Q1 2023 Samsara Inc Earnings Call
Good afternoon, and welcome to the <unk> first quarter.
[music].
Good afternoon, and welcome to <unk> first quarter of fiscal 2023 earnings call I might change I'm, sorry, as vice President of corporate development and Investor Relations.
Joining me today are Sam sorry, co founder and Chief Executive Officer, Sandeep, Biswas, and our Chief Financial Officer, Dominic Phillips.
In addition to our prepared remarks on this call additional information can be found our shareholder letter press release Investor presentation, and SEC filings on our Investor Relations website at investors <unk> com.
The matters discussed today include forward looking statements actual statements actual results may differ materially from those contained in the forward looking statements any forward looking statements that we make on this call are based on assumptions as of today June <unk> 2022.
And we undertake no obligation to update these statements as a result of the information or future events unless required by law geron.
Today's call some of our discussions will include our first quarter fiscal 2023 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 revenues and revenue growth.
Reconciliations of GAAP to non-GAAP financial measures are provided with the press release and Investor presentation.
We will make opening remarks davita highlights for Q1, and then open up the call for Q&A with that I'll hand, the call over to Sanjay.
Thanks, Mike and thank you everyone for joining us today.
We had a strong start to the year, surpassing $600 million of <unk> and just the seventh year since our founding.
This represents 59% year over year growth and is a great milestone for the company as we continue to grow at scale.
We also surpassed 15000 core customers and continue to see exceptional growth in our $100000 plus IRR customers. This segment now represents approximately 900 customers spanning various industries. It includes the addition of coach USA, Oklahoma City, a major United States provider of automotive travel and financial services and two four.
500 customers one of the largest home improvement retailers in the United States and one of the world's top 10 global retailers.
<unk> is operating at a scale that's hard to replicate.
The amount of Iot data, we process in our connected operations cloud more than doubled last year too.
To about $4 six trillion data points. In addition, API calls grew to $33 billion last year, an increase of more than <unk> year over year.
We use this massive amount of data to regularly trainer AI models and enhance our benchmarking data.
Our year over year growth speaks to <unk> integral role in supporting digital transformation and physical operations, our customers provide mission critical services to keep our planet running and represent over 40% of global GDP.
Now more than ever they are investing in digital technology to streamline operations and increase efficiencies and we are here to help.
Our customers come from every segment of the world the physical operations.
They help keep the world running whether its construct the infrastructure maintaining utilities clearing snow off the streets are managing the global supply chain.
Many have been around for over half a century and weather challenging cycles in the past.
Today, the world is facing particularly challenging macro environment with inflation rising interest rates tightening supply chain tight labor markets and geopolitical uncertainty.
These challenges represent <unk> biggest opportunities to add value for our customers. We are proud to partner with our customers to use data to mitigate cost challenges, including labor inefficiencies asset and fuel inefficiencies insurance costs compliance safety and emissions use.
Using the same sorry connected operations cloud our customers are seeing their investment return several times over let me share three examples.
First GP Transco is it trucking logistics company with over 400 drivers 410 tractors and 550 trailers.
<unk>, sorry to improve fuel efficiency and reduced vehicle idling by 35% they've saved an estimated 205000 gallons of fuel that's over $350000 in savings GP Transco use these savings to fund driver pay increases and bonus programs, giving them a competitive edge in this market.
Second head of transportation systems, a leader in liquid bulk transportation is using our video based safety with 1800 drivers in sight visibility across our 80 terminal locations nationwide.
They're proactively coaching drivers and employees to reduce spend on insurance claims <unk> estimates, a 50% reduction in liabilities because of our technologies.
And third UFP industries, the leading manufacturer and distributor of wood products is using the connected operations cloud to streamline worker productivity. They wanted to improve operational visibility driver safety and customer service. Our solutions are used in 350 private fleet trucks to complete over 200000 deliveries.
A year by going paperless with Samsung USPI estimates they saved $600000.
