Samsara Inc (NYSE:IOT). (SMAR) reported strong third-quarter earnings, surpassing Wall Street expectations with an EPS of $0.07 compared to the forecasted $0.04. Revenue also exceeded projections, reaching $322 million against the anticipated $310.57 million. Despite these positive results, shares fell 1.27% in regular trading and declined further in after-hours trading.
Key Takeaways
- Samsara's EPS of $0.07 beat the forecast of $0.04.
- Revenue grew 36% year-over-year to $322 million.
- Stock price decreased by 1.27% during regular trading hours.
- Strong growth in AI-powered product offerings.
- Significant international market opportunities identified.
Company Performance
Samsara demonstrated robust growth, with a 35% increase in annual recurring revenue (ARR) to $1.35 billion. The company reported a 78% gross margin and an 11% operating margin, showcasing efficient operational management. Samsara added 170 customers with over $100,000 in ARR, reflecting its strong market position and customer acquisition strategy.
Financial Highlights
- Revenue: $322 million, up 36% year-over-year.
- Earnings per share: $0.07, exceeding the $0.04 forecast.
- Gross margin: 78%
- Operating margin: 11%
- Free cash flow margin: 10%
Earnings vs. Forecast
Samsara's EPS of $0.07 exceeded the forecast by 75%, marking a significant earnings beat. This performance is consistent with the company's trend of surpassing expectations, although the magnitude of the beat is notable compared to previous quarters.
Market Reaction
Despite the earnings beat, Samsara's stock fell 1.27% during regular trading and an additional 0.09% in after-hours trading. The stock is currently trading near its 52-week high of $57.51, indicating that the market may have already priced in some of the positive news. Broader market trends and sector performance may have also influenced the stock's decline.
Company Outlook
Samsara provided guidance for fiscal year 2025, projecting revenue between $1.237 billion and $1.239 billion, indicating a 35% growth. The company expects a non-GAAP operating margin of around 7% and an EPS between $0.22 and $0.23. Samsara plans to continue focusing on enterprise customers and expanding its international presence.
Executive Commentary
CFO Dominic Phillips emphasized the market opportunity, stating, "We're digitizing the world of physical operations, which is a very large and underserved market opportunity." CEO Sanjit Biswas highlighted future investments, noting, "87% reported that they are planning to increase AI investments in the coming year."
Q&A
Analysts expressed strong interest in Samsara's AI product development and international expansion plans. Questions focused on renewal rates, expansion opportunities, and potential investments in cybersecurity and data privacy, which are becoming key differentiators for the company.
Risks and Challenges
- Market saturation in the U.S. could limit domestic growth.
- International expansion presents challenges, including regulatory compliance and market entry barriers.
- Economic uncertainties could impact customer spending and investment in technology.
- Increasing competition in AI and IoT sectors may pressure market share and margins.
- Cybersecurity risks and data privacy concerns could affect customer trust and regulatory compliance.
Full transcript - Samsara Inc (IOT) Q3 2025:
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Good afternoon, and welcome to Samstar's 3rd quarter fiscal 2025 earnings call. I'm Mike Chang, Samstar's Vice President of Corporate Development and Investor Relations. Joining me today are Samstar's 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, December 5, 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 Q3 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 and A. With that, I'll hand over the call to Sanjit.
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Thanks, Mike, and thank you, everyone, for joining us today. Samsara delivered another strong quarter of durable and efficient growth. We ended Q3 with $1,350,000,000 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 2nd highest quarterly additions ever. This includes major customer wins with large organizations like Papa John's (NASDAQ:PZZA), the world's 3rd largest pizza delivery company, a Fortune 500 confectionery, food and beverage company and a Fortune 1,000 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 and D dollars to invest in technology. Our customers provide the mission critical infrastructure that keeps the world running.
They are 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 the IDC, they estimated that Samsara customers realized $2,000,000 of savings on average per customer per year.
