Samsara Inc. Q4 FY2025 Earnings Call

Good afternoon and welcome to Samsara's Fourth Quarter Fiscal 2025 Earnings Call. I'm Mike Chang, Samsara's Vice President of Corporate Development and Investor Relations. Joining me today are Samsara Chief Executive Officer and Co-Founder, Sanjit Biswas, and our Chief Financial Officer, Dominic Phillips. In addition to our prepared remarks on this call, additional information can be found in our shareholder letter, press release, investor presentation, and SEC filings on our investor relations website at investors.samsara.com. The matters we'll discuss today include forward-looking statements. Actual results may differ materially from those contained in the forward-looking statements and are subject to risks and uncertainties described more fully in SEC filings. Any forward-looking statements that we make on this call are based on assumptions as of today, March 6, 2025, and we undertake no obligation to update these statements as a result of new information or future events unless required by law. During today's call, we will discuss our fourth quarter fiscal 2025 financial results. We'd like to point out that the company reports non-GAAP results in addition to and not as a substitute for or superior to financial measures calculated in accordance with GAAP. Reconciliation of GAAP to non-GAAP financial measures are provided in our press release and investor presentation. We'll make opening remarks, dive into highlights for the quarter, and then open the call up for Q&A. With that, I'll hand over the call to Sanjit.

