Q4 2023 Amplitude Inc Earnings Call

Yaoxian Chew: Stop the meeting. Hello, everyone. Welcome to Amplitude's fourth quarter and full year 2023 Earnings Conference. I'm Yaoxian Chew, Vice President of Investor Relations. Joining me here are Spencer Skates, CEO and co-founder of Amplitude, and Chris Harms, the company's chief financial officer. During today's call, management will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full year 2024, the expected performance of our products, our expected quarterly and long-term growth, investments, and overall future prospects. These forward-looking statements are based on current information, assumptions, and expectations and are subject to risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially from those described in these statements. Further information on the risks that could cause actual results to differ is included in our filings with the Securities and Exchange Commission.

Hello, everyone welcome to attitude its fourth quarter and full year 2023 earnings conference call announcing Chu Vice President of Investor Relations joining me Gary <unk>.

<unk> CEO and co founder of attitude and Criss harms, the company's Chief Financial Officer.

During today's call management will make forward looking statements, including statements regarding our financial outlook for the first quarter and full year 2024, do you expect the performance of our products, our expected quarterly and long term growth.

And overall future prospects before looking statements are based on current information assumptions and expectations and are subject to risks and uncertainties some of which are beyond our control that could cause actual results to differ materially from those described in these statements.

Information on the risks that could cause actual results to differ is exceeding our filings with securities and Exchange Commission.

Yaoxian Chew: You are cautioned not to place undue reliance on these forward-looking statements, and we assume no obligation to update these statements after today's call, except as required by law. Additionally, certain financial measures used in today's call are expressed on a non-GAAP basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. However, these non-GAAP financial measures have limitations and should not be used in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Youre cautioned not to place undue reliance on these forward looking statements and we assume no obligation to update these statements after today's call except as required by law.

Certain financial measures used in today's call I expressed on a non-GAAP basis. We use these non-GAAP financial measures intended to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be viewed in isolation from or as a substitute for financial information compared to <unk>.

Accordance with GAAP a reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, which can be found on our Investor relations website at investors of amplitude dot com with that I'll hand, the call over expensive.

Yaoxian Chew: A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings pressures, which can be found on our investigations website at investorsatamplitude.com. With that, I'll hand the call over to Spencer. Thanks Yao and good afternoon everyone. I'm excited to welcome you to the Amplitude Q4 and 2023 earnings call. We have a lot to share today, and we're going to cover it in three main sections. First, our financial results for Q4 and 2023 overall. Second, the maturation of Amplitude in 2023, including an update on innovation and customer breadth. And thirdly, our views on 2024. Let's start with the Q4 and full year financial highlights. Our fourth quarter revenue was $71.4 million, up 9% year-over-year. Annual recurring revenue was $281 million, up $8 million from the end of the third quarter.

Yeah.

Thanks Al and good afternoon, everyone I'm excited to welcome you to the amplitude Q4, and 2023 earnings call. We have a lot to share to date and where and cover it in three main sections first our financial results for Q4 and 2023 overall.

Second the maturation of amplitude in 2023, including an update on innovation and customer wins.

And thirdly, our views on 2024.

Let's start with the Q4 and full year financial highlights.

Our fourth quarter revenue was $71 4 million up 9% year over year and.

Annual recurring revenue was $281 million up $8 million from the end of the third quarter.

Spencer Skates: We've grown our customer base to more than 2,700. 511 of those customers pay us more than $100,000 per year, up from $480,000 at the end of 2022. We also have 39 who pay us more than $1 million a year, up from $30,000 at the end of last year.

We've grown our customer base to more than 2700.

511 of those customers pay us more than 100000 per year up from 480 at the end of 2022 with.

We also have 39, who pay us more than $1 million a year up from 30 at the end of last year.

Spencer Skates: Lastly, we delivered almost 10 percentage points of non-GAAP operating margin expansion year over year. We also generated $1.5 million of free cash flow in Q4 and $22 million of free cash flow in 2023. Q4 was our largest quarter for NetARR in 2023, marked by broad-based growth across all customer sizes. It was also the largest quarter of new enterprise logo wins in the company's history. While total churn was still high, it was lower than the previous quarter.

Lastly, we delivered almost 10 percentage points of non-GAAP operating margin expansion year over year. We also generated $1 5 million of free cash flow in Q4, and 2020 and $22 million of free cash flow in 2023.

Q4 was our largest quarter for net <unk> in 2023 marked by broad based growth across all customer sizes. It was also the largest quarter of new enterprise logo wins in the company's history.

While total churn was still high it was lower than previous quarters.

Spencer Skates: 2023 was a big year for Amplitude, and I'm proud of how the team delivered. First, we made great progress in stabilizing the business, focusing on what we can control. We delivered margin expansion and positive free cash flow, even against slowing growth. Second, we launched our Plus Plan in October, helping us to serve the lower end of the market much more effectively with a product-led growth strategy. In doing so, we provided ourselves with the ability to further up-level our go-to-market efforts, which we initiated earlier this year. We are scaling our strategic sales efforts across different buyers, focusing on high-potential accounts up and down the stack. We are targeting the lower end of the market with our product-led growth motion and using an inside sales team to address the in between. Third, we had our strongest year ever for product innovation. As I said before, this is the best way to drive value long term.

2023, it was a big year for amplitude.

I am proud of how the team delivered.

We made great progress in stabilizing the business focusing on what we can control, we delivered margin expansion and positive free cash flow even against slowing growth.

Second we launched our plus plan in October helping us to serve the lower end of the market much more effectively with a product led growth motion.

In doing so we provided ourselves the ability to further up level, our go to market efforts, which we initiated earlier this year.

We are scaling our strategic sales efforts across different buyers focusing on high potential accounts up and down the stack.

We are targeting the lower end of the market with a product led growth motion and using an inside sales team to address the in between.

Third we had our strongest year ever for product innovation.

I've said before this is the best way to drive value long term, so I'd like to recap a few key areas.

Spencer Skates: So I'd like to recap a few key areas. I just mentioned our PLUS plan, and we are off to a great start. It's early days on our own product-led journey. There's more to test and iterate on, but we like what we see so far. Plus is tracking ahead of an early internal expectation. There are almost no signs of cannibalization, and we continue to see five-figure deals in the sign-up process. We previewed Session Replay with customers last year and launched it publicly two weeks later. Session Replay helps our customers reconstruct a user visit by capturing how they interacted with a website, app, or digital product.

I just mentioned, our plus plan and we are off to a great start.

It's early days on our own product led journey, there is more to test and iterate on but we like what we see so far.

<unk> is tracking ahead of it early internal expectations. There are almost no signs of cannibalization and we continue to see five figure deals in the sign up process.

We previewed session replay with customers last year and launched it publicly two weeks ago.

Session replay helps our customers reconstruct a user visit by capturing how they interacted with a web site app or digital product. It is a tool used by product marketing and data teams to understand user behavior diagnosed product issues and improve outcomes.

Spencer Skates: It's a tool used by product, marketing, and data teams to understand user behavior, diagnose product issues, and improve outcomes. Session replay is powerful because it is tightly integrated with Amplitude Analytics and our broader platform. As a result, companies can get quantitative and qualitative insights to understand what their customers are doing and why. We are already getting strong feedback and encouraging early traction, with customers already ripping out and replacing point solutions with our session replay platform. They tell us they love being able to watch sessions without having to leave charts and that they are excited to do everything in one platform. As we continue to demonstrate with experiment and CDP, many workflows are better with amplitude analytics at the core.

Session replay is powerful because it is tightly integrated with amplitude analytics and our broader platform.

As a result companies can get quantitative and qualitative insights to understand what their customers are doing and why.

We are already getting strong feedback and encouraging early traction with customers already ripping and replacing point solutions with our session replay offering a.

They tell us they love being able to watch sessions without having a lead charts and that they're excited to do everything in one platform.

As we continue to demonstrate with experiment in CDP, many workflows are better with amplitude analytics at the core.

Okay.

Spencer Skates: In addition to PLoS and Session Replay, we introduced a suite of AI-powered capabilities, including Ask Amplitude to shorten the learning curve when you're getting started, and Data Assistant to make data governance effortless. We believe AI will dramatically improve the caliber of digital products and experiences. We also improved our CDP solution, bringing it close to parity with market leaders in terms of connection speed. This led to an increasing number of companies choosing the powerful combination of analytics, experiment, and CDP as their starting point. We also released numerous product bets explicitly designed to help us win simple and win the enterprise. It's easier to get started with Amplitude with dashboard templates for B2B SaaS, media, fintech, and marketing analytics.

In addition to plus in session replay, we introduced a suite of AI powered capabilities, including ask amplitude to shorten the learning curve. When you are getting started and data assistant to make data governance effortless.

We believe AI will dramatically improve the caliber of digital products and experiences.

We also improved our CDP solution, bringing it close to parity with market leaders in terms of connections. This led to an increasing number of companies choosing the powerful combination of analytics experiment and CDP is theyre starting point.

Yeah.

We also released numerous product best explicitly designed to help us win simple and when the enterprise is.

It's easier to get started with amplitude with dashboard templates for <unk>, SaaS media, Fintech and marketing analytics.

