All right, guys, let's get this started. Thanks for being here. My name is Koji Ikeda. I'm one of the research analysts here at BofA on the enterprise software team. Super thrilled to have Amplitude here with us this afternoon. Christopher Harms, CFO, thanks for being here.
Yeah.
I guess, you know, let's just level set here for anybody in the room and on the webcast that might not be, you know, really into the deep into the story with Amplitude, maybe from a high level, what do you guys do? What's the opportunity you're going after?
Yeah. We provide product analytics. We enable business users to understand how their customers are moving through their digital products. We enable those business users to drive activation of customers, monetization, and retention of those customers.
Got it.
We do it by giving them visibility to what works well, and that customer set ranges from a really digital native company. We reference Atlassian a lot, right? Brought up, made our big PLG motion. It's fundamental to them, digital native, to more traditional companies, where they're doing an omni-channel play. We use Chick-fil-A as a great example, right? Or Panda Express, where online ordering is taking place and that digital experience. We give them insight into what works well, how to upsell, how to, what different targeting and other marketing messages will help put more value in each of those carts each time.
Got it. Got it. You recently joined?
I did, yeah, about three months ago.
Yeah. tell us a little bit about yourself, your background, and what brought you to Amplitude?
There's not much to say about myself. I, but I will go to what brought me, right? I took a lot of time off. It was really nice. I looked at a lot of opportunities, and the things that really attracted me to Amplitude was, the market, right? When I think about five years from now, when I think of any company, whether they are digital native, but really the traditional companies who are building an omni-channel presence to their customers through some digital experience, I can't envision a company that isn't utilizing some digital product. If I'm that business leader, I want to understand how well my product is working. I want to understand how it's working with certain different segments of my customers and all the use cases I just talked about.
I want to understand, it's the dashboard of how my digital product is performing, and it gives me guidance to figure out how to tweak it and adjust it. I can't envision a company that doesn't have some form of that. We see that at Amplitude, right, where we've got large enterprise customers that are getting up to 8-digit, right, ARR with us. They use us over, you know, 18, 30, 40 different business units. It's really compelling, and I would like to see us doing that same thing across the enterprise space, and then up and down that space, from enterprise to the commercial and into the SMB space, which today, for us, is very VC, a VC tech-oriented startup. As SMB start to engage, that was really compelling to me.
The second part was, I know when you all are doing your diligence, when you talk to the Amplitude customers, they're like: "This product is great. It is scalable. I don't see how I'm gonna work without it" type of mentality, right? To have that kind of product leadership. When I think about how the market's transitioning between what has emerged as the product analytics company and the more traditional web analytics, and how those are going to converge with time, and that the product company is probably best positioned to dominate that market and take all of that wallet share. Pretty compelling to be with the company that has the product pole position on that.
I really connected with Spencer and Thomas and the rest of the team. It has a really vibrant culture, and we're working through some of our execution growing pains. That's why I was brought in, was to help, you know, take it, help it scale. It was compelling.
Earlier in the comment, you mentioned, you know, smaller tech, VC-backed, you know, more cash-rich type companies going after opportunities. When I think about Amplitude, and this is helps kind of frame the opportunity out there, the TAM, what's the right way to think about it? Is it any company that has a digital experience should be able to use something like an Amplitude? I mean, help me think about who could utilize this.
Yeah. No, that's spot on. There's, what I described was the core play, but there's ancillary things happening within customer success, within engineering, where that level of analytics is fundamental, right?
Mm-hmm.
It's the ability to get that data, organize it, and get the insights out of it in all these different ways that are complex and which traditional web analytics products kind of do when you have a big data scientist with it.
Mm-hmm.
Right? One of the things I To your question, it also helps frame the competitive environment today. One of the things I try to do in helping shape all the different places it is, I'm like: Think of Google Analytics and how the breadth and of its deployment. Think about all of those small teams and others where they start to hit their head-on capabilities because they've got to bring a data scientist in, we call them, you know, the breadline of trying to get the data scientist to help you use the tool to get insight as a business user. I use that only to give you a sense of just the breadth of play that's there.