These examples show how <unk> connected operations cloud is being used by our customers to improve worker productivity streamlined their operations and reduce their cost tax. It's these kinds of cost savings that are helping our customers combat inflation and maintain competitive put holes in their industries.
As you May have seen in April we released our inaugural ESG report in it we share how we are building a safer and more sustainable world through our customers operations and Aro.
Our customers are vitally important to the global economy small shifts in their operations can dramatically reduce their environmental impact and improve the lives of employees.
With over four trillion data points captured last year alone <unk> is uniquely positioned to impact our customers ESG goals, especially around emissions reporting worker safety and efficiency.
It takes some materials a leading construction materials company their goal is to be the most socially responsible provider in the market and achieved net zero emissions by 2005.
To achieve the goals outlined in <unk> airport, they needed more reliable data and deeper visibility across their operations.
<unk> is using Samsung vehicle telematics video based safety insight visibility.
With <unk>, they expect to save approximately $1 million per year in fuel costs. That's a reduction of more than 2000 tons of Cotwo <unk> are over 175000 gallons of fuel.
We also saw a 33% decrease and preventable vehicle accidents in one year.
We're also helping sunrun unlock new ways to meet their sustainability goals as outlined in their latest impact report, we're helping them reduce transportation emissions by transitioning half of their vehicle fleet to electric or hybrid.
We also made great strides on our own ESG goals. This quarter doing this helps us better understand our customers' ESG journeys and guide them.
<unk> carbon neutral and we're committed to maintaining carbon neutrality and achieving net zero emissions by 2040.
As I mentioned earlier the world of physical operations represents more than 40% of the global GDP and keeps our world running.
We want our connected operations cloud to be the foundation supporting digital transformation in this space for decades to come.
As part of this we are prioritizing profitability, because we plan to be a sustainable long term business.
We improved our operating margins by more than half year over year and remain committed to key operational drivers for profitability disciplined capital allocation, reducing hardware costs and efficient go to market strategy focus on renewals and expansions.
We're also focused on building capacity to serve increasing customer demand Q1 was our best hiring quarter since the pandemic began driven in part by our well received work from anywhere strategy.
90% of the new hires in Q1, our remote first employees by expanding our operations were able to leverage the efficiencies of our global talent pool bolster customer support and accelerate region specific go to market strategies.
We plan to sustain our hiring momentum throughout FY 'twenty three in order to serve our growing base of customers.
Last I'd like to thank all <unk> as well as our customers partners and investors for their continued support we are in the early stages of this tremendous opportunity and look forward to what's ahead.
We're excited to continue the partnership at our first ever in person customer conference <unk> beyond on June 15th and 16th with.
I'll hand, it over to Dominic you over the financial highlights for the quarter.
Thanks, and as a reminder, please refer to our shareholder letter press release and Investor presentation at investors <unk> Dot com for additional information on our Q1 results and guidance.
Q1 was highlighted by strong topline growth at scale due to continued large customer momentum multi product strength and significant expansions within our existing customer base are ending <unk> in Q1 was $607 million growing 59% year over year in Q1 revenue was 143 million growing 63%.
Year over year.
Our investments in serving the largest physical operations customers continue to pay off we now have 897 customers with <unk> of more than 100, K. Each a quarterly increase of <unk> 91, and an annual increase of 379 or 73% year over year growth.
<unk> is purpose built for large customers with complex operations that want full visibility and control over one thousands of disparate assets on one integrated platform.
Additionally, large customers are generally more stable an uncertain macroeconomic environment. They have stronger long term unit economics and higher retention rates.
Our investments in large customer opportunities coincides with the de emphasis in acquiring customers with less than five K of IRR. As a result, the number of 100 K plus our customer additions in Q1 surpassed the number of sub five K.
Our customers acquire for the first time ever and we expect that trend to continue.
Additionally, multi product transactions continued to contribute significantly to our top line growth showing the strength of our connected operations cloud in the market.
Seven of our 10 largest deals in Q1 included subscriptions to two or more products.
More broadly more than 70% of core customers and more than 90% of 100, K plus customers subscribe to multiple applications.
