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What changed in Palantir Technologies's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Palantir Technologies's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+477 added−463 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in Palantir Technologies's 2023 10-K

477 paragraphs added · 463 removed · 377 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

171 edited+44 added−47 removed230 unchanged
Biggest changeOur new and existing platforms and changes to our existing platforms could fail to attain sufficient market acceptance for many reasons, including: • our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; • product defects, errors, or failures or our inability to satisfy customer service level requirements; • negative publicity or negative private statements about the security, performance, or effectiveness of our platforms or product enhancements; • delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; • introduction or anticipated introduction of competing platforms or functionalities by our competitors; • inability of our platforms or product enhancements to scale and perform to meet customer demands; • receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; • poor business conditions for our customers, causing them to delay software purchases; • reluctance of customers to purchase proprietary software products; • reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and • reluctance of customers to purchase products incorporating open source software.
Biggest changeOur new and existing platforms and changes to our existing platforms could fail to attain sufficient market acceptance for many reasons, including: • our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; • product defects, errors, or failures or our inability to satisfy customer service level requirements; • negative publicity or negative private statements about the security, performance, or effectiveness of our platforms or product enhancements; • delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; • introduction or anticipated introduction of competing platforms or functionalities by our competitors; • inability of our platforms or product enhancements to scale and perform to meet customer demands; • receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; • poor business conditions for our customers, causing them to delay software purchases; • reluctance of customers to purchase proprietary software products; • reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; • reluctance of customers to purchase products incorporating generative AI; and • reluctance of customers to purchase products incorporating open source software. 18 Table of Contents If we are not able to continue to identify challenges faced by our customers and develop, license, or acquire new features and capabilities to our platforms in a timely and cost-effective manner, or if such enhancements do not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and our anticipated revenue growth may not be achieved.
Although our revenue has increased in recent periods, there can be no assurances that revenue will continue to grow or do so at current rates, and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance.
Although our revenue has increased in recent periods, there can be no assurances that our revenue will continue to grow or do so at current rates, and you should not rely on the revenue of any prior quarterly or annual period as an indication of our future performance.
These exclusivity provisions limit our ability to license our platforms and provide services to specific customers, or to compete in certain geographic markets and industries, which may limit our growth and negatively impact our results.
These exclusivity provisions limit our ability to license our platforms and provide services to specific customers, or to compete in certain geographic markets or industries, which may limit our growth and negatively impact our results.
We also created a jointly-owned entity in South Korea with HD Hyundai Co. Ltd. in December 2022 in which we also have a controlling interest.
We also created a jointly-owned entity in South Korea with HD Hyundai Co. Ltd. in December 2022 in which we have a controlling interest.
An acquisition, investment or business relationship may result in unforeseen risks, operating difficulties and expenditures, including the following: 30 Table of Contents • any such transactions may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to such transactions; • costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; • we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise; • we may not realize the expected benefits of the transaction; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, result in unfavorable public perception, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; • the potential that our due diligence of the applicable company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the transaction, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; • potential goodwill impairment charges related to acquisitions; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • the transaction may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • our use of cash to pay for the transaction would limit other potential uses for our cash; • if we incur debt to fund such a transaction, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and • to the extent that we issue a significant amount of equity securities in connection with such transactions, existing stockholders may be diluted and earnings per share may decrease.
An acquisition, investment or business relationship may result in unforeseen risks, operating difficulties and expenditures, including the following: • any such transactions may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to such transactions; • costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; • we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise; • we may not realize the expected benefits of the transaction; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses, result in unfavorable public perception, and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; 29 Table of Contents • the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; • the potential that our due diligence of the applicable company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the transaction, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; • potential goodwill impairment charges related to acquisitions; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • the transaction may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • our use of cash to pay for the transaction would limit other potential uses for our cash; • if we incur debt to fund such a transaction, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and • to the extent that we issue a significant amount of equity securities in connection with such transactions, existing stockholders may be diluted and earnings per share may decrease.
Further, winding down joint ventures, channel sales relationships, platform partnerships, or other strategic alliances can result in additional costs, litigation, and negative publicity. Any of these events could adversely affect our business, financial condition, results of operations, and growth prospects. If we are not successful in executing our sales strategy, our results of operations may suffer.
Winding down joint ventures, channel sales relationships, platform partnerships, or other strategic alliances can result in additional costs, litigation, and negative publicity. Any of these events could adversely affect our business, financial condition, results of operations, and growth prospects. If we are not successful in executing our sales strategy, our results of operations may suffer.
As we expand into and within new and emerging markets and heavily regulated industry verticals, we will likely face additional regulatory scrutiny, risks, and burdens from the governments and agencies which regulate those markets and industries.
As we expand into and within new and emerging markets and heavily regulated industry verticals and technologies, we will likely face additional regulatory scrutiny, risks, and burdens from the governments and agencies which regulate those markets, industries, and technologies.
Further corporate governance information, including our corporate governance guidelines, code of business conduct and ethics, and committee charters is also available on our investor relations website under the heading “Governance.” The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K 12 Table of Contents or in any other report or document we file with the SEC.
Further corporate governance information, including our corporate governance guidelines, code of business conduct and ethics, and committee charters is also available on our investor relations website under the heading “Governance.” The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC.
Data, analyses, decisions, and the metadata around each are secured with fine-grained access controls that propagate from source data to shared analyses. Each platform is comprised of user-facing applications that are targeted to the specific industries and sectors in which they are used. Despite their differences, Gotham and Foundry both serve as central operating systems for our customers.
Data, analyses, decisions, and the metadata around each are secured with fine-grained access controls that propagate from source data to shared analyses. Each platform is comprised of user-facing applications that may be targeted to the specific industries and sectors in which they are used. Despite their differences, Gotham and Foundry both serve as central operating systems for our customers.
There have been and may continue to be significant attacks on certain third-party providers, and we cannot guarantee that our or any third-party providers’ systems and networks have not been breached or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support or otherwise interface with us and our platforms and services.
There have been and may continue to be significant attacks on certain third-party providers, and we cannot guarantee that our or any third-party providers’ systems, networks, products, or components have not been breached or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support or otherwise interface with us and our platforms and services.
Our credit agreement and related documents, including our pledge and security agreements, contain, and instruments governing any future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • create liens on certain assets; • incur additional debt; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • sell certain assets; • pay dividends on or make distributions in respect of our capital stock; • place restrictions on certain activities of subsidiaries; • transact with our affiliates; and • use a portion of our cash resources.
Our credit agreement and related documents, including our pledge and security agreements, contain, and instruments governing any future indebtedness of ours would likely contain, a number of covenants that will impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • create liens on certain assets; • incur additional debt; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • sell certain assets; 28 Table of Contents • pay dividends on or make distributions in respect of our capital stock; • place restrictions on certain activities of subsidiaries; • transact with our affiliates; and • use a portion of our cash resources.
Many factors may contribute to declines in our revenue growth rate, including macroeconomic factors, increased competition, slowing demand for our platforms from existing and new customers, a failure by us to continue capitalizing on growth opportunities, terminations of existing contracts or failure to exercise existing options by our customers, and the maturation of our business, among others.
Many factors may contribute to declines or variability in our revenue growth, including macroeconomic factors, increased competition, slowing demand for our platforms from existing and new customers, a failure by us to continue capitalizing on growth opportunities, terminations of existing contracts or failure to exercise existing options by our customers, and the maturation of our business, among others.
Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy. Our top three customers together accounted for 17% and 18% of our revenue for the years ended December 31, 2022 and 2021, respectively.
Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy. Our top three customers together accounted for 18% and 17% of our revenue for the years ended December 31, 2023 and 2022, respectively.
As our business has grown and as interest in Palantir and the technology industry overall has increased and we have engaged more actively with media and marketing efforts, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable coverage and coverage that is not directly 22 Table of Contents attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.
As our business has grown and as interest in Palantir and the technology industry overall has increased and we have engaged more actively with media and marketing efforts, we have attracted, and may continue to attract, significant attention from news and social media outlets, including unfavorable coverage and coverage that is not directly attributable to statements authorized by our leadership, that incorrectly reports on statements made by our leadership or employees and the nature of our work, perpetuates unfounded speculation about company involvements, or that is otherwise misleading.
In addition, in November 2019, we created a jointly controlled entity in Japan with SOMPO Holdings, Inc., in which we subsequently obtained a controlling interest in November 2022. For more information see Note 14. Business Combinations in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Additionally, in November 2019, we created a jointly controlled entity in Japan with SOMPO Holdings, Inc., in which we subsequently obtained a controlling interest in November 2022. For more information see Note 14. Business Combinations in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We often also provide our platforms to potential customers at no or low cost initially to them for evaluation purposes through short-term pilot deployments of our platforms, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue-generating contracts.
We often also provide our platforms to potential customers at no or low cost initially to them for evaluation purposes through short-term pilot deployments of our platforms, including at bootcamps, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue-generating contracts.
Entering new verticals and expanding in the verticals in which we are already operating will continue to require significant resources and there is no guarantee that such efforts will be successful or beneficial to us. Historically, sales to new customers have often led to additional sales to the same customers or similarly situated customers.
Entering new verticals, expanding in the verticals in which we are already operating, and expanding our offerings will continue to require significant resources and there is no guarantee that such efforts will be successful or beneficial to us. Historically, sales to new customers have often led to additional sales to the same customers or similarly situated customers.
While these obligations remain outstanding and are cash collateralized, we do not have access to and cannot use the pledged cash for our operations or to repay our other indebtedness. As of December 31, 2022, we were in compliance with all covenants and restrictions associated with our credit facility.
While these obligations remain outstanding and are cash collateralized, we do not have access to and cannot use the pledged cash for our operations or to repay our other indebtedness. As of December 31, 2023, we were in compliance with all covenants and restrictions associated with our credit facility.
If our efforts to expand within our existing customer base are not successful, our business may suffer. We may not realize the full deal value of our customer contracts, which may result in lower than expected revenue. As of December 31, 2022, the total remaining deal value, as defined in Item 7.
If our efforts to expand within our existing customer base are not successful, our business may suffer. We may not realize the full deal value of our customer contracts, which may result in lower than expected revenue. As of December 31, 2023, the total remaining deal value, as defined in Item 7.
As we have grown, we have increasingly managed larger and more complex deployments of our platforms and services with a broader base of government and commercial customers. As we continue to grow, we face challenges of integrating, developing, retaining, and motivating a rapidly growing employee base in various countries around the world.
As we have grown, we have increasingly managed larger and more complex deployments of our platforms and services with a broader base of government and commercial customers. As we continue to grow, we face challenges of integrating, developing, retaining, and motivating our employee base in various countries around the world.
We believe that this seasonality results from a number of factors, including: • the fiscal year end procurement cycle of our government customers, and in particular U.S. government customers which have a fiscal year end of September 30; 17 Table of Contents • the fiscal year budgeting process for our commercial customers, many of which have a fiscal year end of December 31; • seasonal reductions in business activity during the summer months in the United States, Europe, and certain other regions; and • timing of projects and our customers’ evaluation of our work progress.
We believe that this seasonality results from a number of factors, including: • the fiscal year end procurement cycle of our government customers, and in particular U.S. government customers which have a fiscal year end of September 30; • the fiscal year budgeting process for our commercial customers, many of which have a fiscal year end of December 31; • seasonal reductions in business activity during the summer months in the United States, Europe, and certain other regions; and • timing of projects and our customers’ evaluation of our work progress.
Our platforms were built from the start to protect individual privacy and prevent the misuse of information. We are not in the business of collecting, mining, or selling data. We build software platforms that enable our customers to integrate their own data — data that they already have.
Our platforms were built from the start to protect individual privacy and prevent the misuse of information. We are not in the business of collecting, mining, or selling data. We build software platforms that enable our customers to integrate their own data — data to which they already have access.
We believe these arrangements offer our business strategic operational advantages within the Japanese and Korean markets, but they also limit our ability to independently sell our platforms, provide certain services, engage certain customers, or compete in the Japanese and Korean markets or related industry verticals, which in turn limits our opportunities for growth in Japan and Korea and, depending on the success of each respective entity, may negatively impact our results.
We believe these arrangements offer our 25 Table of Contents business strategic operational advantages within Japanese and Korean markets, but they also limit our ability to independently sell our platforms, provide certain services, engage certain customers, or compete in Japanese and Korean markets or related industry verticals, which in turn limits our opportunities for growth in Japan and Korea and, depending on the success of each respective entity, may negatively impact our results.
Our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors, including customer adoption, customer demand, changing customer needs, the entry of competitive products, the success of existing competitive products, potential customers’ willingness to adopt an alternative approach to data collection, storage, and processing and their willingness to invest in new 28 Table of Contents software after significant prior investments in legacy data collection, storage, and processing software.
Our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors, including customer adoption, customer demand, changing customer needs, the entry of competitive products, the success of existing competitive products, potential customers’ willingness to adopt an alternative approach to data collection, storage, and processing and their willingness to invest in new software after significant prior investments in legacy data collection, storage, and processing software.
When determining the total value of such Strategic Commercial Contracts, we assess customers’ financial condition, including the consideration of their ability and intention to pay, and whether all or some portion of the value of the contracts continue to meet the criteria for revenue recognition, among other factors.
When determining the total value of these Strategic Commercial Contracts, we assess customers’ financial condition, including the consideration of their ability and intention to pay, and whether all or some portion of the value of the contracts continue to meet the criteria for revenue recognition, among other factors.
If there is a security vulnerability, error, or other bug in one of these third-party products or components and if there is a security exploit targeting them, we could face increased costs, claims, liability, reduced revenue, and harm to our reputation or competitive position.
If there is a security vulnerability, error, or other bug in one of these products or components and if there is a security exploit targeting them, we could face increased costs, claims, liability, reduced revenue, and harm to our reputation or competitive position.
Such attacks 32 Table of Contents or security breaches or incidents may be perpetrated by internal bad actors, such as employees or contractors, or by third parties (including traditional computer hackers, persons involved with organized crime, or foreign state or foreign state-supported actors).
Such attacks or security 31 Table of Contents breaches or incidents may be perpetrated by internal bad actors, such as employees or contractors, or by third parties (including traditional computer hackers, persons involved with organized crime, or foreign state or foreign state-supported actors).
Because our customers rely on our platforms and services to address important business goals and challenges, the incorrect or improper use or configuration of our platforms and O&M services, failure to properly train customers on how to efficiently and effectively use our platforms, or failure to properly provide implementation or analytical or maintenance services to our customers may result in contract terminations or non-renewals, reduced customer payments, negative publicity, or legal claims against us.
Because our customers rely on our platforms and services to address important business goals and challenges, the incorrect or improper use or configuration of our platforms and O&M services, failure to properly train customers on how to efficiently and effectively use our platforms, or failure to properly provide implementation or analytical or maintenance services to our customers may result in contract terminations or non-renewals, reduced customer payments, negative publicity, or legal claims 17 Table of Contents against us.
As a result of these and other factors, many of the companies with which we have or are seeking joint ventures, channel sales relationships, platform partnerships, or strategic alliances may choose to pursue alternative technologies and 26 Table of Contents develop alternative products and services in addition to or in lieu of our platforms, either on their own or in collaboration with others, including our competitors.
As a result of these and other factors, many of the companies with which we have or are seeking joint ventures, channel sales relationships, platform partnerships, or strategic alliances may choose to pursue alternative technologies and develop alternative products and services in addition to or in lieu of our platforms, either on their own or in collaboration with others, including our competitors.
Similarly, as we introduce new products and services, or as a result of the evolution of our existing platforms and services, we may have difficulty determining the appropriate price structure for our products and services, or customers may request or demand different pricing structures.
Similarly, as we introduce new platforms, products, and services, such as AIP, or as a result of the evolution of our existing platforms, products, and services, we may have difficulty determining the appropriate price structure for our products and services, or customers may request or demand different pricing structures.
To do so, we treat privacy as a first-order concern at every stage of the engineering process and build privacy features as core capabilities in our platforms, seamlessly integrated with analytical and collaboration tools. 9 Table of Contents • Decisions that can affect individuals’ rights to freedom, opportunity, and happiness cannot be left solely to computers.
To do so, we treat privacy as a first-order concern at every stage of the engineering process and build privacy features as core capabilities in our platforms, seamlessly integrated with analytical and collaboration tools. • Decisions that can affect individuals’ rights to freedom, opportunity, and happiness cannot be left solely to computers.
One avenue for employees to contribute their voices is through Affinity Groups: employee-led resource groups that celebrate unique perspectives and backgrounds and help guide our Diversity, Equity & Inclusion (“DEI”) business initiatives. We also conduct regular company-wide surveys to assess the sentiment toward our values and culture, and our employees’ well-being and overall health.
One avenue for employees to contribute their voices is through Affinity Groups: employee-led resource groups that celebrate unique perspectives and backgrounds and help guide our Diversity, Equity & Inclusion (“DEI”) business initiatives. We also conduct surveys to assess the sentiment toward our values and culture, and our employees’ well-being and overall health.
Our revenue growth rate has declined in recent periods, and may continue to decline in future periods.
Our revenue growth rate has declined in certain recent periods, and may continue to decline in future periods.
If customers do not widely adopt our new platforms, experiences, features, and capabilities, we may not be able to realize a return on our investment and our business, financial condition, and results of operations may be adversely affected.
If customers do not widely adopt our new platforms, products, features, and capabilities, we may not be able to realize a return on our investment and our business, financial condition, and results of operations may be adversely affected.
There are a number of sales and marketing strategies that have accelerated our ability to acquire customers in recent years: Expansion of Access to Platforms The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.
There are a number of sales and marketing strategies that have accelerated our ability to acquire customers in recent years: 6 Table of Contents Expansion of Access to Platforms The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.
We have a culture that encourages employees to quickly develop and launch key technologies and platforms intended to solve our customers’ most important problems and prioritizes the advancement of employees to positions of significant responsibility based on merit despite, in some cases, limited prior work or industry experience.
