Q4 2024 Planet Labs PBC Earnings Call

Participants

Chris Genualdi; IR; Planet Labs PBC

William Marshall; Chairman of the Board, Chief Executive Officer, Co-Founder; Planet Labs PBC

Ashley Johnson; Chief Financial Officer, Chief Operating Officer; Planet Labs PBC

Kevin Weil; President, Product & Business; Planet Labs PBC

Michael Latimore; Analyst; Northland Securities

Jason Gursky; Analyst; Citigroup Inc.

Trevor Walsh; Analyst; JMP Securities

Ryan Koontz; Senior Analyst; Needham & Company LLC

Noah Poponak; Analyst; Goldman Sachs Group, Inc.

Jeff Van Rhee; Analyst; Craig-Hallum Capital Group LLC

Laura Lee; Analyst; Deutsche Bank AG

Chris Quilty; Analyst; Quilty Space

Presentation

Operator

Good afternoon. Thank you for attending the Planet Labs, PBC, Fiscal Fourth Quarter and Full Year 2024 earnings call. My name is Victoria, and I'll be your moderator today. (Operator Instructions)
I would now like to pass the call over to your host, Chris Genualdi, VP of Investor Relations. You may proceed, Chris.

Chris Genualdi

Thanks, operator. And hello, everyone. This is Chris Genualdi, Vice President of Investor Relations at Planet Labs PBC. Welcome to Planet's fiscal fourth quarter and full year 2024 earnings call. I'm joined today by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook as well as Kevin Weil, who is joining us for the Q&A portion of today's call. We encourage everyone to please reference the earnings press release, 8-K filing and earnings update presentation for today's call, which are available on our Investor Relations website.
Before we begin, we'd like to remind everyone that we may make forward looking statements related to future events or our financial outlook. We reference qualified pipeline, which represents a potential sales leads that have not yet executed contracts for the customer contracts referenced during this call. Please note that the revenue figures we cite will generally be recognized over the term of the contract, which can last multiple years. Further, the terms of these contracts can vary, and we may not realize all expected revenue.
Any forward-looking statements are based on management's current outlook, plans, estimates, expectations and projections. The inclusion of such forward-looking information should not be regarded as a representation by planet that future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions as detailed in our SEC filings, which can be found at www.sec.gov.
Our actual results or performance may differ materially from those indicated by such forward-looking statements, and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
During the call, we will also discuss historical and forward-looking non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision-making as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects.
And allow for greater transparency with respect to key metrics used by management and its financial and operational decision-making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier this afternoon. Further throughout this call, we provide a number of key performance indicators used by management and often used by competitors in our industry these and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks.
At this time, I'd now like to turn the call over to Will Marshall, Planet's CEO, Chairperson, and Co-Founder. Over to you.

