Planet Labs PBC

NYSE:PL

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon. Thank you for attending today's Planet Labs PBC Second Quarter of Fiscal 2024 Earnings Conference Call. My name is Alexis, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to Chris Genualdi, VP of Investor Relations. You may proceed.

[Christopher Genualdi, executive]

Thanks, operator, and hello, everyone. Welcome to Planet's Second Quarter of 2024 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. We also referenced 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 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. 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. Finally, for each of the customer contracts referenced during this call, please note that the revenue figures we site will generally be recognized over the term of the contract, which can last multiple years. Further, the terms of these contracts can vary. We may not realize all expected revenue.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. For the second quarter of fiscal year 2024, we generated a record $53.8 million in revenue, representing 11% year-over-year growth in line with our expectations. Non-GAAP gross margin came in at 52%, above the high end of our expected range. Our adjusted EBITDA loss for the quarter was $14.5 million, also better than expected, reflecting company-wide focus on operational efficiency. We ended the second quarter with 944 unique customers spanning across defense, civil government and commercial markets.Today, we'll cover a number of items, including recent organizational changes, M&A, sales wins and product developments. So let's dive in. Starting with organizational changes; in Q2, we undertook significant efforts to focus and optimize resources in support of sustainable long-term growth and profitability. Firstly, on August 1, we announced a headcount reduction that led to an approximately 10% reduction in force. This is a difficult decision, but one that ultimately better positions Planet to the opportunity ahead of us.Our businesses [ go ] rapidly over the last 18 months and while we see the market for our solutions continuing to expand and increased breadth of projects and people resulted in increased cost and complexity. We expect this action will support greater focus, agility and operational efficiency across our organization. On product engineering priorities, we are pacing the build-out of our next-generation satellite fleets to optimize our resources and support our 1-year payback targets for the satellites. I'll cover recent milestones achieved in our Pelican and Tanager program shortly. And one area we're investing more behind is AI.We are seeing promising signs of commercial opportunity in AI, which I'll cover in a moment. We're also actively strengthening our go-to-market strategy. This itself has three components: one, aligning our teams and investments behind our core opportunities, defense and intelligence, civil government and agriculture solutions. Our direct sales team is focused on serving high-value large customer opportunities within these markets. This includes selling our Daily PlanetScope scan with AI-enabled analytics to defense and intelligence customers, selling our area monitoring for regulatory enforcement to civil government customers and selling agricultural solutions that utilize our Planetary Variables.We plan to serve customers in other industries, primarily through our growing network of partners around the globe. Two, we will shift towards supporting smaller opportunities via our platform enabled by the Sinergise acquisition, which we'll discuss momentarily. These changes will allow our commercial teams to focus on high ROI, large opportunities in our pipeline. Three, we're taking steps to streamline and simplify our sales processes. We expect these actions will increase sales efficiency and shorten customer time-to-value. Ultimately, these organizational changes and programmatic focus have sharpened our efforts on key priorities and reinforced our path to profitability.To finish up the organizational updates; in early August, we closed the acquisition of Sinergise which will be a foundational element and accelerant of our Earth Data platform. We see Sinergise as an enabler to broad geospatial adoption and enhanced ease of use for customers, both speedening and widening customer adoption. We're making our data easier to work with by enabling customers to analyze data and create applications directly on our platform. Today, our customers and partners typically build their own custom workflows to download analyze and integrate our imagery. With Sinergise, they will be more easily able to do this in our cloud platform, leveraging the geospatial power tools that Sinergise has created.This will speed time-to-value for our customers in addition to more deeply integrating our platform into critical customer operations. Leveraging Sentinel Hub, Sinergise's self-serve platform, which already serves thousands of users, we will shift towards supporting small deals through a lower touch channel. We're excited about the step function expansion of our platform that this acquisition can enable and incredible talent joining Planet. We'll go into more detail and provide a demo of Sinergise's capabilities at our Investor Day in October. Let's turn to recent sales highlights. Starting with the Defense and Intelligence market, we recently closed an expansion with the U.S. Space Force.This 12-month extension will enable support of coalition partners' military training exercises around the globe, utilizing responsive commercial space capabilities. Through our work together, they have been leveraging SkySat Images, SkySat Video and AI-based Vessel Detection to support the U.S. Department of Defense's commercial satellite capabilities. We also recently received a new 7-figure ACV award from a U.S. government agency for high-resolution SkySat tasking solutions. This award was won through one of our Planet partners. We're proud of the work we do to support multiple agencies across the U.S. government.Additionally, we recently won a 7-figure ACV contract to provide our data to a Ministry of Foreign Affairs in Asia. This is a new customer for us, and the contract was won through one of our partners in the region. Within the Civil Government sector, we are seeing increased demand driven by disaster prevention, emergency response as well as land management and permitting. For example, we recently expanded our contracts with multiple Provincial Governments in Canada. We closed a large expansion with the Government of British Columbia, a 6-figure ACV