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Palantir: Stock-Based Compensation Update

John Rhodes profile picture
John Rhodes


  • In a previous article, I expressed frustration about the lack of guidance provided by PLTR regarding stock-based compensation.
  • After following up with PLTR Investor Relations, I've been able to get some clarity from the company.
  • Importantly, I discuss some of my revenue and expense expectations for Q1 2021 based on this information.
  • Lastly, I've included a recent investment decision I made about PLTR, including the price and impact.

The Source of My Frustration

In my previous Palantir (NYSE:PLTR) article I made this point:

Therefore, before adjustments, PLTR lost about $0.09 per share. After adjustments, PLTR earned $0.06 per share.

Now, it should already be clear that the adjustments are almost entirely due to stock-based compensation and related taxes. And, in turn, simple math tells us that stock-based compensation consumed $0.15 of profits per share.

I voiced my frustration like this:

In other words, given that stock-based compensation was $0.15 per share for Q4 2020, and also because these expenses pushed PLTR from profits to a loss, I fully expected to see some kind of clarity. Instead, no forward guidance was provided at all.

At the time, I reported that I had reached out to PLTR Investor Relations but didn't get a response. However, in this article, I'm going to provide an update based on several responses provided by Rodney Nelson, Head of Investor Relations at PLTR.

GAAP EPS Correction

First, I want to point out that I made a small mistake in my calculations. Here's what Mr. Nelson provided:

You’re correct that adjusted EPS for Q4 was 6 cents. One clarification is that GAAP diluted EPS was ($0.08), not ($0.09)

In other words, PLTR lost $0.08, not $0.09, so the results were better than I reported by an extra penny. Given the number of shares, this is not trivial. My calculation was thrown off by other adjustments to expenses. For added clarity, I suggest you look at PLTR's Q4 2020 Press Release.


The First Response

My first specific question was this: Can you provide any guidance on the size and scope of stock-based compensation in 2021, and beyond?

Mr. Nelson responded:

We have not provided guidance on stock-based compensation, but a couple thoughts worth sharing: we are

This article was written by

John Rhodes profile picture
I am an investor, entrepreneur, father, husband, coach and teacher.

Analyst’s Disclosure: I am/we are long PLTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (179)

@John Rhodes PLTR quarterly earnings are out. Didn't see your earnings analysis post yet. Hopefully on its way....
SAL01 profile picture
@JohnRhodes what happen to your articles about Palantir? Have sold your shares? Or is there so many other authors that you don't need to comment? You were the Trusted authority writer on Palantir.
AlexMVA profile picture
The stock compenasation in the last 3 months is $120+ milions

Am I reading it corectly?
Can you do another article prior to the upcoming earnings if possible?
Excellent article. Thanks . Is this the same CEO admonishing short term investors and telling them to look at other stocks, who sold ASAP? Hypocrite
@johnrhodes good to have you shine a spotlight on their SBC. And your very helpful articles are always top of my reading list.
hi @John Rhodes could this large SBC be one off due to the IPO, meaning PLTR mgnt is giving out extra to reward loyal employees for the IPO ? I know UBER gave all their drivers one-off cash rewards when they go IPO and I read Grab is planning to do so too. Could it be future qtr we do not see such high SBC ?
15 Mar. 2021
@Sggtrader It occurred two quarters in a row. Speaking to a former employee, they don't anticipate it to be as significant of a cost.

