Amplitude's (NASDAQ:AMPL) Q4 Earnings Results: Revenue In Line With Expectations But Stock Drops

Full Report / February 20, 2024

Data analytics software provider Amplitude (NASDAQ:AMPL) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 9.4% year on year to $71.4 million. The company expects next quarter's revenue to be around $72.4 million, slightly above analysts' estimates. It made a non-GAAP profit of $0.04 per share, improving from its loss of $0.03 per share in the same quarter last year.

Amplitude (AMPL) Q4 FY2023 Highlights:

  • Revenue: $71.4 million vs analyst estimates of $71.51 million (small miss)
  • EPS (non-GAAP): $0.04 vs analyst estimates of $0.03 (28.9% beat)
  • Revenue Guidance for Q1 2024 is $72.4 million at the midpoint, above analyst estimates of $71.34 million
  • Management's revenue guidance for the upcoming financial year 2024 is $293 million at the midpoint, missing analyst estimates by 1.4% and implying 6.1% growth (vs 16.5% in FY2023)
  • Free Cash Flow of $1.48 million, down 80.2% from the previous quarter
  • Net Revenue Retention Rate: 101%, down from 105% in the previous quarter
  • Customers: 2,723, up from 2,471 in the previous quarter
  • Gross Margin (GAAP): 74.4%, up from 70.5% in the same quarter last year
  • Market Capitalization: $1.68 billion

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.

Data Analytics

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 strong over the last two years, growing from $49.42 million in Q4 FY2021 to $71.4 million this quarter.

Amplitude Total Revenue

Amplitude's quarterly revenue was only up 9.4% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $766,000 in Q4 compared to $2.87 million in Q3 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Amplitude is expecting revenue to grow 8.9% year on year to $72.4 million, slowing down from the 25.3% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $293 million at the midpoint, growing 6.1% year on year compared to the 16.1% increase in FY2023.

Customer Growth

Amplitude reported 2,723 customers at the end of the quarter, an increase of 252 from the previous quarter. That's quite a bit better customer growth than last quarter and quite a bit above the typical growth we've seen in past quarters, demonstrating that the business has strong sales momentum. We've no doubt shareholders will take this as an indication that Amplitude's go-to-market strategy is working very well.

Amplitude Customers

Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Amplitude Net Revenue Retention Rate

Amplitude's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 101% in Q4. This means that even if Amplitude didn't win any new customers over the last 12 months, it would've grown its revenue by 1%.

Despite falling over the last year, Amplitude still has an adequate net retention rate, showing us that it generally keeps customers but lags behind the best SaaS businesses, which routinely post net retention rates of 120%+.


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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 74.4% in Q4.

Amplitude Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.74 left to spend on developing new products, sales and marketing, and general administrative overhead. Despite the recent drop, Amplitude's gross margin is around the average of a typical SaaS businesses. Gross margin has a major impact on a company’s ability to develop new products and invest in marketing, which may ultimately determine the winner in a competitive market. This makes it a critical metric to track for the long-term investor.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Amplitude's free cash flow came in at $1.48 million in Q4, turning positive over the last year.

Amplitude Free Cash Flow

Amplitude has burned through $22.45 million of cash over the last 12 months, resulting in a negative 8.1% free cash flow margin. This below-average FCF margin stems from Amplitude's poor unit economics or a continuous need to reinvest in its business to penetrate the market.

Key Takeaways from Amplitude's Q4 Results

We were impressed by Amplitude's strong growth in customers this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its full-year revenue guidance was below expectations and its revenue guidance for next year suggests a slowdown in demand. Overall, this was a mediocre quarter for Amplitude. The company is down 7.6% on the results and currently trades at $13 per share.

Is Now The Time?

When considering an investment in Amplitude, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

Although Amplitude isn't a bad business, it probably wouldn't be one of our picks. Although its , Wall Street expects growth to deteriorate from here.

The market is certainly expecting long-term growth from Amplitude given its price-to-sales ratio based on the next 12 months is 5.6x. We can find things to like about Amplitude and there's no doubt it's a bit of a market darling, at least for some. But we are wondering whether there might be better opportunities elsewhere right now.

Wall Street analysts covering the company had a one-year price target of $12.88 per share right before these results (compared to the current share price of $13).

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