Thank You to Saul, the Moderators and to everyone on this board for all you do.
$IOT has been proposed previously; I’m hoping to keep the conversation going for $IOT.
Description
*) Samsara utilizes installed Internet-of-Things ("IOT") endpoints, cell communications, cloud data storage, data Analytics/ML/AI to produce actionable information (Real-time and Compliance Alerts for example) that can make, and save, money.
*) Applications they provide include Video Based Safety, Vehicle Telematics, Equipment Monitoring and Site Visibility.
*) They have an App ecosystem that 125 partners have utilized to develop custom integrations and workflows.
*) Primary revenue is from vehicle fleet customers, but about 15% of revenue comes from other industries. They hope to leverage their technology into (many) more industries to produce durable growth.
*) Mission is “To increase the safety, efficiency, and sustainability of the operations that power the global economy.”
Rapidly improving metrics: Revenue Growth
YE Feb 1 2020 : 119M
YE Jan 30 2021 : 250M
Rapidly Improving Metrics: Gross Margins
YE Feb 1 2020 : 11%
YE Jan 30 2021 : 20%
Currently : 71.3%
…so it looks to me like Gross Margins are improving; they went from 11% in 2019 to 20% in 2021 and are now at 71.3%.
Recurring Revenue
They run a per-truck subscription model.
ARR went from 492,838 (YE Oct 30 2021) to 723,667 ( YE Oct 29 2022 ) which is +46% YOY
Their Sales Pitch
*) 50% reduction in driver accidents
*) 40% decrease in idling time per subscribed truck (…which they claim is worth $2500/year)
*) 76% increase in Dispatch productivity “improving service and the bottom line” resulting in a 20% increase in vehicle utilization.
*) They claim significant tonnage of reduction in CO2 emissions.
…all for an annual cost of $400 per truck!
Moat
*) They have a data moat based on being an early mover not only in collecting, but in ML/AI-driven analysis of data. For instance: they processed 38 BILLION minutes of video in 2020.
*) Their capability to deliver actionable insights increases as more parties add data to the system.
*) A flywheel results whereby better insights lead to improved outcomes for customers, making it easier to obtain still more customers.
Founder-Led / Inside Ownership
Sanjit Biswas has 27% of Class B Common stock
John Bicket has 26% of Class B Common stock
My commentary:
*) They've had four years now of increased revenue every single quarter, with a corresponding steady improvement of Gross Margins. Revenue is rising faster than expenses.
*) They also deliver REAL-TIME alerts, such as alerting the driver to tailgating, Distracted Driving etc. in real-time. This occurs via local "Edge" computing right on their installed devices with no requirement to even utilize their Internet connection or cloud servers. The system can alert that you are braking too hard, turning too suddenly etc. and this improves the drivers' safety habits over time.
*) This strikes me as EXTREMELY easy to sell, because the system more-than pays for itself, per-truck, just from reduced Idling Time, and with an almost-immediate ROI!
*) It reminds me of old-school infomercials: "What if I can demonstrate that we can cut your accidents IN HALF for only $400/year per truck? Would you be interested? BUT WAIT there's more! You also get $2500 PER YEAR BACK, PER TRUCK in reduced idling expenses!
*) Durable growth might come from expansion into other industries, but currently Fleet Operations accounts for 85% of revenue
I own it indirectly in my 401k anyway (it is a real exposure in a concentrated ETF not a 0.07% position), but I have not owned it directly. What I like, using the last call to pull the info:
–Offers fast (less than a year) and easily quantifiable ROI;
–It is a great example of tech cutting costs so it could do ok in tight times;
–By cutting fuel costs it fits both the bean-counting and ESG paradigms;
–Offers a complete platform: safety, fuel usage, paperwork;
–Decreases speeding, exonerates drivers, and helps with retention in a high-turnover industry in which proven workers have been in short supply;
–ARR grew 47% YoY and had record QoQ growth of 100,000+ customers. By signing up 120 new ones, it now boasts 1,100 in the category. As an analyst notes, this is impressive considered the issues others had closing that kind of deals.
–Non GaaP OpMargins improved as did FCF margins.
–It saw no deterioration from Q2 to Q3; no failed closings but extra approvals/time to closing over those two quarters (we shall see Q4 on March 2) with robust pipeline and converting better than ever per the call.
–Not sure how retention rates work for a business like this but they claim 125% for their 100k+ customers and 115 for “core” customers.
I think IOT fits into a debate of what actually means “durable growth.” Do we mean durable as in “can last a long time like a decade?” Or do we mean durable as in resilient in cost-cutting times? Ideally, a business would be both but how many are? Analytics allows companies to prevent things like the nonsensical overstocking with items experienced in 2020-21 and to increase visibility and maximize return on dollars spent in tough times. I would like to think that IOT is of this type, a company that can secure quick and obvious ROI plus added benefits (like retention rates) and thus hopefully do well in uncertain times.
But it has not been on my short list so far. Thanks for giving me one more thing to think about in what will be a hectic week anyway
Durable means that growth will last for many years (“like a decade”). We’re never too precise about exactly how much growth and for how long, because we can’t know the future. If growth holds up enough for long enough for a company, its stock will crush the market.
The elusiveness of predicting this is (to me) a reason to have Samsara in the portfolio, as it’s probably driven by different drivers than a Datadog or Snowflake or BILL. I think you’re right that the ROI Samsara offers customers supports its resilience in tough times, which is also helpful of course.
Thanks intjudo for your excellent introduction to Samsara, I especially liked your section called “Their Sales Pitch” and the other about why it’s such an easy sell.
Best,
Saul