This equates to more than 8 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 2 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 (NYSE:FIX) is a Fortune 1,000 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 6 months. They are now a top 25 customer and have had 9 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 (LON:NXT), let's turn to a Fortune 500 global company that provides water, hygiene 11,000 light duty vehicles to support nearly 3,000,000 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 2 of their divisions. We've also identified additional expansion opportunities in 5 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 increased 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 1500 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 our expansive data set, which has great scale and breadth.
We now process more than 10,000,000,000,000 data points and 70,000,000,000 miles driven annually. Our data spans a broad and diverse group of asset types, end 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. 2nd, the international market is less penetrated than the U. S. And earlier in its digitization journey. 3rd, despite the low penetration, the opportunity for impact in 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 2 international customer events: Go Beyond, our 1st 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 Go Beyond in Europe, we announced 2 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 £23,000,000 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 2 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, and 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.
Dominic Phillips, Chief Financial Officer, Samsara: 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 $101,000,000 plus ARR customers, adding 170, 100 ks plus ARR customers, our 2nd highest quarterly additions ever, more than 100% quarter over quarter growth in asset tag net new ACV in just our Q2 of selling the product and achieving quarterly records for gross margin, operating margin and free cash flow margin. Q3 ending ARR was $1,350,000,000 growing 35% year over year, and Q3 revenue was $322,000,000 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 2,303,100 ks plus ARR customers, representing 38% year over year growth, including a quarterly increase of 170, which is our 2nd 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 1 year ago. The combination of adding more large customers and a higher average ARR resulted in an increased ARR mix for 100 ks plus customers to 54% in Q3, up from 51% 1 year ago and 47% 2 years ago. 2nd, 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 5th consecutive quarter, including our 2nd highest number of core customers added. Additionally, a quarterly record 78 of the 170, 100 k plus ARR customers added were new customers. Also, 9 of the top 10 new customers signed with multiple products. 1 of the largest new customers, a global leader in 3rd party logistics with over 110,000 employees, signed a more than $1,000,000 transaction across 4 different applications. In addition to licensing our 2 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 2 quarters. Also, 8 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% 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 2nd highest quarterly contribution ever.
The strength in international was driven by Mexico, which contributed its highest ever quarterly net new ACV mix, including 9 transactions greater than 100 ks and Europe, which accelerated year over year ARR growth for the 4th consecutive quarter. Construction drove the highest net new ACV mix of all industries for the 5th consecutive quarter, and Public Sector contributed its highest net new ACV mix over the last 4 years, including a quarterly record 16 transactions greater than 100 ks, 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 and just our Q2 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 GAAP 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 1 fewer week in q4 this year will remove 3 percentage points of year over year revenue growth in FY 'twenty five, which was already factored into previous and current adjusted revenue guidance. For full year FY 'twenty five, we expect revenue to be between 1.237 and 1.239000000000, representing year over year adjusted revenue growth of 35%. Our implied Q4 revenue guidance from last quarter of $334,000,000 to $336,000,000 remains unchanged. We expect FY 'twenty five non GAAP operating margin to be approximately 7% and non GAAP EPS to be between $0.22 $0.23 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 FY 'twenty five.
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 and A.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Thanks, Omnic. We'll now open the line up for questions. When it's your turn, please limit your questions to one main question and one follow-up question. The first question today comes from Matt Hedberg with RBC (TSX:RY) followed by Keith Weiss with Morgan Stanley (NYSE:MS).
Matt Hedberg, Analyst, RBC: Great. Thanks for taking my question. Thanks, Mike. Congrats on the quarter, guys. Sanjay, I want to start with you.
There was a lot of talk about AI usage within your customer base. I'm kind of curious, I know this has been something you guys have been focused on for a long time and trying to come up with sort of the next gen killer, AI apps. I wonder if you could, you know, give us a little bit more insight into the product development roadmap there.
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Sure. So, you know, some of the recent announcements, I think, highlight our continued investment in AI. Like you said, Matt, we've been investing AI in AI for several years now. The video based safety application really unlocked a tremendous amount of value for our customers. We think there are additional ways to unlock value using all of the data we've been collecting.
