Samsara Inc.

Good afternoon and welcome to Samsara's first quarter fiscal 2025 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 Sanjay 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 6th, 2024, 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, we will discuss our first quarter fiscal 2025 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. 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 the call up for Q&A. With that, I hand over the call to Sanjay.

Thanks, Mike. And thank you, everyone, for joining us today. Samsara had a strong Q1 of our new fiscal year as we continue to deliver durable and efficient growth. We ended Q1 with $1.18 billion in ARR, growing 37% year over year. We are the strategic partner to the world's leading and most complex physical operations organizations. Large customer momentum continues to fuel our growth. In Q1, we had wins with the Department of Transportation for both Iowa and Kansas and Vinci, a Fortune Global 500 construction company with more than 275,000 employees. Our continued innovation and customer feedback loop drives our success with large customers. Over the past few months, I visited many of our largest customers in the US, Canada, Mexico, and Europe. Seeing their operations firsthand, it's clear that the toughest challenges and priorities in physical operations are universal. First, these customers are operating at a scale in asset-heavy and labor-intensive industries. Second, these customers are using legacy point solutions where data is trapped in silos. And third, these customers are faced with common challenges including fuel savings, workplace accidents, maintenance, and insurance. Across the board, our customers are investing in technology that helps them achieve safer, more efficient, and more sustainable operations. We are proud to partner with our customers on their digitization journeys. Recently, IDC surveyed 130 of our customers to assess the value of our platform. The results are published in a white paper, The Business Value of Samsara. The IDC research shows customers partner with us to be their system of record because we deliver clear and fast ROI. At the same time, we are helping customers achieve their safety, efficiency, and sustainability goals. As one of our customers said to IDC, quote, Samsara has opened up a whole new world for us. Every minute of efficiency gained is significant. Samsara is our most utilized company-wide business system and responsible for millions in savings in our bottom line. Looking more specifically at the findings, IDC estimated that Samsara customers realized more than an 8x ROI on average, representing $2 million of savings per customer per year. Samsara customers achieve these savings from reducing costs related to vehicle-related crashes and insurance, spending less on fuel, lowering maintenance costs and extending vehicle lifespans, minimizing lost revenue associated with vehicle availability, and increasing driver productivity. We're proud to partner with our customers to help them drive meaningful impact in their organizations. Our customers have large, complex operations that are asset and labor intensive. They often require tens of thousands of frontline workers and assets to build the infrastructure supporting our global economy. At this scale, our customers' top priorities are often safety and sustainability. It's critical to how they run their organizations. I'd like to share two examples of how we're helping our customers meet their impact goals. The first is focused on safety with Nutrien Ag Solutions, the world's largest agriculture inputs and services provider. They're using our video-based safety application to improve driver safety for their North American commercial fleet. They've seen good results, as they reported in their most recent sustainability report. In 2023, they saw a 40% reduction in unsafe driving practices, including speeding, harsh braking, and distracted driving. They use SEMSAR on more than 11,000 vehicles with plans to continue expansion. Our next example is on sustainability with Frontier Communications, a top provider of broadband internet and digital television service. They are using CEMSAR to optimize fuel efficiency and reduce fuel costs across their fleet. They installed our Telematics application in 8,100 vehicles, saving them 320,000 gallons of fuel in 2023. This equals more than 6 million pounds of carbon. Both of these organizations are taking a data-driven approach to help them achieve their ambitious goals and make the greatest impact. As we build for the long term, we will continue to invest in emerging products, our culture, and our customers as we scale and grow. First, we are seeing strong momentum in emerging products. We released our Connected Forms application into general availability last quarter. Our customers are excited to adopt it to improve their frontline worker experience. Connected Forms is a workflow solution that allows our customers' frontline workers to streamline their operations through digital forms. Our customers are already finding value. A good example of this is with one of the largest privately owned drainage and wastewater utility specialists in the UK. They're a utility service provider with more than 3,800 employees and 3,000 assets. They've been a customer since 2020, starting with our video-based safety and telematics applications. This quarter, they expanded the partnership further with Connected Forms. Currently, they have more than 30 use cases for Connected Forms, including compliance, labor tracking, attendance, safety briefings, vehicle inspections, and avoiding timesheet fraud. Their long-term vision is to have one system of record for their entire operations. This will enable them to manage all of their data and extract insights and value from one unified platform. Second, focusing on our culture, Samsara has quickly become a destination for some of the world's top talent. This is critical as we scale our global team to support our rapidly growing customer base. We are proud to be certified by the great place to work in the U.S., U.K., and Poland. This marks the second consecutive year of certification in the U.S. and the U.K. and a first-time honor in Poland. We were also listed as number eight on Glassdoor's award list for the best-led companies in 2024. And lastly, we're looking forward to seeing many of you at Beyond, our annual customer conference from June 26th to 28th in Chicago. At Beyond, we'll bring together thousands of leaders across physical operations to discuss the challenges they're facing and discover new ways to use Samsara. We will also be hosting Investor Day on June 27th in Chicago. We hope that you can join us. It was a great start to the new fiscal year. We want to thank our customers, partners, investors, and Samsarians across the globe for your shared commitment to increasing the safety, efficiency, and sustainability of the operations that power the global economy. We're excited about the year ahead. I'll now hand it over to Dominic to go over the financial highlights for the quarter.

