Summary
Samsara opened fiscal 2023 with strong top-line growth, but the bottom line remained deeply negative. Revenue for the first quarter ended April 30, 2022 was $142.6 million, up 62.6% from the prior-year quarter. Ending ARR reached $607.2 million, up 59% year over year. The company had 897 customers with ARR over $100,000, up 73%. Management tied the demand to businesses digitizing physical operations to streamline costs and fuel efficiency. The Connected Operations Cloud remains the core product, and subscription contracts typically run three to five years.
Gross profit rose 65.9% to $103.0 million, and gross margin was 72.2%, up 1.4 percentage points from the prior-year quarter. The improvement came mainly from operational efficiencies, according to the MD&A. Below the gross profit line, spending overwhelmed the gains. Operating loss was $70.2 million, and operating margin was negative 49.2%, down 5.2 percentage points. Net loss was $71.0 million, wider than the prior-year quarter. Diluted EPS was negative $0.14, and that per-share loss narrowed from the prior-year quarter. The gap between GAAP and non-GAAP results is wide. Non-GAAP operating loss was $25.5 million, and non-GAAP operating margin was negative 18%, compared with a non-GAAP operating loss of $37.1 million and negative 42% margin in the prior-year quarter. Non-GAAP net loss per share was negative $0.05, compared with negative $0.15.
Cash generation remains a weak spot. Net cash used in operating activities was $48.8 million, and that outflow increased from the prior-year quarter. Capital expenditures were $10.7 million, up sharply from the prior-year quarter. Adjusted free cash flow was negative $50.7 million, compared with negative $40.0 million in the prior-year quarter, and adjusted free cash flow margin was negative 36%, an improvement of 10 percentage points. Deferred revenue was $329.9 million, up 24.3% from the prior-year quarter. Remaining performance obligations stood at $1.10 billion. Those backlog metrics suggest customers are still committing to multi-year contracts, even as the company burns cash. The MD&A notes that Samsara expects to keep incurring operating losses and negative operating cash flows for the foreseeable future, and it may need additional capital if existing resources are insufficient.
Guidance points to steady growth with continued losses. For the second quarter of fiscal 2023, Samsara expects revenue of $142 million to $144 million, year-over-year growth of 41% to 43%, non-GAAP operating margin of negative 22% to negative 20%, and non-GAAP net loss per share of negative $0.06 to negative $0.07. For the full fiscal year 2023, revenue guidance is $590 million to $600 million, year-over-year growth of 38% to 40%, with non-GAAP net loss per share of negative $0.22 to negative $0.24. The company does not provide a full reconciliation of non-GAAP guidance to GAAP because items such as stock-based compensation are difficult to predict.
Risks are familiar for a high-growth software and hardware business. The press release cites the ongoing COVID-19 pandemic, possible harm from silicon component shortages, security breaches, competitive markets, rapid technological changes, and the ability to keep innovating. The MD&A adds supply chain disruptions and labor shortages as pandemic-related concerns. Customer retention and expansion are critical because the business depends on selling more applications to existing accounts. Samsara also faces the challenge of scaling sales and marketing while trying to narrow losses over time. The company generated roughly 98% of revenue from subscriptions in each of the past three fiscal years, so renewals and upsells carry much of the growth burden. For now, the quarter showed robust demand and improving gross margin, but GAAP profitability remains distant.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $142.6M | — | — | — | — |
| Gross profit | $103.0M | — | — | — | — |
| Gross margin | 72.2% | — | — | — | — |
| Research & development | $41.0M | — | — | — | — |
| Sales & marketing | $87.4M | — | — | — | — |
| General & administrative | $43.7M | — | — | — | — |
| Total operating expenses | $173.2M | — | — | — | — |
| Operating income (loss) | -$70.2M | — | — | — | — |
| Operating margin | -49.2% | — | — | — | — |
| Net income (loss) | -$71.0M | — | — | — | — |
| Net margin | -49.8% | — | — | — | — |
| Diluted EPS | -$0.14 | — | — | — | — |
Risks
We have a history of losses and expect to continue incurring net losses. Operating margin decreased 5.2 percentage points to negative 49.2% for the three months ended April 30, 2022 from negative 44.0% for the three months ended May 1, 2021, and net loss widened to $71.0 million from $38.4 million over the same periods.
We depend on a limited number of joint design manufacturers and suppliers, and the ongoing global silicon component shortage has caused component and freight cost increases and shipment delays. Any delay in shipping IoT devices delays our ability to recognize revenue for subscriptions purchased by customers.
U.S. and global market conditions, including rising inflation, component shortages, supply chain challenges, and geopolitical conflict between Ukraine and Russia, may reduce demand and increase costs. Inflation has increased labor, healthcare, component, and freight costs, and may cause customers to defer or decrease expenditures on products like ours.
The length of our sales cycle is unpredictable, particularly for large customers, and COVID-19 has increased the average sales cycle length to onboard new customers by more than several weeks or months in some cases. As of April 30, 2022, we had 897 customers with greater than $100,000 in ARR, up from 518 as of May 1, 2021, and large customer sales cycles typically last several months and in some cases have exceeded one year.
We face intense and increasing competition from vendors such as Verizon Connect, Geotab, Omnitracs, Lytx, SmartDrive, Orbcomm, ZTR, Avigilon, Netradyne, Platform Science, and Verkada. Competitors may bundle products at significant discounts or have greater resources, potentially reducing gross margins, lengthening sales cycles, and causing loss of market share.
We rely on Amazon for AWS web hosting and do not currently have an alternative provider. If Amazon decided to compete with us and did not allow us to renew our commercial agreement, it would significantly impact our solution and require time and expense to set up our Connected Operations Cloud on an alternative hosting service.
A security breach or incident affecting customer assets or data, our Data Platform, or IoT devices could harm our reputation and business. Risks include nation-state actors such as those connected to the Ukraine-Russia conflict, ransomware, phishing, and employee abuse of internal platform controls, including broad historical access to customer video footage.
We must hire, retain, and manage qualified personnel, particularly key personnel and sales staff. Competition is exacerbated by the 'great resignation,' and we have experienced turnover in sales team members, which results in costly training and operational inefficiency.
Issues in the use of artificial intelligence in our solution may result in reputational harm or liability. Certain of our Applications have features allowing them to control large industrial assets, and any abuse or misuse of these capabilities could cause substantial disruption or damage to customers.
Managing the supply of our IoT devices is complex. Insufficient supply and inventory may result in lost sales opportunities or delayed revenue, while excess inventory may harm our gross margins. We may issue non-cancelable and nonreturnable forecasts, and if we determine we have excess supply, we may record a reserve or write-down inventory.
We have generated negative cash flows from operations in each of the past three fiscal years. Operating cash flow was negative $48.8 million for the three months ended April 30, 2022, down from negative $37.1 million for the three months ended May 1, 2021, and we may require additional capital to fund our business and support our growth.
Our rapid growth makes it difficult to evaluate our future prospects and increases the risk that we will not continue to grow at or near historical rates. Revenue increased 62.6% to $142.6 million for the three months ended April 30, 2022 from $87.7 million for the three months ended May 1, 2021, but we expect our revenue growth rate to decline in the future as our business matures.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Adjusted Free Cash Flow Margin
Customers > $100,000 ARR
Non-GAAP Gross Margin
Annual Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from Samsara Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.