expansion contract with the Northwest Territories Center for Geomatics and a 6-figure ACV expansion with Quebec's Ministry of Natural Resources and Forest.Our data and solutions are being used to support critical disaster response efforts during the wildfire season to monitor the impacts of climate change on ecosystems and to support land rights across Canada. Similarly, here in California, our data is being used by authorities to identify areas at risk of wildfires and to inform prevention efforts. During Q2, we signed a new deal to provide PlanetScope Monitoring, Basemaps, archive access, SkySat tasking and Sinergise platform access to support wildfire fuel reduction programs.As the frequency and scale of wildfires increase causing tens of billions of dollars in worldwide damages annually and broader natural disasters causing hundreds of billions of dollars in damages our solutions help government customers around the globe prevent and respond to these disasters. In the case of wildfire, this can save significant costs through prevention and reducing severity as well as help save lives. In Europe, we were recently awarded a new 7-figure ACV multiyear contract, delivering environmental monitoring to the UK Rural Payments Agency with our partner, Earth-i. The UK government will use our data to support its environmental land management scheme, allowing for countrywide detection of a wide range of biophysical parameters.It's worth noting that the Rural Payments Agency is an early example of a customer accessing our Fusion data via Sinergise's platform. In the commercial market, we continue to add great customers across the agricultural solutions, energy and insurance sectors. Now I want to spend a moment on how AI, especially new Generative AI and large language models are enabling Planet's business traction. Planet has a deep proprietary archive of earth data that grows by terabytes every day, [indiscernible] for Generative AI models to extract in science and create value.We've seen significant interest in this recently, and I'm pleased to report that last quarter we signed our first deal in this area, a 6-figure 3-month pilot to explore the potential to unleash the value of Planet's daily data with large language models. And we continue to see real-world impact that AI models and Planet's data can make together. The latest example of this was in response to the recent wildfire in Maui. In continued collaboration with Microsoft, together, we created an AI-based building damage assessment. Within 24 hours of being notified of the fire, this was delivered to Red Cross, who used it to quickly rearrange work in the field to respond to the most urgent priorities first, better supporting First Responders on the ground.Damage assessment information is vital as it is used to make operational decisions such as where to focus response efforts. It can also be the first step in validating addresses for residents that may qualify her financial assistance, for instance. As you'll recall, we've recently partnered with Microsoft to support a building damage assessment solution in response to the war in Ukraine and the earthquake in Turkey and Syria. Together, we've shortened the time it takes to deploy the building damage assessment to each event from months to days to hours. Whether human conflict or natural disaster, access to timely, reliable data is critical to supporting quick and effective humanitarian responses, and in some cases, avoidance and prevention.This important work has already led to interest in our solutions from other countries and organizations. In all, we see AI as a powerful force that can unlock the potential of our deep data archive and accelerate the adoption of our solutions. Before I turn it over to Ashley, I'd like to highlight a few recent product developments. We're continuing to make great progress on our next-generation missions, Pelican and Tanager. I'm excited to announce that our first Pelican Tech Demo TD1, is now fully built and being ready for launch later this year.While this first Pelican is truly an R&D satellite, whose primary mission is to test the satellite platform and operational systems that are common between Pelican and Tanager, it's a critical milestone in our program, and I'm incredibly proud of our team's progress developing the unprecedented capabilities this new fleet promises. Further, Tanager's imaging spectrometer developed and built by NASA JPL is nearing readiness for integration onto our Tanager-1 satellite, which we expect to have ready for launch next year. The spectrometer is the instrument that will allow us to detect, pinpoint and quantify point source emissions of methane and carbon dioxide, which we've discussed before has huge potential to support the global sustainability transition.Continuing in that vein, we recently shared our concrete plans for the upcoming release of our Forest Carbon Planetary Variable. This groundbreaking dataset aims to provide insights into forest change and carbon capture at nearly the individual tree level, serving voluntary carbon markets, forest-related supply chains, conservation and regulators. Frequent and broad error yet granular data are crucial tools to ensure successful carbon monitoring. Current offerings in this market are often based on data that is used out of date or significantly lacking in accuracy.Our Forest Carbon product has the potential to match the accuracy of physical or airborne measurements at a fraction of the cost, covering the entirety of the Earth landmass. We plan to launch a global 30-meter resolution product this year and a global 3-meter resolution product updated on a quarterly basis in 2024. I want to underscore the significance here. With this capability, we hope to underpin global carbon markets, accelerating our ability to tackle climate change and supporting the multitrillion-dollar transition to a sustainable economy.In summary, this quarter marked one of sharpening focus, increased operational efficiency and improving execution. While the economic climate has been challenging for many companies, including Planet, we also have clear opportunities for changes within our business to support faster growth and a significant and growing pipeline of opportunities to pursue. We expect the changes we're making will make Planet a stronger, more agile and more efficient organization. We continue to feel the pull from customers for our insights to our business enables. Our focus is on improving execution across the board through prioritization and simplification.I'll now turn it over to Ashley for a review of the financials and our outlook. Over to you, Ashley.

