Q3 2024 Amplitude Inc Earnings Call

In This Article:

Participants

Yaoxian Chew; Vice President - Investor Relations; Amplitude Inc

Spenser Skates; Chairperson of the Board, Chief Executive Officer, Co-Founder; Amplitude Inc

Andrew Casey; Chief Finacial Officer; Amplitude Inc

George McGregor-Henon; Analyst; BofA Global Research

Brent Bracelin; Analyst; Piper Sandler Companies

Matt Pryde

Willow Ahn; Analyst; William Blair & Company

Jack Nichols; Analyst; KeyBanc Capital Markets Inc.

Elizabeth Porter; Analyst; Morgan Stanley

Clark Wright; Analyst; D.A. Davidson & Company

Presentation

Yaoxian Chew

Hello everyone, welcome to Amplitude's third quarter 2024 earnings conference call. I'm Yaoxian Chew, Vice President of Investor Relations. Joining me are Spenser Skates, CEO and co-founder of Amplitude, and Andrew Casey, Chief Financial Officer.
During today's call, management will make forward-looking statements, including statements regarding our financial outlook for the fourth quarter and full year 2024, the expected performance of our products, our expected quarterly and long-term growth, investments, and our overall future prospects. These forward-looking statements are based on current information, assumptions, and expectations and are subject to risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially from those described in these statements. Further information on the risks that could cause actual results to differ is included in our filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements and we assume no obligation to update these statements after today's call except as required by law.
Certain financial measures used in today's call are expressed in a non-GAAP basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be used in isolation from or as a substitute for financial information prepared in accordance with GAAP. A reconciliation between these GAAP and non-GAAP financial measures is included in our earnings press release, which can be found on Investor Relations' website at investors.amplitude.com.
With that, I'll hand the call over to Spenser.

