Amplitude is a software company that went public in 2021. They are in the digital analytics space. Below are some of the learnings from their latest Q3 earnings call and further down are learnings from their prospectus (S-1).
Financials. We closed with $61.6 million in revenue, up 35% year over year. This was above the high end of our guidance. Dollar-based net retention was 123% and we have 1900 customers. It was our best land bookings quarter in Amplitude’s history. New Amplitude customers include Zillow, Fox Broadcasting, Volkswagen, Volaris Airlines, Shell, and Ably. This quarter was more challenging with regards to expansion and churn.
Make seats unlimited. For example, “BeReal, the social network app that went from 10,000 daily active users to tens of millions of daily active users in 18 months expanded its work with Amplitude in Q3 in order to keep up with its rapid growth. Data is a central part of BeReal’s culture. Almost all of its employees are in Amplitude daily.”
A good mantra. “We outship and out-innovate everyone in the space, and we are fanatical about being responsive to customer needs. We released more than 30 new features in Q3.”
G2 matters, even to a public company. “Amplitude ranked №1 in nine categories in the G2 Fall 2022 report, including №1 in product analytics for the ninth quarter in a row and №1 in mobile app analytics for the fourth quarter in a row.”
Don’t be scared of big name competitors. “It is also worth mentioning that more than a quarter of our land in Q3 had Google Analytics as the incumbent solution.”
Especially because big name competitors are more likely to lose interest. “Google just announced that they’re extending the sun-setting date for Universal Analytics because a lot of their customers are unhappy. And so, I think that will continue.”
Stealing those customers is about getting the offering right, not changing the product. “I think one of the big things, as I talked about, is like pricing and packaging to make sure that we have more options and opportunities for those people to come on to Amplitude”
Budget scrutiny is up, expansions are slowing. “We mentioned the potential headwinds in the economy during our last earnings call, and we saw the following specific impact in Q3. Expansion bookings were lighter than expected as some of our customer business load and budget scrutiny remain elevated. We saw higher churn from small businesses who were unable to pay and partial churn increase as customer rightsized due to budget or utilization.”
And products are being re-evaluated. One customer is going “through spending reevaluation internally in their company.”
Churn is expected to be up. “Heightened economic stress will cause more full and partial churn. We expect the impact on customer account to be larger than the impact on revenue as we see more churn with smaller customers.”
Vendor consolidation is happening, benefitting the platforms. “in a macroenvironment like this, you’re getting a bunch of spend consolidation where you’re trying to eliminate multiple vendor spend and come to us”
NDR came down, but partly because covid drove expansion in 2021. “I think what you’re seeing is in 2021, we had some customers who really drove a massive expansion as their business grew and kind came back from COVID and post-COVID…. expansion is now a lot less from those existing customer base”
Implementation success is critical for churn control. “the biggest reasons are either companies or business units getting shutdown or going out of business, or lack of ability to secure implementation resources. We almost never see someone kind of go backward in the maturity journey. It’s not like folks are going to Google Analytics or just saying, “Hey, I’m going to go try to build this in-house after having not been successful with Amplitude.” And so that never happens. And so, I think for us, it’s about making sure customers get implemented, customers get set up. I think the large enterprise customer, the only time they really do churn is that they really have not kind of adopted into our solution.”
Primarily enterprise customers that are stickier. “more than 70% of our revenue come from companies spending more than $100,000 a year.”
S-1 Prospectus from 2021 IPO
What they do. Amplitude helps businesses “understand how digital products drive their business. We power the teams behind many of the most-beloved digital products to make the right bets, drive innovation, and maximize business outcomes.” They were a Y-Combinator company.
They recently passed $100mm of ARR. “For the years ended December 31, 2019 and 2020, our revenue was $68.4 million and $102.5 million, respectively, representing year-over-year growth of 50%. For the years ended December 31, 2019 and 2020, our net loss was $33.5 million and $24.6 million. Subscription revenue comprised 97% of our total revenue”
Upselling is done by expanding use cases. “Our customers typically look to use our platform for an initial business use case they have identified, such as analytics on a digital product. As our customers experience the value of our platform in helping to drive business outcomes in that initial use case, they frequently expand that initial use case, expand into new use cases, and expand into additional products.”
Pricing is not per user, but rather is value-based. “Our pricing model is based on both the platform functionality required by our customers as well as committed event volume. In many cases, customers will proactively expand their contract within the contract term, generally increasing event volume and platform capabilities to expand existing or address new use cases.”
One year subscriptions, but payments are flexible. “Substantially all of our customer contracts have a subscription period of one year or longer. In 2020, we billed a majority of these contracts annually in advance with the remainder billed monthly, quarterly, or semi-annually.”
Drive usage to win the sale and get sticky. “Our Starter plan is a free-tier, self-service option that allows prospects to easily sign up and begin to leverage the power of the platform in rapid fashion. This plan includes core product analytics with the ability to track up to 10 million events per month. Users of this plan get access to unlimited user seats and are encouraged to add additional team members across functions to proliferate the use of our platform within their organization.”
Land and expand is key to the business. “Our land-and-expand business model is powered by the ease of use, rapid time to value, and broad applicability of our platform to provide actionable insights in real time to numerous teams across an organization.”
There are some 7 figure contracts. “As of December 31, 2020, we had 262 customers that each represented greater than $100,000 in ARR and 15 customers that each represented greater than $1 million in ARR. Customers that each represented greater than $100,000 in ARR accounted for approximately 71% and 72% of our total ARR as of December 31, 2019 and 2020, respectively. As of December 31, 2019 and 2020, our dollar-based net retention rate across paying customers was 116% and 119%, respectively. 26 of the Fortune 100 were paying customers”
International markets matter. “For the year ended December 31, 2020 and six months ended June 30, 2021, 36% of our revenue was generated outside the United States.”
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