Samsara Inc.

Good afternoon and welcome to SAMSAR's third quarter fiscal 2025 earnings call. I'm Mike Chang, SAMSAR's vice president of corporate development and investor relations. Joining me today are SAMSAR 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.samsar.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, December 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 not discuss our third 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 Sanjay.

Thanks, Mike. And thank you, everyone, for joining us today. Samsara delivered another strong quarter of durable and efficient growth. We ended Q3 with $1.35 billion in ARR, growing 35% year over year. We also delivered a quarterly record 10% adjusted free cash flow margin. Our growth is powered by our deep partnerships with the world's largest and most complex operations organizations. In Q3, we added 170 customers with more than $100,000 in ARR, our second highest quarterly additions ever. This includes major customer wins with large organizations like Papa John's, the world's third largest pizza delivery company, a Fortune 500 confectionery, food, and beverage company, and a Fortune 1000 network of full-service medical equipment companies. As we continue to grow, we're excited about the innovation that we're unlocking with more scale. This includes better AI models and benchmarking, stronger customer feedback loops to better understand our customers' challenges, and more R&D dollars to invest in technology. Our customers provide the mission-critical infrastructure that keeps the world running. They have asset-heavy and labor-intensive operations. We're partnering with them to digitally transform their organizations. Our growing data asset feeds our AI-powered platform, which delivers insights to our customers so they can improve their operations. This translates to clear and fast ROI with payback periods often measured in months. In a recent survey with IDC, they estimated that Samsara customers realized $2 million of savings on average per customer per year. This equates to more than eight times ROI. Typical savings include lower insurance premiums and payouts, improved fuel efficiency, lower maintenance costs, better asset utilization, improved worker hiring and retention. As our customers achieve ROI, they often expand with us for even more savings. I'd like to share two examples of customers that have realized clear and fast ROI. They both expanded this quarter and have had multiple expansions since becoming customers. Comfort Systems is a Fortune 1000 company that provides heating, ventilation, air conditioning, and electrical contracting services. Their operations span over 170 locations with over 40 operating units and over 18,000 employees. Comfort Systems prioritizes safety as a core value and is committed to a zero harm work environment. With Samsara, they achieved an 85% reduction in vehicle safety events and a 72% reduction in speeding in just six months. They are now a top 25 customer and have had nine expansions since becoming a customer in 2022. In Q3, they added asset tags and expanded with more of Samsara's video-based safety, telematics, and equipment monitoring. They're using asset tags to track high value, smaller equipment on job sites, like scissor lifts, welders, and pipe machines. They're also using asset tags to improve their asset utilization. Next, let's turn to a Fortune 500 global company that provides water, hygiene, and infection prevention solutions and services. They have 48,000 employees and 11,000 light duty vehicles to support nearly 3 million customer locations worldwide. They became a customer in 2021 and have had 11 expansions with us. They're using our video-based safety and telematics applications across two of their divisions. We've also identified additional expansion opportunities in five more divisions. They have decreased harsh driving events by 37% using SEMSAR's video-based safety application. In a pilot this year, they also reduced severe speeding by 48% and decreased forward collision warning events by 50% with in-cab alerts. We are proud to partner with our customers to make a real-world impact on their operations. AI is amplifying our impact on the safety, efficiency, and sustainability of our customers' operations. We recently surveyed over 1,500 leaders in physical operations in our State of Connected Operations report. We found that AI-driven advancements are fundamentally reshaping how these organizations operate. 87% reported that they are planning to increase AI investments in the coming year. They reported many benefits of AI. 45% cited improvements in safety. 45% highlighted enhanced data and analytics capabilities. And 43% reported gains in operational efficiency. These findings show the powerful role AI will play in the future of connected operations. To bring more AI to our customers, we announced Samsara Intelligence earlier this week. It is an expanded suite of AI offerings that helps teams make smarter decisions and run safer, more efficient operations. Samsara Intelligence is trained on an expansive data set, which has great scale and breadth. We now process more than 10 trillion data points and 70 billion miles driven annually. Our data spans a broad and diverse group of asset types and markets, data types and geographies. Our customers face tough challenges and our AI models use this data to help them solve real world use cases. Samsara Intelligence includes Samsara Assistant and Intelligent Experiences. Samsara Assistant is an interactive, generative AI tool that provides instant answers to their operational questions. It improves the safety, maintenance, and compliance of our customers' operations. Some examples include identifying vehicles with severe fault codes and receiving step-by-step instructions to resolve them. Spotting time-sensitive disruptions in daily operations, like unexpected stops, which might signal a driver is at risk or in need of assistance. determining the safest drivers and recognizing them for their performance, and understanding hours of service regulatory requirements for a new geography or customer type. Intelligent Experiences embeds AI recommendations and actions throughout the Samsara platform. It makes AI accessible to the frontline by providing visual, training, and coaching intelligence. For example, frontline workers can identify safety hazards from a photo on a job site. They can also provide proof of delivery records from a photo of a bill of lading. Operators can also improve their safety and compliance while reducing administrative time by creating a custom worker training module just by uploading a policy document. Both Samsara Assistant and Intelligent Experiences are now available in beta to customers in North America. They will be generally available after running our customer feedback loop. We're excited to see many of our initial customers already achieving significant impact from our new AI products. Now, I'd like to turn to international growth. I've met with dozens of customers in our international markets this year. Every time I meet with them, I'm inspired by the long-term opportunity to expand our impact. First, the international market is very large. There are more assets and frontline workers in Europe, Canada, and Mexico than in the U.S. Second, the international market is less penetrated than the U.S. and earlier in its digitization journey. Third, despite the low penetration, the opportunity for impact and customer ROI is comparable in these regions. These customers are achieving similar savings from insurance payouts and premiums, fuel costs, improved worker retention, and asset utilization. In November, we hosted two international customer events, Go Beyond, our first European customer conference, and Innovation Day in Mexico. We brought together hundreds of local customers at each event to discuss how AI and data are impacting the world of connected operations. We also announced several new product features tailored for customers in these local markets. At GoBeyond in Europe, we announced two new features, low bridge strikes and electronic brake performance monitoring system, which we call eBPMS. Low bridge strikes uses AI to help our European customers minimize the risk of their trucks hitting low bridges. Customers set the maximum vehicle height and drivers are alerted whenever they approach a bridge that's too low to pass. Every year, nearly 2,000 bridge strikes happen in the UK, costing UK taxpayers around 23 million pounds. EBPMS helps our customers maintain their braking performance record. It also alerts fleet operators when braking performance falls below acceptable standards or if it detects faults. We expect that in 2025, EBPMS will become one of the two accepted methods for brake testing in the UK. At Innovation Day in Mexico, we announced the Engine Immobilizer 2.0 feature. Physical security is top priority for our customers in Mexico. This feature allows new customizable alerts to meet operators' needs when their safety is compromised. It also provides detailed real-time reports through the Samsara dashboard. This helps customers effectively monitor the safety of their vehicles. Our local customers were excited by these new capabilities and we're looking forward to seeing the impact. It's been another exciting quarter of durable and efficient growth for Samsara. We're all grateful for the partnership of our customers around the globe. We'd like to thank all of our Samsarians, customers, partners, and investors for being part of this journey. Together, we're just getting started. I'll now hand it over to Dominic to go over the financial highlights for the quarter.