Thank you, Mike, and thank you everyone for joining us today. Fiscal Year 2025 was another year of strong and efficient growth for Samsara. We concluded FY 2025 with $1.46 billion in Annual Recurring Revenue, achieving a 32% year-over-year growth or 33% year-over-year adjusted growth. Our growth is fueled by our collaborations with some of the largest and most intricate operational organizations globally. Throughout the year, we expanded our customer count with more than $100,000 in Annual Recurring Revenue to 2,506, marking a 36% year-over-year increase. We are functioning with a rare mix of growth, scale, and profitability. Our momentum reflects the robustness of our platform and the vast market potential that lies ahead. We ended the year with a significant fourth quarter for large customers, increasing our customer count over $100,000 ARR by 203, a quarterly record. We also raised our $1 million plus ARR customer count by 14, tying another quarterly record. We are now securing large enterprise clients that could evolve into $10 million plus ARR customers at an accelerated pace. These clients are global leaders in their respective sectors. In Q4, we secured one of the top three telecommunications companies worldwide, one of the leading LTL carriers in the US, and Bimbo Bakeries, the largest commercial baking company in the US. We are establishing these clients with initial footholds that can lead to years of future expansions, driving enduring growth. Typically, these larger customers possess more complex sales cycles that can often take several years and are less predictable. We take pride in partnering with our clients to reshape how the world operates. We are merely at the beginning and are eager about what we can achieve together in the coming decades. Our clients choose us because we empower them to operate more intelligently with our Connected Operations platform, which includes advanced safety features like AI camera alerts, fuel efficiency through routing, asset utilization via location tracking alerts, maintenance through vehicle diagnostics, and workflows for frontline workers. Our expanding data asset assists our customers in working smarter with actionable insights, enhancing the safety, efficiency, and sustainability of their operations. I would like to highlight a customer using data to operate more intelligently. In Q4, we expanded our collaboration with one of North America's largest DIY moving and storage companies. They manage nearly 200,000 trucks, almost 140,000 trailers, and 250,000 portable storage boxes with over 23,000 rental locations. During the quarter, they added over 10,000 asset tags to monitor their new portable storage boxes for an improved end customer experience. They explored multiple solutions, including RFIDs and QR codes, but chose our asset tag for its reliability and ease of use. They also integrated our safety and telematics products during the quarter. In a pilot with us, they estimated savings of $1 million across safety, idling, and maintenance costs. They experienced a 61% reduction in safety incidents, an 82% drop in distracted driving events, and a 47% decrease in harsh driving incidents. We are proud to collaborate with our customers to achieve these remarkable results. With enhanced insights, they are operating smarter with data. Throughout our first decade, we've assisted our clients in their digital transformation journeys. They generally allocate a significant portion of their revenue to their operations, which are asset-intensive and labor-dependent. We started by digitizing their vehicles through safety and telematics and have since expanded to heavy machinery, buildings, frontline workers, and smaller high-value assets. We have successfully built one of the largest operational data assets globally, processing over 14 trillion data points annually, reflecting growth of over 50% year-over-year. We also recorded more than 120 billion API calls last year, which also represents a 50% year-over-year increase. This is having an extraordinary impact. In FY 2025, we helped our customers prevent 250,000 accidents, digitized 300 million workflows, and saved over three billion pounds of CO2. We are strategically positioned to merge AI with our vast and unique data asset for an even greater impact on our customers. We are entering a new age of intelligence. In the past two years, AI's cost has decreased by 100 times, is more accessible than ever, and will become even more abundant. This means that we will eventually apply it everywhere. Our customers are already utilizing AI on our platform for proactive maintenance, training, detecting risky behaviors like drowsiness, and more. We believe AI will entirely transform our customers' operations. In the future, our clients will deploy AI to dynamically oversee operations to improve safety and efficiency, modify delivery routes based on weather and traffic conditions, and anticipate customer needs. By automating these processes, AI will help mitigate labor shortages and skills gaps in operations. We are excited about how this will enhance our customers' operations, making them safer, more efficient, and sustainable. We look forward to collaborating with our clients to construct this future. We believe we are uniquely positioned to amplify our customer impact and achieve sustainable growth in the next decade due to several key factors. Firstly, we are in the early phases of digitizing a vast market. We are generating over $1 billion in Annual Recurring Revenue from our primary vehicle applications alone. Currently, less than half of North American commercial vehicles utilize telematics, and only around 10% employ safety products. As our customers prioritize vehicle digitization, we see a clear path to expanding our core applications into a multi-billion dollar enterprise. More broadly, the market opportunity beyond vehicles is still in the early digitization stages, presenting a significant opportunity for ongoing growth. Secondly, we are experiencing strong momentum with our large enterprise customers. This is driven by numerous factors, including our focus on innovation tailored for the enterprise and our development of products to address their complex operational challenges. We are also investing in our enterprise-focused go-to-market strategy and boosting our enterprise sales capacity to seize this opportunity. As I mentioned earlier, we registered a record number of new large enterprise customers this year. They provide substantial advantages, including valuable feedback for our innovation, improved retention rates, and greater expansion potential. Thirdly, we are consistently innovating and broadening our multi-product platform to address our customers' most challenging issues. Since our inception, we have successfully built and expanded more than eight products. We are witnessing our customers rely on us as their primary system of record and enhancing the use of our products across their operations. Currently, 62% of our large customers utilize three or more products, up from 58% a year ago and 54% two years ago. As we continue to enhance our platform to better serve our customers, we create future expansion opportunities that drive growth. Lastly, we are significantly investing in our team and company culture to better serve our expanding customer base. We take pride in the recent awards we've received that acknowledge these efforts, including Frost & Sullivan's 2024 Company of the Year award, BuiltIn's 2025 Best US Large Company to Work For, and our inclusion in Fortune's 2024 Change the World list. We are operating with a rare combination of scale, growth, and profitability. We are approaching $1.5 billion in Annual Recurring Revenue with 33% year-over-year adjusted growth and 9% adjusted free cash flow margins. It has been an exciting quarter and year to fulfill our mission to enhance the safety, efficiency, and sustainability of the operations powering the global economy. We are grateful to partner with our clients as they modernize their operations. Thank you to all our customers, partners, investors, and Samsarians for being a part of this journey. Additionally, we want to inform you that our President of Worldwide Field Operations, Lara Caimi, will be leaving Samsara after a personal leave of absence. However, she will serve as an advisor over the next few months to ensure a seamless transition. Our Chief Revenue Officer, Amit Vyas, and our Chief Operating Officer for go-to-market, Robert Stobaugh, will assume her responsibilities. Both Amit and Robert possess extensive leadership experience at Samsara, each boasting a strong track record over the past six years, and we have confidence in their leadership capabilities. As always, I will be heavily involved in the go-to-market function. We succeed as a team and appreciate Lara's contributions over the past couple of years. Lastly, we look forward to seeing many of you at Beyond, our annual customer conference, taking place this June in San Diego, where we will also host an Investor Day. Beyond will bring together leaders from various industries to discuss the current state of physical operations, the challenges they face, and new ways to create value through digitization. We will also announce new products to further drive transformation for our customers. We hope you can join us. Now, I will turn it over to Dominic to review the financial highlights for the quarter.