[Ashley Whitfield Johnson, executive]

All right. Thank you, Will, and thanks, everyone, for joining today. As Will mentioned, our revenue for the second quarter of fiscal '24 ending July 31 came in at a record $53.8 million, which represents 11% year-over-year growth. Our revenue for Q2 does not include any revenue from the Sinergise acquisition, which closed in August a little later than we had originally anticipated. On our prior call, we highlighted the record amount of qualified pipeline opportunities generated in Q1, which was more than double the quarterly average of the prior year. We remain pleased with the pace of qualified pipeline generation during the second quarter, reflecting the growing demand we continue to see for our solutions.In particular, civil government pipeline growth has been especially robust driven by applications such as disaster prevention and emergency response fueled unfortunately by the climate crisis that continues to unfold around the planet. In addition to agricultural and land use management and permitting, as Will mentioned earlier, we are also seeing emerging opportunities in civil government for water monitoring and management applications, which our Planetary Variable Solutions address directly. We were pleased to see a number of the 7-figure deals in our pipeline closing Q2 across multiple vertical markets.And the teams continue to make progress against some of the even larger 8-figure opportunities that have emerged both for AI and sustainability-related use cases. As of the end of Q2, recurring ACV or Annual Contract Value was 92% of our book of business. Over 90% of our book of business consists of annual or multiyear contracts, and our average contract length continues to be approximately two years, weighted on an ACV basis. Net Dollar Retention Rate, which we measure relative to the book of business at the beginning of each fiscal year was 102% and net dollar retention rate with winbacks was 103%.The improvement in NDRR for Q2 relative to the prior quarter is driven by customer expansions, particularly in the government sector. It's important to understand that at this point in the year, our net dollar retention rate is reflective of only 6 months. If you look at our prior two years as detailed in our quarterly earnings investor presentation, our net dollar retention rate starts on day 1 of each fiscal year at 100%, then develops through the course of the year toward our final full year results. For the full year, we are now targeting an approximate 115% net dollar retention rate, which is lower than we previously expected, driven by the anticipated delay of one of our 8-figure ACV expansion opportunities with a large government customer.Turning to gross margin; our non-GAAP gross margin for the second quarter of fiscal '24 was 52%, unchanged from the prior year despite the accelerated depreciation of two SkySat satellites discussed on our prior call, which had an approximate 4 percentage point impact. The rest of our satellite fleet is operating well in spite of the continued heightened solar activity, thanks to the skill, expertise and agility of our world-class mission operations team. Adjusted EBITDA loss was $14.5 million for the quarter, which is better than we previously expected, reflecting our focus on driving operational efficiency across the business. As Will mentioned, we recently announced that we have restructured our teams to align resources behind our high priority growth opportunities and to reinforce our path to profitability.We expect to incur a nonrecurring restructuring charge of approximately $7 million to $8 million, the majority of which will hit in Q3. The estimated reduction in our annual operating expense run rate entering fiscal '25 is more than $35 million versus the exit run rate we expected when we started this year. Will already covered some of the changes we've made to our go-to-market strategy to increase sales efficiency and time-to-value for our customers. On the product and R&D side, we focused our teams and resources behind our core initiatives, including the Pelican program, our Earth Data platform and unleashing the potential of our data with AI.As part of the efficiencies we're achieving within our Space Systems teams, we have reassessed the cost to deliver on some of our funded R&D programs, which resulted in a onetime increase in contra R&D expense recognized, reducing our R&D costs in the quarter by approximately $2 million. All of the changes we made across the business reinforce our commitment to achieve adjusted EBITDA profitability by no later than the fourth quarter of fiscal '25 or calendar year-end 2024. We are sharpening our focus and getting more efficient as a company, which we believe supports growth in our core markets and healthy bottom line expansion going forward.Capital expenditures, including capitalized software development were $16.6 million for the quarter or approximately 31% of revenue, above the guidance range we provided, primarily due to the timing of materials purchased related to the Pelican program. Turning to the balance sheet; we ended the quarter with $368 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 we still have no debt outstanding. At the end of Q2, our Remaining Performance Obligations or RPOs were approximately $154.2 million, of which approximately 74% apply to the next 12 months and 96% to the next two years.The $16.2 million increase quarter-over-quarter is primarily driven by [Technical Difficulty]. Please keep in mind that RPOs can fluctuate quarter-to-quarter as multiyear contracts come up for renewal. Also remember that our reported RPOs exclude the value associated with the EOCL contract as well as other contracts that include a termination for convenience clause, which is common in our U.S. Federal contracts. As we turn to guidance, I'd like to first provide color on our revenue forecast, especially as we are adjusting our forecast down from our expectations at the end of Q1. During Q2, we saw delays with some of our large government opportunities, which impacted our expected revenue for the remainder of the fiscal year.While these opportunities remain active and advancing to account for elongated sales cycles, the low end of our range assumes that larger unsigned business contributes minimal revenue during this year. We have also adjusted the revenue contribution from Sinergise to account for the timing and integration of the business. The high end of our range assumes that our later-stage pipeline opportunities sign as forecast and contribute revenue during the second half of the year. We believe this approach to our forecast appropriately captures the revenue impact of delays with some of our larger opportunities. As mentioned, these opportunities are advancing, and we are confident in our position to win them.For the third quarter of fiscal '24, we're expecting revenue of $54 million to $56 million, which represents growth of approximately 11% year-over-year at the midpoint. We expect non-GAAP gross margin for Q3 of 50% to 52%. We expect our adjusted EBITDA loss for the third quarter to be between negative $15 million and negative $13 million. We are planning for capital expenditures of approximately $12 million to $14 million. For the full fiscal year ending January 31, 2024, we expect revenue to be between $216 million and $223 million or growth of 13% to 17% year-over-year. We expect our non-GAAP gross margin to be between 52% and 54%.We expect adjusted EBITDA loss to be between negative $63 million and negative $55 million. We expect our CapEx to be approximately $48 million to $52 million or approximately 22% to 23% of revenue. Before we turn to Q&A, I'd like to remind everyone that we are hosting an Investor Day on October 10, 2023, in San Francisco as well as virtually. Please visit our Investor Relations website or reach out to our Investor Relations team if you would like to receive more details.We hope you are able to join us. In summary, it's been a challenging year in terms of the pacing of new business, which remains in contrast with the strong demand signals we continue to get from the market in the form of robust pipeline generation and high gross retention and expansion opportunities with our customers. We continue to make significant progress across our business and the recent initiatives to refocus our operations reinforce our path to profitability and a strong cash position. We're confident in the market opportunity ahead of us and our team's ability to execute on our mission.Operator, that concludes our comments. We can now take questions.

