Q1 2024 Amplitude Inc Earnings Call
Hello, everyone welcome to Aptitudes first quarter 2024 earnings Conference call I'm Yeltsin Chu Vice President of Investor Relations. Joining me are <unk>, CEO and co founder of amplitude and Criss harms the Companys Chief Financial Officer.
During today's call management will make forward looking statements, including statements regarding our financial outlook for the second quarter and full year 2020 for 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 a sub.
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.
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 are 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 statements and measures have limitations and should not be used in isolation from or as a substitute for financial information.
Repaired in 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 <unk> amplitude dot com with that I'll hand, the call over to Spencer.
Spencer: Thanks, Al and good afternoon, everyone.
Spencer: Welcome to our 2024 first quarter earnings call.
Spencer: I'm going to focus on three topics today.
Spencer: First our Q1 financial results and the latest views on macro.
Spencer: Second how we are going after our market opportunity third continued product innovation and customer stories.
Spencer: Let's start with the Q1 financial highlights.
Spencer: Our first quarter revenue was $72 6 million up 9% year over year Andy.
Spencer: Annual recurring revenue was $285 million up $4 million from the end of the fourth quarter.
Spencer: We now have almost 3000 paying customers up 37% year over year.
Spencer: Results exceeded the midpoint of guidance, we gave last quarter and in part reflect the efforts we've made to focus our investments over the past year.
Spencer: Macro conditions remain consistent.
Spencer: Still challenges out there as companies continue to right size their digital investments in VC backed startups continue to cut back to survive.
Spencer: We believe we have our arms around the magnitude of these changes and have appropriately accounted for them in our revenue guidance.
There is growing evidence to support our view that these headwinds are temporary.
New era has been holding steady as the need for digital analytics remains consistent.
Spencer: We see green shoots and emerging catalyst to growth acceleration.
Spencer: We are getting closer to flushing out the worst excesses of the pandemic surge.
Spencer: We're seeing more conversations with many customers, who realize they need to future proof the way they approach their digital analytics journey.
Spencer: We remain at the beginning of a generational shift how people view understand and use their customer and product data point solutions and legacy technology are limited they offer a fragmented user experience and provide an incomplete picture of customer behavior.
Spencer: The digital experience is one of the most important channels that all businesses can control it as the repository of first parter party customer behavior and intent.
Spencer: Actions speak louder than words, what people do with your product is more important than anything. They tell you. We are going after a multibillion dollar addressable opportunity and believe we remained incredibly well positioned to win the category as the convergence of buyers and budgets across product marketing and experience continues.
Spencer: Everyone wants to understand their customers better amplitude tells you exactly what your customers do and how they behave across the entire customer journey.
Spencer: Many of the largest and fastest growing companies care deeply about acquisition retention and monetization and view amplitude as their first call.
Spencer: You've heard me speak to progressively up leveling our go to market efforts across many dimensions over the last year as we look to win the enterprise.
Spencer: I've shared how we've aligned around a more defined approach to account ownership and engagement I've talked about how newer leaders are driving discipline and rigor, helping us think bigger and elevating our customer relationships.
Spencer: We're not just doing the basics better. We've also brought focus to the way we sell to drive stronger unit economics for different customers.
Spencer: We launched the self serve offering for the lower end of the market and Ive been Resourcing, our sales motion with the named account focus.
Spencer: Amplitude plus is our self serve offering but less customers of all maturity levels try before they buy.
Spencer: Our <unk> motion continues to gain momentum this helps us scale, our offering in a more cost effective way.
Spencer: Plus is attracting a diverse range of customers beyond the startup in <unk> SaaS players. We expected. We're also seeing railroads universities and semiconductor companies find out.
Spencer: These users are trying amplitude for the first time and they represent a tiny fraction of the addressable user base out there.
Spencer: It has only been one quarter since we instituted our named account approach, but we are seeing increased impact across the organization as a reminder, our CRO Nate and team at half the number of target accounts, while growing targeted high potential account dollars by 50%.
Spencer: This approach will take time to mature, but we are seeing some early promising signs.
Spencer: There is greater traction for our professional services portfolio through the named account model. We're also seeing early signals of improvement across pipeline and customer health that we believe can translate to better efficiency metrics.
Spencer: When it comes to renewals, we've talked before about multiyear contract customers, who are right sizing their spend common theme across software optimizations as expected churn was still at an elevated level in the first quarter.
Spencer: There is an important observation that's worth noting as we work our way through these pandemic cohorts. These relationships are actually healthier post renewal.
Spencer: We are now more aligned with our customers' current growth ambitions utilization relative to capacity purchased is also at more balanced levels for customers, who have optimized with us one time the majority of the associated <unk>, either renewed flat or grows off of that base.
Spencer: Speak with customers all day long and I believe were being set up for long term success and ways that we previously were not.
Spencer: We're aligning with senior executive buyers at the VP and C level as well as multiple champions.
Spencer: We're driving higher level conversations that are much more aligned with value and business outcomes. We're attaching services driving more use cases across our entire platform and positioning to economically scale with their future growth.
Spencer: Finally, I want to focus on the work being done to innovate on our digital analytics platform, both improving our current offerings and bring new solutions to market.
Spencer: Product innovation is the biggest driver of long term growth for amplitude other companies in our space have dramatically scaled back their ambitions pare down their teams and reduced product velocity.
Spencer: We are taking the opposite approach, we're making bigger bolder bets, our chief product officer Francois is strategically organizing our strong intimate patient muscle.
Spencer: We continue to see validation that our platform approach is the right one.
Spencer: Traditional enterprise companies don't want a patchwork of disjointed point solutions. They want one end to end platform that covers all of their digital analytics needs.
Spencer: They don't want to waste money on duplicative tools. Most importantly, they want deep customer insights. So they can impact the metric that matters most revenue.
Spencer: Today, 19% of our annual contracted customers use more than one product up from 14% at the same time last year customers, who use more products retained better.
Spencer: There remains a very real opportunity for us to expand the platform grow cross sell and displace point solutions.