Thank you, Sanjit. Q4 was another quarter of durable and efficient growth. The quarter was highlighted by achieving several new records across important operating metrics including surpassing $100 million in quarterly net new ARR, adding 203 $100,000 plus ARR customers and 14 $1 million dollar plus ARR customers and achieving quarterly records for gross margin, operating margin, and free cash flow margin. Q4 revenue was $346 million, an increase of 25% year-over-year, or 36% adjusted growth, which is the same growth rate as last quarter, but at a larger scale. FY ‘25 revenue was $1.25 billion, an increase of 33% year-over-year, or 37% adjusted growth. Adjusted revenue growth enables comparability across periods and contains two items. First, Q4 of last year was a 14-week quarter instead of a typical 13-week quarter. Removing the extra week from the prior period results in an additional 10 percentage points of Q4 FY ‘25 revenue growth and an additional 3 percentage points of full year FY ‘25 revenue growth. Second, constant currency removes the impact of foreign currency exchange rate fluctuations period over period and results in an additional 1 percentage point of Q4 FY ‘25 revenue growth and an additional 1 percentage point of full-year FY ‘25 revenue growth. Q4 net new ARR was $109 million, an increase of 10% year-over-year or 12% adjusted only for constant currency. FY ‘25 net new ARR was $356 million, an increase of 16% year-over-year or 17% adjusted for constant currency and ending ARR was $1.46 billion, an increase of 32% year-over-year or 33% adjusted for constant currency. Several factors drove our strong top-line performance in Q4. First, we focused on serving large enterprise customers to drive durable and efficient growth at scale. In FY ‘25, we further prioritized landing the very largest and most strategic enterprise customers and learned the following. One, we've successfully proven we have an enterprise-grade platform, differentiated product portfolio, and operational support required to win the largest enterprise accounts at a high rate. Two, large strategic enterprise sales cycles can span multiple years and are often much more longer and more variable than sales cycles in smaller customer segments. And lastly, many of our largest enterprise customers and prospects have clear paths to becoming $10 million plus ARR customers and we expect these customers to mostly expand over time versus purchasing wall-to-wall upfront. We ended Q4 with 2,506 $100,000 plus ARR customers, growing 36% year-over-year, including a quarterly record increase of 203. We also ended the quarter with 118 $1 million plus ARR customers, growing 44% year-over-year, including a quarterly increase of 14, which is tied for a quarterly record. In addition to adding more large customers, we also grew our average ARR per $100,000 plus customer to $323,000, up from $313,000 one year ago. And the combination of adding more large customers and a higher average ARR resulted in increased ARR mix for $100,000 plus customers to 55% in Q4, up from 52% one year ago and 48% two years ago. Second, this quarter included a balanced mix of landing new customers and expanding existing customer relationships. For new logos, we added over 1,000 core customers for the sixth consecutive quarter. Additionally, a quarterly record 90 of the 203 $100,000 plus ARR customers added were new logos. Also, nine of the top 10 new customers signed with multiple products. One of our largest new customers in Q4 is a leading provider for the safety and maintenance of gas and water distribution systems, with more than 1,000 field technicians, 2,000 field assets, and 700 vehicles. Their initial purchase included five products across our platform: telematics, video-based safety, equipment monitoring, connected workflows, and connected training. With connected training, they achieved a 98% on-time completion rate and created more than 20 custom courses using our new AI Course Builder. They also achieved immediate results by deploying asset tags and reducing the $500,000 they lost annually for misplaced assets. Overall, they expect an ROI of more than 7x. For expansions, 14 of our top 20 customers expanded in Q4, and seven of the top 10 Q4 expansions included multiple products. Our strength in expansions also allowed us to achieve our target dollar-based net retention rate of approximately 115% and 120% for core and large customers respectively. And third, we demonstrated strong execution across several frontier markets. 17% of net new ACV came from international geographies in Q4, tied for the second highest quarterly contribution ever. The international strength was driven by Mexico and the UK, both of which accelerated net new ACV growth sequentially. The UK also contributed its highest quarterly net new ACV mix, and Mexico contributed its second highest net new ACV mix. We also saw momentum across construction, food and beverage, and public sector end markets. Construction drove the highest net new ACV mix of all industries for the sixth consecutive quarter. Food and beverage contributed its highest net new ACV mix in over three years, led by our largest expansion in Q4 with Bimbo Bakeries, the largest commercial baking company in the US with more than 20,000 workers, 5,500 vehicles, 2,500 trailers, 350 tractors, and 11,000 distribution routes. With Samsara, they saw a 70% reduction in collision risk, a 64% reduction in harsh events, and a 49% reduction in policy violations. Public sector had its highest year-over-year growth rate of the year in Q4, led by Miami-Dade, the seventh largest county in the country. Miami-Dade signed a more than $1 million transaction for the Department of Transportation and Public Works and the Department of Solid Waste Management. And we also saw strength in emerging products. In Q4, 15% of net new ACV came from non-vehicle products, the highest mix in the last 10 quarters. Four of the top 10 new customers included a non-vehicle product and equipment monitoring accelerated year-over-year net new ACV growth for the third consecutive quarter, driven by strength in asset tags. In addition to driving strong top line growth, we continued to deliver operating leverage across our business as we scale. We delivered quarterly records across all key non-GAAP profitability metrics, including a 78% gross margin, a 16% operating margin, and a 14% free cash flow margin. Okay, now turning to guidance, assuming FX rates as of February 1st. For Q1, we expect revenue to be between $350 million and $352 million, representing 25% year-over-year growth, or between 26% and 27% constant currency growth, including a $5 million impact to Q1 revenue. Non-GAAP operating margin to be 7%, and non-GAAP EPS to be between $0.05 and $0.06. For full year FY ‘26, we expect revenue to be between $1.523 billion and $1.533 billion, representing year-over-year growth between 22% and 23%, or between 23% and 24% adjusted for constant currency, including an $11 million impact to FY ‘26 revenue. Non-GAAP operating margin to be approximately 11% and non-GAAP EPS to be between $0.32 and $0.34. And finally, please see the additional modeling notes in our shareholder letter. To close, Q4 punctuated a year in which we saw continued momentum in a very large, very early market opportunity. The world of physical operations is in the early innings of digital transformation and companies' willingness to adopt new technologies to improve their safety, efficiency and sustainability is rapidly increasing as the ROI benefits become even more evident. Most physical operations businesses have large operating budgets consisting of fiscal assets and frontline workers, which consume most of their revenue. Even slight operational improvements can result in millions of dollars of savings for our customers, significantly impacting their bottom line. And Samsara continues to be best positioned to benefit from these long-term market dynamics. And with that, I'll hand it over to Mike to moderate Q&A.

