Amplitude, Inc. Q4 FY2021 Earnings Call

Hello, everyone. Welcome to Amplitude’s Fourth Quarter 2021 Earnings Conference Call. I’m Jason Starr, Amplitude’s 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 will make forward-looking statements, including statements regarding our financial outlook for the fourth quarter and full year 2022, the expected performance of our products, our expected quarterly and long-term growth, accelerated 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 on the risks 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 on 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 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 our 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.

Thanks, Jason, and good afternoon to everyone joining us for our Q4 and fiscal year 2021 earnings call. 2021 was a breakthrough year for Amplitude in our digital optimization strategy. We closed out the year with 64% year-on-year growth for the fourth quarter and 63% for the full year. We also added over 500 customers and now have nearly 1,600 paying customers, including 26 of the Fortune 100. Existing customer demand for Amplitude was strong with expanding customer usage and great traction with our recently introduced products, Recommend and Experiment. This was further demonstrated by a dollar-based net retention rate of 123%, which increased 400 basis points year-over-year. Beyond these great operating results, we also completed our direct listing in September and accomplished our objective of being a publicly traded company. We further expanded our team at the end of the year with 612 employees. To the Amplitude team, incredible work in 2021, I appreciate all of your efforts and dedication. Our 2021 results reflect the increasing demand for digital optimization and the need for companies to use product data to drive growth revenue and competitive advantage. Companies of every size and digital maturity are relying on Amplitude to help drive their product strategy and answer the strategic question, how do our products drive our business? Amplitude’s vision is to help every company create better products through data. We are pioneering a new category of software called digital optimization, which connects product data directly to the business. Today, digital products don’t just support the business; they are the business. Companies have spent the last decade undergoing digital transformation. Now they have to optimize the massive investments they’ve made, which is where digital optimization comes in. Digital optimization accelerates innovation and growth through digital products. It transforms product strategy from an intuition-based process to a data-driven one by using event data to understand every behavior and action taken in the product and discover which behaviors drive better business outcomes. As digital products have become core business drivers, the revenue center within companies is shifting from the sales and marketing functions to the product organization. This shift is resulting in the growing trend of product organizations and the rise of the Chief Product Officer within the C-suite. Organizations are realizing that to connect with their customers, operationalize around product event data, and make better strategic decisions, they need a digital optimization system like Amplitude. Similar to how Salesforce became the system of record for sales organizations and Adobe became the system of record for marketing, we believe that Amplitude can become the system of record for the product organization, representing a $37 billion market opportunity. There is growing evidence that the digital optimization market is gaining traction and we believe Amplitude is the clear leader. Fresh off the press last week, G2’s 2022 Best Software Awards ranked Amplitude as the number three best software product overall and the number five best enterprise product across all software products and markets that they review. The G2 Winter 2022 report also ranked Amplitude as the number one product analytics solution for the sixth quarter in a row and number one in mobile analytics. Amplitude was also recently included in three Forrester Now Tech reports focused on data analytics, customer journey management, and real-time interaction management. Together, these three product segments make up the foundation for digital optimization. As companies transition beyond digital transformation, they realize it is essential to have actual data and insight into how their customers are using their products, whether that’s understanding user journeys, managing interactions, or analyzing behaviors and outcomes. Amplitude’s digital optimization system is critical to accelerating digital business growth. We’re pleased to see this early third-party credibility with Forrester as digital optimization becomes an imperative for the enterprise. A key differentiator for Amplitude and our product suite is the open approach we take to help customers move data to our digital optimization system. Today, we announced new and enhanced integrations across the technology stack to help customers better unify, analyze, and act on customer data. The new set of integrations allows customers to seamlessly ingest data into Amplitude, reduce time to implement, and create more customized marketing campaigns. Amplitude now has new integrations with Adobe Launch, Google BigQuery, AWS Redshift, Google Tag Manager, and more than 60 other technologies in order to unlock actionable customer insights that fuel faster product innovation. With new integrations into Adobe and Google Tag Manager, businesses can now easily move away from traditional web and marketing analytic solutions and adopt Amplitude, drastically reducing time to implement from weeks to minutes. The easier we make it