We have a culture that encourages employees to quickly develop and launch key technologies and platforms intended to solve our customers’ most important problems and prioritizes the advancement of employees to positions of significant responsibility 24 Table of Contents based on merit despite, in some cases, limited prior work or industry experience.
We seek to protect our proprietary inventions relevant to our business through patent protection in the United States and abroad; however, we are not dependent on any particular patent or application for the operation of our business. 11 Table of Contents In addition, we have registered “Palantir” as a trademark in the United States and other jurisdictions.
We seek to protect our proprietary inventions relevant to our business through patent protection in the United States and abroad; however, we are not dependent on any particular patent or application for the operation of our business. In addition, we have registered “Palantir” as a trademark in the United States and other jurisdictions.
Joint ventures, channel sales relationships, platform partnerships, and strategic alliances may have a material adverse effect on our business, results of operations and prospects. We expect to continue to enter into joint ventures, channel sales relationships (including original equipment manufacturer (“OEM”) and reseller relationships), platform partnerships, and strategic alliances as part of our long-term business strategy.
Joint ventures, channel sales relationships, platform partnerships, and strategic alliances may have a material adverse effect on our business, results of operations and prospects. We expect to continue to enter into joint ventures, channel sales relationships (including original equipment manufacturer and reseller relationships), platform partnerships, and strategic alliances (including teaming agreements) as part of our long-term business strategy.
Risks Related to Intellectual Property, Information Technology, Data Privacy, and Security If any of the systems of any third parties upon which we rely, our customers’ cloud or on-premises environments, or our internal systems, are breached or if unauthorized access to customer or third-party data is otherwise obtained, public perception of our platforms and O&M services may be harmed, and we may lose business and incur losses or liabilities.
Risks Related to Intellectual Property, Information Technology, Data Privacy, and Security If any of the systems of any third parties upon which we rely, our customers’ systems, locations, or environments, or our internal systems, are breached or if unauthorized access to customer, third-party, or our data is otherwise obtained, public perception of our platforms and O&M services may be harmed, and we may lose business and incur losses or liabilities.
Although prior known cyberattacks directed at us have not had a material impact on our financial results, and we are continuing to bolster our threat detection and mitigation processes and procedures, we cannot guarantee that past, future, or ongoing cyberattacks or other security breaches or incidents against us or a third party, if successful, will not have a material impact on our business or financial results, whether directly or indirectly.
Although prior known cyberattacks directed at us have not had a material impact on our financial results, and we are continuing to bolster our threat detection and mitigation processes and procedures, our security measures may be circumvented and we cannot guarantee that past, future, or ongoing cyberattacks or other security breaches or incidents against us or a third party, if successful, will not have a material impact on our business or financial results, whether directly or indirectly.
This channel emerged as an extension of the large computing requirements for our platforms and the migration towards the cloud as the hosting environment of choice for many customers. The existing footprint of these providers provides us with access to their large customer base and expands our distribution capabilities.
These cloud partnerships emerged as an extension of the large computing requirements for our platforms and the migration towards the cloud as the hosting environment of choice for many customers. The existing footprint of these providers provides us with access to their large customer base and expands our distribution capabilities.
We focus on innovating and developing new features and modules for our existing platforms, or new products, and further enhancing the functionality, reliability, usability, and performance of our platforms.
We focus on innovating and developing new features and modules for our new and existing platforms, including AIP, or new products, and further enhancing the functionality, reliability, usability, and performance of our platforms.
Potential customers may also prefer to purchase from their existing provider rather than a new provider regardless of platform performance or 24 Table of Contents features. As a result, even if the features of our platforms offer advantages that others do not, customers may not purchase our platforms.
Potential customers may also prefer to purchase from their existing provider rather than a new provider regardless of platform performance or features. As a result, even if the features of our platforms offer advantages that others do not, customers may not purchase our platforms.
If we 20 Table of Contents fail to attract new personnel or fail to retain and motivate our current personnel who are capable of meeting our growing technical, operational, and managerial requirements on a timely basis or at all, our business may be harmed.
If we fail to attract new personnel or fail to retain and motivate our current personnel who are capable of meeting our growing technical, operational, and managerial requirements on a timely basis or at all, our business may be harmed.
In addition, new, innovative start-up companies and larger companies that are making significant investments in research and development may introduce products that have greater performance or functionality, are easier to implement or use, incorporate technological advances that we have not yet developed, or implemented or may invent similar or superior platforms and technologies that compete with our platforms.
In addition, new, innovative start-up companies and larger companies that are making significant investments in research and development may introduce products that have greater performance or functionality, are easier to implement or use, incorporate technological advances that we have not yet developed, or implemented or may invent similar or superior platforms and technologies that compete with our platforms, such as platforms, products, or services that incorporate AI.
Certain companies with which we have entered into commercial contracts have been, and may continue 31 Table of Contents to be, unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them, which has negatively impacted, and may continue to negatively impact, our expected revenue and collections.
Certain companies with which we have entered into commercial contracts have been, and may continue to be, unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them, which has negatively impacted, and may continue to negatively impact, our expected revenue and collections.
We have used, and intend to continue to use, our website, investor relations website, LinkedIn, and Twitter accounts as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We have used, and intend to continue to use, our website, investor relations website, LinkedIn, and X (formerly known as Twitter) accounts as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
The successful execution of our strategy to increase our sales to existing customers, identify and engage new customers, and enter new U.S. and non-U.S. markets will depend, among other things, on our ability to successfully build and expand our sales organization and operations.
The successful execution of our strategy to increase our sales to existing customers, identify and engage new customers, and enter new U.S. and non-U.S. markets will 20 Table of Contents depend, among other things, on our ability to successfully build and expand our sales organization and operations.
If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other things: • develop new products, features, capabilities, and enhancements; • continue to expand our product development, sales, and marketing organizations; 29 Table of Contents • recruit, hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition or other growth or investment opportunities.
If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other things: • develop new platforms, products, features, capabilities, and enhancements; • continue to expand our product development, sales, and marketing organizations; • recruit, hire, train, and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition or other growth or investment opportunities.
Our decisions to not enter into these relationships 25 Table of Contents may not produce the long-term financial benefits and results that we expect, in which case our growth prospects, business, and results of operations could be harmed.
Our decisions to not enter into these relationships may not produce the long-term financial benefits and results that we expect, in which case our growth prospects, business, and results of operations could be harmed.
These risks are described more fully below and include, but are not limited to, risks relating to the following: • we have a history of losses, we anticipate our operating expenses will continue to increase in the future, and we may not be able to achieve or maintain profitability in the future; • we may not be able to sustain our revenue growth rate; • our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable; • a limited number of customers account for a substantial portion of our revenue; • our results of operations and our key business measures are likely to fluctuate significantly on a quarterly basis; • seasonality may cause fluctuations in our results of operations and financial position; • our platforms are complex and may have a lengthy implementation process; • we may not successfully develop and deploy new technologies to address the needs of our customers; • our platforms must operate with third-party products and services; • we may be unable to hire, retain, train, and motivate qualified personnel and senior management and deploy our personnel and resources to meet customer demand; • we may be unable to successfully build, expand, and deploy our marketing and sales organization; • we may not be able to maintain and enhance our brand and reputation; • unfavorable news or social media coverage may harm our reputation and business; • exclusive arrangements or unique terms with customers or partners may result in significant risks or liabilities to us; • we face intense competition in our markets; • we may be unable to maintain or properly manage our culture as we grow; • we may not enter into relationships with potential customers if we consider their activities to be inconsistent with our organizational mission or values; • joint ventures, channel sales relationships, platform partnerships, and strategic alliances may be unsuccessful; • we may not be successful in executing our strategy to increase our sales to larger customers; • breach of the systems of any third parties upon which we rely, our customers’ cloud or on-premises environments, or our internal systems or unauthorized access to data; • the ongoing COVID-19 pandemic, ongoing Russia-Ukraine conflict, and related challenging macroeconomic conditions may adversely affect our business and operations; • the market for our platforms and services may develop more slowly than we expect; • we have made and may continue to make strategic investments to support key business initiatives, including in privately-held and publicly-traded companies, as well as alternative investments, and we may not realize a return on these investments; 13 Table of Contents • issues raised by the use of artificial intelligence in our platforms may result in reputational harm or liability; • we depend on computing infrastructure of third parties and they may experience errors, disruption, performance problems, or failure; • we may fail to adequately obtain, maintain, protect, and enforce our intellectual property and other proprietary rights; • we may be subject to intellectual property rights claims; • there may be real or perceived errors, failures, defects, or bugs in our platforms; • we rely on the availability of third-party technology that may be difficult to replace or that may cause errors; • our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, technology protection, and other matters; • our non-U.S. sales and operations subject us to additional risks and regulations; • we may encounter unfavorable outcomes in legal, regulatory, and administrative inquiries and proceedings; • we may fail to receive and maintain government contracts or there may be changes in the contracting or fiscal policies of the public sector; • many of our customer contracts may be terminated by the customer at any time for convenience and may contain other provisions permitting the customer to discontinue contract performance; • we may not realize the full deal value of our customer contracts; • there may be a decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards; and • the multi-class structure of our common stock, the Founder Voting Trust Agreement, and the Founder Voting Agreement concentrate voting power with certain stockholders, in particular, Stephen Cohen, Alexander Karp, and Peter Thiel (our “Founders”) and their affiliates.
These risks are described more fully below and include, but are not limited to, risks relating to the following: • we have a history of losses, we anticipate our operating expenses will continue to increase in the future, and we may not be able to achieve or maintain profitability in the future; • we may not be able to sustain our revenue growth; • our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable; • a limited number of customers account for a substantial portion of our revenue; • our results of operations and our key business measures are likely to fluctuate significantly on a quarterly basis; • seasonality may cause fluctuations in our results of operations and financial position; • our platforms are complex and may have a lengthy implementation process; • we may not successfully develop and deploy new technologies to address the needs of our customers; • our platforms must operate with third-party products and services; • we may be unable to hire, retain, train, and motivate qualified personnel and senior management and deploy our personnel and resources to meet customer demand; • we may be unable to successfully build, expand, and deploy our marketing and sales organization; • we may not be able to maintain and enhance our brand and reputation; • unfavorable news or social media coverage may harm our reputation and business; • exclusive arrangements or unique terms with customers or partners may result in significant risks or liabilities to us; • we face intense competition in our markets; • we may be unable to maintain or properly manage our culture as we grow; • we may not enter into relationships with potential customers if we consider their activities to be inconsistent with our organizational mission or values; • joint ventures, channel sales relationships, platform partnerships, and strategic alliances may be unsuccessful; • we may not be successful in executing our strategy to increase our sales to larger customers; • breach of the systems of any third parties upon which we rely, our customers’ systems, locations, or environments, or our internal systems or unauthorized access to data; • the market for our platforms and services may develop more slowly than we expect; • we have made and may continue to make strategic investments to support key business initiatives, including in privately-held and publicly-traded companies, as well as alternative investments, and we may not realize a return on these investments; • issues raised by the use of AI in our platforms may result in reputational harm or liability; • we depend on computing infrastructure of third parties and they may experience errors, disruption, performance problems, or failure; • we may fail to adequately obtain, maintain, protect, and enforce our intellectual property and other proprietary rights; • we may be subject to intellectual property rights claims; 12 Table of Contents • there may be real or perceived errors, failures, defects, or bugs in our platforms; • we rely on the availability of third-party technology that may be difficult to replace or that may cause errors; • our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, technology protection, and other matters; • our non-U.S. sales and operations subject us to additional risks and regulations; • we may encounter unfavorable outcomes in legal, regulatory, and administrative inquiries and proceedings; • we may fail to receive and maintain government contracts or there may be changes in the contracting or fiscal policies of the public sector; • many of our customer contracts may be terminated by the customer at any time for convenience and may contain other provisions permitting the customer to discontinue contract performance; • we may not realize the full deal value of our customer contracts; • there may be a decline in the U.S. and other government budgets, changes in spending or budgetary priorities, or delays in contract awards; • there are no guarantees that our Share Repurchase Program (as defined below) will result in increased shareholder value; and • the multi-class structure of our common stock, the Founder Voting Trust Agreement, and the Founder Voting Agreement concentrate voting power with certain stockholders, in particular, Stephen Cohen, Alexander Karp, and Peter Thiel (our “Founders”) and their affiliates.
In addition, our customers’ decisions to expand the deployment of our platforms depends on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our forward-deployed engineers to assist our customers in identifying new use cases, modernizing their data architectures, and achieving success with data-driven initiatives, and our customers’ satisfaction with our services.
In addition, our customers’ decisions to expand the deployment of our platforms depends on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our employees to assist our customers in identifying new use cases, modernizing their data architectures, and achieving success with data-driven initiatives, and our customers’ satisfaction with our services.
Accordingly, the effect of significant downturns in sales or renewals, significant customer terminations, and potential changes in our contracting terms and pricing policies would not be fully reflected in our results of operations until future periods.
Accordingly, the effect of significant downturns in sales or renewals, significant customer terminations, and potential changes in our contracting 22 Table of Contents terms and pricing policies would not be fully reflected in our results of operations until future periods.
Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced their spend with us or terminated their agreements with us, which has reduced our anticipated future payments or revenue from these customers, and which has required us to refund some previously paid amounts to these customers.
Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced, and others may choose in the future to reduce, their spend with us or terminated their agreements with us, which has reduced our anticipated future payments or revenue from these customers, and which has required us to refund some previously paid amounts to these customers.
Further, our references to the URLs for these websites are intended to be inactive textual references only. ITEM 1A. RISK FACTORS Investing in our Class A common stock involves a high degree of risk.
Further, our references to the URLs for these websites are intended to be inactive textual references only. 11 Table of Contents ITEM 1A. RISK FACTORS Investing in our Class A common stock involves a high degree of risk.
The loss of the services of our key personnel and any of our other executive officers, and our inability to find suitable replacements, could result in a decline in sales, delays in product development, and harm to our business and operations.
The loss of the services of our key personnel and any of our other executive officers, and our 19 Table of Contents inability to find suitable replacements, could result in a decline in sales, delays in product development, and harm to our business and operations.
If software for the challenges that we address does not achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions (including due to the ongoing COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related economic sanctions, rising inflation and interest rates, and monetary policy changes), security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, or, alternatively, if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our platforms, or other factors, it could result in decreased revenue and our business, financial condition, and results of operations could be adversely affected.
If software for the challenges that we address does not achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions (including due to the ongoing Russia-Ukraine conflict and related economic sanctions, heightened interest rates, or monetary policy changes), security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, or, alternatively, if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our platforms, or 27 Table of Contents other factors, it could result in decreased revenue and our business, financial condition, and results of operations could be adversely affected.
Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for at least the next twelve months, we may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all.
Although we currently anticipate that our existing cash, cash equivalents, and U.S. treasury securities will be sufficient to meet our cash needs for at least the next twelve months, we may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all.
Competition We are fundamentally competing with the internal software development efforts of our potential customers. Organizations frequently attempt to build their own data platforms before turning to buy ours.
Competition We are fundamentally competing with the internal software development efforts of our potential customers. 9 Table of Contents Organizations frequently attempt to build their own data platforms before turning to buy ours.
Personnel may be more likely to leave us if the shares they own or the shares underlying their vested options or restricted stock units (“RSUs”) have significantly appreciated in value.
Personnel may be more likely to leave us if the shares they own or the shares underlying their vested options, restricted stock units (“RSUs”) or other equity awards have significantly appreciated in value.
The team is supported by the Palantir Council of Advisors on Privacy and Civil Liberties, a group of independent experts in privacy law, policy, and ethics who help us to understand and address the implications of our work. Privacy-Enhancing Technologies • Access Controls.
The team is supported by the Palantir Council of Advisors on Privacy and Civil Liberties, a group of independent experts in privacy law, policy, and ethics who help us to understand and address the implications of our work. Privacy-Enhancing Technologies • Granular Access Controls and Dynamic Data Minimization.
In addition, any significant change to 21 Table of Contents the way we structure and implement the compensation of our sales organization may be disruptive or may not be effective and may affect our revenue growth.
In addition, any significant change to the way we structure and implement the compensation of our sales organization may be disruptive or may not be effective and may affect our revenue growth.
We acknowledge that each member of our increasingly diverse community has their own needs, experiences, and opportunities. Available Information Our website is https://www.palantir.com, our investor relations website is https://investors.palantir.com, our LinkedIn account is @Palantir Technologies and our Twitter account is @PalantirTech.
We acknowledge that each member of our increasingly diverse community has their own needs, experiences, and opportunities. Available Information Our website is https://www.palantir.com, our investor relations website is https://investors.palantir.com, our LinkedIn account is @Palantir Technologies and our X (formerly known as Twitter) account is @PalantirTech.
Additionally, we may be required to make substantial additional investments in our research, development, services, marketing, and sales functions in order to respond to competition, and there can be no assurance that we will be able to compete successfully in the future.