William Marshall

Well, thanks, Chris, and hello, everyone. Thanks for joining the call. Today, Planet delivered a strong fourth quarter capped off the year. For the full fiscal year 2024, we generated a record $220.7 million in revenue representing 15% year on year growth. Non-GAAP gross margin for the full year was 54% and adjusted EBITDA loss was $55.3 million. We continued to make progress towards our target of reaching adjusted EBITDA profitability by Q4 of this fiscal year.
We also surpassed 1,000 customers during the fourth quarter of fiscal 2024 an exciting milestone for Tennant growth for the year was led by the government sector. During fiscal '24, our revenue in the defense and intelligence vertical grew over 30% year over year, while revenue in the civil government vertical saw solid growth as well.
In the near term, we expect growth will continue to be driven by government sector, particularly during the period of heightened security, increase sustainability priorities and climate risk in the defense and intelligent market. Our businesses has historically been led by our differentiated high-resolution tasking fleet, a business which continues to grow year over year.
However, recently, we've seen increased demand from defense customers for our planet scope daily scanning capabilities, particularly when enhanced by AI enabled Partner Solutions. While the unique value of our patent scope daily scan has always been clear. Recent Embark advances in AI are leading to new solutions, extract critical value from our proprietary data sets.
We are seeing new scan and search capabilities developed based on our proprietary data scan, which enable critical applications such as board area threat monitoring for national security purposes. These IP-based solutions help lower customer barriers to entry and speed customer time to value. This shift is just beginning, but we're already starting to see it in our bookings and pipeline.
As an example, we were recently awarded a competitive seven figure ACV contract by the U.S. Navy's naval Information Warfare Center and IWC Pacific for vessel detection and monitoring over key areas throughout the Pacific Ocean and IWC Pacific will integrate Planet data and AI capabilities from our partner C-MAX into their C Vision platform to help improve maritime domain awareness and support board area monitoring throughout the region.
Planet is the prime contract awards and Symbyax is a Houston-based satellite analytics and intelligence companies whose advanced AI solutions do vessel monitoring and classification. As you may recall, we previously part of the estimate and provide energy and maritime intelligence solutions. And we recently expanded our strategic partnership with Cinemax, increasing the breadth of opportunities we can pursue together, and we are already seeing demand from other governments for our combined capabilities.
Additionally, we have multiple seven figure pilot programs in flight or in procurement with forward-leaning defense agencies, which, if successful, have the potential to scale significantly similar to the NAWC. Pacific awards. These pilots include AI based partner solutions sold alongside a data enabling board area of monitoring applications. These pilots are primarily focused on monitoring land-based locations. This is part of a growing trend. The signals increased customer interest in purchasing insights with our data. We are pursuing many of these large pilots this year.
I'll turn now to the civil government vertical, where we are also seeing solid traction for solutions sold alongside our data solutions to this vertical include those built by customers leveraging our internally developed planetary variables, product line as well as solutions developed by partners. In Q4, we closed over 50 new and expansion opportunities in the quarter with governments ranging from large federal agencies to state and local governments, which is more civil government opportunities than in any quarter during fiscal '24.
Recent wins include an expansion with Bolivia's Institute of national Agrarian Reform, which is expanding its use of planetary variables and our central hub platform to manage public land and enforce property titling regulations and an expansion with the Ministry of Natural Resources and Environmental sustainability of Malaysia, which is using Pennant scope and scale that data to monitor large, forested areas for Policy Planning and Management purposes.
As you recall, from our Investor Day last October, the civil government market makes up a significant portion of the six big opportunities and the majority of the seven-figure opportunities in our qualified pipeline. It's a large and reliable stream of opportunities for our sales team to close. As we previously shared, the ROI for civil government customers can be many multiples greater than their investment in our data such as the Indian state.
Of addition, we saved over $200 million to Ford elimination in their FIRST year. And Brazil's government, which has collected billions of dollars in fines sees goods and assets frozen aided by times data with both in-house and partnered developed solutions as well as central hubs platform capabilities. We see opportunity to unlock additional segments of the civil government market by speeding time to value and driving expansions with existing customers looking to enhance their ability to manage board areas of land.
Shifting to the commercial vertical during the fourth quarter, we signed expansions with large customers in the agriculture and energy sectors. However, budget constraints and the completion of the large legacy contract, which we've previously discussed on prior calls, resulted in an overall year-over-year decrease in revenue from this vertical during Q1 of fiscal '25, we will lap the difficult year-over-year comparison, but continue to anticipate that the commercial market will be slower to develop based on budgetary constraints, particularly in the ag sector.
Our strategy for the commercial sector is centered around partner-led opportunities and our efficient platform sales. We see strong indications that this is the best way to serve commercial customers and grow the addressable market for our solutions.
To highlight some of our recent wins in the commercial sector, we closed a three-year extension with Swiss Re. Swiss Re continues to be a great partner, and we're proud of how our relationship is growing. The expansion has planets land, surface temperature, pantry, variable to Swiss Re's tool belt in addition to us or water content venture variable that which they already use.
These tools support Swiss Re's Parametric insurance products by feeding pricing models, validating claims and credit forecasting, potential risk and identifying opportunities within new markets. We also closed a large new multi-year deal with an AG focused insurance company in Canada, which is leveraging finance board area monitoring solutions and plenty of variables to modernize its general insurance program of for crop insurance claim validation.
We also announced that landscape data is now available on Google Cloud Marketplace, allowing TCP's existing customers to purchase Planet data using GCP credits so they can easily onboard and analyze process and derive meaningful insights from our data at scale. We've already had a customer in the commercial sector make a purchase for a seven-figure renewal to the marketplace.
Shifting gears to share a business update that spans across verticals. As you may have seen in the press release this afternoon, we recently signed an eight-figure data license agreement with carbon Napa to provide hyperspectral core imagery to the nonprofit and its partners until 2030. As a reminder, Cobham Napa has been a key partner for Planet in developing the Pan-Asia hyperspectral constellation.
This contract is an extension of an existing arrangement, and we would expect revenue under this contract to begin in 2026. Importantly, this agreement demonstrates our shared confidence around the program and our shared mission to improve understanding and accelerate reductions in global methane and carbon dioxide emissions. We continue to expect to launch the first Pelican the satellite later this year.
Now let me turn to product updates. Our first Pelican tech demo, which we launched in November continues to perform excellently. The hundreds of system tests that we've conducted over the 10 subsystems of the satellite have gone well. We are gaining valuable on orbit learnings and making solid progress towards operationalizing the Pelican platform. As we shared previously, our agile aerospace approach with rapid iteration of capabilities in orbit enables fast improvement cycles to our spacecraft designs. We expect to launch additional pellicles, including the first production satellites during the next 12 months.
Turning now to software and platform on pace. Similar to our approach in spacecraft, we patches, rapid iteration and constant improvements of our software products as well. We recently launched field boundaries analytics, which is the latest addition to our three foundry variable solutions field boundaries provides the spatial context necessary to better understand planted acres for different crop types and growth throughout agricultural season, enabling more accurate yield estimation for our customers at a global level.
We've also recently upgraded our crop biomass plunger variable retirement script data, as was made meaningful improvements to our road and building detection solution. Consistent improvements in our AI powered analytics solutions are helping make our data more accessible and speed customer time to value.
In summary, demand in the government sector is very strong. We are seeing a shift in our business towards selling solutions alongside our data. Ai is enabling board areas, search atop our unique daily scan and is opening use cases and markets with exciting early traction in the defense and intelligence vertical. We are prioritizing investment behind these areas.
I want to emphasize that we remain committed to striking the right balance between growth initiatives and operational discipline so that we can achieve our adjusted EBITDA profitability by Q4 of this year was an important milestone on the path to building a high-margin, sustainable cash flow. Generating business goals for fiscal 2025 will be driven by closing the large deals in front of us and scaling our platform and solutions partners globally across vertical markets.
Our product and engineering teams continue to make incredible strides on both our agile space technologies and equally agile software stack. And I couldn't be more excited about the developments here and there's more to come. We are hosting a milestone platform launch, which will be webcast virtually on April 11. So I encourage you to tune in.
Before I hand the mike over to Ashley, I'd like to discuss the management transition announced earlier today. We shared Kevin Wiels; role is evolving to be an adviser to Planet Labs PBC and a member of the planet federal board and Ashley will be taking on the role of President.
I first want to express my thanks to Kevin who's here on the call with us today for all of his impact at PartnerRe and look forward to continuing to work with them. I'm very glad that Pennant will continue to benefit from his partnership and guidance in this new way.
I'd like to congratulate and recognize actually here for the expanded role that she will be taking on that plan. And I'm pleased to share that you will be assuming the responsibilities of leading our go-to-market and business strategy as President and CFO. I'm excited about taking on this new role because, as you know, actually his leadership and depth of experience or an incredible asset to partner.
She has over 20 years of experience, scaling technology businesses, driving financial performance and building operational excellence at global organizations, a results driven focus and deep understanding of how to make it the right person to lead our go to market and business execution during this next chapter.
Additionally, Robert Cardillo, Chair of Planet Federal and the former head of the National Geospatial Intelligence Agency, who continues to bring a wealth of knowledge, understanding and relationships in the national security domain is taking on a larger role overseeing strategy for our defense and intelligence business globally.
I'll now turn it over to Ashley for a review of the financials and our outlook. Over to you, Ashley.

