Planet Labs PBC (NYSE: NYSE:PL), a leading provider of daily data and insights about Earth, has reported a record revenue of $220.7 million for the fiscal year 2024, marking a 15% increase from the previous year. The fourth quarter alone brought in $58.9 million, driven by robust demand in the government sector, particularly in the Defense & Intelligence vertical.
Planet Labs surpassed the milestone of 1,000 customers and secured significant contracts, including a seven-figure agreement with the U.S. Navy's Naval Information Warfare Center. The company is also optimistic about its future, aiming for adjusted EBITDA profitability by the fourth quarter of the fiscal year and planning further satellite launches and software improvements. A management transition was announced, with Ashley Johnson stepping in as President and CFO, and Kevin Weil transitioning to an advisory role.
Key Takeaways
- Planet Labs PBC reported a 15% year-on-year growth in revenue, reaching $220.7 million for the fiscal year 2024.
- The company crossed the 1,000-customer threshold and saw substantial growth in the government sector.
- Notable contracts include a seven-figure deal with the U.S. Navy and an eight-figure data license agreement with Carbon Mapper.
- Planet Labs aims for adjusted EBITDA profitability by Q4 of the fiscal year and plans additional satellite launches and software enhancements.
- Management transitions announced: Ashley Johnson becomes President and CFO; Kevin Weil to serve as Advisor and Member of the Planet Federal Board.
Company Outlook
- Projected Q1 fiscal 2025 revenue between $58 million and $61 million.
- Continued focus on achieving adjusted EBITDA profitability by Q4 of the fiscal year.
- Plans to launch more satellites and improve software products to drive growth.
Bearish Highlights
- The company faces challenges in the agriculture sector due to the current economic climate.
- Progress in converting pipeline projects has been slower than expected, with the company not assuming an acceleration in year-over-year growth.
- Inflationary pressures and commodity prices may temper growth expectations in the agriculture and commercial sectors.
Bullish Highlights
- Strong demand in the government sector, particularly in Defense & Intelligence, is leading growth.
- The company is confident in its ability to compete for significant government opportunities, such as the NGA's Luno procurement and NASA's CSDA program.
- Planet Labs sees an acceleration in new customer logos thanks to the global commercial organization's efforts.
Misses
- No update was provided on the eight-figure expansion deal mentioned in the previous quarter.
- The company did not have an updated net promoter score to share at the time of the call.
Q&A Highlights
- The company is managing their cash balance to maintain a healthy balance sheet and invest in next-generation fleets.
- Despite the challenges posed by the solar cycle, the company has adapted and learned from the experience, ensuring the fleet's survival.
- Planet Labs is not affected by SpaceX's Starshield program and is focused on executing big deals in the government sector.
Planet Labs PBC has demonstrated resilience and strategic growth in a challenging economic environment. With a strong focus on the government sector and a commitment to innovation and profitability, the company is poised for continued success in the evolving geospatial data market.
InvestingPro Insights
Planet Labs PBC's recent fiscal year performance showcases a company on the rise, with a 15% year-on-year revenue growth and a record $220.7 million in revenue for fiscal year 2024. The company's robust performance, particularly in the government sector, is further illuminated by the real-time data from InvestingPro.
InvestingPro Data metrics reveal a Market Cap (Adjusted) of $733.45 million, indicating a substantial presence in the market. The Gross Profit Margin stands at an impressive 51.34% for the last twelve months as of Q3 2024, underscoring the company's ability to maintain profitability in its operations. Despite these strong figures, the company's Revenue Growth for the same period was 22.45%, reflecting a solid increase that aligns with the company’s reported fiscal year performance.
InvestingPro Tips highlight key aspects of Planet Labs' financial health and future prospects. The company holds more cash than debt on its balance sheet, which is a strong indicator of financial stability. Additionally, the company's impressive gross profit margins are worth noting, as they point to efficient cost management and a strong competitive position in the geospatial data market. However, analysts do not anticipate the company will be profitable this year, which is a critical factor for potential investors to consider.
For readers looking to delve deeper into Planet Labs' financial landscape, InvestingPro offers additional insights. There are currently 7 more InvestingPro Tips available, which could provide further clarity on the company's valuation, cash flow, and operational performance. To access these valuable tips and metrics, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
Planet Labs' strategic focus on government contracts and its aim for adjusted EBITDA profitability by the fourth quarter of the fiscal year are ambitious targets that, if achieved, could significantly impact its financial metrics in the upcoming quarters. With the company's management transition and continued investment in satellite technology and software improvements, Planet Labs is a company to watch in the geospatial data market.
Full transcript - Planet Labs PBC (PL) Q4 2024:
Operator: Good afternoon. Thank you for attending the Planet Labs PBC Fiscal Fourth Quarter and Full Year 2024 Earnings Call. My name is Victoria and I'll be your moderator today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the call over to your host, Chris Genualdi, VP of Investor Relations. Thank you. You may proceed, Chris.
Chris Genualdi: Thanks, operator, and hello, everyone. This is Chris Genualdi, Vice President of Investor Relations at Planet Labs PBC. Welcome to Planet's fiscal fourth quarter and full year 2024 earnings call. I'm joined today by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook, as well as Kevin Weil, who is joining us for the Q&A portion of today's call. We encourage everyone to please reference the earnings press release, 8-K filing 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 reference qualified pipeline which represents potential sales leads that have not yet executed contracts. For the customer contracts referenced during this call, please note that the revenue figures we cite will generally be recognized over the term of the contract, which can last multiple years. Further, the terms of these contracts can vary and we may not realize all expected revenue. 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.