[Operator]

[Operator Instructions] The first question comes from the line of Michael Latimore with Northland.

[Mike Latimore, analyst]

So on the -- you mentioned the government vertical, maybe seeing a little delay there. Is that more international or U.S.? Can you give some color on that? And if the U.S. government gets back into kind of this continuing resolution pattern, how do you think about that, I guess, affecting the business?

[William Marshall, executive]

I think it is both -- just one point on that. Just typically, government deals do take a little bit longer and because we've got so much of our pipeline on the government side, both civil government, which actually is a big factor of it as well as defense and intelligence, it does take a little bit longer to close because of the nature of those deals and those complex processes. Ashley, anything to add on that about the international versus domestic?

[Ashley Whitfield Johnson, executive]

I think we're seeing it on both for Will's point. The budget challenges in D.C. certainly don't help companies that are selling to the U.S. government. But we still continue to win business there. And by example, we recently did win a deal with the Space Force and another U.S. agency. So business is continuing and will continue to do so in spite of a continuing resolution. But nonetheless, we do see sales cycles elongating generally speaking in the government sector.

[Mike Latimore, analyst]

Got it. And then the -- it seems like you're announcing a nice number of 7-figure deals. Do you have the latest stats on the 7-figure deal count now versus a year ago or something like that?

[William Marshall, executive]

Yeah. Actually, I mean we do have a huge pipeline of qualified opportunities. I can share that we've actually got 70 deals, 7- or 8-figure in our qualified pipeline today. And so we've got a huge opportunity to go after. And we saw -- so that continued to expand that pipeline of opportunity in Q2.

[Ashley Whitfield Johnson, executive]

Yeah. And just in general, 7-figure deals in our business have grown year-over-year quite well. So we'll talk about more of those stats at our Analyst Day.

