Yaoxian Chew, Vice President of Investor Relations. Joining me here are Spenser Skates, CEO and Co-Founder of Amplitude; and Criss Harms, the company’s Chief Financial Officer. During today's call management will make forward-looking statements including statements regarding our financial outlook for the first quarter and full year 2024. The expected performance of our products, our expected quarterly and long-term growth, investments and 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 in today's call 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 this 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, Yao, and good afternoon, everyone. I'm excited to welcome you to the Amplitude Q4 and 2023 earnings call. We have a lot to share today, and we're going to cover it in 3 main sections. First, our financial results for Q4 and 2023 overall. Second, the maturation of Amplitude in 2023, including an update on innovation and customer wins. And thirdly, our views on 2024. Let's start with the Q4 and full year financial highlights. Our fourth quarter revenue was $71.4 million, up 9% year-over-year. Annual recurring revenue was $281 million, up $8 million from the end of the third quarter. We've grown our customer base to more than 2,700. 511 of those customers pay us more than $100,000 per year, up from 480 at the end of 2022. We also have 39 who pay us more than $1 million a year, up from 30 at the end of last year. Lastly, we delivered almost 10 percentage points of non-GAAP operating margin expansion year-over-year. We also generated $1.5 million of free cash flow in Q4, and $22 million of free cash flow in 2023. Q4 was our largest quarter for net ARR in 2023 marked by broad-based growth across all customer sizes. It was also the largest quarter of new enterprise logo wins in the company's history. While total churn was still high, it was lower than previous quarters. 2023 was a big year for Amplitude. I'm proud of how the team delivered. First, we made great progress in stabilizing the business, focusing on what we can control, we delivered margin expansion and positive free cash flow even against slowing growth. Second, we launched our Plus plan in October, helping us to serve the lower end of the market much more effectively with a product-led growth motion. In doing…

Thanks, Spenser. Thanks to everyone joining us today. I take pride in our recent performance. We exited 2023 with Q4 being our largest quarter for net ARR for the year. It was also the largest quarter of new enterprise logo wins, which were a positive indicator to the momentum we are building as part of the win the enterprise pillar of our broader strategy. Total churn was still high but I'm encouraged that it was lower than previous quarters. And I'm also encouraged that for the third quarter in a row, actuals were in line with what the forward-looking indicators were projecting. We came in above our guide on Q4 operating profit and delivered positive free cash flow for the third consecutive quarter. We're demonstrating fiscal responsibility and proving ourselves strong stewards of shareholder capital by delivering 13 points of free cash flow margin improvement year-over-year, even against slowing growth in a stubbornly challenging macro environment. Now on to the fourth quarter results. As a reminder, all financial results that I will be discussing with the exception of revenue and balance sheet figures are non-GAAP. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release and supplemental financials on our IR website. Fourth quarter revenue was $71.4 million, up 9% year-over-year. Total ARR exiting Q4 increased to $281 million, an increase of 10% year-over-year and $8 million sequentially. Here's more details on key elements of ARR. New ARR was evenly split between land and expand, exemplified by a broad-based new ARR across our customer segments. Churn remained elevated and slightly lower in absolute dollar terms than Q2 and Q3, consistent with our expectations. Full churn accounted for just under 2/3rds of the total amount in the quarter. As expected,…

Thanks, Criss. [Management Instructions]. Our first question will come from Koji Ikeda of Bank of America, followed by Taylor McGinnis from UBS. Koji, go ahead, please.

Let me just ask the question here. Two questions, one for Spenser, one for Criss. So Spenser, starting with you, how does the demand environment feel today February 2024 versus February 2023. It sounds like things are better lapping of optimizations. It sounds like some green shoots and renewal cohorts. So as you're talking to new customers, are the pain points the same? Are you having same types of conversations, same types of prospects, or have things changed? And if so, maybe you could talk about that a little bit.

Yes, for sure. I think demand for what we do has always been strong, whether I look at now, whether I look at a year ago, whether I look at many years ago. This is a top priority for many product and data teams for them to understand how it is their end customers are using the product, and we're seeing that in both tech companies as well as the traditional enterprise. In terms of now versus a year ago, I'd say it's maybe slightly stronger I think there's still pressure on a lot of digital native ad tech companies as they're optimizing spend. Companies continue to go through layoffs. I think the big thing that changes for us is structurally stuff gets a lot better as we go through the first half, as we talked about, once those earlier renewal cohorts wash out. And then I think I have to give a lot of credit to -- the last piece of that, I give a lot of credit to the changes that Thomas has driven across go-to-market to mature our motion. That's really a big part of what led to our success in Q4 with a record number of enterprise lands. That's what led to our ability to deploy a Plus Plan where we have self-service motion, and we can then take those resources and focus them up market and higher potential accounts. And I'd say the primary driver is demand has always been there. It's our execution is getting better.

