How my vision of Samsara has evolved

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Here’s how my vision of Samsara has evolved.

I first took my position between $17.50 and $20.00 roughly 10 months ago. This is still most of my current position except for a little that I have added after the last earnings report. Along the way I added a little and trimmed a little around the edges, but my position has grown on its own as the stock price has risen. It’s currently a 22.6% position,

At that time I saw Samsara as a little interesting niche play, providing a valuable monitoring service to trucking companies, with an immediate ROI (“For every truck for which we provide monitoring for you, we will charge you $400 per year but you will save $2500 per year in idling expense alone, not even counting fewer accidents, lower insurance, etc.”). Who could turn that down ???

But oh, how that “niche” has grown! as Samsara has segued into a platform provider and its TAM has exploded.

First of all, that platform has ensured that their customers are almost “locked in” as they would have to make major changes their businesses in order to move to another provider (if there even was another provider who had the experience, and data library, and could provide an equivalent service).

Second, it’s no longer just trucking companies. They are providing their services and platform now to major airlines for God’s sake! You may say “What for?” Well if a plane takes off late because they can’t find a baggage cart to load the baggage, or the bus to transport passengers to the plane or from the plane, that plane’s next flight takes off late too, as do other flights, and it snowballs throughout the day and becomes very expensive for the airline.

And Samsara, that little niche company servicing just trucking companies, now has major cities as customers, like Houston, the fourth largest city in the US, and like the the city of New Orleans which signed up Samsara for all 41 departments. They are also already working with the State of New Jersey Transit Dept, the cities of Fresno CA, Mobile AL, Memphis TN, Allentown PA, and Washington DC, among others.

In fact 87% of Q3 net new ACV was from non-transportation verticals. Yes, 87%!!!

And 17% of Q3 net new ACV was from international verticals.

And their new platform product Mobile Experience Management got $1 million in ARR in its first couple of months of availability.

This “little niche company” now has ARR over $1 billion, and I see it continuing to grow to become a monster of a huge company. I’m in awe about this company! It seems to me to be going to the moon. It’s very different from Celsius, for instance, or ELF, both of which I feel I have to watch carefully, or even Monday or Trade Desk.

Let me quote from what the Goldman-Sachs guy said at the conference call:

“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…

“The non-transportation mix of net new ARR is very high. Clearly, the end markets are diversifying and opening up in ways that I at least 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, it’s something much bigger than that…

“How do you think about the product strategy and go-to-market strategy as with time it really becomes something different and bigger than what I, at least, thought it was, which was more telematics and vehicle-related? But it seems like your process workflow automation works for many kinds of business processes that are outside of the core domain… “Congratulations ! Thank you so much.”

He was as much in awe as I am! He sounded as if he couldn’t believe HIS eyes either.

Best,

Saul

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Thank you Saul, this is excellent context!

I also feel like there is an endless amount of greenfield the company could be going after.

A bit off topic, but I actually called them couple months ago because I wanted to install a bunch of their cameras at my home since I travel frequently.

It’s obviously great for security, but also tracking vendors (landscaping, pool maintenance, cars etc) whether they actually are doing what they promised you. The system that I use currently is completely useless, and Samsara has all the state of the art tech and interfaces/apps to do it better than anybody else.

Long story short, they currently focus on large commercial sites with hundreds of cameras installed - so it’s not something they need to even focus on.

Some napkin math: If they installed their cameras at 5% of the homes in the US, let’s say that is approx $7M homes (I applied no science in determining that number), and they charged $10 per month that could add $840M in ARR, not factoring in hardware sales. On larger homes they could charge several hundred dollars/month plus hardware sales.

I could probably come up with 10 additional use cases if I thought hard enough about it :smiley:

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Hi wycap,
The problem with your theory is that now when they make a sale it’s for hundreds or thousands of cameras, etc. Can you even imagine the sales and marketing, labor, paperwork, legal issues, etc in installing a few cameras in seven million homes, all for $120 per year per home. It would be insane for them to undertake it. (On the other hand, if someone approached them, as you did, it might be worth it for them as there wouldn’t be much effort and probably they could charge $70 or $100 a month since you obviously wanted it).

Saul

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Agreed - I was using a ridiculously low number :smiley: - even for a DIY type product. In my case I would likely be willing to pay $200-400/monthly and any install fees…it just got me thinking how many use cases there are.

