Samsara Inc.

Good afternoon and welcome to Samsara's second 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 RCC filings. Any forward-looking statements that we make on this call are based on assumptions as of today, September 5th, 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 second 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'll hand over the call to Sanjit.

Thanks, Mike, and thank you everyone for joining us today. Samsara delivered another strong quarter of durable and efficient growth at greater scale. We ended Q2 with $1.26 billion in ARR, growing 36% year over year. We also achieved a quarterly record for non-gap operating margin. We are the strategic partner to the world's leading and most complex physical operations organizations. Large customer momentum continues to fuel our growth. We added 169 customers with more than $100,000 in ARR. We also added a quarterly record of 14 customers with more than $1 million in ARR. In Q2, we had wins with the state of Maine, one of the largest supermarket chains in the US, and one of the largest retail-owned hardware cooperatives globally. As we grow our customer base, our data asset scales too. We're proud to announce that we achieved an important company milestone. We now collect more than 10 trillion data points annually on the Samsara platform. In addition to scale, our unique IoT dataset has incredible breadth and spans a broad and diverse group of assets. Our growing dataset unlocks unique insights that help our customers tackle their toughest challenges. In June, we hosted Samsara Beyond to discuss the impact of data and AI on the future of connected operations. Nearly 2,000 attendees across the world of physical operations came together for the event. At Beyond, we learned more about our customers' challenges and how they're looking to solve them with data and AI. They told us their top priorities include creating a system of record for their operations, standardizing their data, and using more AI for insights. These conversations are critical as they shape where we prioritize our R&D efforts to maximize customer impact. During Beyond, we also hosted our Connected Operations Award Ceremony. We honored 15 global customers who had an outsized impact on our platform, as well as our Ecosystem Partner of the Year. I'd like to share the impact we've been driving with a few of our winners. Home Depot was our safest operator winner in the Americas. They're the world's largest home improvement retailer with over 2,300 stores and 475,000 employees. Together with their appliance delivery and installation company, Temco Logistics, they achieved an 80% reduction in auto incidents by leveraging Samsara's video-based safety application. Next, let's turn to Sterling Crane, our excellence and efficiency winner. They're one of the world's largest crane rental supply companies with over 625 cranes in their fleet. They saved $1.2 million using Samsara from improved driver productivity and compliance. They also expect to save $2.5 million for major maintenance costs. We're proud to partner with our customers to make a real-world impact on their operations. To help meet the needs of our customers, we've been accelerating our flywheel of innovation. Our growing data set and AI-powered insights drive our flywheel. As it spins faster, we deliver more value from our platform and build more products and features for our customers. All of this innovation helps our customers take more action to improve the safety, efficiency, and sustainability of their operations. At Beyond, we launched a new product, our Asset Tag. The Asset Tag is the industry's first industrial-grade Bluetooth tag to help our customers track and manage their small, high-value assets. It can be used for a range of assets from toolboxes and chemicals totes to engines and hand carts. We expect over time this will help our customers save millions of dollars a year through increasing asset utilization, preventing asset loss, and improving worker efficiency by reducing the time needed to locate stolen or lost assets. In Q2, our first quarter of selling asset tags, we reached approximately $1 million in net new ACV. It's an exciting start and customer feedback has been strong. We're seeing demand from our customers across industries and geographies and learning about new use cases every week. A good example of this is Transcore, the leader in innovative tolling solutions. Transcore purchased a large amount of asset tags to help with inventory management, loss prevention, and hardware functionality. They use this for technology hardware, fuel support assets, critical inventory, and more. This technology is only possible because of the massive network we built at Samsara. We have millions of devices around the globe that are connected to the internet. The asset tag uses industrial-grade Bluetooth to connect to the Samsara network. With the density of our network, organizations can get near real-time visibility, and that will only improve as our network scales. At BEYOND, we announced two new products to further digitize the worker experience, connected workflows and connected training. Our customers are using technology to transform their worker experience. Samsara is their trusted partner to make these jobs better and safer. Last year, we introduced Connected Forms to digitize paper processes for physical operations. Connected Workflows takes us to the next level and goes beyond digitization to orchestrating multi-step workflows. Connected Workflows can automatically assign forms, manage approvals, and create tasks based on contextual insights. Now, every department can easily automate workflows to make work safer and easier from the front lines to the back office. An example is De Silva Gates, a leading construction company in California. De Silva Gates is now automating truck inspections with connected workflows. Drivers are prompted to complete inspections on time. Any reported issues are submitted and addressed right away. And this has saved them about $45,000 a week or more than $2 million on an annualized basis. The second worker experience product we launched was Connected Training. Connected training helps our customers reduce risk by giving them a way to train workers anytime and anywhere. It does this by giving customers remote access to courses on the Samsara mobile app. Now our customers can build customized learning itineraries to address each worker's largest risk areas. They can also streamline all their training requirements across the organization. Customers who use connected training are already seeing significant benefits. For example, Emery Sapp & Sons, a leading heavy civil construction contractor in the Midwest, saw a 40% reduction in safety events with connected training. After launching new products, we continue to run our customer feedback loop to make our products better and more impactful for our customers. At BEYOND, we announced new features and partnerships for our platform. To help improve our customer safety programs, we launched new AI detections and shared updates to smart trailers. To help our customers improve the sustainability of their operations, we launched Charge Insights. This is part of our broader EV management offering. We also announced a new partnership with FirstNet, built with AT&T, the only nationwide communications network created with and for public safety. Samsara is now FirstNet trusted, so public safety customers can use Samsara in emergency response situations. It was another successful Beyond, and I'm happy to share we're hosting the next event next summer in San Diego. We look forward to bringing together even more of our customers, partners, and leaders across the world of physical operations. Digitizing physical operations will be a multi-decade journey. As we build for the long term, we continue to invest in our leadership and our culture. First, I'm excited to welcome Alyssa Henry to our board of directors. Alyssa brings over 25 years of experience as a product and technical leader at some of the world's most influential technology companies. This includes her role as CEO of Square at Block and senior leadership positions at Amazon and Microsoft. She has a proven track record of driving innovation and significant growth in the tech sector. Second, we are also happy to welcome Megan Eisenberg as our chief marketing officer. Megan is joining us from Lacework, where she was their CMO through their recent acquisition by Fortinet. Before that, she was the CMO at both TripActions and MongoDB. She has great experience engaging customers, driving growth, and building brands at many successful companies. We are thrilled to have Alyssa and Megan join our team. And lastly, Samsara continues to be a destination for some of the world's top talent. This is important as we scale to meet customer demand. This quarter, Samsara was recognized by Great Place to Work for development, well-being, and women. We are proud of the impact we're making on our customers. We are operating at scale with our customers, generating more than 10 trillion data points, 85 billion API calls, and 70 billion miles driven across our platform annually. Our growing data asset drives more AI-powered insights so our customers can get clear and fast ROI. Every year, the impact we make with our customers continues to compound. We're excited for the decades-long opportunity ahead. Thank you to our customers, partners, investors, and Samsarians across the globe for joining us on this journey. I'll now hand it over to Dominic to go over the financial highlights for the quarter.