... I've been asking every management team two of the same questions to try and figure out broadly across, you know, the conference. We've talked to a lot of people how companies are feeling. The first question is about the macro, and the next question is about AI. On the macro front, the question is really framed around, you know, how does the end market feel today, June 2023, compared to January 2023 and then June 2022, a year ago?
Yeah.
Just help us compare and contrast what it feels like, what are customers talking about, demand, all that kind of stuff.
Yeah. Harder for me because of the break, but I can speak to how Spencer and Thomas characterized those-
Yes
those other data points.
Sure.
Let's work in reverse. Today's really hard. Amplitude did a big reset with the guidance I put out in May, very reflective of worsening conditions that got even worse. I remind myself when I get a little down on that we're not alone. A lot of companies had to reset their view when they came out in Q1, or like we did in Q2. We're not alone in just facing those macro headwinds, and there's a little bit of whiplash, right? We are definitely facing those tailwinds currently today, that if you go back to 2021, which you didn't ask, but I'm gonna start there.
Yeah, yeah.
Right? Excuse me, I should characterize. We're facing headwinds now. I know I said tailwinds just now, 2021, just huge tailwinds-
Mm-hmm.
-right? With the pandemic and all those, and we're going through a settling period, where that tide changed, that flow changed, and we're working through it. I think the reality of all of that coming to fruition and us having, you know, a lot of us questioning just what does that trough look like, and what does it look like coming out of it? I think brings a level of uncertainty today across the board, that a lot of companies are facing. I'm gonna go back, try to answer your question more directly. It was a lot more, at least optimism about how those macros were playing, definitely a year ago.
While things were getting bad, Q3, Q4, beginning of Q1, for companies like Amplitude, it really came to a head in the back half of Q1. I'm gonna tangent onto one thing I said, 'cause I just want One of the things that we're really focused on is the recognition that there's a lot of the muscle memory that we needed to create that we didn't do when we were riding the tailwinds of 2021. That's the things to focus on right now, right? The go-to-market motions of how we speak to our different buyers across product managers, across data owners, across more of the business owners, right? How we communicate with them is different. Let's get better at that. Let's get better at identifying who those are.
Let's get better at identifying where our customers are on the different use cases, and where they are on the maturation curves of those. Let's get close, and let's start walking them through what we know that expansion play can be. Those are all things that I look to do during this period of 2023, in collaboration with Thomas and Spencer and team, so that when we come out into 2024, like our... I use the university speak of the major and the minor, right? Our major driver for accelerating growth is we're executing a lot better.
Mm-hmm.
Like, we're really effective on our go-to-market motions. We're driving really effective contribution profits up and down the stack from enterprise to commercial to SMB. The minor is then the trajectory we can get off of those tailwinds. That's I hit upon that because that's a reflection also of how we feel right now. Like, we're very optimistic for our longer-term market opportunity, and we recognize there's a journey between where we are now, and there's a little bit of a disconnect between the guidance and numbers we're putting out now, versus what we all intuitively know this longer-term market's gonna look like. Controlling what we can control, right? We went through the restructuring in April, really kinda right-sizing the go-to-market motions around much more focused motions across the enterprise and account ownership.
Recognizing that was hard, but recognizing, like, we're taking that medicine now. It's tough to digest, and I'm just giving more color to the question of how we feel today.
Mm-hmm.
Knowing those are all the right things to do, and let's focus on the things we can control over the next two quarters and be really well positioned in 2024, and then be able to benefit from that, and then benefit from those increased tailwinds, which we know eventually will come.
Yeah.
That's the feeling side of things.
Got it. No, thank you. Thank you for that answer. You mentioned guidance.
Yeah.
Let's talk about the guidance and the methodology and how we should be thinking about it, because it's for lack of better words, when we issued the guidance on the first quarter call, it was tough. You know, it's, it essentially calls for sequentially flat revenue, second quarter, third quarter, fourth quarter.
Yeah
... which is unusual in software. The first question or the first thought I had in my mind was, "Okay, they're clearing the decks." My next thought was, "Well, wait a minute, is this safe?" Maybe walk us through the methodology or the process that you went through to get you to that guidance.
Yeah. Recognizing it was a big step down.
Yeah.
