Amplitude (NASDAQ:AMPL) Posts Better-Than-Expected Sales In Q4 But Full Year Guidance Underwhelms

Full Report / February 15, 2023
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Data analytics software provider Amplitude (NASDAQ:AMPL) reported Q4 FY2022 results topping analyst expectations, with revenue up 32% year on year to $65.3 million. However, guidance for the next quarter was less impressive, coming in at $65 million at the midpoint, being 2.2% below analyst estimates. Amplitude made a GAAP loss of $24 million, down on its loss of $21.9 million, in the same quarter last year.

Amplitude (AMPL) Q4 FY2022 Highlights:

  • Revenue: $65.3 million vs analyst estimates of $63.6 million (2.63% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.04
  • Revenue guidance for Q1 2023 is $65 million at the midpoint, below analyst estimates of $66.5 million
  • Management's revenue guidance for upcoming financial year 2023 is $287 million at the midpoint, missing analyst estimates by 2.01% and predicting 20.6% growth (vs 44% in FY2022)
  • Free cash flow was negative $5.87 million, compared to negative free cash flow of $3.89 million in previous quarter
  • Net Revenue Retention Rate: 119%, down from 123% previous quarter
  • Customers: 1,994, up from 1,913 in previous quarter
  • Gross Margin (GAAP): 70.5%, up from 68.9% same quarter last year

Born out of a failed voice recognition startup by founder Spenser Skates, Amplitude (NASDAQ:AMPL) is data analytics software helping companies improve and optimize their digital products.

Digital products are at the center of how companies interact with customers. Think DoorDash or Paypal or Dropbox - each of these commonly used digital products are built by product managers who tend to create innovative new product features on what they think the customer wants. Intuition. Gut feel. As a result, digital products often introduce new features and then employ data scientists to create a combination of user surveys and complex behavioral models to answer questions like – What drives more revenue, subscriptions or on-demand purchases? or Why aren’t my free users converting to paid?

The plus side of the massive adoption of digital products is the generation of lots of product data. Amplitude's proprietary Behavioral Graph connects millions of seemingly random events from a single user to identify patterns and derive data-driven insights on how users are engaging with digital products. Product designers can gain insight from the specific actions end users take within digital products and answer important questions, such as where in the purchase journey do users experience friction, what are the top user paths between signup and trial conversion, and which features increase new customer retention.

As a result, Amplitude allows businesses to save money on utilizing a patchwork of data visualization and marketing analytics products by instead having Amplitude provide an all in one solution. Amplitude has the added benefit of accelerating the pace of innovation, effectively allowing strategic product decisions to be made in near real time.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the silo-ed data.

Amplitude’s competitors in the digital optimization space include web and marketing analytics vendors such as Adobe Experience Cloud (NASDAQ: ADBE) and Google Analytics (NASDAQ: GOOGL), along with business intelligence solutions like Salesforce.com’s Tableau (NYSE:CRM).

Sales Growth

As you can see below, Amplitude's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $30.1 million in Q4 FY2020, to $65.3 million.

Amplitude Total Revenue

And unsurprisingly, this was another great quarter for Amplitude with revenue up 32% year on year. Quarter on quarter the revenue increased by $3.64 million in Q4, which was in line with Q3 2022. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates Amplitude is expecting revenue to grow 22.5% year on year to $65 million, slowing down from the 60.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $287 million at the midpoint, growing 20.6% compared to 42.3% increase in FY2022.

Customer Growth

You can see below that Amplitude reported 1,994 customers at the end of the quarter, an increase of 81 on last quarter. That's in line with the customer growth we have seen last quarter but a bit below what we have typically seen over the last year, suggesting that sales momentum may be slowing a little.

Amplitude Customers

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Amplitude Net Revenue Retention Rate

Amplitude's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 119% in Q4. That means even if they didn't win any new customers, Amplitude would have grown its revenue 19% year on year. Despite the recent drop this is still a good retention rate and a proof that Amplitude's customers are satisfied with their software and are getting more value from it over time. That is good to see.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Amplitude's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 70.5% in Q4.

Amplitude Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.71 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Amplitude burned through $5.87 million in Q4.

Amplitude Free Cash Flow

Amplitude has burned through $11.2 million in cash over the last twelve months, resulting in a negative 4.7% free cash flow margin. This below average FCF margin is a result of Amplitude's need to invest in the business to continue penetrating its market.

Key Takeaways from Amplitude's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Amplitude’s balance sheet, but we note that with a market capitalization of $1.79 billion and more than $230.5 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see Amplitude deliver strong revenue growth this quarter. On the other hand, it was unfortunate to see that Amplitude's revenue guidance for the full year missed analysts' expectations and customer growth has been slowing down a little. Overall, this quarter's results could have been better. The company is flat on the results and currently trades at $16.74 per share.

Is Now The Time?

Amplitude may have had a bad quarter, but investors should also consider its valuation and business qualities, when assessing the investment opportunity. We cheer for everyone who is making the lives of others easier through technology, but in case of Amplitude we will be cheering from the sidelines. Its revenue growth has been exceptional, though we don't expect it to maintain historical growth rates. Unfortunately, its customer acquisition is less efficient than many comparable companies, and its gross margins aren't as good as other tech businesses we look at.

Given its price to sales ratio based on the next twelve months is 6.4x, Amplitude is priced with expectations of a long-term growth, and there's no doubt it is a bit of a market darling, at least for some. While we have no doubt one can find things to like about the company, and the price is not completely unreasonable, we think that at the moment there might be better opportunities in the market.

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