Spenser Skates : Yes, I mean for sure all of the pieces you just named. So the fact that once customers go through one reset their profile returns to more normal versus the elevated levels, we saw from the 2021 and early ‘22 cohorts. For sure that the kind of 2023 customers renewing at better rates. I think a few other things I’d say, one is we’ve seen Plus be a great channel. So we’ve already seen customers that convert from that to our annual contracted plans. And so that’s fantastic evidence that the win simple piece helps quite a bit. And so we’re getting a high volume of customers as you see in the customer count number. And now that seeds for the future. One other thing I’d call out is the uptick in tax rate of analytics — 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, the more products you on, the more likely you are to retain. And so as that number goes from 19% to 30% to 50% and beyond, expect that to result in revenue acceleration for us as well.
Criss Harms : Yes. So I’m going to add to what Spencer did. You’ll see in that 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 $100,000 of ARR. And those are ones we will be sharing on a quarterly basis because they’re very indicative of the penetration that we’re making in terms of an expansion play in terms of the full platform. And they’re also indicative of what’s taking shape in terms of what is still three quarters of our ARR base, which are larger ACVs north of $100,000. The additional green shoot that was embedded in that metric on the 521 customers that are over $100,000, is it those adds in Q1 were all lands.
So reflective of us very focused on named accounts and making really good footholds into these companies that have significant total potential ARR, that’s another good metric and green shoot that we’re looking at.
Yaoxian Chew : Next question, Rob Oliver from Baird followed by Arjun Bhatia from Blair
Rob Oliver: Great, thanks, yes, I appreciate it. Hi guys, looking forward to the Investor Day later this year, that’s great. So I guess first question, Spencer, for you and in response to Taylor’s question towards the end, you touched on some of the Plus conversions to annual transaction plans. And I wanted to touch on that, obviously really nice customer add number this quarter and I assume that was mostly Plus. Can you talk a little bit about and recognizing that it’s still early, those migrations to annual plans, what you’re seeing within that, what sort of conversion rates or 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 they’re starting to adopt more fully? And then I had a follow up for Criss.
Spenser Skates : Yes, so I think before, again, to your point, Rob, it’s early. So we are not sharing any specific stats around it. I think what we saw before is that, 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 as part of a process, and start paying us $30,000 -$40,000 a year on an annual contract. And that was too big of a jump for many customers. And they wanted to say, is there — are there other ways I can explore getting more value out of Amplitude before having that level of commitment to a conversation with you guys? And the answer is yes, like I mentioned, we’ve seen universities, semiconductor companies, a railroad company sign up on the Plus plan.
And we are going after them to help them understand, okay, here’s the value, if you really deploy on Amplitude. And so it’s just a kind of great way for them to get started and great set on process for us to know who to focus on and who’s serious about trying to get the value out of Amplitude as a platform. So I don’t get — I don’t want any specifics on that. But I think it’s a really helpful bridge. In my opinion, we’re kind of at step one or two out of 10 on that journey. And I think there’s a lot more ways to go. Every quarter that we see, or every month that we go by is a record month for number of Plus sign ups. And so that’s very, very promising. It’s not like we just had a spike, it’s come back down, it’s actually continuing to compound on itself.
And so there’s a lot more to do on that channel as part of going simple.
Rob Oliver: Okay. That’s really helpful. And Criss, 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 super helpful. And it seems like these green shoots are certainly starting to be felt. I wanted to ask specifically about international, which accelerated in the quarter. And if there’s anything to call out relative to international versus North America, if that was a handful of maybe large upsell deals or how to think about maybe trends in international. Thanks.
Criss Harms : Let me do a little homework between now and the callback, be a little bit crisper on that response.
Rob Oliver: Well, first time I’ve ever stumped you. So I’m proud here.
Spenser Skates : 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.
Yaoxian Chew : Next question, Arjun Bhatia from Blair, followed by Tyler Radke from Citi.
