Amplitude : REFINITIV STREETEVENTS EDITED TRANSCRIPT

REFINITIV STREETEVENTS

EDITED TRANSCRIPT

AMPL.OQ - Q2 2022 Amplitude Inc Earnings Call

EVENT DATE/TIME: AUGUST 03, 2022 / 9:00PM GMT

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AUGUST 03, 2022 / 9:00PM, AMPL.OQ - Q2 2022 Amplitude Inc Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Hoang VuongAmplitude, Inc. - CFO & Treasurer

Spenser SkatesAmplitude, Inc. - Co-Founder, CEO & Chairperson

Yaoxian Chew

C O N F E R E N C E C A L L P A R T I C I P A N T S

Arjun Rohit BhatiaWilliam Blair & Company L.L.C., Research Division - Analyst

Clarke JeffriesPiper Sandler & Co., Research Division - Senior Research Analyst

Fiona Grace HynesMorgan Stanley, Research Division - Research Associate

Koji IkedaBofA Securities, Research Division - VP & Research Analyst

Michael C. VidovicKeyBanc Capital Markets Inc., Research Division - Associate

Nicholas William AltmannScotiabank Global Banking and Markets, Research Division - Analyst

Patrick A. SchulzRobert W. Baird & Co. Incorporated, Research Division - Research Analyst

Taylor Anne McGinnisUBS Investment Bank, Research Division - Equity Research Analyst for Software

Tyler Maverick RadkeCitigroup Inc., Research Division - VP & Senior Analyst

P R E S E N T A T I O N

Yaoxian Chew

Hello, everyone. Welcome to Amplitude's Second Quarter 2022 Earnings Conference Call. I'm Yaoxian Chew, Vice President of Investor Relations. Joining me are Spenser Skates, CEO and Co-Founder of Amplitude; and Hoang Vuong, the company's Chief Financial Officer.

During today's call, management we will make forward-looking statements, including statements regarding our financial outlook for the third quarter and full year 2022, the expected performance of our products, our financial goals, 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 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 on 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 it 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 the earnings press release, which can be found on our Investor Relations website at investors.amplitude.com.

With that, I'll hand the call over to Spenser.

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AUGUST 03, 2022 / 9:00PM, AMPL.OQ - Q2 2022 Amplitude Inc Earnings Call

Spenser Skates- Amplitude, Inc. - Co-Founder, CEO & Chairperson

Thank you, Yao, and hello, everyone. We appreciate you tuning in for our Q2 2022 earnings call. Amplitude had a great second quarter. We're seeing many opportunities for growth in our early market. We closed our second quarter with $58.1 million in revenue, up 48% year-over-year and above the high end of our guidance. Our dollar-based net retention rate was also strong at 126%. And as you'll hear from Hoang, we are also raising our top and bottom line guidance for the year.

We hosted 1,500 product leaders in person at Amplify, our annual user conference. It was great to see so much of the product and data community there in person for the first time in 3 years. At Amplify, we made our biggest set of product announcements in company history. This included a brand-new product, Amplitude CDP and lots of new features in our core analytics product. We also hired our first-ever company President, Thomas Hansen. Thomas will lead all of our go-to-market efforts and help us reach the next stage of maturity. There is a lot to be proud of for Q2, but we are just getting started at Amplitude.

Our vision is to help every company build better products through data. We are a digital analytics platform that gives self-service visibility into the entire customer journey. When teams understand how people are using their product, they can deliver better product experiences. With Amplitude, they can understand what product features are working, where users are getting stuck and what actions lead to the right outcomes. Nothing is more critical to driving digital revenue growth.

Amplitude's digital analytics platform is made up of 3 products: Amplitude Analytics, which provides real-time digital product data and is the core of everything else we offer; Amplitude CDP, which creates a single source of truth for customer data and; Amplitude Experiment, which powers, runs and analyzes product tests. Amplitude is fundamentally different from legacy analytics solutions. Legacy analytics focus on page views instead of understanding the end-to-end customer journey. They're not self-service for an organization.

If your company is building a digital product, you need Amplitude to know what's driving impact and what to build next. Amplitude's success is driven by 3 megatrends that are impacting every business. The first is digital transformation. Companies have made massive investments in digital products, and now they need to show a return on that spend. Amplitude helps companies optimize their digital products to drive revenue. The second is data-driven products. Companies are moving from an intuition based development process to a data-driven one. Amplitude makes that switch possible. The third is product-led growth. The best businesses view the product itself as their #1 revenue driver. Amplitude connects the product you build to revenue and business outcomes.

We have an elite engineering team that puts rapid innovation at the core of everything it does. At Amplify, we announced our biggest set of product launches in company history. Product innovation at Amplitude remains the most important priority for the long term and how we create and sustain value for our shareholders. We believe our most valuable innovations have come from when an engineer with deep technical expertise is combined with a strong understanding of the customer problem.