I highlighted 10,000,000,000,000 data points, 70,000,000 miles, 70,000,000,000 miles driven on the platform every year. So we see ways to not just unlock value and safety, but in areas like maintenance where we're able to find insights in the fault code data. We see a tremendous number of fault codes every year. We understand the outcomes of those. So that's one example.
And then there's other areas like fuel efficiency and just asset utilization. So we kind of see AI having impact across the board.
Matt Hedberg, Analyst, RBC: That's great. The other thing that stood out to me, I know international expansion, a huge growth opportunity. Great to hear the success in Mexico and Europe. I'm wondering, you know, when we think operationally, what are some additional steps that are needed to to drive, you know, even further penetration? The products, you know, are already there, but I'm sort of curious operationally, you know, what else has to happen to to drive even more success there?
It seems like a super big long term driver for you guys as well.
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: We're absolutely excited about it for the long term. I I think, what you'll see and what you've seen from us and what you'll continue to see is continued investment that's in go to market teams, customer success, support. And then on the product side, we're always running a customer feedback. We're proud of what we've built so far, but some of the newer features and functionality like the low bridge strikes and EBPMS and those kinds of features, I think are uniquely relevant in some of these international markets. The way we figure that out is by spending time with our customers, which does take some time.
Speaker 7: Thanks, guys.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: The next question comes from Keith Weiss with Morgan Stanley followed by Alex Zukin with Wolfe.
Keith Weiss, Analyst, Morgan Stanley: Thanks. Thank you guys for taking the question and congratulations on a really strong quarter. You talked about the 115 and the 120 in terms of NRR and we could definitely see that upsell motion doing really well within your customer base. I was wondering if you could maybe give us an update on kind of where we are in terms of what percentage of the business now coming from upsells into the installed base versus what's coming from net new? And is there any change in sort of the distribution model or any evolution in the distribution model, as the portfolio expands to better sort of segregate sort of the hunters from the farmers, if you will?
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. Hey, Keith. I'll take that. It was pretty balanced this quarter. It was slightly tilted a little bit more toward expansion, and we've seen that over the last kind of few quarters.
As we continue to move more and more upmarket into some of these larger enterprise deals, you know, they'll they'll tend to purchase over time. I mentioned, I think, 16 out of 25 of our top 25 customers did an expansion, in in q 3, and so that's really driving that expansion. It's, you know, something we're really happy about is it's it's happening naturally. You know, we we don't have a different kind of go to market motion to reward hunters versus farmers. We have, you know, sales reps that, you know, are assigned counts in territories, and they're able to sign new logos in those territories, and they continue to maintain those customer relationships for life and focus on the expansions as well.
Keith Weiss, Analyst, Morgan Stanley: Got it. And maybe if I could sneak in one follow-up. So on the new intelligence products that you guys were just released to SimSara Intelligence and SimSara Assistant, I know it's in beta, but are these solutions that would potentially have a standalone monetization model? Or is this just making the platform better to improve kind of utilization of the platform and it's just about just the evolution of adding value for your customers?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Keith, as as we talked about in the prepared remarks, these are products that are in beta. We're excited to make them generally available to customers in beta. And so we're going to use that as as an opportunity to figure out how to price and package them. We are also continuing to invest in AI in the core platform, so it's kind of a boat strategy, but we'll come back to you all when we have finalized pricing.
Speaker 9: Perfect.
Keith Weiss, Analyst, Morgan Stanley: Thank you so much, guys.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Great. The next question comes from Alex Zukin with Wolfe, followed by Kash Rangan with Goldman Sachs (NYSE:GS).
Alex Zukin, Analyst, Wolfe: Hey, guys. Thanks for taking the question. Congrats on another solid quarter. I just maybe wanted to ask about the general sales cycles, demand environment. Have you seen any shift?