Ashley Johnson

Well, I really appreciate the kind remarks. I'm truly honored to take on this new role excited to partner with the global go-to-market and product leaders and ready to build on this incredible foundation for my next chapter with Planet.
I'm also pleased to report that all of our results for the fourth quarter and full year fiscal 2024 were in line with or better than the guidance we provided on our last earnings call. Revenue for the quarter ending January 31 came in at a record $58.9 million, which represents 11% year-over-year. Growth in the fourth quarter was led by the defense and intelligence vertical, which grew over 20% year over year, driven by the NIWC Pacific win and expansions with customers in both domestic and international markets.
We also saw solid year-over-year growth in the civil government vertical, where our broad area management capabilities and solutions are supporting strong customer adoption and expansion. From a geographic perspective, during the fourth quarter, EMEA revenue grew more than 20% year over year. Latin America grew more than 30% year over year, and Asia Pacific grew over 15% year over year. North America revenue stayed roughly flat on a year-over-year basis, primarily impacted by the discontinuation of the legacy contract that we've discussed previously.
For the full fiscal year, EMEA revenue grew more than 50% year over year. Latin America grew more than 20%, Asia Pacific in the mid-single digits, while North America revenue grew less than 5% year over year. As of the end of Q4, our end of period customer count was 1,018 customers.
Recurring ACV, or annual contract value was 93% of our end-of-period ACV book of business and over 90% of our end-of-period ACV book of business consists of annual or multiyear contracts. Our average contract length continues to be approximately two years weighted on an ACV basis. Net dollar retention rate at the end of FY24 was 101% and net dollar retention rate with win-backs was 103%.
During the year as Will noted, we saw strong expansions with government customers, partially offset by slower uptake in the budget constrained commercial vertical. New customer additions were stronger in FY24 than we had previously expected and gross retention, so year over year improvement reflecting the stickiness of our solutions. Our lower than expected net dollar retention rate for fiscal 24 primarily reflects less expansion than we had expected for the year, but it is not indicative of higher churn.
Turning to gross margin, non-GAAP gross margin for the fourth quarter of fiscal '24 was 58% and for the full year was 54%. Adjusted EBITDA loss was $9.8 million for the quarter and for the full fiscal year was $55.3 million. Adjusted EBITDA losses narrowed quarter over quarter throughout the fiscal year 2024, driven by operational efficiency and focus across the company. Capital expenditures, including capitalized software development were $10.1 million for the quarter and $42.4 million for the year or approximately 17% of revenue for the quarter and 19% of revenue for the full year.
Turning to the balance sheet, we ended the quarter with $298.9 million of cash, cash equivalents and short-term investments, which we continue to believe provides us with sufficient capital to invest behind our core growth, accelerating initiatives and achieve cash flow breakeven without needing to raise additional capital. And we still have no debt outstanding at the end of Q4.
Our remaining performance obligations or RPOs were approximately $133 million, of which approximately 86% apply to the next 12 months and 98% to the next two years. Our backlog, which includes contracts with a termination for convenience clause, which is common in our US federal contracts and occasionally found another customer contracts was approximately $242 million, of which approximately 67% apply to the next 12 months and 85% to the next two years.
Let me turn now to our guidance for the first quarter of fiscal '25. We're expecting revenue to be between $58 million and $61 million, which represents growth of approximately 10% to 16% year over year. We expect non-GAAP gross margin for Q1 to be between 50% and 52%. Gross margin for Q1 is expected to be impacted by the inclusion of Partner Solutions and some of our larger government sales, which we anticipate will have an approximately three percentage point impact during the quarter.
Guidance also reflects an anticipated five percentage point impact from higher depreciation expense related to the shortened estimated useful life for the three SkyTouch satellites, which we expect to lower and reenter the earth's atmosphere within the fiscal year. We expect our adjusted EBITDA loss for the first quarter to be between $11 million and $9 million dollars.
We are planning for capital expenditures of approximately $14 million to $17 million in Q1, reflecting our continued CapEx investments in next-generation fleet as well as the maintenance CapEx for replenishment of our plant scope constellation.
Turning to the year ahead we recognize that we are seeing an increase in large contracts and partner solutions in our existing business and pipeline opportunities. As you've heard, we are pursuing many promising large government contracts including multiple seven-figure pilots, in-flight or in procurement that have the potential to convert into very large operational contracts this year.
In addition, we are seeing significant progress with new solutions that we are providing with partners enabled by recent advancements in AI. The signals we are receiving from existing and potential customers give us confidence in the power of these solutions and our position to win. We believe these opportunities have the potential to drive significant scale and upside in our business. However, the timing, size and structure of such opportunities can be difficult to predict.
That's why we're going to hold off on guiding for the full year until we gain more clarity on how these opportunities develop as we gain visibility on these opportunities through the year, we will provide more color to our outlook. Our long-term financial targets for the business have not changed further, I'd like to emphasize our commitment to reaching our target of adjusted EBITDA profitability by the fourth quarter of this fiscal year.
As Will mentioned, we are prioritizing investment behind core areas to capture the market opportunity unfolding in front of us in parallel, we will reduce expenses where necessary to deliver on adjusted EBITDA profitability, which we view as a key milestone on our journey to building a high margin sustainable and cash flow-generating business.
In summary, the government sectors are strong and we are seeing demand shift to solutions alongside our data enabled by the revolution happening in AI, we are investing behind these trends to capture market share and drive customer adoption while streamlining our cost base to ensure we deploy our cash efficiently and align our operations to profitable growth simultaneously, our engineering teams continue to make great progress toward launching our next-generation fleets, and we have an exciting platform launch coming in just a few weeks. I'm incredibly proud of the accomplishment of our teams around the globe in fiscal 2024 and even more excited for the year ahead.
Operator, that concludes our comments. We can now take questions.