Spencer Skates: Customers can now quickly send data to Amplitude in a low-code fashion. Personalized homepages deliver out-of-the-box insights to users right when they log in. Collaboration is a competitive differentiator for Amplitude and allows us to expand to different teams within the enterprise. We launched team workspaces to make cross-functional collaboration even easier. And last but not least, we welcome Francois Agenstat as our new Chief Product Officer in December. Many of you may recognize Francois from Tableau.

Customers can now quickly send data to amplitude and a low code fashion.

Personalized homepages deliver out of the box insights to users right when they log in.

Collaborations.

<unk> is a competitive differentiator for amplitude and allows us to expand to different teams within the enterprise, we launched team workspaces to make cross functional collaboration even easier.

Yeah.

Last but not least we welcome Francois <unk> as our new Chief product Officer in December.

Many of you may recognize France swapped from tableau. He was there for 13 years and led the product organization.

Spencer Skates: He was there for 13 years and led the product organization. I have huge respect for the work Tableau has done in the data space, and it inspired a lot of Amplitude's own approach. The same is true for Francois.

I have huge respect for the work tableau has done in the data space and it inspired a lot of amplitude stone approach.

The same is true for Francois he is a world class product leader and an inspirational storyteller, who helped tableau scale to beyond the $1 billion in Iraq I am thrilled he is joining us on the next phase of our journey.

Spencer Skates: He is a world-class product leader and an inspirational storyteller who helped Tableau scale to beyond a billion in ARR. I am thrilled he is joining us on the next phase of our journey. Let's turn our attention to customers. Q4 was the largest quarter for new enterprise logo wins in the company's history, and we saw more traction with traditional companies, too. We both landed and grew with companies like Polaroid, CrossFit, iFit, Culver's, Lithia Motors, Rover, Krafton, Strava, and Spartan Nash.

Let's turn our attention to customers.

Q4, it was the largest quarter for new enterprise logo wins in the company's history.

We saw more traction with traditional companies too.

We both landed and grew with companies like Polaroid Crossfit I fit Culver's Lithia Motors Rover crafted strongbox Spartan Nash.

Spencer Skates: In Q4, Driveway, a Lithia Motors company, moved away from their existing analytics provider and went all in on Amplitude across their web property. Ross Sherman, Driveway's VP of Digital Innovation, told us that Amplitude was the best solution to iteratively improve their experience so they could meet customers in their moment of need.

In Q4 driveway Lithia Motors company moved away from their existing analytics provider and went all in on amplitude across their web properties Ross Sherman dry weight <unk> VP of digital innovation told us that amplitude was the best solution to iteratively improve driveways experience. So they can.

Meet customers in their moment of need.

Buying or selling a vehicle online is an emotional decision with amplitude now positioned to ingest all of drive rates web session telemetry. It's team can easily understand customer insights and test new features.

Spencer Skates: With Amplitude now positioned to ingest all of DRIVERAY's web session telemetry, its team can easily understand customer insights and test new features. This will improve the customer lifecycle, unlocking the full potential of its ecosystem. We also won a large aerospace company this quarter. Airlines rely heavily on this company's digital products to manage their most critical aerospace needs, including warranties, repairs, and key safety updates. Every error results in unwanted ground time for aircraft, which costs their customers millions of dollars per minute. Their team realized it needed to use data to better meet their customers' needs. It had been using a legacy MarTech solution for years, but it lacked adoption, trust, and relevance.

This will improve the customer lifecycle unlocking the full potential of that ecosystem.

We also won a large aerospace company this quarter airlines rely heavily on this company's digital products to manage their most critical aerospace needs, including warranties repairs and key safety updates every error results in unwanted ground time for aircraft, which cost their customers millions of dollars per minute.

Their team realized it needed to use data to better meet their customers' needs and had been using a legacy martech solution for years, but lacked adoption trust and relevance in Q4, they turned to amplitude with amplitude analytics. They will help customers better leverage their online portals quickly dive into data related to critical issues.

Spencer Skates: In Q4, they turned to Amplitude. With Amplitude Analytics, they will help customers better leverage their online portals, quickly dive into data related to critical issues, and easily fix problems in a timely manner. It will also aim to help them more effectively use their R&D dollars and improve roadmap prioritization. Another one I'm excited about is with DFL Digital Sports, a subsidiary of Deutsche Fußball League, the German professional football league.

Easily fix problems in a timely manner.

We will also aim to help them more effectively use their R&D dollars improved roadmap prioritization.

Another win I'm excited about is with DFS digital sports a subsidiary of Deutsche <unk> Foods, while we got the German professional football week.

Spencer Skates: DFL Digital Sports is rapidly growing, so it needed a new partner that could handle traffic spikes, connect the web and mobile experience, and provide deep insight. In Q4, it chose Amplitude Analytics to help grow its global fan base. We'll be partnering with DFL Digital Sports to help them reach their most important acquisition goals, including conversion and audience creation and management. With Amplitude, they'll also be able to create personalized fan engagements, investigate issues causing drop-offs, and discover new areas of opportunity. Let's talk about what's ahead for Amplitude this year. It is too early to signal an all-clear on the macro environment, especially with layoffs persisting across our digital native heavy customer base.

DSL digital sports is rapidly growing so it needed a new partner that can handle traffic spikes connects the web and mobile experience and provide deep insights and.

Q4 shoot it shows amplitude analytics to help grow its global fan base will.

We will be partnering with DSL digital sports to help them reach their most important acquisition goals, including conversion and audience creation and management with amplitude you'll also be able to create personalized span engagements investigate issues, causing dropoff and discover new areas of opportunity.

Yeah.

Okay.

Let's talk about what's ahead for amplitude this year it.

It is too early to signal, an all clear on the macro environment, especially with layoffs persisting across our digital native heavy customer base. However.

Spencer Skates: However, there is early evidence to suggest recent renewal cohorts are doing better. We are also starting to see clear examples of companies who are on stronger footing, starting to grow following their initial restart. While slower growth is a reality for this year, nothing has fundamentally changed about our long-term opportunity. Digital products and experiences will continue to proliferate, and there's increasing recognition that legacy web traffic and marketing-centric approaches are no longer sufficient.

However, there is early evidence to suggest recent renewal cohorts are doing better.

We are also starting to see clear examples of companies who are on stronger footing starting to growth following their initial reset.

While slower growth as a reality for this year nothing has fundamentally changed about our long term opportunity digital products and experiences will continue to proliferate.

There is increasing recognition that legacy web traffic and marketing centric approaches are no longer sufficient.

Spencer Skates: We see continued validation that our strategic approach, a digital analytics platform with product analytics at its core, is the right one to win in the long term. We will continue to execute with urgency, drive product innovation aggressively, and widen our lead over our competitors. We will continue to make bold strategic plans, which will all help to drive business growth towards the end of the year and set us up for greater success in the future. Here are the key areas of operational focus.

We see continued validation that our strategic approach a digital analytics platform with product analytics that at its core is the right one to win in the long term.

We will continue to execute with urgency drive product innovation aggressively and widen our lead over our competitors.

We will continue to make bold strategic pets.

This will all help to drive business growth towards the end of the year and set us up for greater success in the future.

Here are the key areas of operational focus.

Spencer Skates: We will continue to improve the effectiveness of our sales force. We made substantial progress across the board last year, but there's plenty more to do to go from good to great. Our named account approach drives focus and prioritization.

We will continue to improve the effectiveness of our sales motion.

We made substantial progress across the board last year, but there's plenty more to do to go from good to great. Our named account approach drives focus and prioritization this increases our opportunity set materially.

Spencer Skates: This increases our opportunity set material. Targeted High Potential Count Dollars grew by 50% while we almost halved the number of accounts that we go after. We're leading with value and selling more strategically, everything from industry-specific use cases to more sophisticated account engagement. We will continue to elevate our platform value proposition. With Experiment, CDP, and now Session Replay, we offer an all-in-one digital analytics platform that enables teams to create products that adapt to users, not the other way around.

Targeted high potential account dollars grew by 50%, while we almost have the number of accounts that we go after.

We're leading with value and selling more strategically everything from industry specific use cases to more sophisticated account engagement.

We will continue to elevate our platform value proposition with experiment CDP and now session replay we offer an all in one digital analytics platform that enables teams to create products adapt to users not the other way around.

Spencer Skates: We know that our customers want a single provider for all their analytics needs; we see many opportunities to grow cross cell and displace point solutions. With Francois now on board, we expect that our pace of product innovation will be even more aggressive. I have been intentional about up-leveling accountability, maturation, and execution at Amplitude throughout 2020. We are demonstrating progress. We will continue to drive profitable growth and invest for the future. At the foundation, our team remains persistent and adaptive.

We know that our customers want a single provider for all of their analytics needs. We see many opportunities to grow cross sell and displaced point solutions with Francois now onboard we expect that our pace of product innovation will be even more aggressive.

I have been intentional about up leveling accountability maturation and execution at amplitude throughout 2023.

We are demonstrating progress we will continue to drive profitable growth and invest for the future at the foundation our team remains persistent and adaptable.

Spencer Skates: I'm optimistic about what we'll accomplish in 2024 and beyond. With that, thank you for your interest in Ampli. I'd now like to turn it over to Chris to walk through the financial results. Thanks, Spencer.

I'm optimistic about what we'll accomplish in 2024 and beyond.

With that thank you for your interest in Apple team I'd now like to turn it over to Chris to walk through the financial results.