Additionally, we may be required to make substantial 23 Table of Contents additional investments in our research, development, services, marketing, and sales functions in order to respond to competition, and there can be no assurance that we will be able to compete successfully in the future.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below: • the success of our sales and marketing efforts, including the success of our pilot deployments; • our ability to increase our contribution margins; 16 Table of Contents • the timing of expenses and revenue recognition; • the timing and amount of payments received from our customers; • termination of one or more large contracts by customers, including for convenience; • the time and cost-intensive nature of our sales efforts and the length and variability of sales cycles; • the amount and timing of operating expenses related to the maintenance and expansion of our business and operations; • the timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new products, features, and functionality introduced by us or our competitors; • interruptions or delays in our operations and maintenance (“O&M”) services; • cyberattacks and other actual or perceived data or security breaches or incidents; • our ability to hire and retain employees, in particular, those responsible for operations and maintenance of and the selling or marketing of our platforms, and develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • the amount and timing of our stock-based compensation expenses; • changes in the way we organize and compensate our sales teams; • changes in the way we operate and maintain our platforms; • unforeseen negative results in operations from our partnerships, including those accounted for under the equity method; • changes in the competitive dynamics of our industry; • the cost of and potential outcomes of existing and future claims or litigation, which could have a material adverse effect on our business; • changes in laws and regulations that impact our business, such as the FASA; • indemnification payments to our customers or other third parties; • ability to scale our business with increasing demands; • the timing of expenses related to any future acquisitions; and • general economic, regulatory, and market conditions, including the impacts of the ongoing COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related economic sanctions and regional instability, rising inflation and interest rates, and monetary policy changes.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below: • the success of our sales and marketing efforts, including the success of our pilot deployments (including bootcamps); 15 Table of Contents • our ability to increase our contribution margins; • the timing of expenses and revenue recognition; • the timing and amount of payments received from our customers; • termination of one or more large contracts by customers, including for convenience; • the time and cost-intensive nature of our sales efforts and the length and variability of sales cycles; • the amount and timing of operating expenses related to the development, maintenance, and expansion of our business and operations; • the timing and effectiveness of new sales and marketing initiatives; • changes in our pricing policies or those of our competitors; • the timing and success of new platforms, products, features, and functionality introduced by us or our competitors; • interruptions or delays in our operations and maintenance (“O&M”) services; • cyberattacks and other actual or perceived data or security breaches or incidents; • our ability to hire and retain employees, in particular, those responsible for operations and maintenance of and the selling or marketing of our platforms, and develop and retain talented sales personnel who are able to achieve desired productivity levels in a reasonable period of time and provide sales leadership in areas in which we are expanding our sales and marketing efforts; • the amount and timing of our stock-based compensation expenses; • the amount and timing of employer payroll taxes related to stock-based compensation resulting from increases in our stock price; • changes in the way we organize and compensate our employees; • changes in the way we operate and maintain our platforms; • unforeseen negative results in operations from our partnerships, including those accounted for under the equity method; • changes in the competitive dynamics of our industry; • the cost of and potential outcomes of existing and future claims or litigation, which could have a material adverse effect on our business; • changes in laws and regulations that impact our business, such as the FASA; • indemnification payments to our customers or other third parties; • ability to scale our business with increasing demands; • the timing of expenses related to any future acquisitions; and • general economic, regulatory, and market conditions, including the impacts of ongoing conflicts, such as those in Russia-Ukraine and Israel, and any related economic sanctions and regional instability, heightened interest rates, monetary policy changes, or foreign currency fluctuations.
The same technology that makes Palantir so analytically powerful — its ability to construct a model of the real world from countless data points — is what allows our customers to monitor and control access to that data and its use.
The same technology that makes Palantir’s software platforms so analytically powerful — the ability to construct a model of the real world from countless data points — is what allows our customers to monitor and control access to that data and its use.
If an actual or perceived breach of security measures, unauthorized access to our system or the systems of the third-party vendors that we rely upon, or any other cybersecurity attack, threat, or incident occurs, we may face direct or indirect liability, costs, or damages, contract termination, our reputation in the industry and with current and potential customers may be compromised, our ability to attract new customers could be negatively affected, and our business, financial condition, and results of operations could be materially and adversely affected.
If an actual or perceived breach of security measures, unauthorized access to our system or the systems of the third-party vendors that we rely upon, or any other cybersecurity attack, threat, or incident occurs, we may face direct or indirect liability, costs, or damages, including expenses related to responding and/or alleviating an actual or perceived breach or other incident, contract termination, our reputation in the industry and with current and potential customers may be compromised, our ability to attract new customers could be negatively affected, our management’s attention could be diverted, and our business, financial condition, and results of operations could be materially and adversely affected.
Variable rate indebtedness that we may incur under our credit facility will subject us to interest rate risk, which could cause our debt service obligations to increase significantly. As of December 31, 2022, no borrowings were outstanding under our credit facility. Any borrowings under the credit facility bear interest at variable rates, which exposes us to interest rate risk.
Variable rate indebtedness that we may incur under our credit facility will subject us to interest rate risk, which could cause our debt service obligations to increase significantly. As of December 31, 2023, no borrowings were outstanding under our credit facility. Any borrowings under the credit facility bear interest at variable rates, which would expose us to interest rate risk.
Principles As we build and implement technology to answer questions of increasing significance and complexity, we follow a set of principles that help us ensure we are doing so responsibly. • Systems should incorporate principles of “privacy by design.” Our goal has always been to eliminate the perceived trade-offs between privacy and utility.
Principles As we build and implement technology to answer questions of increasing significance and complexity, we follow a set of principles that help us ensure we are doing so responsibly, including the consideration of AI ethics and best practices. • Systems should incorporate principles of “privacy by design.” Our goal has always been to eliminate the perceived trade-offs between privacy and utility.
It is also possible that remote work arrangements may have a negative impact on our operations; the execution of our business plans; our ability to recruit, train, manage, and retain employees; our ability to maintain and strengthen our company culture; the productivity and availability of key personnel and other employees necessary to conduct our business; and on third-party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices.
It is also possible that remote work arrangements may have a negative impact on our ability to recruit, train, manage, and retain employees; our operations; our information, data and cyber security; consumer privacy and the risk of fraud; the execution of our business plans; our ability to maintain and strengthen our company culture; the productivity and availability of key personnel and other employees necessary to conduct our business; and on third-party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices.
Because our platforms and services are used by our customers to store, transmit, index, or otherwise process and analyze large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information and personal health information), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, loss, or unavailability of data.
Because our platforms and services are used by our customers to store, transmit, index, or otherwise process and analyze large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information, personal health information, government classified information, and other information subject to regulatory or statutory control or requirements), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, loss, or unavailability of data.
In order to successfully scale our unique sales model, we must, and we intend to continue to, increase the size of our direct sales force, both in the United States and outside of the United States, to generate additional revenue from new and existing customers while preserving the cultural and mission-oriented elements of our company.
In order to successfully scale our unique sales model, we may need to increase the size of our direct sales force, both in the United States and outside of the United States, to generate additional revenue from new and existing customers while preserving the cultural and mission-oriented elements of our company.
Additionally, in 2016, we entered into a partnership with Airbus that, over time, developed into the Skywise platform partnership, which provides our business strategic advantages but also limits our ability to independently provide our platforms to certain airlines and companies that compete with Airbus.
For example, in 2016, we entered into a partnership with Airbus S.A.S. (“Airbus”) that, over time, developed into the Skywise platform partnership, which provides our business strategic advantages but also limits our ability to independently provide our platforms to certain airlines and companies that compete with Airbus.
For example, our headcount has grown from 313 full-time employees as of December 31, 2010 to 3,838 full-time employees as of December 31, 2022, with employees located both in the United States and outside the United States.
For example, our headcount has grown from 313 full-time employees as of December 31, 2010 to 3,735 full-time employees as of December 31, 2023, with employees located both in the United States and outside the United States.
Seasonality We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts and, to a lesser extent, the existence of certain acceptance criteria, as we have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers and at times we may start work prior to finalizing such contracts.
Seasonality We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts as we have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers and at times we may start work prior to finalizing such contracts.
They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, including our business development and product development efforts, they may expose us to unexpected liabilities, they may conflict with our increased sales hiring and direct sales strategy, or we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours.
They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, including our business development and product development efforts, they may expose us to additional or unexpected liabilities, including as a result of partnering with entities in new or unfamiliar territories or markets, they may conflict with our sales hiring and direct sales strategy, or we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours.
Accordingly, we will continue to refine our business strategy and pricing structures to attract and retain such customers, 27 Table of Contents as well as existing and larger customers across the potential customer base.
Accordingly, we will continue to refine our business strategy and pricing structures to attract and retain such customers, as well as existing and larger customers across the potential customer base.
The average revenue for our top twenty customers during the trailing twelve months ended December 31, 2022 was $49.4 million, and is up from 2021, when the average revenue from our top 20 customers during the trailing twelve months ended December 31, 2021 was $43.6 million, demonstrating our expanding relationships with existing customers.
The average revenue for our top twenty customers during the trailing twelve months ended December 31, 2023 was $54.6 million, and is up from 2022, when the average revenue from our top twenty customers during the trailing twelve months ended December 31, 2022 was $49.4 million, demonstrating our expanding relationships with existing customers.
Recent crises and systemic shocks, such as the ongoing COVID-19 pandemic and the ongoing Russia-Ukraine conflict, have made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not a viable option.
Recent crises and systemic shocks, such as the ongoing Russia-Ukraine and Israel conflicts, have made clear to many of our customers that accommodating the extended timelines ordinarily required to realize results from implementing new software solutions is not a viable option.
Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including as a result of the ongoing COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related economic sanctions, rising inflation and interest rates, or monetary policy changes), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments.
Our results of operations depend on sales to enterprise customers, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including as a result of the ongoing Russia-Ukraine conflict and related economic sanctions, the ongoing conflict resulting from Hamas’ attack on Israel, heightened interest rates, monetary policy changes, or foreign currency fluctuations), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

74 edited+11 added−21 removed47 unchanged
Biggest changeThese unallocated costs include stock-based compensation expense, research and development costs, and general and administrative costs, such as legal and accounting. 70 Results of Operations The following table summarizes our consolidated statements of operations data (in thousands): Years Ended December 31, 2022 2021 2020 Revenue $ 1,905,871 $ 1,541,889 $ 1,092,673 Cost of revenue (1) 408,549 339,404 352,547 Gross profit 1,497,322 1,202,485 740,126 Operating expenses: Sales and marketing (1) 702,511 614,512 683,701 Research and development (1) 359,679 387,487 560,660 General and administrative (1) 596,333 611,532 669,444 Total operating expenses 1,658,523 1,613,531 1,913,805 Loss from operations (161,201) (411,046) (1,173,679) Interest income 20,309 1,607 4,680 Interest expense (4,058) (3,640) (14,139) Other income (expense), net (216,077) (75,415) 4,111 Loss before provision for (benefit from) income taxes (361,027) (488,494) (1,179,027) Provision for (benefit from) income taxes 10,067 31,885 (12,636) Net loss (371,094) (520,379) (1,166,391) Less: Net income attributable to noncontrolling interests 2,611 — — Net loss attributable to common stockholders $ (373,705) $ (520,379) $ (1,166,391) ———— (1) Includes stock-based compensation expense as follows (in thousands): Years Ended December 31, 2022 2021 2020 Cost of revenue $ 44,061 $ 68,546 $ 139,627 Sales and marketing 196,301 242,910 398,205 Research and development 93,871 150,298 357,063 General and administrative 230,565 316,461 375,807 Total stock-based compensation expense (i) $ 564,798 $ 778,215 $ 1,270,702 ———— (i) On September 30, 2020, in connection with our Direct Listing, we incurred $769.5 million and $8.4 million of stock-based compensation using the accelerated attribution method related to the satisfaction of the performance-based vesting condition for RSUs and growth units, respectively, that had satisfied the service-based vesting condition as of such date. 71 The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue: Years Ended December 31, 2022 2021 2020 Revenue 100 % 100 % 100 % Cost of revenue 21 22 32 Gross profit 79 78 68 Operating expenses: Sales and marketing 37 40 63 Research and development 19 25 51 General and administrative 31 40 61 Total operating expenses 87 105 175 Loss from operations (8) (27) (107) Interest income 1 — — Interest expense — — (1) Other income (expense), net (12) (5) — Loss before provision for (benefit from) income taxes (19) (32) (108) Provision for (benefit from) income taxes 1 2 (1) Net loss (20) (34) (107) Less: Net income attributable to noncontrolling interests — — — Net loss attributable to common stockholders (20) % (34) % (107) % Comparison of the Years Ended December 31, 2022 and 2021 Revenue Years Ended December 31, Change 2022 2021 Amount % Revenue: Government $ 1,071,776 $ 897,356 $ 174,420 19 % Commercial 834,095 644,533 189,562 29 % Total revenue $ 1,905,871 $ 1,541,889 $ 363,982 24 % Revenue increased by $364.0 million, or 24%, for the year ended December 31, 2022 compared to 2021.
Biggest changeThese unallocated or noncash costs include stock-based compensation expense, research and development costs, and general and administrative costs, such as legal and accounting costs. 72 Results of Operations The following table summarizes our consolidated statements of operations data (in thousands): Years Ended December 31, 2023 2022 2021 Revenue $ 2,225,012 $ 1,905,871 $ 1,541,889 Cost of revenue 431,105 408,549 339,404 Gross profit 1,793,907 1,497,322 1,202,485 Operating expenses: Sales and marketing 744,992 702,511 614,512 Research and development 404,624 359,679 387,487 General and administrative 524,325 596,333 611,532 Total operating expenses 1,673,941 1,658,523 1,613,531 Income (loss) from operations 119,966 (161,201) (411,046) Interest income 132,572 20,309 1,607 Interest expense (3,470) (4,058) (3,640) Other income (expense), net (11,977) (216,077) (75,415) Income (loss) before provision for income taxes 237,091 (361,027) (488,494) Provision for income taxes 19,716 10,067 31,885 Net income (loss) 217,375 (371,094) (520,379) Less: Net income attributable to noncontrolling interests 7,550 2,611 — Net income (loss) attributable to common stockholders $ 209,825 $ (373,705) $ (520,379) The following table sets forth the components of our consolidated statements of operations data as a percentage of revenue: Years Ended December 31, 2023 2022 2021 Revenue 100 % 100 % 100 % Cost of revenue 19 21 22 Gross margin 81 79 78 Operating expenses: Sales and marketing 34 37 40 Research and development 18 19 25 General and administrative 24 31 40 Total operating expenses 76 87 105 Income (loss) from operations 5 (8) (27) Interest income 6 1 — Interest expense — — — Other income (expense), net — (12) (5) Income (loss) before provision for income taxes 11 (19) (32) Provision for income taxes 1 1 2 Net income (loss) 10 (20) (34) Less: Net income attributable to noncontrolling interests 1 — — Net income (loss) attributable to common stockholders 9 % (20) % (34) % 73 Comparison of the Years Ended December 31, 2023 and 2022 Revenue Years Ended December 31, Change 2023 2022 Amount % Revenue: Government $ 1,222,215 $ 1,071,776 $ 150,439 14 % Commercial 1,002,797 834,095 168,702 20 % Total revenue $ 2,225,012 $ 1,905,871 $ 319,141 17 % Revenue increased by $319.1 million, or 17%, for the year ended December 31, 2023 compared to 2022.
In instances where the timing of revenue recognition differs from the timing of payment, we elected to apply 77 the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less.
In instances where the timing of revenue recognition differs from the timing of payment, we elected to apply the practical expedient in accordance with ASC 606 to not adjust contract consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when promised goods and services are transferred to the customer and when the customer pays for those goods and services will be one year or less.
Segments We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker (“CODM”), who is our chief executive officer, manages our operations for purposes of allocating resources and evaluating performance. Various factors, including our organizational and management reporting structure and customer type, were considered in determining these operating segments.
Segments We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker, who is our Chief Executive Officer, manages our operations for purposes of allocating resources and evaluating performance. Various factors, including our organizational and management reporting structure and customer type, were considered in determining these operating segments.
Because of this requirement, we have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract. Revenue is generally recognized over the contract term on a ratable basis.
Because of this requirement, we 78 have concluded that the software subscriptions and O&M services, which together we refer to as our On-Premises Software, are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract. Revenue is generally recognized over the contract term on a ratable basis.
Additionally, we exclude employer payroll taxes related to stock-based compensation as it is difficult to predict and outside of our control. 67 Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics.
Additionally, we exclude employer payroll taxes related to stock-based compensation as it is difficult to predict and outside of our control. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics.
Cost of Revenue Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing O&M and professional services, as well as field service representatives, third-party cloud hosting services, travel costs, allocated overhead, and other direct costs.
Cost of Revenue Cost of revenue primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing O&M and professional services, as well as field-service representatives, third-party cloud hosting services, hardware costs, travel costs, allocated overhead, and other direct costs.
Professional Services Our professional services support the customers’ use of the software and include, as needed, on-demand user support, user-interface configuration, training, and ongoing ontology and data modeling support. Professional services contracts typically include the provision of on-demand professional services for the duration of the contractual term.
Professional Services Our professional services support the customers’ use of the software platforms and include, as needed, on-demand user support, user-interface configuration, training, and ongoing ontology and data modeling support. Professional services contracts typically include the provision of on-demand professional services for the duration of the contractual term.
Research and Development Our research and development efforts are aimed at continuing to develop and refine our platforms, including adding new features and modules, increasing their functionality, and enhancing the usability of our platforms.
Research and Development Our research and development efforts are aimed at continuing to develop and refine our offerings, including adding new platforms, features, and modules, increasing their functionality, and enhancing the usability of our platforms.
We exclude stock-based compensation, which is a non-cash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.
We exclude stock-based compensation, which is a noncash expense, from these non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.
Item 1A. Risk Factors included in this Annual Report on Form 10-K. Expansion of Access to Platforms The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.
Item 1A. Risk Factors” included in this Annual Report on Form 10-K. Expansion of Access to Platforms The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.
Foreign Currency Exchange Rates Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty which may adversely affect our results of operations or financial position. Our contracts with customers are primarily denominated in U.S. dollars.
Foreign Currency Exchange Rates Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes, monetary policy changes, and political and economic uncertainty which may adversely affect our results of operations or financial position. Our contracts with customers and vendors are primarily denominated in U.S. dollars.
Significant Accounting Policies in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 76 Revenue Recognition We generate revenue from the sale of subscriptions to access our software Palantir Cloud and On-Premises Software, with ongoing O&M services and professional services.
Significant Accounting Policies in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Revenue Recognition We generate revenue from the sale of subscriptions to access our software platforms via Palantir Cloud and On-Premises Software, with ongoing O&M services and professional services.
