Notes to Unaudited Condensed Consolidated Financial Statements
(1)Organization
Planet Labs PBC (“Planet,” or the “Company”) was founded to design, construct, and launch constellations of satellites with the intent of providing high cadence geospatial data delivered to customers via an online platform. The Company’s mission is to use space to help life on Earth, by imaging the world every day and making global change visible, accessible, and actionable. The Company is headquartered in San Francisco, California, with operations throughout the United States (“U.S.”), Canada, Asia and Europe. The Company has wholly-owned foreign subsidiaries in Canada, Germany, Luxembourg, Singapore and the Netherlands.
On July 7, 2021, Planet Labs Inc. (“Former Planet”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with dMY Technology Group, Inc. IV (“dMY IV”), a special purpose acquisition company (“SPAC”) incorporated in Delaware on December 15, 2020, Photon Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of dMY IV (“First Merger Sub”), and Photon Merger Sub Two, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of dMY IV (“Second Merger Sub”). Pursuant to the Merger Agreement, upon the favorable vote of dMY IV’s stockholders on December 3, 2021, on December 7, 2021, First Merger Sub merged with and into Former Planet (the “Surviving Corporation”), with Former Planet surviving the merger as a wholly owned subsidiary of dMY IV (the “First Merger”), and pursuant to Former Planet’s election immediately following the First Merger and as part of the same overall transaction as the First Merger, the Surviving Corporation merged with and into dMY IV, with dMY IV surviving the merger (the “Business Combination”). Following the completion of the Business Combination, dMY IV was renamed Planet Labs PBC. See Note 3 for further details of the Business Combination.
Former Planet was incorporated in the state of Delaware on December 28, 2010. Former Planet was originally incorporated as Cosmogia Inc., and the name was subsequently changed to Planet Labs Inc. on June 24, 2013.
(2)Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying interim condensed consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements for the periods presented. Operating results for the three months ended April 30, 2022 are not necessarily indicative of the results expected for the fiscal year ending January 31, 2023 or any other future period.
The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and include the accounts of Planet Labs PBC and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year end is January 31.
Certain notes or other information that are normally required by U.S. GAAP have been condensed or omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022 (the “2022 Form 10-K”).
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, whereby dMY IV was treated as the acquired company and Former Planet was treated as the acquirer. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Former Planet issuing stock for the net assets of dMY IV, accompanied by a recapitalization. The net assets of dMY IV were stated at historical cost, with no goodwill or other intangible assets recorded.
Former Planet was determined to be the accounting acquirer based on the following predominant factors:
•Former Planet’s existing stockholders have the majority voting interest in the combined entity;
•Former Planet had the ability to nominate a majority of the initial members of the board of directors of the combined entity;
•Former Planet’s senior management became the senior management of the combined entity; and
•Former Planet is the larger entity based on historical operating activity and has the larger employee base.
The consolidated assets, liabilities and results of operations prior to the Business Combination are those of Former Planet. The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the exchange ratio of approximately 1.53184 (the “Exchange Ratio”) established in the Business Combination. See Note 3, Business Combination, for additional details.
Liquidity
Since its inception, the Company has incurred net losses and negative cash flows from operations. The Company expects to incur additional operating losses and negative cash flows from operations as it seeks to expand its business. As of April 30, 2022 and January 31, 2022, the Company had $484.5 million and $490.8 million of cash and cash equivalents, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The significant estimates and assumptions that affect the Company’s unaudited condensed consolidated financial statements include, but are not limited to, the useful lives of property and equipment, capitalized internal-use software and intangible assets, allowance for credit losses, estimates related to revenue recognition, including the assessment of performance obligations within a contract and the determination of standalone selling price (“SSP”) for each performance obligation, the fair value of common stock and other assumptions used to measure stock-based compensation, the fair value of convertible notes and warrants, the fair value of assets acquired, and liabilities assumed from business combinations, the impairment of long-lived assets and goodwill, the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions, and contingencies.
These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, due to the inherent uncertainties in making estimates, actual results could differ from those estimates and such differences may be material to the unaudited condensed consolidated financial statements.
Due to the COVID-19 Coronavirus pandemic (“COVID-19” or “COVID-19 pandemic”), and current events involving Russia and Ukraine, there is ongoing uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or assumptions or a revision of the carrying value of its assets or liabilities. These estimates and assumptions may change in the future, as new events occur and additional information is obtained.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
See Note 4, Revenue, for revenue by geographic region. See Note 7, Balance Sheet Components, for long-lived assets by geographic region.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. By their nature, all such financial instruments involve risks, including the credit risk of nonperformance by counterparties. The Company’s cash and cash equivalents are deposited in checking and money market accounts with financial institutions in the U.S. and checking accounts with financial institutions in Canada, Germany, the Netherlands and Singapore that management believes are of high credit quality. The Company generally does not require collateral to support the obligations of the counterparties and deposits at banks may, at times, be in excess of federal or national insured limits or deposit-guarantee limits in each of the respective countries. The Company has not experienced material losses on its deposits of cash and cash equivalents. The maximum amount of loss at April 30, 2022 that the Company would incur if parties to cash and money market funds failed completely to perform according to the terms of the contracts is $483.6 million.
Accounts receivable are typically unsecured and are derived from revenue earned from customers across various countries. As of April 30, 2022, one customer accounted for 35% of accounts receivable. As of January 31, 2022, four customers accounted for 23%, 14%, 12% and 10% of accounts receivable, respectively.
For the three months ended April 30, 2022, two customers accounted for 11% and 10% of revenue.
The Company’s products require continued approval from the Federal Communications Commission (“FCC”) and other international regulatory agencies for the Company to continue its operations. There can be no assurance that the Company’s products will continue to receive the necessary approvals or that its operations will be supported by the U.S. government or other governments. If the Company was denied such approvals, if such approvals were delayed, or if the U.S. government’s or other governments’ policies change, these events may have a material adverse impact on the Company’s financial position and results of operations.
The Company contracts with certain third-party service providers to launch satellites. Service providers who provide these services are limited. The inability of launch service providers to contract with the Company could materially impact future operating results.
Significant Accounting Policies
The Company’s significant accounting policies are included in Note 2 of its Consolidated Financial Statements included in the 2022 Form 10-K. The following section provides information about accounting pronouncements adopted during the three months ended April 30, 2022.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which supersedes the guidance in former ASC 840, Leases. The new guidance requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use (“ROU”) asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases under Topic 840.
The Company adopted Topic 842 effective February 1, 2022 and applied the new guidance prospectively utilizing the modified retrospective approach. Comparative periods prior to the effective date were not adjusted and continue to be reported in accordance with the previous lease guidance under Topic 840.