Thank you, Sanjit. Q3 was another quarter of sustained high growth at scale and continued operating leverage. In particular, the quarter was highlighted by surpassing 100 $1 million plus ARR customers, adding 170 $100K plus ARR customers, our second highest quarterly additions ever, more than 100% quarter-over-quarter growth in asset tag net new ACV in just our second quarter of selling the product, and achieving quarterly records for gross margin, operating margin, and free cash flow margin. Q3 ending ARR was $1.35 billion, growing 35% year-over-year, and Q3 revenue was $322 million, growing 36% year-over-year. Several factors drove our strong top-line performance in Q3. First, we continue to focus on serving large enterprise customers to drive durable and efficient growth at scale. We now have 2,303 100K plus ARR customers, representing 38% year-over-year growth, including a quarterly increase of 170, which is our second highest quarter ever. In addition to adding more large customers, we also grew our average ARR per large customer to 318,000, up from 307,000 one year ago. The combination of adding more large customers and a higher average ARR resulted in an increased ARR mix for 100k plus customers to 54% in Q3, up from 51% one year ago and 47% two years ago. Second, this quarter included a balanced mix of landing new customers and expanding existing customer relationships. For new logos, we added over 1,000 core customers for the fifth consecutive quarter, including our second highest number of core customers added. Additionally, a quarterly record 78 of the 170 100K plus ARR customers added were new customers. Also, nine of the top 10 new customers signed with multiple products. One of the largest new customers, a global leader in third-party logistics with over 110,000 employees, signed a more than $1 million transaction across four different applications. In addition to licensing our two vehicle-based applications, video-based safety and vehicle telematics, this customer also subscribed to equipment monitoring and one of our newer software-only SKUs in their initial transaction. For expansions, 16 of our top 25 customers expanded in Q3, and 21 of our top 25 customers have expanded over the past two quarters. Also, eight of the top 10 Q3 expansions included multiple products. The strength in expansions also 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. 17% of net new ACV came from international geographies in Q3, the second highest quarterly contribution ever. The strength in international was driven by Mexico, which contributed its highest ever quarterly net new ACV mix, including nine transactions greater than 100K, and Europe, which accelerated year-over-year ARR growth for the fourth consecutive quarter. Construction drove the highest net new ACV mix of all industries for the fifth consecutive quarter, and public sector contributed its highest net new ACV mix over the last four years, including a quarterly record 16 transactions greater than 100K, led by customers such as the City of Omaha, Fresno County, and the Florida Department of Fish and Wildlife. And we also saw strength in emerging products. In Q3, we surpassed 70% of large multi-product customers using a non-vehicle application. And we achieved more than 100% quarter-over-quarter growth in asset tag net new ACV in just our second quarter of selling that product. In addition to driving strong top-line growth, we continued to deliver operating leverage across our business as we scale. We delivered quarterly records across all key non-gap profitability metrics, including a 78% gross margin, an 11% operating margin, and a 10% free cash flow margin. Okay, now turning to guidance. We're raising our full year guidance across all key metrics because of our strong Q3 performance. As a reminder, last year's fiscal Q4 included a 14th week compared to a standard 13-week quarter in this year's fiscal Q4. We expect the impact of having one fewer week in Q4 this year will remove three percentage points of year-over-year revenue growth in FY25, which was already factored into previous and current adjusted revenue guidance. For full-year FY25, we expect revenue to be between $1.237 and $1.239 billion, representing year-over-year adjusted revenue growth of 35%. Our implied Q4 revenue guidance from last quarter of $334 to $336 million remains unchanged. We expect FY25 non-GAAP operating margin to be approximately 7% and non-GAAP EPS to be between 22 and 23 cents. And finally, please see additional modeling notes in our shareholder letter. So to wrap up, we are pleased with our Q3 performance and improved outlook for FY25. In Q3, we sustained high growth at scale while also delivering record operating leverage. And looking forward, we believe we're well positioned to continue delivering durable and efficient growth for the following reasons. 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.