Spencer: Our thesis is that analytics is the center of gravity for any workflow that touches customer and product data.
Spencer: Without analytics the rest of the stack is much less useful we bring data insight and action together in ways that no other solution Ken.
Spencer: We are expanding our platform session replay is off to a nice start in its first few months as a reminder, session replay helps our customers reconstruct our user visit by capturing how they interacted with the website app or digital experience.
Spencer: It is a tool commonly used by product marketing and data teams to understand user behavior diagnose product issues and improve outcomes. The majority of session replay wins to date are competitive displacements of an existing point solution.
Spencer: In contrast, we almost never see companies transition from amplitude analytics to another session replay provider that has an analytic solution.
Spencer: We are leaning into win simple across our product organization.
Spencer: To accelerate growth, we are reducing barriers to entry.
Spencer: We have to bring the power of amplitude to everyone regardless of their technical expertise.
Spencer: We focused on radical simplicity as a core differentiator.
Spencer: Made major improvements to our entire product experience to help accelerate finding in landing new customers by releasing a one line of code implementation as the default onboarding experience for starter and plus users.
Spencer: We're already seeing a 30% increase in activation for that group from some of those early changes we've made.
Spencer: We have ambitious goals, we want to reduce our sign up process down to seconds, and then deliver a customers first while within minutes there is more to do.
Spencer: Turning to customers.
Spencer: Rocket money, a leading personal finance App is a great case study for how amplitudes digital analytics platform can drive incredible business outcomes.
Spencer: By understanding user behavior patterns and changes rocket money was able to identify inconsistency in the Prost experience in lockers to user success. They made changes so that iOS Android and web users followed the same customer journey.
Spencer: They also added functionality so that every segment of users could easily upgrade to premium.
Spencer: Changes boosted customer lifetime value significantly and estimated by rocket to drive millions of dollars in revenue a year.
Spencer: In Q1, we landed and grew with companies like the castle on Etsy are Golia woop tickets swap Berta health, the browser company MEO Wolf and cowardly.
Spencer: One big win this quarter is calendar scheduling platform with more than 20 million users around the world.
Spencer: <unk> needed a source of truth for clean accurate data to activate on and its previous analytics provider had become a black box in Q1, <unk> selected amplitude analytics and CDP is it centralized source of truth for customer data and activation.
Spencer: With a consolidated tech stack town Li will have more control over its data governance privacy and security. Its team will also have a deeper understanding of the customer journey. So it can improve its primary growth levers, including customer activation monetization and retention.
Spencer: We also won the browser company best known for its new arc browser. The browser company had been using sequel infrastructure for user analytics, but it encountered bottlenecks and data access as the team grew.
Spencer: Several members of their leadership team came from companies that used amplitude and a strongly advocated for the browser company to adopt multiple parts of our platform.
Spencer: With amplitude the browser company will now have a better databased way to make key decisions and improve its user experience.
Spencer: Lastly, one big expansion this quarter is with one of the worlds largest automotive services providers for car shoppers dealers and lenders prior to 2024 amplitude primarily worked with its BTB team.
Spencer: And the last year, there was a major company effort to have product and data teams roll into centralized leadership under the chief product officer, we.
Spencer: We've seen this move happened at other companies too as more businesses understand the growing importance of product and the need for an aligned tech stack to solve for customer 360.
Spencer: Understanding customer 360 for them it means meaning to piece together the disparate digital journeys from the moment our cars purchased from auction to its listing process to inventory loading to customer website traffic and all the behavior associated thereafter is a huge problem to solve from beginning to end amplitude was built from first principles to solve this very proper.
Spencer: We expanded to their consumer organization this quarter, displacing Google analytics, and another point solution due to scalability depth of analysis platform breadth now leaders for more than 20 business units will rely on amplitude you've understand their customers and inform every product decision.
Spencer: Before I hand, it over to Chris I want to emphasize that our opportunity to lead the digital analytics category remains unchanged.
Spencer: We remain focused on what we can control I am not satisfied with our current growth profile and we are not standing still on.
Spencer: On everyone to know that we are driving focus to set ourselves up for accelerating growth.
Chris: Our platform approach is differentiated and are resonating, we're driving healthy new business and taking market share. We continue to be relentless about driving innovation. We are almost through the cycle of right sizing renewals green shoots continue and we see more pockets of strength and weakness I'm incredibly excited about what's ahead.
Spencer: With that thank you for your interest in amplitude I'd now like to turn it over to Chris to walk through the financial results.
Chris: Sensor and thanks to everyone joining us today.
Chris: It's been just over one year since I joined with this coal marking my fifth earnings call.
Chris: Told you throughout that we are intentionally shaping our focus across go to market and product at amplitude to position ourselves for re accelerating growth to drive more operating leverage at scale.
Chris: We're making progress and I believe today's results.
Spencer: Early evidence that we're moving in the right direction.
Spencer: Now onto our first quarter results.
Spencer: As a reminder.
Spencer: All financial results, but I will be discussing with the exception of revenue our non-GAAP.
Spencer: Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release supplemental financials on our IR website.
Spencer: As Spencer said first quarter revenue was $72 6 million up 9% year over year, and total air or exiting Q1 increased to $285 million, an increase of 9% year over year and $4 million sequentially.
Spencer: There are more details on key elements of the quarter.
Spencer: New IRR was about one third land and two thirds expanded.
Spencer: Primarily reflective of better internal execution and our enterprise business.
Spencer: Churn dollars as expected and as incorporated into our full year guide ticked up quarter to quarter.
Spencer: The number of customers, representing $100000 or more or they are in Q1 grew to 521, an increase of 6% year over year.
Spencer: In period and are are dropped to 97% and inner or on a trailing 12 month basis declined sequentially to 99%.
Spencer: We continue to believe that the worst excesses of the pandemic surge embedded in our <unk> will be in our rearview mirror shortly.
Spencer: For customers, who have optimize where those one time majority of the associated IRR, either renews flat where grows off that base.