We're also seeing multi product adoption at scale at the end of Q1 or two connected fleet applications video based safety in vehicle telematics, each represented more than $250 million of <unk> and our remaining non vehicle applications combined to contribute more than 10% of total IRR.
And finally, while Q1 was another record quarter of new core customer additions. It was also the second consecutive quarter that expansions to existing customers drove more than 50% of net new ACD.
As a result, our dollar based net retention rate for core customers and large customers continues to be greater than our target of 115% and 125% respectively.
In addition to our strong topline performance, we continue to operate more efficiently as we scale and we saw strong year over year leverage across all functions. Our Q1 non-GAAP gross margin was 73% a year over year improvement of approximately two percentage points, primarily from product optimizations improved <unk>.
Strategies and larger scale.
Our operating margin was negative, 18% and annual improvement of more than 50% or approximately 24 percentage points year over year, driven by leverage across all functions.
And our adjusted free cash flow margin improved by 10 percentage points year over year, driven by the operating leverage I, just mentioned, but partially offset by negative net working capital.
A key component of our solution is providing Iot devices that connect physical assets to the Samsung cloud.
More than 75% of our adjusted free cash flow in Q1 was related to payments for Iot devices.
And while these purchases resulted in negative net working capital today, while we're growing rapidly we anticipate net working capital will turn positive in our long term model, primarily from a more stable level supply chain improved device optimizations and a larger renewal base that would require new devices, all of which will lead to.
Operating margin and free cash flow margin converging over time.
It's also worth noting the global supply chain disruption continues to put pressure on critical component costs and availability.
We expect inventory costs and lead times to remain high for the foreseeable future, but we also expect they will normalize over time as the supply chain ramps to meet demand.
But even in the face of this challenge we improved our gross margin we improved our adjusted free cash flow margin and we shifted the Iot devices to meet all customer demand for the quarter.
And the final Q1 point I want to make is regarding hiring in head count.
One was our largest hiring quarter since pre COVID-19 and almost 50% of our net new employees joined our go to market teams.
We primarily utilize a direct sales model, which means adding more sales capacity along with improving productivity are key drivers of future growth.
As a reminder, we reduced head count at the beginning of FY 'twenty one during the onset of Covid to manage costs in an uncertain macro environment and we started to rebuild our head count capacity last year.
We're now above pre Covid head count and on track to accelerate our head count growth in FY 'twenty, three while maintaining our commitment to margin improvement each year.
Okay now turning to guidance for Q2, FY 'twenty three we expect total revenue to be between 142 and $144 million representing year over year growth between 41% and 43% and.
non-GAAP operating margin to be approximately negative 22%.
Based on our strong Q1 results and updated outlook for the remainder of FY 'twenty. Three we are raising our full year revenue guidance to 590 to 600 million or 38% to 40% year over year growth.
We also identified additional savings from operating efficiencies without sacrificing investments to growth given the strong demand we're seeing from customers.
So in addition to increasing our top line guidance. We also raised our FY 'twenty three operating margin guidance to negative 20% for an implied non-GAAP operating income improvement of $7 million.
And finally, we also included some additional modeling notes for Q2 and full year FY 'twenty three in our shareholder letter.
To wrap up we are very pleased with our start to the year and our improved outlook for FY 'twenty. Three we are benefiting from the secular transformation of physical operations and we believe that the macro volatility caused by high inflation and a tight labor market is making <unk>, even more imperative to our customers.
And we remain committed to continued operating efficiencies on our path to profitability through scale product enhancements global employee expansion and cost optimization, all without sacrificing the incredible customer demand we're experiencing.
With that I'll hand, it over to Mike to moderate Q&A. Thanks, Amit.
We'll now open the lineup for questions. Once you turn please limit your questions to one question and one follow up question.
The first question today comes from Kirk <unk> at Evercore, followed by Keith Weiss of Morgan Stanley .
Yeah.
Alright, thanks, very much and congrats on the on the quarter.
