Reporting its first set of results following a successful IPO in December last year, Samsara has seen solid fourth quarter and full year 2022 growth. The numbers suggest strong appetite for its Connect Operations Cloud, which aims to digitize physical environments across industries such as logistics, supply chain, utilities, distribution and construction.
Samsara combines the use of sensors, real-time video feeds and APIs to feed data into its Connected Operations Cloud, where it then uses analytics and AI to licence applications to customers - providing insights into equipment, sites and vehicles. For those familiar with the concept of ‘IoT’, Samsara is essentially providing customers with use cases that improve safety and efficiency, by connecting physical environments to the cloud.
The company’s business model is proving popular with larger customers, as Samsara indicated that 45% of its ARR comes from contracts worth more than $100,000. Only 7% of its revenue comes from customers contracts worth less than $5,000 in ARR.
On an analyst call this week, CEO and co-founder, Sanjit Biswas, said:
Our IPO in December was an important milestone in advancing our mission to increase the safety, efficiency and sustainability of the operations that power the global economy.
In fiscal year 2022, we achieved a significant company milestone in surpassing $0.5 billion of ARR while growing more than 60% year-over-year.
We also continued to see exceptionally strong growth in the $100,000-plus ARR customers. We now have more than 800 customers in this segment, including Roto-Rooter Services Company, Chefs' Warehouse, Atlas Van Lines, Sunrun, Performance Food Group, the State of Tennessee and many others.
We see our success with large customers as a sign that our Connected Operations Cloud is resonating with large-scale, complex physical operations.
The key highlights from the numbers include:
Q4 revenue of $125.8 million, representing 66% year-over-year growth
Ending ARR of $558.1 million, representing 64% year-over-year growth
806 customers with ARR over $100,000, up 78% year-over-year
Guidance for Q1 2023 is between $130 million - $132 million, which represents 25% growth year-over-year
Guidance for FY 2023 is between $568 million - $578 million, which represents 22% growth year-over-year
Biswas said that eight of Samsara’s top 10 deals in Q4 included two or more subscriptions, and over 70% of its core customers and 90% of its $100,000-plus customers subscribe to multiple applications.
The company estimates that its total addressable market is $55 billion, growing to $97 billion by 2024, which represents a 21% compound annual growth rate.
The world of physical operations is rapidly digitizing, and we're in the early innings of this massive opportunity.
Biswas said during the call with analysts this week that the industries Samsara is targeting make up more than 40% of global GDP, but that businesses that have vast physical operations haven’t kept pace with the digital transformation efforts seen elsewhere. In other words, there’s plenty of opportunity.
Explaining the fundamental proposition of Samsara’s business, Biswas said:
Historically, the complexity of physical operations made it difficult to connect and analyze data at scale. Recent breakthroughs in technology are unlocking this opportunity. First, the ability to collect vast amounts of data and process it in the cloud is growing exponentially. Second, more IoT assets are connecting to the Internet. Third, an evolution in wireless technologies has enabled higher bandwidth and greater coverage, making it possible to do things like stream HD video in real time. And last, sensors are now being made smaller at lower costs and higher quality than ever before.
Here's how the Connected Operations Cloud works. First, we aggregate massive amounts of data from vehicles, pieces of equipment and sites using Samsara gateways. In addition to the data we gather directly, we also integrate with OEMs and other third parties to bring in external data. All this data flows into our cloud where we process it, aggregate it, enrich it and run it through our AI and machine learning models. From there, this data can be used to power workflows or provide alerts to customers. Ultimately, this manifests into different applications that we license to the customer, depending on what problems they're trying to solve.
Biswas added that Samsara’s scale will be difficult to replicate, as the amount of IoT data the company has collected over the past year has doubled - from more than 2.2 trillion data points to 4.6 trillion. API calls also grew to 33 billion this year, a 4x increase year-over-year. Video recorded on Samsara’s IoT devices also grew to 85 billion minutes. Biswas said that this massive amount of data is helping to train its AI models and enhance its benchmarking data.
What’s particularly interesting about Samsara is the use cases that are emerging from its Connected Operations Cloud platform. For instance, customers are combining safety and telematics data to exonerate drivers by recreating entire accidents in the cloud, whilst helping them benefit from risk-adjusted premiums as they quantify the safety of fleets.
Biswas provided some useful customer examples. For instance, he explained:
First, we welcomed a new Fortune 500 customer in a 7-figure deal. This peer-to-peer car-sharing service operates in over 15 airports nationwide. They saw a sharp increase in demand due to limited rental car availability caused by chip shortages. So they chose Samsara's vehicle telematics solution to track and maintain their 6,100-vehicle fleet. Our solutions help keep their fleet running longer and more efficiently. Now they're better positioned to gain valuable insights, improve efficiency and increase fleet longevity across their extensive operations.
Next, one of the largest office retailers in North America chose Samsara for their 1,100 vehicles and 40-plus warehouse and fulfillment centers in a 6-figure deal. They're using Samsara's video-based safety and vehicle telematics applications to increase safety and reduce carbon emissions across their supply chain. During the Samsara pilot, they reduced safety events by 73% by using our real-time in-cab audio alerts and driver coaching.
And on Samsara’s competitive advantage, Biswas added:
We see a number of different competitors depending on the kind of application we're engaging with the customer on. So for example, there are different competitors in telematics versus driver safety versus even areas like compliance, Connected Equipment and Connected Sites. So it's a fragmented set. The big pattern, however, is that they tend to be legacy incumbents. Their technologies haven't changed in 15 to 20 years. And the solutions are fragmented. So the data is siloed. The customers can't gain insights from connecting all that data together.
So the biggest difference that we offer to the customer is that we're one single consolidated platform. We have a massive data advantage.
Big customer wins, solid use cases, a significant addressable market, large contracts representing a growing proportion of ARR, 98% subscription-based revenue - all these structural points to Samsara’s earnings present what seems to be a good opportunity over the medium term for the company. Samsara is solving complex problems and the company needs to continue to illustrate the results its customers are achieving - but this feels like a company that’s executing well on the promise of IoT.