Q2 2025 Samsara Inc Earnings Call
In the world running, it's tough work. Your team serve our communities around the clock.
Speaker Change: From the hottest days of summer to the coldest days of winter, you manage thousands of people and thousands of assets across entire continent. To build, maintain and deliver what the world needs.
Speaker Change: and what the world needs changes every day. Your business is growing and evolving, and you want to do more for your customers and stay ahead of their expectations.
Sam Sara: At Sam Sara, we help you prepare for anything and everything. Imagine if there was a way to work even smarter. Technology that easily connects all of your data from your teams, equipment and sites in a single platform.
Sam Sara: and AI that finds the most important insights so you can take action. Transformation is a journey. But you have a partner by your side with a shared mission.
Sam Sara: Creating new technology for both your front lines and your back office.
Sam Sara: We speak good things ahead and we're building it in partnership with you. Let's operate smarter together.
Mike Chang: Good afternoon and welcome to SamSar's second quarter fiscal 2025 earnings call. I'm Mike Chang, SamSar's vice president of corporate development and investor relations. Joining me today are SamSar Chief Executive Officer and co-founder of Sanjit Biswas and Archief Financial Officer Dominic Phillips.
Speaker Change: In addition to a prepared mark on this call, additional information can be found in our shareholder letter, cross-release, investor presentation and as you see, following on our investors.samsart.com.
Speaker Change: The Maestro discussed say include for-looking statements.
Speaker Change: Actual results made different material from those contained in the poor looking statements, and are subject to risks and in certainties described by fully narcissistic violence.
Speaker Change: Any four looking statements that we make on this call are based on assumptions as of today, September 5th, 2024, and you undertake no obligation to update these statements as a little new information or future events unless you're acquired by law.
Speaker Change: During today's call, we will discuss our second quarter fiscal 2025 financial results. We like to point out that the company force non-gap results in addition to and not as a substitute for or superior to financial measures calculated in accordance with gap.
Speaker Change: Reconciliation is a gap to non-gap financial measures or provide our press release and investor presentation.
Speaker Change: We'll make opening marks, diving highlights for the quarter and the open the call up for Q&A. With that, I'll hand over the call to Sanjit.
Sanjit: Thanks, Mike, and thank you everyone for joining us today. Since our delivered a non, another strong quarter of durable and efficient growth at greater scale, we ended Q2 with $1.26 billion near our growing 36% year over year. We also achieved a quarterly record for non-gap operating merchant.
Speaker Change: We are the Strategic Partners, the world's leading and most complex physical operations organizations.
Speaker Change: Large customer momentum continues to fuel our growth. We added 169 customers with more than $100,000 in ARR. We also added a quarterly record of 14 customers with more than $1 million in ARR.
Speaker Change: In Q2, we had winds with the state of Maine, one of the largest supermarket chains in the US, and one of the largest retail-owned hardware cooperatives globally.
Speaker Change: As we grow our customer base, our data assets scales too. We're proud to announce that we achieved an important company milestone. We now collect more than 10 trillion data points annually on the SAMHSA R platform.
Speaker Change: In addition to scale, our unique IoT data set has incredible breath and spans a broad and diverse group of assets. Our growing data set unlocks unique insights that help our customers tackle their types of challenges.
Speaker Change: In June, we hosted SEMS R Beyond to discuss the impact of data and AI on the future of connect operations. Nearly 2010, he's across the world of physical operations, came together for the event.
Speaker Change: At Beyond, we learned more about our customer's challenges and how they're looking to solve them with data and AI. They told us their top priorities include creating a system of record for their operations, standardizing their data, and using more AI for insights.
Speaker Change: These conversations are critical as they shape where we prioritize our R&D efforts to maximize customer impact.
Speaker Change: During Beyond, we also host our Connected Operations Award ceremony. We honored 15 global customers who had an outsized impact on our platform as well as our ecosystem partner of the year.
Speaker Change: I'd like to share the impact we've been driving with the few of our winners.
Speaker Change: Home Depot was our safest operator winner in the Americas. There's a world's largest home improvement retailer with over 2,300 stores and 475,000 employees.
Speaker Change: Together with their appliance delivery and insulation company Tempo Logistics, they achieved an 80% reduction in auto-instance by leveraging sensors, video-based safety application.
Speaker Change: Next, let's turn to Sterling Crane, or Excellence in Efficiency Winner.
Speaker Change: They're one of the world's largest crane rental supply companies with over 625 cranes in their fleet. They save $1.2 million using Sam Sarra from improved driver productivity and compliance. They also expect to save $2.5 million for major maintenance costs.
Speaker Change: We're proud to partner with our customers to make a real-world impact on their operations.
Speaker Change: To help meet the needs of our customers, we've been accelerating our flywheel of innovation. Our growing data set and AI powered insights driver flywheel. As it's been faster, we deliver more value from our platform and build more products and features for our customers.
Speaker Change: All of this innovation helps our customers take more action to improve the safety, efficiency and sustainability of their operations.