for customers to unify and act on their data, the more powerful Amplitude becomes for them. Amplitude’s leadership is further demonstrated by our customer momentum. Our paying customer base has expanded 54%, driven by strong demand for our products from organizations across a variety of sizes, verticals, and digital maturity. Several notable new wins in the quarter included Toyota U.S., Taco Bell, Twilio, Wealthfront, UBS, Chatbooks, and HackerOne. We also had several customer expansions with A&E Networks, HBO, Notion, Canva, Olly Public Benefit Corp, and ClearScore in the quarter and we continue to make encouraging progress with the adoption of our new products, Experiment and Recommend. I’ll expand upon a few customer stories for the fourth quarter to provide additional context of what drove some of these wins and our increasing value to customers. One of our exciting wins in Q4 is Toyota, the world’s largest automotive manufacturer and number nine on the 2021 Fortune Global 500. Toyota purchased Amplitude analytics in Q4 to increase speed to insight, drive product strategy, and understand how users engage with the Toyota and Lexus apps. The Toyota and Lexus apps were developed to provide a convenient way to stay connected and informed about your vehicle, such as easy access to your owner’s manual, warranty guides, locating a dealer, scheduling service, getting roadside assistance and other connected services. The Toyota team wanted their app and their decisions about new features to be data-driven. Now with Amplitude, they can move quickly and use data to support strategic product decisions. Their goal is to drive growth by increasing service purchases and in-app subscriptions and better tie the in-app experience together with their vehicle. As consumers demand more digital connectivity from their vehicles, Toyota will use the Amplitude Digital Optimization System to manage their largest digital bets. The Chief Product Owner at Toyota and Lexus mobile app said it best, 'It is critical how we take a data-driven approach to develop new features, instead of guessing what our customers may want. I want to have analytics at my fingertips so that I can focus on problem-solving rather than waiting days or weeks to get someone to generate reports.' Another big Q4 win was Wealthfront, a leading automated wealth management provider that recently agreed to be acquired by UBS. With over $27 billion in assets under management and more than 475,000 clients in the U.S., Wealthfront is an award-winning platform that helps clients easily manage their wealth. With aggressive growth goals for 2022, they knew they needed to scale their analytics efforts. In Q4, Wealthfront chose Amplitude as a strategic partner to drive velocity, visibility, and growth. Another great Q4 expansion is A&E Networks, a global media company comprised of some of the most popular and culturally relevant brands, including A&E, The History Channel, Lifetime, LMN, FYI, Vice TV, and Biography. Its premium content spans linear and digital platforms and is in seven out of ten American homes, cumulatively reaching 335 million people worldwide with over 500 million digital users. A&E Networks partnered with Amplitude for two of their main categories of products, TV Everywhere (TVE) ad-supported streaming and subscription video on demand (or streaming). A key objective was to increase their customer base across TVE and subscription video on demand with retention as a significant focus. Beginning in 2017, Amplitude has helped A&E enhance their visibility into insights across their organization and we’ve continued to bolster their customer engagement efforts. They saw the Amplitude Digital Optimization System as a powerful way to create self-sufficiency across their marketing, strategy, digital video analytics, and product teams. This quarter, A&E expanded their adoption of Amplitude’s newest product, Experiment, to bet big on the customer experience, to optimize how customers interact with digital experiences, and to be able to test current and future features. Now looking ahead to 2022, making our customers successful is deeply embedded in our culture, and you’ll continue to see us prioritize ease of adoption and world-class customer success capabilities in support of winning the enterprise. We have been making significant investments in our product development and engineering teams over the past year, which resulted in the introduction of our Recommend and Experiment products. In 2022, we’ll be accelerating these investments to help customers bring on the full suite of our capabilities. We’ll also expand the Amplitude Digital Optimization System to address more use cases, building out the most comprehensive product suite available in the market. The digital optimization category is still early and relatively unknown, and we will continue to evangelize the success and transformative business impact our customers are seeing, which is key to our mission of helping companies build better products. Finally, supporting all these initiatives, I’m really excited to announce that we’re holding Amplify, the number one product growth conference from May 24 to May 26 as a hybrid in-person and online event. We’ll be welcoming customers and users in person in Las Vegas, as well as streaming the event live so that everyone can benefit from the experiences of global product leaders and learn about our exciting upcoming product announcements. In closing, we’re pleased with our results in full year 2021 and I’m proud of our team’s continued execution. We believe that we’re at the beginning of a significant market opportunity and we’re investing aggressively in our pursuit of capturing that. Thank you for your interest in Amplitude, and now I’d like to turn it over to Hoang to walk through the financial results.