Question and Answer Session

Operator

(Operator Instructions) Michael Latimore, Northland.

Michael Latimore

On sales cycles and new deal sizes, how are they trending now versus you four to five months ago.

Ashley Johnson

And I'd say on on the sell side, we're definitely seeing opportunities for for-sale home sales to sorry, average sales sizes to increase. And just given what we alluded to with some of the larger contracts, some of which have been awarded, some have been awarded in the form of pilots and with government contracts. And as you know, that those sales cycles tend to be longer, although on the pilot side, we can say shorten turnarounds. So net-net, I'd say stable to up seeing positive signals.

Michael Latimore

And then I think there was a eight figure expansion deal that was kind of effectively in the pipeline last quarter. Any update on that one?

Ashley Johnson

So on the pipeline, nothing to share.

Michael Latimore

And just last, do you have an updated net promoter score NPS?

Ashley Johnson

Not at this time and we'll have to circle back to you with that.

Operator

Jason Gursky, Citigroup.

Jason Gursky

Thanks, everybody. Will, maybe this is a question for you, talk a little bit about the Sky sets and the transition to the publicans. Some if for whatever reason, there's a delay or gap in capability set that comes about as you retire some of these guys had before Republicans get up there and do you have any contracts that would be at risk today? You are currently performing on a contract. And if for whatever reason, there was a gap in that capability set that you would not be able to perform on?

William Marshall

The short answer is no. And so we have plenty of capacity to provide to our customers. At the present time, we have seen some accelerated depreciation of those startups from the lower of it, but generally our and that sort of offset by the fact that actually we increase the capacity on those satellites routinely with software improvements.
So just to give you a sense of that over the last year, we improved the capability capacity per satellite by 40%, and that does a more than doubling the prior year and that'll with software improvements. So and the longevity of those assignments or anything in the higher orbit looks good. And Pelican is on track, and I shared a little bit about Powercom and I'm a tech demo. It's going pretty well, we're planning for the first operational satellites and that's 12 months, as I also mentioned, and really pleased with the results so far and incredible work of that team that has pulled it all together because it's a new cargo mentioned.

Jason Gursky

Same topic, how many Sky sets AMI Sky sets after these three go retire, you have left and how many do you need to perform on your existing contracts?

William Marshall

Yes, we have approximately 15 and remaining and the I think the group that's plenty for the revenue, not just revenue that we have, but for the revenue to continue to grow. And again, with that sort of capacity improvements of the kind that I just said on a year on year, and we still see potential for growth in that somebody is capped out or we're going to continue to work on improving that further this year. And so and yet we think 15 is fine.

Chris Genualdi

Okay, great. Thanks. And then Ashley a couple for you on. Can you get to EBITDA break-even with your current revenue run rate, which you've got your projected in the in the first quarter '25?

Ashley Johnson

Yes, I'd say that the way that we're thinking about this year and obviously I alluded to the fact that and there are a number of opportunities inside that and, you know, from very large deals and work with partners that are making full-year guidance a little more difficult than usual. But and I'd say generally, it is because of the fact that we do have so much opportunity that makes it harder for us to the opposite.
What I can share is that for our own internal and budgeting purposes, even though we're very confident in our position to compete and win in these opportunities and we're investing behind them and we're not assuming acceleration in our year-over-year growth rate as we progress through the year and are aligning our costs accordingly.

Jason Gursky

And I guess the question is it roughly $60 million a quarter. Can the business be EBITDA breakeven?

Ashley Johnson

There's no reason why it couldn't be.

Jason Gursky

Okay. And then on cash flow. Maybe talk a little bit about expectations around the cash flow number. You new gets to breakeven and turns positive, the timing and drivers of that?

Ashley Johnson

And I guess the way that I talk to it is we are balancing a number of different factors in managing our cash balance. So one is we want to maintain a healthy balance sheet with that very large government customers that will look to us to sustain a nine figure balance and cash balance on our books and to know that they can continue to invest behind us as a as a key provider of the very critical services that we provide. So that's one factor.
The other is we're making investments in our next-generation fleet and we are in a what we would call a growth CapEx mode. And we want to make sure that we continue to invest behind those so that we can sustain our space and data advantage. And all of that is combined with the operational efficiencies that we've continued to drive quarter-after-quarter.
And we are prioritizing internally so that we're investing in things like our core platforms that are enabling the solutions that are driving the exciting opportunities that we talked about earlier and making sure that as we as we think about our own internal operations that we're freeing up our capacity to continue those investments.
So it's a balancing act. Obviously, if revenue accelerates, that gives us more flexibility, but we're not relying on acceleration beyond where we are and in order to achieve our profitability goals and ultimately our cash flows.