Thank you, Sanjit. Q2 was another quarter of sustained high growth at scale and continued operating leverage. In particular, the quarter was highlighted by maintaining the same year-over-year revenue growth rate for the third consecutive quarter at a larger scale, surpassing 2,000 large customers, including adding a quarterly record number of $1 million plus ARR customers, adding approximately $1 million of asset tax net new ACV in our first quarter of selling, and achieving a quarterly record operating margin while sustaining a quarterly record gross margin. Q2 ending ARR was $1.264 billion, growing 36% year-over-year. Within this, we added $88 million of net new ARR, representing 20% year-over-year growth. And Q2 revenue was $300 million, growing 37% year-over-year, which is the same year-over-year growth rate for the third consecutive quarter at a larger scale. Several factors drove our strong top line performance in Q2. First, we continue to focus on serving large enterprise customers to drive durable and efficient growth at scale. We now have 2,133 100K plus ARR customers representing 41% year-over-year growth, including a quarterly increase of 169, which is our second highest quarter ever. And within that, we also added a quarterly record 14 $1 million plus ARR customers in the quarter. In addition to adding more large customers, we also grew our average ARR per large customer to 318,000, up from 306,000 one year ago. The combination of more large customers added and a higher average ARR per large customer increased our ARR mix for 100k plus ARR customers to 54% in Q2, up from 50% one year ago and 46% two years ago. Second, our customers increasingly utilize SAMSAR 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 subscribe to multiple products and 59% subscribe to three or more. We're also seeing multi-product adoption at scale. Our two vehicle-based applications, video-based safety and vehicle telematics, each represent more than 500 million of ARR, while equipment monitoring and other emerging products combine for more than 150 million of ARR. In addition to large scale, each of these three product categories continue to grow more than 30% year over year. We also saw a number of large multi-product transactions in Q2. Nine of the top 10 new logos in Q2 included two or more products, and six included three or more. Notably, one of our largest Q2 new logos, Kasson's Transport Company, one of the largest auto haulers in the U.S., landed with four different products. In addition to licensing our two vehicle-based applications, Kassens also purchased equipment monitoring and one of our newer software-only SKUs, Connected Training, in their initial transaction. Additionally, all of our top 10 expansions included two or more products, and five included three or more. This expansion strength allowed us to achieve our target dollar-based net retention rate of 115 and 120% for core and large customers, respectively. And third, we demonstrated strong execution across several frontier markets. Sixteen percent of net new ACV came from international geographies in Q2, driven by strength in Europe, which had its fourth consecutive quarter of accelerating year over year ARR growth at a larger scale. Construction drove the highest net new ACV mix of all industries for the fourth consecutive quarter, and field services had the second highest mix for the second consecutive quarter. In total, 87% of Q2 net new ACV came from non-transportation verticals, an increase from 83% in Q2 last year. And lastly, we also saw strength in emerging products. We achieved roughly $1 million of asset tags, net new ACV in our first quarter of selling, including a more than 300K expansion with a top 100 customer in the construction industry. We also added roughly $1 million of connected workflows, net new ACV in Q2, including four separate 100K plus ARR transactions. And we signed an approximately 250K connected training expansion in our first quarter of selling the product with a top 30 customer in the logistics industry. In addition to driving strong top line growth, we continue to deliver operating leverage across our business as we scale. Non-gap gross margin was 77% in Q2, which was tied for a quarterly record. Non-gap operating margin was a quarterly record 6% or 9 percentage points higher year over year. And adjusted free cash flow margin was 4% in what is our seasonally weakest free cash flow quarter. Okay, now turning to guidance. We're raising our guidance across all key metrics because of our Q2 performance and outlook for the rest of FY25. For Q3, we expect total revenue to be between $309 and $311 million, representing year-over-year growth between 30% and 31%, non-GAAP operating margin to be approximately 4%, and non-GAAP EPS to be between 3% and 4%. For full year FY25, we expect revenue to be between $1.224 and $1.228 billion, representing year-over-year adjusted revenue growth between 33% and 34%, non-GAAP operating margin to be approximately 5%, and non-GAAP EPS to be between $0.16 and $0.18. And finally, please see additional modeling notes in our shareholder letter. So to wrap up, we are pleased with our first half performance and our improved outlook for FY25. In Q2, we sustained our revenue growth rate at a larger scale while also delivering more operating leverage. 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 and a fast payback period to our customers, 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.