Beyond: At Beyond, we launch a new product, our asset tag. The asset tag is the industry's first industrial grade Bluetooth tag to help our customers track and manage their small, high-value assets. It can be used for a range of assets from toolboxes and chemicals, totes, to engines and handcarts.
Beyond: We expect over time this will help our customers save millions of dollars a year through increasing asset utilization, preventing asset loss and improving worker efficiency by reducing the time needed to locate stolen or lost assets.
Beyond: In Q2, our first quarter selling asset tags, we reach approximately $1 million in net new ACB. It's an exciting start in customer feedback spend strong. We're seeing demand from our customers across industries and geographies and learning about new use cases every week.
Speaker Change: A good example of this is trans-core, the leader and innovative tolling solutions.
Speaker Change: Transport purchased a large amount of asset tags to help with inventory management, loss prevention and hardware functionality. They used this for technology hardware, fuel support assets, critical inventory, and more.
Speaker Change: This technology is only possible because of the massive network we built at Semsara. We have millions of devices around the globe that are connected to the Internet. The Asset tag uses industrial grade Bluetooth to connect to the Semsara network. With the density of our network, organizations can get near real-time visibility, and that will only improve as our network scales.
Speaker Change: At Beyond, we announced two new products to further digitize the worker experience, connected work flows and connected training. Our customers are using technology to transform the worker experience, Sanjit Biswas is their trusted partner to make these jobs better and safer.
Speaker Change: Last year, we introduced connected forms to digitized paper processes for physical operations. Connected workflows takes us to the next level and goes beyond digitization to orchestrating multi-step workflows.
Speaker Change: Connected workflows can automatically assign forms, manager approvals, and create tasks based on contextual insights.
Speaker Change: Now, every department can easily automate workflows to make work safer and easier from the front lines to the back office.
Speaker Change: An example is the Silver Games.
Speaker Change: the leading construction company in California. The Silver Gates is now automating truck inspections with connected workflows.
Speaker Change: Drivers are prompted to complete inspections on time. Any reported issues are submitted in the dress right away, and this has saved them about $45,000 a week for more than $2 million on an annualized base.
Speaker Change: The second worker experience product we launch was connected training. Connected training helps our customers reduce risks by giving them away to train workers anytime and anywhere.
Speaker Change: It does this by giving customers remote access to courses on the SAMHSA R mobile app. Now our customers can build customized learning itineraries to address each worker's largest risk areas. They can also streamline all their training requirements across the organization.
Speaker Change: Customers who use connected training are already seeing significant benefits. For example, Emory Sapensen's, the leading heavy civil construction contractor in the mid-west, soft 40% reduction in safety events with connect training.
Speaker Change: After launching new products, we continue to run our customer feedback loop to make our products better and more impactful for our customers.
Speaker Change: at Beyond We announced new features and partnerships for our platform.
Speaker Change: To help our customers improve our customer safety programs, we launch new AI detections and share updates to smart trailers. To help our customers improve the sustainability of their operations, we launch charge insights. This is part of our broader EV management offering.
Speaker Change: We also announced a new partnership with FirstNet, built with AT&T, the only nationwide communications that we're created with and for public safety.
Speaker Change: SEMSAR is now first-net trusted, so public safety customers can use SEMSAR in emergency response situations.
Speaker Change: It was another successful beyond and I'm happy to share with you the next event next summer in Sanjango.
Speaker Change: We look forward to bringing together even more of our customers, partners and leaders across the world of physical operations.
Speaker Change: Digitizing physical operations will be a multi-decade journey, as we built for the long-term, we continue to invest in our leadership and our culture.
Speaker Change: First, I'm excited to welcome Alyssa Henry, Tour Board of Directors. Alyssa brings over 25 years of experience as a product and technical leader at some of the world's most influential technology companies.
Speaker Change: This includes her role as CEO of Square at Block and Senior Leadership positions at Amazon and Microsoft.
Speaker Change: She has a proven track record of driving innovation and significant growth in the tech sector.
Speaker Change: Second, we are also happy to welcome Megan Eisenberg as our chief marketing officer.
Speaker Change: Megan is joining us from Lakeshore, where she was there CMO through their recent acquisition by Fordonette. Before that, she was the CMO but trip actions in MongoDB. She was great experience in gauging customers, driving growth, and building brands at many successful companies. We are thrilled to have Alyssa and Megan join our team.
Speaker Change: And lastly, Semzar continues to be a destination for some of the world's top talent. This is important as we scale the most customer demand. This quarter, Semzar was recognized by great place to work for development, well-being, and women.
Speaker Change: We are proud of the impact we are making on our customers. We are operating at scale with our customers generating more than 10 trillion data points, 85 billion API calls, and 70 billion miles driven across our platform annually. Our growing data asset drives more AI powered insights so our customers can get clear and fast ROI.
Speaker Change: Every year, the impact we make with our customers continues to compound. We're excited for the decades-long opportunity ahead.
Speaker Change: Thank you to our customers, partners, investors, and simsariens across the globe for joining us on this journey.
Speaker Change: I'm now handed over to Dominic to go over the financial highlights for the quarter.
Dominic: 2. Thank you, Sanjit. Q2 was another quarter of sustained high growth at scale and continued operating leverage.