Will Marshall: Thanks Chris, and hello, everyone. Thanks for joining the call today. Planet delivered a strong fourth quarter to cap off the year. For the full fiscal year 2024, we generated a record $220.7 million in revenue, representing 15% year-on-year growth. Non-GAAP gross margin for the full year was 54% and adjusted EBITDA loss was $55.3 million. We continue to make progress towards our target of reaching adjusted EBITDA profitability by Q4 of this fiscal year. We also surpassed 1,000 customers during the fourth quarter of fiscal 2024, an exciting milestone for Planet. Growth for the year was led by the government sector, during fiscal 2024, our revenue in the Defense & Intelligence vertical grew over 30% year-over-year, while revenue in the Civil Government vertical saw solid growth as well. In the near-term, we expect growth will continue to be driven by government sector, particularly during the period of heightened security, increased sustainability priorities and climate risks. In the Defense & Intelligence market, our businesses has historically been led by our differentiated high resolution tasking fleet, a business which continues to grow year-over-year. However, recently we've seen increased demand from defense customers for our PlanetScope daily scanning capabilities, particularly when enhanced by AI-enabled partner solutions. While the unique value of our PlanetScope daily scan has always been clear, recent advances in AI are leading to new solutions that extract critical value from our proprietary dataset. We are seeing new scan and search capabilities developed based on our proprietary daily scan, which enable critical applications such as broad area threat monitoring for NASA security purposes. These AI-based solutions help lower customer barriers to entry and speed customer time-to-value. This shift is just beginning, but we're already starting to see it in our bookings and pipeline. As an example, we were recently awarded a competitive seven figure ACV contract by the U.S. Navy's Naval Information Warfare Center, NIWC Pacific for vessel detection and monitoring over key areas throughout the Pacific Ocean. NIWC Pacific will integrate Planet data and AI capabilities from our partner SynMax into their SeaVision platform to help improve maritime domain awareness and support broad area monitoring throughout the region. Planet is a prime contract for the award and SynMax is a Houston-based satellite analytics and intelligence companies whose advanced AI solutions do vessel monitoring and classification. As you may recall, we previously partnered with SynMax to provide energy and maritime intelligence solutions, and we recently expanded our strategic partnership with SynMax, increasing the breadth of opportunities we can pursue together, and we are already seeing demand from other governments for our combined capabilities. Additionally, we have multiple seven-figure pilot programs in flight or in procurement with forward-leaning defense agencies, which if successful, have the potential to scale significantly. Similar to the NIWC Pacific award, these pilots include AI-based partner solutions sold alongside our data enabling broad area monitoring applications. These pilots are primarily focused on monitoring land-based locations. This is part of a growing trend that signals increased customer interest in purchasing insights with our data. We are pursuing many of these large pilots this year. I'll turn now to the Civil Government vertical, where we are also seeing solid traction for solutions sold alongside our data. Solutions for this vertical include those built by customers leveraging our internally developed Planetary Variables product line, as well as solutions developed by partners. In Q4, we closed over 50 new and expansion opportunities in the quarter with governments ranging from large federal agencies to state and local governments, which is more civil government opportunities than in any quarter during fiscal 2024. Recent wins include an expansion with Bolivia's Institute of National Agrarian Reform, which is expanding its use of Planetary Variables and our Sentinel Hub platform to manage public land and enforce property titling regulations, and an expansion with the Ministry of Natural Resources and Environmental Sustainability of Malaysia, which is using PlanetScope and SkySat data to monitor large forested areas for policy, planning and management purposes. As you recall from our Investor Day last October, the Civil Government market makes up a significant portion of the six-figure opportunities and the majority of the seven-figure opportunities in our qualified pipeline. It's a large and reliable stream of opportunities for our sales team to close. As we previously shared, the ROI for Civil Government customers can be many multiples greater than their investment in our data, such as the Indian state of Odisha, which saved over $200 million through fraud elimination in their first year, and Brazil's government, which has collected billions of dollars in fines, seized goods and assets frozen, aided by Planet’s data. With both in-house and partner developed solutions as well as Sentinel Hub's platform capabilities, we see opportunity to unlock additional segments of the Civil Government market by speeding time-to-value and driving expansions with existing customers looking to enhance their ability to manage broad areas of land. Shifting to the commercial vertical, during the fourth quarter, we signed expansions with large customers in the agriculture and energy sectors. However, budget constraints and the completion of the large legacy contract, which we've previously discussed on prior calls resulted in an overall year-over-year decrease in revenue from this vertical. During Q1 of fiscal 2025, we will lap the difficult year-over-year comparison, but continue to anticipate that the commercial market will be slower to develop based on budgetary constraints, particularly in the ag sector. Our strategy for the commercial sector is centered around partner-led opportunities and our efficient platform sales. We see strong indications that this is the best way to serve commercial customers and grow the addressable market for our solutions. To highlight some of our recent wins in the commercial sector, we closed a three-year expansion with Swiss Re (OTC:SSREY). Swiss Re continues to be a great partner and we're proud of how our relationship is growing. The expansion adds Planet's land surface temperature of Planetary Variable to Swiss Re's tool belt, in addition to our soil water content Planetary Variable, which they already use. These tools support Swiss Re's parametric insurance products by feeding pricing models, validating claims and credit, forecasting potential risk, and identifying opportunities within new markets. We also closed a large new multiyear deal with an agriculture focused insurance company in Canada, which is leveraging Planet’s broad area monitoring solutions and Planetary Variables to modernize its drought insurance program and for crop insurance claim validation. We also announced that PlanetScope data is now available on Google (NASDAQ:GOOGL) Cloud Marketplace, allowing GCP's existing customers to purchase Planet data using GCP credits so that they can easily onboard and analyze, process, and derive meaningful insights from our data at scale. We've already had a customer in the commercial sector make a purchase for a seven-figure renewal through the marketplace. Shifting gears to share a business update that spans across verticals. As you may have seen at the press release this afternoon, we recently signed an eight-figure data license agreement with Carbon Mapper to provide hyperspectral core imagery to the nonprofit and its partners until 2030. As a reminder, Carbon Mapper has been a key partner for Planet in developing the Tanager hyperspectral constellation. This contract is an extension of an existing arrangement, and we would expect revenue under this contract to begin in 2026. Importantly, this agreement demonstrates our shared