Amplitude, Inc. (NASDAQ:AMPL) Q3 2023 Earnings Call Transcript

Patrick Schultz: Okay, very helpful. Just a follow-up to from Chris, maybe. You guys have done a great job improving profitability in the past quarters and appreciate some of the color you provided on 2024 and not trying to push for guidance here. But how are you thinking about the trade-off between investing for growth as the macro stabilizes, as you anniversary some of those customer renewals relative to ongoing margin improvement? Just want to get a better understanding of those trade-offs?

Christopher Harms: Yes. No, look, you’ve heard me say I have huge conviction in the market opportunity that’s ahead of us. I have huge conviction in the operational changes we’re making that will be even in a better position to execute upon. I think we have great growth potential as we work our way through this. And I look forward to helping enable Thomas and team to drive a lot of that. If given the choice, we’re going to lean towards growth and reinvesting into our organization. We think it’s a really sizable market opportunity that’s emerging, that’s converging in the existing legacy ones. We want to be really well positioned to be the dominant player in the long term. That’s where we’re going to focus.

Patrick Schultz: Awesome. Appreciate it.

Yaoxian Chew: Great. Next question, Rachel [indiscernible] from Blair followed by Taylor McGinnis from UBS. Rachel, please.

Unidentified Analyst: Yes, thank you. And appreciate you taking the question. The customer example you guys gave of the deployment was interesting. I’m curious if you’re seeing more existing customers leveraging CDP to consolidate the stack, or if it’s still mostly resonating with new customers?

Spenser Skates: Sorry, Rachel, what was that last part, if it’s mostly what?

Unidentified Analyst: Resonating with new customers.

Spenser Skates: It’s a big play on existing customers. So I mentioned that out of the 20 folks at our customer advisory board, all 20 were interested in some capabilities beyond analytics. For some that was CDP, for some that was experiment, for some that was what we had on session replay. And so, yeah, we see huge growth potential within our existing customer base by allowing them to use the full suite of software, not just the analytics portion and consolidate existing point players. So the wall-to-wall deployment was a great example of that. Midjourney was another great example of that where they bought the whole suite out of the box. So we’re seeing it both with our existing customers and with new ones.

Unidentified Analyst: Awesome. Just a follow-up on that. Is there any other changes you need to make on the go-to-market motion to improve the cross-sell? Is it more just waiting for those recent changes to continue materializing?

Spenser Skates: I mean, there is, we are continuing, I think there is quite a bit of education of the team that we’re working on. So we’ve done things like training on some of our new offerings, including an experiment. We trained an experiment a quarter or two ago. We’re training on CDP now when we do a launch of session replay. We’re going to have to train the field on that. And so then, from there, customers will have to understand. We have these and then adopt them when the right point and time comes in their buying cycle. So obviously, it’s not just you flick a switch and then all of a sudden the entire customer base adopts. It’s a whole process, but we’re well underway with it. And the thing I’m excited about is just it’s very promising.

Almost, I was just talking with our president, Thomas, who came back from Asia for a two-week trip out there. Every single customer he talked to was interested in one of the new offerings. So it’s just, I think, again, a lot of validation of our thesis on the category convergence, a lot of validation of our ability to upsell them. Now we actually have to go and do it, but all the ingredients are there.

Unidentified Analyst: Great. Thank you.

Yaoxian Chew: Great. Next question from Taylor McGinnis, followed by Michael Vidovic from KeyBanc. Taylor from UBS. Go ahead, please.

Taylor McGinnis: Yes. Hey, Spenser and Chris. Thanks so much for answering my question and taking the time. The first one is just, if I look at the gap between annualized revenue and ARR, it looked like it narrowed a bit in the quarter. And then also, if I look at CRPO and Total RPO, I think those were both down sequentially. So was there any deterioration that you might have seen in terms of macro or maybe there was something on the churn side with a larger customer that might have explained some of that at the end of the quarter?

Christopher Harms: Well, on taking the annualized revenue of where we finished June 30th and dividing it by four and adding $3 million in change, it’s usually a pretty good proxy for what our Q3 revenue is going to be, even though I explicitly guided it. And similar mechanics are in play for Q4, right, taking our September 30th ARR, divided by four and kind of adding $3 million for the overages and pro-services that we do routine. That’s probably a pretty good proxy to kind of validate that and really rationalize the relationship between the ARR and the revenue. As it pertains to the role of RPO, like that’s definitely a reflection of the second half of the year having a smaller renewal base. It has a reflection of those multi-year contracts kind of weaving their way through.

It’s just the mechanics of the RPO timing, both from a total RPO, kind of a current RPO, as those one-year contracts again are more concentrated in the first half of the year. I wouldn’t read anything more on the RPO than just those mechanics of the cyclical nature between H1 and H2.

Taylor McGinnis: Perfect. And then, Chris, I know you talked about the level of renewals being pretty similar over these next couple quarters, but in just in terms of the composition of them, I’m hoping you can give a little bit more color there. So as we think about what could happen to optimization levels versus what we’ve seen, any thoughts that you can give on the level of VC-backed companies that might be in that, some of the more challenged verticals, how that looks for larger customers versus smaller customers, anything composition-wise that you can share?

Christopher Harms: Well, the composition point that we’ve been discussing is those are the multi-year, and that those were the ones that had the highest natural inclination for some resetting and some optimization, and that the levels we have for Q4 is relatively commensurate with where we’ve been in Q3 and Q2, and it’s relatively commensurate with where we will be in Q1 and Q2, and that will drop off fairly considerably when we get into Q3 of next year. As it pertains to the other slices, I haven’t really given more on those. Other than to give you the flavor, I can lean very heavily or much more heavily on the work that Thomas, Dan, Nate, and team have done around our operational rigor and having much more clarity about, within those risk profiles, much closer to the accounts, up and down a larger stack, being much more precise on our trend forecasting, which is one of the other things I tried to allude to.