I was wondering if you all could just talk a little bit about what youre seeing in your pipeline build and maybe juxtapose that versus what you saw at the beginning of 2020, obviously everybody's pretty nervous about the macro but I imagine for your business is very different today, just given your size and scale and the maturity.
Of the business. So can you just give us a bit of a sense of what youre seeing on just sort of a pipeline build.
Also just Tom could you just talk a little bit about the sequential guide on revenue why youre seeing it sort of flat sequentially makes sense given.
That sort of deviates from the pattern, we've seen over the last year at least thanks.
Kurt This is Andrew I'll start with your first question around pipeline builds so in general we are on track in terms of pipeline build for the year and we are seeing healthy incoming inbound business leads and so on from across different industries. So we serve a variety of industry segments.
Including construction field services local governments transportation and we are continuing to see growth. There I think this is very different than what we saw at the beginning of 2020 when effectively a lot of the world froze. Our shutdown. It was just uncertain what was going to happen and what turned out to be the case was that the industries. We serve are the <unk>.
Essential industries are the ones that keep.
Keep the energy utility is running and keep the water running and so on so they spring back very quickly I think that was just not clear at the beginning of 2020, whereas right now what we're seeing is even with inflation, even with macro uncertainty people stonegate waste management, they still need energy utilities to run they still need to local governments and they need food and beverage to continue to operate.
So I think well everyone's keeping their ear to the ground to understand what might happen in the future. These industries are really robust and they're truly essential industries.
And again on the I think we feel good about what we're seeing in our pipeline and that allowed us to raise our full year revenue guidance for the year and then just on your Q2 sequential revenue guidance question. Kurt again. This is similar to kind of the comments that I made three months ago during our Q4 earnings call.
This is our first year as a public company and so we want to make sure that we're putting out numbers that we feel highly confident about hitting and so this is similar to the Q1 guide that we provided three months ago, but we're not seeing any major negative impacts to our business.
Are aware of the broader macro factors that we've talked about that.
That may impact the economy, but.
Not seeing anything in our pipeline that concerns us.
Great. Thank you all.
Great and next question comes from Keith Weiss of Morgan Stanley followed by Michael turn at Wells Fargo.
Keith.
Okay, Let's go to next question.
Come back to you.
So she comes from Michael <unk> at Wells Fargo.
Hey, there thanks I'm here.
It's clear to us from the initial question, we're feeling a lot of questions on the macro some of your customers are dealing with things like supply chain complexity that question, but you've referenced there are elements of the product set that can help with things like fuel savings and efficiency gains. So anything you can add and just your latest view on those market cross wins. If they are observations you can share from recent.
Customer conversations that showcase certain elements of the product portfolio.
That's all very helpful.
Sure. So Michael this descended I've been spending a lot of time over the past months out in the field meeting customers. Both here domestically in the U S as well as out in Western Europe .
We are seeing a couple of trends there that are very related to these kind of macro.
Issues fuel savings as I highlighted in the shareholder letter in earlier in the earnings call is something that's very front of mind. This is an operating expense for our customers across all of these industries and frankly they'd like to find ways to save money on that especially the rising cost of fuel. So our products has been essential in terms of helping them quantify where.
Those fuel expenses are going and finding opportunities to reduce those fuel spend by 15 20, 30% in some cases. So that's one area I think the other area. That's related as you mentioned the supply chain crunch that affects the availability of vehicles for many of our customers as well as other kinds of equipment, so that could be construction equipment trailers.
Generators compressors, and so on which means that they need to find ways to sweat their assets and run them for longer lifetimes and specific I'm thinking of a customer conversation at two weeks ago. They said, we normally run our vehicles for 600000 miles. We're now trying to find a way to run them for 900000 miles and we're using the same SAR products to understand which of those vehicles.
Needs maintenance and might breakdown and caused unplanned downtime and they're being very data driven about how do they run those assets for longer. So that's heather commenting the supply crunch theyre still seeing a ton of customer demand from their end customers. They just can't get new assets to deploy out in the field. So they are trying to be smarter about their operations. So those are hopefully just too helpful. Examples of <unk>.