Got it. Thank you. And then a follow-up for Criss here. ARR just grew 10%, added $8 million net new sequentially, as you said, the best of 2023. And last quarter, you said there's a high correlation of kind of this year's ARR as an indication of next year's growth, but you are guiding to 6%. I did hear you on your commentary of kind of the puts and takes there. But just trying to understand a little bit further that 400-point delta, it'd be finishing ARR growth to the next year guide? Is it just added conservatism or just take key to what you said in your prepared remarks? Thank you.

Yes. No. There is a spread acknowledged. There is the kind of the really the role that Q1 and Q2 were going to play in terms of our expectation and the drag on our net ARR from the anticipated churn and the impact that they're going to have on the 2024 revenue. That's the primary driver to that obvious disconnect, yes.

Taylor McGinnis, you are up next followed by Rob Oliver at Baird. Taylor go ahead please.

Just with the rise of layoff activity that we've seen in tech. Can you talk about where we stand in terms of the timeline of license rationalization and what's embedded in the guide. So it seems like the guide implies a steady deceleration throughout the year. But it looks like in 1Q, you're assuming similar growth to 4Q. So is that just because of you're assuming now these tougher renewals are going to continue into the second half. Maybe it's just conservatism. But I guess why could we not see an acceleration if churn starting to improve? Some of these new cohorts look better? Maybe you can just give a little bit of color there.

Yes. Look, I'll take that on. I talked about churn, I've talked about it being at commensurate levels with what we saw Q2, Q3, Q4. Commensurate level doesn't mean down, and we did say that Q4 was down relative to Q2 and Q3. Kind of with those elements in play, I'll remind you that my guide or I didn't guide it specifically, but my signaling for Q4 kind of net ARR was a number much closer to 0. Like, I was very pleased with our overall performance. It's very pleased, it was very broad-based. And I guess that same level of tempering both what we hope to achieve in Q1 and Q2 from a new ARR perspective is just being offset as I try to be prudent about how to approach it with what we see from churn. And I'll just remind you, churn, we definitely have gotten our arms around, right, for Q2, Q3, Q4, while it's been an elevated number, one of the positives I take away from that is at least the indicators gave us pretty good signaling to that. So all of those different ingredients [indiscernible] is kind of what has shaped how I'm thinking about those elements.

Perfect. And just a little follow-up question. So it seemed like this past quarter, the pace of NRR deterioration was starting to subside. But you talked about NRR troughing in the mid-90s. And 2Q revs being down sequentially. So is there something specific to the 2Q renewal base that you're trying to fly coming up, I guess is it larger? Does it greater tech exposure? Maybe you can just help us think through what that base looks like maybe relative to what we've seen in the last couple of quarters?

Yes. So remember, we do not have an evenly distributed renewal base. We are definitely highly concentrated in Q1 and Q2, relative to where we are in Q3 and Q4. And then our ability to have our arms better around our customers, the role of the multi-years and kind of where we think they're going to reset on their renewals. All of those are just taking shape to how we're thinking about the precision to Q1 and Q2 and how we think about the kind of the cyclical nature of being in a mechanically different place as we talked about in Q3 and that therefore kind of forming our trough.

Next question, Rob Oliver from Baird. Followed by Tyler Radke from Citi. Rob, go ahead please.

My question is, I think probably a bit of a follow-up to Taylor's. You guys clearly have made some tremendous strides on managing that churn. There's been a lot of changes in go-to-market, a lot of internal optimization of the process. So I guess what I'm wondering is when you look out to that big cohort that's coming out in Q2. In terms of what you guys can control, because some of this is just natural there's fewer lower headcount. But in terms of what you guys can control, maybe talk about some of the opportunities to get other products into the hands of these customers or other ways to maybe get the platform sell going. Spenser, I know in your prepared remarks, you mentioned Session Replay as an example. So maybe talk a little bit about like some of the ways you guys can maybe work those contracts a bit better? And then I have a quick follow-up.

