Here are my notes from the Samsara (IOT) William Blair Growth Stock Conference that took place today, 06/06/2023, 10:00 Central Time. A lot of insightful information was shared by Dominic Phillips, CFO. I was quite surprised to see that only +/-20% of IOT’s ARR comes from transportation.
IPO’d at end of 2021
Will be Free Cash Flow (FCF)/Break even by end of 2023
IOT’s customers represent +40% of GDP
Q Target market
A Much more than long haul trucking. A little over 20% of ARR comes from transportation markets. A majority of IOT’s ARR comes from non-transportation verticals. The overall mix of transportation customers is actually coming down relative to their other verticals such as construction, agriculture, utilities, etc.
83% of Net New Annual Contract Values (NN ACV) was from non-transportation customers and 17% of NN ACV was from non-US customers.
Q Value proposition
A Very ROI-driven
Q Quantify $ vs. other software co’s
A Hard ROI savings. Free trial/pilot period. Deploy over a subset of their assets. It’s a different buyer, in lieu of CIO, it’s operations people who they’re targeting in their go to market strategy.
Q Competitors, Why is IOT winning.
A Very fragmented marketplace, mid-market enterprises, many geographies, end markets, connecting many asset types. Real reasons for success is
- Size of their data asset (IOT collects +6 trillion data points ANNUALLY). As they connect more assets, they provide more value to customers.
- Enterprise grade solution. Scalable, secure, very robust marketplace, robust partner ecosystem.
- Product just works very well. Customers can get up and running in just minutes. Very plug an play. Don’t really have services revenue.
Q Greenfield vs. displacing legacy systems?
A Customers are adopting multiple products and not just telematics, video safety, or this or that. Core feature is GPS. Have added a lot of functionality. +50% of vehicles have connectivity. They see building their systems into automotive manufacturers. Just 5% of vehicles have video technology embedded in them. Video based safety is currently their largest category.
Q Where do you see the most potential for IOT?
A Customer feedback, they spend a lot of time identifying customer pain points and solving them. Customers want visibility into their non-vehicle assets such as a dumpster, trailer, construction cranes and equipment. They now have 3 main focuses at IOT: Telematics, video safety and equipment.
A IOT is built for and gives the most ROI value to enterprise customers. Have more than 50 customers who contribute over $1M to ARR per year. 49% of their customers are their large customers who contribute +$100K/year, and this large customer segment grew 53% y/y.
Q IOT has been doing AI for a long time. Why is it difficult for competitors to replicate this.
A IOT has a large team of data scientists. Differentiators include:
- Size of their data to provide more insights
- Training data and bringing it together to provide actionable outcomes
- Using customer feedback and specific use cases to deploy AI in a way that meets their customers’ needs.
Q Cross-selling opportunities.
A Overall expansion mix has increased. +60 % of new revenue has come from existing customers, and 8 of their 10 largest deals in the last quarter were from existing customers. Land and expand. Existing customer expansion is driving growth and scale. Many of their customers are multi product customers. With a majority of their customers they’re just scratching the surface. Customer expansion is very common.
Q Highlights from earnings announcement last week:
A Customer demand continues to be very strong. Key advantages
Subscription model (not usage based) not tied to head count, rather tied to the number of assets
Sell into the operations department not IT department (less competitive than calling on the IT department as a result)
Payback period can be seen in a matter of months.
Q Net new ARR growth accelerated over the year. What are the drivers?
A Productivity. Net new ARR was 24% this Q1 and 20% ARR growth a year ago. 15% of net new ARR came from new geographies.
Q Break even FCF by end of 2023
A Focusing on balance. Want to grow more efficiently. IOT has achieved the Rule of 40 for the 3rd consecutive quarter. Seeing leverage across the business. Gross margin is in line with their goals. A lot of their leverage comes from sales and marketing. The commission for sales people is much lower than with new logos. SG&A leverage is lower in year after you IPO than the first year. Supply chain is much less of an issue now than a year ago. Working capital benefits are making FCF/break even happen.
Q Balancing growth and margins?
A Balancing this really matters. Getting to FCF/Break even is critical. Growth will be very durable. You can expect us to gain efficiencies to drive profitability margins.
A $30B TAM now and $50B in the future. Very fragmented marketplace. There’s not a clear competitor they see every time, rather they see a wide variety of competitors.
Q Channel vs. direct to customers?
A 90-95% of their business is direct, rather than in the channel w/ resellers. They can provide more value to customers if they deal directly with them.
Q OEM relationships
A App marketplace is part of how IOT brings value to customers, as IOT has +230 apps with which IOT’s customers can integrate their data . Allows customer data to the cloud through IOT. Telematics, which is one of IOT’s focuses is 40% penetrated, but IOT believe they can expand the TAM.
Q Electric vehicles vs. Internal combustion engines.
A Customers use IOT’s data to help determine if they should go from internal combustion engines to electric vehicles.