Dominic: In particular, the quarter was highlighted by maintaining the same year-over-year revenue growth rate for the third consecutive quarter out-of-large scale.
Dominic: are passing 2,000 large customers, including adding a quarterly record number of $1,000,000 plus ARR customers, adding approximately $1,000 of asset tags net new ACV and our first quarter of selling.
Dominic: and achieving a quarterly record operating margin while sustaining a quarterly record gross margin. Q2 ending ARR was 1.264 billion growing 36% year over year. Within this, we added 88 million of net new ARR representing 20% year over year growth.
Dominic: and Q2 revenue is 300 million growing 37% year over year, which is the same year over year growth rate for the third consecutive quarter out of larger scale.
Dominic: Several factors drove our strong top line performance in Q2. First, we continue to focus on serving the large enterprise customers to drive durable and efficient growth at scale.
Dominic: We now have 2133 100 K plus ARR customers representing 41% year over your growth, including a quarterly increase of 169, which is our second highest quarter ever.
Dominic: And within that we also added a quarterly record 14, $1,000,000 plus ARR customers in the quarter.
Dominic: In addition to adding more large customers, we also grew our average ARR per large customer to 318,000 up from 306,000 one year ago.
Dominic: The combination of more large customers added and a higher average ARR per large customer increased our ARR mix for 100 K plus ARR customers to 54% in Q2, up from 50% one year ago and 46% two years ago.
Dominic: Second, our customers increasingly utilize SAMHSARA as a system of record for physical operations by subscribing to multiple applications all on one unified platform. 94% of our 100K plus ARR customers subscribe to multiple products and 59% subscribe to three or more.
Dominic: We're also seeing multi-product adoption at scale, our two vehicle-based applications, video-based safety, and vehicle telematics, each represent more than 500 million of ARR, while equipment monitoring and other emerging products combined for more than 150 million of ARR.
Dominic: In addition to large scale, each of these three product categories continued to grow more than 30% year over year.
Dominic: We also saw a number of large multi-product transactions in Q2, 9 of the top 10 new logos in Q2 included two or more products and six included three or more.
Dominic: Notably one of our largest Q2 new logos, Cassins Transport Company, one of the largest auto haulers in the US, landed with four different products.
Dominic: In addition to licensing, our two vehicle-based applications, Cassins also purchased equipment monitoring and one of our newer software-only skews connected training in their initial transaction.
Dominic: Additionally, all of our top 10 expansions included two or more products, and five included three or more.
Dominic: This expansion strength allowed us to achieve our target dollar-based net retention rate of 115 and 120% for core and large customers respectively. And third, we demonstrated strong execution across several frontier markets.
Dominic: 16% of net new ACV came from international geographies in Q2, driven by strength in Europe, which had its fourth consecutive quarter of accelerating year over year ARR growth at a larger scale.
Dominic: Construction drove the highest net new ACV mix of all industries for the fourth consecutive quarter and field services had the second highest mix for the second consecutive quarter.
Dominic: and total 87% of Q2 net new ACV came from non-transportation verticals and increased from 83% in Q2 last year. And lastly, we also saw strength and emerging products.
Dominic: We achieved roughly $1 million of asset tags net new ACV in our first quarter of selling, including a more than 300k expansion with a top 100 customer in the construction industry.
Dominic: We also added roughly $1 million of connected workflows in that new ACV in Q2, including four separate 100K plus ARR transactions.
Dominic: and we signed an approximately 250K connected training expansion and our first quarter of selling the product with a top 30 customer in the logistics industry.
Dominic: In addition to driving strong top-line growth, we continue to deliver operating levers across our business as we scale.
Dominic: Non-Gap Gross, Margin was 77% in Q2, which was tied for a quarterly record, non-Gap operating mortgage margin was a quarterly record, 6% or 9% at point higher year over year, and adjusted free cash flow margin was 4% and what is our seasonally weakest free cash flow quarter.
Dominic: Okay, now turning the guidance. We're raising our guidance across all key metrics because of our Q2 performance and outlook for the rest of FY25.
Dominic: for Q3, we expect total revenue to be between 309 and 301 percent. Non-gap operating margin to be approximately 4 percent and non-gap EPS to be between 3 and percent.
Dominic: For full year FY25, we expect revenue to be between 1.224 and 1.228 billion representing year-over-year adjusted revenue growth between 33 and 34%.
Dominic: Non-gap operating margin to be approximately 5% and non-gap EPS to be between 16 and 18 cents. And finally, please see additional modeling notes in our shareholder letter.
Dominic: So to wrap up, we are pleased with our first half performance and our improved outlook for FY25. In Q2, we sustained our revenue growth rate at a larger scale while also delivering more operating leverage.
Dominic: and looking forward we believe we're well positioned to continue delivering durable and efficient growth because we're digitizing the world of physical operations, which is a very large and underserved market opportunity and that's driving strong customer demand.
Dominic: Our products offer real ROI and a fast payback period to our customers and we're targeting a very different operations budget. We're proud to partner with our customers and are excited to continue helping them operate more safely, efficiently and sustainably. And with that, I'll hand it over to Mike to moderate Q&A.