Thank you, Dominic. We will now open the line up for questions. When it's your turn, please limit your questions to one main question and one follow-up question. The first question today comes from Matt Hedberg with RBC, followed by James Fish with Piper Sandler.

Great. Thanks for taking my questions, guys. Another great year. Maybe I'll start, Dominic, one for you. Thanks for quantifying the extra week impact on revenue. Super helpful. I noticed you didn't talk about it from an ARR perspective. You clarified for constant currency, but wondering if you could provide any sort of color on how we should think about ARR perhaps adjusted for the week.

Yeah, absolutely, Matt. So, as we've said before, it's really difficult to quantify the impact to ARR of having the extra week in Q4. It's very easy for revenue because of ratable revenue recognition, but to determine the impact on bookings is much more challenging, which is why we didn't adjust it out of Q4 last year, or in the Q4 results that we just gave today. If you did use the same framework that we use for revenue, if you remove one-fourteenth of the $99 million from net new ARR from Q4 of last year, that extra selling week would imply roughly $7 million of added net new ARR in Q4. But again, really difficult to hone in and really quantify that. And just even broader than that with regards to the year-over-year growth, I think it's also just worth reminding investors that Q4 last year was definitely a tough comp, even beyond that extra week, it was a quarter in which we landed our largest net new ACV deal ever. We had a record number of million dollar plus net new ACV deals in the quarter. And so when you consider all of that in, we're happy with the net new ARR growth this quarter.

Got it. That's very helpful. It might round to about a point headwind, which is useful information. Sanjit, last year at your user event, many of us were really excited about the potential for asset tags. We've seen this reflected in various checks with areas or customers that don't typically come to mind as Samsara users. Could you share your thoughts on how asset tags might influence fiscal ‘26 ARR?

Yeah, first of all, the reception around asset tags has been great. I think people are finding lots of use cases where they have these small high-value assets that they want to understand the location of. There's really kind of three use cases that we've seen emerge, and this is across industries. The first is around locating stolen or lost assets. The second is actually around locating those assets. So, a lot of time is spent finding these assets at like a large construction or job site and then also around understanding asset utilization. So again, these are benefits that apply across multiple industry verticals. In terms of impact on FY '26, it's really too early to say. We are seeing good attach, but we're also seeing customers experiment. So I think it takes some time to figure out, well, this is net new functionality, how will I use it? How do I get value from it? And then how do we practically roll it out across thousands or tens of thousands of assets, as I described earlier in the prepared remarks.

Our next question comes from Jim Fish with Piper Sandler, followed by Dylan Becker with William Blair.

Hey, guys. Thanks for the questions here. Maybe just at a high level, given the latest macro uncertainty and the turbulence we're all seeing, especially in the US now, given you guys are exposed to fiscal operations and that being 40% or more GDP, some concerns around GDP is slowing, potentially declining, do you guys expect to see any sort of pressure to unfold this year around that? Or is the ROI that Samsara provides able to kind of get through these potential macro headwinds?