Thanks, Spenser. And thanks again to everyone joining us today. We had a solid fourth quarter with strong revenue growth, customer count, and net retention rate. Q4 revenue came in at $49.4 million, representing 64% annual growth. For the year, revenue was $167.3 million, an increase of 63% compared to the full year 2020. We ended the quarter with 1,597 paying customers, an increase of 54% year-over-year. Because it’s also at the end of our fiscal year, we will provide a more detailed breakdown. We ended with 385 customers with ARR commitment of over $100,000, which was up 47% year-over-year represented approximately 73% of total ARR at the end of 2021. Of these customers, 29 were above the $1 million mark, an annual increase of 93%. We are excited to see more customers embrace our digital optimization system and expand the usage of Amplitude and we are excited to announce that we now have over 100 customers using our products, Experiment and Recommend. This expanding usage of our platform is also reflected in our improving dollar-based net retention rate, which increased 400 basis points year-over-year to 123%. As a reminder, this metric is calculated on a trailing 12-month basis. We are excited to see that our land and expand strategy is working. From a geographic standpoint, Q4 revenue in the U.S. increased 66% year-over-year with $31.3 million, and international revenue increased 62% to $18.1 million. The U.S. was 63%, and international was 37% of reported revenue, consistent with the prior year. Turning to remaining performance obligations or RPO. In Q4, total RPO increased to $170.1 million, up 78% year-over-year. Current RPO increased to $137.3 million, up 60% year-over-year and represents about 81% of total RPO. Before turning to gross margins, expenses and profitability, please note that I will be discussing non-GAAP results going forward. As a reminder, our GAAP financial results, along with reconciliation between GAAP and non-GAAP results can be found in our earnings press release and supplemental financials on our IR website. Gross margins improved to 72% compared to 71% in Q4 2020, which we continue to scale the business. Moving to operating expense. For Q4, sales and marketing expenses were $21.9 million compared to $12.6 million last year. This is up 73% year-over-year and represented 44% of revenue compared to 42% of revenue in Q4 2020. We expect this line to increase as a percentage of revenue in fiscal year 2022, as we build out sales capacity and drive awareness, including our in-person Amplify events in Q2. R&D expense in Q4 was $9.8 million compared to $5.3 million last year. This represented approximately 20% of revenue compared to 18% of revenue in Q4 2020. We continue to increase our investments in product development as we focus on extending our leadership in product analytics and building additional solutions to service the Chief Product Officer role. G&A expenses were $8.9 million for the fourth quarter, compared to $3.6 million in the fourth quarter of last year. G&A was 18% of revenue versus 12% of revenue last year due to incremental cost of operating as a public company, but we expect this to improve as a percent of revenue as we continue to scale. As a result, the loss from operations in the fourth quarter was $5 million compared to a loss of $0.2 million last year. Operating margins were negative 10% compared to negative 1% in the same period as we accelerated growth and investments for growth. Net loss was $5.4 million compared to $0.5 million in the fourth quarter of 2020. Net loss per share was $0.05 based on 107.9 million shares compared to $0.02 in the fourth quarter of 2020 based on 26 million shares. Turning to free cash flow. Free cash flow was negative $12.2 million or negative 25% of revenue compared to negative $3.8 million or negative 13% of revenue in the fourth quarter of 2020 and for the full year 2021, free cash flow was negative $34.9 million or negative 21% of revenue. Note that Q4 and full year 2021 free cash flow includes approximately $6.5 million and $18.2 million in direct listing expenses respectively. Adjusting for this, our free cash flow margin would have been negative 12% in Q4 and negative 10% for the year. Turning to our balance sheet, our cash equivalents were $307.4 million at year-end, down from $317.8 million in the prior quarter. With 2021 complete, let’s now shift our attention and discussion to our outlook for the first quarter and full year 2022. As detailed in today’s press release, our initial revenue guidance for 2022 is $226 million to $234 million, which represents a growth rate of 37% at the midpoint and approximately 40% at the high end. Before going further into guidance, we’d like to provide you with some additional insights into our thinking on this range. We believe we’re still in the early days of Digital Optimization. As we’ve seen with customers like Atlassian, Instacart, NBC and Under Armour, it can take a few years for new customers to completely embrace the full capabilities of our Digital Optimization System and drive larger expansion. As we share, these can be quite meaningful for our results, as we saw in Q2 2021. But the precise timing of these can fluctuate, and that timing uncertainty is reflected in our 2022 guidance. We believe our new customer growth, new product adoption, and rising net retention rates are great signals, and that we’re well positioned to drive strong sustained topline growth. With that said, let me review the rest of our 2022 guidance. We expect our non-GAAP operating margins to be negative 22% to negative 20%, given our planned investments to build awareness and extend our product leadership. We expect non-GAAP net loss per share to be between $0.44 and $0.42, assuming shares outstanding of approximately 111.9 million. For the first quarter of 2022, we expect revenue to be between $50 million and $51 million, representing an annual growth rate of 53% at the midpoint. Note, like most other cloud software companies, we recognize our revenue ratably on a daily basis. As there are two fewer days in the first quarter than in the fourth, this represents a headwind of approximately 2 percentage points of growth sequentially. We expect non-GAAP operating margins to represent approximately negative 22% to negative 20%. We expect non-GAAP net loss per share to be between $0.10 and $0.09, assuming shares outstanding of approximately 109.5 million. In summary, we believe we’re well-positioned to drive attractive revenue growth as we help companies build better products with our Digital Optimization System. We’re looking forward to continuing our discussions with investors and analysts. We’re excited about Amplitude's market opportunities. With that said, I’ll turn it back over to Jason to moderate the Q&A session.