Spencer: Gross and net retention patterns for customers acquired in the second half of 2022 onward continue to show better dynamics than those from 2000 22021.
Spencer: And lastly, underlying utilization trends across our largest customers continue to improve slightly quarter to quarter.
Spencer: Which is also impacting gross margin.
Spencer: Gross margin was 76% for the first quarter up two percentage points year over year and down one percentage point from Q4.
Spencer: Investments in enterprise related professional services and the higher utilization rates relative to the capacity purchased resulted in a sequential margin downtick.
Spencer: Total operating expenses were $58 million.
Spencer: Hub.
Spencer: Four percentage points year on year.
Spencer: Employee payroll taxes and seasonal events like our sales kickoff contributed to higher opex spending this quarter.
Spencer: Operating profit was a negative $2 1 million or 3% of revenue.
Spencer: Which represents a nine percentage point improvement on a year over year basis.
Spencer: Net income per share was <unk> <unk> based upon 139 million fully diluted shares compared to a loss of <unk>, the $114 4 million shares a year ago.
Spencer: Free cash flow in the quarter was negative $1 1 million or negative 2% of revenue, which represents a seven percentage point improvement.
Spencer: On a year over year basis.
Spencer: Now onto our own.
Spencer: For the second quarter of 2024, we expect Q2 revenue to be between $71 $772 3 million, representing an annual growth rate of 6% at the midpoint.
Spencer: We expect a non-GAAP operating loss between four four and $3 8 million.
Spencer: We expect non-GAAP net loss per share to be between negative <unk> <unk> and <unk>, assuming basic shares outstanding of approximately $122 $5 million.
Spencer: For the full year reflective of our Q1's, new <unk> achievement, coupled with the churn coming in at projected levels. We are raising our full year revenue outlook to be between $292, five and $295 5 million in annual growth rate of 6% to 7%.
Spencer: We are holding our outlook for non-GAAP operating income between negative $1 million and positive $2 million.
Spencer: And we expect to be profitable on a non-GAAP net income basis with per share non-GAAP net income to be between seven.
Spencer: <unk> assuming shares outstanding of approximately $133 5 million as measured on a fully diluted basis.
Speaker Change: Here's more color for your modeling purposes.
Speaker Change: We continue to expect churn to remain at elevated levels for at least another quarter and we reiterate that we have incorporated those levels of churn into our full year revenue guidance.
Speaker Change: As we've characterized previously a primary driver to these elevated levels of churn or the multi year contracts from 2021 and 2022 being optimized.
Spencer: We continue to expect in period <unk> to remain below 100% and NR to trough in the mid Ninety's This year.
Spencer: We continue to expect year over year <unk> growth to trough in Q3 of this year in the mid single digits.
Spencer: We continue to expect to be free cash flow positive for the full year as we were in 2023.
Spencer: What a difference a year makes we remain hard at work on improving the business and investing in key areas that we believe will eventually lead to re accelerating growth.
Speaker Change: I am increasingly confident of the path, we are setting for ourselves through 2024 and beyond with that I will open for Q&A over to you <unk>.
Speaker Change: Great.
Speaker Change: Telling your microphone and camera and limit yourself to one question and one follow up in the interest of time. Our first question comes from <unk> of Bank of America, followed by Brent <unk> from Piper <unk> go ahead. Please.
Speaker Change: Yeah, Hey, guys. Thanks, so much for taking the questions.
Speaker Change: Maybe a question for Chris here, just wanted to dig in on the E. R. R.
Brent: In the quarter, you guys added $4 million that is a bit lower than the prior two quarters.
Brent: But as you stated in your prepared remarks, you know clearly there was a bunch of pandemic are renewals coming up in the first half of this year. So just just wanted to dig in a little bit on this net new.
Brent: <unk>.
Speaker Change: But it did it come in as expected here just thinking about the renewals versus Upsells is there anything we should be thinking about within that net new <unk> that wasn't in the prepared remarks.
Speaker Change: Well it definitely came in above what we had modeled into our revenue guidance. We shared in February and I think if you recall from.
Speaker Change: The transcripts from that thoroughly timeframe I've signaled a zero net <unk> for the quarter so coming in.
Speaker Change: A $4 million was it over achievement relative to that.
Speaker Change: Got it no. Thank you and so we've heard from a lot of other software companies over the past few weeks and.
Speaker Change: And definitely heard.
Speaker Change: He is calling out SMB weakness out there, but when I look at your guys' metrics.
Speaker Change: The customer count.
Speaker Change: Customer growth there.
Speaker Change: Thinking about the plus plan for smaller customers or just thinking about how what you guys are seeing out there from the SMB front.
Speaker Change: Yeah I'll take that.
Speaker Change: On the SMB side, so first.
Speaker Change: Obviously focus on winning the enterprise.
Speaker Change: And what we've seen on the SMB side is the release of plus has allowed us to be meet those customers, where they're at and allowed a lot more customers come on board as you've seen in the plus customer count numbers.
Speaker Change: I think.
Speaker Change: There continues to be headwinds on SMB.
Speaker Change: But over time, we expect a larger proportion of our customers to be on the enterprise and traditional companies segment and so for US it's less about extracting the most dollars out of SMB, but it's it's about okay. How can you get them started on amplitude and when those folks go to larger companies or become larger companies get acquired by larger companies.
Speaker Change: The revenue from the enterprise segment so.
Speaker Change: We haven't.
Speaker Change: I would say macro has been very consistent it's been tough for the last year in that segment that continues to be the case, we're not planning on seeing any changes in that.
Speaker Change: And so for US, it's just making sure we went out with those customers with where their app versus maximizing the dollars on our revenue.
Speaker Change: I also just wanted to comment on what you said on the four previously.
Speaker Change: Building on what Chris said on that.
Speaker Change: Obviously, you know I wouldnt be putting up numbers way way stronger than $4 million and net.
Speaker Change: As we've talked about before.
Speaker Change: And expect to as we accelerate our growth.
Speaker Change: As we've talked about before the churn levels from contract resets from 2021 and 2022.
