Business context and reporting period
Amplitude, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2023. The company sells a SaaS digital analytics platform and reports as one operating segment.
Financial and operating metrics
Amounts are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $66.5 | $53.1; up 25% |
| Gross profit / margin | $47.3 / 71% | $37.0 / 70% |
| Operating expenses | $76.5 | $59.0; up 30% |
| Operating loss | $(29.2); (44)% margin | $(22.0); (41)% margin |
| Net loss / diluted loss per share | $(26.3) / $(0.23) | $(22.2) / $(0.20) |
| Operating cash flow | $(5.1) | $(8.3) |
| Free cash flow | $(5.8); (9)% margin | $(9.6); (18)% margin |
| Cash and cash equivalents | $214.1 at March 31 | $218.5 at December 31, 2022 |
| Marketable securities | $84.1 at March 31 | $83.2 at December 31, 2022 |
| Debt and lease liabilities | No borrowings are listed; operating lease liabilities totaled $10.5, including $4.4 current |
Non-GAAP gross margin was 74% versus 72%; non-GAAP operating loss was $7.9 million versus $7.7 million, with margins of (12)% and (15)%, respectively. These measures exclude, among other items, stock-based compensation and acquired intangible amortization. Stock-based compensation expense was $20.0 million, compared with $13.5 million.
Other indicators: annual recurring revenue was $262 million, up 25%; paying customers numbered 2,175, up 28%; trailing-twelve-month dollar-based net retention was 114%, down from 126%. Remaining performance obligations were $240.4 million, up 24% year over year; $191.5 million was expected to be recognized within 12 months. Deferred revenue was $89.3 million. International customers generated 39% of revenue.
Material changes versus the prior comparable period
- Revenue growth reflected a larger paying-customer base, but retention weakened: ending dollar-based net retention fell to 106% from 127%.
- Operating expenses rose 30%, led by research and development, up 44%, and sales and marketing, up 39%; the operating loss widened to $29.2 million from $22.0 million.
- Net loss increased to $26.3 million from $22.2 million. Higher interest income contributed to other income of $3.1 million, versus $0.1 million.
- Operating cash outflow improved by $3.2 million year over year, although cash, cash equivalents and restricted cash declined $4.4 million during the quarter.
Outlook, management commentary, risks and unusual items
The filing provides no specific revenue or earnings guidance. Management expects current cash and cash equivalents to cover working capital and capital expenditure needs for at least the next 12 months. It also anticipates continued investment in product development and sales, and expects operating expenses to rise in dollars; expense ratios may increase in the short term. Management says it expects gross margin to improve over the longer term.
On April 3, 2023, after quarter-end, Amplitude authorized a workforce reduction of approximately 13% and estimated related non-recurring charges of $7 million to $9 million, mostly in the quarter ending June 30, 2023. The company also issued approximately 2.0 million employee RSUs in April, with grant-date fair value of about $25.4 million. The filing notes the CFO transition effective February 22, 2023, when Christopher Harms replaced Hoang Vuong.
Principal risks include persistent losses and uncertainty about achieving profitability; weaker customer retention or expansion; economic pressure on software spending and sales cycles; execution and savings risks from restructuring; competition and reliance on the Analytics product; cybersecurity, service availability and privacy-regulatory exposure; and international and geopolitical risks. The company reports ordinary-course legal matters but says it is not aware of litigation expected to have a material adverse effect. It maintains a full valuation allowance against U.S. deferred tax assets. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting reported.
Most important facts for investors to verify
- Whether customer retention and expansion stabilize after the declines in reported retention metrics.
- Whether revenue and ARR growth can continue without operating expenses rising faster than revenue.
- Actual restructuring charges, timing, realized savings and any effects on execution or customer support.
- Cash burn and liquidity trends, including the composition and maturities of marketable securities and the absence of listed borrowings.
- The effect of substantial stock-based compensation and outstanding equity awards on future dilution and reported profitability.