Good afternoon, and welcome to Samsara's Third Quarter Fiscal 2024 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, 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, November 30, 2023, 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, some of our discussions will include our third quarter fiscal 2024 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. All financial figures we will discuss today are non-GAAP, except for revenue and revenue growth. Reconciliations of GAAP to non-GAAP financial measures are provided with 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 had another milestone quarter. We surpassed $1 billion in ARR, growing 39% year-over-year. We are a strategic partner for the world's leading and most complex physical operations organizations. Large customer momentum continues to fuel our growth, and we added a record quarterly – a quarterly record of 148 customers with more than a $100,000 in ARR. This represents our fastest-growing customer cohort, growing 49% year-over-year. We also added a quarterly record of nine customers with more than a $1 million in ARR and seven Fortune 1000 customers. Our customers partner with us because we drive impact for them. As part of our ongoing customer feedback loop, we meet with the frontline and back office workers to understand where they are getting the most value. Here is what they say sets us apart. First, our single platform for all of their operational systems; second, our simple, intuitive and easy-to-use technology that just works out of the box; and third, our strategic customer partnership. All of this together is what powers our customers' outcomes and helps deliver clear and fast ROI for their organizations. I'd like to share two examples of this. Earlier this year, we announced a partnership with one of the largest air carriers in the world to digitize its ground equipment across major U.S. hubs. This quarter, we partnered with another major airline, the world's largest low cost carrier to help their teams use equipment more efficiently and avoid unnecessary spending. We gave them visibility in their fleet utilization and helped their employees locate critical equipment in real-time. This decreased both maintenance times and costs and help to ensure planes were serviced. Based on results from an initial pilot, we estimate the airline can save more than $15…

Thank you, Sanjit. Q3 was highlighted by several new records for important operating metrics and surpassing notable milestones. First, we surpassed $1 billion of ARR and just our eighth year of selling to customers. Second, this was our third consecutive quarter of accelerating year-over-year net new ARR growth at a larger scale. Third, we achieved a quarterly record number of large customer additions with both 100k plus and 1 million plus ARR customers. Fourth, our video-based safety and vehicle telematics products each surpassed $400 million of ARR while still growing more than 30% year-over-year. And lastly, we achieved our first quarter of positive non-GAAP operating profit led by a quarterly record non-GAAP gross margin. Q3 was another quarter of sustained high growth at scale. Our ending ARR was $1.003 billion, growing 39% year-over-year, and Q3 revenue was $238 million, growing 40% year-over-year. Several factors drove our strong topline performance in Q3. First, we continue to focus on serving large enterprise customers to drive durable and efficient growth at scale. We now have 1,663, 100k plus ARR customers, a quarterly record increase of 148, representing 49% year-over-year growth. We also saw particular strength within our largest customers. We now have 71 $1 million plus ARR customers, a quarterly record increase of nine, representing 54% year-over-year growth accelerating from 51% year-over-year growth last quarter at a larger scale. 100k plus ARR customers also represent our fastest-growing cohort and make up 51% of our total ARR up from 47% one-year ago. And our land-and-expand strategy for large customers continues to pay off. In Q3, four of our five largest net new ACV transactions were new logos, including three new $1 million plus ARR customers that each landed with our three largest products, Video-Based Safety, Vehicle Telematics and Equipment Monitoring. Additionally, almost 60% of…

Thanks, Dominic. 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 Michael Turrin at Wells Fargo followed by Matt Hedberg at RBC.

Hey. Great. Appreciate you taking the question and again, just congrats on the clean results. In terms of the international opportunity, I want to spend a minute there, there was a commentary on the net new ACV there coming in stronger than historical. Where are you? Can you just help level set where you are in terms of scaling some of those efforts? How we should think about the investments required to enter into new territories and how you think about the potential mix there overseas over time?

Yes. So look, we're very focused in North America, U.S., Canada, Mexico, and then in some core markets within Western Europe. We view this as a really important frontier for future growth, and so we're investing accordingly. These are really large markets and there are a lot of similar dynamics as what we see in the U.S. in terms of physical operations customers with not a lot of visibility into their operations. And so again, we're very focused on these markets over the long run and we're going to continue to invest and monitor results and productivity and efficiency and that will really gauge how we invest going forward.

