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Samsara Inc. is expected to price shares of its initial public offering late Tuesday and trade the following day as it hopes to grab a share of an estimated $55 billion market to digitize the operations of non-tech companies.
The stock will begin trading under the ticker “IOT” on the New York Stock Exchange on Wednesday. Morgan Stanley, Goldman Sachs, JPMorgan and Allen & Co. are among the underwriters.
Last week, the company estimated pricing its shares between $20 and $23 apiece, which would value it at up to about $11.5 billion.
Founded in 2015, Samsara offers a cloud-based platform that allows businesses to use Internet-of-Things connected devices that can range from video cameras to data-collecting equipment to help run operations. Here are five things to look for:
It targets industries not already swept up in ‘digital transformation’
“Unlike retail, advertising, media, and information technology, which have already undergone digital transformation, industries with physical operations are still in the early stages of digital adoption,” the company said in its S-1 filing with the Securities and Exchange Commission.
The company estimates a total addressable market of about $54.6 billion by the end of 2021, and $96.9 billion by the end of 2024.
Just for telematics alone — or monitoring cars and trucks and other mobile equipment — Samsara estimates a market opportunity of $32.9 billion market in 2021, and $63.7 billion in 2024, based on Gartner estimates.
The company cited operational efficiencies from using their platform from “a large freight carrier,” “a large city government,” “a waste transportation company,” and “a crane, rigging and heavy transport company.”
“While connected devices are now everywhere in our personal lives, it may surprise you to learn how much pen-and-paper is still being used in the industries that keep our planet running,” said co-founder John Bicket and Sanjit Biswas, co-founder and chief executive, in a founders’ letter in the filing.
“The possibilities are practically endless: we estimate that the industries we serve account for over a third of the global economy, and it’s easy to imagine a future when every asset has a chip in it and is connected to the cloud,” they said.
ARR has grown 68% and while revenue is on track for 78% growth
Samsara reported annual recurring revenue, or ARR, of $492.8 million as of Oct. 30, compared with $293.1 million in the year previous. ARR is a metric often used by software-as-a-service companies to show how much revenue the company can expect based on subscriptions.
That comes from 13,000 core customers, which account for $5,000 or more ARR, as of Oct. 30. More importantly, Samsara said that the number of its customers that pay more than $100,000 for its services surged 83% to 715 compared with 390 a year ago.
The company reported annual revenue of $249.9 million for a loss of $210.2 million for the fiscal year ending Jan. 30, 2021, compared with $119.9 million and a loss of $225.2 million in the previous year.
So far, for the nine months ending Oct. 30, Samsara reported revenue of $302.6 million for a loss of $102.3 million, compared with $174 million in revenue and a loss of $174 million .
About 15% of proceeds go to restricted stock settlements
Samsara said in its filing that expected proceeds of about $819.9 million will go to generic things like operations and to create a public market for its stock, but a significant chunk of the IPO money is going to settle restricted stock units.
Specifically, about $124.2 million in proceeds will go to a restricted stock unit settlement based on a midpoint pricing estimate of $21.50 a share. The settlement involves anticipated tax withholding and remittance obligations and an assumed 33.6% tax withholding rate, the company said.
Competitors are not direct but offer specific services that Samsara offers via suite
Samsara said no specific company competes toe-to-toe with its connected operations cloud suite.
Vendors like Verizon Communications Inc.’s
VZ,
Verizon Connect and Geotab offer driver management and GPS tracking tools, and Motorola Solutions Inc.’s
MSI,
Avigilon specializes in video analytics, AI, and network video management software.
Samsara, however, also lists Amazon.com Inc.
AMZN,
as a potential rival and that could spell trouble.
“For example, we rely upon Amazon for AWS web hosting and we do not currently have an alternative provider,” Samsara said in the filing. “If Amazon decided to compete with us and did not allow us to renew our commercial agreement, this may have a significant impact on our solution and would require that we allocate time and expense to setting up our Connected Operations Cloud on an alternative hosting service.”
Founders retain stake just shy of majority
The offering is for shares of our Class A stock, which get one vote per share, unlike Class B shares that get 10 votes per share.
Many IPOs of late have had early backers of the company commanding a majority stake in the company, and therefore, majority voting power. That’s not the case with Samsara.
The company raised $930 million in funding prior to the IPO, according to Crunchbase data. Of those early investors, Andreessen Horowitz will have 17.5% of the votes after the offering, while General Catalyst has 9.7% of the votes.
On the other hand CEO Biswas will retain 24.8% of the votes, while co-founder Bicket retains 24.3%.