People use our technology, maybe the third one if I could cram one more in there would be just around insurance costs distracted driving continues to be an issue accident rates are still very high and in these kind of in these macro environments, our customers being very conscious around cost so were looking to reduce accidents lower their insurance premiums exonerate their drivers.
And so I think our driver safety products continue to also do very well for that reason.
That's very helpful. That's great that's out as Dominic if I can sneak in a follow up you added more than 90 customers to that 100 K customer metric during our Q1.
Can you just speak to the drivers there is that unusual for Q1 is there anything in the demand environment, that's driving that or is it more just natural expansion more thing customers that helps explain that maybe you can just put some context around around that metric as well, yes. I mean Q1 is our seasonally lowest net new ACD quarter. We did 66 to 100 K plus adds in Q1.
Last year. So the 91 was a great start to the year and it was kind of in line with what we saw in Q2, three and four of last year, but this has been a concerted effort and then investment focus for us for a long time really building out an enterprise sales segment of <unk>.
The team to go after these customer opportunities and and we're also seeing it within the expansion numbers again. This is the second quarter in a row, where more than 50% of our new bookings.
Came from our existing customers and those tend to be larger.
The larger customers as well, but overall our customer demand remains really strong our productivity improved year over year from our fully ramped sales reps. We came in slightly ahead of our forecast and so it was really solid Q1.
Great. Thank you.
Thanks, Michael let's come back to Keith to get back on here.
Excellent can you hear me now.
Yes, we can hear Keith.
Sorry about that.
Nice quarter. Thank you for for taking the question.
I think the two two for Dominic.
You talked about a kind of a.
More of a focus on profitability and that ran profitability, we saw that in the quarter with it with the outperformance on our margin.
Yeah.
Is it should we be thinking about a kind of faster ramp of profitability.
Maybe it's a it's sort.
A longer term view on what that means in terms of when we should expect you guys to get to breakeven on an operating income line or free cash flow line. That's part one part two the other part of the equation, that's really top of mind for a lot of investors right now stock based compensation, particularly with companies that have hired a lot over the past year at a point.
Where their stock prices were materially higher so how are you guys thinking about stock based compensation is there a prospect of a larger grant.
Up to make employees hole or something that investors should be aware of on the horizon.
Sure. Thanks, Keith So on your on your first question.
The path to breakeven whether it's on free cash flow is probably going to come for us first on operating margin because of the networking capital dynamics of our business, but it's definitely a big priority internally, we have a number of initiatives.
We're focused on that we're going to accelerate the timeline that we've determined over the last kind of three months.
I think we're probably a few years away I'll provide a more kind of firmer timeline is maybe closer to that milestone, but I think regardless of that timing, we are committed to showing more leverage across both operating margin and free cash flow margin each year on that.
On that path to breakeven.
On the second question in terms of.
SBC as a percentage of sales.
For Q1 for US it was just over 30% I expect that that will decrease over time.
And I do think that it will be lower for the full year than it was in Q1. The first half of this year is being impacted by two things we.
We are we have some accelerated SBC expense, that's tied to that pre IPO shares that vested at the time of the IPO that's impacting at the beginning of this year and then we do our large annual equity refresh in the middle of Q1, and so we will see a little bit more of that expense in the kind of the first half of the year, but I do expect that the second half.
Half of the year will be lower I think another way that we look at this is on an.
In SBC as a percentage of of Opex and Cogs and for US It was 20% in Q1 and when we when we look at that benchmarks to other recent software Ipos, it's actually quite favorable.
And it's actually in line with some of that scale SaaS companies and so it's something that we're tracking and monitoring and on both of those metrics, we expect to see improvements over time.
Got it.
Grant in Q1, but those are kind of in line with kind of historical granted there's nothing kind of out of the ordinary because of the pullback in the stock price. Yes. So we typically have two comp cycle of the year, we do one at the beginning of the year and we do want it at mid year and so we're going to we'll look at that comp again in a few months, but other than those normal new hire grants and.