Thanks Spencer.

Chris Harms: Thanks to everyone joining us today. I take pride in our recent performance. We exited 2023 with Q4 being our largest quarter for net ARR for the year, and it was also the largest quarter of New Enterprise LogoWin, a positive indicator of the momentum we are building as part of the win-the-enterprise pillar of our broader strategy. Total churn was still high, but I'm encouraged that it was lower than previous years. And I'm also encouraged. For the third quarter in a row, actuals were in line with what the forward-looking indicators were projecting. We came in above our guide on Q4 operating profit and delivered positive free cash flow for the third consecutive quarter. We're demonstrating fiscal responsibility and proving ourselves strong stewards of shareholder capital by delivering 13 points of free cash flow margin improvement year over year, even against Lowering Growth and a Stubbornly Challenging Macro Environment. Now on to the fourth quarter results. As a reminder, all financial results that I will be discussing, with the exception of revenue and balance sheet figures, are non-GAAP. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found in our earnings press release and supplemental financials on our IR website.

Thanks to everyone joining us today.

I take pride in our recent performance, we exited 2023 with.

With Q4, being our largest quarter for net IRR for the year.

It was also the largest quarter of new enterprise logo wins, which were a positive indicator to the momentum we're building as part of the when the enterprise pillar of our broader strategy.

Total churn was still high.

I'm encouraged that it was lower than previous quarters.

And I'm also encouraged.

For the third quarter in a row actuals were in line with what the forward looking indicators where project.

We came in above our guide on Q4 operating profit and delivered positive free cash flow for the third consecutive quarter.

We're demonstrating fiscal responsibility and proving herself strong stewards of shareholder capital by delivering 13 points of free cash flow margin improvement year over year, even against slowing growth and a stubbornly challenging macro environment.

Now onto the fourth quarter results.

As a reminder, all financial results that I will be discussing with the exception of revenue and balance sheet figures are non-GAAP.

Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can.

It can be found in our earnings press release and supplemental financials on our IR website.

Chris Harms: Fourth quarter revenue was $71.4 million, up 9% year-over-year. Total ARR exiting Q4 increased to 281 million, an increase of 10% year over year and 8 million sequentially. Here's more details on key elements of recurring revenue.

Fourth quarter revenue was $71 4 million up 9% year over year.

Total IRR exiting Q4 increased to $281 million, an increase of 10% year over year and $8 million sequentially.

Theres more details on key elements.

Sure.

Chris Harms: New ARR was evenly split between land and expanse, exemplified by broad-based new ARR across our customer segment. Turn remained elevated, slightly lower in absolute dollar terms than Q2 and Q3, consistent with our expectations. Full churn accounted for just under two-thirds of the total amount in the quarter. As expected, in-period NRR dropped to 98%, and NRR on a trailing 12-month basis declined sequentially to 101%. Spencer alluded to early evidence of recent renewal cohorts doing better. First Year Gross Retention Patterns from Customers Acquired in the Second Half of 2022 Onward are, on average, five to ten points higher than cohorts across 2020 and 2021. Non-analytics ARR crossed the $30 million threshold at the end of 2023. Our base of million dollar and hundred thousand dollar customers grew year over year. Double clicking into these metrics, customers who spent more than a million dollars increased to 39, up from 30 customers at the end of last year.

New <unk> was evenly split between land and expand.

Exemplified by broad based new IRR across our customer segments.

Churn remained elevated.

And slightly lower in absolute dollar terms than Q2, and Q3 consistent with our expectations.

Full term accounted for just under two thirds of the total amount in the quarter.

As expected in period in RR dropped to 98%.

And <unk> on a trailing 12 month basis declined sequentially to 101%.

Spencer alluded to early evidence of recent renewal cohorts doing better.

First your gross retention patterns from customers acquired in the second half of 2022 onward is on average five to 10 points higher than cohorts across 2020 and 2021.

Non analytics <unk> across the 30 million threshold at the end of 2023.

Our base of million dollars and $100000 customers grew year over year.

Double clicking into these metrics customers, who spent more than $1 million increased to 39.

From 30 customers at the end of last year.

Chris Harms: Customers who spend more than $100,000 continue to represent approximately three quarters of our ARR base. Gross margin was 77% for the fourth quarter, up 3 percentage points year over year. Total operating expenses were $53 million, flat sequentially, and down 1% year over year. Operating profit was a positive $2.3 million, or 3% of revenue, almost a 10 percentage point improvement on a year-over-year basis. Net income per share was $0.04, based on 129.2 million fully diluted shares, compared to a loss of $0.03 with 113.1 million shares a year ago.

Customers, who spend more than $100000 continue to represent approximately three quarters of our IRR base.

Gross margin was 77% for the fourth quarter up three percentage points year over year.

Total operating expenses were $53 million flat sequentially and down 1% year over year.

Yeah.

Operating profit was a positive $2 3 million or 3% of revenue.

Almost a 10 percentage point improvement on a year over year basis.

Net income per share was four cents based on $129 2 million fully diluted shares compared to a loss of <unk> <unk> with $113 1 million shares a year ago.

Chris Harms: Free cash flow in the quarter was positive $1.5 million or 2% of revenue for the full year 2023. Free cash flow was positive $22.4 million or 8% of revenue. A 13 percentage point improvement over last year's margin of negative $5. Now on tour out.

Free cash flow in the quarter was positive $1 5 million or 2% of revenue.

For the full year 2023 free cash flow was positive $22 4 million or 8% of revenue is 13 percentage point improvement over last year's margin of negative 5%.

Now onto our outlook.

Okay.

Chris Harms: We've taken many steps to stabilize the business, improve level execution, and revisit how we allocate capital. We are selectively investing in key areas to ensure we successfully reaccelerate growth. The top of our list is continued product innovation, platform expansion, product-led growth, professional services, and business application infrastructure to better enable our go-to-market efforts. For the first quarter of 2024, we expect Q1 revenue to be between $72.1 and $72.7 million, representing an annual growth of 9% at the midpoint. We expect a non-GAAP operating loss between 2.8 and 2.2 million, and we expect a non-GAAP net loss per share to be between negative one cent and zero cent, assuming basic shares outstanding, approximately $120.5 million.

We've taken many steps to stabilize the business up level execution and revisit how we allocate capital.

We are selectively investing in key areas to ensure we successfully reaccelerate growth.

The top of our list our continued product innovation platform expansion product led growth professional.

Professional services and business application infrastructure to better enable our go to market efforts.

For the first quarter of 2024, we expect Q1 revenue to be between $72, one and $72 7 million, representing an annual growth of 9% at the midpoint.

We expect our non-GAAP operating loss between two eight and $2 2 million.

And we expect non-GAAP net loss per share to be between negative <unk> and zero cents, assuming basic shares outstanding of approximately $125 million.

Chris Harms: For the full year, we expect revenue to be between $291.5 and $294.5 million, an annual growth rate of 6% to 7%. We expect non-GAAP operating income between negative $1.0 million and positive $2.0 million, and we expect non-GAAP net income per share to be between 6 cents and 8 cents, assuming shares outstanding, approximately 133.0 million as measured on a fully diluted basis. Here's more color for your modeling purposes, consistent with what we conveyed in November 2023. We expect churn to remain at elevated levels through Q2 2024 and at similar levels to the recent quarter, as we've characterized previously. The primary driver for these elevated levels of churn are multi-year contracts from 2021 and 2022 that are being optimized upon renewal. As reflected in our 2024 revenue guidance, we are implying that healthy new business trends in the first half of 2024 will be substantively offset by churn during this period. Specific to quarter, quarter, quarter to quarter dynamic.

For the full year, we expect revenue to be between 291, five and $294 5 million in annual growth rate of 6% to 7%.

We expect non-GAAP operating income between negative 1.0 million and positive 2.0 million.

And we expect non-GAAP net income per share to be between <unk> and <unk> assuming shares outstanding of approximately 133 zero million as measured on a fully diluted basis.

Here's a more color for your modeling purposes.

Consistent with what we conveyed in November 2023, we expect churn to remain at elevated levels through Q2, 2024 and at similar levels to recent quarters.

As we've characterized previously.

Primary driver at these elevated levels of churn or multiyear contracts from 2021, and 2022 that are being optimized upon renewal.

As reflected.

Selected and our 2020 for revenue guidance, we are implying that healthy new business trends in the first half of 2024 will be subsequently offset by churn during this period.

Specific to quarter core quarter to quarter dynamics.

Chris Harms: We expect Q2 revenue to be down slightly from Q1, due to the timing of anticipated churn within each of the respective quarters. We expect N-period NRR to remain below 100% and NRR to trough in the mid-90s this year. Both metrics should increase as we exit 2020. We expect year-over-year ARR growth. We'll trough in Q3 of this year in the mid-single digit

We expect Q2 revenue to be down slightly from Q1 due.

Due to the timing of anticipated churn within each of the respective quarters.

We expect in period in <unk> to remain below 100% and NR to trough in the mid nineties are this year.

Both metrics should increase as we exit 2024.

We expect year over year <unk> growth will trough in Q3 of this year and mid single digits.