You clearly had a really, really strong Beyond Conference and a number of international events. Just momentum, linearity in the quarter, any kind of, feeling like there was hesitation because of the election and then that that opened up? And and then I got a quick follow-up.
Dominic Phillips, Chief Financial Officer, Samsara: Hey, Alex. It's Tomic. I'll take that. It was it was a pretty consistent quarter in q 3. It's it's similar to what we've seen in in in previous quarters.
You know, as I said, you know, we're doing more enterprise deals, larger deals, and and those tend to be more back of the year, weighted, but no real change. I did hear anecdotally of of a few customers that said that they wanted to delay a purchase decision until after the election results. We've we've already closed a a number of those deals in q 4, but but I would that wasn't a a material impact on the quarter, you know, but it but it but it was notable.
Alex Zukin, Analyst, Wolfe: Super helpful. And then maybe just, you know, this time last year, Dominik, you talked a little bit about how to think about next year in terms of where consensus was. I'm just curious given again more momentum from new products, launching some AI monetization opportunities and continued really strong large multi product lands in what seems like a better economy. Any kind of initial thoughts or brackets of how we should kind of tune our models so we don't get out of our skis?
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. Yeah. So I mean, yeah, we're we're definitely not in a position yet to give formal guidance for next year. You know, as you know, Q4 is our largest quarter and and, you know, our FY 'twenty six plan, it's going to be heavily influenced by what happens, over the next couple of months. And so we really need to kind of get through the the quarter, and then we can finalize our FY 'twenty six plan.
What I would say is that, you know, based on our current outlook, we do feel good with where the current consensus dollars are right now. I don't think that that needs to change, you know, but we'll provide more formal guidance on the the next earnings call.
Alex Zukin, Analyst, Wolfe: Excellent. Thank you very much.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: The next question comes from Kash Rangan with Goldman Sachs followed by Michael Turrin with Wells Fargo (NYSE:WFC). Kash? All right. Next question, let's go with Michael Turrin with Wells Fargo, followed by Kirk Materin with Evercore.
Michael Turrin, Analyst, Wells Fargo: Hey, thanks. I appreciate you take the questions. You're reaching purely unprecedented territory, dollars 1,350,000,000 in ARR, still growing 35%. So maybe just zoom out and help us think through the ARR scale the current product set can address and maybe couple that with what you're seeing from the new frontiers you're highlighting and potential scale or sequence of contribution we could see from those over a longer period of time as well.
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. So, as I Michael, it's Dominic. I as I talked about at our Investor Day a few months back, and we still have so much opportunity within our our core products. If I look at just the the, you know, vehicle telematics market just in the US, you know, more than 50% of commercial vehicles still aren't using, technology. If you look at our our largest product now, video based safety, 90% of commercial vehicles in US are not using technology, and so there's still so much opportunity for us to land and expand with with our 2, you know, vehicle vehicle based products.
And then we've got a a whole host of other nonvehicle based products that are, you know, doing more than a 150,000,000 of ARR and still growing very quickly that are great opportunities to to land and and expand, you know, impact that we have with customers. And so, you know, we feel really good about about our product set. We're we're continuing to innovate quickly, you know, introducing things like asset tag this year and and all of the kind of the AI announcements that came out this week, you know, so we feel good about the the the pace of product innovation.
Michael Turrin, Analyst, Wells Fargo: And maybe just, a little bit of a different twist on the the the question that Alex was asking to some degree. Are there any implications or just scenarios you're contemplating with the new administration? We've seen the headlines around things like tariffs. You're very sophisticated in terms of just procurement and supply chain, and we've seen you navigate turbulence very effectively in prior periods. But just anything that we should be just mindful of and contemplating as we're just digesting a lot of, varying pieces in terms of the the puts and takes of what the government could start to, to implement.
Thanks.
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. I mean, it things are just still so unclear. It's an it's not we're not sure how things are gonna play out, so we're definitely working through a number of of strategies based on on different scenarios. To your point, we have a lot of experience dealing with some of this. You know, we have a really incredible supply chain team team.