Speaker Change: Have we're expecting to get to that.
Speaker Change: The bulk through the bulk of those.
Speaker Change: As we pass Q1, and Q2 and get into the second half of this year and so I'm really looking forward to that.
Speaker Change: Thanks, guys. Thanks for taking my questions.
Speaker Change: Next question of Brent <unk> from Piper followed by Jackson Ader from Keybanc. Brent go ahead. Please.
Brent: Thank you and good afternoon.
Brent: I'll start with you Chris here, we've seen our <unk> backlog growth decline for a couple of years now.
Brent: But this quarter reversed a little bit.
Brent: It looks like <unk> growth is not high but back to growth after being negative last quarter, what drove the improvement in backlog this quarter.
Chris: Was there some anomalies that <unk>.
Chris: To do this quarter or do you think maybe that one metric is starting to kind of reverse here. Thanks.
Chris: So.
Speaker Change: To remind you I don't spend a lot of time looking at the <unk> I do focus on the AOR and would encourage everyone to continue to focus on AUR, but I will speak to the dynamic that you just raised.
Chris: You recall prior comments that I made is that our renewal base is more heavily weighted towards Q1 and Q2 than it is in Q3 and Q4, it's very reasonable for me to expect the <unk> in aggregate to increase as we enter Q2 and Q excuse me Q1, and Q2 and I would expect it to have a little.
Chris: Bit of downward pool in the Q3 and Q4 now I expect that historical renewal base somewhat shift as we mature and get a larger footprint into the enterprise space are reflective of their more Q3, and predominantly Q4, our buying patterns, but that's what we're seeing today.
Speaker Change: Helpful Color and then maybe it's Spencer for you.
Spencer: Trying to think through potential.
Spencer: Potential levers that could accelerate the business you clearly have some new products that you can control new.
Speaker Change: Product line growth initiatives that are in your control one of the debates out there in the software land is when does AI start to show up at the application layer and so my question here is on AI, but not a product AI question more of a industry driver question. We're hearing a lot of these.
Speaker Change: Asian companies do experimentation with AI features the UX is going to be quite different as you think about layering in large language model are you seeing any of your customers that are now starting to lean in on AI start to either.
Speaker Change: Show increasing volume commitments.
Speaker Change: As they do experimentation do you think ultimately amplitude could benefit as more and more of these application companies PW applications companies start to layer in lodging or models or not and Brian just to make sure I understand what youre, saying I mean, there's a few different ways first it's like if they have more and usage.
Brian: From their customers, because hey, we created a chat bot theres a lot more engagement that sending us more data is that what you're talking about are you talking about amplitude itself, having AI capabilities that drive a bunch of <unk>.
Brian: Yeah, I'll go about end users and any sort of like acceleration you might see based on more application companies leaner and these these AI features yes.
Speaker Change: Sure I think so.
Speaker Change: What we've seen with every wave of technology disruption is that that's been an accelerant to the amount of data that gets tracked for your end users and the need for something like an amplitude. So when we first founded that wave was mobile.
Brian: And then the whole rise a SaaS kind of coincided with some of our largest customers today are SaaS companies, we saw that with crypto and now we're starting to see that with AI and all the workflows on that.
Brian: I'd say to be companies that have a strong help or like.
Brian: Like our support component that's that uses chat with agents, we've seen some upticks from that.
Brian: And then it kind of goes back to if you look at AI native companies.
Brian: Desperately need us and so that's why you've seen mid journey character, a whole bunch of others adopt amplitude and so absolutely. That's a that's a growth lever for us the more people spend time on in the digital world. The better that is for us because that means that's where your customers are and you want to optimize that journey. So now that all said I want to be really.
Brian: It's early for a lot of these companies I think I've probably seen.
Brian: Three or four companies on the <unk> side that have a real AI offering them in a lot of people just brand, they're stuffed with AI, but the percentage of value driven through that workflow is minimal. So it's early days for it.
Speaker Change: That consists of what we see thank you so much.
Speaker Change: Thanks, Brian next question Jackson Ader from Keybanc, followed by Nick Altman from Scotia Jackson go ahead. Please.
Jackson Ader: Hey, guys. This is Michael the Diavik off of Jackson, Thanks for taking my questions here.
Jackson Ader: So on renewals they've been a large part of your story as of late so I guess could you just speak to the different factors at play that you're looking at but I guess, we'll drive customer renewals to come in better or worse than you expect in the next year here.
Speaker Change: Yes, so the.
Jackson Ader: On the renewal side I mean, we've obviously talked a lot about.
Speaker Change: The customers, who bought in 2021 and the early part of 2022 that are resetting their contracts is just part of what a renewal where the customer size went from $2 5 million to $1 9 million.
Speaker Change: Cause they add over bought in 2022, and we're looking to reset that now that customer expects to grow with us here on out and that's like a onetime pandemic, a reset where people had over projected the 2021 growth rates forward without realizing that theyre going to reset to normal levels.
Speaker Change: So that's the biggest driver behind the elevated churn levels that we're seeing in both Q1 and Q2 of this year.
Speaker Change: The early indicators are that once that happens our customer is much more likely to renew flat on the subsequent renewal or even grow.
Speaker Change: And then.
Speaker Change: I think the other thing that we see is from customer cohorts in 2023 and beyond while it's early obviously, we're only one quarter into those renewals.
Speaker Change: Are significantly stronger and more like our kind of 2019 cohorts and before which had much higher gross and net dollar retention.
Speaker Change: Great and then just make sure I understand you didn't see any change in upsell down seller churn dynamics this quarter compared to <unk> right.
Speaker Change: It was elevated so we called out it was elevated because we have a significant number of customers who are Q are renewing in Q1 or Q2 on the large customer side, yes.
Speaker Change: I think it's worth adding.
Speaker Change: Since last May we have been calling out an expectation for an elevated level of churn for US Q2 of last year Q3, Q4, continuing into Q1 of this year continuing into Q2.