Chris Harms: Gross margin should be between 76% and 77% for the year due to the aforementioned investments in professional services. While we have guided to operating profit for fiscal year 2024, we expect to generate a non-gap operating loss in the first half of 2024 due to the timing of certain events, such as employee tax resets and a higher concentration of discretionary spending. These items include certain marketing programs and events, like the sales. We expect to continue to be free cash flow positive for the full year. We expect the diluted share count to increase by 3% to 5% in FY25.

Gross margin should be between 76, and 77% for the year due to the aforementioned investments in professional services.

While we have guided to operating profit for fiscal year 2024, we expect to generate a non-GAAP operating loss in the first half of 2024 due to the timing of certain events, such as employee tax resets and a higher concentration of discretionary spending.

These items include certain marketing programs and events like the sales kickoff.

We expect to continue to be free cash flow positive for the full year.

We expect diluted share count to increase by three 5% in FY 'twenty four.

Chris Harms: But I am happy but not satisfied with what we achieved in 2020. I am confident of the path we are setting for us; through 2024 and into 2024, we will continue to drive profitable growth; we will continue to deliver a rapid pace of product innovation and platform expansion. Our go-to-market efforts will be even more targeted and effective, which we believe will drive much higher sales productivity, NRR, and revenue acceleration. With that, I'll open it up for Q&A to you. Yeah. Thanks, Chris.

But I am happy, but not satisfied with what we achieved in 2023.

I am confident of the path, we are setting for ourselves through 2024 and into 2025.

We will continue to drive profitable growth.

We will continue to deliver a rapid piece of product innovation and platform expansion.

Our go to market efforts will be even more targeted and effective which we believe will drive much higher sales productivity and RR and revenue acceleration.

With that I'll open it up for Q&A over to you yet.

Thanks, Chris.

Yaoxian Chew: Please turn your microphone and camera on and limit yourself to one question and one follow-up in the interest of time. Our first question will come from Koji Ikeda of Bank of America, followed by Taylor McGinnis from UBS. Koji, go ahead, please.

Microphone and camera on let me yourself to one question and one follow up in the interest of time.

First question will come from Koji Ikeda of Bank of America, followed by the Mcginnis from UBS.

Go ahead please.

Spencer Skates: Hey guys, for some reason, I can't turn my camera on here, but let me just ask the question here. So, maybe a question, two questions, one for Spencer, and one for Chris. So Spencer, starting with you, you know, how does the demand environment feel today, February 2024 versus February 2023. It sounds like things are better, the lapping of optimization. It sounds like some green shoots and renewal cohorts. You're talking to them so as you're talking to new customers. Are the pain points the same, you know? Are you having the same types of conversations, same types of prospects, or have things changed, and if so, maybe you could talk about that a little bit.

Hey, guys for some reason I cant turn my camera on here, but let me just ask the question here.

So maybe a question two questions one for Spencer one for Chris.

Just starting with you how does the demand environment feel today February 2024 versus February 2023.

Sounds like things are better lapping of optimizations. It sounds like some green shoots in renewal cohorts now youre talking to so as you're talking to new customers are the pain points to fame there or are you having the same types of conversations same types of prospects or have things changed and if so maybe you could talk about that a little bit yeah.

Spencer Skates: Yeah, for sure. I think demand for what we do has always been strong, whether I look at now, whether I look at years, a year ago, whether I look at many years ago. This is a top priority for many products and data teams to understand how their end customers are using the product, and, you know, we're seeing that in both tech companies as well as traditional enterprises. In terms of now versus a year ago, I'd say it's, you know, maybe slightly stronger. I think there's still pressure on a lot of digital native and tech companies as they're optimizing spend, you know, companies continue to go through layoffs. I think the big thing that changes for us is structurally, stuff gets a lot better as we go through the first half, as we talked about once those earlier renewal cohorts wash out. And then, you know, I think I have to give a lot of credit to the last piece of that. I give a lot of credit to the changes that Thomas has driven through go to market to mature our motion.

For sure I think demand for what we do has always been strong whether I look at now whether you look at years a year ago, whether you look at many years ago. This is a top priority for many products and data teams for them to understand how it is there and the customers are using the product.

Matt in both tech companies as well as the traditional enterprise.

In terms of.

Now versus a year ago, I'd say, it's maybe slightly stronger I think there's still pressure on a lot of digital natives and tech companies as they are optimizing spans companies continue to go through layoffs I think the big thing that changes for US is structurally stuff gets a lot better as we go through the first half as we talked about those earlier renewal cohort.

It's a washout.

And then I think I'll have to give a lot of credit to the last pieces I give a lot of credit to the changes that Thomas is driven across go to market to mature our motion.

Spencer Skates: That's really a big part of what led to our success in Q4 with a record number of enterprise lands. That's what led to our ability to deploy a plus plan where we have self-service motion, and we can then take those resources and focus them up market. And so it's just it's both, you know, I'd say that the primary drivers are our demands always been there, and it's just, you know, our execution is getting better. I got it. Thank you. And then a follow up for Chris.

That's really a big part of what led to our success in Q4 with a record number of enterprise Lans, that's what led to our ability to deploy a plus plan, where we have self service motion and we can then take those resources and focus them up market at higher potential accounts.

And so it's just it's both I would say the primary drivers are demand has always been there. It's our execution is getting better got it. Thank you and then a follow up for Chris here.

Chris Harms: ARR just grew 10% and added 8 million net new sequentially, you know, as you said, the best of 2023. And last quarter, you said there's a high correlation between this year's ARR and next year's growth, but you are guiding to 6%. You know, I did hear you on your commentary of kind of the puts and takes there, but just just trying to understand a little bit further that 400 point delta, you know, the finishing ARR growth to the next year's guide, is it just added or just, you know, take heed to what you said in your prepared remarks. Thank you. Yeah, no.

<unk> grew 10% added.

Added $8 million net new sequentially as you said the best of 2023 and last quarter. You said there is a high correlation of kind of this year's <unk> an indication of next year's growth, but you are guiding to 6%.

I did hear you on your commentary of kind of the puts and takes there, but just just trying to understand a little bit further of that 400 point Delta.

Finishing our growth for the next year guide is it just added conservatism or just take take heed to what you said in your prepared remarks. Thank you.

Yeah no.

There is a spread acknowledged.

Chris Harms: There is a spread acknowledged. There's the kind of the role that Q1 and Q2 are going to play, in terms of our expectation and the drag on our net ARR from the anticipated churn and the impact that they're gonna have on 2024 revenue. That's the primary driver.

There's the kind of the really the role that Q1 and Q2, we're going to play.

In terms of our expectation and the drag on our net IRR from from the anticipated churn and the impact that theyre going to have on the 2020 for revenue. That's the primary driver to that obvious disconnect here.

Chris Harms: Obvious Disconnect. Got it. Thanks so much, guys. Thank you. Great. Taylor McGinnis, you're up next, followed by Rob Oliver at Baird. Taylor, go ahead, please.

Got it thanks, so much guys. Thank you.

Great talent Mcginness, you're up next followed by Rob Oliver at Baird Pillar go ahead. Please yes.

Chris Harms: Yeah, hi, team. Thanks so much for taking the question. So just with the rise of layoff activity that we've seen in tech, can you talk about where we stand in terms of the timeline of license rationalization and what's embedded in the guide? So it seems like the guide implies a steady deceleration throughout the year, but it looks like, in one cue, you're assuming similar growth to 4Q. So is that just because, you know, you're assuming now these tougher renewals are going to continue into the second half? Maybe it's just conservatism, but I guess why could we not see an acceleration?

Hi team. Thanks, so much for taking the question. So just the rise of layoff activity that we've seen in tech can you talk about where we stand in terms of the timeline of license rationalization and what's embedded in the guide. So it seems like the guide implies a steady deceleration throughout the year, but it looks like in <unk>.

Assuming similar growth to <unk>. So is that just because you know you're assuming now these tougher renewals are going to continue into the second half maybe it's just conservatism, but I guess why could we not see an acceleration if churn starting came through some of these new carhartt slipped out or maybe you can just give a little bit of color there.

Chris Harms: If churn is starting to improve some of these new cohorts look better, maybe you can just give a little bit of color there. Yeah, look, I'll take that on. I've talked about churn, and I talked about it being at commensurate levels with what we saw in Q2, Q3, and Q4. Commensurate Level doesn't mean down, and we did say that Q4 was down relative to Q2 and Q3. Uh, kind of with those elements in play, I'll remind you that my guide for, or I didn't guide it specifically, but my signaling for Q4 kind of net ARR was a number much closer to zero.

Yes look I'll take that on.

I've talked about churn I talked about it being a commensurate level with what we saw Q2 Q3 Q4.

Thats fair level doesn't be down and we did say that Q4 was down relative to Q3 Q2 and Q3.

Kind of.

With those elements in play I'll remind you that my guide for I didn't guide specifically, but my.

My signaling for Q4 kind of net IRR was a number much closer to zero.

Chris Harms: I was very pleased with our overall performance, very pleased; it was very broad-based. And I guess that same level of tempering, both what we hope to achieve in Q1 and Q2 from a new ARR perspective, is just being offset as I try to be prudent about how to approach it with what we see from churn. And I'll just remind you, churn. We definitely have gotten our arms around, right for Q2, Q3, Q4. While it's been an elevated number, one of the positives I take away from that is at least the indicators gave us pretty good signaling about that. So all of those different ingredients in the kind of stew is kind of what has shaped how I'm thinking about those elements.