And the equity the annual equity refresh that we did at the beginning of year, we haven't done anything off cycle.
But with that I will say that we're always evaluating compher in equities, but we haven't done anything more broadly beyond that.
Perfect. Thanks, so much guys.
Great. Our next question comes from Matt at William Blair, followed by cash at Goldman Sachs.
Hey, guys. Thanks for taking my question wanted to ask on the John Deere partnership that you mentioned in the shareholder letter any additional details on that in any sort of plans to build out a broader suite focused on digitizing the farming space. Thanks.
Happy to take that.
Matt.
Glad youre able to see that in the shareholder letter, we're really excited to bring John Deere onto the platform and this is again connecting all of their different kinds of equipment that used to be on J D link into the same store operations cloud. So we've been building this out as a strategy not just for farm equipment or construction equipment, but all kinds of equipment. So we've partnered with for.
<unk> Volvo and others.
OEM integrations to bring that data into the cloud.
I would say this is again just trying to give our customers full visibility over connected operations. So while deere has farming equipment.
We also are partnering with others that make construction equipment and others that make generators compressors and so on and I would expect to see that that rollout continue over the next couple of years.
Okay, Great and one follow up for Dominic if I may just on the margin guidance for the year. I think you guys had previously communicated that we should expect revenue upside to be reinvested in the business and further margin guidance to sort of remain consistent throughout the year you brought it up a bit you said it was due to some operational efficiency.
Should we view this as maybe a one time thing and that your plan is to continue to hold it steady going forward or should we expect.
Revenue upside to produce some some improvement to the margin guidance going forward, yes, Matt. Thanks for pointing that out I think our posture and that has definitely changed over the last few months, where we were potentially going to have implied operating profit would be lower and keeping margins flat as we.
<unk> improved our revenue guidance throughout the year you saw in this quarter not only did we improve our revenue guidance, but we also took up our operating margins for the year, which which resulted in that $7 million of implied operating profit I think that's something we're going to be focused on going forward is really looking at the implied operating profit and do not expect.
That to get worse and ideally we can continue to make improvements as we.
Our scale the business.
Great. Thank you.
Great. Our next question comes from cash at Goldman Sachs, followed by Derek at Cowen.
Yeah.
Yes. Thank you very much congrats on the quarter.
I was curious to get your thoughts on customer acquisition economics I'm sure that you look at the metrics and are far more detailed manner that we're not able to just stick with reported financials any change that you see as the as the macro environment arguably it gets a little bit more challenging.
How are you monitoring how you spend and how that dollar of spend is translating into.
Revenue at attractive economics, and also if I could you've had the entire month of May after closing the quarter.
Have things changed or.
With respect to linearity of business pretty much playing.
Playing out the way you expected.
Any thoughts there would be highly appreciate it. Thank you so much more cash.
Cash.
Let me start there and then Sanjay can pile on I will talk a little bit more about.
Some of the kind of unit economic data at our Investor day coming up on a couple of weeks, but we are looking at.
CAC payback period, LTV to CAC net retention rates across different products different geographies different sales segments.
And they continue to be strong.
Our LTV to CAC continues to be more than eight acts and so we have really strong long term profitability and the investments that we're making and we're not seeing payback periods.
Increase over time and in fact, I kind of made the point and.
One of the other questions that we saw that productivity.
Per rep ramped reps improve.
Year over year, which gives us confidence that we should continue to invest in the business and.
As we talked about we're going to we plan to accelerate head count growth. This year and I would say that what we're seeing out of may so far getting through month one.
We feel really good about.
And that is factored into the guidance that we just provided where we were able to pull up guidance for that for the year.
Yes, I don't think I have anything significant to add to that other than it is sort of playing out as expected in the month of May and Thats again, why we felt confident with the guidance up.
May it continue thank you so much.
Thanks, guys.
Our next question comes from Derek <unk>.
Cowen followed by Ethan.
Most research.
Hey, guys congrats on a strong quarter first question.