Mike Chang: Thanks, Dominic. We'll now open the line for questions. When's your turn? Please let me know your questions to one main question and one fall of question.
Speaker Change: The first question today comes from cash ringin with Goldman Sachs, followed by Agzugen with Wolfrucurch.
Speaker Change: Thank you guys, what up!
Speaker Change: in Albrone Quarter. It's like the tone of new business seems to have picked up the fight and tell from the net new ACB growth rate you've experienced in the quarter and also the billion dollar ACB contract for Leonard the Quarter.
Speaker Change: How about any potential changes to the buying environment you've noticed in the past month or so?
Speaker Change: and also, Sanjit curious to get you a birthday call.
Speaker Change: the impact of the tremendous new product innovation that you played for here.
Speaker Change: How could they translate into better pricing power for the company and also better retention rates as your products?
Speaker Change: like the work flow which we had a lot of fun talking about our conferences. Those things start to take hold. How do you envision this stickiness renewal in Christchurch for the company? Thank you so much.
Speaker Change: Sure, cash is in Sanjit
Sanjit Biswas: the show.
Sanjit Biswas: First of all, I think the adoption of the platform has been really strong. This really is a continued pattern we've seen for a couple of quarters now. So I wouldn't say that this was especially different in terms of buying environment. Other than customers are really seeing clearance fast ROI with the platform, and they want to do more. So not just safety and telematics, but monitor equipment, track those assets, like you said, connect their workflows into the system.
Sanjit Biswas: So the impact of the new products, I think it strengthens our platform story for our customer. They're already in the system. They have lots of front line and back office employees using Semsara. And ultimately that helps us deliver more value for them.
Sanjit Biswas: In terms of pricing power, you know, I think really it's about delivering great value for our customers, we're seeing strong renewal rates and that's what I focus on is making sure our customers are happy that they're getting tons of value from the product and if we do that, they're going to keep coming back.
Sanjit Biswas: and the next episode of the show.
Speaker Change: The next question comes from Alex Zugin with Wolf, followed by Keith Weiss with Mori Sanley.
Alex Zugin: Hey guys, can you hear me or come? Yeah.
Alex Zugin: Perfect thanks for taking the question and congrats.
Alex Zugin: On another great quarter, I guess maybe just to for me the first one, if you think about the asset tax product, the industrial asset tax, it's pretty remarkable to hear about a, you know, multi-hundred-thousand dollar deal in.
Alex Zugin: like basically the first weeks of availability. So just if you can give us your sense of Sanjit, like the trajectory of how to ballpark the tam for this product relative to telematics, they have a safety and others.
Speaker Change: Where is this kind of fit in that?
Speaker Change: in that game and how fast relative to those other products can this ramp over the course of the coming year and that got a coming year or something that I can't recall.
Speaker Change: Chip.
Chip: So, you know...
Chip: It's hard to do a compare versus safety and telematics because when we release those products, we were a much smaller company. We weren't as well known in the market. And so we're very pleased with how asset tax is kind of jumped off the line. There was a lot of excitement at the customer conference when we released it. And I think it's because it got our customers thinking about all the other assets they have in their operation. They go well beyond vehicles and even trailers, like all the smaller assets, fiber spliceers, tools, things they get left behind at job sites. So overall it feels very strong. There's a lot of strong customer pull and interest in it. But again, it's hard to kind of compare it to products that we launched many years ago as a smaller company.
Speaker Change: Okay, understood. And then maybe Dominic, not like this question, but the federal motor carrier safety administration.
Speaker Change: seems to be planning to revisit the ELD mandate in June of 25. Is there any tailwind that you can kind of see or have this ability on? Because it seems like that would expand your telematics there are. Like if it ends up being applicable to fleets that have free 2,000 engines, how powerful would they? How much more coverage do you feel like that could unlock?
Speaker Change: within your existing, you know, large customers.
Speaker Change: Yeah, I think the way that...
Speaker Change: We're going to continue to drive growth out of the business, is really being more on offence, meaning customers are buying, Sam Sara, and really using us as a system of record across multiple products.
Speaker Change: Because they're getting ROI, they're finding ways to operate more safely and more efficiently and reduce their costs and improve their asialization and work of productivity. There may be other regulatory compliance things that ultimately kind of pop up, but we're not necessarily tracking that or relying on that to drive future growth. It's really more about being on offense and providing ROI for customers and we'll take those things as they come up, but none of that's on our radar right now.
Speaker Change: for a good pet bath, thanks guys.
Speaker Change: The next question comes from Keith Wise with Martin Stanley, followed by Kirk Matern with Evercore.
Speaker Change: Hey guys, this is Chris Cantaro on Ricky. Thanks for taking the questions here.
Keith Wise: I want to go back to an interesting slide you had at Analyst Day where, or the half-memarket does not use a telemedic solution and even higher percentage is not used as video safety solutions.
Speaker Change: So here's the hearth thoughts on why these companies are not using a provider today and are there any potential challenges around getting these customers to adopt this solution or is it really just a timing thing and eventually everyone will.