Palantir Cloud Our Palantir Cloud subscriptions grant customers the right to access the software functionality in a hosted environment controlled by Palantir and are sold together with stand-ready O&M services, as further described below. We promise to provide continuous access to the hosted software throughout the contract term.
Palantir Cloud Our Palantir Cloud subscriptions grant customers the right to access the software functionality in a hosted environment controlled by Palantir and are sold together with stand-ready O&M services, as further described below. We agree to provide 70 continuous access to our hosted software throughout the contract term.
Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our consolidated statement of operations.
Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our consolidated statements of operations.
We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.
We encourage investors and others to review our business, results of operations, and financial information in their 69 entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.
We use it, in part, to evaluate the performance of, and allocate resources to, each of our operating segments, which excludes certain operating expenses that are not allocated to operating segments because they are separately managed at the consolidated corporate level.
We use it, in part, to evaluate the performance of, and allocate resources to, each of our operating segments, which excludes certain operating expenses that are not allocated to operating segments because they are separately managed at the consolidated corporate level, or are noncash costs.
Total remaining deal value excludes all or some portion of the value of certain commercial contracts as a result of our ongoing assessments of customers’ financial condition, including the consideration of such customers’ ability and intention to pay, and whether such contracts continue to meet the criteria for revenue recognition, among other factors.
Further, total remaining deal value may exclude all or some portion of the value of certain commercial contracts as a result of our ongoing assessments of customers’ financial condition, including the consideration of such customers’ ability and intention to pay, and whether such contracts continue to meet the criteria for revenue recognition, among other factors.
As a result, current macroeconomic conditions may continue to impact our ability to realize the full value of our commercial contracts with such early- or growth-stage customers. For additional information see Note 4. Investments and Fair Value Measurements in the consolidated financials statements included elsewhere in this Annual Report on Form 10-K.
As a result, current macroeconomic conditions have impacted, and may continue to impact, our ability to realize the full value of our commercial contracts with 68 such early- or growth-stage customers. For additional information, see Note 4. Investments and Fair Value Measurements in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(2) The contractual commitment amounts under operating leases in the table above are primarily related to facility and equipment leases. Operating lease commitments are reflected net of $120.8 million of sublease income from tenants in certain of our leased facilities. Refer to Note 7.
(2) The contractual commitment amounts under operating leases in the table above are primarily related to facility and equipment leases. Operating lease commitments are reflected net of $102.4 million of sublease income from tenants in certain of our leased facilities. Refer to Note 7.
We exclude stock-based compensation as it is a non-cash expense. We believe that our contribution margin provides an important measure of the efficiency of our operations over time.
We exclude stock-based compensation as it is a noncash expense. We believe that our contribution margin provides an important measure of the efficiency of our operations over time.
Contract Liabilities The timing of customer billing and payment relative to the start of the service period varies from contract to contract; however, we bill many of our customers in advance of the provision of services under our contracts, resulting in contract liabilities consisting of either deferred revenue or customer deposits.
Contract Liabilities The timing of customer billings and payments relative to the start of the service period varies from contract to contract; however, we bill many of our customers in advance of the provision of services under our contracts, resulting in contract liabilities consisting of either deferred revenue or customer deposits.
We promise to provide continuous access to the hosted software throughout the contract term. Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir Cloud services to the customer.
We agree to provide continuous access to our hosted software platforms throughout the contract term. Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir Cloud services to the customer.
GAAP). For additional information see Note 4. Investments and Fair Value Measurements and Note 14. Business Combinations in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
GAAP) that was reported in 2022. For additional information see Note 4. Investments and Fair Value Measurements and Note 14. Business Combinations in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
When calculating the total remaining deal value of government contracts, we do not include government contracts known as IDIQ contracts, totaling $2.8 billion, as of December 31, 2022, that we have been awarded, but where the funding of such contracts has not yet been determined. The funding of these contracts is not guaranteed.
When calculating the total remaining deal value of government contracts, we do not include government contracts known as IDIQ contracts, totaling $4.1 billion, as of December 31, 2023, that we have been awarded, but where the funding of such contracts has not yet been determined. The funding of these contracts is not guaranteed.
Research and development costs are expensed as incurred. 69 We plan to continue to invest in personnel to support our research and development efforts. As a result, we expect that research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest to support these activities.
We plan to continue to invest in personnel to support our research and development efforts. As a result, we expect that research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest to support these activities.
Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in sales functions, executing on pilots and customer growth activities; as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead. Sales and marketing costs are generally expensed as incurred.
Sales and marketing costs primarily include salaries, stock-based compensation expense, commissions, and benefits for our sales force and personnel involved in sales functions, executing on pilots, including bootcamps, and customer growth activities; as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead.
We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, sales force, and enhancing our brand awareness.
Sales and marketing costs are generally expensed as incurred. We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, in our sales force, and in enhancing our brand awareness.
Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms, internal use third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead.
Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms and products, as well as third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead. Research and development costs are expensed as incurred.
Total remaining deal value presumes the exercise of all contract options and no termination of contracts; however, the majority of our contracts are subject to termination provisions, including for convenience, and there can be no guarantee that contracts are not terminated or that contract options will be exercised.
However, the majority of our contracts are subject to termination provisions, including for convenience, and there can be no guarantee that contracts are not terminated or that contract options will be exercised.
The increases were partially offset by a decrease of $31.0 million in stock-based compensation expense and related expenses. For additional information, see the section titled “Stock-Based Compensation” below. Our gross margin for the year ended December 31, 2022 increased by 1% compared to 2021. Gross margin increased as a result of revenue growth outpacing costs of revenue.
The increases were partially offset by a decrease of $5.9 million in stock-based compensation expense and related expenses, net. For additional information, see the section titled “Stock-Based Compensation” below. Our gross margin for the year ended December 31, 2023 increased by 2% compared to 2022, as revenue growth outpaced costs of revenue.
The portion of customer deposits that is anticipated to be recognized as revenue during the succeeding twelve-month period is recorded as customer deposits and the remaining portion is recorded as customer deposits, noncurrent. Our deferred revenue and deferred revenue, noncurrent as of December 31, 2022 were $183.4 million and $10.0 million, respectively.
The portion of customer deposits that is anticipated to be recognized as revenue during the succeeding twelve-month period is recorded as customer deposits and the remaining portion is recorded as customer deposits, noncurrent. Our deferred revenue and deferred revenue, noncurrent as of December 31, 2023 were $246.9 million and $28.0 million, respectively.
As of December 31, 2022, the total remaining deal value of the contracts, as defined above, was $3.7 billion, down 3% from December 31, 2021, when our total remaining deal value of such contracts was $3.8 billion.
As of December 31, 2023, the total remaining deal value of the contracts, as defined above, was $3.9 billion, up 5% from December 31, 2022, when our total remaining deal value of such contracts was $3.7 billion.
The primary cause of this growth rate variation was the decrease in stock-based compensation expense and related expenses in cost of revenue relative to total expense growth as compared to the prior year.
The primary cause of this growth rate variation was the decrease in stock-based compensation expense and related expenses, net in cost of revenue and smaller growth in field service representatives and other direct costs relative to revenue growth as compared to the prior year.
However, if the conflict continues or worsens, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
If the respective conflicts continue or worsen, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.
As of December 31, 2022, the total remaining deal value of the contracts that we had been awarded by government agencies in the United States and allied countries around the world, including existing contractual obligations and contractual options 65 available to those government agencies, was $1.7 billion, up 37% from December 31, 2021, when the total value of such contracts was $1.2 billion.
Of our total remaining deal value, as of December 31, 2023, the total remaining deal value of the contracts that we entered into with commercial customers, including existing contractual obligations and available contractual options, as defined above, was $2.1 billion, up 7% from December 31, 2022, when the total remaining deal value of such contracts was $2.0 billion. 67 As of December 31, 2023, the total remaining deal value of the contracts that we had been awarded by government agencies in the United States and allied countries around the world, including existing contractual obligations and contractual options available to those government agencies, was $1.8 billion, up 4% from December 31, 2022, when the total value of such contracts was $1.7 billion.
Other Income (Expense), Net Other income (expense), net consists primarily of foreign currency exchange gains and losses, realized and unrealized losses from Investments, and our share of income and losses from our equity method investments. The year ended December 31, 2022 also included a gain from a step acquisition.
Interest Expense Interest expense consists primarily of interest expense and commitment fees incurred under our credit facility. Other Income (Expense), Net Other income (expense), net consists primarily of foreign currency exchange gains and losses and realized and unrealized losses from equity securities. The year ended December 31, 2022 also included a gain from a step acquisition.
Gross Profit and Gross Margin, Excluding Stock-Based Compensation The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the years ended December 31, 2022 and 2021 (in thousands, except percentages): Years Ended December 31, 2022 2021 Gross profit $ 1,497,322 $ 1,202,485 Add: stock-based compensation 44,061 68,546 Gross profit, excluding stock-based compensation $ 1,541,383 $ 1,271,031 Gross margin, excluding stock-based compensation 81 % 82 % Adjusted Income from Operations The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the years ended December 31, 2022 and 2021 (in thousands): Years Ended December 31, 2022 2021 Loss from operations $ (161,201) $ (411,046) Add: stock-based compensation 564,798 778,215 Add: employer payroll taxes related to stock-based compensation 17,156 106,283 Adjusted income from operations $ 420,753 $ 473,452 68 Components of Results of Operations Revenue We generate revenue from the sale of subscriptions to access our software in our hosted environment along with ongoing O&M services (“Palantir Cloud”), software subscriptions in our customers’ environments with ongoing O&M services (“On-Premises Software”), and professional services.
Gross Profit and Gross Margin, Excluding Stock-Based Compensation The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the years ended December 31, 2023 and 2022 (in thousands, except percentages): Years Ended December 31, 2023 2022 Gross profit $ 1,793,907 $ 1,497,322 Add: stock-based compensation 35,995 44,061 Gross profit, excluding stock-based compensation $ 1,829,902 $ 1,541,383 Gross margin, excluding stock-based compensation 82 % 81 % Adjusted Income from Operations The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the years ended December 31, 2023 and 2022 (in thousands): Years Ended December 31, 2023 2022 Income (loss) from operations $ 119,966 $ (161,201) Add: stock-based compensation 475,903 564,798 Add: employer payroll taxes related to stock-based compensation 36,907 17,156 Adjusted income from operations $ 632,776 $ 420,753 Components of Results of Operations Revenue We generate revenue from the sale of subscriptions to access our software platforms in our hosted environment along with ongoing O&M services (“Palantir Cloud”), software subscriptions in our customers’ environments with ongoing O&M services (“On-Premises Software”), and professional services.
Revenue from U.S. government customers was $826.3 million for the year ended December 31, 2022 compared to $678.2 million for the same period in 2021. Revenue from commercial customers increased by $189.6 million, or 29%, for the year ended December 31, 2022 compared to 2021.
Revenue from U.S. government customers was $921.2 million for the year ended December 31, 2023 compared to $826.3 million for the same period in 2022. Revenue from commercial customers increased by $168.7 million, or 20%, for the year ended December 31, 2023 compared to 2022.
Debt in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
For more information, see Note 6. Debt in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Customer deposits consist of amounts billed and/or paid for anticipated revenue generating activities in advance of the start of the contractual term or for the portion of a contract term that is subject to cancellation by our customers.
The portion of deferred revenue that is anticipated to be recognized as revenue during the succeeding twelve-month period is recorded as deferred revenue and the remaining portion is recorded as deferred revenue, noncurrent. 77 Customer deposits consist of amounts billed and/or paid for anticipated revenue generating activities in advance of the start of the contractual term or for the portion of a contract term that is subject to cancellation by our customers.
The decrease was primarily driven by timing of payments to vendors and timing of the receipt of payments from our customers. Investing Activities Net cash used in investing activities was $45.4 million and $397.9 million for the year ended December 31, 2022 and 2021, respectively.
The increase was primarily driven by timing of payments to vendors and timing of the receipt of payments from our customers, as well as an increase in interest income. Investing Activities Net cash used in investing activities was $2.7 billion and $45.4 million for the year ended December 31, 2023 and 2022, respectively.
Other Income (Expense), Net Years Ended December 31, Change 2022 2021 Amount Other income (expense), net $ (216,077) $ (75,415) $ (140,662) Other income (expense), net changed by $140.7 million for the year ended December 31, 2022 compared to 2021 primarily due to $272.1 million of net unrealized and realized losses from our investments in marketable securities, partially offset by a $44.3 million gain from a “step acquisition” (as defined by U.S.
Other Income (Expense), Net Years Ended December 31, Change 2023 2022 Amount Other income (expense), net $ (11,977) $ (216,077) $ 204,100 75 Other income (expense), net changed by $204.1 million for the year ended December 31, 2023 compared to 2022 primarily due to the net decrease in unrealized losses from our shares held in equity securities, partially offset by an increase in net realized losses from sales of publicly-traded equity securities, and $44.3 million gain from a “step acquisition” (as defined by U.S.
Actual results could differ from those estimates and such differences could affect our financial position and results of operations. Recent Accounting Pronouncements For information on recently issued accounting pronouncements, if any, refer to Note 2. Significant Accounting Policies in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Recent Accounting Pronouncements For information on recently issued accounting pronouncements, if any, refer to Note 2. Significant Accounting Policies in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Contribution Margin The following table provides a reconciliation of contribution margin for the years ended December 31, 2022 and 2021 (in thousands, except percentages): Years Ended December 31, 2022 2021 Loss from operations $ (161,201) $ (411,046) Add: Research and development expenses (1) 265,808 237,189 General and administrative expenses (1) 365,768 295,071 Total stock-based compensation expense 564,798 778,215 Total contribution $ 1,035,173 $ 899,429 Contribution margin 54 % 58 % ———— (1) Excludes stock-based compensation.
Contribution Margin The following table provides a reconciliation of contribution margin for the years ended December 31, 2023 and 2022 (in thousands, except percentages): Years Ended December 31, 2023 2022 Income (loss) from operations $ 119,966 $ (161,201) Add: Research and development expenses (1) 306,560 265,808 General and administrative expenses (1) 343,126 365,768 Total stock-based compensation expense 475,903 564,798 Total contribution $ 1,245,555 $ 1,035,173 Contribution margin 56 % 54 % ———— (1) Excludes stock-based compensation.
We expect that general and administrative expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our increased compliance and reporting requirements as a public company.
We expect that general and administrative expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our continuing compliance and reporting requirements as a public company. 71 Interest Income Interest income consists primarily of interest income earned on our cash, cash equivalents, U.S. treasury securities, and restricted cash balances.
If additional funds are not available to us on acceptable terms, or at all, our business, financial condition, and results of operations could be adversely affected.
In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If additional funds are not available to us on acceptable terms, or at all, our business, financial condition, and results of operations could be adversely affected.
The following table summarizes our cash flows for the periods indicated (in thousands): Years Ended December 31, 2022 2021 2020 Net cash provided by (used in): Operating activities $ 223,737 $ 333,851 $ (296,608) Investing activities (45,427) (397,912) (14,920) Financing activities 85,996 306,747 1,036,453 Effect of foreign exchange on cash, cash equivalents, and restricted cash (3,885) (3,918) 1,259 Net increase in cash, cash equivalents, and restricted cash $ 260,421 $ 238,768 $ 726,184 Operating Activities Net cash provided by operating activities was $223.7 million and $333.9 million for the year ended December 31, 2022 and 2021, respectively.
Stockholders’ Equity in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 76 The following table summarizes our cash flows for the periods indicated (in thousands): Years Ended December 31, 2023 2022 2021 Net cash provided by (used in): Operating activities $ 712,183 $ 223,737 $ 333,851 Investing activities (2,711,180) (45,427) (397,912) Financing activities 218,839 85,996 306,747 Effect of foreign exchange on cash, cash equivalents, and restricted cash 2,930 (3,885) (3,918) Net increase in cash, cash equivalents, and restricted cash $ (1,777,228) $ 260,421 $ 238,768 Operating Activities Net cash provided by operating activities was $712.2 million and $223.7 million for the year ended December 31, 2023 and 2022, respectively.
Of the increase, $151.1 million was from government customers existing as of December 31, 2021. Generally, increases in revenue from our existing customers are a result of expanded use of our products and services within their organizations.
Revenue from government customers increased by $150.4 million, or 14%, for the year ended December 31, 2023 compared to 2022. Of the increase, $129.4 million was from existing government customers as of December 31, 2022. Generally, increases in revenue from our existing customers are a result of expanded use of our products and services within their organizations.
Macroeconomic Trends As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, the ongoing COVID-19 pandemic, the impact of the ongoing Russia-Ukraine conflict, rising inflation and interest rates, monetary policy changes, and foreign currency fluctuations.
Macroeconomic Trends As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, geopolitical tensions, heightened interest rates, monetary policy changes, and foreign currency fluctuations. Additionally, these macroeconomic impacts have disrupted, and may continue to disrupt, the operations of our customers and prospective customers.
We believe that cash flows generated from operations, cash, cash equivalents, available funds and access to financing sources, including our credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty.
We had cash, cash equivalents, and short-term U.S. treasury securities totaling $3.7 billion available as of December 31, 2023. We believe that cash flows generated from operations, cash, cash equivalents, marketable securities, available funds, and access to financing sources, including our credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.
The decrease was primarily driven by forfeitures and lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our Direct Listing, during the year ended December 31, 2022 compared to the same period in 2021, partially offset by an increase related to awards granted after December 31, 2021.
The decrease was primarily driven by lower expense under the accelerated attribution method for RSUs granted prior to our Direct Listing, during the year ended December 31, 2023 compared to the same period in 2022. Additionally, stock-based compensation expenses decreased due to the cancellation and vesting of options and RSUs during the year.
Our customer deposits and customer deposits, noncurrent as of December 31, 2022 were $142.0 million and $3.9 million, respectively. Our deferred revenue and deferred revenue, noncurrent as of December 31, 2021 were $227.8 million and $40.2 million, respectively. Our customer deposits and customer deposits, noncurrent as of December 31, 2021 were $161.6 million and $33.7 million, respectively.