Very pleased with our over performance.

Please it was very broad based.

And I guess that same level of temporary.

What we hope to achieve in Q1 and Q2 from a new IRR perspective is just being offset as I tried to be prudent about how to approach it with what we see from chart and I'll just remind you.

Churn, we definitely have gotten our arms around right for Q2, Q3 Q4, while it's been an elevated number one of the positive side takeaway from that is at least the indicators came it's pretty good signally to that so all of those different ingredients tenants do is kind of what shape Paul.

I'm thinking about those elements.

Chris Harms: Perfect. And just a follow-up question. So it seemed like this past quarter, the pace of NRR deterioration was starting to subside. But you talked about NRR dropping in the mid 90s and 2Q revs being down sequentially. So is there something specific to the 2Q renewal base that you're trying to flag coming up? I guess, is it larger?

Perfect and just a follow up question. So it seemed like this past quarter. The pace of IRR deterioration was starting to subside, but you talked about NR chopping in the mid nineties and QQ ratcheting down sequentially. So is there something specific to the <unk> renewal base that that you're trying to fly coming up I guess is it larger does that greater tech.

Chris Harms: Does it have greater tech exposure? Maybe you can just help us think through what that base looks like, maybe relative to what we've seen in the last couple quarters. Yeah, so remember, we do not have an evenly distributed renewal base; we are definitely highly concentrated in Q1 and Q2, relative to where we are in Q3 and Q4, and then our ability to have our arms better around our customers, the role of the multi-years, and kind of where we think they're going to reset on their renewals, all of those are just taking shape to how we think about the precision of Q1 and Q2, and how we think Thanks so much.

Exposure, maybe you can just help us think through what that base looks like maybe relative to what we've seen in the last couple of quarters. Yes. So remember we do not have any evenly distributed renewable base. We are definitely highly concentrated in Q1 and Q2.

Relative to where we are in Q3 and Q4.

And then our ability to have our arms better around our customers the role of the multi years and kind of where we think they are going to reset on their renewals all of those are just <unk>.

Taking shape to how we're thinking about the precision to Q1 and Q2 and how we think about the kind of the cyclical nature of being in a mechanically different place as we've talked about in Q3, and therefore kind of forming our trough.

Awesome. Thanks, so much I appreciate it.

Spencer Skates: Appreciate it. Great. Next question, Rob Oliver from Baird, followed by Kyla Radke from Citi. Rob, go ahead, please.

Great next question, Rob Oliver from Baird, followed by Tyler Radke from Citi. Go ahead. Please yes, great. Thanks, Yeah. Thanks, guys. Good afternoon.

Spencer Skates: Yeah, great. Thanks, Yael. Thanks, guys. Good afternoon.

Spencer Skates: My question is, I think, probably a bit of a follow-up to Taylor's. You guys clearly have made some tremendous strides in managing that churn. There's been a lot of changes in how we go to market, a lot of internal optimization of the process. So I guess what I'm wondering is when you look out to that big cohort that's coming out in Q2. In terms of what you guys can control, because, you know, some of it's just natural, there's fewer lower headcount, but in terms of what you guys can control, maybe talk about some of the opportunities to get other products into the hands of these customers or other ways to maybe get the platform sale going. Spencer, I know in your prepared remarks, you mentioned Session Replay as an example.

My questions would be probably a bit of a follow up to Taylor's.

You guys clearly have made some tremendous strides on managing that churn theres been a lot of changes in go to market a lot of internal optimization of the process. So I guess, what I'm wondering is when you when you look out to that big cohort that's coming out in Q2.

In terms of what you guys can control because some of it is just natural there's fewer lower head count but in terms of what you guys can control maybe talk about some of the opportunities to get.

No.

Other products into the hands of these customers are other ways to maybe get the platform sale going Spencer I know in your prepared remarks, you mentioned session replay as an example, so maybe talk a little bit about like <unk>.

Spencer Skates: So maybe talk a little bit about some of the ways you guys can maybe, you know, work those contracts a bit better. And then I had a quick follow-up. Totally. So I divided it into two big ones.

Some of the ways you guys can maybe.

Worked out those those contracts a bit better than I had a quick follow up totally so I divide it into two big ones Theres. The operational of how we manage a particular account and then theres the strategic in terms of how we approach our entire customer base.

Spencer Skates: There's the operational in terms of how we manage a particular account. And then there's the strategic in terms of how we approach our entire customer base. On the operational side, we've gone through a lot of maturing of our go-to market team over the last year, and I think you're starting to see the results in terms of our ability to forecast and understand where things are going to be further out. We're also able to have conversations with much more senior executives than we've worked before. A great example is one of our large food delivery customers, a multi-million dollar customer with us, who has been with us for six or seven years. We were stuck at the director level in terms of our conversations for many years.

On the operational side, we've gone through a lot of maturing of our go to market team over the last year.

And I think youre starting to see the results in terms of our ability to forecast and understand where things are going to be further out. We're also able to have conversations with much more senior executives have worked before a great example is one of our large.

Food delivery customers multimillion dollar customer with us had been with us for six or seven years.

We were stuck at the director level in terms of our conversations for many years and we just had a conversation with them about a month ago with the VP of data engineering and that was a completely changed the dynamic they were skeptical of continuing to invest in amplitude in the past because they are like hey, This thing keeps growing in terms of cost.

Spencer Skates: And we just had a conversation with them about a month ago with the VP of data engineering, and that completely changed the dynamic. They were skeptical of continuing to invest in amplitude in the past because they're like, hey, this thing keeps growing in terms of costs without bound, and I don't necessarily know. Yes, it's popular and used by a lot of end users at my company, but I don't necessarily know and understand the value it's driving. We had that conversation. We said, hey, we're going to work through doing an enterprise license agreement so you don't have to worry about how stuff scales and work with you on the pricing side. And then that helped him direct the organization to lean into us. And so it's like those conversations repeated again and again and again. We're focusing on getting into much senior levels, doing executive business reviews, and talking about the value that we're driving on the strategic side. I think the call out is great.

Bound and I don't know necessarily know, yes, its popular and used by a lot of end users that my company, but I don't necessarily know and understand the value. It's driving we had the conversation we said hey, we're going to work through that.

Enterprise license agreements and not to worry about how stop scales and work with them on the pricing side and then that helped him direct the organization to lean in to us and so it's like those conversations repeated again and again and again.

Where we're focusing on getting into much senior levels getting executive business reviews.

Talking about the value that we're driving.

On the strategic side I think the callout is great.

Spencer Skates: I'd point to a few different things. First, while it's early, we do see that customers on multiple products have higher retention rates. And so that's a big focus for us this year, both across experiments, CDP, and now session replay as well, just to get those attaches much higher. As Chris mentioned, non-analytics products are at only 30 million in ARR. So, still, a small portion of our customer base. We have an opportunity to penetrate way more.

I'd point to a few different things. So first while it's early we do see that customers on multiple products have higher retention rates and so that's a big focus for us this year.

Both across experiment CDP now a session replay as well as just to get those attach is much higher.

As Chris mentioned non analytics products are at only $30 million in IRR. So still a small portion of our customer base, we have an opportunity to penetrate way more and the early signs there are that.

Spencer Skates: And the early signs there are that if you do, the retention rate gets significantly better. So that's been very good. The other element I'd talk about is the fact that we launched the plus plan which allows us to take resources and focus them on higher-value accounts. And so instead of running the same go-to-market motion that you do for a multi-million dollar customer with a $10,000 customer, we're starting to specialize it a lot more and introduce things like premium professional services at the high end in order to make sure those customers get deployed and grow with us successfully. So there's a lot, as I've been talking about, we're not happy with where it's at. There's a lot we're doing both operationally and strategically. And as those 2021 and 2022 cohorts finish coming up for renewal, we expect that to get structurally better in terms of our growth. That's super helpful. Thanks. I'll hop back in the queue.

If you do the retention rate gets significantly better. So that's that's that's been very good the other element I talked to is.

The fact that we've launched the plus plan allows us to take resources and focus on the higher value value accounts and so instead of running the same go to market motion that you do for a multimillion dollar customer with a $10000 customer we're starting to specialize it a lot more and introduce things like premium professional services at the high end in order to make.

Sure those customers get deployed and grow with us successfully so theres a lot.

As I have been talking about this we're not happy with where it is that there's a lot we're doing both operationally and strategically.

As those of 2021 and 2022 cohorts finished coming up for renewal, how we expect that to get structurally better in terms of our growth.

Great. That's super helpful. Thanks, I'll hop back in the queue. Thanks, guys.

Great Tyler Radke from Citi.

Spencer Skates: Great. Tyler Radke from Citi, followed by Nick Altman from Scotia. Tyler, go ahead, please.

Followed by Nick Altman from Scotia, Tyler go ahead. Please.

Chris Harms: Yeah, thanks. Yeah. Hey, everyone.

Yeah. Thanks, Yeah.

Hey, everyone. So just starting off on the.

Chris Harms: So just starting off on the quarter, I asked Chris a question about revenue performance being a little bit light on the midpoint of guidance. And I think historically, you typically show some upside relative to that guidance range. So, you know, ARR was solid.

A quarter.

Question for Chris It it looked like the revenue performance.