Jason Gursky

Last one for me. On the large government opportunities that you've got there on slide 23, which is the outlook slide. Can you talk a little bit about the geographic demand with the government customers and where the sources of those opportunities are?

William Marshall

Yes, I can elaborate a little bit about some of the big deals we are looking to today. And as the NGA has a lunar procurement, which is a $300 million-ish, a procurement mechanism that we have for analytics on top of satellite data that will be going after competing for this year. And NASA has had an expansion of the budget for the CSD program at the commercial space data layer on there, and we will be competing for more dollars there.
And globally, we have a few really important international customers that are that we are in active pursuit of partnerships with significant expansions. And I know you know, I mentioned the number of the fact that a lot of us own seven-figure deals are civil government. So that sort of it is and as well. So yes, there's a lot that we're going after right now. I feel very good about the deals and opportunities that we get. We're pursuing this year and yes, route, I'm feeling pretty solid about that.

Operator

Trevor Walsh, JMP Securities.

Trevor Walsh

Thanks, team for taking the questions. Well, maybe I'll start with you if that's okay. And could you maybe talk a little bit more about the NIWC. Pacific contract from the perspective of I think you had mentioned that other governments might be able to operationalize kind of a similar type of use case, I guess how sensitive is the U.S. Navy's program around this, whereas you might not be able to kind of share all the learnings from that particular on contract and then replicated for other governments?
And then secondarily, kind of around that contract, what's the opportunity for expansion within that? Would that just be kind of broadening the area of interest kind of the beyond Pacific into other geos? Or is there just additional kind of imagery services that could come along? I guess give us a little sense of how that might expand over time, that would be great.

William Marshall

Yes, happy to and really excited by that contract. Overall, it was a as an example where AI on top of our planet scope data can enable new capabilities of their movie maritime domain awareness, MDA, as it's called in the sector that the need is large area, frequent monitoring rates and obviously, our planet scope daily scan is ideal for that.
And AI on top really pulls out things like vessel detections, visual identification tracking that is useful for situation awareness. That's what this does is Ghana. And I also know that that was a competitive win over an incumbent that had a system, but theirs was based on a tasking satellite fleet and obviously, our scan is more well suited for that.
And so it was great to see our team put up that competitive win now has two expansion that you asked about and that's certainly possible within that. In fact, we've so far the performance of that contract has been really strong, and we've got good initial indications from that customer. Very excited by that and then more broadly to your question, can this go to other customers?
Absolutely. In fact, we already have several conversations ongoing for that capability, and it is both for up and there's nothing that restricts us from doing that with other countries and anything more than any other products.

Ashley Johnson

If I could add onto that, I think it's worth noting and will add to this in his prepared remarks that this was a solution that was initially developed in the commercial sector for energy and financial markets that has applicability to the defense and intelligence sector. So often things start in government and then go out commercial as it relates to geospatial data, but this is actually one way or the opposite direction.

Trevor Walsh

Thanks both for the color on that and good segue for me. So thanks, on that. On the commercial business front, you talked about kind of the budget constraints leading to some of the results for the year within that, that part of the business, what are I guess, the outside of just the broader kind of macro things that we've all been talking about for the last 18, 24 months.
Are there any other just technical hurdles or things for that part of the business to just really start going and kind of getting getting back to fuller health? Or is it really just once people feel like interest rates are kind of normalizing or whatever that looks like, then budget dollars are available and it's just a flip of the switch or are there other kind of convincing I guess you would need to do around just the kind of the value buy of solutions?

William Marshall

Well, I'd say fundamentally, nothing has changed. And the need for position in agriculture in these other sectors remains the same, is mainly the economy that is affecting there. There's been a lot of pressure on the ag sector in particular, which was our biggest part of our commercial segment. So today and it is a test that has had its challenges.
However, our data fundamentally can enable improved crop yield, decreasing fertilizer use and other things and inputs as they go up, which actually can you to yield meaningful improvements in profitability for that multi-trillion dollar sector, there's no reason why we shouldn't be doing that long term, I would say so. So the fundamentals of that, and I would say the same in other commercial sectors like insurance and other things, they've been less weight on that. I would say there's still a lot of work for us to do as well and solutions, right?
And so we are building solutions we have some and we mentioned in the Swiss Re example, how and adding the extra planetary variable land surface temperatures enabling and reinforcing the ability to do Parametric agriculture insurance. That's the kind of thing we need to do to enable that customer to get immediate value without having to have complex understanding of geospatial data, right?
So the more we do that the more that opens up markets. But fundamentally, the effect is because the economy and nothing has changed about our outlook about those. Our sector has been very strong long-term.

Trevor Walsh

Actually, maybe just a couple of last quick ones for you. If I can on the the acceleration in new customer logos was great in the quarter, was there. Can you provide just any was there anything in particular that you think kind of help to achieve that? And I know you've been talking about a greater efficiencies around your go-to-market processes. I'm assuming that kind of helps. But was there anything else just out of the ordinary in the quarter that also can you kind of contributed to that that metric?