Speaker Change: Yeah, so the dynamics are obviously different on the tommy exciting. Again, it's it's it's it's it's
Speaker Change: Industry, you know, it's a product set that's been around for multiple decades. And as you said, you know, more than half or roughly 50% of commercial vehicles in North America are not using that.
Speaker Change: Solutions today and so most of our customers are multi-product and so it's often the case that they're subscribing to multiple products which ultimately helps convince them to maybe adopt telematics technology when they weren't using it previously. On the other side safety, it's really tied more to recent technology tailwinds so.
Speaker Change: You know, going that to 4G or HD videos.
Speaker Change: Um...
Speaker Change: It has really kind of unlocked the ability to sell a solution and safety. And we're seeing that that market rapidly starts to adopt new technology. So maybe at the time of the IPO, only 5% of commercial vehicles. How to solution now, we're up to 10, and a lot of our safety ARR and growth is coming from new use cases for customers.
Chris Bikandis: in Chris Bikandis at one more point there. If he's in way out, historically, telemedics have been viewed as something that was prevalent in the transportation industry, so kind of long-haul trucking. As we described earlier in the prepared remarks, 87% of our business came from industries outside of that field services construction. We're very strong. And so what we're seeing is even for applications like telemedics.
Chris Bikandis: New Industries that had not previously adopted GPS tracking or adopting it, and then to Dominic's point in my video base safety, that's enabled by new technologies, the connection, the quality of the cameras, but also AI being able to go sift through all the safety events and deliver value for the customer.
Speaker Change: God, that's that's super helpful. And then my second question is, is for both of you, who do you think they're firing on all cylinders that's in Sara and the results clearly backed up? But just at a high level, we all can always improve. I'm curious from both of you perspectives, what are some areas that's in Sara that you're looking to improve on or get better at today?
Speaker Change: There's a lot that obviously that we can improve when I think it's just about execution can we.
Speaker Change: makes sure that we're hiring the right people and retaining the right people and creating the right kind of company culture and ultimately.
Speaker Change: Improving sales capacity and productivity, can we make sure that we're making the right capital allocation decisions around R&D and building the right products not only focused on kind of near term growth, but as we've demonstrated over recent product, you know, announcements, making sure that we're planting seeds for medium and longer term growth to drive that that durability, make sure that we're constantly taking customer feedback and and and making improvements. And so, because there's just a lot of execution that's required, obviously, as we continue to scale and we're very focused on that.
Speaker Change: Yeah, I think I would echo Dominic's points around, you know, there's a lot that we can do. And one of our operating principles that our company is to build for the long-term, I feel like we can always do a better job spending time with customers in the field hearing what else they want us to build and put on the platform. So if I had more hours than today, that's what I would go do is go spend even more time with the customers.
Speaker Change: Awesome, thank you guys.
Speaker Change: Alright, so the next question comes from Kirk Matern with Evercore, followed by Matt Headberg with RBC.
Kirk Matern: Great, thanks guys, and I got the congrats on the great court. As one ring, I was asked to tag to incredibly early on for you all, but you want to think that's kind of interesting about these tags to be used for incredibly high value assets, as well as maybe lower value assets. I'm just kind of curious if customers are leaning one way or the other. I think you guys gave it the example of everything from a toolbox to a train carpool or just kind of curious, are they going after the high asset value and assets at all? And you know, does that?
Speaker Change: Inform your thought process on pricing longer term. Again, I realize it's like the first quarter end, but just kind of curious what you're seeing out there.
Speaker Change: Sure, as you said, it's very early, but it's exciting to see all the different use cases and I think we mentioned earlier, we're seeing basically any use case every week.
Speaker Change: It's hard to see a specific pattern related to asset value. A lot of what we're hearing about our assets that are left behind, that we're historically untracked. And these are ones that often don't have power, so they're not connected to a vehicle, or they don't have a fuel source or battery in them. So that's a lot of it, and that encompasses tools, but there's all kinds of accessories in the world of physical operations. If you think about an excavator, for example, little bucket at the end, gets left behind at a job site, those can cost thousands of dollars and heard the same thing about crane parts and so on. So I would say a lot of different kinds of assets is the pattern if there is one, but what we should see a little more of kind of the high value versus low value over the next couple of quarters. Stepping.
Speaker Change: Back, we have a portfolio strategy when it comes to equipment. We offer powered equipment, trackers, we have unpowered whole family really. And so we kind of view it as a portfolio and we can kind of mix and match within a customer's deployment to meet their needs.
Speaker Change: That's super helpful and then Dominic really quick follow up obviously great to see the leverage flowing through the cash flow numbers and the operating margins. Given the strength and demand, how are you thinking about hiring, heading into...
Speaker Change: Counter-25, or really just early, but I assume you're starting to think about that now. It's just kind of trying to think about how that might impact through your thought process over the next couple of hours.
Speaker Change: You know, it's still really to early to kind of get into calendar 25. I think we're just kind of kicking off our annual operating plan kind of review process. And so we'll have more details on that in a couple of quarters. But the hiring has continued to be robust. We obviously had a kind of an accelerated hiring year last year. We've continued to hire aggressively this year and and we're kind of on track with our plans and
Speaker Change: We'll work through our annual operating plan review process and figure out what we're going to do for next year. So, thank you all.