A little bit light of the midpoint of guidance and I think historically, you typically show some upside relative to that guidance range. So.

It looks like <unk> was was solid so was there anything unusual to call out in terms of linearity in.

Chris Harms: So was there anything unusual to call out in terms of linearity in the quarter, maybe more back-end loaded? And then the follow-up question is, if we just think about the guidance for 2024, with sequential revenue declines in Q2, it does imply a pretty, you know, larger pace of sequential revenue increases in Q3, Q4. Can you just talk about the visibility and confidence you have in the new business side of that? For that to be to play out?

In the quarter, maybe more backend loaded.

And then.

The follow up question is as we just think about the guidance for 2024 with sequential revenue decline in Q2, it does imply a pretty.

Larger pace of sequential revenue increases in Q3 Q4 can you just talk about the visibility and confidence you have in the new business side of that.

For that to be for that to play out. Thanks, Yes, both very fair questions. It's a pretty straightforward answer is as it pertains to Q4 actually any quarter. We do have in period revenue Overages professional services, but.

Chris Harms: Thanks. Yeah, both very fair questions with pretty straightforward answers as it pertains to Q4. Actually, any quarter we do have in-period revenue, overages, and professional services, but it was overages. Overages did not come in at a consistent level with where they had. The plan beat that.

But he was overage its origins did not come in at a consistent level with where it had the plan be to.

Chris Harms: I had woved into the midpoint, but it did not materialize, and we came in about 200,000 below that. It is a small part of our top line, but it did drop off in Q4 below expectations. And then that prompted me to do the postmortem and make sure that I was more appropriately gauging it for how we look at 2020. As it pertains to your second question on the quarter over quarter, the churn that we've identified for Q1 is very backend load. And you know, some of the large ones that we're expecting are actually happening. March 30th, March.

Well then to the midpoint did not materialize when we came in about 200000 below that it is a small part of our top line.

But it did it did drop off in Q4 below the expectations and then Godfrey.

That prompted me to do the postmortem and make sure that I was more appropriately gauging it for how we look to 2024.

As it pertains to your second question on the quarter over quarter.

The churn that we've identified for Q1 is very backend loaded.

Some of the large ones that were expecting are actually happening.

March 30 March 31.

Chris Harms: But that's not the same case in Q2. The ones that we've identified as, you know, really weeding in, those are month one and early parts of month two of the quarter. So while the ARR, the associated churn that we're Conveying is a consistent, consistent number, the timing of when those happen in the quarter and their associated impact is what's in play.

But that's not the same case in Q2.

The ones that we've identified.

As you know really leading in those are month, one and early parts of month two of the quarter.

While the the IRR of the associated churn that were.

Okay.

Convene as a consistent consistent number.

The timing of when those happened in the quarter and their associated impact is what's in play and Yao and I just felt it was appropriate to signal that to you know as part of our color that that's our expectation for Q2.

Chris Harms: And Yao and I just felt it was appropriate to signal that to you now, as part of our color, that those are our expectations. Great. And then just on the second half, you know, anything that you're assuming, I guess, is it consistent with new business assumptions with the first half? And then just to follow up on the spending, so it looks like you are guiding margins to be down from this year. You know, what are the biggest priority areas you're spending on?

Yeah.

Great and then just on the second half.

Anything that you're assuming I guess is it consistent new business assumptions with the first half and then.

A follow up on the.

Spending so it looks like you are guiding margins to be down from this year.

What are the biggest priority areas youre spending on and can you just talk about.

Chris Harms: And can you just talk about, you know, how you think about the pace of medium to long-term margin expansion? Yeah, so let me try to break down the first part of your question. Well, I don't want to get into specifics about new ARR.

How do you think about that.

The pace of medium to long term margin expansion, yes. So let me try to breakdown first part of your question I don't want to get into specifics of of new IRR.

Chris Harms: I will say, look, I have high expectations for how we deliver in the second half of the year, but I haven't built all of those into our topic. As it pertains to the mechanics of churn, let me finish off that prior thought because their impact on revenue in 2024 is obviously very de minimis tied to the Q3 ERR performance. As it pertains to the broader look, kind of read, reemphasizing the point that we've been conveying is that the first half of the year is going to face some anticipated churn that will substantively offset our new A As it pertains to your margin question, look, we are increasing our margin profile from where we finished in 2023.

I will say look I have high expectations for how we deliver in the back half of the year, but I havent built all of those into our top line.

As it pertains to the mechanics of churn.

Let me finish up that prior thought because of their impact on revenue in 2024, obviously.

Very de Minimis type into Q3, our performance.

As it pertains to the broader look.

Kind of a REIT.

Re emphasizing the point that we've been conveying is that the first half of the year is going to is going to is going to face.

Some.

Anticipated churn that will subsequently offset.

Our new <unk> for the first half and that obviously plays a role in the broader broader revenue.

As it pertains to your margin question look we are we are increasing our margin profile from where we finished 2023 we are guiding.

Chris Harms: We are guiding a couple points up in terms of margin expansion. One of the points I did try to call out in the prepared remarks is, Because I look at our business, I look at how we are from a market maturation, when I look at all the things that Spencer alluded to in terms of uplifting the business, getting more focused, you know, I have a lot of confidence. And I tried to convey that in my closing remarks about how we'll be positioned exiting 2024 and heading into 2025 when all of these pieces start to come together.

Points up in terms of margin expansion.

One of the points I did try to call out in the prepared remarks is.

As I look at our business as I look out we are from a market maturation when I look at all the things that Spencer alluded to in terms of up leveling the business getting more focused.

I have a lot of confidence and I tried to convey that in my closing remarks about how we will be positioned exiting 2024 and heading into 2025 when all of these pieces start to come together.

Chris Harms: With that level of confidence, there's a level of investment that I just think is appropriate for the opportunity that's ahead of us and kind of where we are in our maturation. I hit upon those across product innovation, platform expansion, all the things that we've done within PLG, and all the things that we're going to do in PLG in 2024. Now that we've got a much more focused approach to go to market, I think our customer engagement on professional services can be much more effective.

With that level of confidence that at a level of investment.

I just think it's appropriate for the opportunity. That's ahead of us and kind of where we are in our maturation I hit upon those across product innovation platform expansion all the things that we've done with <unk> and all the things that we're going to do in <unk> in 2024 now.

Now that we've got a much more focused go to market I think our customer engagement on professional services can be much more effective Spencer spoke to what we're doing with kind of premium services packages. There I think we can get some value out of those incremental investments, which is why it's getting a little bit of a point drag in terms of range on gross margin and then just in my own.

Chris Harms: Spencer spoke to what we're doing with kind of premium services packages there. I think we're going to get some value out of those incremental investments, which is why it's given a little bit of a point drag on terms of range on gross margin. And then just in my own backyard of the business applications infrastructure and what we can do to further enable Thomas and his team to understand what dials to turn up, and what dials to turn down. I think all of those investments are prudent.

Back yard are the business applications infrastructure and with what we can do to further enable Thomas and his team to understand what dials to turn of what dials to turn down I think all of those investments are prudent and if you look at it in the overall kind of percentage of our cost structure. They are relatively nominal investments on a year over year basis, but I think that the.

Chris Harms: And if you look at them in the overall kind of percentage of our cost structure, they are relatively nominal investments on a year over year basis, but I think they're the right ones to make at this time for the long term. Thank you. Thank you. Next question: Elizabeth Porter from Morgan Stanley, followed by Arjun Bhatia. Elizabeth, go ahead, please.

<unk> wants to make at this time for the long term.

Great. Thank you.

Next question Elizabeth Porter from Morgan Stanley followed by Arjun Bhatia.

Go ahead please.

Spencer Skates: Hey, thanks so much for the question. Really impressive acceleration in new customer acquisition in the total customer count. I just wanted to get some color on how we should think about the pace of ads into 2024. And then additionally, just given a lot of the momentum likely driven by some of those smaller, low-end customers, how do you think about the opportunity to upgrade that customer base? If the character is the quality of those companies, it is very likely that upgrading any color there would be helpful.

Great. Thanks, so much for the question.

Really impressive acceleration in the new customer and that's all customer count I just wanted to get some color on how we should think about that piece of it I think in 2024 and then additionally, just given a lot of the momentum is likely driven by some it is smaller low end customers. How do you think about the opportunity to upgrade that.

<unk> base.

Character is that quality of those companies.

Barry.

Likely tied to upgrade.

Chris Harms: Thank you. That's where you want to take it? Yeah, sure. Yeah, so a total customer account includes both those plus customers and those annual contracted customers, so it can be deceiving as to which bucket is which. I think first on the enterprise side, like I said, a record number of lands there on the high end. And so that was fantastic to see, obviously going to make a, you know, not a huge contribution to the total customer account. So the acceleration really comes from the plus plan.

Color that'd be helpful. Thank you.

Yeah sure Yeah, So we don't add.

The total customer count includes both those plus and those annual contracted customers. So it can be deceiving.

Which bucket is which.

I think first on the enterprise side like I said, a record number of lands there on the high end and so that was fantastic to see obviously going to make are not huge contribution to the total customer count. So the acceleration really comes from the plus plan now.

Chris Harms: Now, I think Most of those customers, obviously, you know, they're going to be paying hundreds, thousands of dollars a month, not the level of our enterprise customers, but we have seen some upgrade over time. And we expect that that'll be a fantastic channel for our enterprise team. I'll add, you'll see that I actually pulled it out of our press release. I didn't want to highlight it.

