Samsara (NYSE:IOT) surprises with Q2 sales, share price rises

Internet of Things company Samsara (NYSE:IOT) reported results for its second quarter of fiscal 2024 that beat Wall Street analysts' expectations. Revenue rose 36.9% year over year to $300.2 million. The company expects revenue of around $310 million for the next quarter, in line with analysts' estimates. It posted non-GAAP earnings of $0.05 per share, improving from earnings of $0.01 per share in the same quarter last year.

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Highlights of Samsara (IOT) in the 2nd quarter of the calendar year 2024:

• Revenue: $300.2 million versus analyst estimates of $289.5 million (3.7% above)

• Adjusted operating result: $17.55 million versus analyst estimates of -$5.41 million (424% above)

• Earnings per share (non-GAAP): $0.05 versus analyst estimates of $0.01 (beating $0.04)

• The company increased its sales forecast for the full year from USD 1.21 billion to USD 1.23 billion on average, an increase of 1.4%

• Full year EPS forecast (non-GAAP) is $0.17 on average, exceeding analyst estimates by 27.5%

• Gross margin (GAAP): 75.6%, compared to 73.3% in the same quarter last year

• Free cash flow margin: 4.4%, after 6.6% in the previous quarter

• AR: $1.26 billion, an increase of 36% year-on-year

• Market capitalization: 21.29 billion US dollars

“We delivered another strong quarter of sustainable and efficient growth at scale,” said Sanjit Biswas, CEO and co-founder of Samsara.

Samsara (NYSE:IOT), one of the few publicly traded companies where Marc Andreessen is a board member, provides software and hardware for tracking industrial equipment, assets and fleets.

Data analysis

Organizations generate large amounts of data that is stored in silos, often in incompatible formats. This makes extracting actionable insights slow and costly, driving demand for modern, cloud-based data analytics platforms that can efficiently analyze the siloed data.

Sales growth

As you can see below, Samsara's 49% annual revenue growth over the past three years has been incredible, with revenue this quarter reaching $300.2 million.

Unsurprisingly, this was another great quarter for Samsara, with revenue up 36.9% year over year. Additionally, revenue increased by $19.48 million quarter over quarter, a very strong improvement over the $4.45 million increase in the first quarter of fiscal 2024. This acceleration in growth was encouraging.

In its forecast for the next quarter, Samsara expects revenue to rise 30.5% to $310 million, slowing from the 39.9% increase in the same quarter last year. Analysts who follow the company had expected revenue to rise 24.4% for the next 12 months before the earnings announcement.

The story continues

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Cash is king

While earnings undoubtedly play an important role in assessing a company's performance, we believe cash is the most important thing because accounting profits cannot pay the bills.

Samsara broke even on free cash flow last year, leaving the company with limited opportunities to return capital to shareholders.

Samsara's free cash flow for the second quarter was $13.13 million, representing a margin of 4.4%. This quarter's performance was good, as the margin was 2.2 percentage points higher than the same quarter last year. Cash profitability was also above one-year levels, and we hope the company can build on this trend.

Analysts forecast that Samsara's cash conversion will improve next year. Their consensus estimates are for the trailing twelve-month free cash flow break-even margin to increase to 7.4%, giving the company more cash for investments.

Key takeaways from Samsara’s Q2 results

It was encouraging to see Samsara beat analyst expectations for revenue, adjusted operating income, and earnings per share this quarter. We were also pleased to see the company raise its full-year guidance for all three metrics. Overall, this was an excellent quarter of beating and raising expectations. The stock rose 6.3% to $41.20 immediately following the earnings release.

Samsara may have had a good quarter, but does that mean you should invest now? When making this decision, it's important to consider the valuation, business qualities, as well as what happened last quarter. We cover that in our actionable full research report, which you can read for free here.