Our customer deposits and customer deposits, noncurrent as of December 31, 2023 were $209.8 million and $1.5 million, respectively. Our deferred revenue and deferred revenue, noncurrent as of December 31, 2022 were $183.4 million and $10.0 million, respectively. Our customer deposits and customer deposits, noncurrent as of December 31, 2022 were $142.0 million and $3.9 million, respectively.
The increase was primarily due to increases of $33.0 million in third-party cloud hosting services driven by increased usage from customer growth and expansion, $29.4 million in field service representatives mainly related to new projects, $18.1 million in payroll and other payroll-related costs as a result of increased headcount attributable to our cost of revenue function, and $11.9 million in travel and office-related costs.
The increase was primarily due to increases of $12.2 million in third-party cloud hosting services and other IT costs driven by usage from customer growth and expansion, $9.4 million in payroll and other payroll-related costs as a result of higher average headcount during the year, and $7.5 million in field service representatives, hardware, and other direct costs generally related to new or expanded projects.
See the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K for further discussion of the impact of macroeconomic trends on our business. COVID-19 Impact The COVID-19 pandemic continues to impact the global economy.
We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape. See the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K for further discussion of the impact of macroeconomic trends on our business.
Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.
Provision for Income Taxes Provision for income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes. Net Income (Loss) Attributable to Noncontrolling Interests Net income (loss) attributable to noncontrolling interests represents the share of income (loss) that is not attributable to the Company.
The increase was primarily due to increases of $93.1 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function, $36.3 million in travel and office-related costs, and $23.5 million in marketing and advertising expenses. The increases were partially offset by a decrease of $81.3 million in stock-based compensation expense and related expenses.
The increase was primarily due to increases of $53.6 million in payroll and other payroll-related costs driven by higher average headcount, $20.2 million in travel and office-related costs, and $10.2 million in professional services. The increases were 74 partially offset by a decrease of $26.2 million in stock-based compensation expense and related expenses, net.
General and Administrative General and administrative expenses decreased by $15.2 million, or 2%, for the year ended December 31, 2022 compared to 2021. The decrease was primarily due to a decrease of $113.0 million in stock-based compensation expense and related expenses. For additional information see the section titled “Stock-Based Compensation” below.
General and Administrative General and administrative expenses decreased by $72.0 million, or 12%, for the year ended December 31, 2023 compared to 2022. The decrease was primarily due to decreases of $46.2 million in stock-based compensation expense and related expenses, net, $17.9 million in professional services, and $11.3 million in travel costs.
Financing Activities Net cash provided by financing activities was $86.0 million and $306.7 million for the year ended December 31, 2022 and 2021, respectively.
Financing Activities Net cash provided by financing activities was $218.8 million and $86.0 million for the year ended December 31, 2023 and 2022, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.
Interest Income Years Ended December 31, Change 2022 2021 Amount Interest income $ 20,309 $ 1,607 $ 18,702 Interest income increased by $18.7 million for the year ended December 31, 2022 compared to 2021 primarily due to an increase in U.S. interest rates on interest earned from our cash, cash equivalents, and restricted cash.
Interest Income Years Ended December 31, Change 2023 2022 Amount Interest income $ 132,572 $ 20,309 $ 112,263 Interest income increased by $112.3 million for the year ended December 31, 2023 compared to 2022 primarily due to higher U.S. interest rates and increases in our interest-bearing cash and cash equivalents, and our investments in short-term U.S. treasury securities.
For additional information, see the section titled “Stock-Based Compensation” below. Research and Development Research and development expenses decreased by $27.8 million, or 7%, for the year ended December 31, 2022 compared to 2021. The decrease was primarily due to a decrease of $75.1 million in stock-based compensation expense and related expenses.
For additional information, see the section titled “Stock-Based Compensation” below. Research and Development Research and development expenses increased by $44.9 million, or 12%, for the year ended December 31, 2023 compared to 2022.
Deferred revenue represents billings under noncancelable contracts before the related product or service is transferred to the customer. The portion of deferred revenue that is anticipated to be recognized as revenue during the succeeding twelve-month period is recorded as deferred revenue and the remaining portion is recorded as deferred revenue, noncurrent.
Deferred revenue represents billings under noncancelable contracts before the related product or service is transferred to the customer.
Operating Expenses Years Ended December 31, Change 2022 2021 Amount % Sales and marketing $ 702,511 $ 614,512 $ 87,999 14 % Research and development 359,679 387,487 (27,808) (7) % General and administrative 596,333 611,532 (15,199) (2) % Total operating expenses $ 1,658,523 $ 1,613,531 $ 44,992 3 % Sales and Marketing Sales and marketing expenses increased by $88.0 million, or 14%, for the year ended December 31, 2022 compared to 2021.
Operating Expenses Years Ended December 31, Change 2023 2022 Amount % Sales and marketing $ 744,992 $ 702,511 $ 42,481 6 % Research and development 404,624 359,679 44,945 12 % General and administrative 524,325 596,333 (72,008) (12) % Total operating expenses $ 1,673,941 $ 1,658,523 $ 15,418 1 % Sales and Marketing Sales and marketing expenses increased by $42.5 million, or 6%, for the year ended December 31, 2023 compared to 2022.
Income Taxes in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 74 Liquidity and Capital Resources We generated positive cash flow from operations for the year ended December 31, 2022 and had $2.6 billion in cash and cash equivalents available as of December 31, 2022.
The Company maintains a full valuation allowance against its U.S. federal and state, and certain foreign deferred tax assets. For additional information see Note 11. Income Taxes in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Liquidity and Capital Resources We generated positive cash flow from operations for the year ended December 31, 2023.
Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies. As such, we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.
Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies; additionally, we may repurchase shares of our Class A common stock from time to time under our Share Repurchase Program. As such, we may be required to seek additional equity or debt financing.
Total remaining deal value is the total remaining value of contracts that have been awarded by our government and commercial customers and includes existing contractual obligations and unexercised contract options available to those customers.
Total remaining deal value is the total remaining value of contracts that have been entered into with, or awarded by, our customers as of the end of the reporting period. Total remaining deal value presumes the exercise of all contract options available to our customers and no termination of contracts.
As a result, the general strengthening of the U.S. dollar relative to other major foreign currencies (primarily the Euro and GBP) had an unfavorable impact on our revenues from certain non-U.S. customers; however, that impact for the year ended December 31, 2022 was not material to our financial position or results of operations. 66 Customer Impacts Current macroeconomic conditions may also adversely impact our customers’ business, particularly our early- and growth-stage customers.
For the year ended December 31, 2023, such impacts were not material to our financial position or results of operations. Customer Impacts Current macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses, particularly our early- and growth-stage customers.
Interest Expense Years Ended December 31, Change 2022 2021 Amount Interest expense $ (4,058) $ (3,640) $ (418) Interest expense increased by $0.4 million for the year ended December 31, 2022 compared to 2021 driven by the amendments to our credit facility during the year.
Interest Expense Years Ended December 31, Change 2023 2022 Amount Interest expense $ (3,470) $ (4,058) $ 588 There was no material change in interest expense for the year ended December 31, 2023 compared to 2022.
While the conflict is still evolving and the outcome remains highly uncertain, we do not expect that the Russian invasion will have a material impact on our business and results of operations. We do not currently have office locations in Russia and none of our revenues came from sales to entities headquartered in Russia.
While the ongoing Russia-Ukraine and Israel conflicts are still evolving and the outcomes remain highly uncertain, we do not expect that resulting challenging macroeconomic conditions will have a material impact on our business or results of operations.
As of December 31, 2022, our accumulated deficit balance was $5.9 billion, and our principal sources of liquidity were $2.6 billion of cash and cash equivalents. During April 2021, we repaid our outstanding term loans of $200.0 million.
As of December 31, 2023, our accumulated deficit balance was $5.6 billion, and our principal sources of liquidity were cash, cash equivalents, and short-term U.S. treasury securities totaling $3.7 billion. As of December 31, 2023, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 million under our credit facility.
We have generated significant losses from our operations as reflected in our consolidated balance sheets and we expect cash flow from operations may fluctuate for the foreseeable future. Historically, we have financed our operations primarily through the sale of our equity securities, including proceeds from option exercises, and payments received from our customers.
However, any projections of future cash needs and cash flows are subject to substantial uncertainty. We have historically generated significant losses from our operations as reflected in our consolidated balance sheets and while we have generated income from operations and positive cash flows from operations in the year ended December 31, 2023, the amounts may fluctuate for the foreseeable future.
Investments and Fair Value Measurements in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 72 Cost of Revenue and Gross Profit Years Ended December 31, Change 2022 2021 Amount % Cost of revenue $ 408,549 $ 339,404 $ 69,145 20 % Gross profit 1,497,322 1,202,485 294,837 25 % Gross margin 79 % 78 % Cost of revenue for the year ended December 31, 2022 increased by $69.1 million, or 20%, compared to 2021.
Cost of Revenue and Gross Profit Years Ended December 31, Change 2023 2022 Amount % Cost of revenue $ 431,105 $ 408,549 $ 22,556 6 % Gross profit 1,793,907 1,497,322 296,585 20 % Gross margin 81 % 79 % Cost of revenue for the year ended December 31, 2023 increased by $22.6 million, or 6%, compared to 2022.
The decrease in cash provided by financing activities was driven by a decrease in proceeds from the exercise of common stock options, partially offset by the principal repayments on borrowings of $200.0 million made during the year ended December 31, 2021. 75 Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2022 (in thousands): Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years Noncancelable purchase commitments (1) $ 1,275,377 $ 169,124 $ 591,000 $ 515,253 $ — Operating lease commitments, net of sublease income amounts (2) 193,075 40,385 74,633 38,550 39,507 Total contractual obligations and commitments $ 1,468,452 $ 209,509 $ 665,633 $ 553,803 $ 39,507 ————— (1) Noncancelable purchase commitments primarily relate to purchase commitments for third-party cloud hosting services and represents only contracts which are enforceable and legally binding.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2023 (in thousands): Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years Noncancelable purchase commitments (1) $ 2,082,992 $ 131,342 $ 367,400 $ 481,150 $ 1,103,100 Operating lease commitments, net of sublease income amounts (2) 174,399 50,827 69,016 23,201 31,355 Total contractual obligations and commitments $ 2,257,391 $ 182,169 $ 436,416 $ 504,351 $ 1,134,455 ————— (1) Noncancelable purchase commitments primarily relate to purchase commitments for third-party cloud hosting services and represents only contracts which are enforceable and legally binding.
The decrease in cash used in investing activities was primarily due to a reduction of our purchases of alternative investments and marketable securities, as well as increases from cash acquired from business combinations and sales or redemption of certain marketable securities.
The increase in cash used in investing activities was primarily due to purchases of marketable securities, primarily comprised of short-term U.S. treasury securities, offset by proceeds from sales and redemptions of marketable securities.
In June 2022, our Chief Executive Officer, Alexander Karp, met with the President of Ukraine and other senior officials to discuss opening an office in Ukraine and providing ongoing support. Our current operations related to Ukraine are not material to our financial position or results of operations.
In 2024, we agreed to a strategic partnership with the Israeli Defense Ministry to supply technology to Israel to assist in the ongoing war. However, our current operations related to Ukraine and Israel are not material to our financial position or results of operations.
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We have also made a number of investments in companies whose businesses rely on the ability of their organizations to manage and analyze data effectively at scale.
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Geopolitical Tensions Our business operations are subject to interruption by events that are beyond our control, including geopolitical tensions. We continue to closely monitor the impact of various geopolitical tensions and their global impacts on our business.
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Total remaining deal value also includes remaining contract value from Strategic Commercial Contracts, which are subject to termination for cause provisions.
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We do not currently have office locations in Russia or Palestinian territories and none of our revenues came from sales to entities headquartered in those countries or territories. In 2023, we announced partnerships with Ukraine to support its defense and reconstruction efforts and investigations of potential war crimes, among other activities.
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Of our total remaining deal value, as of December 31, 2022, the total remaining deal value of the contracts that we entered into with commercial customers, including existing contractual obligations and available contractual options, as defined above, was $2.0 billion, down 23% from December 31, 2021, when the total remaining deal value of such contracts was $2.6 billion.
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However, the general strengthening of the U.S. dollar relative to other major foreign currencies (primarily the Euro and GBP) has had, and could in the future have, an unfavorable impact on our revenues and expenses from certain non-U.S. customers or vendors whose contracts are denominated in currencies other than U.S. dollars.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our existing facilities are adequate to meet current requirements, and that suitable additional or substitute space will be available as needed to accommodate any further physical expansion of operations and for any additional offices.
Biggest changeIn addition, we lease various other office spaces throughout the world. 62 Table of Contents We believe that our existing facilities are adequate to meet current requirements, and that suitable additional or substitute space will be available as needed to accommodate any further physical expansion of operations and for any additional offices.
ITEM 2. PROPERTIES Facilities We have leased principal properties in Denver, Colorado, which is the location of our corporate headquarters; in Palo Alto, California; New York City, New York; and London, England. In addition, we lease various office space throughout the world.
ITEM 2. PROPERTIES Facilities We have leased principal properties in Denver, Colorado, which is the location of our corporate headquarters; in Palo Alto, California; New York City, New York; Washington, D.C.; and London, England.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor information on legal proceedings, refer to Note 8. Commitments and Contingencies—Litigation and Legal Proceedings in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 61 Table of Contents PART II
Biggest changeFor information on legal proceedings, refer to Note 8. Commitments and Contingencies—Litigation and Legal Proceedings in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 63 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDollar-weighted average contract duration represents the length of time we expect to generate revenue on average, including existing contractual obligations and assuming that our customers will exercise all of the contractual options available to them, and is subject to change as we enter into new contracts or if customers terminate for convenience.
Biggest changeDollar-weighted average contract duration represents the length of time we expect to generate revenue on average, based on the total potential lifetime length and value of contracts entered into with, or awarded by, our customers at the time of contract execution, presuming that our customers will exercise all of the contractual options available to them and no termination of contracts, 66 although the majority of our contracts are subject to termination provisions, including for convenience, and there can be no guarantee that contracts are not terminated or that contract options will be exercised.
For more information about our adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes; and gross profit and gross margin, when excluding stock-based compensation; as well as reconciliations from loss from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below.
For more information about our adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes; and gross profit and gross margin, when excluding stock-based compensation; as well as reconciliations from income (loss) from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below.
See also the discussion of “ Risks Related to Relationships and Business with the Public Sector” within
See also the discussion of “ Risks Related to Relationships and Business with the Public Sector” within “
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index at the market close on September 30, 2020, and its relative performance is tracked through December 31, 2022.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index at the market close on September 30, 2020, and its relative performance is tracked through December 31, 2023.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. This section of this Annual Report on Form 10-K generally discusses fiscal years 2022 and 2021 items and year-to-year comparisons between fiscal years 2022 and 2021.
Our historical results are not necessarily indicative of the results that may be expected for any period in the future. This section of this Annual Report on Form 10-K generally discusses fiscal years 2023 and 2022 items and year-to-year comparisons between fiscal years 2023 and 2022.
Discussions of fiscal year 2021 items and year-to-year comparisons between fiscal years 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 24, 2022 and is incorporated herein by reference.
Discussions of fiscal year 2022 items and year-to-year comparisons between fiscal years 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 21, 2023 and is incorporated herein by reference.
The returns shown are based on historical results and are not intended to suggest future performance. 62 Table of Contents Unregistered Sales of Equity Securities None. ITEM 6. [RESERVED] ITEM 7.
The returns shown are based on historical results and are not intended to suggest future performance. 64 Table of Contents Unregistered Sales of Equity Securities None. ITEM 6. [RESERVED] ITEM 7.
Our Customers We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period. During the period ended December 31, 2022, we had 367 customers, including companies in various commercial sectors and government agencies around the world. During the period ended December 31, 2021, we had 237 customers.
Our Customers We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period. During the period ended December 31, 2023, we had 497 customers, including companies in various commercial sectors and government agencies around the world. During the period ended December 31, 2022, we had 367 customers.
We manage customers at the account level, not by industry or sector, so that we can optimize on the specific growth opportunities for each customer. In the year ended December 31, 2022, 56% of our revenue came from government customers and 44% came from commercial customers. Our U.S. customers have been a meaningful source of revenue growth for our business.
We manage customers at the account level, not by industry or sector, so that we can optimize on the specific growth opportunities for each customer. In the year ended December 31, 2023, 55% of our revenue came from government customers and 45% came from commercial customers. Our U.S. customers have been a meaningful source of revenue growth for our business.
We enter into initial pilots with customers, generally at our own expense and without a guarantee of future returns, in order to access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons.
We conduct pilots and bootcamps with customers, generally at our own expense and without a guarantee of future returns, in order to access a unique set of opportunities that others may pass over for lack of resources and shorter investment horizons.
Apollo allows our customers to run their software in virtually any environment. While our focus in the short term remains on making our principal software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own.
While our focus in the short term remains on making our software platforms available to increasingly broad swaths of the market, we are also working to identify additional component parts and products embedded within those platforms that have potential as commercial offerings on their own.
For the year ended December 31, 2022, we generated $1.9 billion in revenue, reflecting a 24% growth rate from the year ended December 31, 2021, when we generated $1.5 billion in revenue.
For the year ended December 31, 2023, we generated $2.2 billion in revenue, reflecting a 17% growth rate from the year ended December 31, 2022, when we generated $1.9 billion in revenue.
In the year ended December 31, 2022, we generated 61% of our revenue from customers in the United States and the remaining 39% from non-U.S. customers. Revenue from our U.S. customers during the trailing twelve months ended December 31, 2022 was $1.2 billion, which grew 32% from the prior twelve-month period.