Okay. I'll start and Dominic, if you want to add. So I think at a high level, it's important to remember that our customers are very large scale in terms of their operations. So, we're talking about asset-heavy, labor-intensive businesses. And so they're always trying to find ways to be more efficient. To put that in perspective, for every dollar of revenue they earn, somewhere between $0.60 and $0.80 is spent on those operations, and we help optimize those operations. So I think in times like this, where our customers are trying to figure out how to drive efficiencies, the data is incredibly valuable. We're really helping them get leverage, and they're seeing that ROI. It's too early, it's too hard to say what these macro impacts will be. But for them, there's a lot of optimization opportunities below the line? I don't know if you want to add anything.

These customers have been in operation for many years, often over a century, and have navigated various economic cycles. As they begin to embrace digital transformation and recognize the potential of data, they are finding ways to improve efficiency within their businesses and are increasingly adopting this technology at quicker rates.

Helpful. And Dom, for you, I guess, what's giving the confidence in the stable to potentially even up NRR for the core customers and can we get the percentage of new ACV from new customers versus existing here at year-end?

Sorry, I missed the first part, but the mix was pretty balanced this year. It was essentially a 50-50 distribution between new logos and expansions regarding the net new ACV mix for the quarter.

The next question comes from Dylan Becker with William Blair followed by Kirk Materne with Evercore.

Perfect. Thanks, guys. Maybe, Sanjit, starting with you. It's really impressive the data scale that you guys have and maybe even more so the 50% growth kind of annually on top of that, giving you a lot of network density obviously. At the same time, I mean, there's plenty of white space here. So wondering how you're thinking about kind of the network density benefit and your opportunity to go and capture kind of more assets from the net new user side, which feels pretty balanced. But also the ability to kind of go deeper with the existing customers and kind of more ingrain yourself and understand the entirety of kind of their physical operations workflows?

Yes, we are actively pursuing both strategies. Firstly, increasing network density improves our coverage for new products like the asset tag I mentioned earlier. It also enhances our visibility into operational behaviors, allowing us to analyze risks based on trends in fuel consumption by vehicle make and model or equipment type. This extensive data provides numerous advantages. Currently, we are only in the low double digits in terms of market penetration, which indicates a significant opportunity to expand our view of assets, increase the miles driven, and encourage more frontline workers to utilize the product. We will continue to invest in this expansion. As we deepen our presence, it will support the development of new AI-driven products, particularly in maintenance. With over 1 billion fault codes analyzed each year, we gain valuable insights into asset performance, failure causes, and maintenance needs. The depth of our data will be beneficial as we embark on this long-term journey to enhance our data assets.

Perfect. That's helpful. And maybe a good segue to sticking with you here on kind of the AI use cases that you're seeing, there's obviously a significant kind of tangible external value here and maybe monetization still on the come as we think about that. But how are you guys thinking about leveraging it internally, right? There's a lot of room for internal efficiency in your core operations, I would think it can help accelerate product development. That's very clear kind of with your innovation engine, but maybe the kind of the internal leveraging of AI as well, if you don't mind?

There's a lot of potential, both externally and internally. We're heavily invested in this product and in the way we develop it. We utilize modern AI coding tools on the sales side to enhance our understanding of customer accounts, conduct research, and answer questions. Our sales and go-to-market teams have access to all the information they need to be effective. In support functions, we can respond to inquiries more efficiently. Essentially, every team and department at Samsara is employing AI in meaningful ways, and we're excited because the potential of this technology seems to be growing and has surpassed our expectations.

The next question comes from Kirk Materne with Evercore, followed by Chris Quintero with Morgan Stanley.

Yeah. Hi, guys. Thanks. It's Pete Burkly on for Kirk Materne. Appreciate taking the question. So really strong large customer momentum to get a quarterly record for $100,000 customer adds. Construction vertical continues to be really, really strong. It sounds like food and bev did quite well this quarter as well. I'm curious as you keep landing these larger customers, are there any verticals in particular that are structurally more in line with there's just an opportunity to be bigger within those customer verticals? And then maybe just as a quick follow-on to that, is there any thought as you do continue to grow in these verticals of sort of verticalizing the go-to-market efforts at all? Or is the sort of horizontal nature of your solutions, just continuing to resonate to where that's not necessary at this point?