The Company elected to utilize the package of practical expedients for transition which permitted the Company to not reassess its prior conclusions regarding whether a contract is or contains a lease, lease classification and initial direct costs.
Upon adoption, the Company recognized ROU assets and lease liabilities for operating leases of $8.4 million and $11.4 million, respectively. The difference between the ROU assets and lease liabilities resulted from deferred rent liability balances that were reclassified to ROU assets upon adoption. The Company currently has no finance leases.
The adoption of Topic 842 did not result in a cumulative effect adjustment to accumulated deficit, did not impact the Company’s previously reported financial results and did not impact the Company’s condensed consolidated statements of operations and comprehensive loss. Additionally, the adoption of Topic 842 had no impact on cash provided by or used in operating, investing or financing activities on the Company’s condensed consolidated statements of cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial instruments, Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments, which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for most financial assets, including trade receivables, and other instruments that are not measured at fair value through net income. The Company adopted the new guidance effective February 1, 2022 utilizing the modified retrospective transition method and recorded a $0.3 million adjustment to the beginning accumulated deficit balance to reflect the cumulative effect of the accounting change. The adoption of the new guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
The Company’s accounts receivable include amounts billed and billable to customers as of the end of the applicable period and do not bear interest. Accounts receivable are stated net of an estimated allowance for credit losses. Effective February 1, 2022, the allowance is assessed by applying a historical loss-rate methodology in accordance with Topic 326, adjusted as necessary based on the Company's review of accounts receivable, specifically reviewing factors including the age of the balances, customer payment history, creditworthiness, and other factors. The Company also considers market conditions and current and expected future economic conditions to inform adjustments to historical loss data. If it is deemed certain that an amount is uncollectible, the amount is written-off.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, a new accounting standard update to simplify the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company adopted ASU 2017-04 effective February 1, 2022 which did not impact the Company’s condensed consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The Company adopted ASU 2019-12 effective February 1, 2022 which did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
(3)Business Combination
As discussed in Note 1, the Company completed the Business Combination on December 7, 2021, pursuant to the Merger Agreement. Upon the consummation of the Business Combination, the following events contemplated by the Merger Agreement occurred, based on Former Planet’s capitalization as of December 7, 2021:
•all Former Planet convertible preferred stock converted into shares of Former Planet Class A common stock and all Former Planet convertible preferred stock warrants became warrants for Former Planet Class A common stock (see Note 9);
•the Venture Tranche B loans and the 2020 Convertible Notes converted into shares of Former Planet Class A common stock;
•each share of Former Planet capital stock (other than Former Planet Class B common stock) was converted into the right to receive shares of Planet’s Class A common stock after giving effect to the Exchange Ratio of approximately 1.53184 as calculated in accordance with the Merger Agreement;
•each share of Former Planet Class B common stock was converted into the right to receive shares of Planet’s Class B common stock after giving effect to the Exchange Ratio of approximately 1.53184 as calculated in accordance with the Merger Agreement;
•all granted and outstanding unexercised Former Planet stock options were converted into Planet stock options exercisable for shares of Planet’s Class A common stock with the same terms and vesting conditions except for the number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio;
•all granted and outstanding unvested Former Planet restricted stock units were converted into Planet restricted units for shares of Planet’s Class A common stock with the same terms and vesting conditions except for the number of shares, which was adjusted by the Exchange Ratio; and
•Former Planet Class A common stock warrants that remained outstanding subsequent to the closing of the Business Combination were converted into warrants for Planet’s Class A common stock with the same terms except for the number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio
Pursuant to the Merger Agreement, Former Planet equity holders, including Former Planet equity award holders, will have the right to receive up to an additional 27,000,000 shares in earnout consideration (the “Earn-out Shares”), of which up to 24,600,000 shares may be issued as shares of Class A common stock and up to 2,400,000 may be issued to William Marshall and Robert Schingler, Jr. (the “Planet Founders”) as shares of Class B common stock. The Earn-out Shares may be earned in four equal tranches (i) when the closing price of Class A common stock equals or exceeds $15.00, $17.00, $19.00 and $21.00, over any 20 trading days within any 30 day trading period prior to December 7, 2026 or (ii) when the Company consummates a change of control transaction prior to December 7, 2026 that entitles its stockholders to receive a per share consideration of at least $15.00, $17.00, $19.00 and $21.00. Any right to Earn-out Shares that remains unvested on the first business day after five years from the closing of the Business Combination will be forfeited without any further consideration.
Approximately 5,540,990 shares of the Earn-out Shares were allocated to Former Planet equity award holders, which are accounted for as stock-based compensation pursuant to ASC 718, Compensation—Stock Compensation because service must be provided through each market condition vesting requirement described above. The remaining Earn-out Shares are accounted for as equity classified equity instruments, were included as merger consideration as part of the Business Combination, and recorded in additional paid-in capital.
Additionally, the shares of dMY IV Class B common stock automatically converted to 8,625,000 shares of the Company’s Class A common stock (the “dMY Sponsor Shares”), of which, pursuant to a lock-up agreement entered into with the dMY Sponsor in connection with the Business Combination, 862,500 shares are subject to vesting under conditions consistent with the Earn-out Shares discussed above (the “dMY Sponsor Earn-out Shares”). The dMY Sponsor Earn-out Shares are accounted for as equity classified equity instruments, were included as merger consideration as part of the Business Combination, and recorded in additional paid-in capital.
On July 7, 2021, in connection with the execution of the Merger Agreement, and on September 13, 2021, following receipt of interest expressed by additional subscribers after the announcement of the Business Combination, dMY IV entered into subscription agreements (collectively, the “Subscription Agreements”) with certain parties subscribing for shares of dMY IV’s Class A common stock (such parties, the “Subscribers”), pursuant to which the Subscribers agreed to purchase, and dMY IV agreed to sell to the Subscribers, an aggregate of 25,200,000 shares of dMY IV Class A Common Stock, for a purchase price of $10.00 per share. Immediately prior to the closing of the Business Combination, the Company issued and sold 25,200,000 shares of its Class A common stock to the Subscribers for aggregate gross proceeds to the Company of $252.0 million (the “PIPE Investment”).
In connection with the Business Combination transactions, the outstanding principal, accrued interest and repayment fees of $67.1 million of the credit agreement with SVB and Hercules was repaid (see Note 9).
