Amplitude, Inc. — Q3 2021 Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated results; amounts below are in millions of U.S. dollars unless stated otherwise. Amplitude provides a cloud-based Digital Optimization System for analyzing customer behavior in digital products. It completed a direct listing on September 28, 2021.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $45.5 | $26.4 | $117.8 | $72.4 |
| Gross profit / margin | $31.5 / 69% | $18.6 / 71% | $81.5 / 69% | $51.1 / 71% |
| Operating loss | $(36.8) | $(2.4) | $(52.7) | $(18.9) |
| Net loss | $(36.6) | $(2.6) | $(53.1) | $(19.2) |
| Net loss per share | $(0.93) | $(0.10) | $(1.64) | $(0.78) |
- Growth and retention: Revenue rose 72% year over year in Q3 and 63% for the nine-month period. Paying customers increased 54% year over year to 1,417; dollar-based net retention was 121%, versus 119% a year earlier.
- Cash flow: Operating cash flow was $(15.1) million and free cash flow was $(15.8) million in Q3. For the first nine months, operating cash flow was $(20.6) million and free cash flow was $(22.7) million, compared with $(7.4) million and $(8.8) million, respectively, in 2020.
- Liquidity and debt: At September 30, cash and cash equivalents were $317.8 million, plus $1.9 million of restricted cash. Current liabilities were $99.5 million, including $71.5 million of deferred revenue. The balance sheet reports no debt; the filing does not identify debt borrowings. Management said cash on hand should cover working capital and capital expenditure needs for at least 12 months.
- Other indicators: Remaining performance obligations were $152.0 million, up 79% from September 30, 2020; $125.9 million was expected to be recognized within 12 months. One customer accounted for 20% of accounts receivable. Revenue outside the U.S. was 35% in Q3.
Material changes versus prior periods
- Operating expenses rose to $68.3 million in Q3 from $21.0 million a year earlier. R&D increased 231%, sales and marketing 93%, and G&A 604%.
- Q3 G&A included $16.1 million of direct-listing expenses; nine-month direct-listing expenses were $18.2 million. The listing also triggered recognition of stock-based compensation tied to equity awards. Stock-based compensation was $14.5 million in Q3 and $20.1 million for the first nine months, versus $1.4 million and $11.9 million in the comparable periods.
- Gross margin declined to 69% from 71%. Management cited higher hosting and personnel costs, acquired-intangible amortization, and stock-based compensation.
- Cash increased substantially from year-end 2020, principally due to financing proceeds, including $199.8 million net proceeds from Series F preferred stock, plus option exercises. The direct listing converted preferred shares into Class B common stock.
Outlook, commentary, and risks
- No numerical revenue, earnings, or cash-flow guidance is provided. Management expects continued investment and higher operating expenses in dollars, particularly for product development, sales and marketing, and public-company compliance; it does not assure near-term profitability.
- Management attributes growth to customer acquisition and expansion, and points to early adoption of the Recommend and Experiment products launched in 2021. Analytics remains the principal revenue source.
- The company reported a $9.5 million acquisition during the first nine months, comprising cash and equity consideration; it recorded $3.1 million of goodwill. The filing says the acquisition did not materially affect consolidated results.
- Risks highlighted include persistent losses and negative operating cash flow, customer renewal and expansion, longer enterprise sales cycles, competition, reliance on third-party cloud hosting, cybersecurity and service availability, privacy and data-protection regulation, and uncertain COVID-19 effects.
- Class B shares carry five votes per share versus one vote for Class A, concentrating voting power. The company also noted that shareholders are not subject to contractual lock-up restrictions, creating potential public-market share-sale risk.
- Legal proceedings arise in the ordinary course; management reported no known matter expected to have a material adverse effect. The company maintained a full U.S. deferred-tax valuation allowance. Adoption of lease accounting guidance was expected to materially affect the balance sheet through recognition of operating lease assets and liabilities.
Important facts for investors to verify
- Whether customer growth, 121% net retention, and the $152.0 million RPO convert into durable recognized revenue.
- How much of the increased GAAP loss reflects one-time listing costs and equity compensation, and how operating expenses evolve after the listing.
- Cash consumption, deferred-revenue billings and collections, and the timing of the $5.4 million net cash related to equity-award tax withholdings that the company expected to remit in subsequent periods.
- Customer concentration in receivables, hosting-cost trends, and the effect of product launches and acquisitions on margins.
- Potential dilution and voting-control implications from outstanding options and RSUs, equity-plan share reserves, and the dual-class structure.