confidence around the program and our shared mission to improve understanding and accelerate reductions in global methane and carbon dioxide emissions. We continue to expect to launch the first Tanager satellite later this year. Now let me turn to product updates. Our first Pelican tech demo, which we launched in November, continues to perform excellently. The hundreds of system tests that we've conducted over the 10 subsystems of the satellite have gone well. We are gaining valuable on-orbit learnings and making solid progress towards operationalizing the Pelican platform. As we shared previously, our agile aerospace approach with rapid iteration of capabilities in orbit enables fast improvement cycles to our spacecraft designs. We expect to launch additional Pelicans, including the first production satellite during the next 12 months. Turning now to software and platform updates. Similar to our approach in spacecraft, we practice rapid iteration and constant improvements of our software products as well. We recently launched Field Boundaries analytics, which is the latest addition to our suite of Planetary Variable Solutions. Field Boundaries provides the spatial context necessary to better understand planted acres for different crop types and growth throughout agricultural season, enabling more accurate yield estimation for our customers at a global level. We’ve also recently upgraded our Crop Biomass Planetary Variable with PlanetScope data as well as made meaningful improvements to our Road and Building Detection solution. Consistent improvements in our AI powered analytics solutions are helping make our data more accessible and speed customer time to value. In summary, demand in the government sector is very strong. We are seeing a shift in our business towards selling solutions alongside our data. AI is enabling broad area search atop our unique daily scan and is opening use cases and markets with exciting early traction in the defence and intelligence vertical. We are prioritizing investment behind these areas. I want to emphasize that we remain committed to striking the right balance between growth initiatives and operational discipline so that we can achieve our adjusted EBITDA profitability by Q4 of this year, which is an important milestone on the path to building a high margin sustainable cash flow generating business. Growth for fiscal 2025 will be driven by closing the large deals in front of us and scaling our platform and solutions partners globally across vertical markets. Our product and engineering teams continue to make incredible strides on both our agile space technologies and equally agile software stack and I couldn’t be more excited about the developments here and there is more to come. We are hosting a milestone platform launch, which will be webcast virtually on April 11, so I encourage you to tune in. Before I hand the mic over to Ashley, I’d like to discuss the management transition announced earlier today. As we shared, Kevin Weil’s role is evolving to be an Advisor to Planet Labs PBC and a Member of the Planet Federal Board. And Ashley will be taking on the role of President. I first want to express my thanks to Kevin who is here on the call with us today for all of his impact at Planet and I look forward to continuing to work with him. I’m very glad that Planet will continue to benefit from his partnership and guidance in this new way. I’d like to congratulate and recognize Ashley here for the expanded role that she will be taking on at Planet. I’m pleased to share that she will be assuming the responsibilities of leading our go-to-market and business strategy as President and CFO. I’m excited about her taking on this new role because as you know, Ashley’s leadership and depth of experience are an incredible asset to Planet. She has over 20 years of experience scaling technology businesses, driving financial performance and building operational excellence at global organizations. Her results driven focus and deep understanding of Planet make her the right person to lead our go-to-market and business execution during this next chapter. Additionally, Robert Cardillo, Chair of Planet Federal and the former head of the National Geospatial-Intelligence Agency, who continues to bring a wealth of knowledge, understanding and relationships in the national security domain, is taking on a larger role overseeing strategy for our Defense and Intelligence business globally. I’ll now turn it over to Ashley for a review of the financials and our outlook. Over to you, Ashley.
Ashley Johnson: Thanks Will. I really appreciate the kind remarks. I’m truly honored to take on this new role, excited to partner with the global go-to-market and product leaders and ready to build on this incredible foundation for my next chapter with Planet. I’m also pleased to report that all of our results for the fourth quarter and full year fiscal 2024 were in line with or better than the guidance we provided on our last earnings call. Revenue for the quarter ending January 31st came in at a record $58.9 million, which represents 11% year-over-year growth. Growth in the fourth quarter was led by the defense and intelligence vertical, which grew over 20% year-over-year, driven by the NIWC Pacific win and expansions with customers in both domestic and international markets. We also saw solid year-over-year growth in the civil government vertical where our broad area management capabilities and solutions are supporting strong customer adoption and expansion. From a geographic perspective, during the fourth quarter, EMEA revenue grew more than 20% year-over-year, Latin America grew more than 30% year-over-year and Asia Pacific grew over 15% year-over-year. North America revenues stayed roughly flat on a year-over-year basis, primarily impacted by the discontinuation of the legacy contract that we’ve discussed previously. For the full fiscal year, EMEA revenue grew more than 50% year-over-year, Latin America grew more than 20%, Asia Pacific in the mid-single digits, while North America revenue grew less than 5% year-over-year. As of the end of Q4, our end of period customer count was 1,018 customers. Recurring ACV or annual contract value was 93% 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 multi-year contracts. Our average contract length continues to be approximately two years, weighted on an ACV basis. Net dollar retention rate at the end of FY2024 was 101% and net dollar retention rate with winbacks was 103%. During the year as Will noted, we saw strong expansions with government customers, partially offset by slower uptake in the budget constrained commercial vertical. New customer additions were stronger in FY2024 than we had previously expected and gross retention saw year-over-year improvement, reflecting the stickiness of our solutions. Our lower than expected net dollar retention rate for fiscal 2024 primarily reflects less expansion than we had expected for the year, but it is not indicative of higher churn. Turning to gross margin. Non-GAAP gross margin for the fourth quarter of fiscal 2024 was 58% and for the full year was 54%. Adjusted EBITDA loss was $9.8 million for the quarter and for the full fiscal year was $55.3 million. Adjusted EBITDA losses narrowed quarter-over-quarter throughout the fiscal year 2024, driven by operational efficiency and focus across the company. Capital expenditures, including capitalized software development were $10.1 million for the quarter and $42.4 million for the year or approximately 17% of revenue for the quarter and 19% of revenue for the full year. Turning to the balance sheet. We ended the quarter with $298.9 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 Q4, our remaining performance obligations or RPOs were approximately $133 million, of which approximately 86% apply to the next 12 months and 98% to the next two years. Our backlog, which includes contracts with a termination for convenience clause, which is common in our U.S. federal contracts and occasionally found in other customer contracts, was approximately $242 