Okay. And just on the quarterly record in terms of large customer activity. Is there any commonality or anything you can point to in terms of product? There's some good commentary on the diversification towards non-vehicle and smart equipment over a 100 million, but just wondering if there's anything you'd call out in terms of the large deal momentum? Thanks.

Yes. It's Dominic again. Look, I just think it's really just consistent execution. We've really been investing in the Enterprise segment for many years now, and we're just – we're seeing really good consistent execution. I call out and I mentioned in the prepared remarks that about 60% of those 100k plus additions were expansions to existing customers. So within the large enterprises we're seeing more expansion net new ACV, but also when I look at the large deals in the quarter, there were a lot of new logos landing over a $1 million as well. So really just good balanced new customer and expansion mix.

All right. Our next question comes from Matt Hedberg at RBC, followed by Keith Weiss at Morgan Stanley.

Hey guys. Can you hear me?

Yes. We got you.

Great. Congrats from me as well. The $1 billion threshold and the profitability are super exciting milestones. I guess following up on the large deal success, it's great to hear the equipment monitoring is also over $100 million [now too] and growing rapidly. I'm curious, on some of the [New Orleans], are you seeing high – fairly high attach for monitoring on sort of net new, I imagine as part of a lot of upsells. But are you starting to see even more sort of new customers come in and add equipment monitoring right out of the gate?

Maybe I'll start and then Sanjit, if you have some color. So there were several large deals in the quarter. We called out specifically, there were three new logos over $1 million each. All three of those included equipment monitoring. So I mean, that's great to see. Historically, it really did come into play more as an expansion, but in some of these larger customer transactions where they're really looking to Samsara as a system of record across their operations, they're really examples of taking a lot of the platform upfront.

Yes. Matt, if I could just add one or two things. We mentioned some airline customers. For them it's primarily an equipment monitoring use case where they have specialized pieces of equipment out on the airfield under the wing, and they're trying to improve utilization and understand where that equipment is. So that's a great example of what an equipment monitoring – can look like. And we do see that quite often.

That's fantastic. Thank you for that. And then Dom, one for you. Obviously a good quarter, you raised guidance for the year. You didn't comment on fiscal 2025. And I'm curious as we sort of start to think about sharpening our pencils for next year on modeling assumptions. Are there any details that you can share on, maybe just guideposts or how we should think about fiscal 2025 initially?

Sure. Yes. So look –and we need to get through Q4 obviously before we finalize our plan for FY2025. But I'd say that based on our current outlook, I think the initial FY2025 revenue dollar range that we provide will be higher than the current consensus number, given that we just beat Q3 and we raised Q4. And I would also frame that as de-risked.

Thanks a lot guys.

Thanks.

Our next question comes from Keith Weiss at Morgan Stanley, followed by Kash Rangan at Goldman Sachs.

Hey guys. This is Chris Quintero on for Keith. Thanks for taking our questions. And I'll add my congrats too on the quarter. Really exciting to see Mobile Experience Management already cross $1 million ARR given it's a new product. So what do you think that says about your ability to launch and scale new products? And does this change how you view the opportunity with new products like connected forms on a go-forward basis?

Yes. I'll take that one. We are very pleased to see MEM startup line so quickly. I think we have a large base to work with, and that's where we get a lot of our ideas and our product feedback from. We're excited to be launching more products into our markets over time. But this was the strategy was to build out a platform, build deep customer relationships and then continue to scale with multiple products over time.

Got it. That's very helpful. And then Dominic, revenue growth of 40% was really strong. But I think net new ARR growth of 20% year-over-year and down sequentially is a bit lower than the historical seasonality that you've seen in Q3. So just curious if there's anything I call out there?

Yes. I mean, I would just – I'd say it's important to remember that net new ARR is seasonal. So I would probably look at year-over-year comparison as probably more indicative of the performance in the quarter than quarter-over-quarter. But maybe just even as a reminder on the seasonality, normally Q1 is generally our seasonally weakest quarter, and then Q2 generally steps up from Q1 because we've got a bunch of sales reps that are on semi-annual quotas, so we see a bump up from Q1. Q3 tends to be flat – flattish to Q2. And actually, if you look back, three of the last four non-COVID years, Q3 net new ARR has been within a $1 million of Q2. And then Q4 tends to step up and be our seasonally strongest quarter because all of our sales reps have a quota period that ends in Q4. So I would just point back to Q3 net new ARR flattish to Q2. It also accelerated for the third consecutive quarter and Q4 is off to a good start.