Thank you, Sanjay. We delivered strong Q1 results highlighted by sustained high growth at scale and continued operating efficiency improvements, including maintaining the same revenue growth rate as last quarter at a larger scale and quarterly records for both gross margin and adjusted free cash flow margin. Our durable and increasingly efficient growth demonstrates the large and growing opportunity for digital transformation across the world of physical operations and regardless of the broader economic environment, our business has continued to be incredibly resilient and deliver consistent results due to a few key reasons. First and most importantly, our products create a real hard ROI for customers, including reducing accidents, lowering insurance premiums, generating fuel savings, lowering maintenance costs, and improving asset utilization. And our customers' payback period is very quick, often measured in months. Second, we primarily sell into a different budget than many other enterprise software companies. The operations budget is generally larger and less discretionary for our customers. And third, we have a subscription business model that produces highly predictable revenue, and we price most of our subscriptions based on the customer's number of physical assets instead of headcount-based pricing, which results in lower ACV risk if our customer's hiring slows or contracts. Q1 ending ARR was 1.18 billion, growing 37% year-over-year. Within this, we added 74 million of net new ARR, representing 21% year-over-year growth. Q1 revenue was 281 million, growing 37% year-over-year, which is the same revenue growth rate from last quarter when adjusting for the extra week in Q4, but at a larger scale. Several factors drove our strong top-line performance in Q1. First, we continue to focus on serving large enterprise customers to drive durable and efficient growth at scale. We now have 1,964 100k plus ARR customers representing 43% year-over-year growth. we also grew our average ARR per 100k plus customer from 305,000 in Q1 last year to 316,000 in Q1 this year. The combination of more customers added and an increase in the average ARR per customer grew our ARR mix for 100k plus ARR customers to 53% in Q1, up from 49% one year ago and 45% two years ago. Second, our customers increasingly utilize Samsara as a system of record for physical operations by subscribing to multiple applications all on one unified platform. 94% of our 100k plus ARR customers and 83% of our core customers subscribe to multiple Samsara products. We're also seeing multi-product adoption at scale. Our two vehicle-based applications, video-based safety and vehicle telematics, each represent more than 450 million of ARR, and our largest non-vehicle-based application, equipment monitoring, which is used to locate and manage field assets, is doing more than 125 million of ARR. In addition to large scale, each of these product categories continue to grow more than 30% year-over-year. We also saw a number of large multi-product transactions in Q1. All of the top 10 new logos in Q1 included two or more products for the first time since our IPO. And nine of the top 10 expansions included two or more products. One of our largest Q1 transactions was an expansion to one of the largest U.S. telecom companies. This top 20 customer landed back in FY23 with vehicle telematics only as a greenfield opportunity. After achieving significant efficiency improvements and fuel savings, they signed a more than $1 million expansion this quarter, which included more telematics licenses and the addition of video-based safety to a subset of their total vehicles. During the pilot, the customer saw a 62% reduction in safety events and a 92% decrease in mobile usage. After this initial rollout, we expect the customer to add more licenses across a broader set of vehicles over time. And the strengthened expansions also allowed us to achieve our target dollar-based net retention rate of 115% and 120% for core and large customers, respectively. Third, we demonstrated strong execution across several frontier markets. First, a quarterly record 18% of net new ACV came from international geographies in Q1, driven by strength in Mexico and Europe, which contributed its highest ever quarterly net new ACV mix. Second, the construction vertical drove the highest net new ACV mix of all industries for the third consecutive quarter, and field services had the second highest mix. In total, 87% of Q1 net new ACV came from non-transportation verticals, an increase from 82% in Q1 last year. And lastly, we also saw strength in emerging products. In Q1, we signed the city of Pittsburgh as one of our largest new logos in the quarter. In addition to landing with vehicle telematics and equipment monitoring, they also included mobile experience management and connected forms in their initial transaction. We also signed a more than 250K connected forms expansion with one of the UK's leaders in water and wastewater services. And an existing top 50 customer, one of the country's largest food distribution providers, signed a 400K site visibility expansion. In addition to driving strong top line growth, we continue to deliver operating efficiency improvements across our business as we scale. Non-GAAP gross margin was a quarterly record 77% in Q1, approximately four percentage points higher year over year, driven largely by optimizing cellular, customer support, and warranty costs. Non-GAAP operating margin was 2% compared to negative 9% in Q1 last year, driven by leverage across all functions, and adjusted free cash flow margin was a quarterly record 7% in Q1 compared to negative 1% in Q1 last year. Okay, now turning to guidance. Because of our strong Q1 performance and outlook for the rest of FY25, we're raising our guidance across all key metrics. We've also analyzed various scenarios and believe that this guidance is adequately de-risked to account for the potential impact of worsening macroeconomic factors on our business. For Q2 FY25, we expect total revenue to be between $288 and $290 million, representing year-over-year growth between 31 and 32%, non-GAAP operating margin to be approximately negative 2%, and non-GAAP EPS to be between 0 and 1 cent. For full-year FY25, we expect revenue to be between $1.205 and $1.213 billion, representing year-over-year adjusted revenue growth between 31% and 32%, non-GAAP operating margin to be approximately 3%, and non-GAAP EPS to be between $0.13 and $0.15. And finally, please see the additional modeling notes in our shareholder letter. So to wrap up, we are pleased with our start to the year and our improved outlook for FY25. In Q1, we sustained our revenue growth rate at a larger scale while also achieving a record free cash flow margin. We are now operating in rarefied air in terms of scale, growth, and profitability. Samsara is one of only two public companies, software companies, at more than $1 billion of scale, expected to grow more than 30% this year, and generating positive free cash flow. And looking forward, we believe we're well-positioned to continue delivering durable and efficient growth because we're digitizing the world of physical operations, which is a very large and underserved market opportunity, and that's driving strong customer demand. Our products offer real ROI in a fast payback period, and we're targeting a very different operations budget. We're proud to partner with our customers and are excited to continue helping them operate more safely, efficiently, and sustainably. And with that, I'll hand it over to Mike to moderate Q&A.