Yeah, I'll take the first part of that question and then Dominic can cover the second. So in terms of industry verticals, we are seeing strong traction across a number of different industries. They're the same ones that we talked about at Investor Day, and a lot of this is related to our penetration rates. So like I said earlier, still early innings. There's a lot of room for digitization. So when we think about industries like construction, they historically didn't buy a lot of telematics products or video-based safety, they're seeing tangible ROI benefits. They're seeing decreased risk-related costs, are seeing better fuel consumption. So I do think industries like that, that historically hadn't bought a lot of this technology really starting to digitize, but we see opportunity across the board because we talked about this briefly, but over half the vehicles on the road still don't have telematics, only about 10% have video-based safety. So there's opportunity again in really every major industry vertical and physical operations.

Yeah. And on the verticalized sales strategy, that's not something that we're planning on doing formally in FY '26. There's still enough commonality in the use cases across these industries that we don't need industry experts selling into them. I think that, that's something that we could consider more gradually as we kind of think about how we map accounts to individual reps and try to group them together tied to industries. And maybe longer term, when we're at a larger scale, it's a strategy that could make sense. The only area that we do it today is within public sector where the selling motion is a little bit different. But other than that, sales reps are tied to patches geographies to sell into many different industries.

Very helpful. Thanks guys. The next question comes from Chris Quintero with Morgan Stanley, followed by Alex Zukin with Wolfe.

Hi, Sanjit. Hey, Dominic. Thanks for taking our questions. On for Keith here. I wanted to hit on international. Really great to see that new ACV growth in both Mexico and the UK accelerate. What's working well there? And how does that inform your plans for 2026 international expansion?

I believe we have made significant investments in these areas over the years, and we are experiencing strong momentum. During our last call, we highlighted several product-specific features for the markets we've been focusing on. Our efforts have gone beyond research and development to include go-to-market strategies, which have helped us secure larger customers and gain referenceability. Additionally, there are more physical operations assets and frontline workers in these international markets compared to the US. We anticipate continuing to invest in similar use cases and areas.

Got it. That's super helpful, Dominic. And then wanted to ask on hiring. You guys keep winning a lot of these best company you work for. And so I'm just curious how that's helped enable bringing in new talent into the organization. What kind of talent are you getting? And how is that helping as you continue to scale through the current revenue base?

Well, I think for us, talent is important across the board. From a sales perspective, it gives us capacity to work with more customers. We're investing in our long-term customer relationships as well. So the go-to-market side, the investment is very clear. On the engineering side, we have a lot of different products that we're developing on the platform. And so scaling up those teams. All that being said, we want to keep a very close eye on culture and make sure we're scaling that up along with the headcount. So we take a balanced approach to it and make sure we stay very involved in the operations.

The next question comes from Alek Zukin with Wolfe followed by Matt with BofA.

Hi. This is an inquiry on behalf of Alex. Given the uncertainty regarding potential macro impacts from geopolitical tensions, is there any increased caution in the guidance? Additionally, considering the continued growth internationally, how have discussions with major international customers evolved or stayed consistent amid these geopolitical concerns?

I would just say, high-level guidance for FY '26, the philosophy hasn't changed. It's not more or less conservative than the initial guidance in FY '25. I think we're always wanting to make sure that we're providing guidance with a lot of confidence and especially to start the year, we feel good about being able to hit the numbers that we put out. And we obviously factor in all of the broader macro implications and potential outcomes into the guidance.

Thanks, Dominic. On the customer side. Most of these companies are providing services like construction, field services, in food and beverage. So they're very much focused on their kind of critical infrastructure jobs within their countries.

Got it. That's really helpful. And you're continuing to see strong new large logo adds, I guess how much of those large new logo adds or from competitors versus completely new adopters. And with like new large logo strength, particularly in the back half of fiscal '25. How should we think about this for fiscal '26?

It really depends on the specific situation. We have several products that present more greenfield opportunities. For instance, in the case of video-based safety, 90% of commercial vehicles in the US are not leveraging technology, which creates more greenfield opportunities compared to telematics, a product that has existed for decades. Although less than 50% of vehicles have telematics, that still represents a larger adoption than in video-based safety. Consequently, we typically encounter more competitors in those areas. The situation really varies based on the use case. Some of the newer products we are introducing are designed to replace manual processes, meaning we are not competing against other technology vendors in those instances. Ultimately, it varies by use case.

The next question comes from Matt with BofA, followed by David with Wells Fargo.

Great. Thanks for taking the questions. Maybe just a couple for Dominic. I wanted to double tap on hiring intentions for fiscal year '26. Anything you can tell me in terms of percentage of growth, you intend to grow the workforce? Any additional color on sales and marketing versus the other areas of the business or geography would be helpful?