Now I think.

Most of those customers, obviously theyre going to be paying.

It's thousands of dollars a month not the level that our enterprise customers, but we have seen some upgrading over time and we expect that that'll be a fantastic channel for our enterprise team.

I'll add youll see that actually pulled it out of our press release I didn't want to highlight it.

Chris Harms: We're very focused on the million-dollar-plus customers, increasing from 30 to 39. We're very focused on the $100,000-plus customers, increasing from $480,000 to $511,000. That pool reflects three-quarters of our ARR base, and I think it is central to our long-term success. We know we're going to be able to farm and develop those that are coming into the low, but I don't find the metric to be as insightful as to our progress as it did before we got the PLG motion in a much more, you know, generally available full production environment. So, we're going to continue to share the number. I just... It's not going to be one of my highlight bullets for me yet.

We're very focused on the million dollar plus customers increasing from 30 to 39, we're very focused on the $100000 plus customers increasing from 488 480 to 511.

That pool reflects three quarters of our <unk> base I think is central to our long term success. We know we're going to be able to farm and develop those who are coming into the low but I don't find the metric to be as insightful as to our progress.

As it did before we got the P&G motion it up much more.

Generally available full production environment. So we're going to continue to share the number I just.

It's not going to be one of my highlight bullets in the press release.

Spencer Skates: Got it. And just as a follow-up, now that you're kind of bifurcating the strategy more between the low end and the high end customers, any sort of differences in the competitive landscape that you could speak to at each of those points? That is a great question. I think on the low end, it tends to be, How would I characterize it?

Got it and then just as a follow up now that you kind of bifurcate the strategy more between the low end and high end customers any sort of differences in the competitive landscape that you could speak to at each of those pieces.

That is a great question.

I think on the low end it tends to be.

Let's see how would I characterize it well let me start with the high end first I think that's one more straightforward high end is very greenfield.

Spencer Skates: Well, let me start with the high end first. I think that's a little more straightforward. The high end is very green field.

Spencer Skates: I think you might see previous-generation legacy marketing analytics players like Google Analytics or Adobe, but it's not like when thinking about product analytics and session replay and some of these other pieces of value, it's not. A lot of times, these companies are adopting them, and it might just be you and the RFP or might just be you and one other company. I'd say on the lower end, that's where we see ourselves competing with a lot more point solutions and is a big part of why we released that suite approach as well as the plus plan so that we say, hey, we're gonna provide the most value at the lowest cost. There's no reason not to choose Amplitude as the provider to get started with there.

You might see previous generation legacy marketing analytics players like a Google analytics or Adobe, but.

It's not like when thinking about product analytics session replay in some of these other.

Pieces of value. It is not a lot of times. These companies are adopting it and it might just be you win the RFP or might be you and one other company I would say on the lower end, that's where we see us competing ourselves with a lot more point solutions.

A big part of why we released that suite approach as well as the plus plan. So that we say hey, we are in fact, the most value at the lowest cost.

There is no reason not to choose amplitude as the provider to get started with.

Spencer Skates: Great, thank you. Great. Next question is Arjun Bhatia from Blair, followed by Nick Altman from Scotia. Arjun, go ahead, please.

There.

Okay. Thank you.

Great next question Arjun Bhatia from Blair, followed by Nick Altman from Scotia Ocean go ahead. Please.

Spencer Skates: Yep. Hey, guys. Thanks for taking the question. Maybe if I could start on the turn side of the equation.

Hey, guys.

Thanks for taking the question.

Maybe if I could start on the churn side of the equation.

Spencer Skates: I'm curious, I guess, is this something that you're seeing with your competitors as well? Like, is this more of an industry issue in product analytics where either customers are right sizing or, you know, you have budgetary pressures that are impacting growth? Or is there something you think internal that's driving it?

I'm curious I guess is there something that you're seeing with your competitors as well it gives us more of an industry issue and product analytics, where either customers or right sizing or youre, a budgetary pressures that are impacting growth or is there something you think.

Internal that's.

That's driving it.

Spencer Skates: I guess where are these customers going when they're turning? Yeah, we're not seeing them go to competitors. And typically, as I talked about in the past, a huge chunk of it is right sizing to aggressive spends in that 2021 and 2022 time period. And so all our indicators on the competitive front as we continue to make progress against both the legacy players and the point solutions and continue to grow market share. And so it's just, you know, you've got an overexuberance in 2021. Some of that's coming off, but you still have a great underlying growth rate as you look at where we sit versus, you know, any of those guys in the market. Yeah, I'm going to add it because I think.

I guess, where are these customers going when they are turning yeah, we're not seeing them go to competitors and typically as I talked about in the past it's more.

A huge chunk of it is right sizing to aggressive spends from that 2021 and 2022 time period.

And so.

All our indicators on the competitive front as we continue to make progress against both the legacy players in the point solutions.

<unk> continued to grow market share and so it's just you have gotten over exuberance in 2021, some of that is coming off but he still has a great underlying growth rate as you look at where we sit versus any of those guys in the market.

I'm going to add.

Chris Harms: One of the things we've communicated in Q2, Q3 was that there are two forces that are in play. Spencer just spoke to what we're seeing at the high end, both in digital, native, and traditional enterprises, where we're doing a lot of the right side, which is the nature of what was driving it. Yes, there was some lost churn there, but that's by far the small minor to the major, which has been just partial churns. And a reminder to everyone, we count both partial and fully lost churns in our GDR numbers. The second theme that's there is at the low end, right?

One of the things we've conveyed Q2 Q3 was but there are two forces that are in play.

Spencer just spoke to what we're seeing at the Hyatt both in digital native and traditional enterprises.

We're doing a lot of right size, that's just the nature of what was driving that.

Yes, there was some some loss churn there, but thats by far the small minor to the major which is just partial churns and reminder to everyone like we count both partial and.

And fully loss and our and our GDR numbers. The second theme Thats. There is at the low end the venture capital funded companies.

Chris Harms: It's a venture capital funded company where they are struggling to survive. And I alluded in the prepared remarks that two-thirds of our churn in Q4 was lost churn, but very much driven by what's happening in that venture capital digital native community and as they're struggling to survive. Clearly, that will be a temporary environment that we're going to face at that end of our market, but that too will change, and we look forward to being in a much different position on our execution muscle when those market forces change and getting the most out of that opportunity. Sorry, Arjun, you're on mute.

They are struggling to survive.

And I alluded to in the prepared remarks that two thirds of our of our churn.

In Q4 was loss churn.

But very much driven by what's happening in that venture capital digitally.

Community and as they are struggling to survive and.

Clearly that will be a temporary.

The environment that we're going to face that.

That end of our market, but that too will change and we look forward to Indiana.

What's different position and our execution muscle when those market forces change and take that get the most out of that opportunity.

Yeah.

Sorry, I was on mute, okay, perfect Alright, sorry, yep. Thanks.

Spencer Skates: Yep, perfect. All right. Sorry.

Spencer Skates: Yep. Thanks. That's, that's, that's, that's helpful.

That's helpful.

And then one.

Spencer Skates: And then one, maybe for Spencer, again, just as we're thinking about category evolution, I think there was a time even for Amplitude where we kind of started to go down a different buyer persona into the marketing org. I'm curious if you think that's something that's still inevitable in the product analytics category. And how fast do you think that might occur, both with Amplitude and the broader industry? I think it's a longer-term phenomenon. I mean, we launched a whole bunch on the marketing side, and we've been deliberate about targeting that persona. But most companies we work with, it's still kind of two separate personas and two buying centers, and, you know, they have their own tech stack. So, well, eventually, when I look five, 10 years out, you know, I expect to see it be quite different. In the short term, they're still quite distinct.

Maybe for Spencer again, just as we're thinking about category evolution I think there was a time even.

For amplitude, where we kind of started to go down.

<unk> buyer persona into the marketing Org I'm curious if you think that's something that's still inevitable in the product analytics category.

And how fast do you think that might occur both with amplitude and the broader industry.

I think it's a longer term phenomenon I mean, we launched a whole bunch on the marketing side and we've been deliberate about targeting that persona, but most companies. We work with it's still kind of two separate personas and two buying centers.

Have their own tech stack. So while eventually I look 510 years out I expect to see it be quite different.

In the short term there is still quite distinct now that all said, we want to get ahead of it. So we're doing quite a bit as I mentioned on making sure that we're able to speak to value to that persona.

Spencer Skates: Now, that all said, we want to get ahead of it. So, we're doing quite a bit, as I mentioned, on making sure that we're able to speak to value to that persona and tackle them, and displace a lot of the legacy players. The other thing I'll call out about the suite offering is that I, I, we've always been very aggressive on the innovation front. The part I'm excited about Francois joining is to help us in terms of how he tackles the organization of that innovation so that we can continue. We have four products now; how do we continue to come out with a fifth, a sixth, and a seventh and make sure we win everyone in this broader category by having the best offering in terms of the full platform?

<unk> and displace a lot of the legacy players.

The other thing I'll call out on the suite offering is that it.

We've always been very aggressive on the innovation front.

The part I'm excited about French swatted joined us to.

