Amplitude (AMPL +2.27%) debuted on the market in September, offering a new kind of cloud software for investors to get a piece of.
The company provides digital optimization tools, which give product managers the insights to improve their digital products and better understand how they're working. As the company sees it, digital optimization is the next step after digital transformation. Once companies have built the digital infrastructure they need, they can focus on optimizing that infrastructure, which is where Amplitude comes in.
Image source: Amplitude.
The company has helped Peloton Interactive recognize that making social interaction part of the experience would drive user experience, and helped Spirit Airlines increase traffic to its mobile app and early check-ins.
After debuting at a reference price of $35 in September, Amplitude stock quickly soared, finding an enthusiastic base of support.
Amplitude just delivered its first quarterly results as a public company, topping expectations. Below are some of the highlights:
- Revenue jumped 72% to $45.5 million, ahead of estimates at $43.6 million.
- Its adjusted loss of $0.05 per share beat expectations of a per-share loss of $0.14.
- The number of paying customers increased 54% to 1,417.
- The net retention rate was 121%, showing existing customers increased their spending by 21% from a year ago.
Altogether, the numbers show the business accelerating after 66% year-over-year revenue growth in the second quarter, with strong growth in both new customers and existing ones. The company continues to expand its customer base beyond the tech industry, signing up names such as Carvana, Nautilus, and MacMillan Learning while showcasing the broad appeal of its software suite.
The company is also taking steps to make its optimization tools more accessible to customers. It announced a new integration and partnership with Snowflake (SNOW +1.24%), the cloud-based data warehousing company, that will allow Snowflake customers to easily import data into Amplitude, giving business actionable insights into customer behavior.
In an interview with The Motley Fool, CFO Hoang Vuong described the partnership as a natural fit between the two companies, as so many of Amplitude's customers use Snowflake's data cloud. It also makes Amplitude more accessible to Snowflake's 5,000 customers, giving the company a new growth pipeline.
CEO Spenser Skates explained on the earnings call that simply getting data into Amplitude is the biggest challenge its customers face, and added: "Given how widespread usage of Snowflake is, it's a huge opportunity for us to tap into that data stream as opposed to having to instrument that from scratch."
Tailwinds are emerging
Amplitude was only founded in 2014, and the company is moving fast to tackle a new market in product data and digital optimization. Vuong said that the company's direct listing in September and the digital transformation during the pandemic have helped raise awareness for its brand and digital optimization as a business tool.
The company also introduced two new products in the second quarter, Recommend and Experiment. Recommend helps personalize customer experience points, and Experiment allows companies to use high-impact A/B testing and scale experimentation to improve customer service. Those products have helped accelerate the company's growth, and it expects to introduce one or two new products each year.
The company is also stepping up investments in its business to drive long-term growth. As Vuong said on the call: "We believe we're still in the early stages of our market. We want to prudently invest for growth, given our product position and strong unit economics."
Management was conservative with its guidance, calling for revenue growth to slow to 55% and see top-line growth. It expects revenue growth of at least 40% in 2022.
The stock was expensive coming into the earnings report, and shares sold off on the news, down 7% Wednesday morning, likely a response to the muted guidance. That steep valuation means investors should expect the stock to be volatile over the coming years. But the third-quarter results were essentially flawless and the company is building momentum with the Snowflake integration, new products, and balanced growth between new and existing customers.
With its eyes on a $37 billion addressable market, the company appears to be making the right moves to penetrate it as quickly as possible.