million, of which approximately 67% applied to the next 12 months and 85% to the next two years. Let me turn now to our guidance for the first quarter of fiscal 2025. We’re expecting revenue to be between $58 million and $61 million, which represents growth of approximately 10% to 16% year-over-year. We expect non-GAAP gross margin for Q1 to be between 50% and 52%. Gross margin for Q1 is expected to be impacted by the inclusion of partner solutions and some of our larger government sales, which we anticipate will have an approximately 3 percentage point impact during the quarter. Guidance also reflects an anticipated 5 percentage point impact from higher depreciation expense related to the shortened estimated useful life for the three SkySat satellites, which we expect to lower and re-enter the earth’s atmosphere within the fiscal year. We expect our adjusted EBITDA loss for the first quarter to be between $11 million and $9 million. We are planning for capital expenditures of approximately $14 million to $17 million in Q1, reflecting our continued CapEx investments in next generation fleets as well as the maintenance CapEx for replenishment of our PlanetScope constellation. Turning to the year ahead, we recognize that we are seeing an increase in large contracts and partner solutions in our existing business and pipeline opportunities. As you’ve heard, we are pursuing many promising large government contracts, including multiple seven-figure pilots in flight or in procurement that have the potential to convert into very large operational contracts this year. In addition, we are seeing significant progress with new solutions that we are providing with partners enabled by recent advancements in AI. The signals we are receiving from existing and potential customers give us confidence in the power of these solutions and our position to win. We believe these opportunities have the potential to drive significant scale and upside in our business. However, the timing, size and structure of such opportunities can be difficult to predict. That’s why we’re going to hold off on guiding for the full year until we gain more clarity on how these opportunities develop. As we gain visibility on these opportunities through the year, we will provide more color to our outlook. Our long-term financial targets for the business have not changed. Further, I’d like to emphasize our commitment to reaching our target of adjusted EBITDA profitability by the fourth quarter of this fiscal year. As Will mentioned, we are prioritizing investment behind core areas to capture the market opportunity unfolding in front of us. In parallel, we will reduce expenses where necessary to deliver on adjusted EBITDA profitability, which we view as a key milestone on our journey to building a high margin, sustainable and cash flow generating business. In summary, the government sectors are strong and we are seeing demand shift to solutions alongside our data enabled by the revolution happening in AI. We are investing behind these trends to capture market share and drive customer adoption, while streamlining our cost base to ensure we deploy our cash efficiently and align our operations to profitable growth. Simultaneously, our engineering teams continue to make great progress toward launching our next-generation fleets and we have an exciting platform launch coming in just a few weeks. I’m incredibly proud of the accomplishment of our teams around the globe in fiscal 2024 and even more excited for the year ahead. Operator that concludes our comments, we can now take questions.
Operator: [Operator Instructions] Our first question comes from the line of Michael Latimore with Northland. Your line is now open.
Will Marshall: You there, Mike?
Michael Latimore: Yes. On sales cycles and new deal sizes, how are they trending now versus four to five months ago?
Ashley Johnson: I’d say on sale sizes, we’re definitely seeing opportunities for sales – sales to – sorry, average sales sizes to increase. Just given what we alluded to with some of the larger contracts, some of which have been awarded, some have been awarded in the form of pilots with government contracts. As you know, those sales cycles tend to be longer, although on the pilot side, we can see shortened turnarounds. So, net-net, I’d say stable to seeing positive signals.
Michael Latimore: Got it. And then I think there was a eight-figure expansion deal that was kind of effectively in the pipeline last quarter. Any update on that one?
Ashley Johnson: Still in the pipeline, nothing to share.
Michael Latimore: Got it. And just last, do you have an updated net promoter score, NPS?
Ashley Johnson: Not at this time. We’ll have to circle back to you with that.
Michael Latimore: All right, great. Thanks a lot.
Ashley Johnson: Great. Thank you.
Operator: Thank you for your question. The next question comes from the line of Jason Gursky with Citigroup. Your line is now open.
Jason Gursky: Great. Thanks, everybody. Will, maybe this is a question for you. Talk a little bit about the SkySats and the transition to the Pelicans. If, for whatever reason, there’s a delay or gap in capability set that comes about as you retire some of these SkySats before the Pelicans get up there. Do you have any contracts that would be at risk today where you’re currently performing on a contract and if for whatever reason, there was a gap in that capability set that you would not be able to perform on?
Will Marshall: The short answer is no. So we have plenty of capacity to provide to our customers at the present time. We have seen some accelerated depreciation of those SkySats from the lower orbit, but generally that is sort of offset by the fact that actually we increase the capacity on those satellites routinely with software improvements. So just to give you a sense of that in the last year, we improved the capacity per satellite by 40%. And that built off more than doubling the prior year. And that’s all with software improvements. And the longevity of those satellites remaining in the higher orbit looks good. And Pelican is on track. I shared a little bit about Pelican and the tech demo, it’s going really well. We’re planning for the first operational satellites in the next 12 months, as I also mentioned, and I’m really pleased with the results so far and incredible work of that team that has pulled that all together because it’s an incredible mission.
Jason Gursky: Maybe ask that different way, same topic. How many SkySats after these three go retire we have left? And how many do you need to perform on your existing contracts?
Will Marshall: Yes, we’ll have approximately 15 remaining. And I think that’s plenty for the revenue. Not just the revenue that we have, but for the revenue to continue to grow. Again, with that sort of capacity improvements of the kind that I just said year-on-year and we still see potential growth in that. It’s not like it’s capped out. We’re going to continue to work on improving that further in this year. So, yes, we think 15 is plenty.
Jason Gursky: Okay, great. Thanks. And then, Ashley, a couple for you. Can you get to break – EBITDA breakeven with your current revenue run rate, what you’ve got here projected in the first quarter 2025?
Ashley Johnson: Yes. I’d say the way that we’re thinking about this year and obviously I alluded to the fact that there are a number of opportunities in flight that from very large deals and work with partners that are making full year guidance more difficult than usual. But I’d say generally it’s because of the fact that we do have so much opportunity that makes it hard, as opposed to the opposite. What I can share is that for our own internal and budgeting purposes, even though we’re very confident in our position to compete and win in these opportunities and we’re investing behind them, we’re not assuming acceleration in our year-over-year growth rate as we progress through the year and are aligning our costs accordingly.
Jason Gursky: But I guess the question is roughly $60 million a quarter. Can the business be EBITDA breakeven?