Excellent. Thank you.

Our next question comes from Kash at Goldman Sachs, followed by Derrick Wood at TD Cowen.

Okay, great. That's an unbelievable benchmark you've reached. Very few companies have been able to grow at that pace and hit a $1 billion in revenue and keep the momentum growing. My question for you, maybe it's more appropriate for Sanjit. The non-transportation mix of net new ARR is very high. Clearly, the end markets are diversifying and opening up in ways that at least I had not thought about. What does that tell you about the TAM for the company? Because it's no longer just the fleet management, telematics type opportunities, something much bigger than that. Can you tell us how you think about the product strategy, go-to-market strategy as a time really becomes something different and bigger than what at least I thought it was, which was going to be more telematics and vehicle-related? But seems like your process workflow automation for many kinds of business processes that are outside of the core domain. Thank you so much.

Sure. So Kash, I think you're making a really important point, which is, we are selling to the broader world of physical operations. They happen to have many fleet vehicles, and so it's been our kind of entry point or foothold. But we now work across companies in the world of construction, energy utilities as I mentioned some local governments. So it's way beyond kind of the typical or the fleet market that people tend to imagine. So that's been part of the strategy from the beginning, which is to build out this broad platform. We do see an opportunity to continue expanding with lines like connected equipment, which is now over a $100 million in annual recurring revenue. As you said, non-fleet products are now over 17% of our mix, so we would expect to see continued strength and growth there. But we are thinking much more broadly. We're thinking about workflows, we're thinking about Mobile Experience Management, and we're kind of trying to find new ways to really connect our customers' operations across more than just their fleet vehicles.

Fantastic. Congratulations. Thank you so much.

Our next question comes from Derrick Wood at TD Cowen, followed by Alex Zukin at Wolfe.

Sorry, I was on mute. Thanks, and congrats on another great quarter. Sanjit, you guys have 6 trillion data points running through your platform, I think I saw. Anything to update on what kinds of potential there is to train large language models with this data, create new kinds of generative AI applications, and how should we be thinking about the potential value for copilots?

So it's an area we're investing in, as you mentioned 6 trillion data points. On the video side, we also see 44 billion minutes of video footage recorded by these dash cameras. And then we have now third-party ecosystem integrations as well. So there's frankly a lot of data to train on. We've seen great results training on some of that video footage for our AI-based safety. And now we're taking in that kind of broader moralistic set of data to train generative AI models. The way we think about it is, again, through the lens of the customer, what's going to be practically useful for them out in the field? Can we speed up some of their workflows? Can we help them with things like dispatch and their customer activities? So we're going to be continuing to train models the way we have for the last several years with this increasing data asset that we're building. But we're going to be looking at it through a customer lens to say, what else can we do for them and not just the technology lens of generative AI.

Okay. Great. And Dom, so I mean, you guys have I mean, just one of the highest growth rates in all of software, really impressive. And I think of kind of the algorithm underneath this is kind of a P x Q model, sales capacity and sales productivity. You had a lot of sales hiring last year and those new reps ramped quite a bit through this year. You've moderated your growth this year, and that would insinuate that maybe you've got some slower growth and productive sales capacity next year. I guess, how do you think about this growth algorithm for next year? And now that you're generating cash and continue to see such good demand, are you thinking about kind of pressing the gas a little bit more on hiring going into next year?

Yes. So I think that our – we've done a lot of hiring across the company over the last one to two years. And we've done a good job of ramping that capacity and making them productive in a lot of – three consecutive quarters now of accelerating net new ARR growth year-over-year as a result of adding additional capacity that has driven some of that. I think going forward, we see a really large opportunity. We're operating in a big TAM, physical operations, again is 40% of global GDP. And we think we're just getting started. So I do expect us to continue to make investments next year at a consistent pace. And our goal is to operate within the guardrails of being free cash flow positive. We think about things like Rule of 40 in terms of balance, but beyond that, we want to drive high levels of growth for as long as we can and we think we're set up well to do that.

Great. Congrats. Thanks.

Thank you.

Our next question comes from Alex Zukin at Wolfe, followed by Matt Pfau at William Blair.