We've heard a lot about your commitment to customer success and listening to the customer needs from your installed base. How is this helping drive more wallet share and I guess outside of telematics and safety what do you see as the next strongest emerging product that the cross sell.
Sure Derrick I'll take that this is sandra so.
One of the areas that we have seen and I'll kind of answer both questions at once one of the areas. We are seeing healthy growth has been around connected equipment. So these are non fleet assets that our customers have as part of their physical operations I've mentioned construction equipment in one of the previous questions.
There's all different kinds of equipment out there and so bringing those assets onto the sensor connected operations cloud has unlocked even more value for the customer it's oftentimes an add on or follow on project and you see that in our in our expansions that have been occurring over time, but that's how when we run that customer feedback loop when we build these deep relationship.
We were able to expand within these opportunities and there was a slide in the presentation earlier around multi product adoption, our largest customers 90% of them are using multiple products from us and so that is I think how we're driving a lot of expanded share of wallet, which is finding more areas of value to unlock for the customer and I'll just add on there I mean the customer.
Success team for Us is instrumental and.
Their singular focus is on.
On our net retention rate and I'll sure I'll give you an update on where that is at an investor day in a couple of weeks, but as we said where we continue to be above our target and we are seeing that trend up over the last several quarters and so.
A lot of that is what seems you just mentioned customers, especially larger customers coming back and an expanding more seats and more products.
Alright, that's.
That's great to hear and Dan one for you and nice job on the strength of gross margins, but it does sound like you're still seeing some higher component costs or how are you managing those costs and how should we be thinking about gross margin trends for the rest of the year.
Yes.
I think Kevin.
With the increasing cost we've been able to find additional savings to more than offset those costs and so when.
Whether it's cloud or cellular fees and you can see that our gross margin improved from 71% in Q1 of last year to 73% in Q1 of this year and so even with the increased cost that we've seen we've been able to find other other more than more than enough savings to offset that.
So you feel good about kind of maintained in this kind of a seven handle plus yes, I think we will stay above 70, and then again I think.
Our outlook for the rest of the year is kind of in line with where we were three months ago, but we expect to be in the low seventies.
Got it alright. Thanks.
Thanks, Sir.
Our last question for today comes from Ethan at Wolf.
Hey, guys, because they've embarked on for Alex and thank you for taking my questions I have two questions. The first one is that you guys had the same amount of large customers added in the quarter. It was great to see so I guess my question is typically there are new customers.
What gives you confidence as the macro environment gets tougher that net new customers to the platform, especially our larger enterprise customers will still continue to adopt our solution.
Yeah, maybe I'll take that I think that's what gives us.
We're really excited about is that not only was it a really strong.
Expansion quarter. It was also our largest.
Core customer addition quarter that we've ever seen and so it's a really nice balanced mix now between new customers and expansion. It's roughly 50 50 in terms of.
Net new ACD bookings mix.
Gotcha. Thank you.
Second one is so the beat in the quarter were stronger than last quarter.
Equally strong rate, so I guess how much.
Should we consider how much.
Confidence is conservatism is factored into the full year outlook I'll, just considering how the macro today and how you guys are viewing the environment and just the outlook in general for your customers back half of the year.
Yes, I think getting through Q1 and having the success you saw in terms of the <unk> gives us a lot of confidence is as I kind of mentioned that customer demand remains really strong our productivity grew year over year.
We were ahead of our forecast for Q1 and our outlook.
It remains really strong which gave us the confidence to raise the top line guidance for the rest of the year.
Okay, great. Thank you guys.
Perfect. So this concludes the question and answer portion. Thank you all for attending our Q1 fiscal year 2023 earnings call before they can go over a few short assets first we will be attending the William Blair growth stock conference in person on June 7th and we look forward to senior there.
We are hosting our normal investor day on June 15th in San Francisco.
Friday, and additional insights into sensors trajectory and the overall state of physical operations, our Investor Relations website web link to Libra <unk> broadcast.
So that's it for today's meeting if you have any follow up questions you can email us at IR <unk> com. Thanks, again bye bye.
Okay.