Ashley Johnson: There’s no reason why it couldn’t be.
Will Marshall: So, yes.
Jason Gursky: Yes. Okay. And then on cash flow, maybe talk a little bit about expectations around when the cash flow number gets to breakeven and turns positive, the timing and drivers of that.
Ashley Johnson: I guess the way that I talk to it is, we are balancing a number of different factors in managing our cash balance. So one is, we want to maintain a healthy balance sheet. We’ve got very large government customers that will look to us to sustain a nine-figure balance – cash balance on our books to know that they can continue to invest behind us as a key provider of the very critical services that we provide. So that’s one factor. The other is, we’re making investments in our next-generation fleets. We are in a, what we would call a growth CapEx mode, and we want to make sure that we continue to invest behind those so that we can sustain our space and data advantage. And all of that is combined with the operational efficiencies that we’ve continued to drive quarter-after-quarter. And we are prioritizing internally so that we’re investing in things like our core platform that are enabling the solutions, that are driving the exciting opportunities that we talked about earlier and making sure that as we think about our own internal operations, that we’re freeing up our capacity to continue those investments. So it’s a balancing act. Obviously, if revenue accelerates, that gives us more flexibility. But we’re not relying on acceleration beyond where we are in order to achieve our profitability goals and ultimately our cash goals.
Jason Gursky: Okay, well, last one for me. On the large government opportunities that you’ve got there on Slide 23, which is the outlook slide, can you talk a little bit about the geographic demand with the government customers and where the sources of those opportunities are?
Will Marshall: Yes, actually, I can elaborate a little bit about some of the big deals we’re looking to today. There’s the NGA has the Luno procurement, which is a $300 million-ish procurement mechanism for analytics on top of satellite data that we’ll be going after and competing for this year. NASA has had an expansion of their budget for the CSDA program that’s the commercial space data layer there, and we’ll be competing for more dollars there. Globally, we have a few really important international customers that we’re in the active pursuit of partnerships with significant expansions. And then I mentioned a number of the fact that a lot of our seven-figure deals are civil government. So that sort of tease in as well. So there’s a lot that we’re going after right now. I feel very good about the deals and opportunities that we’re pursuing this year. Yes, we’re feeling pretty solid about that.
Jason Gursky: Right. Okay. Thank you very much for the time, guys.
Ashley Johnson: Great. Thanks, Jason.
Operator: Thank you for your question. The next question comes from the line of Trevor Walsh with JMP Securities. Your line is now open.
Trevor Walsh: Great. Thanks, team, for taking the questions. Will, maybe I’ll start with you, if that’s okay. Could you maybe talk a little bit more about the NIWC Pacific contract from the perspective of – I think you had mentioned that other governments might be able to operationalize kind of a similar type of use case. I guess, how sensitive is the U.S. Navy’s program around this? Whereas you might not be able to kind of share all the learnings from that particular contract and then replicate it for other governments? And then secondarily kind of around that contract, what’s the opportunity for expansion within that? Would that just be kind of broadening the area of interest kind of to beyond the Pacific and to other geos? Or is there just additional kind of imagery services that could come along – I guess, give us a little sense of how that might expand over time? That’d be great.
Will Marshall: Yes, happy to. Look, really excited by that contract overall. It was a – it’s an example where AI on top of our PlanetScope data can enable new capabilities, there it’s maritime domain awareness, MDA as it’s called in the sector, the need is large area frequent monitoring, right? And obviously our PlanetScope daily scan is ideal for that. AI on top really pulls out things like vessel detections, vessel identifications tracking that is useful for situation awareness. That’s what this is getting at. I also note that that was a competitive win over an incumbent that had a system, but theirs was based on a tasking satellite fleet and obviously our scan is more well suited for that. And so it was great to see our team pull off that competitive win. Now, as to expansion you asked about, that’s certainly possible. Within that, in fact, so far the performance of that contract has been really strong and we’ve got good initial indications from that customer. Very excited by that. And then more broadly, to your question, can this go to other customers? Absolutely. In fact, we already have several conversations ongoing for that capability. It is brought up and there’s nothing that restricts us from doing that with other countries and any more than any other products.
Ashley Johnson: If I could add on to that, I think it’s worth noting, and Will had said this in his prepared remarks, that this was a solution that was initially developed in the commercial sector for energy and financial markets that has applicability to the defense and intelligence sector. So often things start in government and then go out commercial as it relates to geospatial data, but this is actually one where it went the opposite direction.
Trevor Walsh: Awesome. Thanks both for the color on that and good segue for me. So thanks. On the commercial business front, you talked about kind of the budget constraints leading to some of the results for the year within that part of the business. What are – I guess, the outside of just the broader kind of macro things that we’ve all been talking about for the last 18, 24 months are there any other just technical hurdles or things for that part of the business to just really start going and kind of getting back to fuller health? Or is it really just once people feel like interest rates are kind of normalizing or whatever that looks like, then budgets – dollars are available and it’s just a flip of the switch? Or are there other kind of convincing, I guess, that you would need to do around just kind of the value of the solutions?
Will Marshall: Well, I’d say fundamentally nothing has changed. The need proposition in agriculture and these other sectors remains the same. It is mainly the economy that is affecting there. There’s been a lot of pressure on the ag sector in particular, which was our biggest part of our Commercial segment and that’s had its challenges. However, our data fundamentally can enable improved crop yield, decrease in fertilizer use and other things and inputs, as they call it, which actually can yield meaningful improvements in profitability for that multi-trillion dollar sector. There’s no reason why we shouldn’t be doing that long-term. So the fundamentals of that, and I would say the same in other commercial sectors, like insurance and other things, they’ve been less weighed on this. I would say that there’s still a lot of work for us to do as well on solutions, right? So we are building solutions. We have some, we mentioned in the Swiss Re example how adding the extra Planetary Variable at land surface temperatures, enabling and reinforcing their ability to do parametric agricultural insurance. That’s the kind of thing we need to do to enable the customer to get immediate value without having to have complex understanding of geospatial data, right? So the more we do that, the more that opens up markets. But fundamentally, the effect is because of the economy and nothing has changed about our outlook about those sectors being very strong long-term.
