Two recent investor conferences - the UBS Conference on 7 Dec and the Wells Fargo Conference on 30 Nov - were quite bearish and convinced me to sell Amplitude. Management basically admitted that Q4 will be weak and the weak guide was not due to conservatism from being a “newly public company”. A few points raised by Management:
The strong growth in Q2 and Q3 benefited from one-off factors (early customer renewals, Covid tailwind, semi-annual comp plan which spurred sales team to close deals early); and that’s coming back to earth in Q4.
the newer products - Experiment and Recommend - are small, does not move the needle and not responsible for the sales spike in Q2 and Q3.
The rapid margin improvement in 2021 was due to under-investment in costs because of Covid. That will change in 2022 as it spends more - it soft guided to 40% revenue growth in 2022 and -20% operating margin in 2022.
If it similarly beats its Q4 guidance by 5% (similar beat % as Q3), this implies 48.8 mil Q4 revenue or 7.3% sequential growth.
I believe this would causes its NTM multiple to contract to the low 20s or even worse (under the current poor environment).
I have included the quotes below.
Comments on Q4:
UBS Analyst: “but I believe 2Q had some early renewal and pull-forward activity as well as some larger expansions, which I think made for a little bit of a tougher compare in 3Q. So, I guess in terms of how you’re thinking about the renewal opportunity as we look into the back half of this year because of that, and some of like the expansion opportunities, did that – did you see any impact there,
and is there any risk associated with that?”
CFO: “obviously, Q2 because of the – our
semiannual comp plan and some the customer kind of growing that fast and kind of renewed and expanded in
Q2, some of that probably [garblded] in Q3. So, maybe it’s a little bit early. But I think the
bigger picture is, to zoom back, I was just kind of thinking about the market longer term, and that’s kind of where our investments and kind of it’s really about, right? We’re – obviously, quarter to quarter, there’ll be different kind of movement”
CFO: "Yeah. And, I mean, I think the main driver is actually to think about what kind of accelerated kind of Q3 – would
accelerate Q3, which is really kind of we have, as we mentioned, you know, a few customers who has a really large expansion in the state benefits from COVID in Q2.
And when you – when we do that, the way that we recognize revenue is we – you know, if they have a remaining contract, we take that plus a new contract and recognize it gradually. And so, what that typically does is it obviously boosts your Q3 revenue, but then it makes your Q4 revenue and sequentially quarter-on-quarter a tougher comparison.
On the 2 new products:
CEO: "We have seen great early traction on them [Experiment and Recommend]. I think in terms of, just to set the expectations, in terms of it’s not like it’s they’ve made massive impacts across our average deals or anything like that. They’re still again on small portions of the overall customer base, relatively speaking. Within those, I think there’s a bunch of promising indicators that we’re
On Operating Margin:
CFO: on operating margin side, you know, actually when we’ve looked at it,
we feel like we’ve almost been too efficient [in 2021]. You know, the reality is, if you look back at 2020, we didn’t really understand or know, and I guess you can blame me for it, that we didn’t know how it’s going to be. And so we basically took a little bit of a pause in March of 2020, just because we wanted to understand how that was going…