They're they're they're really good at navigating through some of these different scenarios. And so we just need to see, you know, what happens when the new administration comes in, what policies they they put in place. And we're thinking through some of that, and and, you know, we can feed that into the, the outlook when we provide that, in 3 months.
Michael Turrin, Analyst, Wells Fargo: Thanks very much.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Next question comes from Kirk Materne with Evercore followed by Dylan Becker with William Blair.
Kirk Materne, Analyst, Evercore: Hi,
Keith Weiss, Analyst, Morgan Stanley: Kirk.
Speaker 0: Okay.
Kirk Materne, Analyst, Evercore: Can you hear me?
Speaker 0: Yeah. I can hear you.
Kirk Materne, Analyst, Evercore: Oh, sorry about that. Sanjay, I was wondering just about some of the newer products specifically designed for Europe. And I was kind of curious in terms of is there an application of a similar mindset as you get into bigger verticals, meaning you're designing some of those things that are very helpful for your European clients. Are there verticals like state and local or construction that are you have customers that are now asking for things that are maybe more specific to those verticals? Is that something you want to pursue at this point in time or not necessarily yet, keep it more horizontal?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Yeah. Great question, Kirk. So we run feedback loops across all of our frontiers, so the different geographies as well as public sector. But we also spend time trying to understand what's going on in each industry vertical. Dominic highlighted construction has been an industry that's been performing really well for us.
They're digitizing rapidly, and it's because they have a lot of assets. They're labor intensive. But some of those assets are different. So they'll have big yellow iron bulldozers or lots of small tools that get left behind the job sites, and they've been great adopters of the new AT11 product, for example. So, we do spend time with each of these different industries trying to understand their needs.
80% of the use case and their needs are very similar across the board. I would say about 20% either require partnerships and integrations or maybe some tweaks or additional product features. And that's how we think about the investment.
Kirk Materne, Analyst, Evercore: Okay. That's helpful. And then, Dominic, just a follow-up to your answer from Alex's question on next year. I was just is there anything we should also consider for 1 q due to leap year last year? I I feel like I'm asking a lot of leap year questions these days, but anything we should consider from a seasonality perspective as we go into next year on that front?
Dominic Phillips, Chief Financial Officer, Samsara: No. I don't think so. I mean, one one day is is not gonna have an impact on our business. I mean, we run into weekends and holidays in in various quarters. And so I I I I don't expect one day to to have a a material impact.
Kirk Materne, Analyst, Evercore: Okay. Just want to check. Thank you all.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Next question comes from Dylan Becker with William Blair followed by Matt Bullock with BofA.
Speaker 7: Hey, gentlemen. Appreciate the call here. Maybe, on the international front, another kind of quarter of successive strength, I think, 4th or 5th period here of continued acceleration and increasing contribution of the overall mix. I guess, how much of a function of that? Obviously, the ROI and value proposition is significant, but how much of that is further, brand awareness kind of driving and building out that referenceable base given the fact that there's a larger and kind of water wider swath of opportunities, in the international segment?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: I'll I'll take that one. So we're we're pleased with the growth. Like you said, it's been sort of accelerating on a kind of consistent regular basis, but it it still feels very early. I would say our international market share is still low single digits. There is growing awareness.
We have more reference customers. And to the earlier question, we have more of the sort of product features people are looking for that are unique to these markets, like low bridge strikes, for example. So I think, we have a great pathway to continue growing for a while, but it still feels early.
Speaker 7: Okay, that's great. Thanks, Sanjay. And then, Dom, maybe for you too, just given kind of the the exceptional growth in the business here at the scale that we're at, I guess, how are you guys thinking about the opportunity for, operational improvement and leverage here as we kind of lap some of these initial renewal cohorts from those customers that continue to expand? Would would think the economics of that are highly favorable for you guys, but how are you thinking about that internally? Thanks.