In the year ended December 31, 2023, we generated 62% of our revenue from customers in the United States and the remaining 38% from non-U.S. customers. Revenue from our U.S. customers during the trailing twelve months ended December 31, 2023 was $1.4 billion, which grew 19% from the prior twelve-month period.
In the year ended December 31, 2021, our losses from operations were $411.0 million, or adjusted income from operations of $473.5 million when excluding stock-based compensation and related employer payroll taxes. In the year ended December 31, 2022, our gross profit was $1.5 billion, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.
In the year ended December 31, 2022, our losses from operations were $161.2 million, or adjusted income from operations of $420.8 million when excluding stock-based compensation and related employer payroll taxes. In the year ended December 31, 2023, our gross profit was $1.8 billion, reflecting a gross margin of 81%, or 82% when excluding stock-based compensation.
In the year ended December 31, 2021, our gross profit was $1.2 billion, reflecting a gross margin of 78%, or 82% when excluding stock-based compensation.
In the year ended December 31, 2022, our gross profit was $1.5 billion, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.
We have built lasting and significant customer relationships and partnerships with some of the world’s leading government institutions and companies. As of December 31, 2022, we expect to generate revenue under our existing customer contracts for an additional 2.8 years on a dollar-weighted average contract duration basis.
We have built lasting and significant customer relationships and partnerships with some of the world’s leading government institutions and companies. As of December 31, 2023, we expect to generate revenue from contracts closed during the year ended December 31, 2023 for an additional 3.4 years on a dollar-weighted average contract duration basis.
In the year ended December 31, 2022, we incurred losses from operations of $161.2 million, or adjusted income from operations of $420.8 million when excluding stock-based compensation and related employer payroll taxes.
In the year ended December 31, 2023, we generated income from operations of $120.0 million, or adjusted income from operations of $632.8 million when excluding stock-based compensation and related employer payroll taxes.
Holders of Record As of February 14, 2023, there were 850 holders of record of our Class A common stock, 32 holders of record of our Class B common stock, and one holder of record of our Class F common stock.
Holders of Record As of February 13, 2024, there were 1,076 holders of record of our Class A common stock, 28 holders of record of our Class B common stock, and one holder of record of our Class F common stock.
Foundry is becoming a central operating system not only for individual institutions but also for entire industries. Apollo, which we began offering as a commercial solution in 2021, is a cloud-agnostic, single control layer that coordinates ongoing delivery of new features, security updates, and platform configurations, helping to ensure the continuous operation of critical systems.
Apollo, which we began offering as a commercial solution in 2021, is a cloud-agnostic, single control layer that coordinates ongoing delivery of new features, security updates, and platform configurations, helping to ensure the continuous operation of critical systems. Apollo allows our customers to run their software in virtually any environment.
Our decisions about which customer relationships require further investment may change over time, based on our assessment of the potential long-term value that our software can generate for them.
Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward. Our decisions about which customer relationships require further investment may change over time, based on our assessment of the potential long-term value that our software can generate for them.
Our average revenue for the top twenty customers during the trailing twelve months ended December 31, 2022 was $49.4 million, which grew 13% from an average of $43.6 million in revenue from the top twenty customers during the trailing twelve months ended December 31, 2021, demonstrating our expanding relationships with existing customers. 64 Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward.
Our average revenue for the top twenty customers during the trailing twelve months ended December 31, 2023 was $54.6 million, which grew 11% from an average of $49.4 million in revenue from the top twenty customers during the trailing twelve months ended December 31, 2022, demonstrating our expanding relationships with existing customers.
We have built three principal software platforms, Gotham, Foundry, and Apollo. Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations. For over a decade, Gotham 63 has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond.
For over a decade, Gotham has surfaced insights for global defense agencies, the intelligence community, disaster relief organizations and beyond. Foundry is 65 becoming a central operating system not only for individual institutions but also for entire industries.
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Issuer Purchases of Equity Securities In August 2023, our Board of Directors authorized the Share Repurchase Program which allows for the repurchase of up to $1.0 billion of our outstanding shares of Class A common stock. The Share Repurchase Program does not obligate us to repurchase any specific number of shares and may be discontinued at any time.
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During the year ended December 31, 2023, we did not repurchase any shares of our Class A common stock under the Share Repurchase Program. For additional information see Note 9. Stockholders’ Equity in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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We have built four principal software platforms, Gotham, Foundry, Apollo, and our Artificial Intelligence Platform (“AIP”).
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Gotham and Foundry enable institutions to transform massive amounts of information into an integrated data asset that reflects their operations, and AIP leverages the power of our existing machine learning technologies alongside large language models (“LLMs”) directly within Gotham and/or Foundry to help connect AI to enterprise data.
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In 2023, we began deploying our newest offering, AIP, which is designed for customers across the commercial and government sectors, enabling them to derive value from recent breakthroughs in artificial intelligence via the combination of our existing software platforms with LLMs.
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We believe AIP uniquely allows users to connect LLMs and other AI with their data and operations to facilitate decision-making within the legal, ethical, and security constraints that they require.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFactors that could cause fluctuations in the public trading price of our Class A common stock include the following: • the number of shares of our Class A common stock publicly owned and available for trading; • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales or expected sales of shares of our Class A common stock by us or our stockholders; • short-selling of our Class A common stock or related derivative securities; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • any financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new services or platform features; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or security breaches or other incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, services or technologies by us or our competitors; • changes in our management, including any departures of one of our Founders; • new laws or regulations, public expectations regarding new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • other events or factors, including those resulting from war, including the ongoing Russia-Ukraine conflict, incidents of terrorism, pandemics, including the ongoing COVID-19 pandemic, or responses to these events; and • general macroeconomic conditions, such as rising inflation and interest rates and slow or negative growth of our markets.
Biggest changeFactors that could cause fluctuations in the public trading price of our Class A common stock include the following: • the number of shares of our Class A common stock publicly owned and available for trading; • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks; • the inclusion, exclusion, or deletion of our Class A common stock from any major trading indices, such as the S&P 500 Index; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales or expected sales of shares of our Class A common stock by us or our stockholders; • our repurchase of shares of our Class A common stock pursuant to our Share Repurchase Program; • short-selling of our Class A common stock or related derivative securities; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • any financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new platforms, products, services, or capabilities; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or security breaches or other incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, services or technologies by us or our competitors; • changes in our management, including any departures of one of our Founders; • new laws or regulations, public expectations regarding new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant change in our management; • other events or factors, including those resulting from war, including the ongoing Russia-Ukraine conflict, incidents of terrorism, such as Hamas’ attack against Israel, pandemics, or responses to these events; and • general macroeconomic conditions, such as heightened interest rates and slow or negative growth of our markets. 50 Table of Contents In addition, stock markets, and the market for technology companies in particular, have experienced price and volume fluctuations that have affected and continue to affect the trading prices of equity securities of many companies.
Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition and income taxes. We could be subject to additional tax liabilities. We are subject to federal, state, and local income taxes in the United States and numerous foreign jurisdictions.
Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition. We could be subject to additional tax liabilities. We are subject to federal, state, and local income taxes in the United States and numerous foreign jurisdictions.
These rights and remedies allow government customers, among other things, to: 47 Table of Contents • terminate existing contracts for convenience with short notice; • reduce orders under or otherwise modify contracts; • for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; • for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity (“IDIQ”) contracts; • claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; • suspend or debar us from doing business with the applicable government; and • control or prohibit the export of our services.
These rights and remedies allow government customers, among other things, to: • terminate existing contracts for convenience with short notice; • reduce orders under or otherwise modify contracts; 47 Table of Contents • for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; • for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; • cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; • decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity (“IDIQ”) contracts; • claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; • prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage over competing contractors, or the existence of conflicting roles that might bias a contractor’s judgment; • subject the award of contracts to protest by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; • suspend or debar us from doing business with the applicable government; and • control or prohibit the export of our services.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • our multi-class common stock structure, which provides our Founders and their affiliates with the ability to effectively control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding common stock; • prior to the Final Class F Conversion Date (as defined in our amended and restated certificate of incorporation), the holders of our common stock will only be able to take action by written consent if the action also receives the affirmative consent of a majority of the outstanding shares of our Class F common stock, and after such point the holders of our common stock will only be able to take action at a meeting of the stockholders and will not be able to take action by written consent for any matter; • from and after the Final Class F Conversion Date, our Board of Directors will be classified into three classes of directors with staggered three-year terms; • our amended and restated certificate of incorporation does not provide for cumulative voting; • certain transactions, other than restructuring transactions or transactions that otherwise do not involve a Change of Control (as defined in our amended and restated certificate of incorporation), which transactions require, pursuant to Section 251(c) or Section 271(a) of the Delaware General Corporation Law, the approval of the holders of a majority of the voting power of all of the outstanding shares of our capital stock entitled to vote thereon, will require approval by the holders of at least 55.0% of the voting power of all of the outstanding shares of our capital stock entitled to vote thereon if the record date for determining the stockholders entitled to vote to approve such transaction occurs prior to the Final Class F Conversion Date; • certain transactions prior to the Final Class F Conversion Date, that would require disclosure pursuant to Item 404(a) of Regulation S-K, between any of our Founders (or their controlled affiliates), on the one hand, and us, on the other, in which consideration exchanges hands between our Founders (or their controlled affiliates) and us, and such consideration has a fair market value in excess of $50.0 million as determined in accordance with our amended and restated bylaws will require approval by either (i) the holders of at least 66 2/3% of the voting power of all of the outstanding shares of our capital stock, voting together as a single class, or (ii) an Independent Committee (as defined in our amended and restated bylaws); • the acquisition of our equity securities by our Founders (including their controlled affiliates), prior to the Final Class F Conversion Date, in a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Exchange Act) will be conditioned on approval by (i) an Independent Committee and (ii) the holders of a majority of the voting power of our capital stock 52 Table of Contents that is held by our stockholders other than the Founders (including their controlled affiliates) and any holder of the Class F Common Stock; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • our directors may only be removed as provided in the Delaware General Corporation Law; • a special meeting of our stockholders may only be called by the chairperson of our Board of Directors, our Chief Executive Officer, our President, or our Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directorships, whether or not there exist any vacancies or other unfilled seats in previously authorized directorships; • our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders, except that any designation and issuance of preferred stock must receive the affirmative vote of a majority of the outstanding shares of our Class F common stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • our multi-class common stock structure, which provides our Founders and their affiliates with the ability to effectively control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding common stock; • prior to the Final Class F Conversion Date (as defined in our amended and restated certificate of incorporation), the holders of our common stock will only be able to take action by written consent if the action also receives the affirmative consent of a majority of the outstanding shares of our Class F common stock, and after such point the 52 Table of Contents holders of our common stock will only be able to take action at a meeting of the stockholders and will not be able to take action by written consent for any matter; • from and after the Final Class F Conversion Date, our Board of Directors will be classified into three classes of directors with staggered three-year terms; • our amended and restated certificate of incorporation does not provide for cumulative voting; • certain transactions, other than restructuring transactions or transactions that otherwise do not involve a Change of Control (as defined in our amended and restated certificate of incorporation), which transactions require, pursuant to Section 251(c) or Section 271(a) of the Delaware General Corporation Law, the approval of the holders of a majority of the voting power of all of the outstanding shares of our capital stock entitled to vote thereon, will require approval by the holders of at least 55.0% of the voting power of all of the outstanding shares of our capital stock entitled to vote thereon if the record date for determining the stockholders entitled to vote to approve such transaction occurs prior to the Final Class F Conversion Date; • certain transactions prior to the Final Class F Conversion Date, that would require disclosure pursuant to Item 404(a) of Regulation S-K, between any of our Founders (or their controlled affiliates), on the one hand, and us, on the other, in which consideration exchanges hands between our Founders (or their controlled affiliates) and us, and such consideration has a fair market value in excess of $50.0 million as determined in accordance with our amended and restated bylaws will require approval by either (i) the holders of at least 66 2/3% of the voting power of all of the outstanding shares of our capital stock, voting together as a single class, or (ii) an Independent Committee (as defined in our amended and restated bylaws); • the acquisition of our equity securities by our Founders (including their controlled affiliates), prior to the Final Class F Conversion Date, in a “Rule 13e-3 transaction” (as defined in Rule 13e-3 under the Exchange Act) will be conditioned on approval by (i) an Independent Committee and (ii) the holders of a majority of the voting power of our capital stock that is held by our stockholders other than the Founders (including their controlled affiliates) and any holder of the Class F Common Stock; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • our directors may only be removed as provided in the Delaware General Corporation Law; • a special meeting of our stockholders may only be called by the chairperson of our Board of Directors, our Chief Executive Officer, our President, or our Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directorships, whether or not there exist any vacancies or other unfilled seats in previously authorized directorships; • our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders, except that any designation and issuance of preferred stock must receive the affirmative vote of a majority of the outstanding shares of our Class F common stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
Our non-U.S. operations subject us to a variety of risks and challenges, including: • increased management, travel, infrastructure, and legal and financial compliance costs and time associated with having multiple non-U.S. operations, including but not limited to compliance with local employment laws and other applicable laws and regulations; • longer payment cycles, greater difficulty in enforcing contracts, difficulties in collecting accounts receivable, especially in emerging markets, and the likelihood that revenue from non-U.S. system integrators, government contractors, and customers may need to be recognized when cash is received, at least until satisfactory payment history has been established, or upon confirmation of certain acceptance criteria or milestones; • the need to adapt our platforms for non-U.S. customers whether to accommodate customer preferences or local law; • differing regulatory and legal requirements and possible enactment of additional regulations or restrictions on the use, import, or re-export of our platforms or the provision of services, which could delay, restrict, or prevent the sale or use of our platforms and services in some jurisdictions; • compliance with multiple and changing foreign laws and regulations, including those governing employment, privacy, data protection, information security, data transfer, and the risks and costs of non-compliance with such laws and regulations; • new and different sources of competition not present in the United States; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may cause us to withdraw from particular markets, or impact financial results and result in restatements of financial statements and irregularities in financial statements; • volatility in non-U.S. political and economic environments, including by way of examples, the potential effects of the ongoing COVID-19 pandemic, and the ongoing Russia-Ukraine conflict, as well as economic sanctions the United States and other countries have imposed on Russia; • weaker protection of intellectual property rights in some countries and the risk of potential theft, copying, or other compromises of our technology, data, or intellectual property in connection with our non-U.S. operations, whether by state-sponsored malfeasance or other foreign entities or individuals; • volatility and fluctuations in currency exchange rates, including that, because many of our non-U.S. contracts are denominated in U.S. dollars, an increase in the strength of the U.S. dollar has made our products more expensive for non-U.S. dollar denominated customers, which may make doing business with us less appealing to such customers; • management and employee communication and integration problems resulting from language differences, cultural differences, and geographic dispersion; • difficulties in repatriating or transferring funds from, or converting currencies in, certain countries; • potentially adverse tax consequences, including multiple and possibly overlapping tax regimes, the complexities of foreign value-added tax systems, and changes in tax laws; • lack of familiarity with local laws, customs, and practices, and laws and business practices favoring local competitors or partners; and 41 Table of Contents • interruptions to our business operations and our customers’ business operations subject to events such as war, incidents of terrorism, natural disasters, public health concerns or epidemics (such as the ongoing COVID-19 pandemic), shortages or failures of power, internet, telecommunications, or hosting service providers, cyberattacks or malicious acts, or responses to these events.
Our non-U.S. operations subject us to a variety of risks and challenges, including: • increased management, travel, infrastructure, and legal and financial compliance costs and time associated with having multiple non-U.S. operations, including but not limited to compliance with local employment laws and other applicable laws and regulations; • longer payment cycles, greater difficulty in enforcing contracts, difficulties in collecting accounts receivable, especially in emerging markets, and the likelihood that revenue from non-U.S. system integrators, government contractors, and customers may need to be recognized when cash is received, at least until satisfactory payment history has been established, or upon confirmation of certain acceptance criteria or milestones; • the need to adapt our platforms for non-U.S. customers whether to accommodate customer preferences or local law; • differing regulatory and legal requirements and possible enactment of additional regulations or restrictions on the use, import, or re-export of our platforms or the provision of services, which could delay, restrict, or prevent the sale or use of our platforms and services in some jurisdictions; • compliance with multiple and changing foreign laws and regulations, including those governing employment, privacy, data protection, information security, data transfer, AI, and the risks and costs of non-compliance with such laws and regulations; • new and different sources of competition not present in the United States; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may cause us to withdraw from particular markets, or impact financial results and result in restatements of financial statements and irregularities in financial statements; • volatility in non-U.S. political and economic environments, including by way of examples, the potential effects of the ongoing Russia-Ukraine conflict, as well as economic sanctions the United States and other countries have imposed on Russia, and the ongoing conflict resulting from Hamas’ attack on Israel; 40 Table of Contents • weaker protection of intellectual property rights in some countries and the risk of potential theft, copying, or other compromises of our technology, data, or intellectual property in connection with our non-U.S. operations, whether by state-sponsored malfeasance or other foreign entities or individuals; • volatility and fluctuations in currency exchange rates, including that, because many of our non-U.S. contracts are denominated in U.S. dollars, an increase in the strength of the U.S. dollar in the past has made our products more expensive for non-U.S. dollar denominated customers, which may make doing business with us less appealing to such customers; • management and employee communication and integration problems resulting from language differences, cultural differences, and geographic dispersion; • difficulties in repatriating or transferring funds from, or converting currencies in, certain countries; • potentially adverse tax consequences, including multiple and possibly overlapping tax regimes, the complexities of foreign value-added tax systems, and changes in tax laws; • lack of familiarity with local laws, customs, and practices, and laws and business practices favoring local competitors or partners; and • interruptions to our business operations and our customers’ business operations subject to events such as war, incidents of terrorism, natural disasters, public health concerns or epidemics (such as the COVID-19 pandemic), shortages or failures of power, internet, telecommunications, or hosting service providers, cyberattacks or malicious acts, or responses to these events.