Speaker Change: The next question comes from Matt Headbar with RBC, followed by Jim Fish with Piper Samler.
Matt Headbar: Great, thanks guys for the questions I'll come back again. Really do appreciate the sizing, the asset that I just used in the first quarter of the sample. I'm curious and I know it's, again, it's early, but, you know, looking at that customer, where you saw three-year K-op lift.
Speaker Change: Do you get a sense like that's like an initial purchase, you know, is like, does they think about scoping that like, like that's going to keep them going for the next year? I just started curious on because that's a big number. This is any any perspective on where that order would be in their asset tag journey.
Speaker Change: I think for that customer and for other customers that are at least in the pipeline, there's really more of a phase roll out approach of
Speaker Change: We're going to go after one use case up front, and then we're going to find other things that we ultimately want to track and bring into the SAMHSA our cloud. And so I think this kind of quarter will be indicative of future quarters where it's more of a land and expand over time.
Speaker Change: and if I can add to that a little bit, some of our customers, they once they try the asset tax are discovering these cases within their operations, one of the examples we shared in the remarks.
Speaker Change: I met the customer and they ordered a few thousand tags. One of the departments had a project in mind and another department swooped in and said, wow, this is super useful. We'd like half of those and so they had to come back in order some more and it's exciting because that means we're providing value for these customers.
Speaker Change: have sprayed a great call it's crashing on that launch and then maybe you know reflecting back on your user event which I thought was a well gone event.
Speaker Change: There's a lot of buzz about gender AI, and I think trying to find that killer use case that your customer base is looking for.
Speaker Change: And can you give any perspective on sort of like, you know, where we're at in that journey and that's something that we're thinking about in the next year or so. Because I have to mention, there's a lot of opportunities to leverage that, that's a whole new technology within your kind of platform.
Speaker Change: Yeah, absolutely, Matt, if you recall, in our investor day, we shared a demo of basically a chat environment that is powered by the unique data asset that we've been creating here at Semsara, so we talked about.
Matt: Maintenance, for example, being able to assist in...
Matt: Playing English or playing Spanish, whichever you prefer, be able to tell you which vehicles need maintenance next, what's wrong with them, you know, all that kind of detail.
Matt: So, we're excited to experiment. I think this technology is absolutely transformational. It can deliver a lot of value for the customers. It needs to be practical and useful in terms of how we deliver it. So over the next couple of months, we're rolling that out to customers and getting their feedback and enhancing it through our feedback loop.
Speaker Change: God, it makes luck, guys.
Speaker Change: The next question comes from Jim Fish with Piper Sandler, followed by Michael Turing with Ballshargo.
Jim Fish: Hey guys, thanks for your questions here. I guess underneath, it does look like the mid-market ARR accelerated. And so, you know, Donald, how much of that was driven by sort of SMB expansion versus net new, just generally overall, how should we think about the percentage of ACV from new versus existing this quarter?
Donald: Yeah, like, like, um, in our most recent quarters, it was pretty balanced, it tilted slightly towards expansion.
Speaker Change: So, it was very strong against the pancer, we talked about getting to our net retention rate targets. But it was also a really strong new logo quarter. It was our second highest quarter ever in terms of new core customers added.
Speaker Change: talked about nine of the top ten new logos were multi-product transactions. And so similar to the kind of the most recent quarters, it continued to be very balanced.
Speaker Change: and looking in your proper and your outlook in the back pages there you talked about.
Speaker Change: Net New ARR, and that you're embedding macro worsening in your ARR outlook. What are you actually seeing any impact to the business today? Our deal cycle is relative to 90 days ago.
Speaker Change: No customer demand continues to be robust, I think we're just making sure that, you know, we're, we're, we're setting up expectations in a, in a way that we feel highly confident we can hit obviously there's
Speaker Change: Talks about.
Speaker Change: Slawing macroeconomics and we're in an election year and so there's just more inherent kind of uncertainty but with that we want to make sure that we're...
Speaker Change: Setting Expectations that we feel good about hitting and again, we're not seeing an impact in customer demand, but it's something that we're always at watching out for. Thank you.
Speaker Change: The next time I should come to a Michael Turin with Wells Fargo, followed by Gillen Becker with Blue and Blair.
Michael Turin: Hey, great. I appreciate taking the question. It's something we've probably touched on before, but the diversity logos, your landing certainly stands out. I see the state of Maine, a US supermarket, two Fortune 500s.
Speaker Change: So maybe you can just go back to the diversification, the business holds, and how Sanjit is going to market and underlying platformer able to address all of those different types of customers as effectively as you are.
Speaker Change: So, Michael, I think
Michael: One of the interesting things we learned over the last few years is how much commonality there is across these different industries. So, whether you're in construction or field services or the state of Maine, you're always trying to be more efficient, you're trying to understand how to be safer, how well you're asked that through utilized. So, we focus on those common use cases and find that they really do apply across these different industries.