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, whereby dMY IV was treated as the acquired company and Former Planet was treated as the acquirer. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Former Planet issuing stock for the net assets of dMY IV, accompanied by a recapitalization. The net assets of dMY IV were stated at historical cost, with no goodwill or other intangible assets recorded.
The number of shares of the Company’s common stock outstanding immediately following the consummation of the Business Combination and related transactions is as follows: | | | | | |
| Number of Shares |
| Former Planet stockholders - Class A Common Stock (1) | 172,161,152 | |
| Former Planet stockholders - Class B Common Stock | 21,157,586 | |
| dMY IV’s public stockholders - Class A Common Stock (2) | 33,810,330 | |
| Holders of dMY IV’s sponsor shares - Class A Common Stock (3) | 7,762,500 | |
| PIPE Investment - Class A Common Stock | 25,200,000 | |
| Total shares of common stock immediately after Business Combination | 260,091,568 | |
| | | | | |
| (1) | Excludes 1,746,296 shares of Class A common stock associated with the early exercise of unvested Former Planet stock options. |
| | | | | |
| (2) | Upon the closing of the Business Combination, dMY IV’s public stockholders were offered the opportunity to redeem shares of dMY IV Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing) in the trust account. The table above reflects redemptions of 689,670 shares of Class A common stock that occurred. |
| | | | | |
| (3) | Excludes 862,500 shares of Class A common associated with the dMY Sponsor Earn-out Shares that are subject to vesting requirements. |
(4)Revenue
Deferred Revenue
During the three months ended April 30, 2022 and 2021, the Company recognized revenue of $22.6 million and $21.3 million, respectively, that had been included in deferred revenue as of January 31, 2022 and January 31, 2021, respectively.
Remaining Performance Obligations
The Company often enters into multi-year imagery licensing arrangements with its customers, whereby the Company generally invoices the amount for the first year of the contract at signing followed by subsequent annual invoices at the anniversary of each year. Remaining performance obligations represent the amount of contracted future revenue that has not yet been recognized, which includes both deferred revenue and non-cancelable contracted revenue that will be invoiced and recognized in revenue in future periods. The Company’s remaining performance obligations were $152.4 million as of April 30, 2022, which consists of both deferred revenue of $60.7 million and non-cancelable contracted revenue that will be invoiced in future periods of $91.7 million. The Company expects to recognize approximately 71% of the remaining performance obligation over the next 12 months, approximately 93% of the remaining obligation over the next 24 months, and the remainder thereafter.
Disaggregation of Revenue
The following table disaggregates revenue by major geographic region:
| | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | |
| (in thousands) | 2022 | | 2021 | | | | |
| United States | $ | 18,752 | | | $ | 13,170 | | | | | |
| Norway | 1,785 | | 6,736 | | | | |
| Canada | 3,976 | | 2,266 | | | | |
| Rest of World | 15,614 | | 9,785 | | | | |
| Total revenue | $ | 40,127 | | | $ | 31,957 | | | | | |
No single country in the Rest of World accounted for more than 10% of revenue for the three months ended April 30, 2022 and April 30, 2021.
Costs to Obtain and Fulfill a Contract
Commissions paid to the Company’s direct sales force are considered incremental costs of obtaining a contract with a customer. Accordingly, commissions are capitalized when incurred and amortized to sales and marketing expense over the period of benefit from the underlying contracts. The period of benefit from the underlying contract is consistent with the timing of transfer to the performance obligations to which the capitalized costs relate, and is generally consistent with the contract term.
During the three months ended April 30, 2022 and 2021, the Company deferred $0.5 million and $0.3 million of commission expenditures to be amortized in future periods, respectively. The Company’s amortization of commission expenditures was $0.3 million for both the three month periods ended April 30, 2022 and 2021. As of April 30, 2022 and January 31, 2022, deferred commissions consisted of the following:
| | | | | | | | | | | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
| Deferred commission, current | $ | 1,412 | | | $ | 1,375 | |
| Deferred commission, non-current | 1,170 | | 1,083 |
| Total deferred commission | $ | 2,582 | | | $ | 2,458 | |
The current portion of deferred commissions are included in prepaid expenses and other current assets on the condensed consolidated balance sheets. The non-current portion of deferred commissions are included in other non-current assets on the condensed consolidated balance sheets.
(5)Fair Value of Financial Assets and Liabilities
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis for recognition or disclosure purposes as of April 30, 2022 and January 31, 2022 by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability.
| | | | | | | | | | | | | | | | | |
| | April 30, 2022 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | |
| Cash equivalents: money market funds | $ | 96,850 | | | $ | — | | | $ | — | |
| Restricted cash: money market funds | 5,875 | | — | | — |
| Total assets | $ | 102,725 | | | $ | — | | | $ | — | |
| Liabilities | | | | | |
| Public Warrants | 8,556 | | — | | — |
| Private Placement Warrants | — | | — | | 11,392 |
| Total liabilities | $ | 8,556 | | | $ | — | | | $ | 11,392 | |
| | | | | | | | | | | | | | | | | |
| | January 31, 2022 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 |
| Assets | | | | | |
| Cash equivalents: money market funds | $ | 470,066 | | | $ | — | | | $ | — | |
| Restricted cash: money market funds | 5,875 | | — | | — |
| Total assets | $ | 475,941 | | | $ | — | | | $ | — | |
| Liabilities | | | | | |
| Public Warrants | 10,764 | | — | | — |
| Private Placement Warrants | — | | — | | 12,460 |
| Total liabilities | $ | 10,764 | | | $ | — | | | $ | 12,460 | |
The fair value of cash held in banks and accrued liabilities approximate the stated carrying value due to the short time to maturity and are excluded from the table above.
The fair value of the Company’s money market funds is based on quoted active market prices for the funds and is determined using the market approach. There were no realized or unrealized gains or losses on money market funds for the three months ended April 30, 2022 and 2021.
The Public Warrants are classified within Level 1 as they are publicly traded and have an observable market price in an active market.