Thanks, Hoang. We’ll now begin the Q&A portion of our webcast with sell side analysts. Our first question will come from Michael Turits from KeyBanc, and our follow-up will be from Rob Oliver at R. W. Baird.

Hey guys. I’m unmuted there. Thank you. So Hoang and Spenser, last quarter, you spoke about not seeing the expansion that you had seen earlier in the year in 2Q as you just referred to now. So what did you expect to turn around that didn’t? Obviously, how do you rectify that? And at the same time, how does that square with what looks like Hoang with – looks like a pretty good expansion in your DBNRR and pretty decent CRPR growth on a sequential basis?

Michael, thanks for the question. First of all, obviously, whatever we give guidance, we’re obviously looking forward and we’re trying to make sure that whatever guidance we provide, we feel comfortable in delivering. And so the guidance is more about, like, I would say the future expansion. I think we kind of ended Q4 and what we executed Q4 was exactly kind of what we wanted to do. But when we look at the opportunities for expansions brought out, there was just more kind of like the fluctuation that we see in terms of – there were obviously expansions that happened in 2021, and we had a customer that had accelerated growth in their business due to COVID. We obviously expected that growth rate to slow down or decline, but still growing, just at a slower pace. But it’s not clear is like, those companies that are not impacted by COVID, but actually would benefit from, let’s say they returned back to normal. First, you kind of had Delta, then you had Omicron, and so what’s the exact timing of that? We also, like I said, we’re excited by the fact that we had so many new customers and we’re also excited that our new product Recommend and Experiment are seeing traction with over a hundred customers that are on it now. But it’s just not clear for us right now in terms of the exact timing of these expansions. We’re very confident that in the long term, companies will adopt and expand their use of Amplitude, just like we’ve seen in the past with other customers. But that’s just the best visibility we have at the moment.

And I guess whether it’s, I guess maybe – maybe Spenser can take the question maybe, I guess go to market – is it a go-to-market issue or a product approach that you take to try to rectify this? I mean, to be as specific as you can, where is it that people were really not expanding or expected? Do you feel like you’ve got to rectify that from a product perspective or as I said, in terms of a different go-to-market motion, some sort?

I think, you know, to be clear, I mean, so 2021 was a phenomenal year, a real breakout year for us, 63% revenue growth and 54% customer growth. I think what’s key to understand is to Hoang’s point, the precise timing, this is an evangelical sale. So the precise timing of these expansions can fluctuate. A great example of that is, you know, consider Venmo in PayPal. Venmo has been a customer with us for a really long time. When they got acquired by PayPal, it took a few years for PayPal to adopt the religion of digital optimization of data-driven product structure—figuring out how to track metrics in their product to drive revenue throughout their offerings. It's not a rip-and-replace approach; it's more about the adoption of a new method of running product businesses. So, to that point, I have a lot of confidence that that’s the right way to run your product business. There’s no question that that paradigm shift is happening. We’re seeing it; if you had asked me a few years ago, 'Hey, would Toyota be a customer?' I would have said it'll probably take a while. But we’re witnessing that adoption in companies across both tech and non-tech sectors. The question remains, however, is about the precise timing of that adoption of this new way of building products.