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. I I think for us, again, it it's really a a balanced focus on both sustaining high growth and and driving more operating leverage. We we think that we can continue to do both. I think near term from an operating leverage perspective, you're right that, you know, our largest area of investment is in go to market and and therefore is is most likely to be the area of of most leverage. The cost of sale on a renewed dollar of of ACV is is lower than it is when we first land that customer or if they expand their their relationship with us.
And so, you know, there's still a significant portion. You know, we're a 9 year old company. We sell 3 to 5 year contracts, and so there's still a large portion of our customers, that have not gone through a first renewal. And and as that happens, we we I would expect to see more, natural leverage and and go to market.
Speaker 7: Okay. Great. Thanks, guys. Appreciate it.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: The next question comes from Matt Bullock with BofA, followed by Derrick Wood with T. E. Cowen.
Matt Bullock, Analyst, BofA: Great. Thanks for taking the questions. A few for Sanjeet, if I could. First, just on the launch of Samsara Intelligence in beta last week, seemed to be a slight acceleration from the historical cadence of product releases annually and beyond. Is there anything you'd attribute that to?
And would it be fair to assume that the trajectory of new feature and product launches will continue to accelerate going forward?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Hey, Matt. Well, I'll take that as a compliment. We we really work hard to deliver new features and functionality, and we don't want to wait for our annual customer conference. So, it is not something that, we're waiting until each June of every year to release features. Samsara Intelligence is a whole kind of portfolio suite of products and features for us.
And so we're excited to get that out the door. I think you should expect to see us continue a pretty rapid pace of innovation as we continue to invest in R and D and scale our engineering team.
Matt Bullock, Analyst, BofA: Great. Thanks. And then just one more on competition. Since last quarter, there's been quite a few notable transactions in the fleet management industry. GPS Track, it just bought Xonar Systems this week.
Trimble divested its telematics business and then PowerFleet (NASDAQ:AIOT) acquired Fleet Complete. How should we be thinking about consolidation in the industry and how it can impact competitive dynamics? And then more specifically, do you see this as an opportunity to to capture additional share as some of those peers are distracted by integration and customers reevaluate some of their vendor choices?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Yeah. I think if we zoom out, this is a a large market. It's got dozens of players in it. And over time, we have seen companies be bought and sold, and and merged together. So I think this is consistent with what we've seen in the past.
Our position is unchanged. I think we're seeing our customers really rapidly adopt our products because it's a platform, it's a system of record for them. So it's not just telematics or video based safety or equipment monitoring or the other products. It's everything together. That's a strong competitive position that we're in.
And I think it all comes back to can we deliver really clear ROI for our customers, which we are. So we kind of aren't changing our strategy relevant or relative to some of those moves that have been made in the market, and we're going to continue to stay focused on the customer.
Matt Bullock, Analyst, BofA: Got it. Thank you.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Next question comes from Derrick Wood with TD (TSX:TD) Cowen followed by Jim Fish with Piper Sandler.
Derrick Wood, Analyst, TD Cowen: Great. Thanks, guys. I guess high level question on the video safety market for you Sanjit. I mean video monitoring has certainly become more prevalent. I know it's still an early market.
But just is there more market acceptance by drivers with driver facing cameras? And does this make it easier to sell and kind of drive more greenfield conversion in this market? Just would love to hear an update there.
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Yeah. So I think if you spend time with drivers, everyone's very accustomed to the idea of having a dash camera. It's most often used for exoneration. So it's not so much the inward facing, but being able to see what happened if there was an accident or some sort of incident on the road. The inward facing side is really around safety.
And I think both fleets and drivers want to be safe on the roads. They're putting their lives at risk every day when they're doing their jobs. So if we can help break bad habits like, you know, either not wearing a seat belt or using a mobile phone or being distracted, it makes everyone's lives a little bit better. So there is increased awareness and adoption of what these technologies do. And then the other piece is because of artificial intelligence, it's not like there's someone in the back office watching all these videos.
It's really a computer model sitting in the camera that's helping provide those real time alerts. And I think drivers now understand the technology, and that's really increased their comfort level with it.