What I've tried to convey is I got to benefit in the late February, March period from the fruition of a lot of efforts that had started months in advance, both in terms of what Thomas had done, getting visibility kind of the new ARR from land and expansion, getting new visibility and level of depth and breadth as it pertained to our exposure on churn, both from customer rightsizing and from kind of facing their own challenges of lost customers.
What I tried to do is take the benefit of that insight, spend a lot of time with some of the sales leaders to understand some of the cultural elements that led into how we looked at things, and apply all of that, plus a kind of a view of pattern, plus what I knew was going on at a macro level, and apply that kind of comprehensive view into a distillation of, look, as I interpret all those leading indicators, here's what I think is a prudent and reasonable basis to guidance. Questions have been asked to me, is it conservative? I always respond, like, conservative is a subjective term. I don't like to respond to the subjective.
I'm just trying to describe to you how I approached it and why I think it is reasonable and the diligence that I tried to apply in there. That's how I thought about guidance, and yeah, the net of it is just what you said.
Yep.
Those leading indicators all suggest that a prudent basis to guide for the rest of the year is built around really a flat zero net ARR, where what we do in terms of landing and expanding is offset by what we're losing as we're rightsizing with customers, and what we're losing in churn as some customers are choosing to go blind. That was the net effect. Yep.
What's the right way to think about the assumptions and the guidance from the, call it, expand the net new and the churn? Is there a broad way to think about those components in the guide?
Yeah. There is.
Mm-hmm.
Let's just start with the ARR being added.
Mm-hmm.
Both our land and our expand have been declining. Our expand has been declining at a much faster rate than our land. If you intuitively sit back and go, "Hey, this is the installed base. They're going through all of these budget assessments, is it reasonable that they would pull down the expand trajectories that Amplitude has experienced historically?" The answer is yes. That intuitively makes sense. That's what we're seeing. You, anyone from the outside can look into the NRR and go, "Yeah, that we're seeing it manifest itself there." We also tried to give the end period number to even be more transparent with how that's taking shape. I tried to give a sense of where the trajectory was. Our expand was coming off quite a bit.
I also tried to just give some color to Q1, that the mix was roughly 50/50. It wasn't absolute, but in relative terms, half of that came from land, and half came from expand, suggesting that expand used to play a larger portion. I would expect as we, as all of the points I hit upon earlier, start to manifest themselves, that it becomes an increasing part of our.
Yeah
... ARR add, because as you're entering into the enterprises and then you're becoming prolific across multiple business units and digital products, that is the experience you should be having in the enterprise space. Obviously, less so in the commercial, and definitely much less so in the SMB space.
Got it. No, that's helpful. Enough of guidance.
Okay.
Let's move to AI.
Okay.
I've been asking 3 questions, 3 flavors of AI and generative AI.
Yeah.
First question. How does Amplitude think about leveraging AI and generative AI within the platform over the next three to five years?
Yeah, no, absolutely it's built upon the data set, and we have a huge data set. You know, two of our founders or three of the founders are MIT, and one was Stanford PhD, right? We are surrounded by really smart people, one of which was immersed in early machine learning and AI. We look to leverage that level of product data that we have and bring it to fruition in a very natural language based.
How do you think... Second question on AI, gen AI, is: How do you think the rapid awareness of AI this year has changed the way, or maybe not, the way that your end market is viewing their data, their digital analytics, what they want to do with their data? Has it created any sort of pause or certain thought processes, or changed their thought process? I'm just curious to hear from you what you're seeing from your lines.
Well, I haven't gotten to spend enough time with customers to give a firsthand-.
Mm-hmm
... impression, but I can give some anecdotal impression.
Sure.
They're seeing it with other vendors, and it's gonna be, "Why aren't you doing at least that?
Mm-hmm.
I think for Amplitude's case, it would be a, "Why aren't you at the forefront?" That's where we expect to be.
Okay. Okay, okay. Last question on AI is.
Funny, I always defer to Yao on all the AI questions. He's always really on top of this stuff.
Monetization of AI. How does Amplitude think about monetizing... I mean, you guys have AI in your platform already?
Yeah.