[Operator]

The next question comes from the line of Jason Gursky with Citigroup.

[Jason Gursky, analyst]

Ashley a quick one for you. You continue to reiterate the profitability breakeven next fiscal year, by the end of the year there. Can you update us on your assumption related to revenue growth that's tied to that statement?

[Ashley Whitfield Johnson, executive]

Well, I'd say we're committed to that regardless of revenue growth for next year. So obviously, getting to operating profitability is an important first step in getting to overall cash profitability. But in terms of thinking about next year's growth, while we're not giving specific guidance at this point, I'd just remind you that this year, we did have some pretty significant headwinds coming into the year that we talked about from a growth rate perspective, and that included the large legacy contract that was about $12 million last year and contributed very little revenue this year as well as some of the commercial customer contractions that we talked about, just given the general macroeconomic environment that we saw coming into the year. So as we continue to build business this year, we'll be overcoming some of those difficult compares year-over-year as we think about next year and the potential to really see the growth rate reaccelerate. But as I said, we are not relying on growth rate -- significant growth rate acceleration in order to get to that commitment to EBITDA breakeven.

[Jason Gursky, analyst]

Okay. And then Will, on Pelican, you described for lack of a better phrase here, I guess, Unit 1 as a little bit more than R&D or kind of prototype, I mean that was the word that you used to take some of the similarities -- yeah, there we go, that's the word -- so that you can make sure that whatever you got going on there is going to work with Tanager as well. So is the expectation here that this initial launch won't have any revenue associated with it and you're just using it as kind of a test bed.

[William Marshall, executive]

I think that's correct. Yeah, I mean these are tech names. I mean the way we do -- we've described before our agile aerospace approach, which is one of our core differentiators that enables us to rapidly improve capabilities over time and respond to demand from the customers, both in the sense of improving capabilities and ramping up the number of spacecraft we need for demand and continuity of our spacecraft missions.And always through the history of developing new spacecraft especially in new spacecraft bus like the Pelican bus that supports both Pelican and Tanager -- those are complicated new spacecrafts. So the main thing we're doing on a first mission is establishing the spacecraft itself or the aspects of it, the reaction wheels and the solar panels and the radios and the computers and everything work together. And that's the most important piece is getting data on all of that bus. And then subsequent ones, we will turn into operational spacecraft.

[Jason Gursky, analyst]

It's going to go up with another optical sensor on it -- you named everything about the sensor.

[William Marshall, executive]

Oh, yeah. No, it's going up with the payload, but just not the prime mission of the spacecraft to drive that so much as to learn and to improve that spacecraft bus and again, it will go up with a Pelican bus -- sorry, payload, i.e., the telescope, the high resolution telescope. But it's mainly the bus that will also support the hyperspectral instrument for the Tanager mission that we -- next year that I also mentioned that the hyperspectral instrument is nearing readiness now. So we're close on that one, too. Does that make sense to you?

[Jason Gursky, analyst]

Yeah, it does. Yeah. For sure. I appreciate that. And then last one for me. Just turning quickly to the commercial side of things. We've got some new regulations going into effect in Europe to require companies that are bringing or sourcing materials from other parts of the world to kind of prove out their supply chains and how those impact deforestation that's going on around the world. I'm just kind of curious as to how you see Planet playing in this and supporting companies that need to demonstrate to the regulators that the materials that they're sourcing are not leading to the deforestation of sensitive areas of the world.

[William Marshall, executive]

Yeah. I mean, well, look, thank you for raising this because I mean, it is -- we're seeing this sort of regulation from the EU and particularly the EU DR, the Deforestation Regulation that is looking at importing of commodities and ensuring that they don't cause deforestation as well. There's not many ways at least at scale that you can do this without our dataset. And our dataset is primed to check whether or not a commodity from a source is causing deforestation or not.So how we play into it, to answer your question, is really we have many agricultural companies that we're working with who are trying to address this and how they will meet their regulatory requirements under this act, which, by the way, I think, comes into force next year. So it's not like -- it's not that far away. And the scale of the proposition really demands our solution. Also though, we can work with the regulators themselves, which is the other side of that because, of course, they want to check that the companies are doing what they say. So we can play both sides of that.

[Operator]

[Operator Instructions] Our next question will come from the line of Trevor Walsh with JMP Securities.