Help us how in terms of how he tackles, the organization of that innovation. So that we can continue we have four products now how do we continue to come out with the fifth sixth or seventh and make sure. We win everyone. In this product category by having the best offering in terms of the full platform. So.

Spencer Skates: So we're gonna continue to do more there, whether it's to tackle marketing or to tackle some of the other use cases when you think about digital analytics broadly. All right. Perfect. Thank you. Thank you. Last question, Nick Altman from Scotia. Nick, go ahead, please.

We're going to continue to do more there whether it's to tackle marketing are to tackle some of the other use cases, when you think about digital analytics broadly.

Alright, perfect. Thank you.

Last question, Nick Altman from Scotia, Nick go ahead. Please.

Chris Harms: Awesome. Thanks, guys. Um, Chris, you mentioned overages were a bit light in Q4. I guess, how should we read into that exactly? And what is the guidance sort of embed from an overage perspective?

Awesome. Thanks, guys.

Chris You mentioned Overages were a bit light in Q4, I guess, how should we read into that exactly and what does the guidance sort of embed from an overall perspective.

Chris Harms: Yeah, great question. Look, it is a small part of our top line. But when it moves a few hundred thousand in any quarter as an end-period revenue, It can just impact, and it did kind of come in lower than what our historical models had suggested for Q4, which definitely prompted us to update how we were looking at that heading into Q1 and the rest of 2024. But it was one of these where a small part of the equation just moved in a different direction than what our historical trend lines would suggest.

Yeah, Great question look it is a it is a small part of our top line.

But when it moves a few hundred thousand.

In any quarter is an in period revenue.

Sure.

It can just step back and.

Just kind of.

Came in lower than what our historical model says suggested for Q4 was definitely prompted us to update how we were looking at that heading into Q1 and the rest of 2024.

But it was it was one of these where a small part of the equation just moved in a different direction.

Than what our historical trend lines would suggest in terms of the core of your question, what's what's undermining I think are underpinning it it is.

Chris Harms: In terms of the core of your question, what's undermining it, I think, or underpinning it, it is, It's a function of where we are and in both rightsizing contracts. Part of the optimization, the other side of that coin is customers increasing their levels and expanding and upselling in a period where it's now part of the subscription base. And when those happen, and I'm not offsetting any overages, it was just a fine tuning of our model that, you know, I had to take a lesson out of Q4 and apply it. Okay, and just to clarify...

It's a function of where.

Where we are in and both right sizing contracts.

Part of the optimization the other side of that coin is customers increasing their levels in expanding and upselling in the period.

Where it is now part of the subscription base and when those happen and im not offsetting any overages.

Fine tuning to our model that.

And to take a lesson out of Q4 and apply it going forward.

Okay, and just to clarify it.

Chris Harms: The rev of the new guidance for this year, what does that kind of imply from an overage perspective versus this year? Is there sort of not any overages embedded in the guidance? There is, I actually have less overages built into the 2024 guidance than what we deliver in 2026. Okay.

The revenue guidance for this year, what does that kind of imply from an overall perspective versus versus this year. So it's sort of not any overages embedded in the guidance.

There is I actually have less of Enbridge is built into the 2024 guidance than what we delivered in 2023.

Okay and then.

Chris Harms: And then my second one is just, you guys have said that the renewal cohort has been trending sort of above expectations. Churn actually improved a little bit in the quarter, but you're still kind of circling 2Q as potentially a little bit of a higher churn quarter. You talked about a sequential step down from 1Q on the top line. I guess, how much visibility do you guys have into that? And is it isolated to a couple of large customers?

My second one is just.

You guys have said like the renewal cohort has.

It's been trending sort of above expectations churn actually improved a little bit in the quarter.

But you're still kind of circling to Q as potentially a little bit of a higher churn quarter, you talked about a sequential step down from <unk> on the top line I guess, how much visibility do you guys happen to that and is it isolated to a couple of large customers is it a cohort of customers who have.

Chris Harms: Is it a cohort of customers who have, you know, large multi-year deals that they purchased when the macro looked a lot different? Maybe just help us understand the visibility into that 2Q renewal base and why you expect things to get a little bit worse there. Yeah. There are many facets to that question. Let me try to hit them all.

Large multi year deals that they purchased when the macro looked a lot different maybe just help us understand the visibility into that two key renewal base and why do you expect things to get a little bit worse. There are many facets to that question, let me try to hit them all first.

Chris Harms: First, As it pertains to the mix of renewals and expected churn, it's not just Q2, right, it's Q1 and Q2, and I've tried to convey that those are commensurate levels with what we generally saw across Q2, Q3, and Q4 of 2023, acknowledging Q4 was a little lower than Q2 and Q3. So I wanted to clarify that it's not just Q2, but once we get to Q3, we go from an environment where the multi-year contracts are representing 50% of the renewal base to them reflecting less than a quarter of the renewal base. So just a mechanically different environment in Q3 and Q4 in terms of the impact that these can have. Second piece I want to pass on that I wanted to hit upon.

As it is as it pertains to.

The mix of renewals and expected churn, it's not just Q2 Q1 and Q2.

Tried to convey that those are commensurate levels with what we generally saw across Q2 Q3, and Q4 of 2023, acknowledging Q4 was a little lower than Q2 Q3.

So I wanted to clarify its not just Q2, but that once we get to Q3, we go from an environment where.

The multiyear contracts are representing.

50% of the renewal base to them are reflecting less than a quarter of the renewable base. So just mechanically different environment in Q3 Q4 in terms of the impact that these can have.

Second piece I wanted to pass it I wanted to hit upon you heard me to kind of with price for the entire organization is that for.

Chris Harms: You heard me kind of with pride for the entire organization is that for three consecutive quarters, Q2, Q3, Q4, Thomas and his team really had their arms around our churn exposure, and what their leading indicators were suggesting to me came in very consistent with where actuals were. Now, while nobody's pleased with the level of those coming in, I take a very cup-half-full view on that, that we really got our arms around that, which we didn't have when I arrived, right? That was one of the things I tried to highlight in my first turning.

For three consecutive quarters, Q2, Q3, Q4, Thomas and team really had their arms around our churn exposure and what they're leading indicators, we're suggesting to me came in very consistent with where actuals were now while nobody's pleased with the levels of those came in I think a very cup half full view on that that.

We really got our arms around that which we didn't have when I arrived but that was one of the things I.

Tried to highlight in my first earnings call. So as it pertains to our visibility. It is both at an account level very much up and down the stack driven by the kind of account executive ownership culture that Thomas started to drive back in April.

Chris Harms: So as it pertains to our visibility, it is both at an account level, very much up and down the stack, driven by the kind of account executive ownership culture that Thomas started to drive back in April and May of last year that Nate, with his arrival, has continued to drive, and us just being much closer, as reflective of Spencer's anecdote of us getting much closer to the strategic level than just the buyer. So our pulse with our customers as we're going through renewals is much better, and thirdly, our ability to convey the platform in its entirety and the additional capabilities that Experiment, CDP, and now Session Replay could bring is something we're doing to offset that churn, and the team's getting better and better about it. One of them, you know; we still 80% of our customers still are, excuse me, over 80% of our customers are still analytics only.

In may of last year that made with his arrival as continue to drive and us just being much closer as reflective of Spencer's antidote.

We're getting much closer to a strategic level than just the buyer. So are our pulse with our customers as we're going through renewals is much better.

Third facet to it right.

Our ability to convey the platform in its entirety and the additional capabilities that experiment and CDP and now session replay could bring.

It's something we're doing to offset that churn and the team is getting better and better about it.

One of them.

We still 80% of our customers still are assuming over 80% of our customers are still analytics only so we have an opportunity to kind of offset what's ahead of us, but as I said at the core much of it is these large digitally native and traditional company enterprise caught.

Chris Harms: So we have an opportunity to kind of offset what's ahead of us. But as I said, at the core, much of it is these large digitally native and traditional company enterprise contracts that we signed in 21 and 22 that we know are going to get optimized. And we know, or we expect that the role of our SMB venture capital-backed companies is going to continue at a similar pace. So many facets to how we're looking at this many, you know, identifying the maturation we've developed to be able to be better about it.

Tracks that we signed the 'twenty one 'twenty two that we.

We know we're going to get optimized and we know or we expect that the role of our SMB venture capital backed are going to continue at a similar pace. So many facets to how we're looking at this many.

Identifying the maturation.

We've developed to be able to better about it and as I've tried to share since November I think we're just in them.

Chris Harms: And as I've tried to share since November, I think we're just in a, you know, different mechanical situation come Q3 of this year, and I look forward to being able to demonstrate that when we get into that time period. Thanks guys. Great. Thank you. With that, I'm seeing no further questions in the queue. We'll be at the Morgan Stanley Global Technology Conference in March. Details will be posted on the IR website.

Different mechanical.

Situation come Q3 of this year and I look forward to being able to evidence that when we get into that time period.

Alright, Thanks, guys, great. Thank you with that I'm seeing no further questions in the queue will be at the Morgan Stanley Global Technology Conference in March details will be posted on the IR website. Thank you very much for attending our Q4 earnings Conference call. You May now disconnect. Thank you all.

Yaoxian Chew: Thank you very much for attending our Q4 Earnings Conference call. You may now disconnect. Thank you all. Goodbye.

Yeah.

Goodbye.