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There are a number of products/services that have what seems to me a similar model as samsara. One that has been very useful in Northern California over the past 5-10 years is Purple Air, which deals with smoke and particulate sensors. I found it so useful that I considered buying a sensor and hooking it up to their network, but didn’t. Amazon’s Ring seems also quite similar in concept and structure. At least from this remove. There is probably lower hanging fruit for samsara, but I don’t see some kind of average consumer oriented service as too far fetched.
Cold Mountain

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Hi Saul
I want to ask do you have anything to worry about IOT? besides numbers and anything you can think of future development.

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Hi Chang,
There are always things to worry about. The Law of Large Numbers means rate of growth will inevitably slow down (although they are moving into new markets so rapidly and successfully means they are almost starting over). We can worry about competition (but would many cities or airlines go with a new startup in the field when they can go with the standard in the field. I must admit that I thought competition was more of a threat before they became so successful at expanding their market. It would be a lot harder for a new player to compete now). We can worry about management changing some time in the future, but we can worry about that with any company. We can worry about some huge accident or failure which causes bad publicity, but they don’t say your trucks will have no accidents, just that they will have A LOT less. Another real worry is that their valuation may get too high. I’m sure that you can think of other worries to go with those. Worries are, and should be, always present.
Saul

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Hi Cold Mountain,
Purple Mountain which provides air pollution sensors, and Amazon Ring which gives home security sensors, simply don’t compete with Samsara at all. They are retail mostly and in different fields than Samsara.
Saul

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Hi Saul
Sorry if I wasn’t clear with my comment about purple air and ring. I wasn’t suggesting that they are possible competition for samsara. I was using them as examples of services that END consumers such as you or I can presently use (that is, we are not large commercial entities). Their fundamental architecture is not dissimilar to that used by samsara – in fact I would venture to say it is essentially identical. I do not know this for certain, but I say this having spent the past 20 years building applications that do very similar things, albeit on a different scale from samsara. The tools and architecture we use can scale in the same way any web based application can scale. IF samsara had a mind to do something like was suggested above, I think it would be much less difficult than you or I think. Again, I am not saying they should, only that the technological barriers have largely already been overcome. cm

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I went into Samsara cautiously, as I found that its technology was not particularly groundbreaking nor unique. There are many competitive systems (Harman, part of Samsung, for instance) in Sansara’s early markets (transportation, trucking, automotive, etc.).

Samara isn’t a technology play, then. Their real advantage appears to be their management team, which obviously has been smart about what they develop and how they GTM (Go To Market). That they’ve been able to start dominating a fairly well trod set of existing products from other companies and expand on that is what makes investing in Samara worthwhile.

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Hi Smorg, I took a look at Samsung’s last earnings results and Harman revenue was up 5% yoy, while Samsara revenue was up 40%.

Clearly there is something VERY different about either Samsara’s technology, their go-to-market, their management, their new platform presentation, or something.

I’m not at all a techie and I don’t know enough to figure it out, but I know that if one is growing at 5% and the other is growing at 40%, there must be something profoundly different enough between the two to create that difference in growth. If you say it’s management and Go To Market, I won’t argue with you, but it’s clear that Harman isn’t an effective competitor against Samsara.

In fact, one could say that Harman isn’t a competitor, period.

Best,
Saul

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I was curious about management’s response to this specific question, and found this response:

“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 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.“

I had to read that a few times to let that really sink in.

Global GDP is expected to be $105 trillion in 2023. 40% of that is a $42 trillion TAM. For context I think NVDA has stated their long term TAM is $1 trillion even with all the AI rush. I’m having a hard time wrapping my head around a number that big, especially when their current market cap is only $18B.

I do believe the product itself is a low-moat product/service. But in situations like these I always think back to Starbucks, who took one of the the lowest-moat products around and turned it into a global brand. Their secret is written out plainly in one of their exec’s book called “It’s Not About the Coffee” where he said with the same management team and values, they could have done the same thing with office paper, or any other low-moat commodity. It was never about the product itself.

IOT’s management team clearly knows that, and a $42T TAM is big enough for multiple successful players at this point. But the one who executes like IOT has been will likely be the king of this market. It’s hard to see anything but upside here if they keep on this path.

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I’ve seen a lot of inflated, ridiculous TAM estimates thrown out by management teams, but this one takes the cake.