Derivative claims, lawsuits, and proceedings involving breach of fiduciary duty, failure of oversight, corporate waste claims, and other matters have been, and may in the future be, asserted against our officers and directors by our stockholders. In addition, we and certain of our officers and directors were recently sued in purported class action lawsuits and derivative lawsuits.
Derivative claims, lawsuits, and proceedings involving breach of fiduciary duty, failure of oversight, corporate waste claims, and other matters have been, and may in the future be, asserted against our officers and directors by our stockholders. In addition, we and certain of our officers and directors were sued in purported class action lawsuits and derivative lawsuits.
If a product, or component of a product, is classified under the ITAR, or is ineligible for the EAR encryption exception, then those products could be exported outside the United States only if we obtain the applicable export license or qualify for a different license exception.
If a product, or component of a product, is classified under the ITAR, or is ineligible for the EAR encryption exception, then those products could be exported outside the United States only if we obtain the applicable export license or qualify for a different license exemption or exception.
We may not be able to utilize a significant portion of our net operating loss carryforwards and tax credits, which could adversely affect our results of operations. We record an asset for the future tax benefits from unused U.S. federal, state, and non-U.S. net operating losses (“NOLs”) and tax credits subject to a full valuation allowance.
We may not be able to utilize a significant portion of our net operating loss carryforwards and tax credits, which could adversely affect our results of operations. We record an asset for the future tax benefits from unused U.S. federal, state, and foreign net operating losses (“NOLs”) and tax credits subject to a full valuation allowance.
A further downturn in macroeconomic conditions, including rising inflation and interest rates; supply chain disruptions; global political and economic uncertainty; geopolitical tensions, such as the ongoing Russia-Ukraine conflict; a lack of availability of credit; a reduction in business confidence and activity; the curtailment of government or corporate spending; public health concerns or emergencies; financial market volatility; and other factors have in the past, and may in the future, negatively affect the industries to which we sell our platforms and services.
A further downturn in macroeconomic conditions, including heightened interest rates; supply chain disruptions; global political and economic uncertainty; geopolitical tensions, such as the ongoing Russia-Ukraine conflict; a lack of availability of credit; a reduction in business confidence and activity; the curtailment of government or corporate spending; public health concerns or emergencies; financial market volatility; and other factors have in the past, and may in the future, negatively affect the industries to which we sell our platforms and services.
We have received notices, and may continue to receive notices in the future, that claim we have infringed, misappropriated, misused or otherwise violated other parties’ intellectual property rights, and, to the extent we have made or will make more information about our platforms publicly available and become exposed to greater visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation or other violation claims, which is not uncommon with respect to software technologies in particular.
We have received notices, and may continue to receive notices in the future, that claim we have infringed, misappropriated, misused or otherwise violated other parties’ intellectual property rights, and, to the 35 Table of Contents extent we have made or will make more information about our platforms publicly available and become exposed to greater visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation or other violation claims, which is not uncommon with respect to software technologies in particular.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year 2023. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year 2024. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Bribery Act, and other laws may result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, as well as severe criminal or civil sanctions, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities and adverse effects on our 43 Table of Contents reputation, which could negatively affect our business, results of operations, financial condition, and growth prospects.
Bribery Act, and other laws may result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, as well as severe criminal or civil sanctions, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities and adverse effects on our reputation, which could negatively affect our business, results of operations, financial condition, and growth prospects.
Failure to comply with governmental laws and regulations could harm our business, and we have been, and expect to be, the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations.
Failure to comply with governmental laws and regulations or contractual requirements could harm our business, and we have been, and expect to be, the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations.
We take precautions to prevent our offerings from being exported in violation of these laws, including: (i) seeking to proactively classify our platforms and obtain authorizations for the export and/or import of our platforms where appropriate, (ii) implementing certain technical controls and screening practices to reduce the risk of violations, and (iii) requiring compliance with U.S. export control and sanctions obligations in customer and vendor contracts.
We take precautions to prevent our offerings from being exported in violation of these laws, including: (i) seeking to proactively classify our platforms and obtain authorizations for the export and/or import of our platforms where appropriate, (ii) implementing certain technical 43 Table of Contents controls and screening practices to reduce the risk of violations, and (iii) requiring compliance with U.S. export control and sanctions obligations in customer and vendor contracts.
Determining our provision for income taxes requires significant management judgment, and the ultimate tax outcome may be uncertain.
Determining our provision for income taxes requires management judgment, and the ultimate tax outcome may be uncertain.
The California state legislature passed the California Consumer Privacy Act (“CCPA”) in 2018 and California voters approved a ballot measure subsequently establishing the California Privacy Rights Act (“CPRA”) in 2020, which regulate the processing of personal information of California residents and increase the privacy and security obligations of entities handling certain personal information of California residents, including requiring covered companies to provide new disclosures to California consumers, and affords such consumers new abilities to opt-out of certain sales of personal information.
The California state legislature passed the California Consumer Privacy Act (“CCPA”) in 2018 and California voters approved a ballot measure subsequently establishing the California Privacy Rights Act (“CPRA”) in 2020, which regulate the processing of personal information of California residents and increase the privacy and security obligations of entities handling certain personal information of California residents, 38 Table of Contents including requiring covered companies to provide new disclosures to California consumers, and affords such consumers new abilities to opt-out of certain sales of personal information.
However, because of the voting rights of the shares of Class F common stock, in the event that our Founders and their affiliates have less than 49.999999% of the Voting Power prior to giving effect to the voting power of the Class F common stock, future issuances of Class A common stock to stockholders other than our Founders and their affiliates will generally not result in dilution of the voting power of our Founders who are then party to the Founder Voting Agreement or their affiliates, but rather, will correspondingly increase the voting power of the Class F common stock.
However, because of the voting rights of the shares of Class F common stock, in the event that our Founders and their affiliates have less than 49.999999% of the Voting Power prior to giving effect to the voting power of the Class F common stock, future issuances of Class A common stock to stockholders other than our Founders and their affiliates will generally not result in dilution of the voting power of our Founders who are then party to the Founder Voting Agreement or their affiliates, but rather, will correspondingly increase the voting power of the Class F common 58 Table of Contents stock.
The requirements of these rules and regulations may continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. 59 Table of Contents The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
The requirements of these rules and regulations may continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Results of Operations” ), customer relationship management activities, billing and order management, and financial accounting services. Additionally, we rely on computer hardware purchased in order to deliver our platforms and services.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Results of Operations” ), customer relationship management activities, billing and order management, cybersecurity program, and financial accounting services. Additionally, we rely on computer hardware purchased in order to deliver our platforms and services.
If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to fundamentally change our business activities and practices or modify our platforms, which could have an adverse effect on our business.
If so, in addition to the possibility of fines, lawsuits, investigations, and other claims or proceedings, we could be required to fundamentally change our business activities and practices or modify our platforms, which could have an adverse effect on our business.
If our Founders and their affiliates, individually or collectively, retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, 57 Table of Contents individually or collectively, continue to control a significant portion of the combined voting power of our Class A common stock and Class B common stock, even without the use of the Class F common stock, and such voting power could enable holders of Class B common stock to effectively control all matters subject to the stockholder approval.
If our Founders and their affiliates, individually or collectively, retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, individually or collectively, continue to control a significant portion of the combined voting power of our Class A common stock and Class B common stock, even without the use of the Class F common stock, and such voting power could enable holders of Class B common stock to effectively control all matters subject to the stockholder approval.
Further, if 54 Table of Contents there are only two Founders who are party to the Founder Voting Agreement, one Founder will be able to effectively defeat any stockholder action, except for the election of directors or other matters that are decided by a plurality of votes, if his instruction to vote the shares of Class F common stock differs from the other Founder.
Further, if there are only two Founders who are party to the Founder Voting Agreement, one Founder will be able to effectively defeat any stockholder action, except for the election of directors or other matters that are decided by a plurality of votes, if his instruction to vote the shares of Class F common stock differs from the other Founder.
We cannot yet fully predict the impact of the State Privacy Laws and other new laws or regulations on our business or operations, but developments regarding these and all privacy and data protection laws and regulations around the world may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to maintain compliance on an ongoing basis.
We cannot yet fully assess the impact of these laws and other new laws or regulations on our business or operations, but developments regarding these and all privacy and data protection laws and regulations around the world may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to maintain compliance on an ongoing basis.
Shares of our common stock designated by one or more of our Founders pursuant to our amended and restated certificate of incorporation may be voted or not voted by such Founders or their affiliates in their discretion and will reduce the voting power exercised in accordance with the decision of a majority in number of the Founders who are then party to the Founder Voting Agreement.
Shares of our common stock designated by one or more of our Founders pursuant to our amended and restated certificate of incorporation may be voted or not voted by such Founders or their affiliates in their discretion and will reduce the voting 56 Table of Contents power exercised in accordance with the decision of a majority in number of the Founders who are then party to the Founder Voting Agreement.
Any new export restrictions, new legislation, changes in economic sanctions, or shifting approaches in the enforcement or scope of existing 44 Table of Contents regulations, or in the countries, persons, or technologies targeted by such regulations, could result in decreased use of our platforms by existing customers with non-U.S. operations, declining adoption of our platforms by new customers with non-U.S. operations, limitation of our expansion into new markets, and decreased revenue.
Any new export restrictions, new legislation, changes in economic sanctions, or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or technologies targeted by such regulations, could result in decreased use of our platforms by existing customers with non-U.S. operations, declining adoption of our platforms by new customers with non-U.S. operations, limitation of our expansion into new markets, and decreased revenue.
Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics such as COVID-19, terrorism, political unrest, cyberattacks including as may be exacerbated by the ongoing Russia-Ukraine conflict, geopolitical tensions including those related to the invasion of Ukraine, the effects of climate change such as drought, wildfires, increased storm severity, and sea level rise, telecommunications failure, vandalism, and other events beyond our control.
Our business operations are subject to interruption by natural disasters, earthquakes, flooding, fire, power shortages, pandemics (such as COVID-19), terrorism, such as Hamas’ attack against Israel, political unrest, cyberattacks including as may be exacerbated by the ongoing Russia-Ukraine conflict, geopolitical tensions including those related to the invasion of Ukraine, the effects of climate change such as drought, wildfires, increased storm severity, and sea level rise, telecommunications failure, vandalism, and other events beyond our control.
Some countries and regions, including the EU, are considering or have passed legislation that imposes significant obligations in 39 Table of Contents connection with privacy, data protection, and information security that could increase the cost and complexity of delivering our platforms and services, including the European General Data Protection Regulation (“GDPR”) which took effect in May 2018.
Some countries and regions, including the EU, are considering or have passed legislation that imposes significant obligations in connection with privacy, data protection, and information security that could increase the cost and complexity of delivering our platforms and services, including the European General Data Protection Regulation (“GDPR”) which took effect in May 2018.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in fiscal or contracting policies or decreases in available government funding; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government and foreign government agencies; • ability to achieve or maintain one or more government certifications, including, but not limited to, our existing FedRAMP, IL5, and IL6 authorizations; • changes in the political environment, including before or after a change to the leadership within the government administration, or due to the ongoing Russia-Ukraine conflict and related economic sanctions and regional instability, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards the capabilities that we offer, especially in the areas of national defense, cybersecurity, and critical infrastructure, including the financial, energy, telecommunications, and healthcare sectors; • changes in the government’s attitude towards us as a company or our platforms as viable or acceptable software solutions; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; 46 Table of Contents • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies; • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the coronavirus pandemic; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in fiscal or contracting policies or decreases in available government funding; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government and foreign government agencies; • ability to achieve or maintain one or more government certifications, including, but not limited to, our existing FedRAMP, IL2, IL4, IL5, and IL6 authorizations; • changes in the political environment, including before or after a change to the leadership within the government administration, or due to ongoing conflicts such as the Russia-Ukraine conflict and related economic sanctions or the conflict resulting from Hamas’ attack on Israel, and regional instability, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards the capabilities that we offer, especially in the areas of national defense, cybersecurity, and critical infrastructure, including the financial, energy, telecommunications, and healthcare sectors; • changes in the government’s attitude towards us as a company or our platforms as viable or acceptable software solutions; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies, for example in connection with an extended federal government shutdown; 46 Table of Contents • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the COVID-19 pandemic; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors.
Although we have limitation of liability provisions in our standard software licensing and service agreement terms and conditions, these provisions may not be enforceable in some circumstances, may vary in levels of protection across our agreements, or may not fully or effectively protect us from such claims and related liabilities and costs.
Although we have limitation of liability provisions in our standard 36 Table of Contents software licensing and service agreement terms and conditions, these provisions may not be enforceable in some circumstances, may vary in levels of protection across our agreements, or may not fully or effectively protect us from such claims and related liabilities and costs.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Additional information regarding certain of the lawsuits we are involved in is described further in Note 8.
These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Additional information 42 Table of Contents regarding certain of the lawsuits we are involved in is described further in Note 8.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price 44 Table of Contents of our Class A common stock.
Additionally, post-Brexit updates to U.K. data protection laws and regulations, while largely conforming to EU GDPR standards paving the way for a 2021 European Commission adequacy determination for export of personal data from the European Economic Area to the U.K., may change over time as the U.K. and its regulator, the Information Commissioner’s Office, continue to examine its global market standing.
Additionally, post-Brexit updates to United Kingdom (“U.K.”) data protection laws and regulations, while largely conforming to EU GDPR standards paving the way for a 2021 European Commission adequacy determination for export of personal data from the European Economic Area to the U.K., may change over time as the U.K. and its regulator, the Information Commissioner’s Office, continue to examine its global market standing.
Noncompliance with applicable regulations or requirements could subject us to investigations, administrative proceedings, sanctions, enforcement actions, disgorgement of profits, fines, damages, litigation, civil and criminal penalties, termination of contracts, exclusion from sales channels or sales opportunities, injunctions, or other consequences.
Noncompliance with applicable regulations or requirements could subject us to investigations, administrative proceedings, sanctions, enforcement actions, disgorgement of profits, fines, damages, litigation, civil and criminal penalties, 41 Table of Contents termination of contracts, exclusion from sales channels or sales opportunities, injunctions, or other consequences.
We could also be subject to audits in states and non-U.S. jurisdictions for which we have not accrued tax liabilities. One or more states or countries may seek to impose incremental or new sales, use, or other tax collection obligations on us or may determine that such taxes should have, but have not been, paid by us.
We could also be subject to audits in states and foreign jurisdictions for which we have not accrued tax liabilities. One or more states or countries may seek to impose incremental or new sales, use, or other tax collection obligations on us or may determine that such taxes should have, but have not been, paid by us.
Many of our customers use our platforms in applications that are critical to their businesses or missions and may have a lower risk tolerance to defects in our platforms than to defects in other, less critical, software products.
Many of our customers use our platforms in applications that are critical to their businesses or missions and may have a lower risk tolerance to errors, failures, defects, or bugs in our platforms than in other, less critical, software products.
It is possible, however, that we could face sales tax, VAT, or GST audits and that our liability for these taxes could exceed our estimates as state and non-U.S. tax authorities could still assert that we are obligated to collect additional tax amounts from our customers and remit those taxes to those authorities.
It is possible, however, that we could face sales tax, VAT, or GST audits and that our liability for these taxes could exceed our estimates as state and foreign tax authorities could still assert that we are obligated to collect additional tax amounts from our customers and remit those taxes to those authorities.
Any failure or perceived failure by us or our platforms to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the United States, EU, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations. 40 Table of Contents Our non-U.S. sales and operations subject us to additional risks and regulations that can adversely affect our results of operations.
Any failure or perceived failure by us or our platforms to comply with the laws, regulations, directives, policies, industry standards, or legal obligations of the United States, EU, or other governmental or non-governmental bodies at the regional, national, or supra-national level relating to privacy, data protection, or information security, or any security incident that results in actual or suspected loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
Our successes to date have primarily come from customers in relatively stable and developed countries, but we are in the process of entering new and emerging markets in non-U.S. countries, including with COVID-19 response efforts and defense, law enforcement, national security, and other government agencies, as part of our growth strategy.
Our successes to date have primarily come from customers in relatively stable and developed countries, but we are in the process of entering new and emerging markets in non-U.S. countries, including with law enforcement, national security, and other government agencies, as part of our growth strategy.
If we combine our proprietary software with open source software in a certain manner, we could, under certain provisions of the open source licenses, be required to release the source code of our proprietary software.
If we combine our proprietary 37 Table of Contents software with open source software in a certain manner, we could, under certain provisions of the open source licenses, be required to release the source code of our proprietary software.
While we have established procedures, including a review 38 Table of Contents process for any such contributions, which is designed to protect any code that may be competitively sensitive, we cannot guarantee that this process has always been applied consistently.
While we have established procedures, including a review process for any such contributions, which is designed to protect any code that may be competitively sensitive, we cannot guarantee that this process has always been applied consistently.
Substantially all of 51 Table of Contents these shares may be immediately sold, although sales by our affiliates remain subject to compliance with the volume limitations of Rule 144.
Substantially all of these shares may be immediately sold, although sales by our affiliates remain subject to compliance with the volume limitations of Rule 144.
Subject to compliance with Rule 144 or the availability of an alternative exemption, the shares issued upon exercise of stock options or upon settlement of RSUs will be available for immediate resale in the United States in the open market.
Subject to compliance with Rule 144 or the availability of an alternative exemption, the shares issued upon exercise of stock options or stock appreciation rights (“SARs”), or upon settlement of RSUs or P-RSUs will be available for immediate resale in the United States in the open market.
Natural disasters, including climate change, and other catastrophic events beyond our control could harm our business. Natural disasters, including climate change, or other catastrophic events may cause damage or disruption to our operations, non-U.S. commerce and the global economy, and thus could have a negative effect on us.
Natural disasters, including climate change, or other catastrophic events may cause damage or disruption to our operations, non-U.S. commerce and the global economy, and thus could have a negative effect on us.