Level 3 Disclosures
The following is a rollforward of Level 3 liabilities measured at fair value for the three months ended April 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
| (in thousands) | Private Placement Warrants | | Convertible Notes | | Preferred Stock Warrant Liability |
| Fair value at end of year, January 31, 2021 | $ | — | | | $ | 101,212 | | | $ | 11,359 | |
| Change in fair value | — | | 4,691 | | 3,335 |
| Fair value at April 30, 2021 | $ | — | | | $ | 105,903 | | | $ | 14,694 | |
| | | | | |
| Fair value at end of year, January 31, 2022 | $ | 12,460 | | | $ | — | | | $ | — | |
| Change in fair value | (1,068) | | — | | — |
| Fair value at April 30, 2022 | $ | 11,392 | | | $ | — | | | $ | — | |
Private Placement Warrants
The Private Placement Warrants (excluding the Private Placement Vesting Warrants) were valued based on a Black-Scholes option pricing model. Due to the market condition vesting requirements, the fair value of the Private Placement Vesting Warrants were valued using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the market condition targets may not be satisfied. The Private Placement Warrants were collectively classified as a Level 3 measurement within the fair value hierarchy because these valuation models involve the use of unobservable inputs relating to the Company’s estimate of its expected stock volatility which was developed based on the historical volatility of a publicly traded set of peer companies. The expected volatility inputs utilized for the fair value measurements of the Private Placement Warrants as of April 30, 2022 and January 31, 2022 were 70.0% and 60.0%, respectively.
Convertible Notes
In connection with the Business Combination, the convertible notes converted into shares of Class A common stock. The Company measured the fair value of the convertible notes upon conversion based on the closing price of the Company’s Class A common stock on the date of the Business Combination and the number of Class A common stock shares into which the notes converted.
As of April 30, 2021, the Company measured its convertible notes at fair value based on significant inputs not observable in the market, which caused them to be classified as a Level 3 measurement within the fair value hierarchy. The fair value of the convertible notes as of April 30, 2021 was estimated using a probability- weighted hybrid method combining (i) an option pricing model, and (ii) a discounted cash flow analysis. The significant unobservable inputs used in the fair value measurement of the Company’s convertible notes are the estimated time to liquidation, volatility, discount yield and risk-free interest rates.
The following table provides quantitative information associated with the fair value measurement of the convertible notes as of April 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value as of April 30, 2021 | | Valuation Technique | | Unobservable Input
Description | | Input |
| | (in thousands) |
| Convertible Notes | $105,903 | | Probability-weighted | | Estimated time to
liquidation | | 0.43 years |
| | | | | Volatility | | 35.0% |
| | | | | Discount Yield | | 14.0% |
| | | | | Risk-free interest rate | | 0.1% |
Preferred stock warrant liability
In connection with the Business Combination, all preferred stock warrants converted into warrants for Class A common stock. A portion of such Class A common stock warrants were exercised upon the closing of the Business Combination. The Class A common stock warrants that remained outstanding were measured at fair value and classified within stockholders’ equity on the date of the Business Combination.
As of April 30, 2021, the Company measured its liabilities for the preferred stock warrants at fair value based on significant inputs not observable in the market, which caused them to be classified as a Level 3 measurement within the fair value hierarchy. The fair value of the preferred stock warrant liabilities as of April 30, 2021 was estimated using an option pricing model. The significant unobservable inputs used in the fair value measurement of the Company’s preferred stock warrant liabilities are volatility, term and discount for lack of marketability.
The following table provides quantitative information associated with the fair value measurement of the preferred stock warrant liability as of April 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value as of April 30, 2021 | | Valuation Technique | | Unobservable Input
Description | | Input |
| (in thousands) |
| Preferred Stock Warrant Liability | $14,694 | | Option Pricing Method | | Term | | 0.43 - 1.5 years |
| | | | | Volatility | | 60% |
| | | | | Discount for lack of
marketability | | 9% - 16% |
Other
The Company measures certain non-financial assets including property and equipment, and other intangible assets at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets are impaired below their recorded cost. As of April 30, 2022 and January 31, 2022, there were no material non-financial assets recorded at fair value.
(6)Leases
The Company’s leasing activities primarily consist of real estate leases for its operations, including office space, and certain ground station service agreements that convey the right to control the use of specified equipment and facilities. The Company assesses whether each lease is an operating or finance lease at the lease commencement date. As of April 30, 2022, the Company has no finance leases.
The Company’s lease agreements do not contain residual value guarantees or material restrictive covenants.
Certain of the Company’s leases include escalation clauses, options to renew and options for early termination. The Company utilizes the base, non-cancelable period as the lease term when initially recognizing right-of-use assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised.
Leases with an initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and expense for these leases are recognized on a straight-line basis over the lease term.
The Company does not separate lease and non-lease components for its operating leases.
Operating lease costs were $1.5 million for the three months ended April 30, 2022. Variable lease expenses, short-term lease expenses and sublease income were immaterial for the three months ended April 30, 2022.
Operating cash flows from operating leases were $2.0 million for the three months ended April 30, 2022.
Maturities of operating lease liabilities as of April 30, 2022 were as follows:
| | | | | |
| (in thousands) | |
| Remainder of Fiscal Year 2023 | $ | 5,896 | |
| 2024 | 2,576 | |
| 2025 | 737 | |
| 2026 | 514 | |
| 2027 | 12 | |
| Thereafter | 8 | |
| Total lease payments | $ | 9,743 | |
| Less: Imputed interest | (284) | |
| Total lease liabilities | $ | 9,459 | |
| Weighted average remaining lease term (years) | 1.70 |
| Weighted average discount rate | 3.6 | % |
As the rate implicit in the lease is generally not readily determinable for the Company’s operating leases, the discount rates used to determine the present value of the Company’s lease liabilities are based on the Company’s incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. To determine the incremental borrowing rate, the Company references market yield curves which are risk-adjusted to approximate a collateralized rate.
The Company does not have any significant leases that have not yet commenced but that create significant rights and obligations for the Company.
In accordance with ASC Topic 840, rent expense for the three months ended April 30, 2021 was $0.8 million, net of sublease income of $0.1 million.
(7)Balance Sheet Components
Cash and Cash Equivalents and Restricted cash
Cash and cash equivalents include interest-bearing bank deposits, money market funds and other highly liquid investments with maturities of 90 days or less at the date of purchase.
The Company had restricted cash balances of $6.0 million and $6.1 million as of April 30, 2022 and January 31, 2022, respectively. The restricted cash balances as of both April 30, 2022 and January 31, 2022 primarily consisted of $4.2 million of collateral money market accounts for the Company’s headquarters and other domestic office operating leases and $1.6 million of performance guarantees required for the Company’s foreign sales activities.
A reconciliation of the Company’s cash and cash equivalents in the condensed consolidated balance sheets to total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows as of April 30, 2022 and January 31, 2022 is as follows:
| | | | | | | | | | | |
| | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
| Cash and cash equivalents | $ | 484,489 | | | $ | 490,762 | |
| Restricted cash, current | 389 | | | 309 |
| Restricted cash, non-current | 5,653 | | | 5,743 |
| Total cash, cash equivalents and restricted cash | $ | 490,531 | | | $ | 496,814 | |
Restricted cash of $0.4 million and $0.3 million is included in prepaid expenses and other current assets as of April 30, 2022 and January 31, 2022, respectively.
