Yaoxian Chew: Great. Next question Arjun Bhatia from Blair followed by Nick Altmann from Scotia. Arjun, go ahead please.
Arjun Bhatia: Maybe if I could start on the churn side of the equation. 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 rightsizing, or you have budgetary pressure or impacting growth, or is there something you think internal that’s driving it? I guess where are these customers going when they’re turning?
Spenser Skates: Yes. We’re not seeing them go to competitors. And typically, as I talked about in the past, a huge chunk of it is rightsizing to aggressive spends from that 2021 and 2022 time period. And so all are 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 you’ve got an over exuberance 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 any of those guys in the market.
Criss Harms: I’m going to add because one of the things we’ve conveyed Q2, Q3 was, look, there are 2 forces that are in play. Spenser 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 rightsizing. That’s just the nature of what was driving that. 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 reminder to everyone like we count both partial and fully lost in our GDR numbers. The second theme that’s there is at the low end, right? It’s the venture capital-funded companies where they are struggling to survive. And I alluded to in the prepared remarks that 2/3rds of our churn in Q4 was lost churn.
Very much driven by what’s happening in that venture capital, digital native community and as they’re struggling to survive. And 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 in our execution muscle when those market forces change and get the most out of that opportunity.
Yaoxian Chew: Sorry, Arjun, you’re mute.
Arjun Bhatia: Yes. Perfect. All right. Sorry. Yes, thanks. That’s helpful. And then one maybe for Spenser 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?
Spenser Skates: 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 is still kind of 2 separate personas and 2 buying centers and they have their own tech stack. So while eventually, I look 5, 10 years out, I expect to see it be quite different. In the short term, they’re 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 and tackle them and displace a lot of the legacy players. The other thing I’ll call out on the suite offering is that, we’ve always been very aggressive on the innovation front.
The part I’m excited about Francois to join is help to us in terms of how we tackle the organization of that innovation so that we can continue. We have four products now, how do we continue to come out with the five and the six and seven and make sure we win everyone in this broader category by having the best offering in terms of the full platform. So we’re going to 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.
Yaoxian Chew: Last question, Nick Altmann from Scotia. Nick, go ahead please.
Nick Altmann: Awesome. Thanks, guys. Criss, 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 overage perspective?
Criss Harms: Yes. 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 in-period revenue, it can just impact. And it did kind of came 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 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, I think are underpinning it. It’s a function of where we are 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 to our model that had to take a lesson out of Q4 and [indiscernible] going forward.
Nick Altmann: Okay. And just to clarify, the revenue 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?
Criss Harms: There is, I actually have less overages built into the 2024 guidance than what we delivered in 2023.
Nick Altmann: Okay. And then my second one is, you guys have said like 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? Is it a cohort of customers who have large multiyear 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?
Criss Harms: Yes. Many facets to that question, let me try to hit them all. 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 want to clarify, it’s not just Q2. But once we get to Q3, we go from an environment where the multiyear contracts are representing 50% of the renewal base to them reflecting less than 1/4 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 what I want to hit upon. You heard me kind of with [indiscernible] for the entire organization is that for 3 consecutive quarters, Q2, Q3, Q4, Thomas and team really have 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 is pleased with the levels those came 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. 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, May of last year. Then, Nate, with his arrival has continued to drive and us just being much closer as reflective of Spencer’s anecdote, we are getting much closer to a strategic level than just the buyer.
So our pulse with our customers as we’re going through renewals is much better. Third facet to it. Our ability to convey the platform in its entirety and the initial capabilities experiment in CDP and now Session Replay could bring is something we’re doing to offset that churn and the team is getting better and better about it. 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 contracts that we signed in ’21 and ’22 that 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, meaning identifying the maturations that 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 a different mechanical situation to come Q3 of this year. And I look forward to being able to evidence that when we get into that time period.
Yaoxian Chew: 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 our IR website. Thank you very much for attending our Q4 earnings conference call. You may now disconnect.
Spenser Skates: Thank you all.