Spenser Skates

Thanks Yao, and good afternoon everyone. Welcome to our 2024 third quarter earnings call. I'm going to focus on three sections today. First, Q3 financial results and what we're seeing in the market. Second, how we are going after our market opportunity. Third, command AI, continued product innovation, and customer stories. I'm pleased to report that we beat all guided metrics this quarter. Our third quarter revenue was $75.2 million, up 6% year-over-year. Annual recurring revenue was $298 million, up $8 million from the end of the second quarter. Non-GAAP operating income was $1.6 million, or 2.1% of revenue. We now have almost 3,500 paying customers.
In Q3, customers representing $100,000 or more of ARR grew to 567, an increase of 13% year-over-year. We put up a better quarter thanks to execution. This quarter's results are especially encouraging when taking into account the unexpected headwinds from the new Russian sanctions that we discussed on last quarter's call. Here are the highlights.
Our integrated platform approach is uniquely suited for this moment. Customers are looking to us to drive consolidation. Today, 23% of our annual contracted customers use more than one of our products. Our competitive position remains strong, particularly against point solutions and legacy players. One callout this quarter is Google Analytics, whose customers are dissatisfied with its persistent usability problems and unresolved privacy issues. This is creating a long tail of opportunities for Amplitude. We are building a higher quality book of business.
Last quarter, I spoke to promising signals across pipeline and attach rates. We believe the nature of larger sales is changing for the better as we make progress to win the enterprise. We are starting customer conversations differently, reaching key decision makers and demonstrating fast value in ways we weren't before. We saw continued healthy growth in our 100k or more ARR customer base and a stronger mix of multi-year deals this quarter. It's worth noting just how different the nature of these deals is compared to the wins we were seeing a couple years ago. We delivered several million-dollar-plus expansions, the majority of which were multi-product wins. I am again encouraged by the continued green shoots that we have been calling out.
Cohort health continues to improve. Newer customer cohorts are demonstrating healthier gross and net retention patterns. Customer utilization is showing stability quarter to quarter. We are entering Q4 with strong enterprise pipeline and feel confident in our ability to execute. I've said that ARR and revenue re-acceleration are both well within our reach.
This quarter sets us firmly on that path. While we are making progress, there is still plenty of work to do. We are past the significant majority of overbought-to-optimization contracts, but churn is still too high. The macro environment is still choppy. Buyer scrutiny remains high, especially for larger deals. Digital natives remain on the defense, while M&A and layoffs are an unpredictable variable impacting end-user demand. Next, I want to share a quick update on the team.
We hired Wade Chambers as Chief Engineering Officer. Wade has an incredible perspective on what a great engineering organization looks like at scale and will bring that to amplitude. I've talked to many leaders across Silicon Valley who consider Wade to be the best engineering leader working today for this stage of company.
Most recently, he was the CTO and SVP of Engineering at Included Health. Previously, he led engineering at Twitter, Telepart, Proofpoint, Yahoo, Opsware, and Netscape. Wade has been an advisor to Amplitude for eight years, and I have learned a huge amount from him. He has a courageous and first-principles approach to tackling tough challenges. His ability to build and run high-functioning teams will enable us to drive execution at scale. I am thrilled to be working with him.
Moving to product updates. We had a big launch with Amplitude Made Easy in September as part of WinSimple. We rebuilt the Amplitude platform to make it easier for new users to get started. We are now offering users a single line of code to get up and running, auto-capture and visual tagging, default dashboards out of the box, and bundling of session replay and experiment SDKs. We've already begun our enterprise rollout following encouraging signals in our self-service motion.
New self-service sign-ups have increased by 40%. We've also seen a 40% increase in new organizations who are sending data per week. Session replay activation has more than doubled as a result of these changes. We are reducing data frictioning, widening the top-of-funnel, and encouraging multi-product behavior. Our mission is to help companies build better products. Our thesis is that analytics is positioned to be the center of gravity for workflows that touch customer and product data. Without analytics, the rest of the stack is much less useful. Amplitude's platform continues to evolve to serve more users, more workflows, and more outcomes.
To win the digital analytics category, we need to deliver the data and insights customers need and help them take the actions that will drive acquisition, growth, retention, and expansion. We see immense opportunity for AI to let us deliver more customer value.
There are two areas of near-term focus. The first is automated insights, which we can surface to customers proactively without human intervention. The second is automated actions, where Amplitude can recommend and take actions that we know will improve the end-customer experience. More on these to come at a future date.
Our recent Command AI acquisition accelerates this ambition. Teams around the world use Amplitude to gain a deeper understanding of user behavior and build great digital experiences. However, customers are often asking us for more. They want a way to take action to influence or learn more about the trends they're uncovering with their analysis. Command AI does this through form factors like guides to help with onboarding, messages to share in-app announcements, and the ability to get user feedback in real-time through surveys.
Command AI provides intuitive AI-powered user assistance to make complex software easier to adopt and navigate. Their product offers in-product nudges and tours, onboarding guides, and surveys delivered in a way that resonates with users rather than annoying them like these tools all too often do.