Ashley Johnson

Nothing that jumps out at me as being out of the ordinary I have, and I would say that we have an incredible global commercial organization that has been building these relationships and really educating the market on the up the opportunity for planning to drive value with these end customers and some of the sales have taken time. But the team has been persistent and it was great to see them bring in some new logos and because obviously, land and expand is a core part of our sales motion.
So while we typically expect to see the majority of our growth in any given year coming from expansions just by the nature of the way, these deals tend to progress. And it was interesting to see that last year was much more balanced between new business and expansion business. And that just it speaks to more opportunity in front of us.

Jason Gursky

Great. And then lastly, the NDR number, it looks like kind of I'm just looking on your on the slide deck. So we're working off the same sheet of music. It looks like the kind of the delta between the pure NDRR. number and the one with win backs essentially converging and coming together, does that make the win backs kind of less kind of less meaningful as a kind of a separate call out?
And is that essentially happening less and less as the numbers would sort of dictate and that and is that or is this more just is that something I guess you'll continue to sort of support and look into kind of on a quarterly and yearly basis?

Ashley Johnson

I'll tell you that nothing would make me happier than for that metric to become obsolete because the two numbers converge, because that would tell me two things, one that we're getting renewals and on-time so we don't need to report win-backs and we get renewals at the point of when the contract ends. And two, that would speak to just continuity of the business with the with the end customer.
And as you know, there are some sectors of the market we serve, where the work with our data data tends to be more seasonal. And so that can sometimes lead to gaps between when a contract expires and when the customer focuses on the renewal. And that doesn't speak to the data not being valuable, but rather just the periodicity being having some months and spikes and peaks and valleys.
And as we are driving more solutions and really educating our customers on more ways that they can be using our data to drive elements of their business. We should see less of those peaks of peaks and valleys and more on-time renewals across all of our contracts. So and we'll keep reporting it as long as it's relevant and but as I said, nothing would make me happier than to not need to report that number.

Operator

(Operator Instructions) Ryan Koontz, Needham & Company.

Ryan Koontz

Yes, great. Thanks for the question. First, just a little bit of housekeeping on the gross margin step-down in Q1 -- bridge is there. I heard you mentioned the 300 bps of impact from third party solutions kind of selling through your channel as I understood. And then you're talking about a 500 basis point hit from the accelerated depreciation.
So my question is, but is that 500 basis points it's relative to the relative Q4 or maybe your plan of record before? So maybe you can just walk us through that, suppose that bridge?

Ashley Johnson

Yes, so the numbers I was providing were specific to Q1 guidance. So am just some context on on the year end with the gross margin for the full year will be impacted by increased depreciation from the three satellites. That will be the orbiting until around Q3. So it's an approximate $5 million impact over that period. And I gave you kind of that impact on Q1. A
nd with respect to partners, as I noted, when we act as a prime with pulling partners into that relationship, then we get both the revenue, but also and the revenue that goes to the partner that's providing they're part of the solution. And so that flows through our cost of goods sold.
And so I quantified that impact on Q1. Obviously, how that will impact the full year will depend on the mix of business that we see come in and how much of that are these and government deals where we're prime and pulling out a partner solution or how much of it is in a more of our traditional business where a partner might sell side-by-side with us or on where the partner might actually be prime.
So and a little hard to quantify at this point gave you Q1 and we are leaning into it. So we do expect that to continue, but unable to give you exact quantification at this time, other than to say it, you know, we do expect this to help us drive scale and so we are leaning into it.

Ryan Koontz

Makes sense. Can you maybe explain where you are in the process building out solutions and how we should think about partner prime versus plan as prime like which ways more common now in which ways trending?

William Marshall

Yes. I mean, it's really both of those things. I mean, both plants and solutions and partner solutions typically, we have been the prime in those cases where they do involve plant dependent partners. And we're obviously looking primarily at what the customer needs most and driving it from there. But fundamentally, AI is driving a lot of this and both our own and partner solution. I is opening up the value proposition here to extracting more value from our data.
I think our planet scope dataset is particularly well suited to that because of the broad area and the fact that we revisit every area each day, no matter what which means that you have this consistent data set a time series stack to train AI and algorithms upon. So it's a pretty unique asset that we have that is differentiated and has high appeal to AI. companies that have anywhere in the Costa space. And but anyway, I don't see any particular trends.
I mean, we've seen some very good takeoff with some of our partner and partners like the Navy example that I mentioned, but there are others. We mentioned a couple of pilots that we're working on, and there is a distinction between most of the existing work has been on what we would call classical machine learning some of the pilots or based on large language model type fundamental capabilities, which is at opening up more things. I would say most of the growth right now is more to do the classical stuff.
And there's a huge Frontier opening up with large language models now tackling and both the text motor multimodal pieces of multimodal language ones are now doing text, the imagery conversion and that fundamental capability is something that will become a more of a boon to us from my perspective for sort of extrapolated beyond your answer there, but I think it's an exciting time in that domain.

Ryan Koontz

Great, Will. Well, thank you. And just one more if I could on any color you can give us on your steel contract, how that's progressing? Is any of this strength in government that you're seeing come in the result of that or maybe just a little update on how that's how that's progressed.

William Marshall

So far so good. And we feel very good about the implementation of our team against that contract. And the I understand the customers satisfied, we do have a renewal coming up and with that contract and we feel very good about that prospect. I don't know as to how it's affecting other areas. I do think that the more we show that we're a serious player in this space generally, and that's one of the mainstays of that the reputation that Planet is providing services there and reliably is important. So in that sense, I think it has a sort of indirect a benefit.

Ryan Koontz

That's excellent. Thanks for the color.

Operator

Noah Poponak, Goldman Sachs.