[Trevor Walsh, analyst]

Great. Will, maybe for you, from your prepared remarks, you mentioned the unfortunate kind of, I guess, uptick or at least deals coming off of some of the natural disasters that we've seen lately, whether it's the fires in Maui or hurricanes and fires in Canada, et cetera. Do you get a sense or feel that those are state and local governments being very reactionary in their kind of use of turning the Planet for the data that you can provide to help with those types of issues or do you also see governments taking a more proactive nature to sort of bring in your solution beforehand before the problem actually becomes a problem? Just would like to hear your thoughts on kind of just more of a kind of a one-off thing or something that has to happen first for there to be an action taken.

[William Marshall, executive]

Well, look, governments are beginning to see the value of this to really help them both in the response and prevention. Let me just touch on it a tiny bit in the Maui case, which is a terrible event, our maps really helped in practical ways. So the Red Cross was using our data on the ground, in particular, the map of all the building damage as well as Hawaii State officials and even the President had a map with our -- our map in his hands when being briefed on this. So across the board, we're seeing real use of that data. And it's also, by the way, a great example of how AI can play a part because this is making that data more useful for the people on the ground.It's not just a picture. It is a map of the building with a damage and that can help in quick response and prioritization on the ground. But to your point -- and one more point on that, the Canadian wildfires, we're seeing a similar sort of reaction, and that's why there were those three customer deals in Canada that I mentioned in my prepared remarks. But to your point about prevention, and I think that's a really critical one. We can do work to help civil governments prevent and prepare for disasters. In fact, the work with the California that I mentioned -- with California on fires is actually about fire prevention by looking for the stocks for future fires that they can then do clearing in or -- and we are also working with our soil water content on giving pre-warnings of potential drought risk.Also, you can help through that to provide flooding risk. And so some of these data sets can enable getting ahead and as I mentioned, civil governments are spending hundreds of billions of dollars a year with these events. Sadly, climate change is causing these extreme weather events to increase. And so that hundreds of billions is only going to go up and we can help them save billions of dollars getting ahead of that. So it stands to reason -- I mean, civil governments are taking a while to pick this stuff up, but it is -- the pace is increasing. And we've got a significant fraction of that pipeline that I mentioned of 7- or 8-figure deals is civil government.

[Ashley Whitfield Johnson, executive]

The other sector where, obviously, this data is of interest, especially around soil water content as well as soil temperature is obviously the insurance sector. And that's both understanding risk models as well as thinking about preparedness for business continuity and business disruption.

[Trevor Walsh, analyst]

Great. Super helpful. Maybe just one more for me. With respect to the Sinergise acquisition closing, appreciate the perspective or the additional detail that the revenues might be coming in from that a little bit later than expected. Can you give us a sense of how customer numbers may or may not be adjusted? And I ask given the fact that you had some nice acceleration in terms of the customer -- new customer adds in the quarter. And just curious if that is reflective of the Sinergise acquisition at all or if those numbers are not necessarily included yet and how that might -- how that might look?

[Ashley Whitfield Johnson, executive]

None of the metrics that we provided from Q2 include Sinergise revenue or customer accounts. Obviously, Sinergise has a very large number of users on their Sentinel Hub platform in addition to a number of enterprise customers that would be coming over and government customers. So we'll be updating those numbers and talking about how we roll those into our metrics at our Analyst Day.

[William Marshall, executive]

And let me just broaden it out just a tiny bit to say that we are super excited by that acquisition closing. We really think it meaningfully accelerates our Earth Data platform strategy. And to my point about small deals and automation and how that's one of the components of speeding up time-to-value for customers and sales cycles, and it's a way of dealing with smaller deals, enabling our AEs to focus on the big deals, Sinergise really helps with that as well. So it's a product accelerant and it's a sales accelerant.

[Operator]

The next question comes from the line of Jeff Van Rhee with Craig-Hallum.

[Jeff Van Rhee, analyst]

Great. A couple. First, just on Sinergise, the -- I think the original number was around $7 million was the expectation. I guess it's going to be a little bit lower here, maybe a month lower. But what's the number there now in terms of expectation?

[Ashley Whitfield Johnson, executive]

Sorry. In the -- I would give a range of about $4 million to $6 million for the year -- for the remainder of the year, sorry.

[Jeff Van Rhee, analyst]

Okay. Okay. And then just curious kind of the overall progression of the quarter as you move through the three months of the quarter. I mean, obviously, pipeline is massive as you've called out, but cycles seem like they're stretching and stretching. Just talk about kind of how you progressed and how the market felt as you moved through the quarter.