Yeah. I mean we're definitely adding more headcount into FY '26. I think in like previous years, the majority of it will go into go-to-market. We're always obviously trying to add more capacity to keep pace with the scale and the growth of the business. I think we're also really focused on finding ways to improve our productivity. That's the other kind of input and the growth and to drive more efficiency. There's obviously a lot of new opportunities with some of the recent technology advancements. And so productivity improvements and then handing out is also a big focus for us.

Understood. Thanks. And then just one quick follow-up on operating margin. obviously, a great quarter, I think 700 basis points above the guide. Can you just help us understand the drivers of that outside of just revenue outperformance, anything in the quarter that stood out in terms of productivity or efficiency?

No. Yeah, most of it came from the revenue outperformance, there's kind of puts and takes to expenses. Most of our margin leverage tends to come in the back half of the year. We front load a lot of our OpEx. And so Q4 tends to be one of our largest operating margin quarters, and most of it came from the revenue outperformance.

The next question comes from David with Wells Fargo, followed by Andrew with BNP.

Hey, thank you for taking our questions and I appreciate it. So obviously, really like all the charts throughout your deck, you guys did a great job. Question on the massive market pie charts. Can you just talk through maybe at a high level, the newer products added since FY '21, such as site visibility, connected forms, asset tech, et cetera. And how we should think about the competitive dynamics you're seeing in those products today versus the competitive dynamics you saw in telematics and safety when you first disrupted the space back in FY '17, '18? Thanks.

Yeah. Let me take a kind of first pass at that. And, Dominic, if you want to add anything. So some of these newer products, forms is a great example. Asset tags is another one. They're really net new. These are not products that were widely available in the industry. A lot of our customers were coming up, manual workflow like pen and paper process. And so it's a different competitive dynamic compared to, say, telematics, where, as Dominic mentioned earlier on the call, people have had GPS tracking for decades in some cases. So there was more kind of incumbency and sort of existing form factors that we're replacing. Here, I think we're seeing more net new. That being said, there's competitors for each of these products, but we're really unique in terms of how we structured the whole system as a single platform. The workflows are intuitive for the frontline workers, they use us for compliance and for safety. Some of them clock in and clock out on the Samsara system. We're integrated with over 300 different technology partners. And that's what makes us different. And that's also what makes it easier to adopt these products and add on. So the majority now of our large customers are using three or more products, that continues to accelerate. So all of this is to say that while these are newer products, we're able to attach them quite easily in some of these accounts once we get to know the nature of their business.

Thank you. I appreciate that. And just one follow-up. Would you mind just talking through the opportunity set in front of you as it relates to the public sector, as we think through their focus on efficiency and optimization? Thank you.

Yeah. I mean it's an area that we've been focused on for several years, as I said earlier, it's the one industry where we have a vertical-specific sales organization. And unlike some other software businesses where there's a large federal presence for our industries, most of these physical operations assets and frontline workers are housed within the state and local level. So that's really where we've been focused. And we saw, again, the strongest growth for public sector to place in Q4 and it was led by Miami-Dade, again, the seventh largest county in the country. So I think that's indicative of $1 million-plus opportunity to a large county. Obviously, we've got a number of large state wins as well. And so that's an area of continued investment and focus for us going into FY '26.

The next question comes from Andrew with BNP, followed by Dan with BMO.

Thanks for addressing the geopolitical issues. I'm curious to know how much of your exposure is related to cross-border traffic. While I understand you're not in transportation specifically, you do have connections to food and beverage, energy, and construction. Do you have any data that suggests you’re not significantly impacted by potential tariff repercussions? I have a follow-up question as well.

I don't have any data at my fingertips in terms of the cross-border, but the majority of our customers operate within their countries. They're in the domestic operations, like if you think about food and beverage distribution, they're delivering to restaurants, retail stores, that sort of thing. Same thing with construction. Dominic just talked about public sector. So, while we have some customers across the border or across various borders, most of their work tends to be in their countries.

Great. And then for my follow-up, just in terms of your comments on ARR, the extra week in FX. I'm just wondering, is the 10 percentage point swing or 11. Should we apply that to billings as well just for apples-to-apples comparison? Or is it above or below that?

Yeah. I mean I would really just focus it on revenue and then obviously for net new ARR, there's the currency impact. And as we said, just the impact of the additional week, a lot less clear. So I mean those are the two metrics that I'd focus you on.

The next question comes from Dan with BMO, followed by Mark with Loop Capital.

Hi, thanks for taking my question. Maybe 2 for Dominic. One, with regards to tariffs and your own supply chain, things like gateways and cameras and asset tags, are you factoring any impact on that? Or maybe help us think about how that could potentially impact your business this year? And then secondly, on the comments about free cash flow margin being roughly similar in fiscal '26 versus '25, can you help us understand sort of the why that is relative to the EBIT margin expansion, if there's anything you call out specific to cash flow, '26, that would be helpful? Thank you.