Totally. So I divide it into 2 big ones. There's the operational of how we manage a particular account and then there's the strategic in terms of how we approach our entire customer base. On the operational side, we've gone through a lot of maturing of our go-to-market team over the last year. And I think you're starting to see the results in terms of our ability to forecast and understand where things are going to be further out. We're also able to have conversations with much more senior executives than we were before. A great example is one of our large food delivery customers, multimillion dollar customer have been with us for 6 or 7 years. We were stuck at the director level in terms of our conversations for many years. And we just had a conversation with them about a month ago with the VP of Data Engineering, and that was completely changed the dynamic. They were skeptical of continuing to invest in amplitude in the past because they're like, hey, this thing keeps growing in terms of cost without bound. And I don't know necessarily no. Yes, it's popular and used by a lot of end users at my company, but I don't necessarily know and understand the value it's driving. We had the conversation. We said, hey, we're going to work through doing an enterprise license agreement, so you don't have to worry about how stuff scales and work with you on the pricing side and then that helped him direct the organization to lean in to us. And so it's like those conversations repeated again and again and again, where we're focusing on getting into much senior levels, doing executive business reviews, talking about the value that we're driving. On the strategic side, I think…

Great. Tyler Radke from Citi. Followed by Nick Altmann from Scotia. Tyler, go ahead please.

So just starting off on the quarter, maybe a question for Criss. It looked like the revenue performance was a little bit light of the midpoint of guidance. And I think historically, you typically show some upside relative to that guidance range. So it looks like ARR was solid. So was there anything unusual to call out in terms of linearity in the quarter, maybe more back-end loaded? And then the follow-up question is, as we just think about the guidance for 2024, with sequential revenue declines in Q2. It does imply a pretty larger pace of sequential revenue increases in Q3, Q4. Can you just talk about the visibility and confidence you have in the new business side of that for that to play out? Thanks.

Yes. Both very fair questions pretty straightforward answers. As it pertains to Q4, actually any quarter, we do have in-period revenue, overages, professional services, but it was overages. Overages did not come in at a consistent level with where it had. The planned beat that I had rolled into the midpoint did not materialize and we came in about $200,000 below that. It is a small part of our top line, but it did drop off in Q4 below the expectations. And then that prompted me to do the postmortem and make sure that I was more appropriately gauging it for how we look to 2024. As it pertains to your second question on the quarter-over-quarter. The churn that we've identified for Q1 is very back-end loaded. And some of the large ones that we're expecting are actually happening March 30, March 31. But that's not the same case in Q2. The ones that we've identified as really weaving in, those are month 1 and early parts of month 2 of the quarter. So while the ARR or the associated churn that were kind of conveying as a consistent number, the timing of when those happen in the quarter and their associated impact is what's in play. And Yao and I, that just felt, it was appropriate to signal that to you now as part of our color that's our expectation for Q2.

Great. And then just on the second half, anything that you're assuming, I guess, is it consistent new business assumptions with the first half? And then just a follow-up on the spending. So it looks like you are guiding margins to be down from this year. What are the biggest priority areas you're spending on? And can you just talk about how you think about the pace of medium- to long-term margin expansion?

Yes. So let me try to break down the first part of your question. Well, I don't want to get into specifics of new ARR. I will say, look, I have high expectations for how we deliver in the back half of the year, but I haven't built all of those into our top line. As it pertains to the mechanics of churn, we finish out that prior thought because of their impact on revenue in 2024, obviously, very de minimis tied to the Q3 ARR performance. As it pertains to the broader look kind of reemphasizing the point that we've been conveying is that the first half of the year is going to face some anticipated churn that will substantially offset our new ARR for the first half and that obviously plays a role in the broader revenue. As it pertains to your margin question, look, we are increasing our margin profile from where we finished 2023. We are guiding a couple of points up in terms of margin expansion. One of the points I did try to call out in the prepared remarks is, as I look at our business, as I look out where we are from a market maturation. When I look at all the things that Spenser alluded to in terms of up-leveling the business, getting more focused I have a lot of confidence, and I tried to convey that in my closing remarks about how we'll be positioned exiting 2024 and heading into 2025 when all of these pieces start to come together. With that level of confidence, there is a level of investment that I just think is appropriate for the opportunity that's ahead of us and kind of where we are on our maturation. I hit upon those across product innovation, platform expansion, all the things that we've done within PLG and all the things that we're going to do in PLG in 2024. Now that we've got a much more focused go-to-market, I think our customer engagement on professional services can be much more effective. Spenser spoke to what we're doing with kind of premium services packages there. I think we're going to get some value out of those incremental investments, which is why I've given a little bit of a point drag in terms of range on gross margin. And then just in my own backyard of the business applications infrastructure and what we can do to further enable Thomas and his team to understand what dials to turn up, what dials to turn down. I think all of those investments are prudent. And if you look at it in the overall kind of percentage of our cost structure, they are relatively nominal investments on a year-over-year basis, but I think they're the right ones to make at this time for the long term.