Speaker Change: With the two drivers being the multiyear contracts getting optimized for the dynamics that smiths or just sit upon.
Speaker Change: And then the the VC startups rate cutting our solution just to survive.
Speaker Change: What we've tried to profile is that we will be in a structurally different place as we enter into Q3 of this year. We will have worked our way through most of those multiyear resets that we will be in a structurally different place in an expectation.
Speaker Change: Notably reduced churn from the levels that we've been experiencing for those.
Speaker Change: Prior quarters and in the first quarter, including this upcoming Q2 as we enter into Q3 and Q4.
Speaker Change: Well add is we haven't changed our assumptions in terms of VC kind of startups of them exiting out of our <unk> base that I think consistent with what you've been hearing from some of our peers is that we don't know where that endpoint is going to be and so therefore, we have not built.
Speaker Change: Any improvement in terms of that part of our churn.
Speaker Change: For the lower end of the market into our revenue guide for the year and our and our outlook for the topline those I think are the two dynamics to embrace.
Speaker Change: Great. Thanks, guys.
Speaker Change: Great next question, Nick Altman from Scotia, followed Vitellin Mcginnis from UBS go ahead. Please.
Speaker Change: Hi, This is John <unk> on for Nick Aman, Thanks for taking my question.
John: Can you talk about the factors that pressured NR and whether there are any drivers gender or that is improving are holding up better than ever.
Speaker Change: There's another thanks.
Speaker Change: So there are two factors the first one by far is the role that churn is playing in bringing down our GDR and obviously then the impact it has on it.
Speaker Change: And with the more macro conditions of budgets have been getting tighter or expand motion has not been operating at the same levels. It was when we were up north of 120%.
Speaker Change: Combination of those two factors have clearly brought us down. So we've tried to signal to you is where we feel that trough is going to be in a sense about where that trough.
Speaker Change: The level I think we quoted in the prepared remarks kind of the mid nineties.
Speaker Change: Inclusive in that but we will be in a fundamentally different place.
Speaker Change: As we've talked about in Q3.
Speaker Change: And then the other thing to highlight is we did talk about the new IRR that we brought in this quarter that it was about two thirds driven by expand.
Speaker Change: Gives you a sense of the magnitude of the churn that we're working through as part of this reset of the optimization because we did continue to trend down at.
Speaker Change: All of those we continue to convey we see trough ing in the very near term and having us positioned for a much cleaner level of Reacceleration now the degree of that Reacceleration is something we will convey later in the year in our Investor Day, We talk about our long term model then we will talk through the drivers about how we.
Speaker Change: I would see that.
Speaker Change: That growth rate developing over the coming years.
Speaker Change: Got it and I think you mentioned the pipe you saw the pipeline is improving.
Speaker Change: You talk about what exactly you're seeing there.
Speaker Change: I'll, let spencer speak about pipeline.
Spencer: We've put a lot of work into pipeline.
Spencer: It's still early days on that and so, particularly on the enterprise side, there's been a change in named account focus where we've had the number of accounts, we're focusing on and focusing on accounts with very high potential value.
Spencer: And so that's been a change across the sales and marketing team.
Spencer: And so we've been kind of through one quarter of operationalized that already seeing improvement in.
Spencer: Or just kind of aggregate quantity of pipeline, but again, that's a that's a very early and Thats just an early indicator and so proof will be as we go through this year.
Speaker Change: Great. Thank you great question Ted.
Speaker Change: Mcginnis from UBS, followed by Rob Oliver from Baird tailored go ahead. Please.
Robert Cooney Oliver: Yeah, and Chris Thanks, so much for taking the time. This evening. So alright, Chris you meet you mentioned this a little bit earlier, but I just want to double click on it. So you made two comments one is that you feel like youre getting close to getting through the peak COVID-19 renewal, but also that youre seeing VC backed companies sell cutting so how do we think about those two dynamics.
Chris: As we move throughout the year. So are we getting to the point, where it can start to normalize. After Q2, you are willing to be hampered by some of the.
Speaker Change: Smaller companies cutting and I guess, what I'm, just trying to get at it or are you seeing a smaller company optimizations get worse anything where the same because that an additional headwind just how do we think about that in terms of our recovery, Yes, now understood. Let me start here alright.
Speaker Change: Beginning Q2 of 2023.
Speaker Change: Four quarters.
Speaker Change: That just completed with Q1, we've really had our arms around churn our ability to understand our customers, where we are in a likely resets that were going to happen. While they were large and that obviously is hard for us real positive side as we've got our arms around it and we're modeling it correctly.
Speaker Change: As I look into Q2, Q3, and Q4, the rest of the year I expect us to continue to repeat that pattern I think we have our arms around and we're building our expectations with roll of that churn into our top line.
Speaker Change: I wanted to convey.
Speaker Change: As it pertains to the optimization.
Speaker Change: We're expecting that to decrease considerably from.
Speaker Change: The levels that we've been which will culminate in Q2 down into Q3.
Speaker Change: We have not done is changed our outlook for improvements in that VC backed side of churn that's built into our renewal base.
Speaker Change: That we have.
Speaker Change: We have not modeled any any improvements in the full year revenue guide that we've provided kind of reflects.
Speaker Change: The trend lines that we've seen and our.
Speaker Change: Again pretty pretty good view about what those expectations are Q2, Q3, and Q4 and their associated impact on our topline.
Speaker Change: Perfect and then on a sensor maybe one for you I'd love to understand you mentioned like seeing Green shoots right I'd love to understand that dynamic a little bit more so as you look at some of the newer land that you guys have had more recently or if you look at some of the post optimization renewals can you talk about that being flat to up like have you seen.
Speaker Change: Seen any inflection in those either in size or number of <unk>.
Speaker Change: Products that people are incorporating that giving you guys comfort that once you get beyond this period of tougher renewals that you could see healthy growth on the back of that.
Speaker Change: Yeah, I mean for sure all of the pieces you just name. So the fact that once customers go through one reset their profile returns to more normal.