Speaker Change: We do break out our public sector team because the way the deal cycle's work is a little bit different and contract with government agencies is a bit different, but we have otherwise a pretty much a general sales team who are able to sell across these industries.
Speaker Change: i
Dominic: and Dominic in the...
Speaker Change: Materials, there's some commentary around the operating margin improvement flowing through the free cash flow. Maybe you can just help level set all of us as we're working through models just in thinking through the delts of between those two, how we should expect that to progress going forward.
Speaker Change: Yeah, until...
Speaker Change: We did talk about, yeah, 200 basis points of operating leverage improvement for the year. And then that 200 basis points would flow through to...
Speaker Change: Free cash flow.
Speaker Change: There is more seasonality in Free Casual where Q1 and Q3 tend to be a little bit higher than Q2.
Speaker Change: Q1 gets the benefit obviously of the collections coming in from Q4, which is our seasonally strongest net new ACV quarter.
Speaker Change: and then Q4 tends to be our largest free cash flow quarter because Q4 is our largest, seasonally largest, net new ECV quarter and so a lot of benefits from that quarter then obviously all of the kind of the,
Speaker Change: 2nd and 3rd year kind of billings from the contracts that were booked in previous year. So there was a little bit more kind of lumpiness within Free Castle, but for the rest of the year we do expect another kind of 200 basis points to flow through to both operating margin and the Free Castle margins versus what we got into in consensus.
Speaker Change #100: All right, the next question comes from Dylan Becker with William Blair, followed by Matt Bollock with Bivé.
Speaker Change #100: [inaudible]
Speaker Change #101: Okay, let's go with, let's go with Matt Bullock with B.A.Va, followed by AlexiegogoLev with JP Morgan.
Matt Bullock: Hi, thanks for taking my question. A few of I could on the new product launches. So, great to see the early traction with the asset tag. Understanding it's early days. Can you talk about how we should think about the pricing and packaging strategy there? Now that there's been a little bit of time to collect feedback from the broader customer base.
Speaker Change #103: I'll start with that one.
Speaker Change #104: I think the initial pricing that we set on the asset tag seems to be working well. Feedback's been strong and we talked about earlier, there have been pretty significant orders on it.
Speaker Change #105: We do think of the acetatech again as part of a portfolio within our connected equipment. Lines, so there's lots of different tracking products we offer for non-vehicle assets. And I think it fits in well, especially because it gives you the ability to crack some of the less expensive smaller assets throughout their operations.
Speaker Change #106: Super helpful thanks and then just one quick follow-up on the continued strength in Europe. I think you said it was the fourth consecutive quarter of accelerating air our growth. What would you attribute that to? Was that just building up a larger base of reference customers, better sales infrastructure or just improvements to the product market fit?
Speaker Change #107: I think it's really all of the above. Obviously Europe's a really big market opportunity for us. I mean, it's just on the commercial vehicle side.
Speaker Change #108: More commercial vehicles and physical operations assets and Europe than there in North America. So, Sanjit, we've been focused on a lot of sales capacity building pipeline, making sure that we have the right products for those given regions and just kind of consistent investment.
Speaker Change #108: has really, you know, paid off in particular over the last four quarters.
Sanjit Biswas: Excellent, thank you very much.
Speaker Change #109: We'll stick with Dylan back, so let's go Dylan Becker, which we'll be in Blair, followed by Alexi, but Jepi Morgan.
Dylan Becker: Great, thanks guys, sorry about that. Maybe starting with Sanjit or Dom here, given that the ROI is so high and obviously you're seeing healthy demand in the ecosystem.
Speaker Change #111: I guess what's keeping customers from adopting even faster and realizing some of the value that you guys deliver. I know that their space for all else maybe but is there a way to think about how we should think about that evolution of Cross-Sale and of self kind of playing out within the existing base.
Speaker Change #112: I just a lot of these physical operations customers are really...
Speaker Change #113: In the early innings of digital transformation until adopting technology, there's change management required internally, but really ensuring that they get ROI and therefore they do it more in a kind of a phase for a lot of way.
Speaker Change #113: and we're fine working with customers, you know, whether they want to kind of...
Speaker Change #113: Take on all the licenses up front or they want to do a phase roll up for us. We just want to make sure that they're getting value and they're getting real ROI. And really kind of depends on customer basis based on where they are in their journey in terms of adopting technology.
Speaker Change #113: Okay, okay, that makes sense and then
Speaker Change #114: Speaking to, I think kind of some of the highlights as well to you on the large customer side. Step up in both new logo ads and revenue for customer.
Speaker Change #115: I guess for you, how does this help fuel confidence in that outlook given this is becoming an incrementally kind of more strategic and larger segment that's growing faster than the aggregate next year?
Speaker Change #116: Yeah, it's been incredibly consistent. I mean, like over the last several several quarters, you know, kind of one percentage point of mixed continues to move towards
Speaker Change #117: the large customers were now at 54% you know I said 50% you're going 46 a year
Speaker Change #117: before that and so this is you know an area where we continue to make more and more investments.
