Samsara Inc. — Q2 FY2023 Form 10-Q
Reporting period: Three and six months ended July 30, 2022; comparative periods ended July 31, 2021. Amounts below are in U.S. dollars. The filing is unaudited.
Business context
Samsara provides a cloud platform and connected IoT devices for businesses with physical operations. Subscription services accounted for nearly all revenue. Management cited customer growth and increased purchases by existing customers as the main drivers of revenue growth.
Key financial metrics
| Metric | Q2 FY2023 | Q2 FY2022 | Six months FY2023 | Six months FY2022 |
|---|---|---|---|---|
| Revenue | $153.5m | $101.0m | $296.2m | $188.8m |
| Revenue growth, year over year | 52% | — | 57% | — |
| Gross margin | 71% | 72% | 72% | 71% |
| Operating loss | $65.8m | $31.2m | $136.0m | $69.8m |
| Net loss | $64.3m | $31.4m | $135.3m | $69.8m |
| Basic and diluted loss per share | $0.13 | $0.13 | $0.27 | $0.28 |
- Cash flow: For the six months, operating cash used was $85.8m (prior year: $81.9m); investing cash used was $16.9m (prior year: $6.8m); financing cash provided was $8.0m (prior year: $1.0m used). Adjusted free cash flow was negative $89.1m, versus negative $86.5m; adjusted free cash flow margin improved to negative 30% from negative 46%.
- Liquidity and debt: At July 30, cash and cash equivalents were $826.1m, with $23.1m restricted cash. The filing reports no financial borrowings; operating lease liabilities totaled $133.6m. In August 2022, Samsara invested $650.0m in marketable securities. Management said existing cash and cash equivalents were expected to fund working capital and capital expenditures for at least 12 months.
- Operating metrics: ARR was $662.8m, up from $436.9m a year earlier. Customers with more than $100,000 ARR numbered 989, versus 615.
- Contracted revenue: Remaining performance obligations were $1,187.0m; approximately $577.0m was expected to be recognized over the next 12 months.
Material changes versus prior year
- Revenue rose faster than expenses, but GAAP net loss nearly doubled for both the quarter and six-month period. Operating expenses for the first half increased to $348.3m from $204.6m.
- Stock-based compensation was a major expense driver following the IPO: $44.3m in Q2 and $88.0m for the first half, compared with $1.3m and $2.8m, respectively, a year earlier. The filing reported $328.0m of unrecognized RSU compensation expense expected to be recognized over a weighted-average 1.8 years.
- Quarterly gross margin slipped one percentage point, which management attributed mainly to higher post-IPO stock-based compensation. First-half gross margin improved one point, primarily due to operating efficiencies.
- Sales and marketing, research and development, and general and administrative expense rose substantially, reflecting higher compensation, hiring, and growth investment. G&A also included increased public-company and litigation-related costs.
- First-half operating cash use increased modestly. Cash and cash equivalents declined from $921.2m at fiscal year-end to $826.1m at July 30.
Outlook, risks, and unusual items
- No numerical revenue or earnings guidance is provided. Management expects continued operating losses and negative operating cash flows for the foreseeable future, and expects operating expenses to increase in absolute dollars as it invests in growth.
- Management identified macroeconomic uncertainty, inflation and rising interest rates, COVID-19 effects, the Russia-Ukraine conflict, foreign exchange movements, and supply-chain constraints as potential business pressures. It highlighted component availability, freight costs, and inventory planning as risks to device delivery, revenue timing, margins, and cash flow.
- In June 2022, Samsara committed to spend at least $275.0m on cloud infrastructure services between July 2022 and June 2027, subject to up to $11.0m in conditional credits.
- The company recorded $1.1m of first-half lease impairment and related charges associated with office space; it relocated its headquarters during the quarter. The filing also describes ongoing litigation with a former landlord over lease termination and an $8.7m letter of credit drawn by the landlord, recorded as a receivable. The outcome is uncertain; the filing says recorded probable litigation losses and aggregate reasonably possible exposure were not material.
- Other key risks include sustained losses, customer acquisition and retention, competition, dependence on suppliers and cloud infrastructure providers, cybersecurity and service reliability, privacy regulation, and dilution from equity compensation. The dual-class structure gives Class B shares ten votes per share versus one vote for Class A.
Important facts for investors to verify
- Whether ARR, large-customer growth, renewals, and remaining performance obligations translate into recognized revenue and improved profitability.
- How stock-based compensation, RSU vesting, and share issuance affect future expenses and dilution.
- Whether gross margins and cash use improve as device amortization, infrastructure costs, and growth investments evolve.
- Progress on the landlord litigation and recovery of the $8.7m receivable, as well as lease and cloud-infrastructure commitments.
- Whether supply constraints, macroeconomic conditions, and customer spending affect delivery, sales cycles, collections, or outlook; the filing provides no formal numerical guidance.