Samsara Inc. — Q3 FY2023 Form 10-Q
Reporting period: Three and nine months ended October 29, 2022; comparative periods ended October 30, 2021. Financial statements are unaudited. Samsara provides a subscription-based Connected Operations Cloud combining IoT devices, software applications, and support services.
Financial and operating performance
| Metric | Q3 FY2023 | Q3 FY2022 | Nine months FY2023 | Nine months FY2022 |
|---|---|---|---|---|
| Revenue | $169.8M | $113.8M | $466.0M | $302.6M |
| GAAP gross margin | 72% | 72% | 72% | 72% |
| Operating loss | $(63.5)M | $(32.3)M | $(199.5)M | $(102.1)M |
| Net loss | $(58.6)M | $(32.4)M | $(193.8)M | $(102.3)M |
| GAAP net loss per share | $(0.11) | $(0.13) | $(0.38) | $(0.42) |
- Q3 revenue grew 49% year over year; nine-month revenue grew 54%. Management attributed growth primarily to more customers and increased purchases, including additional subscriptions, from existing customers. Subscription revenue was $166.6M of Q3 revenue and $457.1M for the nine-month period.
- Q3 operating expenses were $186.0M, up from $114.3M. Research and development, sales and marketing, and general and administrative expenses all increased, principally reflecting hiring and higher stock-based compensation (SBC).
- Q3 SBC expense was $45.5M versus $1.2M a year earlier; nine-month SBC was $133.5M versus $4.0M. Unrecognized compensation for outstanding RSUs was approximately $379.0M, expected to be recognized over a weighted-average 1.8 years.
- Non-GAAP Q3 operating loss was $16.6M versus $29.5M; non-GAAP net loss was $11.7M versus $29.7M. These measures exclude SBC-related charges and, where applicable, lease-related charges.
- ARR was $723.7M at October 29, 2022, compared with $492.8M a year earlier. Customers with more than $100,000 ARR numbered 1,113, versus 715.
Cash, liquidity, and obligations
- At October 29, 2022, cash and cash equivalents were $447.0M, short-term investments $291.8M, and long-term investments $63.7M; together these totaled $802.5M. Restricted cash was a further $23.1M.
- Current assets were $963.0M and current liabilities $377.8M. Deferred revenue totaled $374.2M. Total liabilities were $610.2M. The balance sheet reports no borrowings; operating lease liabilities totaled $127.9M.
- Nine-month operating cash use was $98.6M, compared with $123.2M in the prior-year period. Investing cash use was $382.5M, largely reflecting $355.7M of investment purchases and $27.2M of property and equipment purchases. Adjusted free cash flow was negative $104.0M, versus negative $129.5M.
- Remaining performance obligations were $1,290.8M; the company expected to recognize approximately $631.3M over the next 12 months. This is contracted revenue, not a revenue forecast.
- The company stated existing cash, cash equivalents, and investments should fund working capital and capital expenditure needs for at least 12 months. It expects operating losses and negative operating cash flows for the foreseeable future.
Changes, outlook, risks, and unusual items
- Revenue increased substantially, but GAAP net loss widened year over year as expenses rose; gross margin remained flat at 72%. The per-share loss narrowed, while weighted-average shares increased substantially year over year.
- No specific numerical revenue, earnings, or cash-flow guidance was provided. Management expects continued investment in sales and marketing, research and development, and headcount; it expects these expenses to rise in absolute dollars in the foreseeable future.
- Management cited COVID-19 effects, supply-chain and freight challenges, inflation, higher interest rates, currency movements, and geopolitical uncertainty as potential pressures on the company, customers, and suppliers. Risks also include dependence on a limited number of device manufacturers and suppliers, customer retention and sales-cycle uncertainty, competition, cybersecurity and service availability, privacy regulation, and continued losses.
- The company committed to at least $275M of cloud-infrastructure spending from July 2022 through June 2027, subject to up to $11M in credits if specified conditions are met.
- In the second quarter, Samsara relocated its headquarters. It recorded $1.1M of lease impairment-related expense during the nine months. A separate dispute with a former San Francisco landlord remains unresolved; the landlord drew down an $8.7M letter of credit, recorded as a receivable, and the outcome is uncertain.
- Available-for-sale investments had $1.3M of net unrealized losses recorded in other comprehensive loss. The company said it did not intend, and was not likely required, to sell the securities before recovery or maturity; no credit-loss allowance was recorded.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. The company expected to cease being an emerging growth company as of January 28, 2023.
Investor verification priorities
- Track customer growth, ARR, renewals, and expansion to assess whether strong reported growth converts into recognized subscription revenue.
- Assess the pace of operating-loss reduction alongside rising operating expenses and the substantial remaining RSU compensation expense.
- Reconcile operating cash use and adjusted free cash flow with investment purchases, capital expenditures, device-cost commitments, and liquidity needs.
- Review device supply and inventory conditions, deferred device costs, and whether supply or freight pressures affect customer onboarding or margins.
- Follow the former-headquarters landlord litigation and collectability of the recorded $8.7M receivable.
- Evaluate the $275M cloud-services commitment, lease obligations, market risk in the investment portfolio, and the company’s stated 12-month liquidity assessment.