Property and Equipment, Net
Property and equipment, net consists of the following:
| | | | | | | | | | | |
| | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
| Satellites* | $ | 311,374 | | | $ | 310,861 | |
| Leasehold improvements | 15,448 | | | 15,448 | |
| Ground stations and ground station equipment | 12,697 | | | 12,685 | |
| Office furniture, equipment and fixtures | 5,381 | | | 5,335 | |
| Computer equipment and purchased software | 8,176 | | | 8,197 | |
| Total property and equipment, gross | 353,076 | | | 352,526 | |
| Less: Accumulated depreciation | (227,747) | | | (219,246) | |
| Total property and equipment, net | $ | 125,329 | | | $ | 133,280 | |
| | | | | |
| * | Satellites include $6.7 million and $13.7 million of satellites in process and not placed into service as of April 30, 2022 and January 31, 2022, respectively. |
Interest expense associated with manufactured satellites was not material for the three months ended April 30, 2022 and 2021.
The Company’s long-lived assets by geographic region are as follows:
| | | | | | | | | | | |
| | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
| United States | $ | 122,428 | | | $ | 130,230 | |
| Rest of World | 2,901 | | 3,050 |
| Total property and equipment, net | $ | 125,329 | | | $ | 133,280 | |
The Company concluded that satellites in service continue to be owned by the U.S. entity and accordingly are classified as U.S. assets in the table above. No single country other than the U.S. accounted for more than 10% of total property and equipment, net, as of April 30, 2022 and January 31, 2022.
Total depreciation expense for the three months ended April 30, 2022 and 2021 was $10.4 million and $9.5 million, respectively, of which $8.9 million and $8.2 million, respectively, was depreciation expense specific to satellites.
Capitalized Internal-Use Software Development Costs
Capitalized internal-use software costs, net of accumulated amortization consists of the following:
| | | | | | | | | | | |
| | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
| Capitalized internal-use software | $ | 37,322 | | | $ | 36,453 | |
| Less: Accumulated amortization | (26,217) | | | (25,685) | |
| Capitalized internal-use software, net | $ | 11,105 | | | $ | 10,768 | |
Interest expense associated with capitalized internal-use software costs was not material for the three months ended April 30, 2022 and 2021.
Amortization expense for capitalized internal-use software for the three months ended April 30, 2022 and 2021 was $0.5 million and $1.6 million, respectively.
Goodwill and Intangible Assets
Goodwill and Intangible assets consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | April 30, 2022 | January 31, 2022 |
| (in thousands) | Gross
Carrying
Amount | | Accumulated
Amortization | | Foreign
Currency
Translation | | Net
Carrying
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Foreign
Currency
Translation | | Net
Carrying
Amount |
| Developed technology | $ | 16,557 | | | $ | (7,948) | | | $ | (9) | | | $ | 8,600 | | | $ | 16,557 | | | $ | (7,583) | | | $ | (9) | | | $ | 8,965 | |
| Image library | 12,145 | | (10,674) | | 123 | | 1,594 | | 12,028 | | (10,610) | | 104 | | 1,522 |
| Customer relationships | 3,951 | | (2,313) | | 7 | | 1,645 | | 3,951 | | (2,161) | | 8 | | 1,798 |
| Trade names and other | 4,551 | | (2,825) | | 39 | | 1,765 | | 4,551 | | (2,678) | | 39 | | 1,912 |
| Total intangible assets | $ | 37,204 | | | $ | (23,760) | | | $ | 160 | | | $ | 13,604 | | | $ | 37,087 | | | $ | (23,032) | | | $ | 142 | | | $ | 14,197 | |
| Goodwill | $ | 101,413 | | | $ | — | | | $ | 1,806 | | | $ | 103,219 | | | $ | 101,413 | | | $ | — | | | $ | 1,806 | | | $ | 103,219 | |
Amortization expense for the three months ended April 30, 2022 and 2021 was $0.7 million and $0.4 million, respectively.
Estimated future amortization expense of intangible assets at April 30, 2022, is as follows:
| | | | | |
| (in thousands) | |
| Remainder of Fiscal Year 2023 | $ | 2,138 | |
| 2024 | 2,851 |
| 2025 | 1,936 |
| 2026 | 1,441 |
| 2027 | 1,108 |
| Thereafter | 4,130 |
| $ | 13,604 | |
Accrued and Other Current Liabilities
Accrued liabilities and other current liabilities consist of the following:
| | | | | | | | | | | |
| | |
| (in thousands) | April 30, 2022 | | January 31, 2022 |
Deferred R&D service liability (1) | $ | 21,115 | | | $ | 21,878 | |
| Payroll and related expenses | 4,578 | | | 6,007 | |
| Deferred hosting costs | 4,148 | | | 3,967 | |
| Deferred rent | — | | | 2,193 | |
| Withholding taxes and other taxes payable | 4,044 | | | 3,731 | |
| Other accruals | 9,299 | | | 11,047 | |
| Total accrued and other current liabilities | $ | 43,184 | | | $ | 48,823 | |
| | | | | |
| (1) | In December 2020, the Company entered into a development services agreement, whereby the Company agreed to provide the technical knowledge and services to design and develop certain prototype satellites and deliver and test early data collected (the “R&D Services Agreement”). The R&D Services Agreement is unrelated to the Company’s ordinary business activities and originally provided for a fee of $40.2 million, to be paid to the Company as specified milestones are achieved over a three year period. In November 2021, the R&D Services Agreement was amended to increase the fee to $45.2 million. The Company has discretion in managing the activities under the R&D Services Agreement and retains all developed intellectual property. The Company has no obligation to repay any of the funds received regardless of the outcome of the development work; therefore, the arrangement is accounted for as funded research and development pursuant to ASC 730-20, Research and Development. As ASC 730-20 does not indicate the accounting model for research and development services, the Company determined the total transaction price is taken over the agreement term as a reduction of research and development expenses based on a cost incurred method. During the three months ended April 30, 2022, the Company recognized $2.8 million of fees and incurred $2.8 million of research and development expenses in connection with the R&D Services Agreement. The activity for the three months ended April 30, 2021 was immaterial. As of April 30, 2022 and January 31, 2022 , the Company had received a total of $28.7 million and $26.7 million, respectively, under the R&D Services Agreement. |
(8)Commitments and Contingencies
Launch Services
The Company has purchase commitments for future satellite launch services to be performed by third- parties subsequent to April 30, 2022. Future purchase commitments under noncancelable launch service contracts as of April 30, 2022 are as follows:
| | | | | | | |
| (in thousands) | | | |
| Remainder of Fiscal Year 2023 | $ | 800 | | | |
| 2024 | 1,025 | | |
| | | |
| | | |
| | | |
| Thereafter | — | | |
| Total purchase commitments | $ | 1,825 | | | |
Other
The Company has minimum purchase commitments for hosting services from Google through January 31, 2028 (see Note 11). Future minimum purchase commitments under the noncancelable hosting service agreement with Google as of April 30, 2022 is as follows:
| | | | | |
| (in thousands) | |
| Remainder of Fiscal Year 2023 | $ | 18,595 | |
| 2024 | 28,050 | |
| 2025 | 30,120 | |
| 2026 | 31,190 | |
| 2027 | 32,725 | |
| Thereafter | 33,427 | |
| Total purchase commitments | $ | 174,107 | |
Contingencies
The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims, individually or in the aggregate, that are expected to have a material adverse impact on its condensed consolidated financial statements as of each reporting period. From time to time however, the Company may have certain contingent liabilities that arise in the ordinary course of business activities including those arising from disputes and claims and events arising from revenue contracts entered into by the Company. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent, or other intellectual property infringement claim by any third-party with respect to its technology. The term of these indemnification agreements is generally perpetual after the execution of the agreement. The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on the Company’s future business, operating results or financial condition. It is not possible to determine the maximum potential amount under these contracts due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify them against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
To date, we have not incurred any material costs, and have not accrued any liabilities in the consolidated financial statements as a result of these provisions.
