Samsara achieves ‘Rule of 40’ for two quarters in a row as it heads towards $1 billion ARR

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Samsara’s mission to digitize the world of physical operations continues to hit the mark with large buyers, as the company reports strong Q4 and FY2023 earnings. The long-neglected sector is seemingly proving buoyant for Samsara, despite macroeconomic headwinds, as the vendor reported that it has achieved ‘Rule of 40’ for the last two consecutive quarters (when revenue growth and profit margin are equal to, or greater than, 40%). 

However, CEO Sanjit Biswas noted that there is no room for complacency, as achieving these numbers over the next 12 months may prove more challenging. He said: 

We also achieved Rule of 40 for the last two quarters of the fiscal year, which is a significant milestone, but there is still much work to be done to consistently achieve Rule of 40 on a quarterly and annual basis. 

The key numbers from this week's earnings include: 

• Q4 revenue of $186.6 million, representing 48% year-over-year growth

• ARR of $795.1 million, representing 42% year-over-year growth

• 1,237 customers with ARR over $100,000, up 53% year-over-year

• 431 of these large customers with more then $100,000 ARR were added during the 2023 financial year 

Samsara started out by providing fleet management solutions to small and mid-sized trucking businesses, connecting sensors in vehicles to its management software in the cloud to help track mileage and other performance indicators. The company now offers more sophisticated AI-enabled video solutions in-vehicle, where it actually coaches drivers to drive more safely.

It has since expanded to include workflow technologies to companies with huge physical operations and its Connected Operations Cloud uses AI and machine learning to provide companies with the intelligence they need to run either more safely, more sustainably or more efficiently.

Commenting on the numbers, Biswas added: 

FY ‘23 was a year of durable and efficient growth for Samsara and our continued momentum reflects the strength of our platform and large market opportunity ahead of us. 

As you know, our customers represent the broad world of physical operations and span diverse industries from food and beverage to construction to government and more. I am always impressed by the resilience of our customer base. They are the backbone of the economy and provide the critical infrastructure that keeps the world running. Many have been around for over half a century and are no strangers to challenging economic cycles.

Digitization is more important than ever in today’s macroeconomic climate. Our customers are faced with difficult operating challenges and continue to search for ways to maximize the return on their investments to achieve their business goals. 

Customer stories

Biswas took the time to point to some use cases during the Samsara earnings call, with particular emphasis on some of the large customers the vendor has secured over the year. He said that the Connected Operations Cloud is resonating with these buyers, as they digitize their infrastructure into a single integrated platform and create a system of record for their daily physical operations. 

Biswas spoke about Samsara’s largest ever contract, with Nutrien AG Solutions. He said: 

Let’s start with Nutrien Ag Solutions, our largest new ACV transaction ever. They are one of the world’s largest agricultural agriculture inputs and services providers and the third largest nitrogen producer in the world, with roughly 75,000 assets. 

Nutrien adopted Samsara’s video-based safety solution to prevent accidents, promote safer driving behaviors through in-cab alerts, and help exonerate drivers from false insurance claims. 

Nutrien’s goal is to up-level its existing safety programs and mitigate risks through event analysis, education and training. After completing a pilot with Samsara, Nutrien saw significant improvements across driving behaviors.

Another customer, Estes Express Lines, is using Samsara to improve efficiency and uptime. Biswas added: 

Let’s now turn to another exciting Q4 win. Estes Express Lines is the largest privately owned freight carrier in North America and a top 10 less-than-truckload carrier with more than 22,000 employees over 45,000 tractors and trailers and 270 terminals. Estes expects the real-time data from Samsara’s connected operations cloud will help them increase uptime, reduce costs and achieve their goal of creating a digital twin of its entire shipment lifecycle to improve the customer experience. 

This way they can provide better visibility to their own customers, while removing time-intensive paper-based processes for their drivers and operations staff.

Our video-based safety and vehicle telematics applications can help improve driver safety by using real-time alerts and help reduce idling. We project that a 10% to 15% reduction in idling can save them an estimated $2 million to $3 million in fuel costs annually. Additionally, we estimate that saving drivers 5 minutes per week by automating manual tasks could lead to over $1 million in annual savings.

Forward looking statements

Samsara also provided guidance for the coming year, which looks slightly softer than what it has achieved during FY2023 - perhaps unsurprising given the challenging economic environment. However, it looks like in the next couple of years Samsara will achieve the symbolic $1 billion ARR milestone. Chief Financial Officer Dominic Phillips said: 

As we enter our second year as a public company, we expect our guidance philosophy will be less conservative than during our first year. However, after analyzing various scenarios, we also believe it is adequately de-risked to account for the potential impact of worsening macroeconomic factors on our business. 

For Q1 FY ‘24, we expect total revenue to be between $190 million and $192 million representing year-over-year growth between 33% and 35%, non-GAAP operating margin to be approximately negative 15%.

For full year FY ‘24, we expect revenue to be between $838 million and $848 million representing year-over-year growth between 28% and 30%. 

So, whether Samsara can maintain its ‘Rule of 40’ streak over the coming quarters remains to be seen, but it’s clear that there is still plenty of opportunity there for the vendor.