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    Amplitude Inc (AMPL)

    Q1 2024 Earnings Summary

    Reported on Mar 24, 2025 (After Market Close)
    Pre-Earnings Price$9.26Last close (May 9, 2024)
    Post-Earnings Price$9.49Open (May 10, 2024)
    Price Change
    $0.23(+2.48%)

    What went well

    • Amplitude's platform approach is driving increased cross-sell opportunities, with 19% of customers now using more than one product, up from 14% the previous year. Customers using multiple products exhibit higher gross and net retention, indicating potential for future revenue growth through expansion within existing accounts.
    • The company is seeing early positive signs ("green shoots") such as improved pipeline and customer health, and expects elevated churn from prior contract resets to subside in the second half of the year, setting the stage for growth acceleration.
    • The rise of AI technologies is expected to increase the need for digital analytics as companies track more user interactions, representing a potential growth opportunity for Amplitude. AI-native companies are already adopting Amplitude's platform.

    What went wrong

    • Elevated churn is impacting growth rates, with churn levels expected to remain high for at least another quarter. The company acknowledges that churn is happening and is affecting their ARR growth, largely due to contract resets from 2021 and 2022. ,
    • Net Retention Rate (NRR) has decreased significantly, dropping from above 120% to the mid-90s due to elevated churn and reduced expansion activities. The expand motion is not operating at the same level as before, contributing to the decline in NRR.
    • The SMB segment continues to face headwinds with no near-term improvement expected. Macro conditions have been tough for the last year in the SMB segment, and the company does not anticipate any changes soon.

    Q&A Summary

    1. Churn Impact on Growth
      Q: How will churn affect future ARR growth?
      A: Churn has been a significant headwind, particularly from customers who overbought during the pandemic in 2021 and 2022. These contracts are resetting, leading to elevated churn levels in Q1 and Q2. However, management expects churn to decrease considerably after Q2, positioning the company for improved growth in the second half of the year.

    2. Net Revenue Retention Trends
      Q: What's driving changes in net revenue retention (NRR)?
      A: Elevated churn and tighter customer budgets have brought NRR down from over 120% to the mid-90s. While expansion remains strong, churn is impacting overall NRR. Management anticipates NRR to trough soon and improve as churn decreases in the latter half of the year.

    3. Signs of Growth Acceleration
      Q: Are there indications of accelerating growth ahead?
      A: Yes, management notes "green shoots" such as customers returning to normal spending after contract resets. The attach rate of non-analytics products has increased to 19%, indicating potential for revenue acceleration as this grows. Additionally, 521 customers now have over $100,000 in ARR, with recent additions being new lands, reflecting a focus on high-potential accounts.

    4. Gross Margin Considerations
      Q: Why did gross margins decrease, and what is the outlook?
      A: Higher customer utilization is driving increased COGS, which impacts gross margins. While this leads to a slight decline in gross margin percentage, currently in the 76%-77% range, it indicates stronger customer engagement. Management is willing to accept this trade-off to unlock top-line growth.

    5. Self-Service Plus Plan Growth
      Q: How is the Plus plan affecting unit economics and growth?
      A: The self-service Plus plan improves unit economics by automating customer acquisition without dedicated sales reps. While revenue from this channel is currently small, it's a promising farming ground for future upgrades to annual contracts. The company is seeing record numbers of Plus sign-ups, which bodes well for future growth.

    6. Impact of AI Adoption
      Q: Is AI adoption among customers benefiting Amplitude?
      A: Each technological shift, including AI, increases data tracked and the need for Amplitude's solutions. AI-native companies are adopting Amplitude, but it's early days with few B2B companies having significant AI offerings yet. As AI adoption grows, it is expected to be a growth lever for the company.

    7. Pipeline and Enterprise Focus
      Q: How is the sales pipeline developing, especially in enterprise?
      A: The company has refocused on named accounts with high potential value, leading to improvements in pipeline quantity. While it's early, this shift is expected to drive future growth, particularly in the enterprise segment.

    8. International Growth Performance
      Q: What trends are seen in international markets?
      A: Management notes that sellers in the EMEA region have performed phenomenally in recent quarters. However, specific details on international growth trends require further analysis.

    9. Expansion vs. New Lands in ARR
      Q: How is ARR growth split between expansions and new lands?
      A: About two-thirds of new ARR in the quarter was driven by expansions. While churn has kept net ARR growth modest, underlying gross new business remains strong. Over time, management expects to land smaller customers and expand them significantly.

    10. Future Outlook on ARR Growth
      Q: How fast could ARR grow if churn normalizes?
      A: Churn is currently impacting growth rates, but management expects structural changes in the back half of the year as churn decreases. Specific growth rates will be discussed at the upcoming Investor Day.

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