(9)Debt, Convertible Notes, and Warrants
The terms of the Company's debt, convertible notes and warrants are described in Note 9, Debt, Convertible Notes, and Warrants, in the Notes to the Consolidated Financial Statements in the 2022 Form 10-K.
Venture Loan Amendment
On June 21, 2019, the Company amended the 2017 loan agreements with Venture Lending & Leasing, Inc. (“Venture”), an affiliate of Western Technology Investment (the “Amendment”). Following the Amendment, Tranche B, consisting of two separate subordinated contract liability instruments of $4.3 million each, remained outstanding for which the Company elected to apply the fair value option. The Tranche B loans were classified as a current liability and were measured at a fair value of $10.9 million at issuance. Changes in fair value were subsequently recognized in the condensed consolidated statements of operations and comprehensive loss.
In July 2021, the Company amended certain terms of its Venture Tranche B loans and certain terms of the warrants issued to Venture.
In connection with the Business Combination (see Note 3), the Venture Tranche B loans converted into 754,378 shares of the Company’s Class A common stock, and there were no loan amounts outstanding as of April 30, 2022 or January 31, 2022.
SVB & Hercules Loan
On June 21, 2019, the Company entered into a Credit Agreement with Silicon Valley Bank (“SVB”) and Hercules Capital, Inc. (“Hercules”) for a $50 million secured loan with an interest rate of 11.0% per annum (the prime rate plus 5.5%, minimum of 11%). The loan was scheduled to mature in June 2022. On June 5, 2020, the Company obtained an additional $15 million secured loan from SVB and Hercules. The loan bore an interest rate of 11.0% per annum and was scheduled to mature on June 21, 2022, or 91 days prior to the maturity date of the 2020 Convertible Notes, described below, if the outstanding 2020 Convertible Notes had not been converted into equity securities.
In connection with the loans, the Company issued warrants to the lenders and their affiliates for the purchase of 1,433,956 shares of the Company’s Class A common stock, consisting of 1,049,801 with an exercise price of $0.00001 per share which expire in June 2029, and 384,155 which expire in June 2030.
The Company incurred total loan fees of $0.9 million associated with its entry into the agreements and accrued $1.5 million of final loan fees payable upon maturity of the 2019 Credit Agreement. The proceeds of debt issuances were allocated between debt and the warrants based on their relative fair values. The difference between debt proceeds and the amount of those proceeds allocated to debt gave rise to total debt discounts of $5.8 million. The discount amount due to the warrant of $5.8 million along with the total loan fees of $2.4 million was being amortized as interest expense through maturity using the effective interest method.
In connection with the Business Combination (see Note 3), the outstanding principal, accrued interest and repayment fees of $67.1 million relating to the Credit Agreement with SVB and Hercules was repaid. Therefore, there were no loan amounts outstanding as of April 30, 2022 or January 31, 2022.
2020 Convertible Notes
During the fiscal year ended January 31, 2021, the Company entered into a Convertible Note and Warrant Purchase Agreement with certain investors, pursuant to which it issued convertible promissory notes (the “2020 Convertible Notes”). The 2020 Convertible Notes bore interest at a rate of 6.0% per annum, which compounded quarterly and were scheduled to mature on June 22, 2022. The principal amount of 2020 Convertible Notes issued was $71.1 million in aggregate. The Company issued warrants for the purchase of Series D convertible preferred stock, equal to 20% of the original principal amount of the notes, with an exercise price of $9.3844. The warrants expire on the tenth anniversary of the date of issuance. The number of shares of Series D convertible preferred stock issuable under the warrants is 1,515,799 in aggregate. The Company elected to apply the fair value option to the outstanding 2020 Convertible Notes. As such, the 2020 Convertible Notes were recognized at fair value with changes in fair value recognized in the condensed consolidated statements of operations and comprehensive loss.
In July 2021, the Company amended certain terms of its 2020 Convertible Notes to provide for, among other things, the automatic conversion of the outstanding principal and accrued interest under the notes into shares of common stock immediately prior to the Business Combination. The amended terms of the 2020 Convertible Notes were not considered substantially different than the original terms of such notes. As such, the 2020 Convertible Notes continued to be recognized at fair value pursuant to the fair value option.
In connection with the Business Combination (see Note 3), the 2020 Convertible Notes converted into 9,824,143 shares of the Company’s Class A Common Stock, therefore there were no 2020 Convertible Notes outstanding as of April 30, 2022 or January 31, 2022.
In connection with the Business Combination (see Note 3), 450,205 of the Series D convertible preferred stock warrants discussed above converted into warrants for Class A common stock and were exercised on a cashless basis, resulting in the issuance of 27,713 shares of Class A common stock. The remaining 1,065,594 Series D convertible preferred stock warrants that were not exercised converted into warrants for Class A common stock shares and remained outstanding and exercisable as of April 30, 2022 and January 31, 2022. As of April 30, 2022, the outstanding warrants have a weighted average remaining term of 7.9 years.