Noah Poponak

Hi, good evening, Kinner. It sounds like are saying that the decision to not provide full year 2025 annual guidance is less downside uncertainty and more upside uncertainty. I guess as you're alluding to these large prospects, but where you don't know if and when they'll land, you've given the 1Q guidance where the growth rate is somewhat consistent with full year '24, and that's on your toughest year-over-year compare that you'll face this year by far.
And so I guess, is it a reasonable base case for all of us on the outside to assume 2025's growth rate looking similar to '24, it's kind of a floor and then there's upside depending on when the large opportunities land, if they land or is that too optimistic. Are there scenarios where the growth rate decelerates is there a scenario where revenue is down and so obviously, a lot of this has to do with timing.

Ashley Johnson

So as we expressed, we feel really good about the business opportunity that is in front of us and the business that we've landed, the pilots that we're working and the opportunity to convert some things that, you know, as we expressed last year have been maturing in the pipeline and really have the teams have continued to progress them.
And just not at the pace that obviously, we had we had hoped previously. So and the visibility is challenging to your point and in particular on the upside. And when I think about just managing our overall cost base and making sure that we're getting to profitability. And as I mentioned, we're not assuming acceleration on that year-over-year growth rate.
And that helps us kind of ring-fence how much we have to invest and where we determine where we best place it and to drive the growth in the business beyond that. And obviously, I'm not giving a range of any sort for reason. But I'd say you should be hearing a ton of confidence in the opportunity in front of us and uncertainty really around timing.

Noah Poponak

Do you anticipate that you will have a range at some point through the year?

Ashley Johnson

We'll continue to give more color. And obviously, as we've as we progress each quarter, we get more visibility into as to how the new business lands will be translating into revenue on the year. So we do anticipate giving giving more color and as the year progresses.

Noah Poponak

And Ashley remind me over the past few years on average or maybe just kind of directionally as a framework on how much of your annual revenue do you book and deliver within the year versus it was in the backlog when you entered the year?

Ashley Johnson

And so we've talked in the past that we've typically seen the amount that's in kind of RPOs and backlogs representing about 60% to 65% of revenue. And then from there, a decent amount of the remainder comes from renewals. And, you know, we tend to, for internal purposes, assume new bookings to be back-half weighted. And so, you know, a lesser percentage contributing to current year revenue and really more driving that extra revenue. So that's typically how we think about it. We've talked about it in the past.

Noah Poponak

Okay. And then just last one I wanted to ask about is on the capital plan from the $14 million to $17 million for the first quarter. Is a pretty big number compared to the run rate, although last year you had one quarter in that range. I guess is that up? Is that anomalous or is that a run rate, what's the full year look like? And I guess where to where do we how do we how does that sort of start to normalize as a percentage of revenue over time?

Ashley Johnson

As a percentage of revenue is a metric that depends on quantifying the revenue. But I'd say our long-term target is unchanged for where we expect CapEx as a percentage of revenue to be in as we move out of this growth CapEx phase and into maintenance CapEx this year is a growth CapEx here. And so Q1 levels I'm not what I would characterize as anomalous, but kind of more work what we would expect to see as we're in this growth CapEx cycle.

Operator

Jeff Van Rhee, Craig-Hallum.

Jeff Van Rhee

Great. Thanks for taking the questions. And I guess this would probably be for Kevin naturally beyond the sales execution with the transition going on, I think it'd be good just to get a sense of where you feel you are now with respect to sales execution. So number one, just where are you what's working? What's not? And generally speaking, what needs to change?

Ashley Johnson

Why don't I jump in? And Kevin, if you want to add any color to that? As we talked about a lot of the changes that we wanted to make in our go-to-market strategy, we initiated back in Q3 and I'd say the team executed against that really thoughtfully in terms of thinking about where are we going direct customers and where do we want to really be and evolving? And leaning into our partner ecosystem. And so a lot of those changes get implemented over the back half of the year so that we were ready to start this year With those changes completed and everyone focused on just this year's numbers and getting out there and bringing the business in.
So and I would say with some of the heavy lifting on the organizational work. And now we're excited for an upcoming sales kickoff and continuing to see strong performance around the globe and additional color you would add there, Kevin?

Kevin Weil

All I'd say is I have a lot of confidence internally who leads our sales team and as we transition here and actually the ability to continue this execution.

Jeff Van Rhee

Okay, got it. And then with respect to the commercial and maybe more specifically ag, I mean, in general, ag names in the space have been lifting their head for a little while now. I'm curious if you're seeing the same or any changes in behavior in ag? And just yet just fundamentally trying to understand the weakness in ag and commercial in general, is it up?
Is it a function of the solutions needing to be more, I guess I'd say productized or easier to consume maybe a more demonstrable ROI. I mean, there's both landing new customers and there's retaining and those two factors would obviously way, but just thoughts on commercial and ag?

Ashley Johnson

Maybe why it's been as soft as it has when I'd say coming off of ag conferences, earlier this month. There's I'd say you're right, the sector is starting to take a tad up and a lot. We had a lot of exciting comes conversations with both customers and potential customers. And that said, we're counterbalancing our optimism, our long-term optimism for that sector with the continued inflationary pressures and commodity prices for the sector as a whole. So we remain very bullish on the opportunity for us in ag and commercial at large. And but for this year, in particular, we're tempering our expectations just given some of the dynamics in the in the sector.