We launched 4 new features that improve the value of our core analytics product, which is foundational to everything we do. The one I'm most excited about is campaign reporting. This enables teams to understand which acquisition channels users are coming from and how marketing programs impact product goals. The second is metrics. It lets users tie customer behaviors directly to business outcomes, not just product wise, like sales and customer lifetime value.

The third is our new data tables, which allow customers to measure multiple KPIs in a single view. This is critical for advanced analysis of reporting because it enables side-by-side analysis. The last is experiment results. Experiment results allows companies to use their own AB testing infrastructure while they analyze the results of Amplitude. This makes our experimentation capabilities more accessible to large enterprises who prefer to use their own feature flagging infrastructure.

We also launched a brand-new product at Amplify, Amplitude CDP or customer data platform. Now companies can collect, analyze and activate customer data in a single platform, Amplitude Recommend. Our audience segmentation and targeting capability will be folded into our CDP and become an add-on for it. Our goal of entering the CDP space is to make it easier to start with amplitude. We never want the need for a CDP to be a blocker and Amplitude CDP provides an easy entry point for companies to get started with us. We want to reduce duplicative spending for our customers so they are not paying different vendors for CDP and analytics.

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AUGUST 03, 2022 / 9:00PM, AMPL.OQ - Q2 2022 Amplitude Inc Earnings Call

Amplitude CDP has the benefit of being integrated with our analytics product, which allows you to use the same tools to manage data across both products. While there are a number of benefits to using Amplitude CDP, we're agnostic as to whether customers use our CDPs or third-party CDPs. We want customers to keep their data wherever it best fits their use case. We will continue to work with other CDPs in the same way we have before. Amplitude is already the top destination for many other CDPs. Launching Amplitude CDP allows customers another choice as the CDP space becomes commoditized.

We welcomed Thomas Hansen as our first ever President last month to help us get to the next stage of growth. He will lead Amplitude's go-to-market efforts. This includes sales, customer success, marketing, partnerships and revenue operations. Thomas' track record speaks for itself, having led multiple businesses towards $1 billion in revenue in his roles as CRO of UiPath, CRO and COO at Carbon Black and senior leadership roles at Dropbox and Microsoft.

A few things really stand out to me about Thomas. He has an exceptional ability to develop and hire great leaders. He also has experience scaling companies at Amplitude stage of growth towards $1 billion in revenue. Most importantly, Thomas is someone who embodies the cultural values that we built Amplitude around: humility, ownership and growth mindset. I've been impressed by his level of empathy as well as his ability to navigate who Amplitude is as a company in his short time here so far.

In Q2, Amplitude was named a strong performer in the Forrester Wave Customer Analytics Technologies report. We received perfect scores on 8 criteria, this includes product vision, performance, customer journey analytics, next best experience analysis, user personas and more. Amplitude also ranked #1 in 8 categories in the G2 Summer 2022 report. We ranked #1 in product analytics for the 8th quarter in a row. We ranked #1 in mobile app analytics for the third quarter in a row, and we also ranked #3 in digital analytics for the 6th quarter in a row. These are big validators for our leading position in the market.

Organizations of all types are increasingly understanding the importance of taking a data-driven and product-led approach. Some big wins in Q2 include UiPath, Groupon and Dynata. You might recall that last quarter, we talked about how Google Analytics is shifting its customers to a new platform. We continue to view that as an opportunity to introduce many of their customers to the power of Amplitude. I'm happy to say that this catalyst helped drive 2 of our biggest clients in Q2. Amplitude's sophistication and ability to go beyond surface level metrics truly resonated with them. I think we're early on in attacking this opportunity.

Our land and expand strategy continues to pay off. We had several notable customer expansions in Q2, including Webflow, Chick-fil-A, Jersey Mike's, Al Jazeera U.S. and Cisco Innovation. Companies need to prioritize their digital product experiences regardless of the environment. A great example of an enterprise win is Groupon, the global online marketplace for services and experiences. After relying on another tool for the last 1.5 years, the Groupon team realized it needed a better digital analytics solution that could handle its heavy event volume and return queries in seconds. That's why Groupon selected Amplitude Analytics. Now it's product, engineering, analytics and marketing teams are using Amplitude to build better customer and merchant experiences.

Jersey Mike's, the sub sandwich restaurant with more than 2,200 locations across the U.S. has been an Amplitude customer since 2019. After overhauling a path to drive online sales, the Jersey Mike's team needed a better way to get the right messages and promotions in front of the right people. A big portion of its daily online sales are driven by MyMike's loyalty members. So it used Amplitude to identify which customer cohorts would be the most likely to join a loyalty program based on average order value and number of items purchased. With that insight, the Jersey Mike's team was able to serve tailored messaging and incentives to that cohort in order to drive more loyalty program sign-ups. And in Q2, it renewed and expanded its work with us to include Amplitude Recommend.