Trevor Walsh: Got it. Okay, that’s helpful. Ashley, maybe just a couple of last quick ones for you, if I can. The acceleration in new customer logos was great in the quarter. Can you provide just any – was there anything in particular that you think kind of helped to achieve that? I mean, I know you’ve been talking about greater efficiencies around your go-to-market processes, so I’m assuming that kind of helps. But was there anything else just out of the ordinary in the quarter that also can kind of contribute to that metric?
Ashley Johnson: Nothing that jumps out at me as being out of the ordinary, I would say that we have an incredible global commercial organization that has been building these relationships and really educating the market on the opportunity for Planet to drive value with these end customers. And some of these sales have taken time, but the team’s been persistent and it was great to see them bring in some new logos because obviously, land and expand is a core part of our sales motion. So while we typically expect to see the majority of our growth in any given year coming from expansions, just by the nature of the way these deals tend to progress, it was interesting to see that last year was much more balanced between new business and expansion business. And that just speaks to more opportunity in front of us.
Trevor Walsh: Great. And then lastly, the NDRR number, it looks like and I’m just looking on the slide deck, so we’re working on the same sheet of music. It looks like the kind of delta between the pure NDRR number and the one with winbacks is essentially converging. It’s coming together. Does that make the winbacks kind of less meaningful as a kind of a separate call out? And is that essentially happening less and less as the numbers would sort of dictate? And is that – or is this more just – is that something I guess you’ll continue to sort of report and look into kind of on a quarterly, yearly basis?
Ashley Johnson: I’ll tell you that nothing would make me happier than for that metric to become obsolete because the two numbers converge, because that would tell me two things. One, that we’re getting renewals in on time, so we don’t need to report winbacks. We get renewals at the point of when the contract ends. And two, that would speak to just continuity of the business with the end customer. And as you know, there’s some sectors of the market we serve where the work with our data tends to be more seasonal. And so that can sometimes lead to gaps between when a contract expires and when the customer focuses on the renewal. That doesn’t speak to the data not being valuable, but rather just the periodicity being having somewhat spikes in peaks and valleys. And as we are driving more solutions and really educating our customers on more ways that they can be using our data to drive elements of their business, we should see less of those peaks and valleys and more on time renewals across all of our contracts. So we’ll keep reporting it as long as it’s relevant. But as I said, nothing would make me happier than to not need to report that number.
Trevor Walsh: Got it. Okay. Thanks all. Appreciate the questions.
Will Marshall: All right.
Operator: Thank you for your question. [Operator Instructions] Our next question comes from the line of Ryan Koontz with Needham & Company. Your line is now open.
Ryan Koontz: Great. Thanks for the question. Ashley, first, just a little bit of housekeeping on the gross margin, step down in Q1 if you can bridge us there. I heard you mention the 300 bps of impact from third-party solutions kind of selling through your channel, as I understood. And then you talked about a 500 basis point hit from the accelerated depreciation. So my question is, what is that 500 basis point hit relative to? Is it relative Q4 or maybe your plan of record before? So maybe kind of just walk us through that that bridge, if you could.
Ashley Johnson: Yeah. So the numbers I was providing were specific to Q1 guidance. So just some context on the year. The gross margin for the full year will be impacted by increased depreciation from the three satellites that will be deorbiting, it’s around Q3. So it’s an approximate $5 million impact over that period. And I gave you kind of that impact on Q1. With respect to partners, as I noted, when we act as a prime, we’re pulling partners into that relationship then we get both the revenue, but also the revenue that goes to the partner that’s providing their part of the solution. So that flows through our cost of goods sold. So I quantified that impact on Q1. Obviously, how that will impact the full year will depend on the mix of business that we see come in and how much of that are these government deals where we’re prime in pulling in a partner solution or how much of it is more of our traditional business, where a partner might sell side by side with us or where the partner might actually be prime. So, a little hard to quantify at this point, gave you Q1 and we are leaning into it. So we do expect that to continue, but unable to give you exact quantification at this time, other than to say, we do expect this to help us drive scale. And so we are leaning into it.
Ryan Koontz: Make sense. Can you maybe explain where you are in the process of building out solutions? And how we should think about partner prime versus sell with versus Planet as prime like, which way is more common now? And which ways are you trending in the future maybe?
Will Marshall: Yeah, I mean, it's really both of those things. I mean, both Planet’s own solutions and partner solutions. Typically, we have been the prime in those cases where they do involve Planet partners. We're obviously looking primarily at what the customer needs most and driving it from there. But fundamentally, AI is driving a lot of this, and both our own AI and partner solution AI is opening up the value proposition here to extracting out more value from our data. I think our PlanetScope data set is particularly well suited to that because of the broad area and the fact that we revisit every area each day, no matter what, which means that you have this consistent dataset, time series stack to train AI algorithms upon. So it's a pretty unique asset there that we have that is differentiated and has high appeal to AI companies that are anywhere close to this space. But anyway, I don't see any particular trends. I mean, we've seen some very good takeoff with some of our partners that like the Navy example that I mentioned, but there were others. We mentioned a couple of pilots that we're working on. There is a distinction between most of the existing work has been on what we would call classical machine learning. Some of these pilots are based on large language model type fundamental capabilities, which is opening up yet more things. I would say most of the growth right now is more to do with the classical stuff, but there's a huge frontier opening up with large language models now tackling both text – multimodal pieces, multimodal large language models are now doing text to imagery conversion. And that fundamental capability is something that will become a more of a boon to us from my perspective. So I've extrapolated beyond your answer there, but I think it's an exciting time in that domain.
Ryan Koontz: Great. Well, thank you. And just one more, if I could on, any color you can give us on the EOCL contract, how that's progressing? Is any of these strength in government that you're seeing coming the result of that, or maybe just a little update on how that's progressing? Thank you.
Will Marshall: So far, so good. We feel very good about the implementation of our team against that contract. I understand the customers satisfied. We do have a renewal coming up with that contract, and we feel very good about that prospect. I don't know as to how it's affecting other areas. I do think that the more we show that we're a serious player in this space generally, and that's one of the mainstays of that, the reputation that Planet is providing good services there and reliably is important. So in that sense, I think it has a sort of indirect benefit. Yes.