Speaker Change #117: really purpose-built for these large enterprises with complex physical operations. They have the ability to take on more products. We can just have more impact and drive more ROI for those customers. That will continue to be an important part of our growth strategy.
Speaker Change #117: Thanks for watching!
Speaker Change #118: The next question comes from a Laxio J. Morgan, followed by Derek with TD Cowan.
Speaker Change #118: Good evening, this is Ella Smith, calling on behalf of the Lexi Google Ads, thank you for taking your questions. So first I'm hoping that you could share whether there are any products to call out that customers cross a touch either particularly fast, but then also particularly slowly.
Speaker Change #119: and figures that consistent pattern, most of our customers are adopting multiple products, obviously, are too large-ish.
Speaker Change #120: Video-based safety and vehicle telematics tend to be the most common, but equipment monitoring and some of the emerging products combined for more than $150 million of ARR.
Speaker Change #121: Again, it really depends on individual customers and what the use cases are, and we see different combinations of products across all of our customers.
Speaker Change #122: Very helpful. Thank you. And for my second question, are you interested in investing in additional product development, or are you satisfied with your product portfolio at this structure?
Speaker Change #123: Well, I think I can say, as a technology oriented founder, we're here to build products that go solve problems for our customers, so we're absolutely investing in R&D. And it's an area that we get a lot of great ideas from our customers on. So we're going to keep improving the products we have and investing in some new ones.
Speaker Change #124: Great, thank you both.
Speaker Change #125: The next question comes from Derek with TD Cowan, followed by Jeneh with Trist.
Derek: Great, thanks for having another strong quarter. Can you dive a little bit into the technology behind the new asset tags? I know this uses Bluetooth instead of your typical vehicle gateway systems.
Speaker Change #127: One of the differences between using Bluetooth versus game ways obviously this helps target a lot more assets to light up and track but what capabilities do you give up? You have to rely on other networks and what are the implications for your cog's requirement?
Speaker Change #128: Yeah, so in terms of how these asset texts connect, they are absolutely powered by Bluetooth, but we have an industrial grade Bluetooth implementation, so a bit of a broader range, it's designed with security and mind as well.
Speaker Change #128: But again, Bluetooth doesn't connect to the cellular network. Instead, these devices connect to the sensor gateways or out there. We have millions of gateways out there. There's a high enough density now that we can achieve near real time tracking with them. And that's really a byproduct of the scale that we've achieved as a company. We basically created this big network across where operations happens.
Speaker Change #128: [inaudible]
Speaker Change #128: Enhanced, so in a very small form factor, the tag is
Speaker Change #128: kind of the size of a fun-sized candy bar. We're able to achieve multi-year, about four-year battery life for our customers while doing that real-time tracking. So, again, not something we could have done with cellular, and not something that we could have done until we achieved the scale and density of the Samsara network that we have with the millions of gaveways out there. [inaudible]
Speaker Change #129: Got it. That's helpful color. I know we only get total customer count once a year, but can you speak to the just the velocity of how total customer count is trending versus historic levels.
Speaker Change #130: How you're feeling about making sure you've got kind of a funnel to keep graduating and a healthy level of customers into that 100K number and drive good growth in that 100K number.
Speaker Change #131: Yeah, as I said earlier, answering those our second highest quarter ever in terms of new new or customer logos added. So really strong, and again, it drove, you know.
Speaker Change #131: Roughly, you know, close to you know, 50% of the overall kind of net new ACDX is a little bit slightly of a larger expansion quarter. And so kind of similar to these previous quarters.
Speaker Change #131: Landing new logos is really important for us because obviously that leads to future expansion opportunities and it was very kind of consistent, you know, from, from previous quarters.
Speaker Change #132: Alright, thank you.
Speaker Change #133: Thanks, Eric. Our last question today comes from Janade with truest.
Janade: Thank you for taking my question. Just on that large customer count, you know, as you continue to steer focus on serving these large runner prices.
Speaker Change #135: which has been growing pretty impressively. Where are some of the additional levers that you can use, you know, apart from maybe hiring more court-of-caring reps to pour the drafts that large customer penetration?
Speaker Change #136: I think a big part of it is this capital allocation and R&D investment, the more products that we can create and obviously we were.
Speaker Change #137: Reaching a pretty good velocity on the kind of an annual basis, it just opens up more opportunities for us to have conversations with customers and ultimately solve more of their problems.
Speaker Change #137: you know, create more ROI and have it more impact for them and if we can continue to do that, that will allow us to continue to grow the large customer cohort fast.
Speaker Change #138: Thank you.
Speaker Change #139: Okay, this concludes the question and answer portion. Thank you for attending our Q2 fiscal year 2025 earnings call. Before I let you go, I have a few short announcements.
Speaker Change #140: will be attending the Goldman Sachs Communicopeia Conference in San Francisco on September 9th. The Wolf Technology Conference in San Francisco on September 10th, the Piper Sanford Growth Frontiers Conference in Nashville on September 11th, and the JPMore in software forum in App on October 8th. We hope to see it one of these events.
Mike Chang: Welcome back to my channel, my name is Mike Chang, I am the president of the United States.