AJ

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Sorry, I wasn’t putting Harman out there as anything to invest in, or even to compare to on a company performance basis. Harman is a behemoth of a company that has been assembled over the years via multiple acquisitions and is in multiple markets with multiple products and services. Their IOT (Internet of Things, not the Samara ticker) business is centered around automotive, but they tie it in with things like Infotainment hardware and software, as well as OTA (Over The Air) updating of remote devices. It’s probably a good business for Harman, and from what I can in discussions with their people, their wins are usually because companies need/want multiple products/services and Harman becomes a one-stop-shop.

My only point, and sorry I wasn’t clear enough, is that there was deep and established competition in the space Samara started out in. Besides Harman, there are a large number of medium to small players, right down to 10 person companies that do things like trucking, fleet management, etc. The technology isn’t hard, and the hardware is pretty commoditized by now (wasn’t true 5-8 years ago). So that a somewhat late-comer like Samara can have big wins and expand quickly is pretty great from a management point of view.

@jgrothaus 's comparisons to Starbucks and view of the acumen of the management team are spot on to me. It wasn’t about the coffee then and it’s not about Samara’s technology now. It’s the integrations and ROI and customer knowledge and service that obviously matter more.

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I’d have to say I’m not sure if they could’ve done the same with office paper, or any other low-moat commodity. Coffee is a consumable. There is a taste factor and frankly loads of people are dependent on caffeine. No one gets addicted to paper. In fact, I’d argue in the past 10 years every place tried to reduce how much paper they were using with going green movement and all. Almost everyone now opts into not receiving paper mail. I wouldn’t discount the product here. The same applies to Celcius. People like the taste and there is a caffeine factor.

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Do you have any evidence to disprove their statement? Just because a TAM is large doesn’t mean it’s inflated or ridiculous. It just seems like a statement of fact. “40% of the global GDP is physical operations, and we’re going after that.” Great.

In any manner, it’s not about exactly measuring a TAM of this size. It’s more so about what reasonable market share they can achieve in what time period. If they said they’re going to achieve 100% of that TAM within 5 years, then yes, I’d join your assessment. But my interpretation here is just that the TAM is so large (and maybe impossible to truly measure) that there’s plenty of long-term runway for continuous growth as long as the management team can execute.

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I’m not sure that even that is accurate. Muji wrote a Samsara Platform Dive a couple of months ago for his HHHypergrowth Newsletter, and he went on for twenty pages or so, and I never remember seeing Muji so euphoric about any other company he wrote up.

Then just recently he wrote another called Samsara Dreams about the last two reports and where he sees them going.

Doesn’t sound like a commodity product to me.

Saul

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The quote was: physical operations, again is 40% of global GDP and we think we’re just getting started

$42T is the actual operations (shipping, trucking, etc. etc. ). Samsara’s interest is in monitoring their operations. They are NOT claiming a $42T TAM but rather that they could address this huge opportunity with their products. Their slice of the pie will be much smaller….but still pretty darn big.

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That’s an excellent point, and I agree with you. It’s just a massive TAM either way. Big enough for an $18B company to become, say, an $180B company faster than most other opportunities in the market right now, and so that’s where I’ll invest.

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We’re getting into the weeds here, but what I said was that the hardware was commoditized. From your Muji link, Samsara itself has said in their S1:

We expect that the need for our IoT devices will diminish over time as physical asset OEMs begin to produce connected assets that can connect to our Connected Operations Cloud without additional IoT devices provided by us.

Which is basically saying the assets being monitored will themselves will have that connectivity functionality built-in, without any additional hardware from Samsara. That’s about as commoditized as one can get. The technology to do all this (GPS, cellular/WiFi, data logging, audit trails, databases, etc.) is all well understood and has been available piecemeal for years.

The problem as I see it is that the existing solutions don’t even attempt to address a wholistic solution, because, well, because there are so many different things that different businesses want to do and the existing solutions are all single-solution/point based.

Samara’s difference, AFAICT, is in their integrations and their analytics. By integrating with everything, they intend to become the base platform from which all analytics and even operations can be based. There’s even an API for third-party or custom integrations.

All such platforms today are incomplete as customer needs vary considerably. But the difference, I think, with Samsara is that they work on as many popular integrations as they can and enable others to do any custom work needed. The Customer Feedback Look Muji describes seems to me key to their success

None of this, however, is really special new technology, just good old listening to customers to help solve their issues.

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