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Samsara, Inc. (IOT) Q1 2024 Earnings Call Transcript

Samsara, Inc. (IOT)

Q1 2024 Earnings Conference Call

Company Participants

Mike Chang - VP, Corporate Development & IR

Sanjit Biswas - Co-Founder, CEO & Chairman

Dominic Phillips - EVP & CFO

Conference Call Participants

Aleksandr Zukin - Wolfe Research

Sterling Auty - MoffettNathanson

Christopher Quintero - Morgan Stanley

Kirk Materne - Evercore ISI

James Fish - Piper Sandler & Co.

Michael Turrin - Wells Fargo Securities

Matthew Pfau - William Blair & Company

Junaid Siddiqui - Truist Securities

James Wood - TD Cowen

Presentation

Mike Chang

Good afternoon, and welcome to Samsara's First Quarter Fiscal 2024 Earnings Call. I'm Mike Chang, Samsara's Vice President of Corporate Development and Investor Relations. Joining me today are Samsara Chief Executive Officer and Co-Founder, Sanjit Biswas; and our Chief Financial Officer, Dominic Phillips.

In addition to our prepared remarks on this call, additional information can be found in our shareholder letter, press release, investor presentation and SEC filings on our Investor Relations website at investors.samsara.com. The matters we'll discuss today include forward-looking statements. Actual results may differ materially from those contained in the forward-looking statements and are subject to risks and uncertainties described more fully in our SEC filings. Any forward-looking statements that we make on this call are based on assumptions as of today, June 1, 2023. And we undertake no obligation to update these statements as a result of new information or future events unless required by law.

During today's call, some of our discussions will include our first quarter fiscal 2024 financial results. We'd like to point out that the company reports non-GAAP results in addition to and not as a substitute for or superior to financial measures calculated in accordance with GAAP. All financial figures we will discuss today are non-GAAP, except for revenue and revenue growth. Reconciliations of GAAP to non-GAAP financial measures are provided in our press release and investor presentation. We'll make opening remarks, dive into highlights for the quarter and then open up the call for Q&A.

With that, I'll hand over the call to Sanjit.

Sanjit Biswas

Thanks, Mike, and thank you, everyone, for joining us today. Samsara delivered another strong quarter of durable and efficient growth. We ended Q1 with ARR of over $850 million, growing more than 40% year-over-year. We also achieved Rule of 40 for the third consecutive quarter. Samsara's vision is to empower the industries that power our world, and we continue to see strong adoption of digital transformation for physical operations. Large customer wins, in particular, are fueling our momentum.

In Q1, we added a record 138 large customers, bringing us to a total of 1,375 customers with over $100,000 in ARR, growing 53% year-over-year. This includes Fortune 1000 companies with large and complex operations such as United Rentals, Iron Mountain and Werner Enterprises. Our customer feedback loop is central to our success. Samsara customers are the backbone of the global economy and are leaders in diverse industries like construction, field services, manufacturing and retail.

During the quarter, I was on the road with our executive leadership team in the U.S. and Europe, meeting with some of our largest customers. Our technology is driving meaningful business impact for them, and they are asking us to double down on a few things. First, AI-based safety technologies to reduce risk across operations; second, digital workflows to increase efficiency for frontline workers; and last, more platform and data integrations to drive higher asset utilization in the field.

We're hearing this across the board, not just in a single industry. In this current environment, our customers are prioritizing investments in solutions that help control costs and deliver rapid ROI by running smarter, safer and more efficient operations.

Now I'd like to focus on how we are using AI to deliver rapid ROI and transform customer data into business impact. AI has been core to how we built our product over the last 5 years, and our data moat is one of our key competitive advantages. The more operational data we unlock and transform into powerful insights for our customers, the bigger the business impact.

I'd like to bring this to life with a customer example. One of our customers is a global leader in storage and information management services that serves 95% of the Fortune 1000 and has more than 25,000 employees. They are focused on investing in software that delivers a high business impact and quick ROI. This organization uses our Vehicle Telematics application for asset location and maintenance and is expanding to our AI-powered Video-Based Safety application to improve workplace safety, reduce insurance premiums and lower corporate risk.

Based on results from a pilot study, we anticipate our platform can help them achieve more than a 3x annual ROI, which is roughly a 4-month payback period. By improving their safety program, we expect to see a 54% reduction in safety events, a 91% reduction in mobile usage and a 97% reduction in no seatbelt usage.

On top of reducing accidents and creating a safer work environment, they're also gaining a competitive advantage when recruiting talent in a challenging labor market. These types of results are always amazing to see, and we're excited about the opportunities where AI can unleash the power of data to deliver value for our customers. I'm amazed by the improvements AI has made on the safety, efficiency and sustainability of our customers' operations. The magnitude of AI's impact on the world of physical operations is clear, and Samsara is positioned to be on the forefront of this technological revolution because of 3 unique competitive advantages. First, we continue to amass a massive operational data set -- data asset, approximately 6 trillion data points flow annually into our Connected Operations Cloud, and it continues to grow in size and sophistication. The combination of diverse assets and data types across different industries, geographies and customer sizes, makes our data asset truly unique. This allows us to train powerful AI models to unlock valuable insights for our customers.