Next question, Elizabeth Porter from Morgan Stanley, followed by Arjun Bhatia. Elizabeth, go ahead please.

Really impressive acceleration in the new total customer call. I just wanted to get some color on how we should think about the pace of adds into 2024. And then additionally, just given a lot of the momentum is likely driven by some of those smaller low-end customers, how do you think about the opportunity to upgrade that customer base? If the character is the quality of those companies very likely to upgrade, any color there would be helpful.

Spenser, do you want to take that?

Yes, sure. Yes. As the total customer count includes both those Plus and those annual contracted customers, so it can be deceiving as to which bucket is which I think. First, on the enterprise side, like I said, a record number of lands there on the high end, and so that was fantastic to see. Obviously, going to make not huge contribution to the total customer count. So the acceleration really comes from the Plus Plan. Now I think most of those customers, obviously, they're going to be paying hundreds, thousands of dollars a month, not the level that are enterprise customers. But we have seen some upgrading over time, and we expect that that will be a fantastic channel for our enterprise team.

Elizabeth, I'll add. You'll see that I actually pulled it out of our press release. I didn't want to highlight it. We're very focused on the $1 million-plus customers, increasing from 30 to 39. We're very focused on the 100,000 plus customers increasing from the 480 to 511, right? That pool reflects three-quarters of our ARR base I think is central to our long-term success. We know we're going to be able to farm and develop those who are coming into the low, but I don't find the metric to be as insightful as to our progress, as it did before, we got the PLG motion in a much more generally available full production environment. So we're going to continue to share the number. It's not going to be one of my highlight bullets in the press release.

Got it. And then just as a follow-up, now that you're kind of bifurcating the strategy more between kind of the low end and high end customers, any sort of differences in the competitive landscape that you could speak to at each of those basis?

That is a great question. I think on the low end, let's see how would I characterize it. Well, let me start with the high end first, I think that's a little more straightforward. High end is very greenfield. I think you might see previous generation legacy marketing analytics players like Google Analytics or Adobe, but it's not like when thinking about product analytics, Session Replay and some of these other pieces of value. A lot of times these companies are adopting it, and it might just be you and the RFP or might be you and one other company. I'd say on the lower end, that's where we see us competing ourselves with a lot more point solutions. And it's a big part of why we released that suite approach as well as the Plus plan so that we say, hey, we're going to drive the most value at the lowest cost. There's no reason not to choose Amplitude as the provider to get started with there.

Great. Next question Arjun Bhatia from Blair followed by Nick Altmann from Scotia. Arjun, go ahead please.

Maybe if I could start on the churn side of the equation. I'm curious, I guess is this something that you're seeing with your competitors as well? Like is this more of an industry issue in product analytics where either customers are rightsizing, or you have budgetary pressure or impacting growth, or is there something you think internal that's driving it? I guess where are these customers going when they're turning?

Yes. We're not seeing them go to competitors. And typically, as I talked about in the past, a huge chunk of it is rightsizing to aggressive spends from that 2021 and 2022 time period. And so all are indicators on the competitive front as we continue to make progress against both the legacy players and the point solutions and continue to grow market share. And you've got an over exuberance in 2021, some of that's coming off, but you still have a great underlying growth rate as you look at where we sit versus any of those guys in the market.

I'm going to add because one of the things we've conveyed Q2, Q3 was, look, there are 2 forces that are in play. Spenser just spoke to what we're seeing at the high end, both in digital native and traditional enterprises, where we're doing a lot of rightsizing. That's just the nature of what was driving that. Yes, there was some lost churn there, but that's by far the small minor to the major, which has been just partial churns. And reminder to everyone like we count both partial and fully lost in our GDR numbers. The second theme that's there is at the low end, right? It's the venture capital-funded companies where they are struggling to survive. And I alluded to in the prepared remarks that 2/3rds of our churn in Q4 was lost churn. Very much driven by what's happening in that venture capital, digital native community and as they're struggling to survive. And clearly, that will be a temporary environment that we're going to face at that end of our market. But that too will change, and we look forward to being in a much different position in our execution muscle when those market forces change and get the most out of that opportunity.

Sorry, Arjun, you're mute.