The following table presents the interest expense related to the contractual interest coupon, the amortization of debt issuance costs, the amortization of debt discounts and loss (gain) on extinguishment of debt:
| | | | | | | | | | | |
| | Three Months Ended April 30, |
| (in thousands) | 2022 | | 2021 |
| Contractual interest coupon | $ | — | | | $ | 1,768 | |
| Amortization of debt issuance costs | — | | 221 |
| Amortization of debt discounts | — | | 538 |
| | | |
| Total interest expense and extinguishment (gain) loss | $ | — | | | $ | 2,527 | |
(10)Public and Private Placement Warrants
In connection with dMY IV’s initial public offering, which occurred on March 9, 2021, dMY IV issued 34,500,000 units, each unit consisting of one share of Class A common stock of dMY IV and one-fifth of one redeemable warrant, at a price of $10.00 per unit. Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (the “Public Warrants”). Simultaneously with the closing of its initial public offering, dMY IV completed the private sale of 5,933,333 warrants to dMY Sponsor IV, LLC (the “dMY Sponsor”) at a purchase price of $1.50 per warrant (the “Private Placement Warrants”). Each Private Placement Warrant is exercisable for one share of Class A common stock at $11.50 per share.
Additionally, pursuant to a lock-up agreement entered into with the dMY Sponsor in connection with the Business Combination, 2,966,667 of the Private Placement Warrants are subject to vesting conditions (the “Private Placement Vesting Warrants”). The Private Placement Vesting Warrants vest in four equal tranches (i) when the closing price of Class A common stock equals or exceeds $15.00, $17.00, $19.00 and $21.00, over any 20 trading days within any 30 day trading period prior to December 7, 2026 or (ii) when the Company consummates a change of control transaction prior to December 7, 2026 that entitles its stockholders to receive a per share consideration of at least $15.00, $17.00, $19.00 and $21.00. Any right to Private Placement Vesting Warrants that remains unvested on the first business day after five years from the closing of the Business Combination will be forfeited without any further consideration.
As of April 30, 2022 and January 31, 2022, there were 6,899,982 Public Warrants and 5,933,333 Private Placement Warrants, including 2,966,667 Private Placement Vesting Warrants, outstanding.
(11)Related Party Transactions
As of April 30, 2022 and January 31, 2022, Google owned greater than 10% of the Company’s common shares through its total investment of 31,942,641 shares of Class A common stock.
In March 2020, Google purchased $10.0 million of 2020 Convertible Notes (Note 9). Upon issuance of such 2020 Convertible Notes to Google, the Company also issued warrants to Google for the purchase of 213,119 shares of Series D preferred stock. In connection with the Business Combination, such 2020 Convertible Notes converted to shares of Class A common stock and such Series D preferred stock warrants converted to and were exercised for shares of Class A common stock.
In April 2017, the Company and Google entered into a five year content license agreement pursuant to which the Company licenses imagery content to Google. In April 2022, the agreement automatically renewed for a period of one-year. The agreement will terminate in April 2023, unless it is extended for up to one year if the delivery obligations are not met by the company, or it is otherwise renewed at Google’s discretion for an additional year, in each case in accordance with its terms. Additionally, Google may terminate the agreement prior to April 2023 once the Company’s outstanding delivery obligations are completed. As of April 30, 2022 and January 31, 2022, the deferred revenue balance associated with the content license agreement was $9.2 million and $12.2 million, respectively. For the three months ended April 30, 2022 and 2021, the Company recognized revenue of $3.0 million and $3.1 million, respectively, related to the content license agreement.
In addition, the Company purchases hosting and other services from Google, of which $16.3 million and $16.1 million is deferred as of April 30, 2022 and January 31, 2022, respectively. The Company recorded hosting expense of $5.5 million and $3.2 million during the three months ended April 30, 2022 and 2021, respectively. As of April 30, 2022 and January 31, 2022, the Company’s accounts payable and accrued liabilities balance included $1.9 million and $2.0 million related to hosting and other services provided by Google, respectively
On June 28, 2021, the Company amended the terms of its hosting agreement with Google. The amendment, among other things, increases the aggregate purchase commitments to $193.0 million. The amended agreement commenced on August 1, 2021 and extends through January 31, 2028. See Note 8 for future Google hosting purchase commitments, including the amended commitments, as of April 30, 2022.
(12)Stock-based Compensation
Prior to the Business Combination, the Company issued equity awards under the Planet Labs Inc. Amended and Restated 2011 Stock Incentive Plan (previously named the Cosmogia Inc. 2011 Stock Incentive Plan) (the “Legacy Incentive Plans”). In connection with the Business Combination, the Company adopted the Planet Labs PBC 2021 Incentive Award Plan (the “Incentive Plan”). No further awards will be granted under the Legacy Incentive Plans. Directors, employees and consultants are eligible to receive awards under the Incentive Plan; however, ISOs may only be granted to employees. The Company's plans are described in Note 13, Stock-based Compensation, in the Notes to the Consolidated Financial Statements in the 2022 Form 10-K.
Stock-Based Compensation
The following table summarizes stock-based compensation expense recognized related to awards granted to employees and nonemployees, as follows:
| | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | |
| (in thousands) | 2022 | | 2021 | | | | |
| Cost of revenue | $ | 1,319 | | | $ | 234 | | | | | |
| Research and development | 8,666 | | 1,197 | | | | |
| Sales and marketing | 3,637 | | 636 | | | | |
| General and administrative | 6,637 | | 1,176 | | | | |
| Total expense | 20,259 | | 3,243 | | | | |
| Capitalized to internal-use software development costs and property and equipment | (437) | | (141) | | | | |
| Total stock-based compensation expense | $ | 19,822 | | | $ | 3,102 | | | | | |
Stock Options
A summary of stock option activity is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding |
| | Number of Options | | Weighted Average Exercise Price | | Weighted Average Remaining Term (Years) | | Aggregate Intrinsic Value (in thousands) |
Balances at January 31, 2022 | 41,907,551 | | $ | 4.63 | | | 6.71 | | |
| Exercised | (2,834,653) | | $ | 1.75 | | | | | |
| Forfeited | (148,302) | | $ | 4.97 | | | | | |
Balances at April 30, 2022 | 38,924,596 | | $ | 4.84 | | | 6.80 | | $ | 47,513 | |
Vested and exercisable at April 30, 2022 | 24,776,770 | | $ | 3.55 | | | 5.76 | | $ | 41,675 | |
As of April 30, 2022, total unrecognized compensation cost related to stock options was $45.4 million which is expected to be recognized over a period of 2.7 years.