Sure. Yeah. So, from a cash expense standpoint, we don't have any concentrated exposure to any one country with regards to importing devices. We obviously are planning for a bunch of different scenarios. We've got a number of different strategies in place to kind of best mitigate any potential impact. And obviously, all of that then is factored into the guidance. For both operating margin and free cash flow margin, the free cash margin was in the modeling notes and so not really formal guidance. But I think that at a minimum, we feel like we can drive the same amount of free cash margin that we did in FY '25. And obviously, as we get through the year, as we've done in previous years, ideally, we can move that up based on what we're seeing. But we feel like that's a good place just to start.

The next question comes from Mark with Loop Capital followed by Alexei with JPMorgan.

Hi, thank you for taking my question. Sanjit, just building on an earlier question around your public sector business. In public sector, DOGE has kind of become a hot topic of late. I realize most of your business there is state and local. It's not federal. But there is some momentum building around state-level DOGE-type initiatives. I'd just be curious to get your take on how you think that may or may not affect your business down the road.

Sure. So as you just highlighted, most of our business is in state and local. In general, if you think about what our platform does, it really helps enable focus on efficiency. You can understand asset utilization. You can be more efficient about how you're using those assets, how people are performing work. So that ultimately will help those public departments save money. And that's why I think we're already seeing momentum in the product absent of a formal effort.

The next question comes from Alexei with JPMorgan followed by Junaid with Truist.

Hi, this is Ella Smith on for Alexei. Thank you so much for taking our question. So first, we did want to ask about the penetration of telematics in North America. We're surprised as to where it is. And we're curious, in your conversation with customers, what's holding back customers from maybe adopting them faster?

It's hard to say. It is an interesting statistic in terms of fraction of adoption of telematics and then even the safety cameras. In some cases, the payback periods are measured in months or in most cases for our customers. So it really is something that seems like it makes a lot of sense for basically every company. In many cases, I would say there's operational inertia. There's change management. You need to deploy this across thousands or tens of thousands of assets, retrain frontline workers. And so that's something we also help with. We build great technology, but we also help these companies digitally transform, which means figuring out how do you deploy technology out to the frontline. And that's how they really get the value from technologies like telematics and safety.

That makes a lot of sense. For a quick follow-up, we discussed the strength in the construction business, and it's clear that part of your value proposition is driving ROI for your customers. However, it's surprising considering the pressure in the nonresidential construction market. Is there any additional insight into why construction companies are choosing Samsara now despite the challenges in their market?

Well, I think I would direct you back to the gains we can drive for efficiency. If you think about a business like construction, it's labor-intensive, it's asset heavy. And so even simple things like understanding which of your assets should be owned by the company versus what should be rented on an as-needed basis can have millions of dollars of impact for some of these larger construction companies. And then again, these are historically industries that had not adopted a lot of the products like telematics or safety. So when it comes to safety, a lot of the risk in construction is when they're driving to and from these job sites. They're at risk over the road. And so understanding distracted driving, following distance, all those kind of risky behaviors makes a huge bottom line impact for them. So it's hard for me to speak about their top line business in terms of what's driving the revenue, but there's a lot of opportunity for savings and efficiency in terms of how they operate.

The next question comes from Junaid with Truist followed by Cole with TD Cowen. Junaid?

Great. Thanks, guys. This is Cole on for Derrick. Could you just dive in on monetization levers for Samsara Intelligence and when we can maybe see that start to show up in the model?

We're still in beta with those products. An important part of the process for us is gathering customer feedback, understanding the use cases, and how they're being applied. I mentioned a new client that's using the AI Course Builder to enhance their connected training, which is an interesting use case. As we collect more data points, we'll have a clearer understanding of how to price and package it, as well as its overall impact on the model.

Thanks, Cole. That concludes the question-and-answer portion. Thank you all for attending our Q4 fiscal year 2025 earnings call. Before I let you go, I have a few short announcements. We will be attending the Loop Capital Markets Conference on March 11 and the Wells Fargo Symposium on April 9. We will also be hosting the Nomura bus tour on March 13 and the Morgan Stanley bus tour on April 14 in San Francisco. We hope to see you on one of these events. Finally, we are hosting our Investor Day this June in San Diego. Please send an email to ir@samsara.com if you're interested in attending in person. For those who prefer to attend virtually, our IR website will have a web link to the live broadcast. That's it for today's meeting. If you have any follow-up questions, you can email us at ir@samsara.com. Thanks, everyone. Goodbye.