Thanks, Michael. Our next question will come from Rob Oliver at R. W. Baird, and the follow-up will be from Elizabeth Elliot from Morgan Stanley.

Great. Thanks Jason. Thanks everybody. Hi Spenser, Hi Vuong. So just, I think I’m going to follow up on Michael’s question and maybe ask just a little differently. It seemed like you guys had a certain cadence of deal evolution with say the Atlassians and Instacarts, and was there an expectation around with that cadence relative to Recommend and Experiment that’s maybe taking a little bit longer? Clearly you guys are getting some nice early traction there, but I’d be curious to hear, say for example, when like at the Fortune 100 where you guys have a really nice presence, but it’s not a multi-product presence yet. What are you seeing there? Has there been any slow in some of those sales cycles?

Yeah. I think this is something we’ve seen since the start of Amplitude where exactly how fast and how quickly someone adopts digital optimization can vary. Obviously, we had a really great breakout year last year. I think if you look at the examples you just talked about, Instacart and Atlassian, the adoption is not just a one quarter or one year thing. It can take many years, even in these companies that are very tech-forward, because they’re adopting a new philosophy for building their products. As we put out guidance for this coming year, we want to be clear about what we feel great about hitting, and that’s what you saw articulated in Hoang’s remarks. Regarding new products, I want to separate it out; new products still make up a very small percentage of the revenue base. Now, we’re really proud of reaching a hundred companies on new products in the first six months, but that’s just a proof point for me as a CEO that what we’re doing here is working. Let’s invest behind this. Now, relative to your overall customer base of 1,600 customers, that’s still a relatively small percentage. But that gives us a lot of confidence to say, hey, let’s continue to invest behind those products and we expect to launch one or two products a year going forward.

Yes. The only thing I would add to that Rob is that, you mentioned lack of expansion in sales cycles. We’re not seeing that timeline lengthen or anything. If anything, what we had hoped for was that the timeline would in fact make it a little bit shorter, but it’s relatively staying the same. And so it takes some time for those expansions to occur. I think the other piece is that when we have folks that we thought would grow and benefit from things going back to normal, we've learned that the recovery timeline is not as fast as we initially thought it might be. So that’s a factor we’re trying to navigate as we go forward.

Great. That’s helpful. I just had a quick follow-up, if I may, Jason, just on sort of the two recent kind of developments around the Adobe extension and then the Snowflake integration, very nice customer additions this quarter. So, I’d love to hear if the Adobe extension played any role there? And then, regarding the IT department, I know it’s still very early and Spenser, we talked about it last call, but just would love to hear if that Snowflake integration is easing that barrier to adoption at all. Thank you guys.

Yes. Absolutely. That’s a great question, Rob. What makes the Adobe and Google integrations particularly exciting is that these are massive companies; it’s like completely different levels compared to Snowflake. This opens up a whole new set of customers that previously would require a lot of engineering resources to transition and get set up with Amplitude. But now it’s just a few clicks in an interface and you’re up and running. Those are really huge proof points for us. To be clear, we just launched them, so it’s not like we have tons of customers on them yet. We’ve obviously beta tested with a bunch of customers and we’re really excited to get them out there because I think going forward, the market for those integrations is really opened up for us. The other part of this is that there’s an expectation in the current generation of SaaS tooling that things are very open, and users need to be able to move data in and out from wherever they want. That’s the primary blocker for customers setting up on Amplitude today. The more we can reduce that barrier, the better it is for us, especially with major integrations like Adobe and Google. It allows us access to new customer bases.

Thanks, Rob.

Hi, thank you so much for the question. I wanted to ask about calculated billings. It looks like it was down quarter-over-quarter, so I just wanted to get a sense of what’s driving that. Was there any sort of pull-forward that you had in Q3 that might be, you’re working through this quarter? What was the rationale for down quarter-over-quarter billings?

Yes. Thanks for the question, Elizabeth. Calculated billing is obviously impacted by the amount of invoicing. And you also tell that decline in Q4 revenue is pretty much typical of our renewal base and the timing of the invoicing. In Q4, we typically call it the end of September renewal base. Whereas the deals are coming in December, the renewal base that comes in December are usually built in Q1. Looking at past trends, you’ll see that we typically have one of our stronger billing periods in Q1, so you’ll see a flip flop in terms of billing for revenue down in Q4, because that’s essentially pulling out of the Q3 renewal base and Q4’s renewal base will actually get invoiced into January. So that’s just a little bit of timing difference between Q4 and Q1.