Arjun Bhatia: Thanks. Spencer, maybe for you, I thought the auto services company example, the case study that you gave was pretty interesting. The part that stuck out was, I guess when you look broadly at your customer base, how common is it that customers are using you currently for an internal kind of maybe lower tier, if I can call it that, for lack of a better word, use case versus like a consumer facing use case. And I assume if that transition happens, it’s a pretty big expansion for you in an upsell. So can you maybe just touch on that and how, if there are customers that use you internally, how do you get them to flip you on to their main product that’s external consumer facing?
Spenser Skates : Yes, so very, very common notion for us on the enterprise side, where we’ll start out in an internal app. Sometimes it’ll be a mobile app or an acquisition or a new experimental project. So that’s very, very typical for our land notion because moving your analytics, it’s a heavy lift. It’s a system of record for your product and marketing teams. And there’s a lot that goes into, okay, hey, we’re self-serving on, this is a source of truth for daily actives and a whole bunch else. And so it’s not a thing that any business decides lightly on, which is why, hey, let’s try it out on a bleeding edge place in the company works really well. Typically you’ll see, we take about a year or so to prove that out. And then we can then go on to the main products, like the automotive one that I talked about.
So that’s very typical. Sometimes it could be faster. If we prove out value really quickly, sometimes it can be longer. But yes, that’s a very, very typical notion on the enterprise. It’s also part of why that we’re calling out the $100,000 plus customer cohort, because it’s like, we want to distinguish between hey, they’re just trying us out on one of these test things that might be $30,000 or $40,000 or $50,000, versus a real deployment to a significant customer facing app as well. So yes, really important part of our motion.
Arjun Bhatia: Okay, the end is so as in a lot of the — $100,000 customers are going to be external, is that fair?
Spenser Skates : Yes. Almost Yes, almost all of them. Yes, I mean, I need to check. I’m sure there might be to otherwise, but almost all of them. Yes.
Arjun Bhatia: Okay, alright, helpful. And then the other thing, just like when we think about kind of growth reaccelerating and what growth rate Amplitude can ultimately be at, right, one of the things that’s obviously going to be important is expansion. And I understand that two thirds of net new ARR is coming from expansion, but that’s still just given where your ARR is, I think that’s just $2 million to $3 million, roughly, in net new quarter. So when you think about the next year, year and a half, what are the factors that’s going to get that $2 million to $3 million to $8 million to $10 million? Like what how do you accelerate the expansion motion from here?
Spenser Skates : 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 $4 million. It’s that what we’ve called out is elevated churn levels that make that net number a lot smaller than it would be otherwise, our new business both on the land side and the expand side has always been quite strong. I think you’ll probably particularly with like Plus now there and newer ways to get in cheaper and faster and easier. I think you’ll see more companies where we’ll land at those smaller dollar sizes and then grow significantly over time. I think the biggest lever always has been and remains more data and more kind of more coverage of the company. So you go from an internal app to few apps to being standardized on companywide.
And so that most of that customer’s growth journey ends up being from expansions, but you’ll still see large lands that come in as part of it. 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 in Session Replay and experimentation and CDP and more parts of the platform to come that 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 them dropping out of a funnel or a lot of people encountering error, what is it that they’re doing in the app to trigger that? Well, analytics in place, or 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 had this error, let me watch a few sessions, and then instantly you get 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 onto the entire Amplitude platform. And so I think, yes, 19% is obviously very early days and we want to grow that significantly, so it becomes a much bigger growth lever for us.
Criss Harms : I would say I would jump just; I do want to validate what Spencer said in terms of that characterization was our new ARR and emphasize the point that the net is low. Again, really a function of the churn. I wanted to hit upon his point of the platform, recognizing there’s two parts there. It is the how those different products integrate effectively together and deliver a value prop for the different use cases that is much more seamless than tying together point products from various vendors. That’s all from the product perspective, and it’s clearly helping our messaging in the field as we are bringing new customers to the table. There are other things that we’re looking at, both how do we extend that platform with what are the next critical pieces to it, we’re spending a lot of time on, and then the next is just pricing itself, both at the high end about how we think about having our cost to our customers be much less linear with the level of event data that they’re sending us, and on the low end, how do we create much lower barriers to entry with us, both in terms of the event volume that we give them and the associated pricing steps.