Into the future, you think about 3 kind of buckets of where we can utilize AI? Does it drive, you know, is it embedded within the platform, just drive increased usage? Could it create some sort of premium SKU of, you know, you only get these features if you pay a little bit more? Or, does it create a maybe the potential for a whole new product to be built? How do we think about those types of levers next 3 to 5 years?
Yeah, no, look, the first two, for sure. Yeah. The third one, that one will be interesting to see how it unfolds. Like I don't know enough from Curtis and Jeffrey and Spencer , how they think about that third one.
Mm-hmm.
Absolutely on the first two.
Got it. Got it. I'm gonna ask one more question, then open it up to the audience. For Q&A, you know, you can just raise your hand, we'll get a microphone over to you if you had a question. My next question before that is competition. You know, on the last earnings call, you know, Spencer did mention that win rates were ticking up versus prior quarters against the competition. Maybe walk us through what is causing that in the end market? You know, is some of the other competitors beginning to fall off? Is there disruption out there? Is Amplitude being, you know, viewed more strategic? Just very curious to dig into that comment a little more.
I kind of frame the competitive landscape in those two lenses, right? One is definitely product analytic oriented, with those we compete in the trenches with, and the others are when we're competing more in a web analytic value prop that's verging into product analytics, which is, you know, it's Adobe and Google Analytics. Even though Adobe's only announced the product, you have wallet share that you're always competing for. As it pertains to the win rates, right? We are doing 2 things well, right? We're winning in the enterprise space, and we're winning in the SMB space. We're winning there partially because as when you look at what's my long-term journey gonna be, the answer always seems to be Amplitude.
Then we try to counter on the more tactical things of what happens on price, right? We changed our pricing mechanisms to go to MTU earlier in the year to compete at the lower end a little more effectively, as well as make it an easier, less friction-based exchange with the customer. We try to be responsive, right? We try to see what's happening, well, and then proactively take the steps that we think are most important from a product packaging or licensing perspective to compete and win, as well as how we convey increased value and what a journey should look like. Those contribute to us winning.
Any questions from the audience? Please raise your hand, and we can get a microphone over to you.
I know it's warm in here.
I got one.
Everybody's a little fatigued at the end of.
I got lots of questions. You mentioned web analytics-
Yeah.
and then Amplitude in two different buckets, right? Of the way to think about analytics. I actually think this is somewhat overlooked, I guess, maybe for a lack of better words.
Mm-hmm.
You know, since you're relatively new, and you come from the financial world, curious to hear how you describe the difference of what web analytics-.
Uh-oh.
means versus what Amplitude does, because I know there's a big difference there.
Yeah. I'm gonna fail miserably on that question. There's definitely a segment that, where there's some overlap right now.
Yeah.
Like, we're doing fringe and they're doing fringe. Like, we're covering mobile analytics up through the web, and they're traditionally dealing with the website of things, right? They've built it around a web play, and we've built it around a product. We're giving that visibility within a digital product environment that's different than how that website experience is. That's a simple delineation.
I gotcha. No, thank you. Go-to-market strategy.
Yeah.
In a lot of changes, Thomas is here. He's been here...
10.
10 months now.
Yeah.
Ten months now. Sounds like it's a transition year for a lot of your customers out there, you're also going after new customers, too, outside of the tech vertical. I mean, every company is trying to become a tech company, right?
Mm.
Walk me through a little bit about what the go-to-market capacity looks like, the strategy looks like. Any things that we should be expecting, you know, from a strategy perspective or things that you've implemented that will begin to ramp over the next 12 to 18 months?
Yeah. Look, Thomas was already formulating changes he wanted to make.
Mm-hmm.
My arrival just kinda helped rally some of those thoughts into fruition, right? That's what we did in April. That was the restructuring. People will often ask me questions about a RIF, I will respond that, look, it's more than semantics for me. I really viewed what we did in April as a restructuring. The derivative outcome of it was a reduction in force. That restructuring was to drive some cultural changes on account ownership and clarity. It partially driven in that, you know, we run an enterprise motion in the enterprise, and we got a little guilty of running an enterprise motion down into the commercial stack as well. That's not an effective way to go to market there. Yeah, look, we're very focused on the enterprise and then what we do to win in commercial and SMB.