Speaker Change: Versus the elevated levels, we saw from the 2021 in early 'twenty two cohorts for.
Speaker Change: For sure that the kind of 2023 customers renewing at better rates I think a few other things I'd say one is.
Speaker Change: We've seen plus V. A great channel. So we've already seen customers that convert from that to our annual contracted plans within so thats fantastic evidenced that the wind simple piece helps quite a bit.
Speaker Change: And so we're getting a high volume of customers as you see in the customer count number.
Speaker Change: Now that that seeds for the future.
Speaker Change: One other thing I'd call out is the uptick in attach rate of analytics apps of non analytics products. So now up to 19%, which is fantastic and while it's early on that those that cohort of customers. We see they tend to have higher gross and net retention characteristics as well.
Speaker Change: The more products you on the more likely you are to retain and so as that number goes from 19%.
Speaker Change: $30 million to $50 million and beyond expect that to result in revenue acceleration for us as well.
Speaker Change: So I'm going to I'm going to add to expenses.
Speaker Change: Youll see in the quarterly those two metrics that we haven't been sharing on a quarterly basis. The first was the one Spencer just alluded to in terms of the percentage of our customers with more than one product as part of the platform and the other is the customers that are over 100000 of <unk>.
Speaker Change: And those are ones, we will be sharing on a quarterly basis, because theyre very indicative of the penetration that we're making in terms of an expansion play in terms of the full platform.
Speaker Change: They are also indicative of whats taking shape in terms of what is still three quarters of our Aurora base, which are larger.
Speaker Change: Cvs North of 100000.
Speaker Change: Additional green shoot that was embedded in that metric on the 521 customers that are over 100000 is it.
Speaker Change: Those ads in Q1 were all lands.
Speaker Change: So reflective of us very focused on named accounts and making really good footholds into these companies that have significant total potential IRR. That's another good metric and green shoots that we're looking at.
Speaker Change: Yes, very interesting. Thanks, so much I appreciate the color. Thanks Taylor.
Speaker Change: The next question, Rob Oliver from Baird, followed by Arjun Bhatia, Rob go ahead, great. Thank you I appreciate it guys looking forward to the analyst or Investor Day later this year that's great.
Speaker Change: So.
Robert Cooney Oliver: I guess first question Spencer for you in <unk>.
Robert Cooney Oliver: In response to Taylor's question towards the end you touched on some.
Robert Cooney Oliver: Some of the plus conversions to annual trend transaction plants and I wanted to touch on that obviously really nice customer add number this quarter and I assume that was mostly plus and then can you talk a little bit about recognizing that it's still early those.
Robert Cooney Oliver: Migrations to annual plans, what youre seeing within that what the conversion rates are use cases, you're seeing are these people dabbling competitively with other products or are you starting to see that as customers get up and running on amplitude that theyre starting to adopt more fully and then I had a follow up for Chris Yeah.
Chris: So I think before again to your point, Rob. It's early so I'm not we're not sharing any specific stats around it I think what we saw before is that.
Speaker Change: So we have a very generous free plan, but then once you hit the limits of that free plan. The first jump was hey talk to a salesperson is part of the process and start paying a $30 $40000 a year on an annual contract.
Speaker Change: And that was too big of a jump for many customers and they wanted to say is there are there other ways that can explore getting more value out of amplitude before having that level of commitment to a conversation with you guys.
Chris: And the answer is yes.
Chris: I mentioned, we've seen universities semiconductor companies a railroad company sign up on the plus plan.
Chris: We are going after them to help them understand okay. Here's the value if you really deploy an amplitude and so its just a kind of a great way for them to get started and great set on process for us to know who to focus on and who is serious about trying to get the value out of amplitude as a platform. So I don't.
Robert Cooney Oliver: Again, I don't want any specifics on that but I think it's a it's a really helpful Bridge.
Robert Cooney Oliver: My opinion, where kind of that step one or two out of 10 on that journey and I think there is a lot more ways to go every quarter that we see or.
Robert Cooney Oliver: Every month that we go by as a record month for a number of plus sign ups.
Robert Cooney Oliver: And so that's very very promising it's not like we just had a spike it's come back down and it's actually continuing to compound on itself and so theres a lot more to do on that that channel is part of when simple.
Robert Cooney Oliver: Right. Okay, that's really helpful and Chris just one for you on geographic but first of all you've been very deliberate in your communication around this going back to last year and it's it's super helpful.
Robert Cooney Oliver: It seems like.
Robert Cooney Oliver: Green shoots are certainly starting to be felt I wanted to ask specifically about international.
Chris: Which accelerated in the quarter and if there's anything to call out relative to international versus North America.
Chris: A handful of maybe large upsell deals or how to think about maybe trends in international.
Speaker Change: Let me, let me do a little homework between now and the call back.
Christopher: Christopher on that response.
Christopher: First time I've ever stumped yourself.
Speaker Change: Here, what I will jump in on that is that I want to actually give huge kudos to all of our sellers in the EMEA region, they've done a phenomenal job the last few quarters and huge credit to those folks on the ground for you for all of you listening so.
Speaker Change: Great. Okay. Thanks, a lot guys I really appreciate it great.
Speaker Change: Great next question Adrienne button blood flow by Tyler Radke from Citi. Arjun go ahead. Please.
Speaker Change: Thanks.
Speaker Change: Spencer.
Speaker Change: Right.
Tyler Maverick Radke: Auto services Company. An example, the case study that you gave was pretty interesting.
Arjun Rohit Bhatia: The part that stuck out was I guess when you look broadly at your customer base, how common is it that customers are.
Arjun Rohit Bhatia: Using you currently for an internal kind of maybe.
Speaker Change: Lower tier if I could call it that for lack of a better word to use cash versus like a consumer facing use case.
Speaker Change: I assume if that transition happens that's a pretty big expansion for you in an up sell so can you maybe just touch on that and how if there are customers that use them internally, how do you get them to.
Speaker Change: Flip you on to their to their main product that's external consumer facing yes.
Speaker Change: Yes.