Got you. Yes, that’ll be helpful as we start building out the historical database on that.

Yes. And there was also obviously the other point to make is that Q3 was also particularly a bit stronger because Q2 expansion is so strong. When they get built out in Q3, you obviously have the Q3 number being a little bit higher.

Hey, thanks for taking my question and good afternoon, everybody. I wanted to drill in a little bit more on your comments around some of the weaker expansions that you’ve seen so far in Q1. As I think about your expansions, I think of it as having multiple dimensions. You have kind of the product usage and increased app usage, and then you also have kind of your upsell motion with newer use cases. So I guess what I’m wondering is if I heard you right then that it was just kind of that first example, the weaker app usage that kind of drove this weaker expansion. And I’m just curious if you’re making any changes internally, whether it’s customer success or deploying more resources to kind of help improve that metric.

Yes, Tyler, I just want to clarify that we’re not really saying that we’ve actually seen lower expansion in any quantifiable manner. It’s more a matter of looking outward and attempting to gauge the pipeline while making sure we’re providing the right level of guidance. Regarding the two questions you asked, I believe that we’re not really seeing a difference in product usage or changes due to either newer products or volume; those variables become intertwined as once a company adopts digital optimization or product analytics as their methodology. That’s why the timeline often remains pretty stable; we still need to keep pushing awareness and education, but I do believe that will standardize as these methods become more widespread in the market.

The only comment I’d add is just on the new products. Again, those are super early, so they’re not dominating a large portion of the numbers we’re discussing. We’ve seen some really exciting progress there, and it's hard for SaaS companies to transition from one product to a multi-product offering. As a CEO, that gives me a lot of confidence in the ongoing success there. We want to invest behind those and introduce new products going forward, but they don’t constitute a significant portion of business revenues yet. Yes. I think we’ve really seen a market change from a few years ago, where in the past, most of the large expansions were tech companies like Intuit, Atlassian, and PayPal. What we’re witnessing now is a rise in adoption among non-tech companies, particularly in the last year, with significant business conducted with Ford, A&E Networks, HBO, and NBC. This transition is happening across many non-tech industries, and as I evaluate how we manage the business, I see it as crucial to make significant investments in these areas too.

Great. Thanks, Tyler. Okay, we’ll go to Bhavan next followed by Koji Ikeda with Bank of America.

Great. Thanks. Can you guys hear me okay?

Great.

Let me just follow up on that line of questioning a little. There’s a concept that’s been put forth where, for example, if you look at Atlassian, they’re so invested in what you guys do that if they launch a new product, it feels as if you guys are embedded in there, no question, or it will be. And that flywheel for some of the tech companies was leading edge, and you’re beginning to see that flywheel emerge with these other companies. I guess my first question would be how do you go to market differently there? Do you have vertical sales divisions in place? Is there an approach you’re taking that says, 'Hey, here’s how we think about it'? And then I’d love to hear more about your conservatism surrounding timing. While you’re seeing the flywheel kick in with tech companies, you’re also expressing uncertainty about the timing of expansions with non-tech companies. Can you help me balance those two observations?

Yes, so it’s early, and it’s not like we've decided to verticalize; we’re still a long way from that. With this sort of customer approach, that’s where you do need more robust support. In conversations with Ford, I’ve observed that they have some truly sophisticated digital insights. These customers understand our religion—they’re just figuring out how to properly implement change management for adoption. This is similar to what we’ve seen with both tech and non-tech companies. There’s been a steady transition in the realization of the opportunities Amplitude can provide, and we want to focus on ensuring that the numbers we share are reflective of that dynamic perspective. From a competitive standpoint, it’s not so much about competing against other players; it’s more about getting people to adopt this concept of digital optimization and embrace Amplitude as part of that process. Most customers will end up piecing together a variety of solutions, but we can come to them and offer an integrated solution that minimizes the need for extensive engineering resources. We see that acceptance of our systems from non-tech companies and tech companies alike. So that competitive landscape remains very conducive to our growth.

Okay. We’ll move on to our next question from Koji followed by Taylor McGinnis from UBS.