[William Marshall, executive]

We just say anything in particular about how it moved through the quarter, but what I would just highlight is that we are market-making here and a lot of these governments have -- we are bringing in a new capability to them. And they've never done this before. And we don't understand that process fully. As we understand it, we're adapting, and that's why we're doing some of those changes to our go-to-market approach. So I just want to emphasize that even civil government, some of which who have used satellite data before, they're changing their motion here from buying satellites and building satellites to buying data.And in many cases, it's just a totally unique and new data product. And so they haven't done this before. So both we and they are learning through this. So it's more about a few bigger deals taking a bit longer and slipping out of the quarter, and we did have that -- some of that in Q2. Although I'd point out one of the biggest ones that we had that slipped out of the quarter subsequently closed in the few weeks afterwards. So it's still happening, but we are learning and understanding and then adapting to those processes.

[Jeff Van Rhee, analyst]

And then I guess as it relates to -- as a follow-on to that, as it relates to the guide, as I look through my numbers the guide implicit for Q4 for the January '24 quarter is about $10 million, give or take below me. I was roughly [ $68 ] looks like it's roughly [ $58-$59 ] at the midpoint, give or take, maybe a smidge lower but close. Can you talk maybe even just to whatever degree you're willing to put some bands around it in terms of that, call it, $8 million to $10 million in Q4 revenue that went away. What were the drivers? I know you had the mega 8-figure deal that you've talked about that pushed out presumably, that's at play there. But even proportionately, can you talk about what's pushing out of Q4, kind of the breakdown of what's pushing out of Q4?

[Ashley Whitfield Johnson, executive]

Yeah, Jeff, thanks for the question. And I tried to give a little bit of this color in my prepared remarks as we thought about guidance for the rest of the year. Obviously, as we get into the back half of the year, the timing of when deals close really impacts how much revenue we see from that business, especially if you factor in ramp time for new customers so to take this into account and to avoid coming back again in a quarter and having subsequent changes in a similar way. On the low end of our range, we basically just assumed very late timing for the closing of new business.So very minimal revenue impact of these larger deals. And that's why you're seeing so much of an impact on Q4 because, obviously, we do have business that we're continuing to progress. And if those do close in Q3 or in early Q4, we would see revenue from them. So really what we're attempting to do is look at what are the major drivers to revenue and how can we take that and take further timing changes into consideration, whether that's around very large renewals or very large new business. We've got strong line of sight to renewals, and I feel very good about that side of the business, as I mentioned.But the timing of new business just continues to be a source of frustration for us. The teams worked really hard through the end of the quarter to try to bring that business in and subsequently driving at least one of those large deals to conclusion in August and getting it over the goal line. But as we thought about the range for revenue for the remainder of the year, it felt prudent to suggest that some of this business continues to push to the right in the same way, even as the teams continue to work hard to close them.

[William Marshall, executive]

Yeah. Let me only add that -- so we are seeing, as we've discussed, the sales cycle will still be long although this quarter there's mainly a few deals slipping out. And a lot of that sales cycle has to do with civil government and Defense Intelligence just being longer. But on the positive side, we've also said last time that we had some impact on the size of deals coming in smaller, whereas actually, we've seen that normalize back to what it was before. So that's a little bit of a positive signal there.

[Operator]

The next question comes from the line of Ryan Koontz with Needham & Company.

[Ryan Koontz, analyst]

Circling back to Sinergise, and I can sense the excitement you guys have for that in lowering friction and customer onboarding. Can you maybe give us a perspective of how Sinergise has sold to-date and where they are now versus maybe where you want to take them at a high level in the future relative 12, 18 months' timeframe, medium-term?

[William Marshall, executive]

Well, I can start actually at a high level. We do see that their platform being utilized by civil government a fair bit. And we, in fact, even in our partnership prior to the acquisition, we're working quite regularly with them. I mentioned one other customer that we established this quarter in the UK Rural Payments Agency. And there another example of using Sinergise together and so we were working on that obviously before we close, that we've seen that in a number of deals.But so civil government is one area. But I don't know it's about the historical mix. I don't know if you want to mention anything about that. They do have a large number of small deals that they've done as a self-serve thousands and thousands of smaller entities. So that was part of the goal of the Sentinel Hub effort that they have. But I don't know if you've got anything to add that, Ashley.

[Ashley Whitfield Johnson, executive]

Yeah. What I would highlight is this is a company that really did not have any type of sales or marketing force. So a lot was done by a handful of key employees in pursuing RFPs on the civil government side, specifically as it related to land monitoring and some of the sustainable agricultural programs in the EU. And we're excited to bring the power of Planet sales force to bear in expanding the reach of those kind of direct sales efforts, even as also the fact that Sentinel Hub is as popular a platform as it is without having had a lot of marketing or any marketing around it.In fact, when we had our Explore Conference earlier in the year, and we actually asked how many users in the audience were familiar with it? And a very large number of hands went up. So it's exciting to us, again, to bring the power of Planet's platform and sales engine to their capabilities and bringing their capabilities into our customers is very exciting opportunity to grow that business.