Command AI's user-focused approach helps create a customer journey that is personalized and unobtrusive. Users love it because it sets them up to be successful. Companies love it because they can encourage the behaviors they want and help users find value faster. In all our strategic conversations with Command AI, it was clear that there would be strong strategic and cultural fit. Their number one position in the G2 digital adoption platform's ranking is strong validation of market momentum. Their amplitude integration was already one of their most popular integrations they offered. Everything they do is more powerful when combined with our platform capabilities.
Analytics and cohorting add context and targeting for guides. Experiment lets users test which interventions and messages are the most effective. Session replay ties user feedback to end product behavior. These are just a few examples of the power of behavioral data driving the right actions. We expect to release an integrated experience early next year.
Product and behavioral data is important to everyone in an organization. We extended our partnership with HubSpot this quarter, allowing teams to combine the power of HubSpot with Amplitude's customer behavior data. With this latest integration, go-to-market teams can easily track product usage alongside traditional CRM data.
Customers can see Amplitude charts in their HubSpot dashboards and target customer cohorts based on product usage or other key buying signals. Teams can also bring HubSpot data into Amplitude to understand marketing campaign performance. Our own product-qualified leads at Amplitude convert better than the average, and we're excited to bring that power into hundreds of joint customers.
Lastly, we continue to grow our platform with the launch of web experimentation. A-B testing tools are often difficult to use and scale, requiring engineering resources. They lack flexibility and introduce page slowness, which impacts conversion rates. With web experimentation, Amplitude now offers a self-serve way to easily run A-B tests across product features and websites. Visual editing and point-and-click interaction reduces the need for engineering support. We are making it easy for product managers, marketers, and growth leaders to A-B test and personalize web experiences.
Turning to Customers In Q3, we landed and grew with customers like Realtor.com, Playrix, DigitalOcean, Fanatics Commerce, Traveloka, ONAG, Philips, Radio France, Joe and the Juice, and Thomson Reuters. We saw continued success this quarter, displacing multiple-point solutions as customers looked to us to drive vendor consolidation.
Realtor.com helps millions of home shoppers find their dream home. They provide a comprehensive list of for-sale properties nationwide, as well as information and tools to make informed real estate decisions. Amplitude began working with the Realtor.com product team three quarters ago. We delivered fast value by unlocking behavioral insights, democratizing data access, and helping the team ship the right experiences faster. Our initial success helped raise awareness that we could solve larger problems across the organization.
Realtor.com was looking to streamline access to data with a single, unified view of the customer journey to generate actionable insights and better meet consumer needs. By supporting a simplification of Realtor's digital tech stack, we are reducing friction and increasing trust between the marketing, analytics, and product organization.
This win speaks strongly to the opportunity ahead for Amplitude. Our growing platform breadth, combined with an increasing pull outside of our core product persona, shows that Amplitude can be the single pane of glass for our customers' digital needs. We also grew an ongoing partnership with a major global sports organization this quarter. They say that personalized fan experiences are a priority advancing them towards their goal of 100 million paying subscribers, which in turn drive billions of dollars in broadcast rights.
Over six years, Amplitude has grown steadily from powering their direct-to-consumer arm to a far more strategic deployment across the organization. Usability, scalability, and cost frustrations with their legacy MarTech providers had reached a breaking point. In contrast, Amplitude gave their marketing and product teams a shared and unified view of the customer journey to test strategies, target audiences, and tailor content.
This quarter, they are going all-in with every part of our digital analytics platform as part of a three-year agreement. Our footprint across their organization continues to grow as we are being implemented across dozens of teams and subsidiary leagues. We believe this marks the start of a larger shift in workflows off their legacy MarTech providers towards Amplitude. Their forward-thinking approach is great validation of our platform vision. We see many similar situations out there and think this can open more opportunities for MarTech replacements with other enterprise clients. DigitalOcean, a leader in cloud services, has partnered with Amplitude to revolutionize their marketing and product-led growth strategies. DigitalOcean is looking to build an entirely new muscle in product-led growth. Previously, DigitalOcean relied on a disjointed toolkit, Looker for reporting on Snowflake and Pendo for user insights. This required data analyst work, which limited both broader team accessibility and the ability to take action.
By consolidating onto Amplitude, DigitalOcean has been able to streamline their processes, eliminate fragmentation, and enable comprehensive data analysis. DigitalOcean aims to derive specific insights related to user onboarding, feature adoption, and engagement metrics. With Amplitude, they can more efficiently analyze user behavior on their cloud platform and pinpoint bottlenecks in onboarding flows to enhance the user experience.
I've been very intentional about repeating these three statements. First, our thesis is that analytics is the center of gravity for any workflow that touches customer and product data. Second, product and behavioral data is important to everyone in an organization.
Third, product innovation is the biggest driver of long-term growth and shareholder value for Amplitude. Nothing has changed about our long-term opportunity. We remained well-positioned to win the category as the convergence of buyers and budgets across product, marketing, and experience continues. We have a unique position to be the platform leader that drives continued consolidation of fragmented tooling and legacy offerings.
I've said before that we are going to drive re-accelerating growth for Amplitude regardless of the macro environment. We are on that path and will keep executing with urgency. We are not here to build a single-digit growth business.
Thank you for your interest and amplitude. I'd now like to turn it over to Andrew to walk you through the financial results.