Ryan Koontz: And it boosts your brand. All right, great. Thanks for the color. That's all I've got.
Ashley Johnson: Great. Thank you.
Operator: Thank you for your question. The next question comes from the line of Noah Poponak with Goldman Sachs (NYSE:GS). Your line is now open.
Noah Poponak: Hi, good evening.
Will Marshall: Hey.
Ashley Johnson: Hi, Noah.
Noah Poponak: It sounds like you're saying that the decision to not provide full year 2025 annual guidance is less downside uncertainty and more upside uncertainty, I guess, as you're alluding to these large prospects, but where you don't know if and when they'll land. You've given that the 1Q guidance where the growth rate is somewhat consistent with full year 2024 and that's on your toughest year-over-year compare that you'll face this year by far. And so, I guess, is it a reasonable base case for all of us on the outside to assume 2025’s growth rate looking similar to 2024 is kind of a floor. And then there's upside depending on when the large opportunities land, if they land, or is that too optimistic? Are there scenarios where the growth rate decelerates? Is there a scenario where revenue is down?
Ashley Johnson: So obviously a lot of this has to do with timing. So, as we expressed, we feel really good about the business opportunity that is in front of us and the business that we've landed, the pilots that we're working, and the opportunity to convert some things that as we expressed last year have been maturing in the pipeline and really have – the teams have continued to progress them, just not at the pace that obviously we had hoped previously. So the visibility is challenging, to your point, in particular, on the upside. And when I think about just managing our overall cost base and making sure that we're getting to profitability. As I mentioned, we're not assuming acceleration on that year-over-year growth rate. And that helps us kind of ring fence how much we have to invest and determine where we best place it to drive the growth in the business. Beyond that, obviously, I'm not giving a range of any sort for a reason, but I'd say you should be hearing a tone of confidence in the opportunity in front of us and uncertainty really around timing.
Noah Poponak: Okay. Do you anticipate that you will have a range at some point through the year?
Ashley Johnson: We'll continue to give more color. Obviously, as we progress each quarter, we get more visibility as to how the new business lands will be translating into revenue on the year. So we do anticipate giving more color as the year progresses.
Noah Poponak: Okay. And, Ashley, remind me, over the past few years, on average, or maybe just kind of directionally as a framework, how much of your annual revenue do you book and deliver within the year versus it was in the backlog when you entered the year?
Ashley Johnson: Yes. So we've talked in the past that we've typically seen the amount that's in kind of RPOs and backlogs representing about 60% to 65% of revenue, and then from there, a decent amount of the remainder comes from renewals. And we tend to, for internal purposes, assume new bookings to be back half-weighted, and so a lesser percentage contributing to current year revenue and really more driving the next year revenue. So that's typically how we think about it, how we've talked about it in the past.
Noah Poponak: Okay. And then just last one I wanted to ask about is on the capital plan, the $14 million to $17 million for the first quarter is a pretty big number compared to the run rate, although last year you had one quarter in that range. I guess, is that anomalous, or is that a run rate? What's the full year look like? And I guess, where do we – how does that sort of start to normalize as a percentage of revenue over time?
Ashley Johnson: Well, as a percentage of revenue is a metric that depends on quantifying the revenue, but I'd say our long-term target is unchanged for where we expect CapEx as a percentage of revenue to be. And as we move out of this growth CapEx phase and into maintenance CapEx, this year is a growth CapEx year, and so Q1 levels are not what I would characterize as anomalous, but kind of more what we would expect to see as we're in this growth CapEx cycle.
Noah Poponak: Okay. Okay. Thank you.
Ashley Johnson: Great. Thanks, Noah.
Operator: Thank you for your question. The next question comes from the line of Jeff Van Rhee with Craig-Hallum. Your line is now open.
Jeff Van Rhee: Great. Thanks for taking the questions. I guess, this would probably be for Kevin and Ashley. On the sales execution, with the transition going on, I think it'd be good just to get a sense of where you feel you are now with respect to sales execution. So, number one, just where are you? What's working? What's not? And generally speaking, what needs to change?
Ashley Johnson: Yes. Why don't I jump in, and Kevin, if you want to add any color to it. But as we talked about, a lot of the changes that we wanted to make in our go-to-market strategy, we initiated back in Q3. I'd say, the team executed against that really thoughtfully in terms of thinking about where are we going direct to customers and where do we want to really be evolving and leaning into our partner ecosystem. And so, a lot of those changes got implemented over the back half of the year, so that we were ready to start this year with those changes completed and everyone focused on just this year's numbers and getting out there and bringing the business in. So, I would say, we've done the heavy lifting on the organizational work, and now we're excited for an upcoming sales kickoff and continuing to see strong performance around the globe. Any additional color you would add there, Kevin?
Kevin Weil: All I'd say is, I have a lot of confidence in Charlie, who leads our sales team, and as we transition here, in Ash's ability to continue this execution.
Jeff Van Rhee: Okay, got it. And then, with respect to the commercial and maybe more specifically ag, I mean, in general, ag names in the space have been lifting their head for a little while now. Curious if you're seeing the same or any changes in behavior in ag, and just fundamentally trying to understand the weakness in ag and commercial in general. Is it a function of the solutions needing to be more, I guess, I'd say, productized or easier to consume? Maybe a more demonstrable ROI? I mean, there's both landing new customers and there's retaining, and those two factors would obviously weigh, but just thoughts on commercial and ag and maybe why it's been as soft as it has.
Ashley Johnson: I mean, I'd say, coming off of the Agri-Tech conferences earlier this month, I'd say you're right. The sector is starting to pick its head up, and we had a lot of exciting conversations with both customers and potential customers. That said, we're counterbalancing our long-term optimism for that sector with the continued inflationary pressures and commodity prices for the sector as a whole. So, we remain very bullish on the opportunity for us in agriculture and commercial at large, but for this year in particular, we're tempering our expectations, just given some of the dynamics in the sector.