Derrick Wood, Analyst, TD Cowen: Got it. Thanks. Dom, just wanted to ask about the motions around the application marketplace. Just what are you seeing around monetization opportunities? And how do you see that manifesting over the next couple of years?
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. Right now, it's, it's really, we have more than 300 technology, integrations, you know, OEMs, insurance providers, you know, other technology vendors, vertical specific applications. There these are really, really important integrations, especially as we get into these large enterprise deals where they wanna use CMCAR as their system of record and pull in a bunch of external data. We have more than 85,000,000,000 API calls a year, and so that that I think that's a good metric just to show the kind of the usage that we're seeing with these these integrations. Right now, that that's where, you know, our plans are to just to have this as a, you know, tech technology kind of integration hub, and, you know, I think longer term, we could think about, opportunities to open this up and maybe there are ISVs or ways to monetize the data or the applications, but not in the near term.
Derrick Wood, Analyst, TD Cowen: Got it. Thanks. Okay. Congrats.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: The next question comes from Jim Fish with Piper Sandler followed by Alexey with JPMorgan (NYSE:JPM).
Jim Fish, Analyst, Piper Sandler: Hey, guys. Thanks for taking the question. It was exciting to see the 100% quarter over quarter growth in the net new asset tags ACV here. Can you help us understand the main use cases for that product at this point? Construction was called out at the conference.
Is that how we should think about the vast majority of exposure? Or is there any sort of diversity in those customers?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Yeah, I'll take that one. So there's a pretty broad set of use cases for the asset tags. It's not limited to the construction industry. We see it getting good adoption in field services and even transportation logistics and so on. If I had to kind of generalize, there's 3 core use cases.
The first is, finding lost or stolen assets. Those again are across industries. The next is helping save frontline workers time to locate assets. So once they arrive at a job site, they can figure out where something is. And then the third is improving asset utilization.
Almost all the industries you serve, they're both labor intensive but also asset heavy industries. And so if these customers can figure out which, call it, 10% or 20% of their assets aren't well utilized and sell those assets off, they can use that cash for more productive purposes. So that's where I think ATs are getting used across the board, and that's pretty consistent across industries.
Jim Fish, Analyst, Piper Sandler: Got it. That's helpful. And then, Dom, maybe one for you. You called out go to market as kind of the key focus for investments next year. How should we think about the mix of rep hiring in terms of domestic versus international, given some of the traction that we're seeing in the international space so far?
Thanks. Yeah.
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. I mean, I think our our capital allocation is gonna be, you know, focused on primarily on go to market, but also on on r and d. I think the the overall number of salespeople that we will hire will will will be higher in in US just because that's a a larger part of our our business. The the the year over year growth may be a little bit higher in international just because it's a it's a smaller number and a and a big opportunity. But, you as I kind of said earlier, we really just need to get through the Q4, and we'll have a better outlook for next year and make our plans at that time.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Okay. The next question comes from Alexei with JPMorgan followed by Daniel Jester with BMO (TSX:BMO).
Elise Kenner, Analyst, JPMorgan: Hi. This is Elise Kenner on for Alexei Gogolev. You alluded to renewals coming up given the 3 to 5 year contract links, but we were wondering, if you could talk more about the renewal rates you're currently seeing and the pricing power that you have during those renewals given the demand environment. Thank you.
Dominic Phillips, Chief Financial Officer, Samsara: Yep. So the renewal rates have been, you know, very strong. They're they're embedded in the net retention rate metrics that I gave of of kind of 115 and and 120 for core and large customers, so that that's been, you know, consistent. And, you know, customers will we we've talked earlier about expansions being a big part of our business. Customers will expand, you know, throughout the life of the contract, but they definitely do it at time of renewal as well, so it's a good opportunity to have broader conversations with customers, and we've seen a lot of success out of that.
Elise Kenner, Analyst, JPMorgan: Got it. Thank you so much.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: The next question comes from Daniel Jester with BMO, followed by Junaid with Truist. Dan? Okay, let's go next to Janae with Truist.