Those are very critical factors as we think into ‘25 and beyond about what that slope of our reacceleration could be, and all of those are on top of something I definitely don’t want to lose sight of. 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 name-to-count approach, and then coupling that with a really low cost of customer acquisition on the low end of serving all of those customers that are coming in through our PLG sets a really great foundation for how we layer those pieces on and all of those vectors driving the steep of that reaccelerating growth. Excuse me, the slope of that reaccelerating growth.
Yaoxian Chew : Last two questions. Next is Tyler Radke from Citi, followed by Elizabeth Porter from Morgan Stanley.
Tyler Radke: Yes, good afternoon. Hey, all. I guess first question for Criss, follow-up to that last question. So you were talking about kind of the delta between gross new bookings and expansion bookings and the churn component. I guess how fast would ARR be growing today if churn was at a normalized way and any way just to bridge like in terms of points how far below that normalized level of churn you are today?
Criss Harms : So I do appreciate the question and I have run so the reality that churn is happening, it is impacting our growth rates. We are trying to signal to you when we see that starting to structurally change in the back half of 2024 and then allow us 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 were built into our ARR has been a headwind, I think has hit Amplitude much greater than most of our peer groups, reflective as you’re aware that really high growth rate that the company experienced back in that 2020 and 2021 time frame.
Tyler Radke: Okay, we’ll definitely pay attention at the Investor day for the information you’re going to give us. And then second question I had was just around your commentary on gross margin. And you talked about better utilization, driving lower gross margins, obviously through higher COGS. I wonder if you could just expand on that. Was the 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 renewing it flat? Just talk a little bit about how the utilization throughout the quarter played out.
Criss Harms : Yes, 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 greater the level of utilization, that is one of the indicators for how sticky we are with a customer. It’s also a good calibration of where they are from an event volume that has been purchased and the capacity that’s embedded versus what they’re using. It is making us much more aligned as a part of resetting, as part of these renewals and the optimizations we’ve been going through. 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 at a calibrated level to their current volumes.
Those are very positive. It does though provide a drag onto the gross margin, but I wanted to highlight it was the second driver in terms of what’s a pull on our gross margin. The first is we have been investing in our professional services team. We’ve recognized the value of some of our larger strategic accounts. We’ve recognized the value of some of our accounts where we’re earlier in the journey. They have significant total potential ARR, but 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. Inclusive in that professional services and utilization, it did speak to the drop that we saw from Q4 to Q1. What I want to kind of close with is, look, we still see our gross margin profile consistent with what the levels were we conveyed earlier, which was in that 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 there’s a good rule of thumb about how we see 2024 and beyond. It’s in that 76% to 77% range. I’m happy to take a 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 a gross margin.
Yaoxian Chew : Final question from Elizabeth Porter.
Elizabeth Porter: Great, thanks. Two questions for me. First on the self-service plan, as it ramps, how does remote volume coming through this channel potentially change your unit economics? You just think these customers don’t have the dedicated sales rep, but it sounds like there’s a pretty good opportunity for them to upgrade into larger plans, likely with less friction and less sales sources needed.
Spenser Skates : Yes, it’s great on the unit economics front, 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 were a $10,000 a year customer, or you were a $5 million a year customer. And doesn’t make sense, you want to specialize. So you want to put the human resources on this end to make sure someone is successful and do even more, like we’ve been talking about in professional services, and here you want to automate 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 a great farming ground for those customers to eventually grow into our annual contracted plans. As I mentioned on an earlier question, we’ve already seen that a few times, and we want to continue to grow that so that a lot of our business can come from there in the future.
Elizabeth Porter: Great, and then second question, just on the new demand side. For the new ARR seems like it was split a little bit more towards the land expand versus expand relative to last quarter, I think was a little bit more balanced. So as we look at just the new business demand, how is that trending relative to your expectations? And any sort of changes and trend to call out?
Spenser Skates : It’s too early. I mean 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, and then expanding them over time. But it’s I think it’ll, it just happens to be a few larger deals that happen to be expansions this quarter, like that automotive company, like Rocket Money, and what have you versus other quarters, which may have really sizable lands.
Yaoxian Chew : Great. Thank you. With that, I’m seeing no further questions in queue. We’ll 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.