Kevin Weil: I'll just add a tiny thing. If you want a little bit of color of how we help here, there was a great blog release, or Bayer (OTC:BAYRY) released one of our customers a few weeks ago, and it just tells the story of how the use case is strong there. Commercially, it's not just agriculture, of course. We do have insurance, energy, and others too. You were speaking about maturity of solutions. I think that is critical, but we now do have some solutions that are really clear. Now, we are being more focused in on that parametric agriculture insurance product, which we are scaling now. We have a few toeholds into a serious market there, as well as the fundamentals that are very strong.
Jeff Van Rhee: Got it. Okay, thanks for taking my questions.
Ashley Johnson: Great, thanks, Jeff.
Operator: Thank you for your question. Our next question comes from the line of Flora Li with Deutsche Bank (ETR:DBKGn). Your line is now open.
Flora Li: Hey, thank you for taking our question. And just a quick one from us. So, what's your initial view on the SpaceX Starshield?
Will Marshall: Initial on SpaceX what?
Flora Li: The SpaceX Starshield, the…
Will Marshall: Yes. Are you referring to the reports that came out recently about one of their programs with the Starshield? Is that what you're referring to?
Flora Li: Yes.
Will Marshall: Yes. I mean, look, that's a government built. These are large government contracts, basically, for government-owned and operated satellites. So, they're playing a sort of classic role of a defense contractor. It's very different from our business. The government will always procure satellites for their own internal uses, if you like, especially in the security domain, like they are doing with SpaceX. But that doesn't, I think, in any way change the market for on the commercial and commercial-first side of supplying to government. Does that make any sense?
Flora Li: Okay. Yes, I appreciate that.
Operator: All right. Thank you for your question, Flora. Our next question comes from the line of Chris Quilty with Quilty Space. Your line is now open.
Chris Quilty: Under the wire, I didn't think I would get it in. Ashley, follow-up on your CapEx discussion. Yes, I know. It was close. On the CapEx discussion, you talked about the growth versus maintenance capital. What do you consider Pelican? And if it's the former, when do we start sort of folding in the growth CapEx associated with that program?
Ashley Johnson: Yes. So, I would say Pelican is definitely in a growth CapEx phase. Obviously, we've introduced the first tech demo, and then we'll begin launching our operational fleet. And we've talked in the past about this being a really important lever for us as we think about managing our cash. We can move at a more maintenance replacement rate with the SkySat fleet after we've gotten through the initial operational launches. And then we can launch more faster, so stay in a growth CapEx phase if we're feeling high demand and the revenue supports it. If we're seeing demand kind of at the same pace as the growth that we've been experiencing today, we can shift more quickly into a maintenance CapEx mode. So, that is an important lever available to us that enables us to manage our cash versus our CapEx investments.
Chris Quilty: Great explanation. Next question, the budget. Did we pass a defense budget or did we extend the CR? Does that mean we're in a CR? I honestly don't have the mental capacity for it. But from your perspective, obviously, you got lots of contracts on the horizon here, and there's a lot of budget melees going on. Two specific questions, can you start new programs, and are new program starts important to close some of these opportunities? And the second one, kind of what sort of a system response are you seeing? I mean, CRs are nothing new. We do them every year. But are you seeing anything where, you know, it's freezing up more than normal? Or is this just like, okay, just punch the clock, same old thing?
Will Marshall: No, I mean, the government is particularly dysfunctional this year. No, I mean, we have, of course, been tracking that and commercializing. It's complicated. Yeah, you're right. But anyway, of course, we do track exactly where our contracts require larger upticks in budgets versus just the CR will do. Look, the budget has passed for both on the civil side, so affecting things like NASA, and on the defense side, affecting things like the NRO and our partnership with the ACL. And that's good, because it generally enables them to put increases where they have increased things. And in general, these program areas for commercial satellite data buyers are increasing. And just end by saying that, we're really proud to serve the government clients that we work with. We think we do some really important services, and I think they do too. And we're glad to be working with them.
Chris Quilty: Great. And final question, solar cycle, I guess, is real. I mean, you but several other companies in the industry, saw some older satellites go to an early demise. I mean, you probably got some good data out of that event. And was it, at this point, looking back, was it kind of an event that happened? I haven't seen anything pointing to that yet, but clearly higher on the solar cycle. And do you have good enough data to say, yes, if we see higher solar activity level, which I think is what they're predicting for the next couple years, we still feel really good about where the satellites are operating?
Will Marshall: Look, as I mentioned earlier, the solar cycle has been affecting us. It isn't, from an anomaly standpoint, it is anomalously high. There's an 11 year cycle that is normal. This went significantly higher in the high part of the normal phase than was normal. But we have adapted, our teams have been really great at adapting our capabilities. Generally, our fleet has survived very well. The redundancy in our fleet has inherently helped us in this situation. But then we have seen a little bit of accelerated decrease of life for a few SkySats. I'm pleased to say that, the final ones in the low orbit that we had are now done with this present increase in the depreciation and that's done for now. So, going forward, we will be, I think there'll be a lot of scientists trying to figure out how to not make that mistake again, and be able to predict this. And there are already papers out there that show how to predict this going forward. But it was certainly, it caught the scientific community off guard in this case. But largely, our satellite fleet and redundancy has enabled us to do very well despite it and the agility of our operations to raise some of the satellites and so on has meant that our services have continued to improve and we've learned a lot.
Chris Quilty: Great. Here's to better weather.
Ashley Johnson: Thank you. Thanks, Chris.
Operator: Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to Will Marshall, CEO, for any closing remarks.
Will Marshall: Yes, I would just like to end by saying that I feel we're in a really strong position for the year ahead with the big deals that we're pursuing in particular. Obviously, you see that we've had significant growth in the government sector last year and their demand continues to grow. We're selling increasingly the solutions enabled and in particular, enabled by the revolution happening in AI. And we've seen some early adoption of that turning into real partnerships. Also, I'm very proud of our teams on the product side that have been executing on the Pelican satellite through to the Earthdata platform. And as I mentioned, there's a platform milestone announcement on the 11th of April if you want to tune in. But we overall are really heads down and focused on executing on the big deals in front of us and I look forward to updating you on the next call.
Operator: That concludes today's call. Thank you for your participation and enjoy the rest of your day.
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