Hey, guys. Thanks for taking the question. And again, just sounds like truly marvelous quarter. I guess, one thing that stood out to me was that four out of the five largest customers in the quarter were kind of net new logos and lands. And I guess, is there anything that you're seeing, you've been operating at a pretty high rate of execution through what some would describe as a pretty challenging macro backdrop. So anything you sensed or saw in the quarter that kind of was changing that maybe led to some incremental momentum that you're starting to see and pick up on in the marketplace? Is it pure execution? Anything there kind of from a macro perspective that you'd comment on with respect to the business?

Hey, Alex. It's Sanjit. We spent a lot of time out in the field talking to customers, understanding their business. I think there's a broader trend towards digitization that's occurring in physical operations. These are folks with lots of assets, lots of labor. They're trying to find ways to be safer, more efficient, more sustainable. So they're now looking to tools like us. And I think word is getting out that this is a product that delivers very clear and fast ROI. As far as what they're seeing in their businesses, many of them have strong books of business where they're booked out a couple of years in advance. And so as we focus on these large complex physical operations customers, I think there's more stability there than you might expect maybe if you were to look at the other end of the market with SMBs or something like that.

That's super helpful. And then as we think about next year – for either you Sanjit or Dom. As you think about stack ranking the growth drivers, can you maybe talk about just where does pricing packaging, where does more verticalized products, maybe gen AI skews, like what's the right way partner influence selling like any of those kind of stack rank some of those more exciting opportunities that's going to drive the net new ARR next year?

Yes. Maybe I can start. I think for us it's just going to be continued execution and I think we need to continue to rollout more and more products. We have a track record now, three products over a $100 million of ARR all still growing really quickly. And on top of that, we're rolling out additional products that we think that we can sell into our existing install base. So continue product innovation will be key. And then the other key driver for us is, is continuing to add sales capacity at a consistent rate, making sure that we're ramping that capacity and that they're staying as productive as they were before and we think that we can continue to drive a lot of growth.

Perfect. Thank you, guys. Congrats.

Thanks.

Our next question comes from Matt Pfau at William Blair, followed by Daniel Jester at BMO.

Hey guys. Thanks for taking my questions and I will echo my congrats on the quarter. Wanted to ask and apologize for the multi-part question, but about the win with the low cost carrier. So first was the win with the previous airline of factor in driving this win. And then the prior airline, I believe was just in couple airports, is that the case with the low cost carrier? And the previous airline win, have you seen an expansion beyond the initial deployment within a few airports? Thanks.

Sure. Matt, I'll take that. This is an interesting story. We held our customer conference Samsara beyond last June. And one of the airlines was on stage with us and a few of the other airlines were in the audience. And so I do think that folks are learning from each other. They're seeing what others are doing in their industry. And this idea of increasing asset utilization is really fundamental in physical operations. These are companies that have hundreds of millions, sometimes billions of dollars of assets, and they're trying to figure out how to get the most [bang for their buck]. So I think that's something where once you have a case study, it kind of sets the pattern and others kind of run with that same idea. As far as the deployments, I don't know off the top of my head. I do know that one of the airlines has expanded with us recently. I can't remember exactly which one.

Great. And then just a quick question for Dom on the gross margins. I think you've been sort of guiding us to expect that to be down and it keeps going up. How should we think about that going forward? Thanks.

Yes. Look, I think there's some timing puts and takes within any given quarter with – throughout our P&L. And so I would just continue to focus investors on the kind of the full-year color that we provided in the modeling notes. We're really happy, again, quarterly record getting to 75%. But most of the leverage, I think, in the model going forward in the out years will really come from below the gross margin line, sales and marketing, G&A and maybe a little bit more out of R&D.

Perfect. Thank you.

Thanks.

Our next question comes from Dan at BMO, followed by Junaid at Truist.

Great. Thanks for taking my question. Actually, can we just follow-up on that last one about sales and marketing expense and R&D. It's been really impressive that you've been able to keep those expenses kind of flat to down sequentially for the last couple of quarters and still sort of drive really strong strength on the topline. So maybe just – can you expand about sort of the ability to drive leverage on those expense items?

Yes. Look, I think there's always some timing stuff at play within quarters. I do expect that our overall OpEx, which decreased in Q3, will be higher in Q4. And you can see that in the – we just did 5% operating margin in Q3, I'm guiding to 2% for Q4. So I do think there's a little bit of timing at play. But I just want to be clear, I think we're definitely investing, and trying to sustain high levels of growth. And so you may see some timing in the quarter-to-quarter.