Yes. Perfect. All right. Sorry. Yes, thanks. That's helpful. And then one maybe for Spenser again. Just as we're thinking about category evolution, I think there was a time even for Amplitude where we kind of started to go down a different buyer persona into the marketing org. I'm curious if you think that's something that's still inevitable in the product analytics category and how fast do you think that might occur both with Amplitude and the broader industry?

I think it's a longer-term phenomenon. I mean, we launched a whole bunch on the marketing side, and we've been deliberate about targeting that persona. But most companies we work with is still kind of 2 separate personas and 2 buying centers and they have their own tech stack. So while eventually, I look 5, 10 years out, I expect to see it be quite different. In the short term, they're still quite distinct. Now that all said, we want to get ahead of it. So we're doing quite a bit, as I mentioned, on making sure that we're able to speak to value to that persona and tackle them and displace a lot of the legacy players. The other thing I'll call out on the suite offering is that, we've always been very aggressive on the innovation front. The part I'm excited about Francois to join is help to us in terms of how we tackle the organization of that innovation so that we can continue. We have four products now, how do we continue to come out with the five and the six and seven and make sure we win everyone in this broader category by having the best offering in terms of the full platform. So we're going to continue to do more there, whether it's to tackle marketing or to tackle some of the other use cases when you think about digital analytics broadly.

Last question, Nick Altmann from Scotia. Nick, go ahead please.

Awesome. Thanks, guys. Criss, you mentioned overages were a bit light in Q4 I guess, how should we read into that exactly and what does the guidance sort of embed from an overage perspective?

Yes. Great question. Look, it is a small part of our top-line but when it moves a few hundred thousand in any quarter as an in-period revenue, it can just impact. And it did kind of came in lower than what our historical models had suggested for Q4, which definitely prompted us to update how we were looking at that heading into Q1 and the rest of 2024. But it was one of these where small part of the equation, just moved in a different direction than what our historical trend lines would suggest. In terms of the core of your question, I think are underpinning it. It's a function of where we are in both rightsizing contracts, part of the optimization, the other side of that coin is customers increasing their levels and expanding and upselling in a period where it's now part of the subscription base. And when those happen, and I'm not offsetting any overages. It was just a fine-tuning to our model that had to take a lesson out of Q4 and [indiscernible] going forward.

Okay. And just to clarify, the revenue guidance for this year, what does that kind of imply from an overage perspective versus this year? Is there sort of not any overages embedded in the guidance?

There is, I actually have less overages built into the 2024 guidance than what we delivered in 2023.

Okay. And then my second one is, you guys have said like the renewal cohort has been trending sort of above expectations. Churn actually improved a little bit in the quarter, but you're still kind of circling 2Q as potentially a little bit of a higher churn quarter. You talked about a sequential step down from 1Q on the top-line. I guess, how much visibility do you guys have into that? And is it isolated to a couple of large customers? Is it a cohort of customers who have large multiyear deals that they purchased when the macro looked a lot different. Maybe just help us understand the visibility into that 2Q renewal base and why you expect things to get a little bit worse there?

Yes. Many facets to that question, let me try to hit them all. First, as it pertains to the mix of renewals and expected churn, it's not just Q2, right? It's Q1 and Q2. And I've tried to convey that those are commensurate levels with what we generally saw across Q2, Q3 and Q4 of 2023, acknowledging Q4 was a little lower than Q2 and Q3. So I want to clarify, it's not just Q2. But once we get to Q3, we go from an environment where the multiyear contracts are representing 50% of the renewal base to them reflecting less than 1/4 of the renewal base. So just a mechanically different environment in Q3 and Q4, in terms of the impact that these can have. Second piece what I want to hit upon. You heard me kind of with [indiscernible] for the entire organization is that for 3 consecutive quarters, Q2, Q3, Q4, Thomas and team really have their arms around our churn exposure. And what their leading indicators were suggesting to me came in very consistent with where actuals were. Now while nobody is pleased with the levels those came in, I take a very cup half full view on that, that we really got our arms around that, which we didn't have when I arrived. That was one of the things I tried to highlight in my first earnings call. So as it pertains to our visibility, it is both at an account level, very much up and down the stack, driven by the kind of account executive ownership culture that Thomas started to drive back in April, May of last year. Then, Nate, with his arrival has continued to drive and us just being much closer as reflective of Spencer's anecdote, we are getting much closer…

Great. Thank you. With that, I'm seeing no further questions in the queue. We'll be at the Morgan Stanley Global Technology Conference in March; details will be posted on our IR website. Thank you very much for attending our Q4 earnings conference call. You may now disconnect.

Thank you all.