Restricted Stock Units
A summary of Restricted Stock Unit (“RSU”) activity is as follows:
| | | | | | | | | | | |
| | Number of RSUs | | Weighted Average Grant Date Fair Value |
Balances at January 31, 2022 | 5,439,736 | | $ | 9.42 | |
| Vested | (215,178) | | $ | 7.78 | |
| Granted | 8,893,242 | | $ | 4.53 | |
| Forfeited | (168,223) | | $ | 7.10 | |
Balances at April 30, 2022 | 13,949,577 | | $ | 6.35 | |
During the three months ended April 30, 2022, the Company granted 8,893,242 RSUs, which generally vest over four years, subject to the recipient’s continued service through each applicable vesting date.
Stock-based compensation expense recognized for RSUs during the three months ended April 30, 2022 was $8.5 million. As of April 30, 2022, total unrecognized compensation cost related to RSUs was $67.7 million. These costs are expected to be recognized over a period of approximately 3.0 years.
RSUs granted in periods prior to the Business Combination were subject to both time-based service and liquidity event vesting requirements. The liquidity event requirement was met upon the closing of the Business Combination on December 7, 2021. As such, on December 7, 2021, the Company commenced recognition of stock-based compensation expense for RSUs granted in periods prior to the Business Combination and there was no expense recognized during the three months ended April 30, 2021.
Early Exercises of Stock Options
The Legacy Incentive Plans provided for the early exercise of stock options for certain individuals as determined by the Company’s board of directors. Shares of common stock issued upon early exercises of unvested options are not deemed, for accounting purposes, to be issued until those shares vest according to their respective vesting schedules and accordingly, the consideration received for early exercises is initially recorded as a liability and reclassified to common stock and additional paid-in capital as the underlying awards vest. As of April 30, 2022, the Company had a $15.2 million liability recorded for the early exercise of unvested stock options, and the related number of unvested shares subject to repurchase was 1,562,476.
Earn-out Shares
Pursuant to the Merger Agreement for the Business Combination, Former Planet equity award holders have the right to receive Earn-out Shares that are contingently issuable in shares of Class A common stock. The Earn-out Shares may be earned in four equal tranches (i) when the closing price of Class A common stock equals or exceeds $15.00, $17.00, $19.00 and $21.00, over any 20 trading days within any 30 day trading period prior to December 7, 2026 or (ii) when the Company consummates a change of control transaction prior to December 7, 2026 that entitles its stockholders to receive a per share consideration of at least $15.00, $17.00, $19.00 and $21.00.
No Earn-out Shares vested during the three months ended April 30, 2022. As of April 30, 2022, there were 4,713,267 Earn-out Shares outstanding relating to Former Planet equity award holders.
During the three months ended April 30, 2022, the Company recognized $7.1 million of stock-based compensation expense related to the Earn-out Shares. As of April 30, 2022, total unrecognized compensation cost related to the Earn-out Shares was $26.9 million. These costs are expected to be recognized over a period of approximately 1.5 years.
(13) Income Taxes
The Company recorded income tax expense of $0.3 million for both the three months ended April 30, 2022 and 2021. For the three months ended April 30, 2022 and 2021, the income tax expense was primarily driven by the current tax on foreign earnings. The effective tax rates for the three months ended April 30, 2022 and 2021 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of the Company’s U.S. and foreign deferred tax assets and foreign rate differences.
Under the Tax Cuts and Jobs Act of 2017, qualified research expenses incurred after 2021 are no longer immediately deductible and must be amortized over 5 years for tax purposes. The Company does not expect this provision to have a material impact on the Company’s financial statements.
The Company evaluates its tax positions on a quarterly basis and revises its estimates accordingly. Gross unrecognized tax benefits were $6.0 million and $5.7 million as of April 30, 2022 and January 31, 2022, respectively. The gross unrecognized tax benefits, if recognized, would not affect the effective tax rate due to the valuation allowance against the deferred tax assets. The Company determined that no accrual for interest and penalties was required as of April 30, 2022 and January 31, 2022 and no such expenses were incurred in the periods presented.
The Company does not anticipate the total amounts of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
The Company files U.S. federal, various state and foreign income tax returns. The Company is not currently under audit by any taxing authorities. All tax years remain open to examination by taxing jurisdictions to which the Company is subject.
(14)Net Loss Per Share Attributable to Common Stockholders
Net loss per share calculations for all periods prior to the Business Combination have been retrospectively adjusted for the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization.
The Company computes net loss per share of the Class A common stock and Class B common stock using the two-class method required for participating securities. Basic and diluted net loss per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights. The following table sets forth the computation of basic and diluted loss per Class A common stock and Class B common stock (amounts in thousands, except share and per share amounts):
| | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | |
| | 2022 | | 2021 | | | | |
| Numerator: | | | | | | | |
| Net loss attributable to common stockholders | $ | (44,360) | | | $ | (29,255) | | | | | |
| Denominator: | | | | | | | |
| Basic and diluted weighted-average common shares outstanding used in computing net loss per share attributable to common stockholders | 264,088,997 | | 45,722,408 | | | | |
| Basic and diluted net loss per share attributable to common stockholders | $ | (0.17) | | | $ | (0.64) | | | | | |
Basic and diluted loss per share was the same for each period presented as the inclusion of all potential Class A common stock and Class B common stock outstanding would have been anti-dilutive.
The following table presents the potential common stock outstanding that was excluded from the computation of diluted net loss per share of common stock as of the periods presented because including them would have been antidilutive:
| | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | |
| | 2022 | | 2021 | | | | |
| Convertible Preferred Stock | — | | 131,252,627 | | | | |
| Convertible notes | — | | 7,366,839 | | | | |
| Warrants to purchase Series B Convertible Preferred Stock | — | | 761,340 | | | | |
| Warrants to purchase Series D Convertible Preferred Stock | — | | 2,261,713 | | | | |
| Warrants to purchase Class A common stock | 1,065,594 | | — | | | | |
| Common stock options | 38,924,582 | | 39,494,957 | | | | |
| Restricted Stock Units | 13,949,577 | | 1,573,622 | | | | |
| Earn-out Shares | 26,172,277 | | — | | | | |
| dMY Sponsor Earn-out Shares | 862,500 | | — | | | | |
| Public Warrants | 6,899,982 | | — | | | | |
| Private Placement Warrants | 5,933,333 | | — | | | | |
| Early exercised common stock options, subject to future vesting | 1,562,476 | | — | | | | |
| Shares issued in connection with acquisition, subject to future vesting | 475,467 | | — | | | | |
| 95,845,788 | | 182,711,098 | | | | |