The biggest part of the market opportunity is in the enterprise. That's, those, that's a big part of why we brought Nate Crook in, was to further build up that leadership side. Thomas and Nate and I all come from heavy high-end enterprise backgrounds, you know, we're very focused there. That's not to say that we deprioritize commercial, that's not to say we deprioritize SMB, but a recognition that there are different ways to serve that market, which can be much more product-led sales assist, where you've got people working with the product and definitely on a kind of free to paid journey, a more robust PLG motion.
Getting some of the prioritization of the company around enabling us to move beyond beta in the PLG and making that more robust to serve that facet of the market is an integral part of the broader go-to-market motion. You know, I'm excited about what we can do back to that theme of getting really more focused and concise and effective up and down the customer stack and the different motions that should be best applied there, which should speak really well to our margin profile as we go forward.
That was gonna be my next-
Oh.
Next question.
Yeah. Yeah.
Next question is, Well, before that, is when you're selling to the enterprise, maybe help us understand the types of personas that you're selling into.
Yeah.
What is that title of that person?
Yeah. It's evolving. I'll tell you, our roots, again, I shouldn't say it as if I've been here longer than three months, but, like, our roots have been selling to product teams and product managers and very focused on that persona. Once we were successful there, we found ourselves, especially in the enterprise, then selling to a chief data officer or a CIO who operates in, right in a center of excellence type of environment, where they're then making that available to business users. Now we're finding ourselves trying to spend more time engaging and communicating with the business users. That's an evolution of our kind of a multifaceted selling motion that's not as straightforward as... Let's just get back to the web analytics, right? They're selling to the CMO today.
Mm-hmm.
We expect that within the next few years, as those markets converge, that more that we're selling beyond the PM, the data business users, now we're selling to the CMO, and we're taking that wallet share. That's kind of the buyer profile that we see. Obviously, as you move down stack, on customer stack, that becomes one person.
Sure, sure, sure.
Playing combined roles.
Right. Moving on to the path to profitability. You know, Spencer, in the past, has always talked about profitable growth and even more of a sharper focus on that now going forward.
Yeah.
Walk us through the journey to profitability, the levers there.
Yeah.
What should we expect from that path over the next year or so?
Let's bring it back to guidance. All right? Let's talk about what's implied in the... What was explicitly, right? We put forth a FY23 guide, that when you back in to what Q3 and Q4 is, right, it is conveying, tipping over from an operating loss position to an operating profit, right? Haven't guided explicitly what those numbers are or the split, but you can back into it. That's a direct derivative of the restructuring we did, right? We basically said, "Look, let's be more effective on our capital allocation about the go-to-market. Let's also make some adjustments, small, in R&D, G&A, others." You know, three-quarters of that restructuring and the cost adjustments were within a go-to-market.
That put us in a position to be, right, increase our free cash flow, positivity, positive profile, and it put us into a profit piece. All built around that same theme of, that's a good balance point for us to be, as we're working through that muscle development in 2023 and positioning us then as we head into 2024. It's a balance between going to where we think the puck's gonna be, waiting to see where the puck lands, but being in a position where our ability to invest back into the business for growth is appropriately placed because we know, with a finer bit of insight, what we expect on the return of effort, return of investment on those individuals and those resources.
Got it.
When I think of this next stage, right? It's a fun choice, right? How much, how much do we keep on the increasing operating profit, because we're getting so much more leverage out of the go-to-market. We're getting additional leverage out of the product piece. We get to make the choice of how much do we let that just continue to flow down, and how much do we reinvest back into the business.
Yeah.
Against the backdrop of where we started, right? This is a really large and converging market that's gonna be really compelling. Not being dismissive of where it is today, but in the magnitude, it'll be significant. You know, our ability to go capture a larger portion in how the market's growing is what we're trying to position ourselves for. Like, one of the themes that we hit on just in, kind of going back to the earnings, was, I think there's a really great asymmetrical outcome here. There's just huge upside for us, and we're gonna navigate through this painful time, a very prudent, financially, built around positioning ourselves to be lean and effective coming out of this year and heading into the future.
Got it. Chris, we're out of time. Thank you so much. It's been a fun conversation.
Thanks, Koji.
Really appreciate it.