Speaker Change: So very very common motion for us on the enterprise side, where we'll start out in an internal app.
Speaker Change: Sometimes it'll be a mobile app or an acquisition or.
Speaker Change: New experimental project. So that's very very typical for our land motion.
Speaker Change: Because <unk>.
Speaker Change: Moving your analytics.
Speaker Change: He left it's a system of record.
Speaker Change: For your product and marketing teams and Theres a lot that goes into okay. Hey, we're self serving on this as a source of truth for daily Actives and a whole bunch Allison so.
Speaker Change: It's not it's not a thing that any business decides slightly on which is why the halos try it out on a bleeding edge.
Speaker Change: And the company it works really well.
Speaker Change: Typically you will see.
Speaker Change: We take about a year or so to prove that out and then we can then get go onto the main products like they wanted the automotive one that I talked about so that's that's very typical sometimes it could be faster if we prove out value really quickly sometimes it can be longer.
Speaker Change: But yeah. That's that's a very very typical motion on the enterprise also part of why that we're calling out the 100 K plus.
Speaker Change: Customer cohort because it's like we want to distinguish between hey, there just trying us out on one of these test things that might be 30, or 40, or 50, K versus a real deployment to a significant customer facing app as well so yeah really important part of our motion.
Speaker Change: Okay.
Speaker Change: So as in a lot of the 100 K customers theyre going to be external is that fair yes.
Speaker Change: Almost yes, almost almost all of them.
Speaker Change: I need to check I'm sure there might be a two otherwise, but almost all of them. Yes, okay helpful and then.
Speaker Change: The other thing just like when we when we think about.
Speaker Change: Kind of growth re accelerating and what growth rate amplitude can ultimately be one of the things, that's obviously going to be important as expansion and.
Speaker Change: I understand that two thirds of.
Speaker Change: Net new <unk> coming from expansion, but that's that's still you know just given where your <unk> I think that's just $2 million to $3 million roughly in that quarter. So when you think about the next year year and a half.
Speaker Change: What are the factors that's going to get that.
Speaker Change: Two to 3 million to eight to 10 like how do you accelerate the expansion motion.
Speaker Change: From here, so first just to be clear the gross number on both the new landed business as well as the expansion business is obviously a lot bigger than four.
Speaker Change: It's that what we've called out as elevated churn levels make that net number a lot smaller than.
Speaker Change: And then it would be otherwise our new business both on the land side and the expand side has always been quite strong.
Speaker Change: I think youll, probably particularly with like plus now there and newer ways to get in cheaper and faster and easier I think youll see more companies, where we'll land at those smaller dollar sizes, and then grow significantly over time.
Speaker Change: The biggest lever always has been and remains <unk>.
Speaker Change: More data and more.
Speaker Change: Kind of more coverage of the company. So you go from an internal lapped a few apps to being.
Speaker Change: <unk> standardized on companywide.
Speaker Change: And so that.
Speaker Change: Most of that customer's growth journey ends up being from expansions, but youll still see large lands that come in as part of it.
Speaker Change: I think the other really big lever I'm excited about is the platform piece because there's just so much value in these other.
Speaker Change: In session replay and experimentation and CDP and more parts of the platform to come that.
Speaker Change: Become a lot more valuable when combined with analytics. So as an example in the session replay side one of the most common use cases is to understand user error. So if you have a lot of people all of a sudden dropping out of a funnel or a lot of people encountering error.
Speaker Change: What is it that theyre doing in the app to trigger that well with analytics in place.
Speaker Change: Sorry, if you don't have analytics in place, it's actually quite a bit of work to try to find a session where a user had an error, whereas if you do have analytics in place very easy you click to give me a group of users that have this error, let me watch a few sessions and then instantly you've got it I mean, we've used that we see a lot of our customers using it and so that's why we see a lot of players switching off of point solutions on.
Speaker Change: To the entire amplitude platform and so I think yes.
Speaker Change: Yes.
Speaker Change: 19% is obviously very early days and we want to grow that significantly so it becomes a much bigger growth lever for us.
Speaker Change: Okay Awesome very helpful. Thank you.
Speaker Change: Let me jump in just.
Speaker Change: I do want to validate with Spencer said in terms of that characterization was our new <unk> and emphasize the point that the net is low again really a function of the churn.
Speaker Change: You hit upon his point of the platform recognizing there's two parts. There is the how those different products integrate effectively together and deliver a value prop for the different use cases to this much more seamless and tying together a point products from various vendors.
Speaker Change: So from the product perspective, and it's clearly helping our messaging in the field as we are bringing new customers to the table.
Speaker Change: There are other things that we're looking at how.
Speaker Change: How do we expand extent excuse me how do we extend that platform with what are the next critical.
Speaker Change: Critical pieces to it we're spending a lot of time on.
Speaker Change: And then the next is just the pricing itself both at the high end about how we think about having our cost to our customers a much less linear with the level of event data that they are sending us and on the low end, how do we created much lower barriers to entry with us both.
Speaker Change: Of the of that volume that we give them and the associated pricing steps. Those are very critical factors as we think into 'twenty five and beyond what that slope of our re acceleration could be.
Speaker Change: All of those are on top of something I definitely don't want to lose sight of.
Speaker Change: Our refocusing efforts in 2023 within go to Mark to take the things that we do really well and focus a lot more of our resources around them as exemplified by the named account approach and then coupling that with a really low cost of customer acquisition on the low end of serving all of those customers are coming.
Speaker Change: Through our PMG since a really great foundation for how we layer those pieces on and all of those vectors driving steep of that re accelerating growth.
Speaker Change: Certainly the slope of that re accelerating cool alright, perfect. That's helpful. Thank you Chris Great Love two questions next is Tyler Radke from Citi, followed by Elizabeth photo for Boeing suddenly Tyler go ahead. Please.
Tyler Maverick Radke: Yeah, Good afternoon, Hey, al.
Tyler Maverick Radke: I guess first.
Tyler Maverick Radke: Question.
Tyler Maverick Radke: For Chris.