[William Marshall, executive]

Yeah. And their customers kept on wondering our data in their platform. So here, we sold both of those.

[Ryan Koontz, analyst]

I remember that at the conference. Circling back on the self-service customers, would you say that the vast majority of the revenue is self-service today and you intend for it to remain that way or will you build some light touch or some kind of channels to feed that engine. Do you feel like you have work to do on go-to-market for that or do you think it's ready to go to plug into your channels?

[Ashley Whitfield Johnson, executive]

Yeah. So we've actually been -- we signed a partnership with them ahead of actually signing the acquisition agreement. So our sales team is familiar with the Sinergise products and solutions. And so there's a lot of activity already going on. I'd say from a revenue -- historical revenue perspective, it's been a blend of their larger direct business and then the smaller self-service business. And our intention, frankly, is to ramp both by bringing some of the business that we have that are smaller deals that are more suited to a light touch approach like Sinergise's had. But also, like I mentioned, bringing the Sinergise Solutions into some of our bigger opportunities both on the civil government side and on the enterprise side.

[Operator]

[Operator Instructions] The next question comes from the line of Greg Mesniaeff with WestPark Capital.

[Greg Mesniaeff, analyst]

In light of the cost-cutting measures you've implemented, including the headcount reduction, how have those measures impacted your sales and marketing effort? Have you guys perhaps shifted more of that effort to a third-party reseller model or are you maintaining the current template with a different number of support staff? Any color would be great.

[William Marshall, executive]

Maybe I can start at a high level. I mean, look, it's been that restructuring, we took a deep look at all of the projects and programs and which ones were the most effective, especially in terms of the growth areas on our go-to-market. And the same was true in our go-to-market effort. And of course, the decision to make a -- do a restructuring and the reduction in force is really hard. But I think it positions the company in the right place going forward. Yeah, on the go-to-market side, it's not a fundamental change in strategy, but it is operational focus on these core vertical markets on streamlining small deals and other operational efficiencies, which can speed up time-to-value and speed up sales cycles. Yeah, that's what I would say at a high level. Ashley, anything to add?

[Ashley Whitfield Johnson, executive]

Yeah. In terms of your question around do we see a shift of moving to more of a reseller model? That's not really how I would think about the change in focus. Obviously, relying on our partner ecosystem for solution selling and for some of the smaller deal opportunities and really more leveraging the capabilities of Sinergise and Sentinel Hub is the shift on the small deal side, but on the majority of our business, certainly from an ACV perspective, the direct model continues to be the focus. And really, it's been about narrowing the focus of our teams around those markets that the product market fit and the maturity of those markets is much farther along so that we can see acceleration in the deal cycles, sales cycles and do that through a focusing of the direct sales efforts, if that makes sense.

[Greg Mesniaeff, analyst]

Yes. Got it. And just a quick follow-up. You mentioned some slowdown, obviously, in the commercial sector. With that, have you guys changed or shifted any of the contract terms to your customers, future contracts that would perhaps address any potential cherry picking of deliverables or alternatively give some inducements to increase the size of the contract?

[Ashley Whitfield Johnson, executive]

Yeah. So we're definitely as part of the efforts that we've been doing in assessing our go-to-market motion, certainly looking at the packaging of our products to, obviously, ensure that we continue to drive up average deal sizes. As Will said, we did see average deal sizes tick up again in Q2. So back to kind of what we had seen in our historical averages. But as we continue to focus on those opportunities in those markets where we have proof points, and we know we drive value and we can drive value quickly. There's obviously an opportunity in the packaging of our solutions to drive higher overall average deal sizes.

[Operator]

There are currently no further questions at this time. So I'll now turn the line back to the management team for closing or additional remarks.

[William Marshall, executive]

Thanks, everyone, for joining today. As you heard, the opportunity for our business is robust, and our team is focused on executing. We are strengthening our go-to-market strategy, and we've increased company-wide focus on operational efficiency. The tailwinds for our business, the sustainability, digital transformation as well as peace and security are driving demand, and we see AI as a further accelerant. In all, we're confident in the market opportunity and our team's ability to execute. And I look forward to seeing you at our Investor Day on October 10, where we'll share lots of exciting details about our product and business strategy. Thanks for joining today.

[Operator]

That concludes the Planet Labs PBC second quarter of fiscal 2024 earnings conference call. Thank you for your participation. You may now disconnect your lines.