by AI. And then there's these future capabilities where it's more to do with leveraging the foundations of large language models.Those are where we're having these pilots, which is pretty narrowly focused at the moment on D&I, but it's building up capabilities with horizontal applicability. So those large language models enable one fundamentally to search through our data stack and over large area and time, which is a completely novel capability, but we need to work on accuracy and other things, of course, and to test quickly with tight collaboration with the government and then the users so that we get to a point where it's really driving significant value for them. So that's the focus there.And then we are also working to enable our partners to be able to build their own AI models on top of our platform so that we can let a 1,000 flowers boom in that sense across all the other markets. So think of it as a narrow effort focused on government clients and then a broader platform tool capability.As for Queryable Earth, I mean, I think that's the end game in that, that's the generic system that enables all of these, but that's our path to get there is what I just mentioned.

[Xin Yu, analyst]

Understood. Appreciate the color. And one on the financials. I know you're not giving full year guidance, but just directionally, should we think about the second half growth trajectory at the very least increasing? Or is there any -- I realize this could be a wide range of outcomes, but just any kind of directional color on the second half growth?

[Ashley Whitfield Johnson, executive]

Yes. I mean, as we're thinking about growth for the remainder of the year, each market that we're in has different dynamics. So on the D&I side, obviously, locking in the EOCL renewal was fantastic to have that stability and visibility. And obviously, they're an important customer also because of the other opportunities that we're pursuing and operating within the U.S. government. And a lot of these opportunities translate into international opportunities as well. So very optimistic about the opportunities within D&I and the continued strength in growth we've seen there.Civil government can fluctuate quarter-to-quarter, just depending on kind of consumption patterns, budget availability, those types of factors. But it's been great to see steady, solid growth in the civil government space. And central hub really enables us to service that market and some of the rural payment agencies and other opportunities that synergize already had underway when we acquired them.And I think the big question is really around the commercial segment. So we do expect to see continued headwinds, but the ability to stabilize that through some of the initiatives that we're making in shifting to a more platform-led, product-led model and leveraging the partner community will really hopefully help us offset that.So we're -- from my own side and trying to manage expenses and make sure that we hit that EBITDA profitability goal in Q4, our assumption is that revenue growth is not going to accelerate beyond the range that we've provided for Q2, which really points to kind of a first half, second half pacing like you've seen in other years. Hope that's helpful color.

[Operator]

Our next question comes from Michael Latimore with Northland.

[Mike Latimore, analyst]

Just on EOCL, can you clarify the amount you're getting on this renewal? Like, is the next 12 months from EOCL similar to prior 12 months?

[Ashley Whitfield Johnson, executive]

Yes. So basically, just to remind you, the way the contract was structured was for the first 5 years, there was a committed amount, base amount of about $19 million. So that's per year over the first -- for the first 5 years. And then there was an incremental award of about $25.5 million per year that was committed for the first 2 years. And so that's the portion that was up for renewal, and we did secure that full renewal. So the next 12 months should look secured at the same amount as the prior 12 months.

[Mike Latimore, analyst]

Got it. And on the AI pilots, sounds like they were successful. You concluded them. Is the next step looking for more pilots with the same customer? Or is it potential commercialization of the use cases?

[William Marshall, executive]

Yes, we are expecting -- sorry. Yes, we are expecting more pilots with the same customer as well as other pilots with other customers in the U.S. government and international interests as well. Eventually our plan is, of course, convert them into large operational contract vehicles like we have spoken about, and there's really large opportunities to go after across the board there and it's our job to execute on.So this is why, as Ashley was just saying in the previous question, we're operationally planning, like, the growth rate that we're looking at, and certainly we're not satisfied with that. And getting these big deals in is where we and mine, especially, attention is to try and mature those opportunities.

[Mike Latimore, analyst]

Got it. Great. And then a pilot -- how long does a 7-figure pilot typically last?

[Ashley Whitfield Johnson, executive]

Not sure that we can speak to typically, but these have been short-term pilots within a single quarter. But depending on the size of a pilot, a 7-figure pilot could also be over a longer period of time. It really depends on the scope and what exactly we're piloting, so...

[William Marshall, executive]

And agency and their needs.

[Ashley Whitfield Johnson, executive]

Exactly. What's great is, as you know, securing operational budget, that's a procedure that takes time. What's been exciting for us is the pace at which we've been able to find funding for these pilots, which really points to the fact that there is a real need for the type of capability that we're offering.

[William Marshall, executive]

Yes, incredible demand.

[Operator]

Thank you all for your questions. That is all the time we have for Q&A today. So I will pass the conference over to Will Marshall for closing remarks.

[William Marshall, executive]

Yes. I'll just close by saying that we feel very strong about our position for the year ahead. Obviously, you saw the significant growth in the government sector, in particular. We're very pleased with the platform launch and the fact that, that has enabled a low-touch approach to getting towards our commercial business. And now we're just focused on operational efficiency and the big deals in front of us and closing them.I'm very proud of the team and where we've come into the last quarter. Thanks very much and see you next time.

[Operator]

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.