William Marshall

Just to add, if you want a little bit of color of how we help her. That was a great blog, a registry release through via release, one of our customers a few weeks ago, and it just tells you the story of how the use cases are strong there and asset assisted and commercial is not just agriculture. Of course, we do have insurance, energy and others too.
And I you are speaking about maturity of solutions. I think that that is critical and that we now do have some solutions that are really clear. And so now we are being more focused in on that like that, Parametric agriculture insurance products, which we are scaling now. And so we have a few a toehold into the service market and as well as the fundamentals that was very strong.

Operator

Laura Li, Deutsche Bank.

Laura Lee

Just a quick one from us. So what's your initial view on the space, commercial and it's a space as well, obviously, Scotia and the kind of value you see there are some other things for the people now you refer to the reports that came out recently about now?

William Marshall

ESTACIO, Is that what you're referring to?

Laura Lee

Yes.

William Marshall

I know that's a that's a government and a bill, I hope is that these are large government contracts basically for government owned and operated satellites. And so they're playing a sort of classic rollover as a defense contractor that's very different from our business. And government will always secure satellites for their own internal uses, if you like, especially in security domain like they are doing with Space X and that that doesn't I think, in any way change the market for on the commercial and commercial first side of it fine to governments.

Operator

Chris Quilty, Quilty Space.

Chris Quilty

Ashley, follow-up on your CapEx discussions, you talked about the growth versus maintenance capital. What do you consider Pelican? And if it's the former, when do we start sort of folding in the growth CapEx associated with that process?

Ashley Johnson

And yes, so I would say Pelican is definitely in a growth CapEx phase. And obviously, we've introduced the first tech demo and then we'll begin launching our operational fleet. And we've talked in the past about this being a really important lever for us as we think about managing our costs and we can move at a more maintenance replacement rate with the Sky that fleet after we've gotten through the initial initial operational launches, and then we can watch more faster to stay in a growth CapEx phase if we're feeling high demand and the revenue supports it.
If we're seeing demand kind of at the same pace as the growth that we've been experiencing today, we can shift more quickly into a maintenance CapEx mode. So that is an important lever available to us. It enables us to manage our cash and versus our our CapEx investments.

Chris Quilty

Great explanation. Next question and the budget, did we pass a defense budget or did we extend the CR? Doesn't mean we're in CR. I honestly don't have the mental capacity for it. But I suspect from your perspective, obviously, you've got lots of contracts on the horizon here, and there's a lot of IT budget going on.
(multiple speakers) Well, I have two quick questions, can you start new programs in our new program starts imports, so to close some of these opportunities.
And the second one kind of what sort of system response are you seeing? I mean, CRs are nothing new. We do them every year, but are you seeing anything where it's freezing up more than normal? Or is this just like same old thing?

William Marshall

It becomes typically dysfunctional this year. I mean, we have, of course, been tracking that and the pricing is still in that area. And they have, yes, right, and you're wrong. But anyway, of course, we do track exactly where where where our contracts require larger and upticks in budgets versus just the CR will do that. And the budget has passed for both on the civil side to affecting things like NASA and the and on the defense side effects and things like that or and our partnership with HCL.
And that's good because it generally enables them to put increases were where they have increased things and in general, these program areas for commercial satellite data buyers are increasing. And I'll just end by saying that we're really proud to serve the government clients that we work with and we think we do some really important services and I think they do to and we got to it wasn't with them.

Chris Quilty

And final question. The solar cycle, I guess is real --

William Marshall

Yes

Chris Quilty

But several other companies in the industry, you saw some older satellites. So to an early demise, I mean, you probably got some good data out of that event? And was it at this point looking back? Was it kind of an event that happened?
And I haven't seen anything pointing to that yet, but clearly higher on the solar cycle? And do you have good enough data to say? Yes, if we see higher. So order activity level, which I think is what they're predicting for the next couple of years, we still feel really good about where the satellites are operating

William Marshall

Well, look, as I mentioned earlier, the yes, this is the server cycle has been affecting us. It isn't from a from a nominal point, but it is enormously high and there's an 11-year cycle that is normal. This went significantly higher in the high part of the normal phase than was normal, but we have adapted our teams have been really great, adapting our capabilities.
And generally Arçelik has survived very well. The redundancy in our fleet is inherently helped us in this situation. But then we have seen a little bit of accelerated a decrease of life with a few Skyfence. I'm pleased to say that the final ones in the low orbit that we had are now done with this present increase in the depreciation, and that's done for now.
So and with it going forward, we will be I think there will be a lot of science is trying to figure out how to not make that mistake again and be able to predict this, and they're already papers out there that show how to predict going forward, but it was certainly caught the scientific community off guard in this case.
But largely our satellite fleet and redundancy has enabled us to do very, very well despite it and the agility of our operations to raise some of the deadlines and so on has meant that our services have continued to improve, and we've learned a lot.

Chris Quilty

Great. Hear's to better weather.

Operator

Thank you for your question. There are no additional questions waiting at this time. I would now like to pass the conference back to Will Marshall, CEO, for any closing remarks.

William Marshall

Yes, overall, I'd just like to end by saying that I feel we're in a really strong position for the year ahead on that but the big deals that we're pursuing in particular, and obviously, you see that we've had significant growth in the government sector last year and that demand continues to grow. And we're selling increasingly these solutions enabled and in particular enabled by the revolution happening in AI.
And we've seen some early adoption of that turning into real partnerships. And also I'm very proud of our teams on the product side. They've been executing on the Pelican satellite through to the US data platform. And I mentioned as the platform milestone announcement on the 11th of April if you want to tune in. But we overall really heads down and focused on executing on the big deals in front of us. And I look forward to updating you on the next call.

Operator

That concludes today's call. Thank you for your participation and enjoy the rest of your day.