Second, we've invested in the infrastructure to rapidly deliver AI features. We've built capabilities to capture and curate structured and unstructured data, train and evaluate models and operate across tens of thousands of customers, both in our cloud and at the edge with IoT devices. And third, our product innovation is powered by incredible customer feedback loop. This allows us to identify our customers' most critical domain specific problems, capture ground truth data and partner with them to test, validate and ultimately deliver AI-powered solutions on our platform.

We are also using data-driven insights to help our customers with their ESG goals. Focusing on the S in ESG for social impact is again all about safety. A top priority for our customers is getting their employees home each day to their families, especially as many work in dangerous physical environments. One of our customers, Liberty Energy, is a great example of this. Liberty is a leading North American oilfield services company. They use Samsara's Video-Based Safety for proactive driver coaching and to get enhanced visibility in the cab, which they feature in their most recent ESG report.

They put millions of miles on their fleet of vehicles each year, making driving the highest risk activity they undertake. By using Samsara, Liberty realized a 50% reduction in vehicle accidents and saved $0.5 million in incident-related costs.

Let's now turn to the E in ESG for environmental. Our customers are faced with the growing demand from their end customers, investors, employees and policymakers to have more sustainable operations. Lanes Group is a great example of a customer using Samsara to reduce emissions. Lanes is a leading waste water utility solutions provider and the largest independent drainage specialists in the U.K. In their most recent sustainability report, Lanes shared that using Samsara helped to reduce fuel consumption by improving driving behavior for their entire fleet. This allowed them to reduce overall carbon emissions even as their fleet continues to grow.

It's also worth mentioning that Lanes adopted Samsara's Video-Based Safety and have decreased the frequency and severity of accidents. They lowered their insurance premiums and reduced the cost of each claim, generating an annual insurance savings of GBP 250,000 per year. We are committed to building a safer and more sustainable world together with our customers and are proud of the progress as we continue on this important journey.

Our customer momentum reflects the large market opportunity for digitizing the world of physical operations. As we head into our next chapter of growth, I'm excited to announce Lara Caimi is joining Samsara as our first President of Worldwide Field Operations. She joins us from ServiceNow, where she served as Chief Customer and Partner Officer, and prior to that as the Chief Strategy Officer. I'm excited to welcome Lara to join us in the next phase of growth. I also want to share the news that our Chief Revenue Officer, Andy McCall, will be retiring at the end of the year and is staying on as an adviser until that time to help us with the transition. I've been fortunate to partner with Andy over the last 6 years as he's helped build the sales team at Samsara into a world-class organization. All of us at Samsara wish Andy the best in his well-deserved retirement.

It's been another exciting quarter of durable and efficient growth for Samsara, and we are grateful for our partnership with our customers and the impact we're able to make together. I also wanted to thank all of our Samsarians, customers, partners and investors for joining us in making this journey to digitize physical operations possible. We're excited to continue our partnership at our second annual customer conference, Samsara Beyond from June 21 to June 23. I'll now hand it over to Dominic to go over the financial highlights for the quarter.

Dominic Phillips

Thank you, Sanjit. Q1 was highlighted by strong top line growth and continued operating efficiency improvements. Our durable and increasingly efficient growth demonstrates the large and growing opportunity for digital transformation across the world of physical operations. While global economic uncertainty persists, we exceeded our expectations for key top line and profitability metrics for a few key reasons.

First, we have a subscription business model that produces highly predictable revenue, and we price subscriptions based on the number of physical assets versus headcount-based pricing, resulting in a lower risk of ACV contraction if our customers hiring slows or contracts. Second, our customers deploy Samsara to generate hard ROI savings and many experienced a quick investment payback period measured in months. And third, we primarily sell into the operations budget, which is generally large and nondiscretionary for our customers.

Q1 ending ARR was $856 million, growing 41% year-over-year. Within this, we added $61 million of net new ARR, representing 24% year-over-year growth or 4 percentage points of year-over-year growth acceleration at a larger scale. Additionally, Q1 revenue was $204 million, growing 43% year-over-year. Several factors drove our strong top line performance in Q1. First, we continue to focus on serving large physical operations customers. We now have 1,375 $100,000-plus ARR customers, a record quarterly increase of 138 or 53% year-over-year growth.

Our investments in serving the largest physical operations companies in the world continue to pay off. $100,000-plus ARR customers represent our fastest-growing cohort and make up 49% of total ARR, up from just 45% 1 year ago. Second, this was a strong customer expansion quarter. 60% of Q1 net new ACV came from expansions to existing customers, our highest quarterly mix ever and up from 51% in Q1 last year. 8 of our top 10 net new ACV deals in Q1 were customer expansions including a large $1 million-plus expansion to a leading national distributor of aftermarket automotive replacement parts. ...

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