In the event that there is a failure of warranties in such agreements, we are generally obligated to correct the product or service to conform to the warranty provision as set forth in the applicable SLA, or, if we are unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term).
In the event that there is a failure of warranties in such agreements, we are generally obligated to correct the product or service to conform to the warranty provision, or, if we are unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term).
We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to fulfill existing obligations, make enhancements, or develop new platforms and features could be limited.
We may be 39 Table of Contents unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to fulfill existing obligations, make enhancements, or develop new platforms and features could be limited.
Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, natural disasters, public health crises such as the ongoing COVID-19 pandemic, geopolitical tensions such as those that may be caused by the ongoing Russia-Ukraine conflict, or acts of misconduct.
Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences such as earthquakes, floods, fires, power loss, telecommunication failures, cybersecurity threats, terrorist attacks, such the ongoing conflict resulting from Hamas’ attack on Israel, natural disasters, public health crises (such as 33 Table of Contents the COVID-19 pandemic), geopolitical tensions such as those that may be caused by the ongoing Russia-Ukraine conflict, or acts of misconduct.
Thiel as Designated Founders’ Excluded Shares represented less than 5% of the voting power of our outstanding capital stock as of February 14, 2023. In the future, Mr. Thiel or our other Founders could designate additional shares as Designated Founders’ Excluded Shares.
Thiel as Designated Founders’ Excluded Shares represented less than 5% of the voting power of our outstanding capital stock as of February 13, 2024. In the future, Mr. Thiel or our other Founders could designate additional shares as Designated Founders’ Excluded Shares.
In such an event, we may be required, or we may choose, for customer relations or other reasons, to expend additional resources in order to help correct any such errors, failures, or bugs.
In such an event, we may be required, or we have chosen, or in the future may choose, for customer relations or other reasons, to expend additional resources in order to help correct any such errors, failures, or bugs.
Federal, state, and non-U.S. taxing bodies often place limitations on NOLs and tax credit carryforward benefits. As a result, we may not be able to utilize our NOLs and tax credits.
Federal, state, and foreign taxing bodies often place limitations on NOLs and tax credit carryforward benefits. As a result, we may not be able to utilize our NOLs and tax credits.
Because of the voting rights of the Class F common stock, such issuances will instead correspondingly increase the voting power of the 55 Table of Contents Class F common stock.
Because of the voting rights of the Class F common stock, such issuances will instead correspondingly increase the voting power of the Class F common stock.
In the past, errors have affected the performance of our platforms and can also delay the development or release of new platforms or capabilities or new versions of platforms, adversely affect our reputation and our customers’ willingness to buy platforms from us, and adversely affect market acceptance or perception of our platforms.
Errors, failures, defects, and bugs have affected the performance of our platforms and can also delay the development or release of new platforms, products or capabilities or upgrades or new versions of platforms, adversely affect our reputation and our customers’ willingness to buy platforms from us, and adversely affect market acceptance or perception of our platforms.
In recent months, the U.S. dollar has strengthened compared to other currencies, which has increased and may continue to increase the real cost of our platforms to our customers outside of the United States, which could reduce demand for our platforms and adversely affect our financial condition and results of operations.
In prior years, the U.S. dollar strengthened compared to other currencies, which increased and has the potential to increase in the future the real cost of our platforms to our customers outside of the United States, which could reduce demand for our platforms and adversely affect our financial condition and results of operations.
If we cannot license rights or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of one 36 Table of Contents or more of our platforms or features, we could lose existing customers, and we may be unable to compete effectively.
If we cannot license rights or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of one or more of our platforms or features, we could lose existing customers, and we may be unable to compete effectively. Any of these results would harm our business, financial condition, and results of operations.
Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our Colorado headquarters have experienced and may continue to experience, climate-related events and at an increasing frequency, including drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires.
For example, our Colorado headquarters have experienced and may continue to experience, climate-related events and at an increasing frequency, including drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with the wildfires.
Moreover, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, 34 Table of Contents financial condition, and results of operations could be adversely affected. The provisioning of additional cloud hosting capacity requires lead time.
Moreover, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition, and results of operations could be adversely affected.
Because we offer very complex technology platforms, undetected errors, defects, failures, or bugs have occurred and may in the future occur, especially when platforms or capabilities are first introduced or when new versions or other product or infrastructure updates are released.
Because we offer very complex technology platforms, various errors, defects, failures, or bugs have occurred and may in the future occur, especially when platforms, products or capabilities are introduced, configured or reconfigured, or when upgrades, new versions or other product or infrastructure updates are deployed, installed, configured, or released.
Such litigation, including the recent purported class action lawsuits and derivative lawsuits filed against us and certain of our officers and directors, could result in substantial costs and a diversion of our management’s attention and resources and harm our business, financial condition, and results of operations.
Such litigation, including the purported class action lawsuits and derivative lawsuits filed against us and certain of our officers and directors, could result in substantial costs and a diversion of our management’s attention and resources and harm our business, financial condition, and results of operations. Further, in the future, we may be the target of additional litigation of this type.
Uncertainty about global and regional economic conditions, a downturn in the technology sector or any sectors in which our customers operate, or a reduction in information technology spending even if economic conditions are stable, could adversely impact our business, financial condition, and results of operations in a number of ways, including longer sales cycles, lower prices for our platforms 58 Table of Contents and services, material default rates among our customers, contract terminations or renegotiations by our customers, reduced sales of our platforms or services, and lower or no growth.
Uncertainty about global and regional economic conditions, a downturn in the technology sector or any sectors in which our customers operate, or a reduction in information technology spending even if economic conditions are stable, could adversely impact our business, financial condition, and results of operations in a number of ways, including longer sales cycles, extended or alternative payment terms or delayed payments from our customers, lower prices for our platforms and services, material default rates among our customers, contract terminations or renegotiations by our customers, reduced sales of our platforms or services, difficulty attracting new customers or retaining and expanding our relationships with existing customers, and lower or no growth.
We generally provide a warranty for our software products and services and an SLA for our performance of software operations via our O&M services to customers.
We generally provide a warranty for our software products and services and an SLA for our performance of software operations.
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro and the British pound sterling (“GBP”).
We may face exposure to foreign currency exchange rate fluctuations. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese yen (“JPY”), and British pound sterling (“GBP”).
Accordingly, if the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be adversely affected. We may face exposure to foreign currency exchange rate fluctuations.
Accordingly, if the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be adversely affected.
While the number of outstanding Corporation Equity Securities may exceed the number of shares of our outstanding capital stock, as a comparison, there were 2,099,074,683 shares of our common stock outstanding as of December 31, 2022.
While the number of outstanding Corporation Equity Securities may exceed the number of shares of our outstanding capital stock, as a comparison, there were 2,200,127,714 shares of our common stock outstanding as of December 31, 2023.
We are required to annually comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.
We are required to annually comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. 60 Table of Contents Our independent registered public accounting firm must also formally attest to the effectiveness of our internal control over financial reporting annually.
Any errors or delays in releasing new software or new versions of platforms or allegations of unsatisfactory performance, errors, defects, or failures in released software could cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in redesigning the software, cause us to lose significant customers, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, results of operations and financial condition.
Any errors or delays in releasing new software or new versions of platforms, allegations of unsatisfactory performance, real or perceived errors, defects, or failures, such as data loss, or untimely or ineffective upgrades, patches, or other fixes to address errors, failures, defects, or bugs, could increase the risk of security vulnerabilities, cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in redesigning the software, cause us to lose significant customers, cause us to issue credits or refunds, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, results of operations and financial condition.
Beginning January 1, 2022, all U.S. and non-U.S. based R&E expenditures must be capitalized and amortized over five years and 15 years, respectively. Beginning January 1, 2022, we began capitalizing and amortizing R&E expenditures over five years for domestic research and 15 years for international research rather than expensing these costs as incurred.
Beginning January 1, 2022, we began capitalizing and amortizing R&E expenditures over five years for domestic research and 15 years for international research rather than expensing these costs as incurred.
Consequently, stockholders must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Consequently, stockholders must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Additionally, as we expand our non-U.S. operations, a larger portion of our operating expenses may be denominated in local currencies. Volatility in exchange rates and global financial markets is expected to continue due to political and economic uncertainty globally.
However, as we expand our non-U.S. operations, a larger portion of our operating expenses may be denominated in local currencies and we may also hold monetary assets and liabilities in currencies other than the respective subsidiaries’ functional currency. Volatility in exchange rates and global financial markets is expected to continue due to political and economic uncertainty globally.
If our existing NOLs are subject to limitations arising from an ownership change, our ability to utilize NOLs could be limited by 45 Table of Contents Section 382 of the Code, and a certain amount of our prior year NOLs could expire without benefit.
If our existing NOLs are subject to limitations arising from an ownership change, our ability to utilize NOLs could be limited by Section 382 of the Code, and a certain amount of our prior year NOLs could expire without benefit. Changes in the law may also impact our ability to use our NOLs and tax credit carryforwards.
Our business depends on the economic health of our current and prospective customers and overall demand for technology. In addition, the purchase of our platforms and services is often discretionary and typically involves a significant commitment of capital and other resources. Over the past year, the United States, the EU, and the U.K. have experienced historically high levels of inflation.
Our business depends on the economic health of our current and prospective customers and overall demand for technology. In addition, the purchase of our platforms and services is often discretionary and typically involves a significant commitment of capital and other resources.
Continued increases in the value of the U.S. dollar and decreases in the value of foreign currencies could result in the dollar equivalent of our revenues being lower, result in increased expenses for our non-U.S. operations, or otherwise impact our financial condition and results of operations.
Continued increases in the value of the U.S. dollar and decreases in the value of foreign currencies could result in the dollar equivalent of our revenues being lower, result in increased expenses for our non-U.S. operations, or otherwise impact our financial condition and results of operations. 59 Table of Contents Natural disasters, including climate change, and other catastrophic events beyond our control could harm our business.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. While we seek to mitigate our business risks associated with climate change, there are inherent climate-related risks wherever business is conducted.
In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We have been, and may continue to be, subject to increased regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
Our multi-class capital structure may make us ineligible for inclusion in any of these and certain other indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices would not invest in our stock. These policies may depress our valuation compared to those of other similar companies that are included.
In addition, our multi-class governance structure may make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track such indices would not invest in our stock.
In the past, following periods of volatility in the overall market and the trading price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
Stock prices of many companies, including technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. In the past, following periods of volatility in the overall market and the trading price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
Even if our patents issue in a form that covers our technology, enforcing patents against suspected infringers is time consuming, expensive, and involves risks associated with litigation, including the risk the suspected infringers file counterclaims against us. 35 Table of Contents In addition, any of our patents, copyrights, trademarks, or other intellectual property or proprietary rights may be challenged, narrowed, invalidated, held unenforceable, or circumvented in litigation or other proceedings, including, where applicable, opposition, re-examination, inter partes review, post-grant review, interference, nullification and derivation proceedings, and equivalent proceedings in foreign jurisdictions, and such intellectual property or other proprietary rights may be lost or no longer provide us meaningful competitive advantages.
In addition, any of our patents, copyrights, trademarks, or other intellectual property or proprietary rights may be challenged, narrowed, invalidated, held unenforceable, or circumvented in litigation or other proceedings, including, where applicable, opposition, re-examination, inter partes review, post-grant review, interference, nullification and derivation proceedings, and equivalent proceedings in foreign jurisdictions, and such intellectual property or other proprietary rights may be lost or no longer provide us meaningful competitive advantages.
Except for certain equitable adjustments as provided in our amended and restated certificate of incorporation, future issuances of Corporation Equity Securities by us will not increase the Ownership Threshold that must be met on any applicable record date and, accordingly, will decrease the percentage of outstanding Corporation Equity Securities represented by the Ownership Threshold. 56 Table of Contents Upon the withdrawal, or removal, of one or more of our Founders from the Founder Voting Agreement (including as a result of death or disability), the Ownership Threshold that must be met on the applicable record date will be reduced on a pro rata basis based on the ownership of Corporation Equity Securities of the Founders and certain of their affiliates as of August 10, 2020.
Upon the withdrawal, or removal, of one or more of our Founders from the Founder Voting Agreement (including as a result of death or disability), the Ownership Threshold that must be met on the applicable record date will be reduced on a pro rata basis based on the ownership of Corporation Equity Securities of the Founders and certain of their affiliates as of August 10, 2020.
Any negative outcome from such inquiries or investigations or failure to prevail in any possible civil or criminal litigation could adversely affect our business, reputation, financial condition, results of operations, and growth prospects. 42 Table of Contents We have previously been, and are currently, or in the future may become, involved in a number of legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other of these matters could negatively impact our business, financial conditions, and results of operations.
We have previously been, and are currently, or in the future may become, involved in a number of legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other of these matters could negatively impact our business, financial conditions, and results of operations.
A number of proposals are pending before U.S. federal, state, and foreign legislative and regulatory bodies that could significantly affect our business.
A number of proposals are pending before U.S. federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. For example, despite recent developments including the EU’s adoption of an adequacy decision for the EU-U.S.
The CCPA went into effect on January 1, 2020, and the California Attorney General may bring enforcement actions, with penalties for violations of the CCPA.
The CCPA went into effect on January 1, 2020, and the California Attorney General may bring enforcement actions, with penalties for violations of the CCPA. The CPRA went into effect on January 1, 2023 instilling enforcement authority in a new dedicated regulatory body, the California Privacy Protection Agency.
As of December 31, 2022, our Founders were 55, 55, and 40 years old.
As of December 31, 2023, our Founders were 56, 56, and 41 years old.
Additionally, shares of our Class B common stock may be transferred (without converting into shares of Class A common stock) to, among others, our Founders or their affiliates, which could result in our Founders and their affiliates or other stockholders obtaining additional voting control.
Additionally, shares of our Class B common stock may be transferred (without converting into shares of Class A common stock) to, among others, our Founders or their affiliates, which could result in our Founders and their affiliates or other stockholders obtaining additional voting control. 57 Table of Contents Additionally, certain provisions of our amended and restated certificate of incorporation related to the calculation of the voting power of the Class F common stock may have an adverse effect on our stockholders other than our Founders.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe do not currently anticipate entering into new Investment Agreements to purchase, or commit to purchase, securities of special purpose acquisition companies. 78 Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Biggest changeThe primary objective of our investment activities and strategies are focused on the preservation of capital and supporting our liquidity requirements. Due to the short-term nature of the financial instruments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, or results of operations. 79
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, or results of operations. 80
We have experienced, and may continue to experience, fluctuations in net loss as a result of transaction gains or losses related to remeasuring certain assets and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change.
We have experienced, and may continue to experience, fluctuations in net income (loss) as a result of transaction gains or losses related to remeasuring certain asset and liability balances that are denominated in foreign currencies. These exposures may change over time as business practices evolve and economic conditions change.
Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro and GBP.
Our results of current and future operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in JPY, Euro, and GBP.
These Investments are often in early- or growth-stage companies that have minimal public trading history; as such the fair value of these Investments may fluctuate depending on the financial outcome and prospects of the Investees, as well as global market conditions including recent and ongoing volatility related to the impacts of the ongoing COVID-19 pandemic, the ongoing Russia-Ukraine conflict, and rising interest rates.
These equity securities are often in early- or growth-stage companies that have minimal public trading history; as such the fair value of these equity securities, and the value of our equity holdings, may fluctuate depending on the financial outcome and prospects of the issuers, as well as global market conditions, including recent and ongoing volatility related to the impacts of the ongoing Russia-Ukraine and Israel conflicts, and heightened interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in the value of our investments, interest rates, foreign exchange, and inflation. Market Risk As of December 31, 2022, we had outstanding investments in marketable securities valued at $35.1 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in the value of our investments, interest rates, foreign currency exchange, and inflation. Market Risk As of December 31, 2023, we held outstanding shares of publicly-traded equity securities valued at $18.3 million.
We have sold, and may continue to sell, some or all of our existing investments.
We have sold, and may continue to sell, some or all of such existing equity securities.
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Additionally, investing in early- or growth-stage companies carries inherent risks because, among other things, the technologies or products that are being developed by these companies are typically in the early phases and may never materialize or they may not achieve their growth or other business objectives, and they have and may continue to experience a decline in financial condition, which could result in a loss of all or a substantial part of our investment in these companies.
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As of December 31, 2023, we held outstanding shares of privately-held equity securities valued at $32.6 million. Valuations of our privately-held equity securities are complex due to, among other things, the lack of liquidity and the lack of readily available market data.
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We record gains or losses as the fair value of these Investments change and as we sell them. We anticipate additional volatility to our consolidated statements of operations due to changes in market prices and declines in financial conditions of Investees, and as such gains and losses are realized.
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Uncertainties in the global economic climate and financial markets, or in the business, financial results, 79 or conditions of companies we hold equity in, could adversely impact the valuations of such companies and, therefore, result in an impairment or downward adjustment in the value of our holdings.
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During the fiscal year ended December 31, 2022, net unrealized losses of $159.0 million and net realized losses of $113.1 million related to marketable securities were recorded in other income (expense), net on the consolidated statements of operations. We do not currently anticipate entering into new Investment Agreements to purchase, or commit to purchase, securities of special purpose acquisition companies.
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We have and may continue to accept securities as consideration or invest in securities, which may contribute to additional volatility to our consolidated statements of operations. Interest Rate Risk Our cash, cash equivalents, restricted cash, and available-for-sale debt securities consist of cash, short-term U.S. treasury securities, money market funds, and certificates of deposit.
Removed
Interest Rate Risk Our cash, cash equivalents, and restricted cash consist of cash, certificates of deposit, and money market funds.
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Our primary investment policy and strategies are focused on the preservation of capital and supporting our liquidity requirements; however, to a lesser extent we have made and may continue to make investments in early- and growth-stage companies as disclosed in Note 4.
Removed
Investments and Fair Value Measurements in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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