Janae, Analyst, Truist: Sanjay, just wanted to ask you about data security and privacy and if they're becoming an important part of discussions with customers as the threat vector expands with increasing number of connected devices, more disclosure and compliance requirements. Is cybersecurity an area where you can potentially differentiate yourself from some of the competition, especially with some of the certifications you've got and working on? So just kind of overall, I just wanted to get your thoughts about how you're thinking about security and how customers are thinking about it.
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Absolutely. So it is an area we differentiate in. We at our scale are able to invest in R and D at a pretty significant level. And we have a very large security related team focused on these sorts of risk factors and attacks. And I think it's an area that our large enterprise customers who are very sophisticated are asking about and we're able to differentiate in.
So we have a number of certifications, whether that's the ISO 27,001 certification or ones related to state and federal or state and local government certification. So we're going to keep investing there. And I think it's a really important area for customers to be aware of because these are the critical infrastructure companies that power our planet. So there are of course targets for these attacks and we've been able to do a good job of helping keep them safe.
Janae, Analyst, Truist: Great. Thank you.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Okay. Our next question comes from Mark with Loop Capital and then we'll come back to check with Kash and Dan.
Kirk Materne, Analyst, Evercore: Mark?
Mark, Analyst, Loop Capital: Hi, can you hear me okay?
Speaker 0: Yeah, we can hear you.
Mark, Analyst, Loop Capital: Okay, great. Thanks for taking my question and nice job on the quarter. Sanjit, could you just talk a little bit about the uptake rates you're seeing with your connected workflows and connected forms products? Also maybe just provide an example too of some new unique use cases that you're seeing with those products?
Sanjit Biswas, Chief Executive Officer and Co-Founder, Samsara: Yeah. So uptake has been good. These are relatively newer products in terms of connected workflows and forms. All of our customers have some sort of pen and paper process. They're looking digitized or monitor or modernized.
So that's what we're really selling into. Some of the newer features that we released as part of the Simmsara Intelligence push earlier this week, I think are relevant there. Visual intelligence is a great example. You can basically take a photograph of a form. We will automatically identify the fields within it, fill out, the workflow fields, and then we can even do things like understand what the risks are in a job site photo.
So that's a brand new functionality. We just released it a couple of days ago, and the beta testers have been really thrilled with it. So we're excited to keep doing more of that.
Mark, Analyst, Loop Capital: Great. Thank you.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: Okay. Our last question comes from Dan Jester with BMO. Dan?
Speaker 9: Can you hear me?
Speaker 0: Yes, we can hear you.
Speaker 9: All right. Thank you. So I apologize about that earlier. So I wanted to ask about the public sector and the strength that you called out this quarter. I guess I know that was an area of focus over the past year to make investments to build out to get into those environments.
Is that what we're seeing here? Or is there anything else you'd call out on the strength across that category? Thank you.
Dominic Phillips, Chief Financial Officer, Samsara: Yeah. I would just say it's been an area of focus and continued investment, and these deals can take time to land. And we saw a culmination of that happen in q 3 with a lot of success against a record 16 deals over 100 ks and the highest net UAC mix we've seen in the public sector in the last 4 years, so really strong quarter.
Keith Weiss, Analyst, Morgan Stanley: Okay. Great. Thank you.
Mike Chang, Vice President of Corporate Development and Investor Relations, Samsara: So this concludes the question and answer portion. Thank you all for attending our Q3 fiscal year 2025 earnings call. Before I let you go, I have a few short announcements. We'll be participating in the following bus tours in San Francisco: the Piper Sandler Bus Tour on December 10 the FBN Virtual Tech Conference on December 11th, the Allen Company bus tour on December 12th, the Goldman Sachs and B of A bus tours on January 7th, the Evercore bus tour on January 7th, and the Jefferies bus tour on January 9th. We hope to see you at one of these events.
That's it for today's meeting. If you have any follow-up questions, you can email us at irsamsar.com. Bye, everyone.
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