Dynata, the world's largest first data party data platform for insights, activation and measurement purchased Amplitude Analytics in Q2. In the past, Dynata used a combination of log-based data and customer feedback to inform product road map decisions and allocate developer resources, but its team was ready for a more sophisticated approach. Now Dynata's product, engineering and customer success organizations are using Amplitude to access actionable customer data and make more informed decisions.

TAG Heuer, the luxury watchmaker, owned by Fortune 500 company LVMH, started working with Amplitude at the end of last year to better understand the performance of its connected smartwatch. In Q2, TAG Heuer expanded its partnership with Amplitude by adding Amplitude

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AUGUST 03, 2022 / 9:00PM, AMPL.OQ - Q2 2022 Amplitude Inc Earnings Call

Recommend. By using Amplitude's advanced audience segmentation capabilities, the TAG Heuer connected team can make better decisions that benefit the end customer.

I know the topic on everyone's mind is the current economic environment. I'll give you my high-level view and I'll let Hoang speak to it in more detail. I'm encouraged by the continued demand I'm seeing for Amplitude based on customer conversations. On expansions, once up and running, our customers tell us that we are a mission-critical part of their technology stack. We saw several $1 million-plus expansions this quarter and drove more multiyear deals. This is a very strong validation of Amplitude's value even in challenging times.

We've said the exact timing of expansions is hard to predict. That remains a work in progress for us. We've seen an outsized benefit from many companies leaning into their digital efforts over the past several years. We're cognizant of our exposure to some specific businesses, namely COVID beneficiaries, crypto and early-stage startups. As it relates to new business, we are playing in and helping shape an earlier category of software. This is a process that takes time and focused education within the market. Product analytics continues to be seen as a strategic must-have by many. Despite this, there should be no surprise that new buying decisions are taking longer and are subject to more approvals in this environment. Some regions and industries that have been notably more challenged than others, specifically parts of Europe and within the SMB market.

We are operating with the assumption that it will be more difficult going forward for early-stagestart-ups and smaller companies. Long term, Amplitude is a must-have for any organization. I've never been more excited about our market opportunity. We see more validation today than ever before. Amplitude is one of the ways that customers can do more with less in a world where that incremental dollar is harder to come by.

I want to share how we are managing the business in the current macro. Given our vantage point, we were early in taking a conservative approach to the year. We have been selective on both hiring and investment. We're confident in our ability to continue to execute in this environment. We are driving sustainable growth. We are continuing to make strategic bets in product innovation to further our competitive differentiation. On go-to-market, we're focused on driving awareness of our category and solutions and maturing our efforts and efficiency. We've always had good instincts for how to help our customers. Those instincts are critical in helping us navigate the coming period.

We are building a world-class team here at Amplitude as an early company helping to shape the category, I am confident our best days remain ahead. Thank you for your interest in Amplitude. I'd now like to turn it over to Hoang to walk through the financial results.

Hoang Vuong- Amplitude, Inc. - CFO & Treasurer

Thanks, Spenser, and thanks again to everyone for joining us today. We had a strong second quarter with revenue of $58.1 million, up 48% year-over-year, boosted by large expansion early in the quarter. Paying customers were up 43% year-over-year to 1,836. Dollar based net retention was solid at 126%. We also achieved a new milestone. We generated $8.2 million in free cash flow, our best quarter ever.

Now as a reminder, event volume plays an important role in determining our subscription pricing. The event volume can fluctuate. And last year, we saw very robust growth as COVID accelerated digital adoption. Today, customers face a more challenging and uncertain operating environment. Certain businesses, namely COVID beneficiaries, crypto and early-stage startups are seeing more volatility. We're managing the business using key metrics like SaaS Magic Number, Rule of 40 and [quota theme].

Combined this with the current economic environment, we think it is prudent to lower our risk appetite on investments in the second half of the year. This means we'll be more conservative with headcount growth. And thanks to our diversified customer base and product value, we are confident that we can navigate the environment and come out even stronger. Our long-term opportunity is huge. Customer overall demand for Amplitude remains strong, and we're still very early in our market. For example, a consumer Internet company that benefited from the acceleration of digital during COVID, signed a multiyear million dollar-plus expansion deal this quarter because they embrace product-led growth despite economic concerns.

Geographically, revenue from the U.S. increased 40% year-over-year to $35.5 million in Q2 or 61% of total revenue. And international revenue increased 63% to $22.6 million or 39% of total revenue. The war in Ukraine is impacting our European business. We're no longer going after new business in Russia, and we're also seeing some deals delay in Europe.

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