Got it. Thank you. And then as you continue to kind of expand products kind of beyond the fleet, any update on how you're thinking about pricing models for those new products, any evolution and kind of customer conversations or how you're thinking about going to market with price? Thank you.

So we've talked a little bit about connected forms and Mobile Experience Management as some new products that we're experimenting with. There I think the pricing model is going to be very similar to what we have where it's per asset per year or per user per year model. We're going to look at different ways to package it, just to make it easy for our customers to adopt and consume the technology. But for us, it's really, let's keep it simple and let's focus on the customer experience.

Great. Thank you very much.

Our next question comes from Junaid at Truist, followed by Kirk Materne at Evercore.

Great. Thanks for taking my question. Sanjit, I was just curious to get your thoughts on the SEC reporting requirements around emissions and whether you think that could serve as a potential catalyst for your business going forward similar to the ELD mandate some years ago?

Sure. So many of our large customers use our – the connected operations data we provide in their ESG reports, and they do that today. And it makes their lives a lot easier because they can understand exactly how much fuel do they consume and where were they operating and so on. I think as those reporting requirements become a little more mature, we'll certainly integrate that into the product. And I think it's going to be helpful for our larger public companies. But I don't know that it's an ELD tailwind that would be a much kind of broader effect.

Great. Thank you. And just on the go-to-market front. Any update that you could provide us with now that Lara has been aboard for a couple of quarters as CRO? Any change in strategy with respect to partners or any changes to your go-to-market organization?

No. I'll say, Lara has been doing a great job just getting up to speech. She's been out on the road with me a time and customers have really enjoyed getting to meet her. No big changes to announce. I think continued focus on execution as Dominic highlighted earlier, is kind of what we're focused on as a team and there's just a lot to do right now.

Great. Thank you very much.

Our last question today comes from Kirk Materne at Evercore.

Yes. Thanks very much. Dom, I was wondering, obviously you guys are now signing up a lot of customers with multiple products at the outset, which is great. Are those customers coming in and is that just still a subset of their equipment sort of inventory? Or are they now coming in when they have multiple products as they're using ecosystem of record and starting at a larger size and scale? I was just kind of curious about that dynamic. Obviously, it's very positive to kind of get the platform deal up front. Just kind of curious if the expand from there is similar to if they just decide to take on telematics to start?

I think we're getting into some bigger lands upfront. But I don't think that's – that customers are landing wall-to-wall. Still the majority of the large customers will land with a subset of their assets, their vehicles, their field assets, and then they'll expand over time. That continues to be the primary way that we see customers growing with us. A lot of these customers have different operating segments and different decision makers and they grow through M&A. And so there's a steady stream of expansions coming on as well. And I think that's indicative of just if you look at the net new ACV mix, in the quarter 51% came from new customers, 49% came from expansions to existing customers. So we tend to experience really good balance across both of those.

Great. And then Sanjit, really quickly, can you just talk about the momentum in the marketplace? Just kind of curious what you're seeing. Obviously as your customer base gets bigger, the opportunity for your partners in the marketplace gets bigger. Just anything that stands out to you in that dynamic?

Sure. Kirk, I think you're referring to our app marketplace.

Yes, I'm.

Yes. So we have now over 260 partner integrations and it's really across a very wide range of partnerships. So great momentum there. Customers are very much adopting those integrations, turning them on. If you look at our larger customers, the ones who are over 500k in ACV, they typically have six or more integrations that are active. So I think that's an area of continued pull and really differentiation where the largest platform for them in terms of these integrations. So it's really about delivering more value for our customers and the partners love it because we make it easy.

Super. Thank you all.

Thanks, Kirk. This concludes the question answer portion. Thank you all for attending our Q3 fiscal year 2024 earnings call. Before I let you go, I have a few short announcements. We'll be participating in the Piper Sandler Bus Tour in San Francisco on December 4. The FBN Virtual Bus Tour on December 12. The William Blair Bus Tour in San Francisco on December 12. The Goldman Sachs Bus Tour in San Francisco on January 3. And the Evercore Virtual Bus Tour on January 8. 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 ir@samsara.com. Thanks, again. Bye everyone.