Hey, guys. Thanks for taking the question. I had a question on sales productivity; just quick back of the envelope math here from the 2022 revenue guide. It looks like the net ad for 2022 is about the same as 2021. But you guys have been clearly investing heavily in sales capacity branding and all that sort of stuff. So I was wondering, if you can talk a little bit about how sales capacity has been ramping. Is it going to plan? How do we triangulate all the investments that you’ve done with the revenue guide?

Yes, for sure. That’s a great question, Koji. There are two important parts to your inquiry. First, if you look at either 2020 or 2021, we were very conservative in how we invested in the business, whether it’s in sales or go-to-market strategies, out of an abundance of caution related to uncertainties in the market with COVID and other developments. Much of what we’re undertaking now is to catch up to where we should have been a year or two ago in terms of making necessary investments. The second part of that is that our investments are not merely about immediate revenue outcomes this year; it’s about laying the groundwork for long-term success, including 2023 and 2024 and beyond. We’ve been closely monitoring the numbers regarding sales capacity, ramping, and overall metrics, and we feel confident with our current positioning. It’s about ensuring that we’re positioned for the expansive market opportunities ahead.

Got it. Thanks, Spenser. And then just one follow-up for Hoang. Wanted to go back to a previous question on the billing seasonality. Just wanted to make sure I understood that correctly. So could you dig in a little bit as to why would Q1 be the strong seasonal renewal quarter, if I heard that correctly? What is different about the customer use cases that shifts it over to Q1 versus what we’re more used to seeing in a traditional Q4 strength? And, as the business scales, do you foresee an eventual shift to a more Q4 weighted billing seasonality?

Yes. I actually think we’re quite similar to most companies in that Q4 has traditionally been our stronger quarter, but the invoicing on those December renewals doesn’t actually take place until January. There’s a timing element at play when examining our invoicing basis; it’s not built out in the same month that renewals occur. A renewal will typically start on the day of the subsequent month. So, when that January 1 start date happens, it will be the day that it’s actually billed.

Okay. Just one quick follow-up regarding the invoicing timing. Is it like a renewal then a 30-day delay? How do we think about that, and how can we incorporate that into our models?

Yes. The best way to think about it in the past is that when a salesperson signs a deal, that deal would typically start the following month. So, on that starting date—commonly January 1—you’ll see the related billing occur.

Yes. Hi, thanks so much for taking the question. So maybe going off of the last question I was just asked, when you think about the billings and invoicing being stronger in Q1 versus Q4, can you maybe talk about that in the context, I guess, of what we saw this past year? So if I look at 2021, it seems that Q1 and Q3 were similar in size in terms of sequential growth and it was really Q2 that I think you saw as the strength in the quarter. So I guess how might this coming year be similar or not to what we saw this past year? Anything you could add just in terms of VR being down sequentially this quarter, if there was anything anomalous in there too.

Sure. Yes, so Q2 was obviously a stronger quarter than normal, because we had some early expansion when it came to billing. Expansion occurring tends to flow into Q2 rather than Q1, so it yields some backward billing impact. However, typically, in the past, if we hadn’t seen that one-time instance of Q2 being excessively strong, we would see Q1 as typically our big quarter-over-quarter growth. Our patterns indicate that Q3 bookings tend to be smaller, and thus Q4 billings are a tad lower due to that one month delay.

Okay, got it. And then just my last one for me; a lot of people have already commented that net customer adds were really strong in the quarter. I guess what we have less visibility into is in the context of what you guys discuss a lot, just the in-quarter dollar-based net expansion rate. So can you maybe talk about what that might have looked like this quarter relative to past quarters? And then anything to share regarding average landing? As we look ahead, I know in the past we’ve discussed maintaining that 120% plus dollar-based expansion rate, but considering today’s call, how do we think about that as we move forward?

Yes. So first off, we’re still committed to maintaining our net retention rate at 120 in the long term. As our customer base increases, it will become more challenging to maintain, but we believe we’re adding so many new customers that they’ll be in the early days of their expansion with us. Also, the new products are just beginning to have a meaningful impact; they were introduced in mid-Q2. We’re seeing strong growth across our metrics overall, including gross retention.

Thank you, Taylor.

Thank you, Taylor.

Thank you all for joining. This concludes today’s discussion. Your interest in Amplitude is appreciated. We look forward to engaging with you in the future.

Thanks, everyone. Appreciate it.