Also, with rapidly growing revenues, even if it remains a flat cost, it becomes an increasingly smaller and smaller cost as a percentage of the operation.
@arem24 thanks !
@John Rhodes , do you expect the same level of employee stock compensation qtr over qtr or or do you the high stock option is one off for this IPO only ? Thanks
Employees taking some profits is no big deal, this stock will be 45 again before the end of the year. 150 within 5 years.
with all the shares outstanding 1.7 billion shares it would have to do a reverse split to ever get to 150$
Insiders have been dumping millions shares of this new listed company. Red flags, stay clear.
Eric_Riggs profile picture
Got in PLTR$ at 22.50 yesterday. We will have a nice rebound to 30 ish and then stabilize around 25. Nice opportunity right here
@Eric_Riggs Look! Someone who can see the future!
@Eric_Riggs No random walks for this guy.
Sparkle0135 profile picture
@Eric_Riggs believe that longer term pltr will succeed. Notice that the short interest is growing but not like GME or AMC, and may never come into play, as their potential new customer growth continues on a slower scale and now they will be realizing revenue when serviced over the life of the term of the contract instead of all at once, as previously done when a new contract was signed.
It’s exceedingly difficult to time the market, let alone a stock. Buy low sell high is a virtue that has eluded the best. 
So, if I’m going to buy a stock, it is for the long term. If you don’t want to own the stock for five years or so, then don’t buy it. PLTR is a play on the future and those that exhibit patience will be rewarded.
@John Rhodes - Dumb question, after you got me thinking ... You referenced (or atleast I interpreted) that SBC adjusted with the current stock price. Not knowing how many shares were exercised is it fair to say that the $241M in Q4 was artificially inflated due to the stock running up to mid $30’s around the time of the earnings call?
GameBuzz profile picture
@John Rhodes Thank you for the additional article, for reaching out to the company and the subsequent analysis. One question, though, about the statement, “We can expect that PLTR revenues will be higher than Q1 2019 but lower than Q4 2020, by $90-100M.”

If the company is forecasting 35% or more annual rev growth, why do you expect lower quarterly revenues? (Apologies if I missed whatever part where that was previously addressed.)
John Rhodes profile picture

Long story short is that I needed to re-run the numbers. I posted an important comment about it below:


I needed to use Q1 2020 vs. Q1 2019. In any case, the "new" numbers now look something like this...

Q1 2020 = $241M
Q4 2020 = $322M
Q1 2021 = $332M (estimated)

In Q1 2021 they are actually forecasting 45% growth:

"And in Q1 of this year, we expect revenue growth of 45% or $332 million at the midpoint and we expect adjusted operating margin of 23% for the quarter."


So, YoY 45% the increase puts them at close to the $332M. For what it's worth, my calculation of YoY puts revenue at $349M. But, they say the $332 is their projection at the midpoint.

Obviously, the simple quarter-over-quarter increase is minimal (see Q4 2020 vs. Q1 2021 projection). Yet, if the stock compensation is in the range of $75M to $125M, then it's going to be very close re: profitability, which would be fantastic.

I appreciate your question.

Have a great night.
GameBuzz profile picture
@John Rhodes Ahh, got it. Thanks for clarifying.
My cost basis is under 10 and will be a long term shareholder but in simple terms more shares outstanding bad less shares good. As a shareholder I want to see share count drop not go up.
A reverse split would do wonders
@john boy

i guess it depends but i don't like reverse splits either lol
@john boy Then he'll have his shares halved. Obviously, he wants to keep his own share count but have the total number of shares reduced.
Steelhead15 profile picture
Good attention to detail in your analysis of PLTR. I trust such an approach.
excellent work, thank you
Full year loss is still -1.1B $ up from -0.6B $ earlier years. It stinks when management grant them self 258M $ stock option programs while business is bleeding. The share count has gone up from 1.47B to 1.75B according to Bloomberg.
Thanks John. It is my opinion that one of Palantir's key strength is the efficiency generated by the Forward Deployed Software Engineers (FDSEs) in reducing the time taken for the client to integrate the product within the organisation. This to me would appear to be a key performance metric and a metric worth considering in a SBC approach towards rewarding high performing teams. Thanks again.
I find it interesting that you view the deployment of FDSEs as an efficient way of product deployment. IMO, the need or even simply the use of FDSEs is a reflection of the friction against deploying Palantir software.
RickJensen profile picture
Well said. It's ironic that a "product" needs "software engineers". I mean it's a product right. Why would a product need coders if it was a product?

I love the classification of the "forward".

PLTR makes more off of the FDSE (also know as consultants) than they do subscriptions. That may change, but not anytime soon. And if the ever get a "product". They'll lose those consulting $$.
hotblueeyez profile picture
@RickJensen why does a car need a mechanic? Lots of times people don’t want to work on it, just use it. I’m sure these engineers have to do a lot of data mappings to get the platform going before handoff to the customer
Warrior2323 profile picture
thanks for the great follow-up article! Always looking forward to your articles
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