Amplitude, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amplitude provides a subscription-based SaaS Digital Optimization System for analyzing customer behavior in digital products. Results are unaudited; the company reports one operating segment.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $53.1 million | $33.1 million | +60% |
| Gross profit / GAAP gross margin | $37.0 million / 70% | $22.9 million / 69% | Margin +1 percentage point |
| Operating expenses | $59.0 million | $29.0 million | +103% |
| Operating loss | $22.0 million | $6.1 million | Loss widened |
| Net loss | $22.2 million | $6.4 million | Loss widened |
| Net loss per share, diluted | $0.20 | $0.23 | Loss per share narrowed |
| Cash used in operating activities | $8.3 million | $0.5 million | Cash use increased |
| Free cash flow (non-GAAP) | $(9.6) million | $(1.1) million | Cash use increased |
Revenue growth reflected a 49% increase in paying customers to 1,701 and dollar-based net retention of 126%, up from 118%. International revenue was $19.5 million, or approximately 37% of total revenue. Remaining performance obligations were $194.4 million, up 84% year over year; $149.6 million is expected to be recognized within 12 months.
Operating expense growth included higher staffing and stock-based compensation. Stock-based compensation expense was $13.5 million, versus $2.6 million in Q1 2021. Hosting costs and personnel drove higher cost of revenue; GAAP gross margin nevertheless increased from 69% to 70%. Non-GAAP gross margin was 72%, compared with 70%; non-GAAP operating loss was $7.7 million, compared with $3.2 million. These non-GAAP measures exclude specified items, including stock-based compensation and acquired-intangible amortization.
Financial position and liquidity
- At March 31, 2022, cash and cash equivalents were $300.4 million, restricted cash was $0.9 million, and current assets totaled $354.1 million.
- Total liabilities were $111.3 million; current liabilities were $99.9 million, including $75.1 million of deferred revenue. The filing reports no debt balance.
- Accumulated deficit was $202.0 million. Operating cash use was partly offset by $13.5 million of noncash stock-based compensation and higher deferred revenue.
- Management said available cash was expected to meet working-capital and capital-expenditure needs for at least the next 12 months.
Material changes, outlook, and risks
- Net loss increased substantially as operating expenses more than doubled, despite 60% revenue growth. Management expects operating expenses to continue increasing in dollars and expects near-term expense ratios to rise as it invests in product development and sales growth; it anticipates improvement as a percentage of revenue over the longer term. The filing provides no specific revenue or earnings guidance.
- The company continues to incur losses and does not expect near-term profitability to be assured. It plans continued investment in research and development, sales and marketing, international expansion, and public-company compliance.
- Amplitude terminated certain relationships with customers in Russia and said disruptions in affected regions could impair customers’ ability to pay and reduce revenue. The duration and financial impact of the war in Ukraine are uncertain.
- The company identifies customer renewal and expansion, enterprise sales-cycle variability, competition, economic conditions and IT spending, cybersecurity and service availability, privacy regulation, and international operations among key risks. COVID-19 effects remain uncertain.
- Amplitude adopted lease accounting standard Topic 842 on January 1, 2022, recognizing $11.6 million of right-of-use assets and $13.2 million of lease liabilities at adoption; the company said the adoption did not materially affect the statements of operations or cash flows.
- Legal matters arise in the ordinary course; management said it did not believe any current litigation was reasonably expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting identified.
Most important facts for investors to verify
- Whether customer growth and 126% dollar-based net retention continue to support revenue growth, and how much growth comes from existing customers versus new customers.
- Whether expense growth, particularly stock-based compensation and sales and marketing, moderates relative to revenue and narrows operating losses and cash use.
- Whether deferred revenue and remaining performance obligations convert to revenue on the expected schedule, and whether collections remain healthy.
- Whether the $300.4 million cash balance and management’s stated 12-month liquidity assessment remain adequate given ongoing operating cash outflows.
- The effects of Ukraine-related customer disruption, macroeconomic conditions, privacy and security risks, and enterprise sales-cycle changes.
- Potential dilution from equity awards and the company’s dual-class structure: Class B shares carry five votes per share, versus one vote for Class A shares.