Tyler Maverick Radke: A follow up to that last question. So you were talking about kind of the delta between gross.
Chris: New bookings in expansion bookings and the churn component I guess, how fast would be.
Chris: Be growing today.
Chris: Was that a normalized way in any way just to bridge like in terms of points, how how far below that that normalized level.
Chris: Churn.
Chris: You are today.
Speaker Change: So I do appreciate the question and I have run several pro forma to get somewhat of a surge, but let's just focus on the reality of it that churn is happening it is impacting our growth rates. We're trying to signal to you when we see that starting to structurally change in the back half of 2024, and then allow us.
Chris: When we get to that Investor day to really then talk about what the future is ahead of us instead of kind of restating. The past clearly it played a role clearly the pandemic excesses that we built into our <unk> has been a headwind I think has hit amplitude much greater than most of our peer groups reflective as to as Youre aware.
Chris: That really high growth rate that the company experienced back in that 2020 in 2021 time frame.
Speaker Change: Okay, well, we'll definitely pay attention at the Investor day for the information you can give us.
Speaker Change: Then second.
Speaker Change: And I had was just around your commentary on gross margins and you talked about better utilization.
Speaker Change: Driving.
Speaker Change: Lower gross margins obviously.
Speaker Change: Through higher Cogs.
Speaker Change: I Wonder if you could just expand on that.
Speaker Change: With utilization ahead of your expectations and I guess, if that's the case does that give you a little bit more confidence that these contracts can tilt more towards expansion as opposed to.
Speaker Change: Renewing at flat, just just talk a little bit about how the utilization.
Speaker Change: Throughout the quarter played out.
Speaker Change: So there are definitely multiple facets to this topic, let's talk about the one that we find to be very positive first and then I'll hit the others, which is the.
Speaker Change: The greater the level of utilization that is one of the indicators for how sticky we are with the customer. It's also a good calibration of where where they are from an event.
Speaker Change: That has been purchased and the capacity thats embedded versus what they're using it as it is making us much more aligned as a part of resetting.
Speaker Change: As part of these renewals and the optimizations, we've been going through.
Speaker Change: It puts us in a much better place with our customers as we tried to indicate in the prepared remarks about how we move forward with them.
Speaker Change: Calibrated level to their current form.
Speaker Change: Those are very positive.
Speaker Change: It doesn't provide a drag onto the gross margin, but I wanted to highlight it was the second driver in terms of of what's what's a pull on our gross margin. The first is we have been investing in our professional services team. We have we recognize the value of some of our larger strategic accounts, we recognize the value of <unk>.
Speaker Change: For accounts, where were earlier in the journey. They have significant total potential and are are we want to make them as successful as we can as quickly as we can to unlock that expansion muscle that we've just been discussing.
Speaker Change: Inclusive in that professional services and utilization.
Speaker Change: Did speak to the the drop that we saw from Q4 to Q1.
Speaker Change: What I wanted to kind of close with this but we still see our gross margin profile consistent with what the levels, where we conveyed earlier, which was <unk>, 76% to 77% range now there will be quarters, where we're going to be over that range and there will be quarters, where we will be below that range, but is a good rule of thumb about how we see.
Speaker Change: 2024, and beyond it's in that 76% to 70 southern range I'm happy to take our gross margin percentage point, if it's unlocking our ability to drive the top line and both of those to me are really positive indicators that we're on a right track, even though it is a little bit of a drag to gross margin.
Speaker Change: Alright, thank you.
Speaker Change: Great and final question from Elizabeth <unk>.
Elizabeth: Go ahead. Please great. Thanks, two questions for me first.
Elizabeth: First on the self service plan.
Elizabeth: Ramps, how does more volume coming through this channel potentially change in the economics.
Elizabeth: These customers don't have the dedicated sales it sounds like there's a pretty good opportunity for them to upgrade it.
Speaker Change: Larger, France likely with less friction.
Speaker Change: Yeah.
Speaker Change: Yeah, it's great on the unit economics front.
Speaker Change: Because of exactly what you called out I think if I were to go back a few years one of our biggest places. We were immature was we were running the same sales motion, whether you're a $10000 a year customer or your 5 million dollar a year customer and doesn't make sense you want to specialize so you want to put the human.
Speaker Change: <unk> on this and to make sure someone is successful and do even more like we've been talking about in professional services on here you want to automate.
Speaker Change: So that you have much better economics on acquiring customers and so that's exactly what we've done and so I think it would be a much much cheaper way to service those customers I do want to call out obviously the revenue from it is actually it's small it's not really meaningful versus our overall base. The reason we have it is because it's.
Speaker Change: Great farming ground for those customers to eventually grow into our annual contracted plans. We've as I mentioned on an earlier question, we've already seen that a few times in <unk>.
Speaker Change: We want to continue to grow that so that.
Speaker Change: A lot of our business, Ken Ken can come from there in the future.
Speaker Change: Okay, and then second question just on the new demand side.
Speaker Change: New <unk> seemed like it was split a little bit more towards the land and expand yeah relative to last quarter, I think a little bit more balanced.
Speaker Change: So I think looking at the new Biz jet demand, how is that trending relative to your expectations and any sort of changes in trend.
Speaker Change: Call out.
Speaker Change: It's too early.
Speaker Change: It'll vary quarter to quarter, it's too early to say, hey, we're going to be heavier I mean, I think over the very very long term, you'll probably see us landing customers smaller and smaller.
Speaker Change: And then expanding them over time, but.
Speaker Change: I think it'll it just happens to be a few larger deals that happened to be expansions. This quarter like that automated company like rocket money and what have you versus.
Speaker Change: Other quarters, which may have really sizeable lance.
Speaker Change: Thank you so much thanks Louis great.
Speaker Change: Great. Thank you with that and I'm seeing no further questions in queue will be at the Bank of America Global Technology Conference and Baird's 2024, Global consumer Technology and services conference in June details will be posted on our IR website. Thank you very much for attending our Q1 earnings you may now disconnect.
Speaker Change: Okay.