Samsara Inc. — Q1 FY2023 Form 10-Q Summary
Reporting period: Three months ended April 30, 2022; compared with the three months ended May 1, 2021. Financial statements are unaudited. Samsara provides a Connected Operations Cloud combining IoT devices and software subscriptions for businesses with physical operations.
Financial and operating performance
| Metric | Q1 FY2023 | Prior-year period | Change |
|---|---|---|---|
| Revenue | $142.6 million | $87.7 million | +63% |
| Subscription revenue | $140.7 million | $85.4 million | — |
| Gross profit / margin | $103.0 million / 72% | $62.1 million / 71% | Margin +1 percentage point |
| Operating expenses | $173.2 million | $100.7 million | +72% |
| GAAP operating loss | $(70.2) million | $(38.6) million | Loss widened |
| GAAP net loss | $(71.0) million | $(38.4) million | Loss widened |
| GAAP diluted loss per share | $(0.14) | $(0.16) | Improved per share |
| Operating cash flow | $(48.8) million | $(37.1) million | Cash use increased |
| Adjusted free cash flow | $(50.7) million; (36)% margin | $(40.0) million; (46)% margin | Cash use increased; margin improved |
Management attributed revenue growth primarily to more customers and increased subscription purchases by existing customers. Gross margin improvement was mainly attributed to operational efficiencies. Subscription revenue was about 99% of quarterly revenue.
Business metrics: ARR was $607.2 million, up from $382.1 million a year earlier. Customers with more than $100,000 ARR increased to 897 from 518. Remaining performance obligations were $1.101 billion; the company expected to recognize approximately $533.8 million over the next 12 months.
Liquidity, balance sheet and cash flows
At April 30, 2022, cash and cash equivalents were $859.8 million, with a further $23.1 million of restricted cash. Cash, cash equivalents and restricted cash totaled $882.9 million, down from $944.3 million at fiscal year-end. Total assets were $1.545 billion, total liabilities $582.5 million, and stockholders’ equity $962.4 million. Current assets were $1.069 billion and current liabilities $352.3 million.
The filing reports no borrowings; liabilities include operating lease obligations of $139.2 million and deferred revenue. Operating cash use was $48.8 million and capital expenditures were $10.7 million. Management said existing cash and cash equivalents should fund working capital and capital expenditure needs for at least 12 months, while expecting operating losses and negative operating cash flows for the foreseeable future.
Material changes and unusual items
- Stock-based compensation rose to $43.6 million from $1.5 million, including $39.3 million of RSU expense following the IPO. Unrecognized compensation for outstanding RSUs was $325.8 million, expected to be recognized over a weighted-average 1.9 years.
- Sales and marketing increased 67%, research and development 74%, and general and administrative expense 76%, reflecting employee-related costs, hiring, and, for G&A, public-company and litigation costs.
- The company recorded $1.1 million of lease impairment-related expense after subleasing office space. It also disclosed an ongoing dispute with a San Francisco landlord: the landlord drew down an $8.7 million letter of credit, which Samsara records as a receivable; the outcome remains uncertain.
- Inventory increased to $42.0 million from $33.1 million, and current and non-current connected-device costs rose to $210.1 million from $193.8 million.
Outlook, commentary and risks
No numerical revenue or earnings guidance is provided in the supplied filing text. Management expects to continue investing in sales and marketing, research and development, hiring, and international growth; it expects operating expenses to rise in absolute dollars and anticipates continued operating losses and negative operating cash flows.
Key disclosed risks include supply constraints and higher component and freight costs affecting device availability, revenue timing, margins, and cash flow; COVID-19-related and broader economic uncertainty; competition and customer retention; and cybersecurity, privacy, regulatory, and execution risks. The company noted that its subscription contracts are generally three-to-five-year terms and revenue is recognized over the subscription period, so changes in sales may not immediately appear in reported revenue. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
The IPO generated $846.7 million in net proceeds, including the underwriters’ option exercise. The filing notes that the IPO lock-up period expired June 6, 2022, after quarter-end, making additional shares eligible for public sale. Samsara has a dual-class structure in which Class B shares carry ten votes per share versus one vote for Class A shares.
Important facts for investors to verify
- Whether ARR and large-customer growth translate into durable subscription revenue, renewals, and improved cash generation.
- How much of the widening GAAP loss reflects continuing operating investment versus IPO-related RSU compensation, and the future expense and dilution from equity awards.
- Whether supply-chain constraints, inventory levels, and device costs affect customer onboarding, gross margins, and cash flows.
- The collectability and eventual resolution of the $8.7 million landlord letter-of-credit receivable and related lease litigation.
- Cash runway against planned investment and lease commitments, and the potential impact of shares becoming sale-eligible after the lock-up expiration.